Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

NINETEENTH CONGRESS
First Regular Session

House Bill No. 3.700

Introduced by Representative Mid;
Lone District, Quirino

AN ACT PROVIDING FOR GOVERNMENT FINANCIAL INSTITUTIONS
UNIFIED INITIATIVES TO DISTRESSED ENTERPRISES FOR ECONOMIC RECOVERY
(GUIDE)

EXPLANATORY NOTE

As the country recovers from the economic repercussions of the COVID-19 pandemic, there is an
urgent need for the State to enact measures aimed at supporting industries critical to economic
recovery and maintaining employment levels.

‘The proposed legislative measure seeks to strengthen the capacity of the Land Bank of the Philippines
(LBP) and the Development Bank of the Philippines (DBP) to aid micro-, small, and medium
enterprises (MSMEs), and other strategically important companies, To this end, LBP and DBP are
‘mandated to provide liquidity to MSMEs in agriculture, infrastructure, manufacturing, and services
affected by the pandemic through expanded credit and rediscounting facilities.

In addition, the proposed bill authorizes LBP and DBP to create a special holding company, which
aims to reinvigorate strategically important companies with solvency and/or liquidity issues heavily
affected by the pandemic. For this purpose, the company shall be authorized to invest or place funds
in equity, execute convertible loans or purchase convertible bonds and/or other securities, and
incorporate subsidiaries, To ensure the successful rehabilitation of affected companies, the proposed
bill imposes restrictions on the investee company in the number of its employees, ability to declare
dividends, and compensation packages. It also ensures that investments of the DBP and LBP are not
diluted and time-bound, with a definite exit mechanism, among others.

The proposed bill was first filed by Representative Junie E. Cua of the Lone District of Quirino in the
18* Congress. It was approved on third reading and transmitted to the Senate. In his first State of the
Nation Address, President Ferdinand R. Marcos, Jr. included GUIDE in his list of priority measures.

In view of the foregoing, approval of this measure is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

NINETEENTH CONGRESS
First Regular Session

House Bill No, 3700

Introduced by Representative Midy N. Cua
Lone District, Quirino

AN ACT PROVIDING FOR GOVERNMENT FINANCIAL INSTITUTIONS
UNIFIED INITIATIVES TO DISTRESSED ENTERPRISES FOR ECONOMIC RECOVERY
(GUIDE)

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Title. ~ This Act shall be known as the “Government Financial Institutions (GFIs)
Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act.”

Section 2. Declaration of Policy. ~The substantial disruption of the economy due to the
community quarantine measures restricted the operation of numerous businesses.

The State recognizes the role of these businesses composed of micro, small and medium
enterprises (MSMEs) and strategically important companies in providing employment to the Filipino
people and in supporting the Philippine economy. Thus, it is essential that these enterprises are given
necessary access to credit and financial assistance. It is hereby declared the policy of the State to
protect employment and assist distressed enterprises in order to reinvigorate the economy.

Section 3. Definition of Terms. ~ As used in this Act

(a) Agribusiness value chain refers to a set of actors/players, such as farmers, fisherfolk.
traders, suppliers, processors, and aggregators, who make up the linked sequence of
value-adding activities undergone by an agricultural product when converted from raw
material to the final form it is presented to the consumers;

(b) Micro, Small and Medium Enterprise (MSMB) refers to any business activity or
enterprise engaged in industry, agribusiness and/or services, whether single
proprietorship, cooperative, partnership or corporation whose total assets, inclusive of
those arising from loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated, must have value falling under the
following categories:

micro not more than PhP3,000,000
small PhP3,000,001 - PhP15,000,000
medium PhP15,000,001 ~ PhP100,000,000


(©) Senior executive officers refer to top management officials exercising responsible and
critical roles, as may be described further in the rules and regulations to be issued to
implement this Act,

(4) Strategically Important Companies or SICs shall have the meaning ascribed in Section
%(b) of this Act.

