I have been spending the last year reviewing for this year's Bar exam, but after the events like Mamasapano, the presence of an MILF camp in Iligan (not part of the ARMM!), and the attack on farmers in North Cotabato, I decided to do something about this whole foolishness.

Many of you haven't read the BBL and I've decided to share this link with you here for your benefit. Go ahead and download it.

I am from Mindanao, but I am not a muslim. Let me set the record straight for all of you. Although the majority of Filipino muslims are from Mindanao, the majority of people of Mindanao are  not muslim! There are more Visayan-speaking peoples, as well as the lumads (non-muslim indigenous people,) living here in Mindanao. If there is any group that can claim the original occupancy of Mindanao, it is the lumads. The lumads were here first; then the Visayans, who later converted to Christianity when the Spanish came; then the muslims in the 1300's. 

I am against the BBL. The BBL is unconstitutional.

I will center my argument against the BBL on the following grounds:

1.) Separation of church and state

2.) Non-delegation of powers

3.) Art. 11 of the BBL

1.) Separation of Church and State

The principle of separation of church and state is a basic democratic principle.  It doesn't matter what the religious establishment is (Christian, Muslim, etc.,) the religious sector is prohibited from meddling in purely secular affairs. By the same token, the state is prohibited from favoring any religion to the exclusion of others.

The BBL violates the separation of church and state by the creation of a Shariah legal system (Art. 10.) While the text says that Shariah law shall apply only to muslims, it must be remembered that Shariah is religious law. Sec. 4 of Art. 10  enumerates the sources of Shariah law:

a.) The Quran

b.) The Sunnah

c.) The Qiyas

d.) The Ijma

These are all religious texts. Even if the BBL states that the Shariah will only apply to muslims, the mere fact that such a provision is inserted into the legal system circumvents the principle of separation of church and state.

Under the principle of separation of church and state, the state cannot interfere in religious matters. The only exception is when religious sentiments are offended because offending religious sentiments is a violation of the universal freedom of belief; therefore the state can intervene in such a case.

But the BBL is different.  Religious law must be exercised within the confines of one's own religion and the state has no power to enforce it.

2.) Non-delegation of Powers

Another important principle of a mature democracy is the non-delegation of powers. This stems from another constitutional principle known as separation of powers. In separation of powers, the powers of the executive department, the legislature and the judiciary are clearly spelled out and neither department can encroach upon the other. This requires the creation of a check and balance system to prevent abuse.

Out of this separation of powers comes non-delegation of powers. Potestas delegata non delegari potest, a power once delegated cannot be delegated further; that is a universal legal principle. If, for instance, the power to legislate has been delegated to the legislature then the legislature cannot further delegate that same power to another body. The legislature may allow subordinate legislation (read: ordinances,) but never co-equal legislation.

The BBL runs against this by stating under sec. 2 of Art. 7 expressly that the Bangsamoro Parliament can enact laws. It even provides, under sec. 13 of Art. 12, for the enactment of a separate tax code! Art. 11 of the BBL also provides for the creation of a separate police force; we will take that up in the next paragraph.

3. Art. 11 of the BBL

Art. 11 of the BBL provides for the creation of a separate police force which, under sec. 2 (1,) is supposedly under the PNP. Under sec. 8 the Chief Minister of the Bangsamoro's powers over this separate police force are spelled out, including the powers of control, supervision and discipline. 

Under sec. 5, complaints against the Bangsamoro police may be appealed to the PNP, but this creates a problem. Since the Chief Minister exercises such tremendous powers over the Bangsamoro police, what is going to happen in case of a conflict between the Chief Minister and the PNP? Such conflicts will happen if the BBL is passed into law.

These principles that have been violated are known by lawyers the world over; they are an integral part of the Rule of Law. I reiterate: the BBL is unconstitutional. You can read more info on its flaws here.

Here's another analysis of the BBL; follow the link.

I'm Back!

Hello everybody! School is over and I've graduated from law school! Now I can write again! But first, I need a break. I'm so stressed, I need to relax before I resume my writing. I also have to prepare for review. See you all in a while!

The Tales of Neo-Byzantium

Hello everybody!

You're probably wondering why I haven't written any articles lately. It's because in this semester, I have 2 subjects handled by the same guy and he gives tests every meeting. Because of this, I have to double-time on schoolwork and what little time I have for myself will have to be spent on things other than law and my officework or I'll go crazy. 

Philcritic isn't dead. I just need to focus for a while. It will be back on track when the semester is over. In the meantime, you can take a look at my other blog, The Tales of Neo-Byzantium, where I write my fictional works, and is one of the things that's keeping me sane as of the moment. Enjoy!

