Creation of Rehabilitation Fice Corporation

Corporate powers for credit and financing

Section 2(a) empowers the Corporation to grant loans for home building and for the rehabilitation, establishment, or development of any agricultural, commercial, or industrial enterprise, including public utilities.
Section 2(b) empowers the Corporation to grant loans to provincial, city and municipal governments for the rehabilitation, construction, or reconstruction of public markets, waterworks, toll bridges, slaughterhouses, and other self-liquidating or income-producing services.
Section 2(c) empowers the Corporation to grant loans to government-owned and government-controlled agencies and corporations for the production and distribution of electrical power, the purchase and subdivision of rural and urban estates, housing projects, irrigation and waterworks systems, and other essential industrial and agricultural enterprises.
Section 2(d) empowers the Corporation to grant loans to cooperative associations to facilitate production, the marketing of crops, and the acquisition of essential commodities.

Investments, underwriting, and bond issuance

Section 2(e) authorizes the Corporation to underwrite, purchase, own, sell, mortgage, or otherwise dispose of stocks, bonds, debentures, securities, and other evidences of indebtedness issued for or in connection with projects or enterprises covered by Section 2(a) to (d).
Section 2(f) authorizes the Corporation to issue bonds, debentures, securities, collaterals, and other obligations with the approval of the President, and it bars issuance such that the aggregate at any one time exceeds an amount equivalent to one hundred per centum of its subscribed capital and surplus.
Section 2(f) requires that the issued obligations be:
- redeemable at the Corporation’s option at or before maturity and in the manner stipulated in the obligations; and
- bear an interest rate fixed by the Corporation.
Section 2(f) provides that the obligations are secured by the Corporation’s assets, including the stocks, bonds, debentures, and other securities it has underwritten, purchased, or holds under the Act.
Section 2(f) requires the Corporation to provide appropriate reserves for redemption or retirement.
Section 2(f) provides that the obligations may be issued and offered for sale at prices determined by the Corporation and are exempt from taxation as to both principal and interest.
Section 2(f) makes the obligations fully and unconditionally guaranteed by the Government of the Republic of the Philippines as to principal and interest, and requires that the guaranty be expressed on the face of the obligations.
Section 2(f) provides a payment and substitution mechanism: if the Corporation is unable to pay, the Secretary of Finance must pay the amount of the obligations (appropriated out of any moneys in the National Treasury not otherwise appropriated), and upon payment, the Government succeeds to all the rights of holders up to the amounts paid.

Rehabilitation bonds and registration powers

Section 2(f) authorizes the Corporation to issue “Rehabilitation bonds” in denominations of not less than fifty pesos nor more than one thousand pesos, redeemable by the Corporation on demand at the option of the holder.
Section 2(f) provides that rehabilitation bonds may be of two types:
- (1) rehabilitation bonds at progressive staggered interest with cumulative face value; and
- (2) rehabilitation bonds bearing interest at one per cent a year during the first year, two per cent a year during the second year, and three per cent a year during the third and succeeding years, with interest due and payable semi-annually and payment annotated on the back of each bond certificate.
Section 2(f) requires that maturity for both bond types is fixed by the Board of Governors but may not exceed ten years.
Section 2(f) grants the Board of Governors authority to prescribe rules for registration of the issued bonds at the request of the holders.

General corporate authority and seal

Section 2(g) authorizes the Corporation to adopt, alter, and use a corporate seal (judicially noticed).
Section 2(g) empowers the Corporation to make contracts, borrow money, lease or own real and personal property, and sell, mortgage, or otherwise dispose of property.
Section 2(g) authorizes the Corporation to sue and be sued.
Section 2(g) allows the Corporation to employ officers and personnel necessary to carry out its business and to do and perform other necessary or proper acts to carry out its purposes.