CHAPTER 1 Development Bank of the Philippines

Section 4. Loan Assistance Program of the Development Bank of the Philippines (DBP). —
The DBP shall expand its loan program for qualified MSMEs affected by the COVID-19 pandemic
under this Act and MSMEs covered under Republic Act No. 11494 or “the Bayanihan to Recover as
‘One Act”: Provided, That such loans shall be granted in accordance with the rules and regulations to
be issued to implement this Act and the following guidelines:

(a) Eligible MSMEs under this Act should be engaged in infrastructure, service
industry, and/or manufacturing business; and

(b) The loans granted hereunder should comply with the applicable prudential
standards and regulations of the BSP.

The DBP shall likewise extend loans to local government units (LGUs) subject to existing
rules and regulations.

Section 5. DBP Rediscounting and other Programs. — Subject to applicable prude
standards and regulations of the Bangko Sentral ng Pilipinas (BSP), the DBP may rediscount loans
and other credit accommodations to enterprises enumerated in Section 4(a) of this Act, granted by
BSP- supervised financial institutions (BSFIs), the Small Business Corporation (SBC), and those
granted pursuant to credit programs of the Department of Agriculture-Agricultural Credit Policy
Council (DA-ACPC) to MSMEs affected by the COVID-19 pandemic engaged in infrastructure,
service industry, and/or manufacturing business.

The DBP may undertake other similar activities as may be provided under the rules and
regulations to be issued to implement this Act.

Section 6. Increase in DBP's Authorized Capital Stock. — Section 7 of Executive Order No.
81, as amended by Republic Act No, 8523, otherwise known as “The 1986 Revised Charter of The
Development Bank of The Philippines”, as amended, is hereby further amended to read as follows:

“Section 7. Authorized Capital Stock-Par Value. The capital stock of the Bank shall
be [Phirty-five-billion-peses—{P35,000,000,000.00)] ONE HUNDRED BILLION
PESOS (PHP100,000,000,000.00) to be divided into [Fheee-hundred-fifiy-mittion
(350,000,009)] ONE BILLION (1,000,000,000) common shares with par value of
One hundred pesos (PRP100.00) per share, which shall be fully subscribed by the

National 1: [Upen—the—effectisiey 4



THAT THE PRESIDENT OF THE PHILIPPINES MAY APPROVE THE
INCREASE IN THE CAPITALIZATION OF THE BANK, UPON THE
RECOMMENDATION OF THE BOARD AND THE CONCURRENCE OF
THE SECRETARY OF FINANCE, UP TO SUCH AN AMOUNT AS MAY BE
NECESSARY TO ATTAIN THE OBJECTIVES OF THIS CHARTER.”

CHAPTER 2 Land Bank of the Philippines

Section 7. Loan Assistance Program of the Land Bank of the Philippines (LandBank). — The
LandBank shall expand its loan program for qualified MSMEs affected by the COVID-19 pandemic
under this Act and those covered under Republic Act No. 11494 or “the Bayanihan to Recover as One
Act”: Provided, That such loans shall be granted in accordance with the rules and regulations that
shall be issued to implement this Act and the following guidelines:

(a) Eligible MSMEs under this Act should be engaged in acti
chain; and

ies in the agribusiness value

(b) The loans granted hereunder should comply with the applicable prudential standards and
regulations of the BSP.

‘The LandBank shall likewise extend loans to LGUs subject to existing rules and regulations,

Section 8, LandBank Redliscounting and other Programs, — Subject to applicable prudential
standards and regulations of the BSP, the LandBank may rediscount loans to eligible MSMEs engaged
in activities in the agribusiness value chain granted by BSFls, the SBC, and those granted pursuant to
credit programs of the DA-ACPC to MSMES affected by the COVID-19 pandemic.

The LandBank may undertake other similar activities for purposes of this Act as may be
provided under the implementing rules and regulations to be issued.