Unrecognized Losses

After taking up the portion on exempt exchanges in this article, we now come here, where we will talk about exchanges and sales whose losses won't be recognized by the BIR and deductions will be prohibited. Whether or not you profit from these sales or exchanges, your losses will be disregarded by the BIR:

1.) Exchanges/sales between related parties (see below)

2.) Wash sales (unless made between dealers in securities)

3.) Exchanges in mergers and consolidations that are partly in kind and partly in cash (the cash portion is taxed)

4.) Illegal transactions

5.) Sales/exchanges generally not at an arm's length.

Related Parties

These just don't mean relatives. They also refer to members of a trust (grantor/trustor, fiduciary/trustee & beneficiary) as well as between corporations -if a single individual owns more than 50% of the outstanding stock of each corporation, if either is a personal holding company, whether local or foreign. Related parties can also refer to an individual and a corporation if he owns more than 50% of its outstanding stock.

"Not at arm's length" refers to a transaction where the consideration paid isn't commensurate with the thing's value because oc a certain relationship, such as between a parent company and its subsidiary.

A Holder in Due Course

Let's go back to negotiable instruments. Every holder of a negotiable instrument is prima facie considered to be a holder in due course and only real defenses are available against them. The following are the characteristics of a holder in due course:

1.) The instrument is taken as complete and regular on its face

2.) He became its holder before the instrument became overdue and without notice that it was previously dishonored (if there was a dishonor)

3.) The instrument was taken in good faith and for value

4.) When it was negotiated to him, he had not notice of an infirmity in the instrument or a defect in the title of the person who negotiated it.

In the absence of these characteristics, he becomes a holder for value and can raise neither real nor personal defenses.

Witness Protection Program: Penalties

The penalties for violating RA 6981 are the following:

1.) Violation of confidentiality of proceedings for application for witness protection: 1 to 6 years imprisonment and deprivation of the right to hold public office/employment for 5 years

2.) Witness giving false/evasive testimony: penalty for perjury

3. Witness fails/refuses to testify: contempt proceedings but the penalty is 1 month to 1 year imprisonment

4.) Harassment of witnesses: fine of up to Php3,000.00 and/or imprisonment of 6 months to 1 year (and if the harasser is a public official, perpetual disqualification from public office)

Harassment takes place when a witness is prevented, hindered or dissuaded from :

1.) Attending/testifying before a judicial, quasi-judicial or investigative body

2.) Reporting the commission/possible commission of a crime or a violation of conditions of parole, probation, or release pending judicial proceedings (a. k. a. Bail)

3.) Seeking the arrest of another person in connection with the crime in question

4.) Causing a criminal prosecution/proceeding for the revocation of parole or probation

Witness Protection Program: Background

Yes, the Philippines does have a witness protection program. It's RA 6981. The program is available to witnesses testifying not only in court but also at a quasi-judicial or investigating body.

Qualifications

1.) The testimony covers a grave felony under the Revised Penal Code or its equivalent under special laws
2.) The testimony's material points can be corroborated substantially
3.) The witness, or a family member within the 2nd degree (parents, siblings, children, grandchildren or grandparents) is subject to death threats, threat of injury or there is a possibility that he/his family member will be killed, harassed, forced, intimidated or bribed to prevent the witness from testifying
4.) The witness isn't part of law enforcement, even if he's testifying against other law enforcement officers (in this case, only immediate family members can receive protection)

If the witness will testify before a legislative panel "in aid of legislation," he will only  be admitted into witness protection if there is a serious need for it. It requires a recommendation from the panel which must be approved by the senate president or speaker of the house, depending on which panel is conducting the investigation.

Bail: When Not Required

Bail will not be required in any of the following instances:

1.) The accused has been in custody for a period equal to or greater than the prison term of his offense

2.) If the crime is a violation of a city or municipal ordinance and/or a light felony with a prison term of not more than 6 months and/or a Php2,000 fine and the accused has proven that he can't post bail except if:

a.) He was caught in flagrante delicto

b.) He jumped bail, escaped from legal custody or evaded sentence

c.) He is a recidivist/habitual delinquent or had previously been convicted of a crime which the law/ordinance imposes an equal or greater penalty or for 2 or more crimes with a lighter penalty

d.) He commits a crime while on parole or conditional pardon or if he was previously pardoned by the municipal/city mayor for violation of ordinances at least twice

3.) Cases covered by the Rule on Summary Procedure (the court won't order the accused's arrest unless he fails to appear when summoned)

4.) Crimes punishable by destierro (there's only preventive imprisonment for 30 days)

Bail is also not available to members of the military, regardless of rank. This is for national security reasons.