Capital and government subscription

Section 3 sets the capital stock at three hundred million pesos divided into three hundred thousand shares with a par value of one thousand pesos each.
Section 3 requires that the capital stock be fully subscribed by the Government of the Republic of the Philippines.
Section 3 provides that payment is made by authority of the President from appropriations provided by law.

Board of Governors governance

Section 4 provides that the Corporation’s affairs and business are directed and its powers exercised through a Board of Governors of a Chairman and six other members.
Section 4 requires that members be appointed by the President with the consent of the Commission on Appointments.
Section 4 requires full-time service from the Chairman and three other members designated by the President.
Section 4 provides that the term of office is seven years, except that the first members serve one, two, three, four, five, six, and seven years as specified in their appointments.
Section 4 provides that the President fixes the compensation and may remove members for cause.

Board powers and interest rates

Section 5(a) requires that the Board prescribe, amend, and repeal by-laws, rules, and regulations governing the manner of conducting business and exercising statutory powers, with approval of the President.
Section 5(a) expressly authorizes by-laws to include provisions for forming committees as the Board deems necessary.
Section 5(b) directs the Board to fix rates of interest on loans in accordance with the different classes of transactions and securities under the Act.
Section 5(c) authorizes the Board to establish branches and agencies as necessary and convenient.
Section 5(d) empowers the Board to appoint and remove personnel, and fix reasonable compensation for personnel necessary for expeditious business conduct.

Chairman as chief executive officer

Section 6 designates the Chairman as the chief executive officer of the Corporation.
Section 6 provides that the Chairman has the direction and control of the Corporation’s business in matters not specifically reserved by the Act or by-laws to the Board or other officers.

Legal counsel and prosecutorial support

Section 7 makes the Secretary of Justice the Corporation’s ex-officio legal adviser.
Section 7 requires the Secretary of Justice to appoint a representative as the Corporation’s legal counsel.
Section 7 provides that assistants and personnel of the legal counsel are also appointed by the Secretary of Justice.
Section 7 provides that the Board fixes the operating expenses of the legal counsel’s office and the salaries and traveling expenses of legal officers and employees, and these are paid by the Corporation.

Auditor General oversight and reporting

Section 8 provides that the Auditor General is ex-officio auditor of the Corporation.
Section 8 requires the Auditor General to appoint a representative as the auditor in charge, upon the recommendation of the Corporation’s auditor.
Section 8 grants the Auditor General authority to appoint or remove auditing office personnel upon recommendation.
Section 8 directs that the Board fixes operating expenses of the auditing office and salaries and traveling expenses of auditing personnel, paid by the Corporation.
Section 8 requires the auditor representative to submit a quarterly report on the Corporation’s condition to:
- the President of the Philippines;
- the Senate through its President;
- the House of Representatives through its Speaker;
- the Secretary of Finance;
- the Auditor General; and
- the Board of Governors.
Section 8 requires the quarterly report to include, among other things, statements of resources and liabilities including earnings and expenses, amount of capital stock, surplus, reserve and profits, losses, bad debts, and suspended and overdue paper carried as assets, and a plantilla of the Corporation.

Transfer from Agricultural and Industrial Bank

Section 9 transfers to the Corporation the powers, duties, funds, properties, and all capital, assets, accounts, contracts, and choses in action of the Agricultural and Industrial Bank under Commonwealth Act No. 459, as amended.
Section 9 provides that the Corporation exercises those transferred powers and duties under the Act’s provisions, and administers, disposes, handles, and executes the transferred items in the Corporation’s determination in the interest of the funds concerned.
Section 9 requires the Corporation to assume all liabilities of the Agricultural and Industrial Bank, either as the bank or as trustee, as applicable.
Section 9 provides that the total amount of the Agricultural and Industrial Bank’s unimpaired capital is credited to the Government’s subscription to the Corporation’s capital stock.
Section 9 provides that the Agricultural and Industrial Bank is abolished on the date the Corporation begins operations.

