Monday, May 30, 2011

Philippine Business Laws

In this article, I will be discussing Philippine Business Laws. This article is the same lecture I conducted last May 21, 2011 for students taking Master in Business Administration at the Central Colleges of the Philippines.

In a nutshell, the following are the different laws related to business in the Philippines:

I. LAW ON BUSINESS ORGANIZATIONS -- The following are the different types of business organizations that one may choose in putting up a business: Sole Proprietorship, Partnership, Corporation.

II. THE BARANGAY MICRO BUSINESS ENTERPRISE (BMBE) LAW or REPUBLIC ACT NO. 9178. This law encourages the formation and growth of barangay micro business enterprises which effectively serve as seedbeds of Filipino entrepreneurial talents.

III. LAW ON OBLIGATIONS AND CONTRACTS. This is governed by Articles 1156 upto 1430 of the Civil Code of the Philippines.

IV. LAW ON SALES, AGENCY & CREDIT TRANSACTIONS. This is governed by the Civil Code of the Philippines, specifically Articles 1458-1618 (Sales); Articles 1868-1932 (Agency); and Articles 1933-1995 (Credit Transactions).

V. MORTGAGE LAW. Mortgage involves the transfer of an interest in land or chattel as security for a loan or other obligation. The laws involving mortgage are Commonwealth Act No. 3135 as amended by Act 4118 (An act to regulate the sale of property under special powers in or annexed to real estate mortgages) and Commonwealth Act No. 1508 (Chattel Mortgage Law).


a) Foreign Investment Act of 1991 -- Republic Act 7042 as amended by Republic Act 8179 provides for the policy that foreigners can now invest in all activities and enterprises in the Philippines, except those covered in the Negative List. Foreign Investments may seek incentives under the Omnibus Investment Code, such as tax holidays.

b) Built-Operate and Transfer Law -- Republic Act No. 6987 as amended by Republic Act 7718 (BOT Law) implements the policy of the state to recognize the indispensable role of the private sector as the main engine for national growth and development and provide the most appropriate favorable incentives to mobilize the private resources for the purpose.

c) Laws on Applicable Documents of Title. Commonwealth Act No. Act No. 2031, also known as the Negotiable Instruments Law, provides for the concept of a promissory note, bill of exchange and checks. Presidential Decree No. 115, also known as the Trust Receipt Law provides for the regulation of Trust Receipt transactions. Commonwealth Act No. 2137 (Warehouse Receipt Law) seeks to encourage transactions on negotiable warehouse receipts, which may be issued by a warehouseman engaged in the business of receiving commodities on deposit for storage.

d) Access Devices Regulation Act. Republic Act No. 8484 seeks to protect the rights and define the liabilities of parties who deal in credit cards and access devices.

e) Bouncing Check Law. Batas Pambansa Blg. 22 penalizes the mere issuance of worthless checks in payment of a pre-existing obligation. Under Administrative Circular No. 13-2001 issued on February 14, 2001 by the Supreme Court of the Philippines, A.C. 12-2000 does not remove imprisonment as an alternative penalty for violations of Batas Pambansa Blg. 22. In this regard, judges of Philippine courts are given discretion to determine whether the mere imposition of fine would best serve the interest of justice.

f) E-commerce Law. Republic Act No. 8792 penalizes hacking or cracking through unauthorized access or interference in a computer system/server and communication system involving e-banking transactions.

VII. LAW ON INSURANCE. An insurance is a contract whereby one party, for a consideration, agrees to indemnify another, against loss, damage, liability arising out of an unknown or contingent event. This is governed by P.D. 612 as amended by P.D. 1460 instituting the Insurance Code.


a) Presidential Decree No. 442, also known as the Labor Code of the Philippines, provides for the rights of workers, including the minimum labor standards that should be provided to every worker. Some of the basic rights of workers include: right to a fair wage, right to equal employment opportunities to all, right to self-organization and collective bargaining, right of labor to a just fruits of production, security of tenure, hours of work, weekly rest day, wage and wage related benefits, safe and healthful conditions of work, and peaceful concerted activities including the right to strike in accordance with law.

b) Republic Act No. 7877 also known as the Sexual Harassment Act of 1995.

IX. INTELLECTUAL PROPERTY LAW.. Under Republic Act No. 8293, also known as the Intellectual Property Code of the Philippines, such law is enacted to streamline administrative procedures of registering patents, trademarks and copyright, to liberalize the registration on the transfer of technology, and to enhance the enforcement of intellectual property rights in the Philippines.


a) Taxes on income. An active business income earned by an individual is subject to graduated rates of tax between 5-32% after deducting personal exemptions. For a corporation, a flat rate of 30% is imposed. Lastly, passive income shall be subject to withholding taxes.

b) Value Added Tax. A 12% tax shall be imposed on any person who, in the course of trade or business sells, barters and exchanges, leases goods, or renders services, or who imports goods.

Related Articles:

Law on Obligations and Contracts (Part 3)

Loan Agreements and Stipulations for Commercial Contracts

Requirements of banks for loan accommodations

Commercial documents necessary for loan availment by companies

Role of banks in Financing

Philippine Insurance Law (Insurable Interest in Group Insurance)

Labor Legislation related to the tourism and hospitality industry in the Philippines

Best Labor Practices in the Hospitality Industry

What is infringement under Philippine copyright laws?

What are the works covered by copyright protection under the Intellectual Property Code of the Philippines

Who is the owner of the copyright under Philippines Laws?

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