Bail: Cancellation or Denial

Bail will be cancelled or denied if the penalty for the crime is imprisonment for more than 6 years or if any of the following circumstances is present:

1.) The accused is a recidivist, quasi-recidivist, habitual delinquent or if there is reiteration

2.) He previously escaped from legal custody, evaded sentence or violated the conditions of the bail without a valid justification

3.) He committed a crime while under probation, parole or conditional pardon

4.) Circumstances indicate that he might escape if he is bailed

5.) There is an undue risk that he might commit another crime while his appeal is pending
6.) The accused is acquitted (obviously!)

Bail: Cash Bail

This is the most common form of bail. When fixing the amount for bail, the judge will consider the following factors:

1.) Accused's financial ability

2.) Nature and circumstances of the crime

3.) The crime's penalty

4.) Accused's character and reputation

5.) Health and age of the accused

6.) Weight of the evidence against the accused

7.) Accused's probability of appearing in court

8.) Forfeiture of other bail (if he's on bail for other crimes)

9.) Whether or not the accused was a fugitive from justice when he was arrested

10.) Other cases the accused is involved in where he's on bail

The amount is deposited with the nearest local government treasurer or BIR collector. It can also be paid to the court. A certificate of deposit will then be issued. Once the certificate and other requirements are submitted to the court, the court will be discharged from custody, but he's still subject to the conditions of the bail. The amount will be returned to the accused, regardless of whether he's convicted or acquitted.

If the accused isn't capable of posting a cash bail, he can put up a surety bail instead. The court can't reject the offer of sureties if the accused can't pay cash (Almeda vs. Villaluz, 66 SCRA 38.)

Bail: Intro

Hello everybody! Philcritic is back on blogspot. Clickbankphilippines has been giving me a headache for the past several months. It 's a good thing blogger has a procedure for removing your blog from a domain and putting it back on blogspot.

A bail is a form of security that allows a person in legal custody to be released. He is, however, required to appear in court under the terms specified in the bond.

Bail is a matter of right, the exception being if the crime is punishable by reclusion perpetua, life imprisonment or death -if the evidence is strong (and if it's weak, bail can be granted.) In case of the 3 exceptions, it becomes discretionary and may be denied. It can also be applied for after conviction in the MTC. If conviction is made in the RTC bail becomes a matter of discretion even if the crime isn't punishable by reclusion perpetua, death or life imprisonment.

Bail cannot be excessive and can be applied for even if the privilege of the writ of habeas corpus is suspended. If a person is arrested by virtue of a warrant, however, a petition for habeas corpus will not be applicable (Moncupa vs. Enrile, 141 SCRA 233) except in certain instances where the person arrested has a right to be protected from arbitrary and oppressive actions by the state (Serapio vs. Sandiganbayan, GR 148468-69, January 28, 2003.)

When a petition for bail is pending in court, a motion to quash an information can be filed. This is because the accused is allowed to apply for bail the moment he is arrested.

A bail can take any of the following forms:

1.) Cash

2.) Corporate Surety (usually 7% of the bail, renewable yearly)

3.) Property Bond (must be equal to the amount of bail)

4.) Recognizance (the bailed person is insolvent and his appearance in court will be guaranteed by another person in good standing -allowed only if the offense isn't serious)

Conditions

1.) A bail remains effective until judgment is made in the RTC, whether or not the RTC is in its original or appellate jurisdiction unless it's cancelled.

2.) The accused must appear in court under the following instances:

a.) Identification purposes

b.) Arraignment

c.) Promulgation of judgment (unless he's convicted for a light offense)

3.) If the accused is absent, he waives his right to be present at trial and he is tried in absentia. For trial in absentia, the following are the requisites:

a.) The accused was already arraigned

b.) He was duly notified of the trial

c.) He has no justification for his absence

4.) The bondsman will surrender the accused to the court for execution of judgment and they can arrest him. Take note of this article.

Even if the accused is absent, his lawyer must still be present at the proceedings so that his constitutional right to counsel isn't violated.

Bad Debts, Depreciation, Amortization and Depletion

If you've read this article and the ones related to it, let's now move on to a set of expenses you can deduct for tax purposes.

