Orderly Disposition of Government Assets

Policy goals and economic intent

Preamble states that the National Government has acquired or owns a large number of assets in industrial, manufacturing, and commercial sectors that must be divested in a planned and orderly manner as part of the economic recovery program.
The Decree requires relief of certain government financial institutions from assets that adversely affect financial viability and liquidity.
The Decree directs disposition of assets generally on terms that permit immediate substantial cash returns to the National Government.
The Decree requires retention of industrial and other property in the Philippines for operation by Philippine nationals, consistent with cash-return objectives.

Core structure: Asset Disposition Trust

Section 1(a) creates a body corporate known as the Asset Disposition Trust (“Trust”) that takes title to, conserves, and disposes of designated assets transferred to it.
Section 1(b) sets the Trust capitalization at One Hundred Million Pesos (P100,000,000.00), paid by the National Government and chargeable against applicable appropriations in Batas Pambansa Blg. 879.
Section 1(c) sets the Trust principal place of business in Metropolitan Manila.
Section 1(d) attaches the Trust to the Ministry of Finance for policy and program coordination.
Section 1(e) limits the Trust’s existence to six years from the date of this Decree, after which all Trust assets, moneys, other property, and liabilities revert to and are assumed by the National Government.

Trust responsibilities, objectives, and proceeds

Section 2 makes it the Trust’s responsibility to administer orderly disposition of transferred assets using terms deemed best for the National Government.
Section 2 directs realization on Trust assets as quickly as possible while optimizing realizable values through:
- returning as many assets as possible to private sector ownership with realistic prospects of productivity and profitability;
- rationalizing capacity, productivity, employment, and related matters in economic sectors represented by the assets; and
- liquidating assets showing no prospect of becoming viable.
Section 3 provides that all proceeds from sale or other disposition form part of the General Fund of the National Government.
Section 3 requires immediate remittance of proceeds to the National Treasury upon receipt.
Section 3 allows the Trust to retain portions of proceeds needed for:
- a revolving fund for payment of fees and reimbursable expenses of the Asset Management Corporation and other external agencies referred to in Sections 14 and 16;
- costs and expenses incurred for conservation and disposition of Trust-held assets; and
- costs of performing responsibilities under the Decree.

Trust powers, tax exemption, and governance

Section 4 authorizes the Trust to adopt, alter, and use a corporate seal; make contracts; lease or own property; sell or otherwise dispose of property; sue and be sued; borrow money and incur liabilities reasonably necessary to carry out its responsibilities.
Section 4 authorizes the Trust to receive and collect interest, rent, and other income from its assets and to exercise all ownership rights and powers over them.
Section 4 authorizes the Trust to compromise and release claims or settled liabilities and to do any acts necessary or proper to carry out the Decree’s purposes.
Section 4 requires that any borrowing by the Trust is subject to prior approval of the Ministry of Finance.
Section 4 prohibits the Trust from directly undertaking conservation and disposition or managing and marketing of its assets; it must employ the Asset Management Corporation and other external agencies referenced in Sections 14 and 16.

Exemption from taxation

Section 5 exempts the Trust and all assets held by it from all income and other taxes, fees, charges, imposts, duties, and assessments imposed by the National Government or any provincial, municipal, or city government or any subdivision or authority thereof.
Section 5 expressly includes exemptions from stock transfer taxes, capital gains taxes, and registration fees.

Board of Trustees composition and operation

Section 6 provides that Trust powers and functions are exercised by a Board of Trustees composed of five members.
Section 6(i)-(iii) makes three members ex officio:
- the Minister of Finance as Chairman (or a Deputy Minister alternate);
- the Director-General of the National Economic and Development Authority (or a Deputy Director-General alternate);
- the Director-General of the Office of Budget and Management (or a Deputy Director-General alternate).
Section 6(iv) provides that two additional members come from the private sector, appointed by the President of the Philippines, serving for the term specified in Section 1(e) (six years).
Section 9 mandates Board meetings at least once every two months; it requires three members for quorum and concurrence of three members for Board decisions.
Section 10 sets per diem at one thousand pesos (P10,000.00) for each meeting attended, but limits each member and alternate to not more than five thousand pesos in any single month in the aggregate.
Section 10 allows the President of the Philippines to adjust per diem amounts and the maximum aggregate monthly amount.

Trustee qualifications, conflicts, vacancies, and removal

Section 7 requires that private-sector and other appointed members must be of good moral character, unquestionable integrity and responsibility, and recognized business competence.
Section 7 forbids appointment of:
- any director, officer, consultant, or stockholder of corporations constituting or having an interest in assets held by the Trust; and
- any director or officer of a government institution from whom such assets are to be acquired by the Trust.
Section 7 extends the conflict prohibition to alternates and bars service on the Board of directors or any direct management participation in corporations constituting assets transferred to the Trust.
Section 8(a) empowers the President to remove a Board member who is guilty of acts that are fraudulent, unlawful, or manifestly opposed to the purposes of the Decree, or who ceases to be qualified under Section 7.
Section 8(b) requires that any vacancy from death, resignation, or removal of a private-sector member be filled by Presidential appointment for the unexpired portion of the term.

