Rules on Exemption of Fishponds from Agrarian Reform

Legal basis and relationship to prior law

Republic Act No. 7881 amends Republic Act No. 6657 by:
- Amending the definition of agricultural activity under Section 3-b.
- Exempting private lands actually, directly, and exclusively used for prawn farms and fishponds as of March 12, 1995 from Section 10 of CARL, subject to conditions on distribution and issuance of CLOAs.
- Excluding certain activities—including aquaculture, fishponds, and prawn farms—from the commercial farm classification subject to CARP coverage after a ten-year deferment period by amending Section 11.
- Incorporating a new provision under Section 32, which is operationalized through Section 32-A.
The Order implements the profit-sharing requirement introduced through Section 32-A of R.A. No. 6657, as amended by R.A. No. 7881.
Procedures for appeals and motions are governed by Section III of DAR Administrative Order No. 9 (Series of 1994).
Dispute settlement through mediation/conciliation is governed by Section VI of DAR Administrative Order No. 8 (Series of 1994).
Property acquisition and distribution upon denial of exemption are tied to DAR Administrative Order No. 1 (Series of 1993) and other related issuances.
Coverage and land acquisition/distribution reversion upon cessation of fishpond/prawn use are tied to DAR Administrative Order No. 9 (Series of 1990), DAR Administrative Order No. 1 (Series of 1992), as amended by DAR Administrative Order No. 1 (Series of 1993).

Policy intent and key directives

The Order directs that private agricultural lands actually, directly, and exclusively used for prawn farms and fishponds as of March 12, 1995 shall be exempt from CARP coverage, subject to conditions prescribed by law and implemented by procedure.
The Order ensures that fishpond and prawn farm workers receive a profit incentive through an enforceable Profit Incentive Plan with specified computation and distribution periods.
The Order requires administrative oversight through inspection/audit, compliance reporting, and monitoring to safeguard workers’ rights and ensure continued lawful use.
The Order provides a consent mechanism for certain previously processed properties (e.g., those under VOS, CFD, or with NOAs) and provides worker-cooperative management in case consent is obtained only by an objecting majority.
The Order treats violations and obstruction of implementation as punishable under Section 74 of R.A. No. 6657 and other penalties.

Coverage rules: who is covered

These guidelines govern all private lands owned by individuals or entities that are actually, directly, and exclusively used for fishponds or prawn farms as of March 12, 1995.
Exemption/exclusion operates for private lands used for prawn farms or fishponds meeting the as of March 12, 1995 devotion requirement.
Lands already distributed to Agrarian Reform Beneficiaries (ARBs) with corresponding CLOAs issued are not subject to exemption continuation because the transaction is deemed consummated.
Fishponds or prawn farms already subjected to Voluntary Offer to Sell (VOS), under Commercial Farm Deferment (CFD), or with Notices of Acquisition (NOA) issued are governed by the special worker-consent regime within the time and manner stated by law and implemented by these rules.

Exemption and exclusion: substantive framework

Private lands actually, directly, and exclusively used for prawn farms and fishponds as of March 12, 1995 are exempt from CARP coverage.
Lands devoted to prawn or fishponds that have already been distributed to ARBs and have CLOAs issued are treated as a consummated transaction and are no longer subject to exemption from CARP coverage.
Fishponds or prawn farms subjected to VOS, under CFD, or with NOAs issued to the landowner are exempt from CARP coverage only upon consent of a simple and absolute majority of the actual regular workers or tenants within one (1) year from March 12, 1995.
The simple and absolute majority for consent is determined as a vote of fifty percent (50%) plus one of the total regular fishpond and prawn farm workers, based on the validated worker list.
If workers or tenants object to exemption/exclusion in the applicable cases, the fishponds and prawn farms must be distributed collectively to worker-beneficiaries who form a cooperative or association to manage the same.
The Land Bank of the Philippines (LBP) must extend financial assistance to the cooperatives or associations through its countryside loan assistance program.
If the one-year period lapses and the required consent is not obtained, the property becomes subject to CARL.
Harassment intended to eject or remove workers or to cause loss of their rights, benefits, and privileges is sanctioned and dealt with under existing laws, rules, and regulations.
Fishpond or prawn farm workers affected by exemption/exclusion may either:
- Remain as workers in the exempted area, retaining rights, benefits, and privileges granted to farm workers under existing laws, decrees, and executive orders; or
- Become beneficiaries of agricultural lands, which may result in award of other lands covered by CARP.