1.) Bad Debts

Bad debts arise when goods are sold on credit, but not paid. Normally, when goods are sold on credit the seller/creditor is said to have made a profit. However, the seller/creditor suffers a loss if he can no longer collect from his customers/clients because of bankruptcy or other causes. To protect the seller from such losses, he can deduct them for tax purposes if he meets the following requisites:

a.) The debt is connected to the seller's business, profession, etc.

b.) It has been determined to be worthless

c.) It was written off/charged off during the taxable year

Note that mere doubtfulness doesn't  justify deductibility. If there is a possibility that the debt can still be paid then it's not deductible. And if a bad debt was written off in one year but the seller was able to recover in the next, the recovered amount will form part of the seller's gross income for the year when it was collected. The recovery of a bad debt is taxable if the seller benefited from it and is not taxable if he didn't benefit from it. 

Worthless debts from unpaid salaries, wages, rentals and similar items are deductible only if they were included in the return of the year they were written off.

2.) Depreciation

Depreciation is the allocation of a part of the cost of a permanent, tangible asset on regular periods as a form of deductible expense. To avail of depreciation as an expense, the taxpayer must show that:

a.) The asset is used in the taxpayer's profession, trade or business

b.) It has a limited useful life.

The following kinds of property are subject to depreciation:

a.) Furniture and fixtures

b.) Returnable containers

c.) Leasehold improvements

d.) Machinery

e.) Patterns and dies used for regular products

f.) Equipment

g.) Buildings

There are many ways of computing depreciation, but the easiest is known as the "Straight-line method." It looks like this:

Annual Depreciation = Cost - Scrap Value

                                   Estimated Useful Life

To illustrate, let's say here's a guy called Bryan who owns a commercial building valued at Php10 Million that has an estimated scrap value of Php500,000 and an estimated useful life of 20 years. We calculate:

= 10,000,000 - 500,000

    20

= 475,000

So the building has a depreciation expense of Php475,000 a year. Note: if a building is renovated, its useful life becomes longer.

3.) Amortization

This is depreciation's equivalent with regard to intangible assets. So now we're talking about copyrights, patents, trademarks, franchises leaseholds and goodwill. The formulas for calculating depreciation can also be used in amortization, with a slight twist. For example, the "Straight line method" will look like this:

Annual Amortization = Cost /Useful Life

4.) Depletion

Depletion is a deductible expense covering the extraction of natural resources (referred to as "wasting assets" because they're irreplaceable.) Timberland, mineral lands and oil, gold, silver and ore deposits are covered by depletion. Depletion is calculated this way:

Depletion Rate = Cost of Wasting Asset/Estimated Resource Deposit

Let's say Billions Mining, Inc. owns land containing silver deposits and is valued at Php1,000,000 with an estimated 25,000 tons of silver in it, the computation will look like this:

= 1,000,000/25,000

Depletion Rate = Php40/ton

Therefore, if 100 tons of silver are extracted, that's:

40 x 100 = 4,000

So Billions Mining can claim Php4,000 as depletion expense from the 100 tons of silver it extracted.

Insurance Premiums Tax

You might find this interesting. RA 10001 has set a new rate on the tax on life insurance policies, including their documentary stamp taxes.

Life insurance premiums tax has been lowered from 5% to 2% on the total premiums collected from life insurance businesses. This 2% rate is not retroactive and will apply only to those insurance policies issued after RA 10001's date of effectivity (February 23, 2010.) In case a policy was taken before February 23, 2010, but the premiums weren't fully paid, the 2% rate will cover the remaining balance for the remaining years. Cooperatives are exempt from this tax.

The following transactions will not be included in the taxable receipts:

1.) Premiums refunded within 6 months from date of payment due to rejection of risk (or other reasons) to a person who is insured

2.) In a contract of reinsurance if the company has already paid the tax

3.) Premiums collected or received by any branch of a domestic corporation, association or firm doing business outside the Philippines on account of a nonresident insured if the foreign country where branch in question is located imposes taxes on the premiums

4.) On the portion of premiums collected or received by the insurance companies on variable contracts, in excess of the necessary amounts to insure the lives of variable contract owners

And it gets better! Under sec. 4 of this law, beginning 2015, no tax on life insurance premiums will be collected. Also,they will be exempt from documentary stamp tax! (Oh yeah!)

The rates of documentary stamp tax on insurance policies (which will thankfully be abolished on 2015) are as follows:

If the insurance amount is

Not more than Php100,000.00 = exempt

More than Php100,000.00 but less than Php300,000.00 = Php10.00

More than Php300,000.00 but less than Php500,000.00 = Php25.00

More than Php500,000.00 but less than Php750,000.00 = Php50.00

More than Php750,000.00 but less than Php1 Million = Php75.00

More than Php1 Million = Php100.00

So there you have it: on more reason to take on life insurance.