CHAPTER 3 Special Holding Company

Section 9, Creation of Investment Vehicle. — To ensure that Strategically Important
Companies (SICs) remain solvent, the LandBank and DBP are hereby authorized to invest in, or enter
into a joint venture agreement to incorporate a special holding company (the “SHC”) that is a stock
corporation to be organized under Republic Act No. 11232, otherwise known as “The Revised
Corporation Code of the Philippines,” within six (6) months beginning from the date of effectivity of
the rules and regulations of this Act, or effectivity of applicable revenue regulations, whichever comes
later. The establishment, administration, and operation of the SHC shall be governed by the following
principles:

(a) The purpose of the SHC is to rehabilitate SIC affected by the COVID-19 pandemic which
are experiencing temporary solvency issues;

(b) SICs are investee companies that are nationally significant, or those with high economic
returns or high employment potential, and which are engaged in any of the following
“strategically important industries or sectors,” such as, but not limited to, agriculture,
construction, education, food industry, healthcare, infrastructure, low-cost and socialized
housing, manufacturing, power and energy, product distributor/retailer, services, tourism
and hospitality, transportation and logistics, water and sanitation, and other industries to
be identified in the rules and regulations issued to implement this Act: Provided, That a
SIC must be able to demonstrate upstream and downstream linkages to other firms and/or


industries, substantial employment to the community, and exhibit high degree of process
efficiency, cost efficiency, product quality, and environmental soundness: Provided,
further, That a SIC can show proof of temporary solvency problems due to the pandemic,
financial soundness prior to the pandemic, and credible and sound financial rehabilitation
plan.

(©) Equity participation in the SHC may be offered to, and held by, qualified private sector
investors, including multilateral companies and lending institutions, as may be determined
by the LandBank and DBP: Provided, That majority ownership of the total outstanding
capital stock in the SHC shall be held by the LandBank and DBP until such time that they
have recovered or will be able to recover their investment in the SHC;

(@) The LandBank and the DBP shall dispose of their stockholdings in the SHC to qualified
private sector investors as they may determine. The LandBank and DBP shall provide
equal opportunity for equity participation in the SHC to all qualified investors, including
multilateral companies and lending institutions. When private shareholdings in the SHC
reaches fifty percent (50%) of the total outstanding capital stock, the stockholders thereof
shall cause the adoption and registration with the Securities and Exchange Commission
(SEC) of the company’s amended articles of incorporation within three (3) months from
such transfer of ownership;

(&) The SHC, as a government-owned or controlled corporation (GOCC), and the
investments of DBP and LandBank therein, shall be subject to the power of the
Commission on Audit (COA) to audit and examine GOCCs and the investments of
government in corporations: Provided, That the audit of the SHC by the COA shall not
preclude the SHC from engaging the services of a private auditing firm when equity
participation in the SHC is offered to qualified private investors: Provided, further, That
‘even if the services of the latter are availed of, the audit report of the COA shall serve as
the report for purposes of compliance with audit requirements as required of a GOCC
under applicable law:

(©) The SHC shall devise mechanisms that shall protect the government's investment, such as
issuing a special class or series of shares, or entering into shareholders’ or voting share
agreements for the purpose as provided in the rules and regulations issued to implement
this Act.

Section 10. Powers of the Investment Vehicle. — The SHC shall have the powers granted to a
stock corporation under Republic Act No. 11232. Furthermore, the power of the SHC to invest shall
be subject to the following investment guidelines:

(a) To avoid undue risk concentration from excessive exposures, the investment of the SHC
in an investee company and the total investment in companies belonging to the same
industry or sector shall be subject to a ceiling in relation to its net income or capital as
prescribed under the implementing rules and regulations;

(b) The SHC can only invest in corporations engaged in strategically important industries or
sectors that are experiencing temporary solvency issues because of the COVID-19
pandemic, such as those with considerable impact on the economy:

(c) Such investment shall be in the form of (i) limited equity participation by subscription or
acquisition of shares, (ii) execution of convertible loans or purchase of convertible bonds;
and/or (iii) investment in such other securities as may be issued by the investee
corporations, acceptable to the DBP and LandBank; and


(d) The investee company is eligible based on the requirements in this Section and in Section
13 of this Act.