Rehabilitation funds from domestic banks and insurance

Section 10 transfers to the Corporation all authority, control, and administration of the rehabilitation funds under Commonwealth Act No. 726 and Executive Order No. 107 dated April 20, 1946, as amended.
Section 10 provides that the Corporation becomes the owner and has sole power of disposition and control over the funds.
Section 10 requires that disposition and control follow the provisions of the referenced Commonwealth Act and Executive Order until the purposes of those measures are accomplished.
Section 10 requires that all stock previously issued to the Government in exchange for contributions or subscriptions from those funds be transferred and reissued in the Corporation’s name.
Section 10 provides that the total amount of those funds is credited to the Government subscription to the Corporation’s capital stock.
Section 10 provides that the powers and functions previously conferred on the Financial Rehabilitation Board are assumed and exercised by the Board of Governors.

Legal investment status of obligations

Section 11 provides that the Corporation’s obligations are lawful investments.
Section 11 authorizes acceptance of the Corporation’s obligations as security for fiduciary, insurance, trust, and public funds whose investment or deposit is under government authority, control, or supervision.

Conflict of interest and removal

Section 12 prohibits Board members, officers, attorneys, agents, or employees from participating in deliberations or determination of any matter affecting their personal interests or the interests of a corporation, partnership, or association in which they are directly or indirectly interested.
Section 12 provides that a violator is summarily removed from office.
Section 12 provides that conviction carries a fine not to exceed ten thousand pesos and imprisonment not to exceed five years.

Restrictions on borrowing and guaranteeing

Section 13 prohibits any officer or employee of the Corporation and any government official exercising executive or supervisory authority over it from borrowing from the Corporation.
Section 13 prohibits such persons from becoming a guarantor, indorser, or surety for loans from the Corporation to others.
Section 13 prohibits such persons from being an obligor for moneys borrowed from the Corporation.
Section 13 provides that a violator is immediately removed by competent authority and is punished with imprisonment not less than one year nor exceeding five years and a fine of not less than one thousand nor more than five thousand pesos.

Loan prohibition where a governor is interested

Section 14 prohibits the Corporation from granting a loan to any corporation, partnership, or company where any member of the Board of Governors is a shareholder, agent, or employee in any capacity.
Section 14 allows a loan only if the Board of Governors approves by unanimous vote of members excluding the interested member and the President approves.
Section 14 provides that any Board member who violates this rule is immediately removed by the President and punished as provided in Section 13.

No fees for obtaining loans

Section 15 prohibits charging or receiving any fee, commission, gift, or charge of any kind for obtaining loans from the Corporation.
Section 15 provides that any officer, employee, or agent who exacts, demands, or receives a fee for service in obtaining a loan is punished by a fine of not less than one thousand nor more than three thousand pesos and imprisonment for not less than one year nor more than three years.

False information and fraud penalties

Section 16 penalizes a person who, to obtain, renew, or increase a loan or to extend its period, gives false information or causes the existence and production of false information regarding:
- the identity, situation, productivity, or value of the security, or
- any point affecting the granting or denial of the loan,
- whether or not the loan has been consummated.
Section 16 penalizes any officer or employee who, through connivance or negligence, allows the false information to pass unnoticed, thereby causing damage to the Corporation or exposing it to the danger of suffering such damage.
Section 16 provides that punishment is imprisonment for not less than three months nor more than three years and a fine of not less than the amount of the loan obtained or applied for, nor more than three times such amount.

General penalty for other violations

Section 17 punishes an officer or employee of the Corporation who violates any provision of the Act, or permits officers, agents, or servants, or any other person to violate the Act.
Section 17 also punishes any person who violates any provision of the Act or who aids and abets the violation.
Section 17 provides that the penalty is a fine not to exceed ten thousand pesos and imprisonment not to exceed five years for violations not specifically punished in Sections 12 to 16.

Effectivity

Section 18 provides that the Act takes effect upon approval.
The Act was approved on October 29, 1946.