Rest in Peace?!

After we've taken up the article on estate taxes, we now come to an object that should concern many and is certain to generate a lot of controversy in the years to come. The BIR issued a memorandum with the ironic name “Project Rest in Peace.” It's ironic; read along and you'll know why.

Revenue Memorandum Order 10-2010 was issued by the BIR after it was dissatisfied with the estate tax returns filed from 2007 to 2009. Some Php2.3816 billion was collected in estate tax. The BIR was dissatisfied with difference between the deaths recorded in the NSO between those years and the estate taxes collected within the same period. Revenue Memorandum Order 10-2010 was therefore issued to increase the number estate tax returns filed and raise Php10 billion in estate taxes. They call it “Project Rest in Peace” but the activities of the BIR under this order are far from comforting.

Policies

1.) All RDOs are required to establish linkages with and/or access records of the following:

a.) Civil registers

b.) Memorial parks

c.) Hospitals

d.) Cemeteries

e.) Funeral parlors

f.) Crematoria  

g.) Obituaries

h.) Clerks of court

i.) Life insurance companies and other financial institutions

2.) In accessing records, the following information will be required and sent to the Audit Information, Tax Exemption and Incentives Division (AITEID) for processing:

a.) Name, civil status and address of the decedent

b.) Date of death

c.) Names and addresses of relatives/contact persons

3.) The RDO shall then send a notification letter within 5 days from obtaining the info in #2 to the relative/contact person named in the information as well as the residence of the deceased. All other info on decedents who aren't under the jurisdiction of the local RDO will be sent to the AITEID, which will then transmit the information to the pertinent RDO. The notification letter shall inform the administrator/executor/relative/contact person of the decedent on the information, requirements and due dates for filing the returns and paying the estate taxes.

4.) If the relative/contact person/administrator or executor fails to file and pay the tax on the due date, the RDO will take the actions necessary to protect the BIR's interest. These shall include (but will not be limited to) the following:

a.) Background investigation to determine the estate's properties

b.) Issuance of a letter of authority to investigate

c.) Issuance of subpoena duces tecum to compel the submission of information

d.) Notice to entities holding the decedent's properties, ordering them not to dissipate or withdraw the properties without BIR approval

e.) Other activities deemed warranted

High Potential Cases

Each week, the National Investigation Division (NID) will prepare a list of names from obituaries in newspapers of general circulation. It will determine who among the decedents in the list have substantial properties and potential for substantial estate tax payments! The list will be sent to the AITEID, which, within 5 days from receipt of the list, will transmit it to the pertinent RDO.

So if a loved one has died and the BIR comes knocking on your door only a few days later, who will be the one resting in peace? Such a name for a BIR issuance adds insult to injury; its real message is: Thou shalt not grieve (until thou hast paid the estate tax!)

Penalties for the BIR 2: Sec. 270-273, NIRC

Continuing from the last post, here's the next set of penalties that can be imposed on public officers.

Unlawful Divulgence of Trade Secrets (Sec. 270, NIRC)

Officers and employees of the BIR can be imprisoned for 2 to 5 years and/or fined Php50,000.00 to 100,000.00 per offense if they divulge information on the business, income, or estate of a taxpayer, or his trade secrets, equipment or confidential information on his business to another person without authority of law. This provision was made to protect taxpayers from unfair competition resulting from the revelation of his trade secrets.

Lawful divulgence is limited to the following:

1.) When a candidate for an elected post files his certificate of candidacy, he waives the privilege from public disclosure of his income tax returns and tax census statements. This waiver covers the last 2 years before the election and is effective only for the candidate's period of candidacy.

2.) If the divulgence is provided by law.

3.) Income tax returns that have already been filed are public records and, under orders of the president, open to inspection under recommendation by the BIR commissioner (sec. 71, NIRC.) The commissioner can have a list of names and addresses of those who filed their ITRs published.

4.) If the ITRs are evidence in a criminal case (Cu Unjieng vs. Posadas, 58 Phil 360) except if the case involves sec. 268 of the NIRC, which covers the forfeiture of illegally stored/removed goods, property used in unlicensed businesses or dies used in printing false internal revenue stamps, tags and labels as well as misdeclaration/misrepresentation of manufacturers subject to excise tax.

