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

nad
{2 RECEIVED 2
Te Speci

\ 3. BY: a,
\G cae

Sixteenth Congress
First Regular Session

House Bill No. 3442

S Novy

Introduced by AKBAYAN Representatives
Walden F. Bello and Ibarra M. Gutierrez III

EXPLANATORY NOTE

Social enterprises refer to organizations engage in providing goods and services that
are directly related to its mission of improving societal well-being. It generates profit
or surplus with due regard to social and environmental costs, and makes a pro-active
contribution to resolving social and environmental problems. At this point, we are in
need of such organizations in order to provide a concrete and sustainable response
against poverty.

This bill, the Magna Carta for Social Enterprises, will promote and develop social
enterprises as tool in the government's poverty reduction program. It aims to
embody all provisions that would uphold the interest and give due advantage to
social enterprises with the poor as its primary stakeholders to become viable and
sustainable. It is a Magna Carta in the sense that it vests rights and privileges to
social enterprises. The bill proposes the formulation and adoption by the national
government of a Poverty Reduction through Social Entrepreneurship or PRESENT
Program

The bill mandates various incentives and benefits for social enterprises. These
include access to capital and other resources (Chapter Vil), fund for capacity
building (Sections 11 and 12 of Chapter V), tax exemptions (Chapter Vill),
marketing, research, and systems development support (Sections 13 and 14 of
Chapter V), and preferential right of social enterprises to government procurement
(Section 28). It also grants cash incentives to start-up social enterprises employing
persons with disabilities (Section 24). Moreover, the bill also mandates the creation
ofa Social Enterprise Commission (Section 6).

It is essential for us to enact a law that will empower these social enterprises that are
geared towards uplifting the conditions of the marginalized in society. It is only
through cooperation between the government and the citizenry that we can truly
address the pressing issues brought about by poverty. This proposed measure
seeks to ensure that this can be achieved.


With these, the passage of this bill is earnestly sought.

4
WALDEN F. BELLO IBARR; ee mW



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

Sixteenth Congress
First Regular Session

House Bill No. 3442

Introduced by AKBAYAN Representatives
Walden F, Bello and Ibarra M. Gutierrez III

AN ACT ORDAINING THE PROMOTION AND DEVELOPMENT OF SOCIAL
ENTERPRISES IN ORDER TO ENSURE POVERTY REDUCTION, PROVIDING
THE MECHANISMS THEREFOR, AND FOR OTHER PURPOSES

CHAPTER |
TITLE, POLICES AND OBJECTIVES

SECTION 1. Short Title. — This Act shall be known as the "Magna Carta for Social
Enterprise of 2013”, It may alternatively be cited as the Poverty Reduction Through
Social Entrepreneurship (PRESENT) Act of 2013".

SECTION 2. Declaration of Policy and Statement of Objectives — It is hereby
declared the policy of the State to promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality life for all.

It is likewise declared a policy of the State the goals of the national economy
are a more equitable distribution of opportunities, income, and wealth; a sustained
increase in the amount of goods and services produced by the nation for the benefit
of the people; and an expanding productivity as the key to raising the quality of life
for all, especially the unprivileged and that, in pursuit of these goals, all sectors of the
economy and all regions of the country shall be given optimum opportunity to
develop. Private enterprises, including corporations, cooperatives, and similar
collective organizations, shall be encouraged to broaden the base of their ownership.

Further, all economic agents shall contribute to the common good and that
individuals and private groups, including corporations, cooperatives, and similar
collective organizations shall have the right to own, establish, and operate economic
enterprises, subject to the duty of the State to promote distributive justice and to
intervene when the common good so demands.

The State shall particularly recognize the important role of entrepreneurship
that contributes responsibly to social and economic goals as embodied in the
Agenda 21 of the United Nations Conference on Environment and Development.

3


Specifically, small and medium-sized entrepreneurs shall be recognized as major
agents for rural development, increasing off-farm employment and providing the
transitional means for improving the livelihoods of women.

Finally, it is declared a policy of the State that the promotion of social justice
shall include the commitment to create economic opportunities based on freedom of
initiative and self-reliance.

In furtherance of these policies, the Government shall pursue a poverty
reduction program that promotes an environment conducive to the development and
viability of social enterprises with the poor as the primary stakeholders, establishing
the mechanisms essential to realizing their potential and achieving their full growth,
and extending the assistance necessary for their advancement.

The Government and all its departments, agencies, subdivisions, branches,
and instrumentalities shall ensure the provision of technical and financial assistance
and other services and incentives free from any conditions that might infringe upon
the autonomy or organizational integrity of said social enterprises in order for them to
develop into viable and vital anti-poverty agents and thereby result in a strong social
entrepreneurship movement that shall be instrumental in bringing about a substantial
reduction in poverty in the country.

CHAPTER II
DEFINITION OF TERMS

SECTION 3. Definition of Terms — For purposes of this Act, the following terms
shall mean:

a) Absolute poverty refers to the condition of the household below the food
threshold level;

b) Assets refer to all kinds of properties, real or personal, owned by social
enterprise (SE) as defined in paragraph (dd) of this Section and used for the
conduct of its business: Provided , That for the purpose of exemption from
taxes and to benefit from other incentives under this Act, this term shall mean
all kinds of properties, real or personal, owned and/or used by the SE for the
conduct of its business;

Basic sectors shall refer to the disadvantaged sectors of Philippine society,
namely: farmer-peasant, artisanal fisherfolk, workers in the formal and migrant
workers, workers in the informal sector, indigenous peoples and cultural
communities, women, persons with disability, senior citizens, victims of
calamities and disasters, youth and students, children, urban poor as defined
under Republic Act (R.A.) No. 8425, otherwise known as the “Social Reform
and Poverty Alleviation Act";

°)


d) Bottom fine shall refer to the objectives or purposes for which a SE is
established, which include, among others, financial, social and ecological
objectives;

e) Capability building shall refer to the process of enhancing the viability and
sustainability of SEs and pertain to the education, training, coaching and other
learning events like study tours; technical, consultancy and advisory services;
assistance in organizational systems development; technology incubation,
development and dissemination; value chain and subsector development;
conduct of SE trade fairs and missions; networking and policy advocacy
initiatives and other such activities that enable SEs to be effective and
efficient vehicles for poverty reduction. The term capability building precludes
the grant of any loan or equity funds to the SE and shall in no way refer to the
provision of equity investments, seed funding, partnership's seed funds,
equity participation, start-up funds or any such activity that connotes the
infusion of capital or funds from the government or from SE Development
Fund created under Section 11 of this Act;

f) Civil society organizations refer to private voluntary organizations of citizens
that are established to pursue a mission, usually involving the interest of the
public, marginalized groups or specific sectors of society. They include non-
government organizations, socio-civic groups, foundations and people's
organizations;

Commission shall refer to the SE Commission

g

h) Cooperative shall refer to an autonomous and duly registered association of
persons, with common bond interest, who have voluntarily joined together to
achieve their social, economic, and cultural needs and aspirations by making
equitable contributions to the capital required, patronizing their products and
services and accepting a fair share of the risks and benefits of the undertaking
in accordance with universally accepted cooperative principles as defined in
R.A. 6938, as amended by R.A. 9520, otherwise known as the “Philippine

