Republic of the Philippines
CONGRESS OF THE PHILIPPINES

Second Regular Session

nous Bilno. GO85

Introduced by Representative Lorenzo “Erin” R. Taiiada

EXPLANATORY NOTE,

Social enterprises refer to organizations engaged 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 conerete and sustainable response against poverty.

This bill, the Magna Carta for Social Enterprises, will promote and develop social ente
tool in the government's poverty reduction program. It aims to embody all the 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,

ises as a

The bill mandates various incentives and benefits for social enterprises. These include access to
capital and other resources (Chapter VII), fund for capability building (Sections 11 and 12 of
Chapter V), tax exemptions (Chapter VIID), marketing, research, and systems development support
(Sections 13 and 14 of Chapter V), and the 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 of a 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.

—
F Jencher
LOREN/P “ERIN” R. TANADA IIL

RepreseMative
Fourth District, Quezon Province


Republic of the Philippines
CONGRESS OF THE PHILIPPINES

FIFTEENTH CONGRESS
Second Regular Session

HOUSE BILLNO._G685

INTRODUCED BY HON. LORENZO “ERIN” R. TANADA 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

CHAPTERI
TITLE, POLICIES AND OBJECTIVES

SECTION 1. Short Title. — This Act shall be known as the “Magna Carta for Social
Enterprises of 2012". It may alternatively be cited as the Poverty Reduction Through
Social Entrepreneurship (PRESENT) Act of 2012”

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 of life for all

It is likewise declared a policy of the State that 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 underprivileged and that, in the 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. Specifically, small and
medium-sized entrepreneurs shall be recognized as major agents for rural development,

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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 Il
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 the 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;

c) Basic sectors shall refer to the disadvantaged sectors of Philippine society,
namely: farmer-peasant, artisanal fisherfolk, workers in the formal sector 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, and urban poor as defined under
Republic Act (R.A.) No. 8425, otherwise known as the “Social Reform and Poverty
Alleviation Act”;

d) Bottom line 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 refers to the process of enhancing the viability and
sustainability of SEs and pertain to 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

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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 the 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;

9) Commission shall refer to the SE Commission;

h) Cooperative shall refer to an autonomous and duly registered association of
persons, with a common bond of 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 be 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;

)) Economic subsectors are networks of related actors and enterprises
performing various functions in value chains. These actors and enterprises transform
raw materials into finished products, or develop services, and distribute or provide
them through market channels to final consumers; they may be identified by key raw
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
programs;

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 a channel for directly distributing income;

!) Fair trade shall refer to a trading partnership based on dialogue, transparency
and respect and which seeks greater equity in international trade and the
transformation and adaptation 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;

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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;

©) Foundation shall mean the categorization ofa 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;

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

q) _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 a critical
mass of these marginalized stakeholders;

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 (R3,000,000.00). 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:

t) Microfinance shall refer to the provision of a broad range of financial services
such as deposits, loans, payment services, money transfers 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;

u) 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);

v) Non-Government Organization or NGO refers to a duly registered non-stock,
non-profit organization focusing on the upliftment of the basic or disadvantaged
sectors of 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 or 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;

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

y)  Poorshall refer to individuals and families whose income fall below the
poverty threshold as defined by the National Economic and Development Authority
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 a SE in order to finance
or subsidize the operations of its core development program or development
interventions among the marginalized sectors;

dd) EPPS refers to a SE with the poor as primary stakeholders and which is a
wealth creating organization that explicitly declares and pursues poverty
reduction/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, clients 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 fulfilment 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

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management/governance and to become partners in 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;

99) Social Enterprise or SE refers to an organization, whether an association,
single proprietorship, partnership, corporation, 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, shall 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 needs such as trainings, education and other capacity-building
measures, research and development, and other similar activities;

ii) 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;

i) 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 address social problems and improve societal well-being;

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:

Il) 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 fulfill a social
mission which may include poverty reduction, concem for environmental protection,
strong organizational governance, and a desire for a more economically just worid,

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 involve 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 participate 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 the 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;

't) Transformational services pertain to activities that empower the poor, such as
leadership formation and organizational development, asset build-up and providing
education 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 and willing to take up work in paid employment or self-
employment, 3) seeking work and had taken specific steps to look 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 or 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 Il
POVERTY REDUCTION THROUGH SOCIAL ENTREPRISES

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 may be collectively owned by the poor in the form
of cooperatives or associations where the poor are the exclusive owners or comprise a

majority of the 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 transformatior

(c) 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 fulfilment
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;

0

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 employees of the said SE.
Provided, That this shall not preclude a SE from accepting subcontracts from
large private enterprises or firms or 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 create
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

8


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
RA. 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 Corporation (NLDC) under the Livelihood Development Program for OFWs;
agrarian reform beneficiary organizations (ARBO) under the various programs of 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 the preceding requirements shall be regarded as a 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 a 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
Through 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 a 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;

@

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 SE's
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, area-based, community-based and other tools and

Ls


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 the potential for growth
and where large numbers of the poor are concentrated. SEs shall be developed as
vehicles to ensure that the poor benefit the 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 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 (DTI) 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);
(b) Director-General of the National Economic Development Authority (NEDA);
(c) __ Secretary of the Department of Finance (DOF);
(4) Secretary of the Department of the 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);
() 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 (8) 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.

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The representatives of the SEs from the main island groupings of Luzon, Visayas,
and Mindanao, the SE Service Institutions, 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 the
Policies and programs provided under this Act.

The Chairperson and members of the Commission shall be entitled to a reasonable
per diem for each 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 in 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 affects 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 at 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:

(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;

(4) 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;

() 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 other 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 such other powers and
functions as may be necessary to carry out effectively the purposes and objectives of this
Act; and

i


(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 created 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 of 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;

(4) to assist the Commission in monitoring the PRESENT development
programs and the activities of the various concerned government agencies with
respect SEs;

(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 hereunder; 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, other 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 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
immediately 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.