Board authority: rules, contracting, working funds, staffing

Section 11(i) requires the Board to issue internal rules and regulations as necessary for proper discharge of its functions.
Section 11(ii) directs the Board to enter into management and other appropriate contracts with the Asset Management Corporation and other external agencies under Sections 14 and 16 on terms best for the National Government.
Section 11(iii) requires the Board to make funds available for disbursement by the Asset Management Corporation and other external agencies for working capital or capital expenditures needed to preserve, maintain, and put assets into marketable condition.
Section 11(iv) authorizes the Board to appoint, remove, and fix Trust personnel remuneration, while:
- forbidding the Trust to hire and maintain its own personnel except to the extent absolutely necessary for discharge of responsibilities; and
- requiring prior approval of the Minister of Finance for such hiring.
Section 11(iv) directs the Trust, as far as practicable, to use personnel seconded or detailed from other government offices.

Legal counsel and personal accountability

Section 12 designates the Minister of Justice as the ex officio legal adviser to the Trust.
Section 12 allows the Trust to engage external legal counsel.
Section 13 imposes liability on Board members or Trust employees who willfully violate the Decree, commit gross negligence, disclose confidential Trust information, or use such information for personal gain or to benefit parties.
Section 13 provides that liable persons are responsible for any loss or injury suffered by the National Government, the Trust, or third parties as a result, without prejudice to penalties under applicable law.

Asset Management Corporation creation and equity

Section 14(a) authorizes the National Government through the National Development Company to organize an asset management corporation under the Corporation Code to perform the functions contemplated in the Decree.
Section 14(a) limits National Government subscriptions to holding up to fifty percent (50%) of the Asset Management Corporation’s authorized capital stock.
Section 14(b) requires the Minister of Finance to invite and arrange investment in the remaining equity by an international financial institution or institutions where the Philippines is a member and by other appropriate investors, foreign or domestic.
Section 14(b) requires investments to be made on mutually agreed terms between the investor(s) and the National Government.

Management contract and disposal authority

Section 15 requires a management contract between the Trust and the Asset Management Corporation that covers:
- management, conservation, and disposition of assets transferred to the Trust and referred to the Asset Management Corporation;
- development, for consideration of the Trust, of programs for disposition of such assets; and
- negotiation of terms and conditions of each disposition, with disposition subject to prior approval of the Trust.
Section 15 requires the contract to define Asset Management Corporation functions and authority, establish general guidelines and policies, and include other necessary terms for effective performance.
Section 15 requires that for each disposition, the Trustees approve or disapprove Asset Management Corporation recommendations.
Section 15 states that once Trustees approve a disposition, it becomes final and does not require or become subject to prior approval or ratification by any other government agency.

Use of external agencies and referrals

Section 16 requires the Asset Management Corporation, within thirty days from receiving the instrument described in Section 20(c) (or a longer period agreed by the Trust), to determine and advise which assets should be conserved and disposed of by entities other than the Asset Management Corporation.
Section 16 requires the Trust, upon receiving such advice, to refer those assets to government or private institutions or other agencies for conservation and disposition, whether specially formed or in conjunction with financial institutions contemplated under Section 14(b).

Foreign currency payments and approvals

Section 17(a) provides that equity investment by an international financial institution in the Asset Management Corporation must be registered with the Central Bank of the Philippines, after which the investment, dividends, and other income are remittable from the Philippines in foreign currency.
Section 17(b) allows the Asset Management Corporation, subject to prior approval of the Central Bank of the Philippines, to:
- agree to pay fees in foreign currency to the international financial institution under management, consultancy, or similar contracts; and
- reimburse foreign currency expenses incurred by the institution in connection with services under those contracts.

Immunities, privileges, and business status

Section 18(a) grants international financial institutions investing in and operating the Asset Management Corporation, and their officers and employees working in or connected with the Corporation, continued enjoyment of immunities and privileges granted by law or treaty, including immunity from legal process and taxation.
Section 18(b) provides that an international financial institution does not become deemed to be transacting or doing business in the Philippines solely by its participation in the equity and activities of the Asset Management Corporation.
Section 18(b) exempts such international financial institution from qualification, registration, or other requirements imposed by law on foreign corporations transacting or doing business in the Philippines.

Status as government-owned controlled corporation

Section 19 provides that if the National Government’s shares in the Asset Management Corporation do not exceed fifty percent (50%) of the outstanding capital stock or do not exceed fifty percent (50%) of the outstanding voting capital stock, the Asset Management Corporation is not deemed a government-owned or controlled corporation for any purpose.