Cooperative Code of 2008";

i) Corporate Social Responsibility or CSR shall refer to the commitment of a
private enterprise or business to contribute on a voluntary basis to a
sustainable social and economic development by working with relevant
stakeholders to improve their lives in ways that are good for business, the
social reform agenda, the sustainable development agenda, and society at
large. CSR-related activities shall include, but not limited to, the following: 1)
Charitable programs and projects; 2) Scientific research; 3) Youth and sports
development; 4) Cultural or educational promotion; 5) Services to veterans
and senior citizens; 6) Social welfare; 7) Environmental sustainability; 8)
Health development; 9) Disaster relief and assistance; and Employee and
worker welfare related CSR activities;

j) Economic subsectors are networks of related actors and enterprises
performing various functions in value chain. These actors and enterprises
transform raw materials into finished products, or developed services, and

5


distribute or provide material source, by finished product or final service
provided. An economic subsector may be comprised of several competing
value chains. By understanding the dynamics of economic subsectors and
using them as units of planning social entrepreneurship interventions,
government agencies, support institutions and SEs shall more effectively
reach and benefit a greater number of poor in poverty reduction program;
k) Empowerment strategy shall mean a development strategy that enables the
marginalized sectors to own, manage, and control SEs in order for them to
reap maximum benefits from it and which acts as channel for directly
distributing income;

) Fair trade refer to a trading partnership based on dialogue, transparency and
respect and which seeks greater equity in international trade and the
transformation and adaption of trading structures and practices in favor of the
poor and disadvantaged by offering better trading conditions to, and securing
the rights of, marginalized producers and workers;

m) Fair trade organizations shall mean enterprises certified by internationally and
nationally recognized Fair Trade networks;

n) Fair trade principles refer to the values adopted by fair trade organizations in
their day-to-day operation. These include creating opportunities for
economically-disadvantaged producers; transparency and accountability;
payment of a fair price; ensuring no child labor and forced labor; commitment
to non-discrimination; gender equity and freedom of association; ensuring
good working conditions; providing capacity building; and, respect for the
environment;

0) Foundation shall mean the categorization of a non-profit organization that
typically either donates funds and support to other organizations or provides
the source of funding for its own charitable purposes. Unlike a company,
foundations have no shareholders though they may have a board, an
assembly and voting members. A foundation may hold assets in its own name
for the purposes set out in its constitutive documents, and its administration
and operation are carried out in accordance with its statutes or articles of
association rather than fiduciary principles;

Pp) GPPB refers to the Government Procurement Policy Board established in
accordance with Article X of R.A. No. 9184, otherwise known as “Government
Procurement Reform Act”,

Intermediation strategy shall refer to a development strategy that provides
financial, agricultural, business development and institutional development
services to the entrepreneurial poor and employers of the poor and provides
as well product development and marketing support using the principles of fair
trade to marginalized producers. A SE engaged in intermediation strategy
need not be owned by the marginalized stakeholders but provide immediate
access to services among critical mass of these marginalized stakeholde!

C)



1) Marginalized sectors shall refer to groups of people who are stigmatized or
marginalized by virtue of their physical, psychological, economic, social or
cultural circumstance;

8) Micro-enterprise as defined in R.A. No 6977, as amended by R.A. No 9501,

otherwise known as the "Magna Carta for Small Enterprises’, shall refer 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 a value of not more than Three Million

Pesos (P3,000,000.00). this amount is subject to review and adjustments by

the Micro, Small and Medium Enterprises Development (MSMED) Council,

taking into account inflation and other economic indicators and may use other
variables such as number of employees, equity capital and assets size;

{) Microfinance shall refer to the provision of a board range of financial services
such as deposits, loans, payment services, money transfer and insurance
products to the poor and low-income households and their microenterprises
and small businesses; to enable them to raise their income levels and
improve their living standards;

Minimum basic needs shall refer to the needs of a Filipino family pertaining to
survival (food and nutrition; health; water and sanitation), security (shelter;
peace and order; public safety, income and livelihood); and enabling services
(basic education and literacy, participation in community development, family
and psycho-social care);

y)

v) Non-Government Organizations or NGO refers to an duly registered non-
stock, non-profit organization focusing on the upliftment of the basic or
disadvantaged sectors of the society by providing advocacy, training,
community organizing, research, access to resources, and other similar
activities, and as defined under Section 34 (H)(2)(c) of Republic Act No. 8424,
as amended, otherwise known as the National Internal Revenue Code of
1997, organized and operated exclusively for scientific research, educational,
character-building and youth and sports development, health, social welfare,
cultural and charitable purposes, or a combination thereof, and no part of the
net income of which inures to the benefit of any private individual;

w) People’s Organization or PO refers to a self-help group belonging to the basic
sectors and/or disadvantaged groups composed of members having a
common bond of interest who voluntarily join together to achieve a lawful
common social or economic end;

Person with Disability shall refer to those suffering from restriction or different
abilities, as a result of mental, physical or sensory impairment, to perform an
activity in the manner or within the range considered normal for human being;

x)

Poor shall refer to individuals and families whose income fall below the
poverty threshold as defined by the National Economic Development Authority

y)

7


and/or are deprived of the means to provide in a sustained manner their
minimum basic needs of food, health, education, housing and other essential
amenities of life, as defined under R.A. 8425;

2) Poverty reduction/alleviation shall mean overcoming the income, resource,
and capability deprivation among the poor as defined in the preceding

paragraph and the marginalized sectors as defined in paragraph (q) hereof;

aa)Private Enterprise shall refer to an organization engaged in a business activity
organized for the purpose of accumulating profit and whose primary
stakeholders and beneficiaries are its owners;

bb)Procuring entity refers to any branch, department, office, agency, or
instrumentality of the government, including state universities and colleges,
government-owned and/or — controlled corporations, government financial
institutions, and local government units procuring Goods, Consulting Services
and Infrastructure Projects

cc) Resource mobilization strategy shall refer to a development strategy intended
to generate income from the sale of products and services of SE in order to
finance or subsidize the operation of its core development program or
development interventions among the marginalized sectors;

dd) SEPPS refers to a SE with the poor as primary stakeholders and which is a
wealth creating organization that explicitly declares and pursues poverty
reductior/alleviation or improving the quality of life of specific segments of the
poor as principal objective. A SEPPS engages and invests in the poor to
become effective workers, suppliers, client and/or owners, and ensure that a
substantive part of the wealth created by the enterprise is distributed to, or
benefits them. In addition to reinvesting its surplus or profits back to the
enterprise to sustain the fulfillment of its social mission, a SEPPS also uses its
surplus or profits and mobilizes other resources to assist the poor to become
partners in SE or value chain management/governance and to become
partners in the community, sectoral and societal transformation;

ee) SEGFP refers to the SE Guarantee Fund Pool created under this Act;

ff) Social development refers to the continuing process of addressing the needs
of society, beginning with the people's minimum basic needs, through a
systematic implementation of socioeconomic programs or packages;

gg)Social Enterprise or SE refers to an organization, whether an association,
single proprietorship, partnership, or a cooperative, whose primary
stakeholders and/or beneficiaries are marginalized sectors of society,
engaged in providing goods and services that are directly related to its
mission of improving societal well-being. It is established to achieve multiple
bottom lines such as financial, social and ecological. It generates profit or
surplus with due regard to social and environmental costs, and makes a pro-
active contribution to resolving social and environmental problems. A SE, for
purposes of this Act, shalll principally mean a SEPPS


hh) Social Enterprise Service Institution refers to an organization that provides
assistance to SEs for them to become viable and sustainable and which
assistance pertains to supplying need such as trainings, education and other
capacity-building measures, research and development, and other similar
activities;