Unlawful Interest (Sec. 271, NIRC)

People for the BIR are also prohibited from having an interest, whether direct or indirect, in the manufacture, sale or importation of any article subject to excise tax or in the manufacture, sale or repair of dies for printing or making internal revenue labels or stamps. For every such offense, the penalty is imprisonment for 2 years and 1 day to 4 years and/or a fine of Php5,000.00 to 10,000.00.

Violation of Withholding Tax Provisions (Sec. 272, NIRC)

Employees of all branches of government, including GOCCs, who violate the NIRC provisions on withholding tax will be punished by imprisonment for 6 months and 1 day to 2 years and/or a fine of Php5,000.00 to 50,000.00 per offense committed. The following are considered violations under sec. 272:

Failing/causing the failure to deduct and withhold any internal revenue tax under any of the withholding tax laws and implementing rules and regulations

Failing/causing the failure to remit taxes deducted and withheld within the time prescribed by law and implementing rules and regulations

Failing/causing the failure to file a return or statement within the prescribed time or rendering/furnishing a false/fraudulent return or statement under withholding tax rules and regulations

Failure to Issue and Execute Warrants (Sec. 273, NIRC)

An officer who fails to issue or execute a warrant of distraint or levy within 30 days after the expiry of the time in sec. 207 (distraint and levy) or is guilty of abusing the exercise thereof by competent authority will be automatically dismissed from service after due notice and hearing.

Penalties for the BIR 1: Sec. 269 NIRC

I am not against the paying of taxes. Taxes are important for the upkeep of the government and every citizen is obliged, one way or another, to pay taxes.

But there is another thing that we, the citizenry, are obliged to do. Taxation is not a one-sided affair with the government unstoppable in its quest to bilk us of our money. We are also tasked with the obligation to ensure that the money goes where it's needed -and that government has no right to collect more that what we owe it. We even have the right to defend ourselves from abuses committed by our underlings in the BIR. I say “underlings” because all government employees, including the elected ones, are nothing more than our servants.

“The Philippines is a democratic and republican state. Sovereignty resides in the people and all government authority emanates from them.”

-Art. 2, Sec. 1, 1987 Constitution

That means the president, senators, congressmen and so on are answerable to the doctor, the teacher, the beggar and the housekeeper.

What I am putting down here now is an article that covers a subject that is either glossed over by many law professors and reviewers, or totally ignored by them. Nevertheless, it is extremely important and no one has the right to ignore it.

You've already read the articles on the Anti-Graft and Corrupt PracticesAct as well as RA 1405. Now here's another one.

Employees, agents or officials of the BIR, as well as other government bodies tasked with enforcing the NIRC provisions can be punished with imprisonment for 10 to 15 years and a fine of Php50,000 to 100,000 plus perpetual disqualification from public officer, to vote and participate in public elections for the following violations of Sec. 269 of the NIRC:

1.) Offering/undertaking to accomplish, file, or submit a report/assessment on a taxpayer without appropriate examination of books of accounts/tax liability or offering/undertaking to submit a report/assessment less than what is due the government -for a price- or conspiring/colluding with others to defraud the government of its revenues.

2.) Extorting or willfully oppressing (using his office) or harassing a taxpayer who rejected any of his offers in #1.

3.) Knowingly demanding/receiving other or greater than authorized by law or accepting any reward  for the performance of any duty, except as prescribed by law.

4.) Willlfully not giving receipts for amounts collected in the performance of duty as legally required or willingly neglecting to perform other duties required by law.

5.) Neglecting or permitting (by design) the violations of law by another person.

6.) Making/signing of false entry/ies in any book or making or signing a false certificate or return.

7.) Allowing/conspiring/colluding with another to allow the unauthorized retrieval/withdrawal/recall of any return/statement/declaration after it has been officially received by the BIR.

8.) Having knowledge/information of any violation of the NIRC or fraud in the collection of NIRC taxes and failing to report such information.

9.) Demanding, accepting or attempting to collect -directly or indirectly, without legal authority, as payment or otherwise- any some of money or thing of value for the compromise, adjustment or settlement of any charge/complaint for any violation/alleged violation of the NIRC.

And that's just part of it.

Cross-Border Insolvency

Because global trade has been accelerated by the internet, this type of case under the FRIA will become very commonplace in the near future. It's called cross-border insolvency and happens when a foreign corporation doing business in the Philippines becomes insolvent. This part of the FRIA is based on the model put forth by the UN Center for International Trade and Development.

