Laguna Lake Development Authority Act

Region and statutory definitions

Section 41(4) defines the Region as the Laguna Lake area proper comprising the provinces of Rizal and Laguna and the cities of San Pablo, Manila, Pasay, Quezon and Caloccan.
Section 41(5) defines Government instrumentalities or agencies or entities as instruments of the national or local governments vested with powers to accomplish a definite government aim or purpose.
Section 41(6) defines Municipal Corporation as one organized for political purposes with political powers exercised for the good of the public, subject to legislative control, with officers of the government as members to administer or discharge public duties.
Section 41(7) defines Government Corporation as corporations engaged in performing functions impressed with public interest.
Section 41(8) defines Investor as including public and private investors whether foreign or local.
Section 41(9) defines External Auditor as a firm or person hired outside the Authority to audit books of accounts, examine financial records, prepare audit reports, and review performance report statements of the Authority.
Section 41(10) defines Subsidiary Corporation as a corporation where at least 51% of its shares are owned or controlled by the Authority to carry out its purposes.

Purposes and powers of the Authority

Section 4 requires the Authority to pursue these purposes:
- Conduct a comprehensive survey of the region’s physical and natural resources and potentialities, including development of Laguna Lake resources, social conditions, hydrological studies, power potentials, development of scenic and tourist spots, conservation of water resources, and other regional problems; draft and implement a comprehensive detailed plan for rapid social and economic development.
- Provide machinery for extending necessary planning, management, and technical assistance to prospective and existing investors in the region.
- Recommend to proper agencies the level of priority and financing/support (peso or dollar financing, technical support, physical assistance) for agricultural, industrial, and commercial projects.
- Review and determine whether to approve plans, programs, project developments proposed by local governmental agencies, public corporations, and private enterprises where related to the development of the region as envisioned in the Act; the Authority’s decision is final.
- Engage in agriculture, industry, commerce, or other activities necessary or directly contributory to socio-economic development, including by organizing, financing, inventing in, and operating subsidiary corporations—only as new ventures or clearly beyond private enterprises’ scope/capacity/interest, unless public interest requires otherwise.
- Plan, program, and/or undertake population readjustment, relocation, or resettlement within the region as deemed necessary and beneficial.
- Make an annual report to stockholders on operation, including statements of financial conditions, activities undertaken, progress of projects and programs, and plans of actions for incoming years; stockholders representing a majority may require additional reports within 30 days from notice.
- Lend or facilitate financial assistance and/or act as surety or guarantor to worthwhile agricultural, industrial, and commercial enterprises.
- Reclaim or undertake reclamation projects and/or acquire lands from the lake as necessary to accomplish the Authority’s aims and purposes.
Section 5 grants the Authority corporate powers including:
- Succeeding on its corporate name and suing and being sued in its corporate name.
- Adopting, altering, and using a corporate name.
- Adopting, amending, and repealing its by-laws.
- Entering into contracts of any kind and description to carry out its purposes and functions.
- Acquiring (by purchase, hold, or lease) personal and real property necessary or convenient, and leasing, mortgaging, selling, alienating, encumbering, or disposing such property.
- Exercising eminent domain whenever necessary to attain the Act’s objectives.
- Borrowing funds from local or foreign financial institutions independent of the bonds it may issue or continue to issue.
- Purchasing, holding, alienating, mortgaging, pledging, or disposing shares of capital stock and other instruments of indebtedness created by other corporations/co-partnerships/government agencies, and exercising ownership rights including the right to vote while owner.
- Performing any acts a corporation, co-partnership, or natural person is authorized to perform under laws in force or later enacted, for carrying on its business or attaining its objectives.
Section 7 authorizes municipalities, cities, and provinces to subscribe, own, buy, or hold shares of stock of the Authority.