Profit Incentive Plan: mandatory worker profit share

Owners or operators of fishponds and prawn farms must execute, within six (6) months from the effectivity of R.A. No. 7881, a Profit Incentive Plan for their regular fishpond or prawn farm workers (or their organization, if any).
The Profit Incentive Plan must grant regular workers a share equivalent to seven-and-a-half percent (7.5%) of the net profit before tax from operation of the fishponds or prawn farms.
The incentive must be distributed within sixty (60) days at the end of the fiscal year and must be paid over and above the compensation the workers currently receive.
The Profit Incentive Plan must be based on audited financial statements of the enterprise.

Books audit, inspection, and safeguards

The books of fishpond or prawn farm owners must be subject to periodic audit or inspection by a Certified Public Accountant chosen by the fishpond or prawn farm workers to safeguard their rights.

Application and approval procedure

The landowner or authorized representative must file a written Application for Land Exemption/Exclusion (Exc. Form No. 1, Annex-A) with the DAR Provincial Office (DARPO).
The application must be accompanied by:
- Ownership documents and title monuments such as Original Certificate of Title or Transfer Certificate of Title (OCT/TCT);
- A certified true copy of a business permit or proof of ownership of the fishpond or prawn farm;
- Certified true copies of Individual Income Tax Returns (BIR Form No. 1701-A) or Corporate Income Tax Returns (BIR Form No. 1702) covering the three (3) calendar years immediately preceding March 8, 1995, with corresponding audited financial statements;
- A certified true copy of the Certificate of Registration issued by the Securities and Exchange Commission if the applicant is a corporation;
- A location plan or vicinity map of the property;
- A sketch plan indicating improvements and existing facilities; and
- A Profit Incentive Plan containing:
  - Name of individual/entity;
  - Address of the establishment;
  - Commodity produced;
  - Names of employees (actual regular fishpond and prawn farm workers) as of March 12, 1995;
  - Estimated total net profit before tax; and
  - Estimated amount of profit to be distributed to each employee.
Upon receipt, the DARPO—with the assistance of the Barangay Agrarian Reform Committee (BARC), the Municipal Agrarian Reform Officer (MARO), and the fishpond and prawn farm specialist of the Bureau of Fisheries and Aquatic Resources (BFAR)—must conduct an ocular inspection/investigation to determine:
- Status of ownership;
- Type and area of the land sought to be excluded/exempted;
- Validity/accuracy of the list of actual regular fishpond and prawn farm workers or tenants submitted;
- Whether the area was devoted to fishpond or prawn farm raising prior to March 12, 1995;
- Areas actually used for fishpond or prawn farm purposes; and
- Whether the property has been subjected to VOS, CFD, or has NOA issued.
The DARPO must complete the required procedures and prepare the report of findings and recommendations within 30 days from receipt of the application.
For cases already subjected to VOS/CFD or with NOAs issued, the DARPO and involved offices must:
- Schedule a meeting/conference inviting in writing the operators/entities and all fishpond and prawn farm workers/tenants for consent determination, based on the validated list;
- Determine consensus through secret balloting by a three-man committee created by the Provincial Agrarian Reform Officer (PARO) consisting of one representative from the fishpond and prawn farm workers, an agrarian reform technologist, and the landowner or authorized representative; and
- Follow the simple and absolute majority rule (50% plus one) to decide whether consent exists.
If a majority objects, the fishponds and prawn farms must be distributed collectively to worker-beneficiaries forming a cooperative or association.
The DARPO must compile documents into an Application for Land Exclusion Folder (ALEF) and transmit the same to the Regional Director (RD).