Social Enterprise Advocacy Group refers to an organization whose primary
purpose is supporting the cause of SEs especially with regard to public policy
and articulating issues or causes related to social entrepreneurship;

ii

Social Entrepreneur refers to an innovative individual or institution that
promotes the creation and operationalization of enterprises or livelihood
endeavors for those in need or which addresses social problems and
improves societal well-being;

i

kk) Social entrepreneurship entails innovations designed to explicitly improve
societal well-being, housed within entrepreneurial organizations, which
initiate, guide or contribute to change in society;

I)

Social Inclusion strategy refers to the development strategy that assists
groups of people who are stigmatized or marginalized by virtue of their
physical, psychological, economic, social or cultural circumstance in order to
restore their dignity by not only removing the barriers that limit their access to
the delivery of basic social services and employment, but more importantly, by
nurturing work and other environments that create avenues for their
participation as productive members of society;

mm) Social Investors are individuals or institutions that choose to put in
money to a business endeavor or activity not principally for financial profit but
to fulfil a social mission which may include poverty reduction, concern for
environmental protection, strong organizational governance, and a desire for
a more economically just world;

nn) Social reform refers to the continuing process of addressing the basic
inequities in society through a systematic, unified and coordinated delivery of
socioeconomic programs or packages;

00) Transactional roles refer to enterprise-related functions performed by the poor
that involves an exchange of goods or services for money including being
workers, suppliers, clients or owners;

pp) Transformational roles are functions performed by the poor as conscious
agents of change to lift their own selves from poverty and to participae in
group efforts to improve the quality of life of their community, sector or society
as a whole;


qq) Transactional services pertain to enterprise or market-driven activities, such
as providing loans, demonstrating new technologies or conducting trainings
that are necessary for the poor in SE system to effectively and efficiently
perform their roles as workers, suppliers, clients and owners. Transactional
services may be fee-based, such as the granting of loans, or non-fee based,
such as the extension of production-related trainings;

1) Transformational services pertain to activities that empower the poor, such as
leadership formation and organizational development, asset build-up and
providing educational and experiential learning opportunities, to become
conscious change agents for themselves, for their communities, sectors and
society as a whole;

ss) Underemployment shall mean an economic position where an employed
person's desire to have additional hours of work in his/her present job or to
have an additional job, or to have a new job with longer working hours is not
met;

tt) Unemployment shall mean an economic situation where persons who are 15
years old and over as of their last birthday and are 1) without work or have no
job or business, 2) available for work or willing to take up work in paid
employment or self-employment, 3) seeking work and had taken specific
steps to look up for a job or establish a business but failed to; and

uu) Value chain refers to value-adding economic activities that an enterprise is
interlinked with in the process of producing goods and/or services to serve its
chosen market. A value chain typically consists of: 1) inbound distribution of
logistics, 2) manufacturing operations, 3) outbound distribution or logistics, 4)
marketing and selling, and 5) after-sales service. These activities are
supported by 6) purchasing or procurement, 7) research and development, 8)
human resource development, and 9) organizational development. A SE that
understands and manages its value chain improves its capability to create
economic, environmental and social values towards improving the position
and benefits of the poor in the value chain and towards ensuring the viability
and sustainability of the enterprise.

CHAPTER III
POVERTY REDUCTION THROUGH SOCIAL ENTERPRISE

SECTION 4. Social Enterprise (SE); General Concept and Coverage — A SE,
for purposes of this Act, refers principally to a SE with the poor as primary
stakeholders. As such, it declares and pursues poverty reduction/alleviation or
the improvement in the quality of life of specific segments of the poor as its
principal objective. It pursues this objective by directly engaging and investing
in the poor to become effective workers, suppliers, clients and/or owners of
the SE as well as partners in poverty reduction, economic and social
development. A SE maybe collectively owned by the poor in the form of

10


cooperatives or associations where the poor ate the exclusive owners or
comprise a majority of members.

In order for the SE to fall under this definition, and thereby be eligible
for the services, assistance and incentives set forth hereunder, said SE:

a. shall provide or facilitate the provision of a combination of transactional
and/or transformational services to improve the position and benefits
derived by the poor from the SE and the value chain or economic
subsector where the SE is located, including becoming worker-owners,
supplier-owners, supervisors and managers, active members and leaders
in governing bodies of the SE or its allied organizations;

b. shall invest a substantive part of its surplus, profits or mobilize other
resources to assist the poor to become partners in SE or value chain
management/governance and/or to become partners in community,
sectoral and societal transformation;

¢. shall make a pro-active contribution to resolving social and environmental
problems and generate profit or surplus with due regard to social and
environmental costs;

d. shall employ any of the following development strategies in the pursuit of
its social mission: 1) empowerment strategy; 2) social inclusion strategy;
3) intermediation strategy; and, resource mobilization strategy;

e, shall reinvest part of its surplus or profits back to the SE to sustain the
fulfillment of its social mission;

f, shall be engaged in an economic activity within the sectors of agriculture
and fisheries, industry and services which, for purposes of this Act, shall
refer to an activity in any of the economic subsectors;

g. shall ensure that a substantive part of the wealth created by the enterprise
is distributed to the poor in the form of services, dividends and other forms
of benefits, and payments and incentives for products or services rendered
consistent with the principles of fair trade;

h. shall be duly registered with the appropriate agencies as provided under
the Corporation Code or the Cooperative Code of the Philippines;

i. shall be one hundred percent (100%) owned and capitalized by Filipino
citizens if single proprietorship or partnership. If the enterprise is a juridical
entity, at least sixty percent (60%) of its capital or outstanding stocks must
be owned by Filipino citizens;

j. shall neither be a branch, subsidiary or division of a private enterprise,
regardless of the size of such private enterprise, nor may its policies be
determined by a private enterprise or by persons who are not owners or
employers of the said SE. Provided, That this shall not preclude a SE from

a


accepting subcontracts from large private enterprises or firms from joining
in cooperative or joint-venture activities with other SEs or foundations
practicing CSR.

Only SEs with the poor as their primary stakeholders are entitled to the
services, assistance and incentives set forth under this Act: Provided, That SEs that
have not achieved financial sustainability may be eligible to avail of the services,
assistance and incentives set forth in this act by presenting a workable strategy to
achieve financial sustainability over a reasonable period of time. This is cognizant of
the fact that SEs creates a combination of economic, environmental and social
values much of which is not easily quantified especially in financial terms and that
these social objectives are primary and cannot be sacrificed; thus, it is generally
more difficult for SEs to achieve financial sustainability. It is further recognized that
SEs may also be creating positive social value even if they have not achieved
financial sustainability.

Micro, small, and medium enterprises established under R.A. No, 6977, as
amended by R.A. No. 8299 and R.A. 9150; Barangay Micro Business Enterprises
established under R.A. 9178; Fair Trade certified organizations or certified Fair
Trade organizations; Overseas Filipino Workers (OFWs) and their dependents that
are organized and assisted by the Overseas Workers Welfare Administration
(OWWA) and the National Livelihood and Development Council (NLDC) under the
Livelihood Development Programs for OFWs; agrarian reform beneficiary
organizations (ARBO) under the Department of Agrarian Reform (DAR); as well as
community-based associations composed of poor families organized by the
Department of Social Welfare and Development and the local government units
(LGUs) under the Self-Employment Assistance — Kaunlaran Program as an
alternative to the Conditional Cash Transfer Program that meet preceding
requirements shall be regarded as SE under this Act.