Capital, financing, bonds, and government guarantee

Section 6 establishes capitalization:
- Authorized capital: P100,000,000.00.
- Subscribed capital: P20,000,000.00.
- Fully paid-up portion of subscribed capital: P5,000,000.00.
- Authorized shares: 1,000,000 shares at P100.00 par value per share.
- Share classes: 700,000 common shares (voting) and 300,000 preferred shares (non-voting).
Section 6 requires subscription structure:
- Of subscribed common shares (200,000), at least 60% must be subscribed by the provinces of Laguna and Rizal equally; of that subscription, 25% must be fully paid.
- The remaining common shares are open for subscription by cities, municipalities, provinces, and private investors.
- Preferred shares are available for subscription by cities, municipalities, provinces, government corporations, and private investors.
- Private investors subscribing to common shares must also subscribe and/or purchase 1 preferred share for every common share held.
Section 8 provides operating expense funding:
- P500,000.00 is appropriated annually from the general fund of the National Government not otherwise appropriated for two (2) years.
- Thereafter, the Board of Directors may appropriate from Authority funds sums needed for operating expenses.
Section 9 authorizes bond issuance:
- When the Board deems it necessary to incur indebtedness or issue bonds, it must declare the purpose by resolution.
- The resolution must be confirmed by affirmative vote of stockholders representing a majority of the subscribed capital stock outstanding and entitled to vote.
Section 10 requires bond issuance to remain within a limit determined by:
- Needed amounts at any one time,
- Absorption by the buying public,
- Fund requirements of ready projects,
- A proper balanced mix of productive and non-productive projects to keep inflation at a minimum.
Section 11 governs bonds’ terms:
- The Board prescribes the form, interest rates, denominations, maturities, negotiability, convertibility, call and redemption features, and all other issuance/placement/sale/servicing/redemption/payment terms and conditions.
- Bonds may be payable in Philippine currency or any readily convertible foreign currency, with payment obligations for both principal and interest.
- Bonds are receivable as security in any transaction with the government where such security is required.
Section 12 provides extensive tax exemption:
- The Authority is exempt from all taxes, licenses, fees, and duties incidental to its operations.
- The exemption extends to subsidiary corporations, but subsidiary corporations must pay such taxes/fees under a graduated scale starting after five (5) years from establishment:
  - 20% during the sixth year,
  - 40% during the seventh year,
  - 60% during the eight year,
  - 80% during the ninth year,
  - 100% during the tenth year.
- The exemption includes any tax or fee imposed by the government on the sale, purchase, or transfer of foreign exchange.
- All Authority notes, bonds, debentures, and other obligations are exempt from all taxes on both principal and interest, except inheritance and gift taxes.
Section 13 mandates a sinking fund:
- A sinking fund must be established so that total annual contributions at an interest rate determined by the Board and confirmed by stockholders representing a majority of subscribed capital stock outstanding and entitled to vote will be sufficient to redeem bonds at maturity.
- The sinking fund is under the custody of the Authority Treasurer, invested as the Board directs.
- Investment expenses are charged to the sinking fund; the fund earns and credits interest and other income belonging to it.
Section 14 establishes a government guarantee:
- The Republic guarantees payment of principal and interest of bonds, debentures, collaterals, notes, and other obligations issued by the Authority under the Act.
- If the Authority fails to pay, the government pays the principal and interest.
- The Secretary of Finance pays from National Treasury funds appropriated for this purpose not otherwise appropriated.
- Upon payment, the government succeeds to the rights of holders to the extent paid unless the paid amount is refunded by the Authority within a reasonable time.

Governance and board requirements

Section 15 requires that the first Board of Directors be elected by stockholders, and incorporation is deemed effected from the date of the first meeting of the Board.
Section 15 requires Board election to follow Section 31 of Act No. 1459, as amended (Corporation Law).
Section 16 provides for a Board of Directors of seven (7) members vested with corporate powers.
- The Board annually elects a Chairman and Vice-Chairman from among members.
- The Board elects a Secretary who is not a member.
Section 17 provides for Acting Chairman:
- If the Chairman’s position is vacant, or if the Chairman is absent or temporarily incapacitated, the Vice-Chairman acts until a new Chairman is elected by the Board.
Section 18 establishes tenure:
- The first Board members’ terms end in staggered succession: two at end of year 1, two at end of year 2, two at end of year 3, and one at end of year 4.
- After the first Board, succeeding Directors serve four (4) years from election.
Section 19 provides for filling vacancies:
- A Director elected to fill a vacancy before term expiration serves only the unexpired period.
Section 20 provides quorum and voting:
- Board vacancies do not impair Board powers as long as four (4) members remain in office.
- The affirmative vote of four (4) members is necessary at all times to pass or approve any act or resolution.
Section 21 imposes qualification and integrity requirements:
- All Board members must be natural born citizens of the Philippines.
- No one may be elected unless of unquestioned integrity and competence.
- Management experts and technical personnel employed in government agencies are not barred from serving and receiving per diem, provided their appointment has consent of their respective chiefs of office.
Section 22 prohibits conflict of interest:
- No Board member may be financially interested, directly or indirectly, in any contract entered into by the Authority or in any special privileges granted by the Authority during the term.
- Violating contracts are automatically null and void.
- A Board member found violating this prohibition by a two-thirds (2/3) vote is automatically disqualified from serving the unexpired term and is perpetually disqualified from membership in the Board.
Section 23 provides removal and resignation rules:
- Board members may be removed by stockholders holding or representing three-fourth (3/4) of the subscribed capital stock outstanding and entitled to vote.
- No Board member is required to submit a courtesy resignation during the term.
Section 24 requires Board meetings:
- The Board meets at least once a month, but never more than once a week.
- Meetings are convoked by the Chairman or upon written request signed by a majority of members.