13


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.

Only the fruits of the 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 (PDTF) - 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 Sec. 11 of R.A. 8425 is hereby amended to read as follows:

“Sec, 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 SEVICES ON SE MANAGEMENT IN THE FUNCTIONAL AREAS
OF MARKETING, ORGANIZATIONAL AND HUMAN RESOURCE
MANAGEMENT, — OPERATIONS MANAGEMENT, —_FINANCIAL
MANAGEMENT AND STRATEGIC MANAGEMENT;

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

(3) Community organizing for microfinance, livelihood, SE and micro-
enterprises 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.

“The PDTF may be accessed by the following:


(a) xxx;

(B) THE NCSED;
(C) QUALIFIED SEs;
(D) xxx

(E) xxx

SECTION 13. Social Enterprise Research and Development System -The
Commission, in coordination 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 quality 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 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 intemet


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

ORONS

Ore

CHAPTER Vi
ACCESS TO CREDIT RESOURCES AND GUARANTEE FUND

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 (10) years from the date of the effectivity of this Act, all other
lending institutions as defined under Bangko Sentral ng Pilipinas (BSP) rules, whether
public of 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 for 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 compliance with
the foregoing provision: 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;

(c) Fixed Assets 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 of the 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, 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 Credit Act 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 and 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 govemment-owned and/or — controlled
corporations and government financial institutions including the Philippine Amusement and
Gaming Corporation (PAGCOR), the Philippine 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

17


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 risks involved in SE sector lending, thereby facilitating the provision of credit therefor.
Such fund shall be placed in trust with the Land Bank of the Philippines for the purpose of
providing guarantee cover to participating financial institutions and other parties in
extending financing to SEs: Provided, 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 Vil
INCENTIVES AND BENEFITS

SECTION 19. Incentives and Benefits. - In recognition of the 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 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 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 inputs, equipment,
machinery, and implements for use by the SEs.

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

a) A SE with a net income of not more than Ten Million Pesos (R10,000,000.00)
shall be exempt from 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
(P15,000,000.00) that qualifies as a SE under this Act shall likewise be exempt
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 exchanges of real property by the SE classified as capital assets or
shares of stock shall be exempt from Capital Gains Tax.

dq)

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 Government - SEs shall be accorded a preferential right in the procurement process
and the 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 provisions 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 a 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, Sections 50, 52, and 53 of R.A. 9184 are hereby amended to read
as follows:

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

a. XXX;
Baxxxy
©. XXX; oF

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 an 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


20

PROCURING ENTITY WHICH IS DULY CERTIFIED BY THE COMMISSION
AS HAVING THE CAPACITY TO SUPPLY SAID GOODS AND SERVICES:
Provided, however, That the amount shall not exceed [Fif

{P50,000)] ONE HUNDRED THOUSAND PESOS (P100,000); 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 (R250,000): Provided, however, That the
Procurement does not result in Splitting of Contracts: Provided, further, That A
PRICE QUOTATION FROM A SE CERTIFIED BY THE COMMISSION AS
HAVING THE CAPACITY TO FURNISH OR PROVIDE SUCH OFFICE
SUPPLIES AND EQUIPMENT SHALL FIRST BE OBTAINED; PROVIDED,
FINALLY, THAT ONLY AFTER THE FAILURE OF SUBMISSION OF A PRICE
QUOTATION BY A SE THAT at least three (3) price quotations from OTHER
bona fide suppliers shall be obtained.

XXX

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

@. XXX;
D.XXxx;
C.XXX;
d. Xxx;

@. XXX; oF

F. WHERE THE GOODS OR SERVICES SUBJECT OF THE PROCUREMENT
CONTRACT MAY BE 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.

(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 of the lack of interest to supply from a SE shall 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
Es;

(d) In the implementation of R.A. No. 7880, 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 percent (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.

() 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”: Provided, 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 Internal Revenue Code of 1997": Provided, That for
purposes of utilization, accreditation granted under this Act shall be sufficient

CHAPTER VII
PENAL PROVISIONS

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).

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 (R25,000.00) but not more than Fifty
thousand pesos (50,000.00) 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

21


the SE shall be jointly and severally liable with the offending employees, agents, and the
enterprise.

In the case of a 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 ten (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
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 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 all 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 a SE and its employees shall apply
and that all employees covered under this Act shall be entitled to the same benefits given
to any regular employee 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 Economic Affairs, Trade and Commerce and the Chairman of the
House 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 coalitions 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

22


therefore cease to exist: Provided, 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 provisions of this Act, the following
amounts are appropriated as follows:

(1) The sum of One Hundred Million Pesos (R100,000,000.00) 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 gifis from both local and
foreign sources as may be accepted by the Commission. In the subsequent years, the
Commission shall have a separate annual appropriation under the Office of the President
which shall be provided in the General 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 (10)
years is hereby appropriated for the establishment of the SEDF from the share of the
national government in the earnings of the Philippine Amusement and Gaming Corporation
(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 (P100,000,000.00); on the second year, One Hundred Fifty
Million Pesos (P150,000,000.00); on the third year, Two Hundred Million Pesos
(R200,000,000.00); on the fourth year, Two Hundred Fifty Million Pesos
(P250,000,000.00); on the fifth year, Three Hundred Million Pesos (R300,000,000.00); and
every year thereafter until the tenth year, Four Hundred Million Pesos (R500,000,000.00)
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 concemed 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 its certificate of accreditation.

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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 especially to its intended beneficiaries.

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 of R.A. 8425, otherwise known as
the “Social Reform and Poverty 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 RA. No. 9184, otherwise known as 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

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