Within ninety (90) days from the effectivity of this Act, the Commission shall
formulate the implementing rules and regulations governing the application of SEs to
qualify and be regarded as SE under this Act, following the principles of self-
regulation, transparency and responsibility.

SECTION 5. Formulation of Poverty Reduction Through Social
Entrepreneurship (PRESENT) Program — To promote the development of SEs with
the poor as primary stakeholders, a comprehensive and fully-integrated Poverty
Reduction Though Social Entrepreneurship (PRESENT) Program shall be
formulated, guided by the following principles:

a. Incorporation of the PRESENT Program in the government's
poverty reduction drive as major sustainable and comprehensive
strategy;

b. Rationalization of poverty reduction programs by streamlining and
coordinating the various anti-poverty programs of the government to
reduce inefficiency and duplication and to improve the effectiveness
of each program;

12


c. People’s participation and empowerment by mobilizing civil society
organizations and social movement groups working with the poor;

d. Promoting sustainable programs that reduce inequality in incomes
across economic sectors and increase self-reliance among the
poor;

e. Enabling SEs to overcome constraints and to take advantage of
opportunities for enhancing the position and benefits of the poor in
economic subsectors and value chains; and;

f. Gender-sensitivity by ensuring women’s equal rights and access to
SEs resources.

The planning framework of the PRESENT Program and its planning process
shall ensure that the poor are engaged as primary stakeholders. It shall add value
and complement ecosystem-based, community-based and other tools and
processes in local economic development by promoting and utilizing the economic
subsector as a strategic unit of analysis and planning SE development interventions.

The PRESENT Program shall identify and develop key SEs and resource
institutions as partners in strategic economic subsectors that have potential for
growth and where large numbers of the poor are concentrated. SEs shall be
developed as vehicles to ensure that the poor benefit most from sustainable
subsector development.

PRESENT medium-term and annual development plans shall be formulated in
synchrony with the medium-term development plan of the national government.

CHAPTER IV
INSTITUTIONAL MECHANISMS

SECTION 6. Creation and Composition of the Commission on SEs - To
carry out the above-stated policy and to spur the growth and development of SEs in
the country, the Commission on SEs, hereinafter referred to as the Commission, is
hereby created under the Office of the President

The Commission shall be the primary agency tasked to carry out the
promotion, propel the development, and spur the growth of SEs in the country, It
shall be responsible for facilitating and coordinating the national efforts to promote
the viability and progress of SEs.

The Commission shall be headed by a Chairperson, to be appointed by the
President, with the Secretary of the Department of Trade and Industry (DT!) and the
Secretary of the Department of Agriculture as Co-Vice-Chairpersons and shall be
composed of the following:

(a) Lead Convenor of the National Anti-Poverty Commission (NAPC);

13


(b) Director-General of the National Economic Development Authority (NEDA);

(c) Secretary of the Department of Finance (DOF);

(d) Secretary of the Department of Interior and Local Government (DILG);

(e) Secretary of the Department of Labor and Employment (DOLE);

() Secretary of the Department of Science and Technology (DOST);

(g) Chairperson of the Cooperative Development Authority (CDA);

(h) Secretary of the Department of Education (DepEd);

(i) Secretary of the Department of Social Welfare and Development (DSWD);

() Secretary of the Department of Agrarian Reform (DAR);

(k) Secretary of the Department of Health (DOH);

(I) Secretary of the Department of Environment and Natural Resources
(DENR)

(m) Nine (9) representatives from SEs, three (3) representatives each from the
main island groupings of Luzon, Visayas, and Mindanao;

(n) Three (3) representatives from SE Service Institutions; and

(0) Three (3) representatives from SE Advocacy Groups.

Cabinet-ranked ex officio members of the Commission shall designate a
permanent representative in case they fail to attend its meetings. The designated
permanent representative of any of the aforementioned Cabinet-ranked members of
the Commission must hold a position not lower than a bureau director.

The representatives of the SEs from the main island of Luzon, Visayas, and
Mindanao, the SE Service Institution, and the SE Advocacy Groups shall be chosen
by the President from among the nominees submitted by their respective national
organizations to serve in the Commission for a term of three (3) years. These
representatives must be conversant in the theory and practice of SE and committed
to policies and programs provided under this Act.

The Chairperson and members of the Commission shall be entitled to a
reasonable per diem for meeting actually attended at such amount as may be fixed
by the Commission in accordance with existing laws, rules and regulations.

The Commission shall, from time to time, call upon the participation of any
government agency to attend in its meetings to assist on clarifying issues and finding
resolution to problems that concern their respective offices with respect to the
implementation of the PRESENT Program enunciated hereunder and which effects
the growth and development of SEs.

The Commission may create an Executive Committee of seven (7) members
elected by the Commission members from among themselves or their designated
permanent representatives, with t least three (3) members representing the SEs, and
with authority to act for and on behalf of the Commission during intervals of
Commission meetings, and within the specific authority granted by the Commission.

SECTION 7. Powers and Functions - The Commission shall have the following
powers and functions:

14


(a) Formulate policies, plans, programs and projects to develop and promote SEs
as a tool for poverty reduction consistent with national development
objectives;

(b) Oversee the successful implementation of the PRESENT Program and other
Public-Private Partnership programs with the poor as the primary
stakeholders;

(c) Identify sources of financing to expand SEs;

(d) Monitor and evaluate the performance of programs and projects for
appropriate incentives;

(e) Call upon any government agency to carry out and implement programs and
projects identified by the Commission;

(f) Call upon POs, NGOs, the academe and other sectors to provide advice on
matters pertaining to SEs and conduct of transactional and transformational
services to farmers, producers, workers, consumers and stakeholders;

(g) Submit annual and other periodic reports to the President and Congress of
‘the Philippines through the Congressional Oversight Committee;

(h) Promulgate such rules and regulations and exercise other powers and
functions as may be necessary to carry out effectively the purpose and
objectives of this Act; and

(i) Perform such other functions as may be necessary for its effective operations
and for the continued enhancement, growth or development of SEs.

SECTION 8. Secretariat and Office - There is hereby crated a Commission
secretariat headed by an Executive Director to serve as the national technical and
administrative secretariat of the Commission with the member agencies providing
additional staff support as the need arises. The secretariat shall perform the
following functions:

(a) to provide staff support to the Commission, with the assistance for the
National Economic and Development Authority secretariat, in the formulation
of the PRESENT development programs and plans;

(b)to assist the Commission in the implementation of the PRESENT
development program and the annual and medium-term development;

(c) to assist the Commission in the accreditation of SEs;
(d) to assist the Commission in monitoring the PRESENT development programs

and the activities of the various concerned government agencies with respect
SEs;

15


(e) to prepare, collate and integrate all necessary inputs to the Council's yearly
report on the status of SEs in the country;

() to. submit periodic reports to the Commission on the progress and
accomplishment of its work programs; and

(g) to perform ad/hoc functions as are authorized by the Commission.

The Commission shall have its principal place of business in Metro Manila and
may establish such branches within the Philippines as may be deemed necessary by
the President of the Philippines to carry out the powers and functions of the
Commission.

SECTION 9. The National Center for SE Development - There shall be
established a National Center for SE Development (NCSED) under the Commission
which shall develop a research and development system, provide training and
education on SE development, and establish a SE marketing services in order to
implement the provisions of this Act.