Regional Director review, order, and finality

The RD must review and evaluate the PARO and MARO report and the documents contained in the ALEF.
If documents are in order, the RD must issue an Order of Approval or Order of Denial; otherwise the RD must return the ALEF to the DARPO for further action.
The RD must forward the Order of Approval or Denial to the PARO for distribution to the concerned or contending parties and counsel, furnishing copies to the Office of the Secretary, the Undersecretary for Field Operations, the Legal Affairs Office [ATTN: Bureau of Agrarian Reform Legal Assistance (BALA)], and the Management Information Service within fifteen (15) days from release of the Order.
The RD’s approving or denying order becomes final and executory after fifteen (15) days from receipt, unless an appeal is made to the DAR Secretary.
If the application is denied, the DAR Regional Office (DARRO) through the DARPO and DAR Municipal Office (DARMO) must cause acquisition and distribution of the property under DAR Administrative Order No. 1 (Series of 1993) and related issuances after the lapse of fifteen (15) days of the reglementary period.
The RD must perform the enumerated duties within ten (10) working days from receipt of the ALEF.

Motions, appeals, and enforcement powers

Motions for reconsideration with the RD and appeals to the Secretary are governed by Section III of DAR Administrative Order No. 9 (Series of 1994), covering RD authority over protests involving coverage under R.A. No. 6657 or P.D. No. 27 and defining the appeal process from RDs to the Secretary.
The Secretary of DAR and the Regional Directors have the power to:
- Order and administer compliance with Profit Incentive Plan provisions;
- Require submission of reports;
- Compel production of books and documents;
- Compel answers to interrogatories;
- Issue subpoena duces tecum; and
- Enforce writs through Sheriffs or other duly deputized officers.

Dispute settlement and mediation pathway

Issues involving the Profit Incentive Plan are treated as part of the administrative implementation of agrarian reform.
Profit Incentive Plan disputes must first be settled through mediation/conciliation pursuant to Section VI of DAR Administrative Order No. 8 (Series of 1994).
When mediation or conciliation fails, the issues must be resolved by the Regional Director, with a right of appeal to the Office of the Secretary.

Profit share compliance reporting deadlines

Individuals or entities must submit under oath a report on profit shares distributed, including special payrolls signed by the employer/landowner or duly authorized representative, not later than 30 days after completion of distribution of the workers’ shares.
Two (2) copies of the report must be submitted to the appropriate DAR Regional Office.
The compliance report must substantially follow these items:
- Name of establishment/employer;
- Address;
- Principal commodity produced;
- Total employment;
- Total net profit before tax (based on audited financial statements);
- Amount of profit shares distributed;
- Number of workers benefited;
- Average amount received per worker;
- Dates of distribution of profit shares;
- Total amount of undistributed/ unclaimed profit shares;
- No. of workers with undistributed/unclaimed profit shares.
Thereafter, compliance reports must be submitted to the DAR Regional Office every 15th of March.

Review, revocation, and monitoring of use

The Office of the Undersecretary for Field Operations must monitor cases where the bases for exclusions granted no longer exist and must recommend revision or revocation of the Certificate of Exemption/Exclusion to return the subject land (or portion thereof) to the category of agricultural land covered under CARP.
The MARO must conduct continuing review and verification to determine whether exempted/excluded lands are no longer used for fishpond or prawn farm purposes.
If lands cease to be used for fishpond or prawn farming, the lands must revert to agricultural land and be covered under CARP pursuant to:
- DAR Administrative Order No. 9 (Series of 1990),
- DAR Administrative Order No. 1 (Series of 1992),
- as amended by DAR Administrative Order No. 1 (Series of 1993) on land acquisition and distribution,
- and Section IV of the Administrative Order.
Compliance with the Profit Incentive Plan must be monitored by the Office of the Regional Director and its representatives.

Sanctions and criminal liability for violations

Any person who knowingly or willfully violates or prevents implementation of these rules and regulations is liable under Section 74 of R.A. No. 6657 and other penalties provided by law.
If the offender is a corporation or association, the officer responsible is criminally liable.
Violations must be reported for proper action to the Municipal Agrarian Reform Office covering the area or any DAR office.