The Securities and Exchange Commission (SEC) is seeking public comments for the draft Implementing Rules and Regulations (IRR) of Republic Act No. 11523 or the Financial Institutions Strategic Transfer (FIST) Act, a critical economic measure in the Philippines’ economic recovery.
In a statement, the commission said the draft IRR will operationalize the newly signed law that allows for the creation of corporations that invest in or acquire non-performing assets (NPAs) of financial institutions such as banks, lending and financing companies, investment houses, and insurance companies.
The measure was passed as part of efforts to cushion the “serious economic setbacks and tremendous financial pressure on markets and industries” caused by the COVID-19 pandemic.
The SEC, the primary implementing agency of the FIST Act, drafted the IRR with inputs from the Bangko Sentral ng Pilipinas (BSP), Bureau of Internal Revenue (BIR) and National Economic and Development Authority (NEDA).
The law provides that a FIST corporation shall be organized as a stock corporation other than a one-person corporation, with a minimum authorized capital stock of P500 million, of which P125 million shall be subscribed and at least P31.25 million paid up.
The draft IRR further provides that a FISTC shall be classified as corporations vested with public interest. As such, it shall have independent directors in its board of directors, appoint a compliance officer, submit compensation and performance reports, and comply with other requirements prescribed by law.
Applications for the establishment and registration of a FISTC shall be filed with the SEC within 36 months from the effectivity of the FIST Act. Those established on the 25th to 36th month cannot avail of the tax incentives unless an amendatory law extending the privileges is passed.
Entities created under Republic Act No. 9182, as amended, or The Special Purpose Vehicle (SPV) Act of 2002, may avail of the privileges and incentives by submitting a notarized Secretary’s Certificate, recent articles of incorporation and bylaws, and latest audited financial statements and General Information Sheet showing their compliance with the minimum capital requirements.
Meanwhile, a FISTC may issue Investment Unit Instruments (IUIs) to any qualified buyer in the minimum amount of P10 million, pursuant to a plan submitted to the SEC and issued with a Certificate of Permit to Sell or Offer for Sale Securities.
The approved plan shall include the investment policies of the FISTC, features of the IUIs including specific amounts issued and or to be issued, rights of the holders of the IUIs, and methods for the liquidation and distribution of assets to the holders of IUIs, among others.
Under the IRR, the transfer and other related transactions involving eligible NPLs and ROPAs shall be exempt from the payment of certain taxes such as the documentary stamp tax, capital gains tax, creditable withholding income taxes and value-added tax, subject to applicable revenue regulations.
To encourage the infusion of capital and financial assistance by the FISTC for the purpose of rehabilitating the borrower’s business, the draft IRR also exempts FISTCs from the income tax on net interest income arising from new loans in excess of existing loans, among others.