In this regard, it shall, in coordination with relevant agencies, perform the
following functions:

(a) provide SEs with capability-training and education through the SE Capability
Building Program created under Section 11 of this Act;

(b) develop and enhance a research and development system that shall equip
every SE with innovative and sustainable approaches that ensures
improvement in the access to more desirable basic social services by the poor
pursuant to Section 13 here under; and

(c) manage a SE Marketing Assistance Program (SMAP) that will ensure the
generation of the highest possible income for the SEs pursuant to Section 14
hereof.

The NCSED shall be headed by the Executive Director of the Commission
Secretariat. It shall maintain a multi-sectoral, multi-disciplinary pool of experts
including those from the academe, practicing professionals, business and industry,
youth, women and other concerned sectors, who shall be screened according to the
qualifications set by the Commission.

The NCSED shall, in addition to coordinating with relevant agencies, partner with
the University of the Philippines Institute for Small Scale Industries (UP ISSI), State
Universities and Colleges, under universities and academic organizations, the
Technical Education and Skills Development Authority (TESDA), and Technology
and Livelihood Resource Center (TLRC), Department of Transportation and
Communication (DOTC), and CSOs in implementing its programs.

SECTION 10. Role of LGUs in SE Development — Pursuant to the relevant
provisions of R.A. No. 7160, otherwise known as the Local Government Code, the

16


LGUs shall be primarily responsible for the development of SEs and the
implementation and enforcement of the relevant provisions of this Act within their
respective jurisdictions with the end in view of reducing poverty therein. The LGUs
are hereby mandated to include in their respective local development plans certain
policies and programs geared toward the development of SEs in their jurisdiction.

LGUs with viable SE development plan as incorporated in their respective local
development plans are entitled to avail of the SE Development Fund created under
the immediate succeeding section for the purpose of initiating and facilitating the
development and sustainability of SEs in their own jurisdiction: Provided, That no
LGU shall establish and operate its own SE.

CHAPTER V.
DEVELOPMENT OF SOCIAL ENTERPRISES

SECTION 11. SE Capability Building and Sustainability Program; Creation
of SE Development Fund — There is hereby established a SE Capability Building
and Sustainability Program whose primary objective is to guarantee the viability and
sustainability of SEs through activities that advance, in general, both
transformational services and transactional services. This program shall include
training in social entrepreneurship development, institutional strengthening, human
resource competency and skills training, business planning and advisory services,
upgrading of accounting and auditing systems, technical assistance for the
installation or improvement of management information systems, technology
intervention, technology incubation/commercialization, market studies, and product
development competitiveness, business matching activities, trade fairs and missions,
policy advocacy, disaster-resiliency and other related activities

The SE Capability Building and Sustainability Program shall likewise include the
establishment of an insurance system for SEs affected by natural calamities in line
with the National Framework Strategy on Climate Change 2010-2022 as provided for
under RA 9729 or the Climate Change Act of 2009 and RA 10121 or the Philippine
Disaster Risk Reduction and Management Act of 2010.

Toward strategically developing the nation’s human resource capability in social
entrepreneurship, the DepEd and the CHED shall cause the integration of SE
content and inclusion of SE courses in the curricula at all levels, especially in the
secondary and tertiary levels.

For this purpose, there is hereby created and established a SE Development
Fund (SEDF) in the amount of Three Billion Pesos (P3,000,000,000.00) to be
administered by the Commission with an endowment from the earnings of the
Philippine Amusement and Gaming Corporation (PAGCOR), in addition to
appropriations by Congress, voluntary contributions, grants, gifts from both local and
foreign sources as may be accepted by the Commission. Capability building projects
approved by the Commission shall be implemented by the NCSED.

7


Only the fruits of SEDF shall be used for the purposes provided herein. Any
undisbursed fruits for the preceding year shall form part of the disbursable portion of
the SEDF in the following year.

SECTION 12. Promotion and Development of SEs as One of the Purposes of
the People’s Development Trust Fund - The promotion and development of SEs
is hereby declared one of the purposes of the PDTF established under Section 10 of
R.A. 8425.

For this purpose Section 11 of R.A. 8425 is hereby amended to read as
follows:

Section 11. Purposes of the People’s Development Trust Fund. - The
earnings of the PDTF shall be utilized for the following purposes:

(1) Consultancy and training services for microfinance institutions and
their beneficiaries on the establishment of the necessary support
services, social and financial preparation of beneficiaries,
preparation of plans and programs including fund sourcing and
assistance, establishment of credit and savings monitoring and
evaluation mechanisms AS WELL AS CONSULTANCY AND
TRAINING SERVICES ON SE MANAGEMENT IN THE
FUNCTIONAL AREAS OF MARKETING, ORGANIZATIONAL
AND HUMAN RESOURCE MANAGEMENT, OPERATIONS
MANAGEMENT, FINANCIAL MANAGEMENT AND STRATEGIC
MANAGEMENT;

(2) Scholarships and training grants for micro finance OR SE staff and
officers, and selected beneficiaries;

(3) Community organizing for microfinance, livelihood, SE and micro-
enterprise training services

(4) Livelihood/micro-enterprise/SE DEVELOPMENT AND.
CAPABILITY BUILDING project/program feasibility studies and
researches;

(5) xxx;

(6) Xxx;

(7) Legal and other management support services such as
registration/ACCREDITATION, documentation, contract review and
enforcement, financial audit and operational assessment;

(8) Information dissemination of microfinance technology AND SE
DEVELOPMENT; and

(9) Other activities to support microfinance AND SEs as approved by
the designated agency administering the PDTF.

18


“The PDTF may be accessed by the following
(a) xxx;

(B) THE NCSED;

(C) QUALIFIED SEs;

(D) x x x;

(E) xxx

SECTION 13. Social Enterprise Research and Development System - The
Commission, in accordance with the NEDA, DOST, and DTI, and other appropriate
agencies and research institutions, shall develop and enhance a research and
development system that:

(a) provides studies on opportunities for poverty reduction and SE development
in key economic subsectors and other inputs for the Commission to undertake
strategic planning for its PRESENT Program;

(b) equip SEs and support institutions with technologies that are appropriate for
enhancing the participation and benefits of the poor in various economic
subsectors; and

(c) equip SEs and support institutions with innovative and sustainable
approaches to improve access of the poor to basic social services.

SECTION 14. Social Enterprise Marketing Infrastructure Development - The
Commission shall promote the development and expansion of local and foreign
markets for the products and services of SEs, guided by the principles of fair trade.
Consistent with this, the Commission shall:

(a) establish a SE Marketing Assistance Program (SMAP) that will assist SEs
match supply with demand in both domestic and foreign markets, as well as
promote SE products and services through tri-media, trade fairs and trade
missions;

(b) develop, install and sustain a SE market information system with the
assistance of the DTI and DOTC which shall be called the SE Marketing
Information Network (SMIN).

The SMIN shall be set up from the level of the municipal and provincial LGUs, the
regional and up to the Commission level within one (1) year from the approval of
this Act, taking into account existing information networks such as the internet

19


and using a dedicated website for the purpose, to ensure linkage of the SEs with
the government and its various departments, agencies, bureaus and
instrumentalities, the local and domestic markets, as well as research institutions.
The Commission shall provide technical assistance in setting up the SMIN at the
local and regional levels.