Transfer of assets: identification, vesting, and limits

Section 20(a) transfers and vests in the Trust assets of government institutions that the President of the Philippines, upon recommendation of the Minister of Finance, identifies as appropriate for divestment.
Section 20(a) requires identification within one year from the date of the Decree.
Section 20(a) includes as transferred assets:
- receivables and other obligations due to government institutions under credit, lease, indemnity, and other agreements, including all collateral security and other rights securing or enforcing payment (including rights related to shares of stock, voting powers, and rights to appoint directors or otherwise engage in management);
- real and personal property of any kind owned or held by government institutions, including corporate shares obtained through foreclosure or other means in settlement of obligations; and
- shares of stock and other investments held by government institutions.
Section 20(b) authorizes the President, on behalf of the National Government, to assume obligations of government institutions on terms and to the extent determined by the President on the recommendation of the Minister of Finance, as warranted by the transfer of assets.
Section 20(c) requires that the President identify assets to be transferred through an appropriate instrument describing such assets or identifying the loan or other transactions giving rise to the receivables, obligations, and other property.
Section 20(c) provides that execution of the instrument by the President constitutes the operative act of transfer of the assets described.
Section 20(d) protects third-party and legal rights by providing that the Decree:
- does not impair creditors’ rights of the government institutions involved;
- does not affect the National Government’s right to enforce claims of a government institution regarding assets transferred;
- does not create novation or require debtor consent for assigned and transferred debts where a government institution is the original creditor; and
- prevents claims by other stockholders for enforcement of pre-emption, first refusal, or similar rights regarding transferred shares, notwithstanding any contrary law.
Section 20(e) defines “government institutions” as government-owned or controlled corporations, financial or otherwise, whether organized by special charter or under general law.

Formal deeds of assignment and registration support

Section 21(a) directs each government institution from which assets are to be transferred to execute, promptly upon the Trust’s request (but no later than thirty days after issuance by the President of the relevant instrument under Section 20(c, or such longer period as specified by the Trust), a deed of assignment in favor of the Trust.
Section 21(a) requires the deed to describe assets account-by-account by nature and extent and to deliver agreements, instruments, records, and other papers reasonably necessary or appropriate.
Section 21(a) provides that the deed of assignment constitutes the Trust as attorney-in-fact for purposes of taking actions to consolidate and perfect title to the transferred assets.
Section 21(b) requires the Trust to receive a certified copy of the deed and excerpts describing particular property, certified true by the Secretary of the Trust before a notary or authorized official.
Section 21(b) states that the certified copy and excerpts provide sufficient basis for registries of deeds, transfer agents of corporations, and other title-issuing authorities to issue new certificates, shares, and instruments evidencing title in the name of the Trust.

Interim management of transferred assets

Section 22 requires each transferring government institution, during the period before receiving notice from the Trust that management arrangements for transferred assets have become effective, to administer such assets for and on behalf of the Trust.

Finality of Trust disposition decisions

Section 23 makes the Trust’s determination that a sale or disposition is consistent with the Decree’s objectives and in the best interest of the National Government conclusive.
Section 23 requires that such determination is evidenced by execution by the Trust of the contract of sale or other conveyance covering the required disposition.
Section 23 states that sale or disposition validity is incontestable and binding and enforceable against the National Government and third parties, except for fraud, breach, or material misrepresentation by the purchaser.

Injunction prohibition against Trust actions

Section 24 prohibits courts, agencies, or bodies from issuing restraining orders and temporary or permanent injunctions aimed at preventing the Trust, its agents, or employees from:
- taking possession of, consolidating title to, or disposing of transferred assets; or
- foreclosing upon security or exercising other legal or contractual remedies available to the Trust or under Section 25 to enforce payment of obligations acquired by the Trust.
Section 24 prohibits injunctions aimed at preventing purchasers from taking possession, taking or consolidating title, or disposing of assets sold by the Trust.
Section 24 allows an injunction only when sought by the Trust itself on grounds of fraud, breach, or material misrepresentation on the part of the purchaser.

SEC receivership for threatened dissipation

Section 25 allows the Securities and Exchange Commission to appoint a receiver nominated by the Trust or the Asset Management Corporation upon ex-parte petition filed by the Trust or Asset Management Corporation on behalf of the Trust.
Section 25 authorizes receivership when Trust-held equity, acquired obligations, or Trust-relevant liens are referred to the Asset Management Corporation for conservation and disposition, and there is imminent danger of:
- dissipation, loss, wastage, or destruction of assets or other properties; or
- paralysis of business operations prejudicial to stockholders, creditors, the general public, or the National Government.
Section 25 also authorizes receivership when appointment of a receiver is stipulated by parties to a real or chattel mortgage or other agreement as an aid to foreclosure.
Section 25 states that the receiver has all powers of a regular receiver under the Rules of Court and a management committee, board, or body under Section 6(d) of P.D. 902-A.
Section 25 states that this receivership authority is without prejudice to other remedies or courses of action available to the Trust or the Asset Management Corporation acting on behalf of the Trust.

Reporting to President and legislature

Section 26 requires the Trust to submit, at least annually, a report to the President of the Philippines and the Batasang Pambansa.
Section 26 requires the report to include:
- a description of individual assets disposed of;
- purchasers thereof;
- consideration received; and
- agreed terms of payment.

Separability and repealing effects

Section 27 provides a separability rule: any portion declared unconstitutional does not nullify the remaining provisions if the remaining portions can stand and achieve the Decree’s objectives.
Section 28 repeals or modifies inconsistent laws, decrees (including Presidential Decree No. 2012), executive orders, rules, and regulations, or parts thereof.
Section 29 provides immediate effectivity for February 04, 1986 issuance.