Section 11, Board of Directors of the SHC - The powers and authority of the SHC shall be
vested in, and exercised by a Board of Directors, hereinafter referred to as the “Board,” composed of
nine (9) members, as follows:

(a) The Secretary of Finance, as ex-officio Chairperson;

(b) The President of the LandBank;

(©) The President of DBP;

(d) The President or Chief Executive Officer of the SHC;

(e) Two (2) independent Directors;

(f) Three (3) directors who shall be appointed by the LandBank, DBP, and the private equity
investor(s), if any, in proportion to the voting shares held in the SHC

‘The members of the Board shall elect from among themselves the Vice Chairperson. The ex-
officio members of the Board may designate their respective representatives who shall exercise the
powers of a director.

Once the private sharcholdings in the SHC reaches fifty percent (50%) of the total outstanding
capital stock, subject to the proviso of Chapter 3, Section 9(c) of this Act, the company shall cease to
be a GOCC, the ex-officio directors will cease to be members of the Board, and the membership of the
Board shall be based on the election of the directors by the voting shares held by the shareholders,
pursuant to the provisions of Republic Act No. 11232.

The Board shall provide for an organization and staff of officers and employees of the SHC
and fix their remunerations and other emoluments. Alll positions in the SHC shall be governed by the
‘compensation, position classification system, and qualification standards approved by the Board based
‘on a job analysis of actual duties and responsibilities. The compensation plan shall be comparable with
the prevailing compensation plans in the private sector and shall be subject to periodic reviews once
every two (2) years, without prejudice to early merit or increases based on the SHC’s productivity and
profitability. The SHC, being a GOCC, shall therefore be exempt from existing laws and the rules and
regulations on compensation, position classification, and qualification standards in the government
service.

Section 12. Responsibility of the Board and the Employees of the SHC — The Board shall set
appropriate standards and corporate governance for the investee companies that the SHC will invest
in, The Board shall likewise institute mechanisms to oversee that such standards are followed by the
investee company.

The general rute and the exception therefrom on the liability of public officers as provided in
Sections 38 and 39 of Chapter 9, Book 1 of the Revised Administrative Code of 1987 shall apply to
the members of the Board and other personnel of the SHC Unless the actions or omissions of the SHC,
members of the Board and its other personnel are finally adjudged to be in wilful violation of this Act,
performed in evident bad faith or with gross negligence, they shall be held free and harmless to the
fullest extent permitted by law from any liability, and they shall be indemnified for any and all
liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever kind and
nature that may arise in connection with the exercise of their powers and performance of their duties
and functions.


Section 13. Requirements for the Investee Company. — To be eligible, the investee company
‘must not be a party to any pending tax-related cases in court for tax collection or tax evasion, must not
be a debtor in any bankruptcy proceeding prior to the enhanced community quarantine period, and
must not be insolvent and is capable of being rehabilitated as determined by the SHC

The agreement between the SHC and the investee company must contain the following
minimum conditions:

(a) The investee company must not reduce the number of employees beyond the percentage
prescribed by the SHC;

(b) The investee company shall not, without prior authority from the SHC, be allowed to
issue stock dividends and repurchases during the term of the investment;

(©) The investee company shall not issue cash dividends during the term of the investment;

(@) The investee company must not increase the salaries, benefits and other forms of
remuneration of its senior executive officers and members of its board;

(©) The investee company shall not provide or grant senior executive officers and members of
its Board separation pay or retirement pay: Provided, That any amount received by the
senior executive officers and members of the board which is in violation of the foregoing
shall be returned;

(© The investee company shall not incur imegular, unnecessary, excessive, extravagant or
unconscionable expenditures such as entertainment, events, office/facility renovations,
aviation/transportation services and other activities;

(g) The ownership of the SHC in the investee company shall not be diluted and a provision
protecting the value of the shares of the SHC from market transactions such as stock
splits, mergers and other forms of reorganization and recapitalization shall be included in
the agreement; and

(h) The investment in the investee company shall be time-bound with a definite exit
‘mechanism.

Provided, further, That additional conditions and provisions may be imposed by the SHC to
ensure that the investment will be properly utilized and ensure the successful rehabilitation of the
investee company.