All government departments, agencies, bureaus, research institutions, as well
as the LGUs shall consolidate and continuously update all relevant information
and data that would be of use to SEs on a periodic basis and make such data
available in a dedicated website on the internet.

The SMIN shall provide information and marketing services related to
products of SEs which shall include the following

. Supply data;
. Demand data;
. Price and price trends;
Product standards;
Directory of, but not limited to SEs, traders, key market centers,
processors and business institutions both at the national and local levels;
Information and technology generated from research institutions;
International, regional and local market forecasts; and
Resource accounting data.

ARON=

ON

CHAPTER VI
ACCESS TO CREDIT RESOURCES

SECTION 15. SEs’ Access to Credit Resources and Mandatory
Allocation Thereof — In the pursuit of poverty reduction through SEs, there is a
need to ensure their access to credit. In this regard, the active participation of the
banking sector and government financial institutions is hereby mandated.

In addition to and apart from the special credit windows mandated under
Section 16 of R.A. No. 8425 to be opened by the Land Bank of the Philippines,
Development Bank of the Philippines, Philippine Postal Bank and Al Amanah Bank
for the promotion of microfinance, the foregoing banks are hereby mandated to set
aside at least eight percent (8%) of their total loan portfolio based on their balance
sheet as of the end of the preceding quarter and open a special credit window for
SEs as herein contemplated.

For a period of ten (ten) years from the date of effectivity of this Act, all other
lending institutions as defined under Bangko Sentral ng Pilipinas (BSP) rules,
whether public or private, shall likewise set aside at least eight (8%) percent of their
total loan portfolio based on their balance sheet as of the end of the previous quarter
and make the same available foe SEs through a special credit window.

The BSP, in consultation with the Commission, shall formulate the rules for
the effective implementation of this provision: Provided, That the purchase of
government notes, securities and other negotiable instruments shall not be deemed

20


compliance with the foregoing provisions: Provided, further, That the BSP shall
establish an incentive program to encourage lending to SEs beyond mandatory
credit allocation to said enterprises, such as possible reduction in bank's reserve
requirement.

The Commission shall establish the appropriate systems to monitor all loan
applications of SEs in order to account for the absorptive capacity of the SE sector.

The BSP shall require lending institutions covered by this Act to furnish the
Commission on a quarterly basis a regular report on their respective compliance with
the above provisions on the mandatory credit allocations for SEs and act with
dispatch on the Commission's reports of non-compliance therewith

The special credit window for SEs shall bear lower than market interest rates
with longer terms or repayment and waiver of applicable fees.

SECTION 16. SEs* Special Credit Window; Purposes ~ The special credit window
mandated in the preceding section to be created shall be intended for, but not limited
to, the following purposes:

(a) Organizational Developmental Loan or Capacity-Building Loan for the
conduct of social preparation activities or the conduct of capability-building
/training or professional development of the board, management and staff
of the SE intended for social entrepreneurship development and
institutional strengthening, human resource competency and skills training,
business planning and advisory services, technology intervention,
technology incubation/commercialization, market studies, and product
development competitiveness, business matching activities, trade fairs and
missions, and policy advocacy

(b) Credit Line for Business Development Loan or Working Capital Loan
to cover the operational and management expenses of a start-up/existing
business or income generating project, including receivable financing
and/or purchase of additional inventory, and soft or intangible investments
such as: trade fair participation; pre-operating expenses for expansion
project; rental deposit; IT software packages; franchise development
packages, and others;

(0) Fixed Asset Financing to cover acquisition of fixed assets like machinery
and equipment or motor vehicle; lot acquisition for project site and/or the
construction of a plant and building and the improvements thereof;

(d) Value Chain Financing to cover any value chain activities (production,
processing and marketing) with direct forward or backward link;

(e) Domestic Letter of Credit/Trust Receipt to provide a standby credit
facility for the borrower for the purchase of product inputs, equipment,
machinery, implements and spare parts, whereby payment of which is
guaranteed and to be made to the seller by the lending institution,

2a


provided all documents conform with the terms and conditions of the
credit; and

(f) Revolving Credit Line for re-lending to finance the livelihood project
requirements of end-borrowers.

SECTION 17. Eligibility for Agriculture and Fisheries Credit — At least ten
percent (10%) of the funds created under Section 6 of Republic Act No. 10000,
otherwise known as “The Agri-Agra Reform of 2009”, and mandated to be set aside
by all banking institutions, whether government or private, for agriculture and
fisheries credit shall be made available for SEs engaged in agriculture and fisheries
activities.

SECTION 18. SE Guarantee Fund Pool - There shall be evolved a SE credit
insurance and financing system to improve the viability and productivity of the SE
through government or private banking institutions.

There is hereby created a SE Guarantee Fund Pool (SEGFP) which shall comprise
five percent (5%) of the 2012 surplus of the government-owned and/or — controlled
corporations and government financial institutions including the Philippine
Amusement and Gaming Corporation (PAGCOR), the Philippines Charity
Sweepstakes Office (PCSO), the Social Security System (SSS), and the
Government Service Insurance System (GSIS), the National Power Corporation and
the Philippine National Oil Company as contribution to the SGFP in accordance with
relevant laws, charters and by-laws, in addition to voluntary contributions, grants and
gifts from both local and foreign sources as may be accepted by the commission.

The SEGFP shall be administered by the commission and shall be used to
mitigate the risk involved in SE sector lending, thereby facilitating the provision of
credit therefore. Such fund shall be placed in trust with the Land Bank of the
Philippines for the purposes of providing guarantee cover to participating financial
institutions and other parties in extending financing to SEs: Provide, That the fund
may also be used to cover the performance bond of SEs in government
procurement. The commission, in coordination with the Land Bank of the Philippines,
shall draw up the mechanics and administrative arrangements and issue the
implementing guidelines for the fund pool.

CHAPTER VII
INCENTIVES AND BENEFITS
SECTION 19. Incentives and Benefits . — In recognition of social value

created by the SEs in addressing the problem of poverty, reducing inequality in
incomes across economic sectors, increasing self-reliance among the poor and
creating opportunities for them toward raising their quality of life, the SEs created
and/or accredited in accordance with this Act shall, in addition to their entitlement for

22


organizational development under Sections 11 through 14 and to gain greater
access to financing under Sections 15 through 17, be entitled to the fiscal incentives
and benefits provided in Sections 20 through 22 of this Act. In addition, social
investors shall also be entitled to certain incentives under Section 23 hereunder.

To level the playing field and in recognition of the circumstances of the start-
up SEs primarily employing persons with disabilities, the SEDF created in section 11
of this Act shall provide a cash incentive for every person with disability employed,
representing at least twenty five percent (25%) of the daily minimum wage, until
such time that the said SE is able to achieve financial sustainability

SECTION 20. Tariffs and Duties Exemption for the Importation of
Product Inputs, Equipment, Machinery, and Implements — All SEs as duly
certified by the Commission in consultation with the Department of Finance and the
Board of Investment of the Department of Trade and Industry shall, for five (5) years
after the effectivity of this Act, be exempted from the payment of tariff and duties for
the importation of all types of product inputs, equipment, machinery, implements,
and spare parts: Provided, However, That these inputs, equipment, machinery,
implements, and spare parts shall be for the exclusive use of the importing SEs and
can be shown to be directly related to further improve the value chain operations of
the SEs.

