Opinion No. 14-31 RE: Transfers under the Special Purpose Vehicle Act

Republic of the Philippines Department of Finance

SEC Building, EDSA, Greenhills, Mandaluyong City Securities and Exchange Commission

OFFICE OF THE GENERAL COUNSEL

10 November 2014

Transfers under the Special Purpose SEC-OGC Opinion No. 14-31

Vehicle Act

PUYAT JACINTO AND SANTOS 1226 Makati City 12th Floor, VGR Center 6772 Ayala Avenue

Si:

series of 2010 ("SEC-MC No. 03-2010")' to certain First Leg Transfers,2 and the issuances requesting for our opinion regarding the applicability of SEC Memorandum Circular No. 3. Asian SpecialSolutions M3P2 (SPV-AMC) Incorporated (hererinafter"ASSI-M3P2") of Certificates of Eligibility ("COEs") for certain Second Leg Transfers. This refers to your letter dated June 21, 2010 concerning questions of your client.

ASSI-M3P2 is a Special Purpose Vehicle (SPV) incorporated on May 16, 2007. Its primary purpo$e is to "invest in, or acquire Non-Performing Assets (NPAs) of Financial

Owned and Acquired (ROPOAs)". 4 Institutions (FIs), whether Non-Performing Loans (NPLs) or Real and Other Properties

You have requested us to confirm your following positions:

the First Leg Transfers of which occurred on or before 9 April 2005; and SEC-MC No. 03-2010 only applies to non-performing assets

2 Provided that ASSI-M3P2 complies with all other requirements under the Special Purpose Vehicle Act, the Amended Special Purpose Vehicle Act, the Implementing Rules and Regulations issued in relation

4 Second Article, Articles of Inccrporation of ASSI-M3P2. 5 Republic Act No. 9182 2 Transfer of non-performing assets from a financial institution to a special purpose vehicle 3 Transfer of non-performing assets from a special purpose vehicle to a third party. 6 Republic Act No. 9343 I Issued on 10 June 2010.

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thereto, and rules and regulations which may be issued by the Commission from time to time, Second Leg Transfers of non-performing assets acquired by ASSI-M3P2 made after 10 April 2010 may still be granted a COE by the Commission.

Circular No. 3, Series of 2010 to First Leg Transfers occutring after 9 April 2005 The applicability of SEC Memorandum

more funds available for lending to businesses which would spur economic growth. By 9182"), fully took effect on 12 April 2003 (not 9 April 2003), with the effectivity of the providing incentives and benefits,' such as tax exemptions, institutions were encouraged to participate in the transactions under RA 9182. Implementing Rules and Regulations (IRR). The main objective of the law is to help Philippine banks dispose of their NPAs in order to become more liquid and be able to have Republi& Act No. 9182, also known as the Special Purpose Vehicle Act of 2002 ("RA

Transfer from a FI to an SPV should be made within two (2) years from the date of transactions should occur within the prescribed period under the said law. The First Leg March 2003, hence, it became effective on 12 April 2003, or fifteen (15) days thereafter. Thus, the First Ieg Transactions covered are those made on or before 11 April 2005. effectivity of it$ IRR. The IRR was published in a newspaper of general circulation on 28 In order to avail of the tax benefits and other incentives under RA 9182, the

Under item 1(a) thereof, the NPAs that are covered are those which are acquired under RA 9182, or those acquired not later than 11 April 2005. determining if the benefits or incentives under RA 9182 may be applicable to the transfer. In relation thereto, the Commission issued SEC-MC No. 03-2010, for the purpose of

or those which made on or before 11 April 2005, the last day of the two-year period from the effectivity of the IRR of RA 9182. Consequently, First Leg Transfers made after 9 April 2005, but not later than 11 April 2005, are still covered by MC 3-2010. Hence, $EC-MC No. 03-2010 covers only those First Leg Transfers under RA 9182

ASSI-M3P2 for Second Leg Transfers occurring after10 April 2010 The Issuance of Certificate of Eligibility to

9343") to provide an extension of the period within which to avail of the incentives and benefits under the Act. RA 9343, which amends RA 9182, was signed into law on 24 April RA 9182 was amended in 2006 with the passage of Republic Act No. 9343 ("RA

: Published in the Manila Standard, March 28, 2003. 9 Section 28, IRR of RA 9182. Sections 15, 16, and 17, RA 9182.

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2006. RA 9343 was published in newspapers of general circulation on 29 April 2006:1 hence, it became effective on 14 May 2006 or fifteen (15) days after its publication, and not 27 July 2006 as you manifested in your letter.

(2) years from the date of effectivity of the said law, that is, until 14 May. 2008. As to Second Leg Transfers from an SPV to a third party, the benefits and incentives are applicable if the same are made within five (5) years from the date of acquisition of the non-performing asset by the SPV from the FI. Under RA 9343, the First Leg Transfers which are covered are those made within two

(SEC-MC No.08-2011)!1 to determine if the Second Leg Transfer is covered by the qualified for the issuance of a COE, the following conditions must be complied: incentives and benefits under RA 9343, and for the issuance of the COE for the transactions covered. Under this Memorandum Circular, in order for the Second Leg Transaction to be Accordingly, the Commission issued Memorandum Circular No. 8, Series of 2011

1. TheNPAs were acquired under RA 9343, meaning, the First Leg Transfer 2 TheSecond Leg Transfer must be made within five (5) years from the date of the occurred on or before 14 May 2008:

3 Applications for a Certificate of Eligibility (COE) must be filed with the First Leg Transfer; and

Commission on or before the sixtieth (6oth) day from the expiration of the five- year period referred to above.

the transactions may be covered by RA 9343. In view thereof, COEs may be issued to ASSI M3P2 for Second Leg Transfers of NPA's acquired by ASSI-M3P2 made after 10 April 2010, provided that the abovementioned conditions have been complied with, and indeed thirty-nine (39) COEs were issued based on records with the Commission, covering the period from June 4, 2010 up to September 12, 2012. Although the transactions occurring after 10 April 2010 are not covered by RA 9182.

of the incentives under RA'9182 and RA 9343. To reiterate, MC 3-2010 applies to First Leg 2011, COEs may be granted for Second Leg Transfers occurring after 10 April 2010, provided that the three conditions enumerated above are met. 9182. Further, with the passage of RA 9343 and the subsequent issuance of SEC MC No. 8- Transfers of non-performing assets which occurred on or before 11 April 2005 under RA We hope that the above discussion made clearer the rules regarding the applicability

CAMILO'S. CORREA General Counsel

11 Issued on October 14, 2011. 10 Published in Malaya and The Manila Times on April 29, 2006.