When a foreign corporation initiates insolvency proceedings, its files the petition. The court then issues the following orders:

1.) Suspension of actions to enforce claims against the foreign corporation (or seize/foreclose its property)

2.) Surrender the foreign corporation's property to its representative

3.) Provide other necessary reliefs

The court will consider the following factors in determining whether to grant relief to the foreign corporation:

1.) Protection of the Philippine creditors and the problems they could face if they pursue their case in a foreign proceeding

2.) Resort to a unified insolvency/rehab proceeding for the just treatment of all the creditors

3.) The extent to which the foreign proceeding recognizes the creditors' rights and those of other interested parties in a way that is substantially in line with what is prescribed in the FRIA

4.) The extent to which the foreign corporation recognizes and defers to FRIA proceedings (and previous legislation)

5.) Whether or not other jurisdictions recognize the foreign proceedings

Stocks and Shares 3: Features of Shares

Now that we've taken up issuance and transfer of stocks, let's look at the shares of stock themselves. There are 7 kinds of shares of stock:

1.) Common

Common shares are equal in rights and privileges and have no fixed/definite ROI. If the corporation issues only one kind of stock, then it's common.

2.) Preferred

Preferred shares, on the other hand, enjoy preferences  on dividends (or assets in case of liquidation.) They also have a fixed or limited ROI.

3.) Redeemable/Callable

Preferred (usually) shares that can be redeemed by the corporation on a fixed date and redemption price, regardless of whether there were unrestricted earnings or not. The corporation won't, however, become insolvent by their redemption because a sinking fund deposited at a trustee bank is always prepared for the purpose.

4.) Treasury

Shares that were issued and fully paid for but bought back by the corporation by purchase, redemption or any other legal means. They're not retired, so they can be sold again (and at a price lower than par value.) They can't be distributed as cash or stock dividends but they can be property dividends.

5.) Convertible

Shares that can be converted from one class to another (preferred to common, or no-par to par) at a certain price and within a certain period.

6.) Shares in Escrow

Shares held in a third party's custody until they're fully paid. The buyer isn't their owner yet, so he doesn't have the rights and privileges of a stockholder.

7.) Founders' Shares

Shares issued to the founders and promoters of the corporation. They can be given certain rights and privileges that the other shares don't enjoy. If the exclusive right to vote and be voted for in the election of directors is granted them, it can't be longer that 5 years after the date of approval by the SEC.

Some Maritime Terms

Here are some terms useful in maritime commerce, transportation and insurance law.

Charter Party

An agreement where the ship is let to the charterer by the shipowner. There are 3 kinds:

1.) Bareboat/demise charter

The charterer provides his own captain and crew. He may also employ the shipowner's own captain and crew but they will be under the orders of the charterer's employees and agents. The charterer becomes pro hac vice owner of the vessel and assumes the shipowner's liabilities and rights as far as third parties are concerned.

2.) Voyage/time charter

The captain and crew are under the shipowner's employ. The ship carries the charterer's cargo for one particular voyage or series of voyages.

3.) Time charter

The charterer uses the vessel for a certain period of time for one or several specific voyages. The captain and crew are employees of the shipowner.

Loan on Bottomry

This is a loan where the ship itself is given as a collateral and payable only if the ship completes the agreed voyage safely. If the ship is lost at sea, the owner doesn't have to pay but he won't be indemnified for the loss.

The interest rate is higher than usual because of the risk of not recovering anything. The shipowner's insurable interest hypothecated by bottomry is the excess of its value over the amount that was secured by the bottomry. Check this related article out.

Loan on Respondentia

This is a loan where the ship's cargo, not the ship itself, becomes the collateral.

Averages

This is a collection of damages that are unique to maritime commerce. There are 2 kinds:

1.) General

Damages deliberately caused by the captain in order to save the ship. Since all the persons with interest in the cargo and the ship have benefitted from such damage, they will all bear the loss; the insurer himself will be liable for his proportion of all general average loss. An example is jettisoning cargo in order to save the ship.

2.) Particular

Not everybody benefits from this kind of damage. The loss will be borne by the shipowner or the owner of the cargo. And unless there is a stipulation to the contrary, the insurer will be liable for particular average loss. An example is the damage the ship suffers throughout the voyage until it reaches its destination.

Marine Insurance

Marine insurance, also known as transportation insurance, covers both ocean and inland marine insurance. Ocean marine insurance covers the risks related to navigation which a ship, its cargo, profits of the shippers/consignees or other insurable interest may be exposed to.

Inland marine insurance, on the other hand, deals with risks concerning land and overland transportation like. property in transit (on railroads, aircraft, etc.,) "floater" policies on jewelry, works of art and other movables, fixed transport instrumentalities (bridges, runways, etc.,) bailees  with the custody of another's property (warehousemen, carriers, etc.) 