CHAPTER 4 Incentives and Exemption Privileges of the DBP, LandBank, and the SHC

Section 14, Twx Exemptions and Fee Privileges. - Any existing law to the contrary
notwithstanding, the following shall be exempt from documentary stamp tax, capital gains tax,
creditable withholding income tax, value-added tax, gross receipts tax, and such other taxes that may
be imposed under Republic Act No. 8424, or the “National Internal Revenue Code of 1997,” as
amended, whichever is applicable pursuant to the regulations to be issued by the Department of
Finance (DOF), upon the recommendation of the Bureau of Internal Revenue (BIR):

(a) Loan assistance program, rediscounting and other programs of the DBP and LandBank
under Chapters | and 2 of this Act, respectively, including dation in payment (dacion en
‘pago) by the borrower or by a third party in favor of the DBP and the LandBank; and

(b) Transactions of the SHC as to its:

(subscription or acquisition of shares;

Gi) execution of convertible loans or purchase of convertible bonds;

(iii) investment in such other securities as may be issued by the investee corporations,
acceptable to DBP and LandBank; and


(iv) acquisitions of assets of an investee company.

Transfer of properties in the abovementioned transactions shall also be subject to the
following, in lieu of the applicable fees:

(a) Fifty percent (50%) of the applicable mortgage registration and transfer fees on the
transfer of real estate mortgage and security interest to and from DBP, LandBank, or the
SHC, as imposed in accordance with the existing circulars of the Land Registration
Authority (LRA);

(b) Fifty percent (50%) of the filing fees for any foreclosure initiated by the DBP and
LandBank in relation to loan assistance and rediscounting programs as prescribed by the
Rules of Court; and

(©) Fifty percent (50%) of the land registration fees prescribed under the existing circulars of
the LRA.

The tax exemptions and fee privileges in this Section cannot be enjoyed by any person not a
party to the above transactions except in cases of subsequent transfers by the DBP, LandBank, or the
SHC to a third party of rediscounted loans and other credit accommodations, properties, shares and
other assets, acquired pursuant to the said transactions.

The incentives enumerated herein may be availed of for a period of three (3) years from the
date of effectivity of the applicable implementing rules and regulations or of the applicable revenue
regulations, whichever comes later: Provided, That the tax exemption and fee privileges of subsequent
transfers may be availed of for a period of three (3) years from the date of acquisition by the DBP,
LandBank, or the SHC; Provided, further, That the Secretary of Finance may extend such period by a
maximum of three (3) years: Provided, finally, That once the SHC ceases to be a GOCC, its tax
exemptions and fee privileges under this clause shall be automatically revoked.

Section 15. Emergency Procurement under the Government Procurement Reform Act. — In
order to ensure the expeditious implementation of their mandates under this Act, procurement
activities undertaken by the LandBank, DBP, and the SHC in light of the COVID-19 pandemic and
pursuant to their mandate and functions as defined in this Act, shall adopt the rules under Negotiated
Procurement under Emergency Cases under Section 53(b) of Republic Act No. 9184, or the
“Government Procurement Reform Act” for a period of three (3) years from the effectivity of the
implementing rules and regulations to be issued under Chapter 5, Section 20 of this Act.

Section 16. Other Exemptions of the SHC — The SHC shall be exempt from the provisions of
Republic Act No. 10149, or the “GOCC Governance Act of 2011.”

Further, transactions by the SHC shall be exempt from the provisions of Republic Act No.
10667, or the “Philippine Competition Act” for a period of three (3) years from its incorporation:
Provided, That this exemption shall only apply to acquisitions of assets of an investee company by the
‘SHC pursuant to its powers under this Act.

Any provision of law to the contrary notwithstanding, the disposal of assets of an investee
company by the SHC pursuant to their mandate and functions, as well as the disposal of shares, assets,
or investments by LandBank or DBP, or both, in the SHC, shall be exempt from the provisions of laws
and regulations on government disposal of assets.