The Commission, in consultation with the Department of Finance and the
Board of Investment, shall, within ninety (90) days from the effectivity of this Act,
formulate the implementing rules and regulations governing the importation of the
product inputs, equipment, machinery, and implements for use of the SEs.

SECTION 21. Taxation of an Accredited SE - The taxation of SE shall be as
follows:

a) A SE with a net income of not more than Ten Million Pesos (P
10,000,000.00) shall be exempt for all national, city, provincial, municipal
or barangay taxes of whatever name and nature: Provided, That a
cooperative with accumulated reserves and undivided net savings of not
more than Fifteen Million Pesos (P 15,000,000.00) that qualifies as a SE
under this Act shall likewise be exemt from all national, city, provincial,
municipal or barangay taxes of whatever name and nature.

b)

Transactions of the SE and its clients shall be exempt from documentary
stamp tax.

Sales or exchange of real property by the SE classified as capital assets
or shares of stock shall be exempt from Capital Gains Tax.

°)

23


d) A reinvestment made by a SE for the expansion of its socioeconomic
projects within the area of its operation shall be tax deductible from the
gross income for income tax purposes

SECTION 22. Preferential Right for SEs Transacting Procurement
Business with the Government — SEs shall be accorded a preferential right in the
procurement process and implementation of procurement contracts by the
government and all its branches, departments, agencies , subdivisions, and
instrumentalities, including government-owned and/or- controlled corporations and
local government units.

All Annual Procurement Plans of a Procuring Entity of the government as
cited in Section 7 of R.A. No, 9184 or the " Government Procurement Reform Act *
shall promote, to the extent possible or available, the preferential procurement of
goods produced and services rendered by SEs.

The provision of Section 10 of R.A. 9184 to the contrary notwithstanding, the
Procuring Entity shall, at all times, resort first to direct contracting, shopping, or
negotiated procurement in obtaining goods or services where such goods or services
may be obtained from SE within the area of operation of the Procuring Entity and is
duly certified by the Commission as having the capacity to supply the same.

(a) For this purpose, Section 50, 52, and 53 of R.A. are hereby amended to
read as follows:

“Sec. 50. Direct Contracting. - Direct Contracting
may be resorted to only in any following conditions:

a. XXX;
Beexixexiy
©, XX KL or

D. WHERE THERE EXISTS A SE SELLING THE GOODS OR
SERVICES REQUIRED BY THE PROCURING ENTITY AS
CERTIFIED BY THE COMMISSION.

“Sec. 52. Shopping - Shopping may be resorted to under any of the
following instances:

a. When there is unforeseen contingency requiring immediate
purchase: PROVIDED, THAT THE PROCUREMENT OF THE
GOODS OR SERVICES IS FIRST OBTAINED FROM A SE WITHIN
THE AREA OF OPERATION OF THE PROCURING ENTITY
WHICH IS DULY CERTIFIED BY THE COMMISIION AS HAVING
THE CAPACITY TO SUPPLY SAID GOODS AND SERVICES:
Provided, however, that the amount shall not exceed [Fifty-thousand

24


peses—{P50,000.00}} ONE HUNDRED THOUSAND PESOS
(P1000,000.00); or

b. Procurement of ordinary or regular office supplies and
equipment not available in the Procurement Service involving an
amount not exceeding Two hundred fifty thousand pesos
(P250,000.00): Provided, however, That the Procurement does not
result in Splitting of Contracts: Provided further, That A PRICE
QUOTAIOTION FROM A SE CERTIFIED BY THE COMMISSION
AS HAVING THE CAPACITY TO FURNISH OR PROVIDE SUSH
OFFICE SUPPLIES AND EQUIPMENT SHALL FIRST BE
OBTAINED; PROVIDED, FINALLY THAT ONLY AFTER THE
FAILURE OF SUBMISSION OF A PRICE QUOTAIOTN BY A SE
THAT at least three (3) price quotations from OTHER bona fide
suppliers shall be obtained.

XXX
“Sec, 53. Negotiated Procurement shall be allowed only in the
following instances

XXX;
xox
XXX}
XIX
XXX} OF

F, WHERE THE.GOODS OR SERVICES SUBJECT OF THE
PROCUREMENT CONTRACT MAYBE OBTAINED FROM A SE
WITHIN THE AREA OF OPERATION OF THE PROCURING
ENTITY AND WHICH IS DULY CERTIFIED BY THE COMMISSION
AS HAVING THE CAPACITY TO SUPPLY SAID GOODS OR
SERVICES.

@290D

(b) Only if and when no procurement is perfected by way of direct contracting,
shopping, or negotiated procurement by reason of the absence of a SE
within the area of operation of the Procuring Entity which is certified by the
Commission as having the capacity to supply the goods and services
subject of the procurement contract or the lack of interest to supply from a
SE shall be the Procuring Entity through its Bids and Awards Committee
issue an invitation to bid;

(©) A Procuring Entity shall, where applicable, have at least one member
representing SEs;

(d)In the implementation of R.A. No. 78801, otherwise known as the “Fair and
Equitable Access to Education Act”, in particular the allocation for textbooks,
desks, furniture and equipment used for instructional purposes, the ten

25


(10%) out of the twenty five percent (25%) of the amount released for the
purchase of desks, furniture and equipment allocated to SEs or cooperatives
of persons with disabilities shall always be observed notwithstanding the
provisions of R.A. 9184 or the “Government Procurement Reform Act” to the
contrary;

(e) Registered small enterprises under R.A. 6977, otherwise known as the
“Magna Carta for Small Enterprises,” as amended by R.A. 8299 and R.A.
9150, that qualify as SE under this Act shall, consistent with Section 4 of
R.A. 9150, be entitled to a share of at least ten percent (10%) of total
procurement value of goods and services supplied to the Government, its
bureaus, offices and agencies annually.

(f) The Commission and the Department of Budget and Management shall
issue the rules and regulations that shall implement the preferential right
accorded to SEs under this Section, including the limitations and restrictions
in the application of the same.

SECTION 23. Incentives for Social Investors - Social investors and other
institutions that contribute money or other forms of donation in the promotion and
development of SEs shall be entitled to the following tax incentives:

(a) Equity investments and donations to SEs shall be fully deductible from
the gross income of the investor and/or donor subject to the conditions of
Section 34(c) of Republic Act No. 8424, as amended, otherwise known as the
“National Internal Revenue Code of 1997": Provide, however, That the
accreditation of the SE by the Commission under this Act shall be sufficient;
and

(b) Donations to the SE shall be exempt from donor's tax subject to the
qualifications of Section 101 of Republic Act No. 8424, as amended,
otherwise known as the “National Revenue Code of 1997”: Provided, That for
purposes of utilization, accreditation granted under this Act shall be sufficient.

CHAPTER VIII
PENAL PROVISION

SECTION 24. Non- Compliance with the Mandatory Allocation of Credit
Resources — The BSP shall impose administrative sanctions and other penalties on
the lending institutions for non-compliance with the provision of this Act including a
fine of not less than Five hundred thousand pesos (P500,000.00).

26


SECTION 25. PENALTY CLAUSE - Any person who, intentionally or by
gross negligence, commits an act, other than the non-compliance with the
mandatory allocation of credit resources as provided in the preceding section, in
violation of any provision of this Act, fails to perform his/her functions under this Act
and/or who shall, in any manner, commit any act to defeat any provisions of this Act
shall, upon conviction, be punished with a fine of not less than Twenty-Five
Thousand pesos (P25,000.00) but not more than Fifty Thousand pesos (P50,000.00)
and suffer imprisonment of not less than six (6) months but not more than two (2)
years, without prejudice to being charged before a regular court for violation of the
provisions of the Revised Penal Code, Civil Code and other pertinent laws.