A "floater" policy is so-called because it "floats" (i.e. follows movable property wherever the latter is brought.) It covers jewelry, works of art and other valuable movables. Sometimes, however, "floaters" are issued even to things that aren't moved from their location.

If the policy is "all risk," it will cover all losses including those not attributable to maritime peril, such as war and pilferage.

If the policy contains a "lost or not lost" provision, the insurer will be liable not only when the vessel is lost but also if it was lost when the contract was entered into.

The concepts of concealment and misrepresentation in marine insurance are stricter than in fire insurance. Failure to communicate information that the insured possesses (even if he's not aware of it personally) will make the contract void. The insured is also bound to communicate the beliefs, opinions or expectations of third persons in reference to a material fact to the insurer.

Liabilities

The insurer is liable for loss or damage due to the perils of the sea, but not for perils of the ship. Perils of the sea are those dangers related to the unusual movement of the wind and waves. They include losses caused by collision, shipwreck, barattry (deliberate misconduct of the captain and crew for an illegal purpose and without the shipowner's consent,) stranding, jettisoning of the cargo in order to save the ship and other navigation-related causes.

Perils of the ship are related to the natural and unavoidable action of the sea, wear and tear of the ship or negilgence or failure to provide the proper crew, supplies and equipment.

Implied Warranties

1.) The ship must be seaworthy at the time of the voyage. It doesn't have to be seaworthy all the time except if:

a.) Time Policy -the ship must be seaworthy at the beginning of each voyage

b.) Voyage Policy -the ship must be seaworthy at the beginning of each stage of the voyage

c.) Cargo Policy -the ship receiving the cargo must be seaworthy at the beginning of each voyage

It's possible that the ship could be seaworthy for insurance purposes but not when it comes to insuring the cargo.

2.) It must not deviate from the voyage. Deviation includes departing from the course of the voyage, going on a completely different one or even an unreasonable delay in undertaking the voyage. A deviation is allowed if:

a.) Made in good faith to save human life or relieving another ship in distress (but not to save cargo)

b.) It is necessary to comply with a warranty or avoid peril

c.) Caused by circumstances beyond the captain's and shipowner's control

d.) Made in good faith and with reasonable ground to avoid peril

3.) The ship must not engage in an illegal venture

4.) It must carry the required nationality or neutrality papers if such is expressly warranted

Inchamaree Clause

This is a marine insurance policy covering loss or damage to the ship's hull or machinery via the following:

1.) Negligence of the captain or crew

2.) Explosion or breakage of shafts

3.) Latent defect in the machinery or hull

Constructive Loss and Abandonment

Loss can be total or partial. If the loss is total it can be either actual (the thing is lost in its entirety) or constructive. Constructive loss takes place when the thing isn't totally lost but, legally speaking, it is totally lost and there is a proper abandonment.

In abandonment, the insured relinquishes his interest in the thing to the insurer if the damage/loss exceeds 3/4 of the thing's value. The loss must be more than 3/4 or it will be considered a partial loss and can't be abandoned. If abandonment is proper, it is an absolute right and acceptance on the insurer's part isn't necessary. If there is a valid abandonment, the insurer now has an interest over the abandoned thing and whatever is recovered belongs to him.

Computation

Insurer's liability = (partial loss/ship's value) x insurance

Example: the MV Indestructible is a local cargo vessel valued at Php10,000,000.00. The same is the amount in its insurance policy is the same. It is damaged and the damage amounts to Php6,000,000.00. We compute:

(6,000,000/10,000,000) x 10,000,000 = 6,000,000

Note: if the value of the ship is greater than the insurance policy, the excess will be borne by the shipowner (he becomes a co-insurer.) Example: MV Unsinkable is an international cargo vessel owned by Oxymoron Shipping Lines. It is valued at Php100,000,000.00 but has an insurance policy for only Php80,000,000.00. During a voyage it suffers a massive damage amounting to Php60,000,000.00. The computation is:

(60,000,000/10,000,000) x 80,000,000 = 48,000,000

The insurance company is liable only for Php48,000,000.00. Oxymoron Shipping, as a co-insurer, will bear the remaining Php12,000,000.00 loss.

1/3 New for Old Rule

This applies when there is a partial loss or its equipment. During repairs, old materials are deducted from the cost of the repairs. When the repairs are completed, 2/3 of the remaining cost is borne by the insurer and 1/3  by the insured. This is because after the repairs, the law considers the vessel more valuable than before, thus "1/3 new for old."