Section 17. Prohibition Against Injunction. - No court, other than the Court of Appeals and the
Supreme Court, shall issue any temporary restraining order, preliminary injunction, preliminary
mandatory injunction, status quo order, stay order, commencement order, or any other issuance of
injunctive relief against the sale or acquisitions of assets of an investee company by the SHC, or the
disposal of assets of an investee company by the SHC, including judicial or extrajudicial foreclosure
sales or execution sales.

CHAPTER 5 Miscellaneous Provisions

Section 18. Ratios, Ceilings, and Limitations. — For purposes of this Act, the Monetary Board
may exempt DBP and LandBank from such ratios, ceilings and limitations, provided under Republic
Act No. 8791 or the “The General Banking Law of 2000,” for a period as may be determined by the
Monetary Board, subject to conditions as may be prescribed by the Monetary Board such as, but not
limited to, the adoption of appropriate risk management measures to mitigate risks that may arise from
the implementation of this law.

Section 19. Appropriations. — The amount of Ten Billion Pesos (PhP10,000,000,000.00) is
hereby appropriated out of any funds actually available in the National Treasury of the Philippines not,
otherwise appropriated, as certified by the National Treasurer, to fund the following:

(a) The amount of Two Billion Five Hundred Million Pesos (PhP2,500,000,000.00) for the
implementation of Chapters | and 3 of this Act: Provided, That this amount shall be applied as
additional paid-up capital of the DBP, for the purposes of lending under the loan assistance program to
qualified MSMEs, its rediscounting and other programs, and the creation of the SHC: Provided,
further, That DBP can also utilize funds appropriated under Section 10 of Republic Act No. 11494 or
“the Bayanihan to Recover as One Act” for the implementation of Chapter I of this Act;
Provided finally, That the total amount of PhP2,500,000,000.00 can be fully utilized, if required, for
the equity infusion in the SHC; and

(b) The amount of Seven Billion Five Hundred Million Pesos (PhP7,500,000,000.00) for the
implementation of Chapters 2 and 3 of this Act: Provided, That this amount shall be applied as
additional paid-up capital of LandBank, for the purposes of lending under the loan assistance program
to qualified MSMEs, rediscounting and other programs of LandBank, and the creation of the SHC:
Provided, further, That LBP can also utilize funds appropriated under Section 10 of Republic Act No.
11494 or “the Bayanihan to Recover as One Act” for the implementation of Chapter 2 of this Act;
Provided, finally, That the total amount of PhP7,500,000,000.00 can be fully utilized, if required, for
the equity infusion in the SHC;

Section 20. Implementing Rules and Regulations — Within thirty (30) days from the
effectivity of this Act, the DOF, together with the BIR, the BSP, the SEC, the DBP, and the LandBank
shall jointly promulgate the necessary rules and regulations for the effective implementation of this
‘Act: Provided, That the DOF may call upon any agency to provide information or assistance in the
drafting of the rules and regulations: Provided, further, That within thirty (30) days from the
effectivity of this Act, the DOF, upon recommendation of the BIR, shall promulgate the revenue
regulations implementing the fiscal incentives under this Act.

Section 21. Oversight Committee. ~ There is hereby created a Joint Congressional Oversight
Committee (JCOC) to oversee, monitor, and evaluate the implementation of this Act. The JCOC shall
be composed of five (5) members each from the House of Representatives and from the Senate. The
JCOC shalt be co-chaired by the Chairpersons of the House Committee on Banks and Financial
Intermediaries and the Senate Committee on Banks, Financial Institutions and Currencies.


‘The Speaker and the Senate President shall designate the other four members of the JCOC of
the House and the Senate from among the members of the House Committee on Banks and Financial
Intermediaries and the Senate Committee on Banks, Financial Institutions, and Currencies, at least one
member of which shall be from the minority.

Section 22. Separability Clause. ~ If any provision of this Act is held unconstitutional or
invalid, all other provisions not affected thereby shall remain valid.

Section 23. Repealing Clause. ~ All taws, decrees, executive orders, rules and regulations or
parts thereof, which are inconsistent with this Act, are hereby repealed, amended or modified
accordingly.

Section 24. Effectivity. - This Act shall take effect immediately upon its publication in the
Official Gazette or in a newspaper of general circulation,

10