Board compensation and executive management

Section 25 sets Board per diems and reimbursements:
- Board members receive PHP 100.00 per meeting attended.
- Each member’s total per diem cannot exceed PHP 1,000.00 for only one month.
- The Authority reimburses actual expenses, including traveling and subsistence expenses incurred in performing duties as authorized by the Board.
Section 26 defines the General Manager as chief executive and assigns powers:
- Prepare Board meeting agenda and submit policies/measures for Board consideration.
- Execute and administer policies and measures approved by the Board.
- Direct and supervise operation and internal administration; the General Manager may delegate administrative responsibilities subject to Board rules and regulations.
- Exercise other powers vested by the Board.
Section 27 imposes appointment and qualification:
- No person is appointed General Manager unless he has demonstrated executive competence and experience in public administration or management of agricultural, industrial, or commercial enterprises.
- The General Manager is an ex-officio member of the Board without the right to vote.
- Director qualification standards apply in addition to these requirements.
Section 28 sets General Manager tenure:
- Fixed term of six (6) years unless earlier removed by stockholders holding or representing two-thirds (2/3) of subscribed capital stock outstanding and entitled to vote.
Section 29 sets General Manager compensation:
- PHP 24,000.00 per annum, charged against the Authority’s annual appropriation for operating expenses.
- The Board sets per diems and allowances for the General Manager.
Section 30 requires residence and restricts other work:
- The General Manager must establish residence within the region.
- During the term, the General Manager must not engage in any business or profession or calling other than those connected with official duties.
Section 31 requires administration through key officials reporting to the General Manager:
- An Assistant General Manager who acts as General Manager in absence/temporary incapacity or until a new General Manager is appointed, with delegated powers/duties.
- A division chief for operations.
- A corporate counsel with the rank of division head to advise and represent the Authority on legal matters.
- A corporate treasurer with the rank of division head with custody of Authority funds and properties.
- Other officials the Board may consider necessary for efficient activities.
Section 32 mandates a merit system:
- Officials, agents, and employees are selected and appointed based on merit and fitness under a comprehensive and progressive merit system established by the Authority.
- Temporary workers are governed by the merit system.
Section 33 assigns appointment responsibilities:
- Assistant General Manager and division chiefs are appointed by the Board upon recommendation of the General Manager.
Section 34 governs appointment below division chief:
- Officials and employees below division chiefs are appointed by the General Manager to positions in the approved budget upon written recommendation of the concerned division head, using the standards of the merit system.
- The General Manager must submit a quarterly report to the Board regarding personnel selection, placement, and training.

Employment, planning, procurement, and auditing

Section 35 requires minimum wage compliance:
- Employment contracts must include a provision that not less than the minimum wage fixed by law shall be paid to persons employed.
Section 36 mandates planning within one year:
- Upon organization, the Board must formulate and report to stockholders with utmost expeditious manner, but no longer than one year, its plans and recommendations for accelerated and balanced development of the region consistent with the Act.
Section 37 governs procurement via bidding and exceptions:
- Purchases of supplies and contracts for services (except personnel services) must be preceded by proper bidding.
- Bidding is not required when:
  - the amount involved is PHP 5,000.00 or less; or
  - an emergency certified by the General Manager requires immediate delivery/performance.
- In comparing bids and making awards, the Authority must consider:
  - cost and relative quality/adaptability of supplies or service,
  - bidders’ financial responsibility, skill, experience, integrity, and ability to furnish repairs/maintenance,
  - time of delivery or performance offered,
  - compliance with desired specifications.
Section 38 requires internal auditing:
- The Board provides and appoints an auditor to formulate an auditing system.
- The auditor must submit semestral and/or annual reports to the Board on the Authority’s financial conditions and operations.
- Reports must include statements of resources and liabilities, earnings and expenses, paid-up capital stock, surplus, reserved and profits, losses, bad debts, and other facts necessary under auditing rules to describe financial condition and operation accurately.
- The auditor reports and is directly responsible to the Board.
Section 39 requires an external auditor:
- The Board must retain a reputable auditing firm as the external auditor.
- The firm must render reports on financial conditions including statements of resources and liabilities, earnings and expenses, paid-up capital stock, surplus, reserves, profits, losses, bad debts, and other necessary facts under auditing rules to describe financial condition accurately.

Corporate reports, separability, repeal, and effectivity

Section 4(g) requires the annual stockholder report on the Authority’s operations and allows stockholders representing a majority to require additional reports within 30 days.
Section 40 provides a separability rule: unconstitutional provisions do not affect the validity of other provisions.
Section 42 repeals or modifies conflicting laws and regulations: all Acts, charters, executive orders, administrative orders, proclamations, rules and regulations, or parts thereof in conflict with the Act are repealed or modified accordingly.
Section 43 states effectivity: the Act takes effect upon approval.
Republic Act No. 4850 is approved on July 18, 1966 and is titled “Laguna Lake Development Authority Act.”