If the violation is committed by the SE or government agency, the members,
officers, directors or trustees thereof who have actually participated in, authorized,
or ratified the prohibited act shall, upon conviction, be held liable.

If the violation is committed by the employees and agents who acted in gross
violation of the provisions of this Act, the officers, directors or trustees, or
incorporators of the SE shall be jointly and severally liable with the offending
employees, agents, and the enterprise.

In the case of the public official or employee, the offender shall, upon
conviction, suffer the accessory penalty of absolute disqualification.

CHAPTER IX
TRANSITORY PROVISION

SECTION 26. Incorporation of the PRESENT Program in All the
Poverty Alleviation Programs of the Government. - Unless circumstances
warrant otherwise, all agencies of the Government implementing a poverty
alleviation program shall, in coordination with the Commission and within a period of
five (5) years but in no case longer than (10) years from the approval of this Act,
incorporate in their respective poverty alleviation programs the development of SEs
as a tool for poverty reduction

The Commission, in coordination with the various government agencies with
the poverty alleviation programs, shall prepare the appropriate beneficiaries thereof
and organize them into full-fledged SEs under the contemplation of this Act.

Within a period of 5 years, the Commission shall facilitate the development
and dissemination of tools, and invest in the development of the capability of SEs to
plan, monitor and evaluate their social and financial performance and outcomes.
Further, the Commission shall evolve socially acceptable benchmarks for evaluating

27


the performance of SEs and incorporate such to more effectively develop and
regulate the sector.

CHAPTER X
MISCELLANEOUS PROVISIONS

SECTION 27. Compliance With Other Laws that Govern the Relationship
Between a SE and its Employees — The Labor Code and other labor laws, the
Social Security Act, the Medical Care Act, and all other Social Legislations, and all
other laws and executive orders that govern the relationship between the SE and
employees shall apply and that all employees covered under this Act shall be entitled
to the same benefits given to any regular employees such as social security and
healthcare benefits.

SECTION 28. Congressional Oversight Committee on SE - There is
hereby created a Congressional oversight Committee on SE composed of the
Chairman of the Senate Committee on Trade and Industry, four (4) members of the
Senate and four (4) members of the House of Representatives. The members from
the Senate shall be appointed by the Senate President from among the members of
the Senate Committee on Economic Affairs, Trade and Commerce based on the
proportional representation of the parties or coalition therein. The members from the
House of Representatives shall be appointed by the Speaker from among the
members of the House Committee on Trade and Industry based on the proportional
representation of the parties or coalition therein.

The Oversight Committee, upon review and approval of the Implementing
Rules and Regulations mandated under Sec. 31 of this Act shall become functus
officio and therefore cease to exist: Provide, however, That the commission shall
submit to the Committee on Economic Affairs, Trade and Commerce of the Senate
and the Committee on Trade and Industry of the House of Representatives an
annual report on the implementation of this Act

The appropriation for the oversight committee shall be charged to the budget
of both Houses of Congress in the Annual General Appropriations Act.

SECTION 29. Appropriations - To carry out the provision of this Act, the
following amounts are appropriated as follows:

(1) The sum of One Hundred Million Pesos (P100,000,000.0) is hereby
appropriated as the initial operating fund which sum shall be sourced from the
President's Contingent Fund and/or voluntary contributions, grants and gifts from
both local and foreign sources as may be accepted by the Commission. In
subsequent years, the Commission shall have a separate annual appropriation
under the Office of ,the President which shall be provided in the General

28


Appropriation Act starting in the fiscal year immediately following the approval of this
Act.

(2) The aggregate sum of Three Billion Pesos (P3,000,000,000.00) for ten
years is hereby appropriated for the establishment of the SEDF from the share of the
national government in the earnings of the Philippine (PAGCOR) and/or voluntary
contributions , grants and gifts from both local and foreign sources as may be
accepted by the Commission, in the following manner: on the first year, One
Hundred Million Pesos (P1000,000,000.00); on the second year, One Hundred Fifty
Million Pesos (P150,000,000.00); on the third year, Two Hundred Million Pesos
(P2000,000,000.00); on the fourth year, Two Hundred Fifty Million Pesos
(250,000,000.00); on the fifth year, Three Hundred Million Pesos (P300,000,000.00)
; and every year thereafter until the tenth year, Four Hundred Million Pesos
(P500,000,000.00) annually.

SECTION 30. Social Enterprise Week — In order to institute continuing
awareness on the primacy of SEs with the poor as the primary stakeholders as a
viable government strategy in pursuing poverty reduction, the week of the month
when this Act shall have been signed into law shall be declared as the “Social
Enterprise Week” and shall be celebrated annually. The Commission, through the
NCSED shall be responsible in organizing activities for the event

SECTION 31. Implementing Rules and Regulations - The Commission
shall formulate and promulgate, in consultation with the concerned sectors, the rules
and regulations necessary to implement the provisions of this Act within three (3)
months from its effectivity.

SECTION 32. Printing and Distribution - 1) The National Printing office
shall publish this Act in the Official Gazette in full within sixty (60) days from the date
of its effectivity. Copies of this Act shall be given to every department, agency,
subdivision, and instrumentality of the Government, including government-owned
and controlled corporations, regional and provincial offices, and local governments.

2) All duly accredited SEs shall be given one (1) copy each at cost.
Thereafter, every newly accredited SE shall be issued at cost a copy of this Act and
the rules and regulations promulgated thereunder together with this certificate of
accreditation

SECTION 33. Information Dissemination- The Philippine Information
‘Agency (PIA), in coordination with the Commission, the DTI, DA, and the DILG, shall
ensure the proper and adequate information dissemination of the contents and
benefits of this Act to the general public specially to its intended beneficiaries.

29


CHAPTER XI
FINAL PROVISIONS

SECTION 34. Non-Impairment Clause — Nothing in this Act shall be
construed as to diminish, impair, or repeal rights recognized, granted, or available to
marginalized or basic sectors under existing laws

SECTION 35. Separability Clause - If any provision of this Act shall be held
invalid or unconstitutional, the remaining provisions thereof not affected thereby shall
remain in full force and effect.

SECTION 36. Interpretation and Construction — In case of doubt as to the
meaning of any provision of his Act or the rules and regulations issued in pursuance
thereof, the same shall be resolved liberally in favor of the SEs and their
stakeholders.

SECTION 37. Repealing Clause — (a) Sec. 11 R.A. 8425, otherwise known
as the “Social Reform and Poverty and Alleviation Act,” is hereby amended by
including SE promotion and development as one of the purposes of the People’s
Development Trust Fund;

(b) Art. 61 of R.A. 9520, otherwise known as the “Philippine Cooperative
Code of 2008” is hereby amended;

(c) Sections 10, 50, 52, and 53 of R.A. No. 9184, otherwise known s the
“Government Procurement Reform Act” are hereby amended;

(d) All laws, decrees, proclamations, orders, other issuances, rules and
regulations or parts thereof which are contrary to or inconsistent with this Act are
hereby repealed, amended or modified accordingly.

SECTION 38. Effectivity - This Act shall take effect fifteen (15) days after
its publication in the Official Gazette or in two (2) national newspapers of general
circulation.

Approved,

30