Republic Act No. 11523, often known as “An Act Guaranteeing Philippine Monetary Trade Resiliency In opposition to the COVID-19 Pandemic” (FIST Act)1 , which seeks to help banks and monetary establishments (FIs) in coping with the antagonistic results of the COVID-19 pandemic, took impact on February 18, 2021 upon its publication within the Official Gazette and in a newspaper of common circulation. This legislation supplies a authorized framework for the complete switch of the dangerous loans and property of banks by permitting them to scrub their books and re-channel their sources to enhance liquidity within the monetary system.
The Securities and Trade Fee (SEC), collectively with the Bangko Sentral ng Pilipinas, Division of Finance, Bureau of Inside Income, and the Land Registration Authority, are tasked to difficulty implementing guidelines and rules inside 30 days from the efficient date of the legislation.
Repeal of the Particular Function Automobile Act of 2002
The principle mechanism below the FIST Act is to permit for the institution of particular goal firms, generally known as Monetary Establishments Strategic Switch Firms (FISTC). The legislation then supplies tax and different incentives for the FISTCs, in addition to for the switch of non-performing property (NPAs) to and from these FISTCs.
The FIST Act repeals Republic Act No. 9182, as amended, or the Particular Function Automobile Act of 2002 (SPV Act). The SPV Act was handed to assist banks eliminate their NPAs within the aftermath of the Asian monetary disaster by offering a authorized framework for this goal and granting fiscal incentives. Nevertheless, banks have stopped establishing SPVs below the SPV Act as a result of transactions are not entitled to incentives. The legislation offered restricted durations for transfers to or by SPVs to qualify for incentives and these durations have now expired.
The FIST Act is basically the identical because the SPV Act when it comes to the creation and powers of the particular goal firm, the situations for the disposition of NPAs, and the incentives given on the numerous levels of the contemplated transactions.
SPVs created below the SPV Act could avail of the privileges and incentives granted below the FIST Act.
Find out how to Set Up a FISTC
A FISTC have to be a inventory company with the facility to put money into, or purchase NPAs of FIs and to have interaction third events to handle, function, accumulate and eliminate NPAs acquired from FIs, amongst different powers.
A FISTC have to be established inside 36 months from the effectiveness of the FIST Act (or by February 2024).
A FISTC should additionally submit a FISTC Plan to the SEC throughout the interval to be prescribed by the SEC. As soon as the FISTC Plan is permitted by the SEC, the FISTC could be licensed to promote and distribute funding unit devices pursuant to the FIST Act.
The switch of NPAs from an FI to an FISTC, and from an FISTC to a 3rd social gathering, or a dation in fee by the borrower or by a 3rd social gathering in favor of an FI or an FISTC, is exempt from the next taxes, when relevant: (a) documentary stamp tax; (b) capital positive factors tax on the sale of sure capital property, or creditable withholding tax on the earnings from the sale of bizarre property; and (c) value-added tax.
These transfers are additionally topic to diminished charges on the next: (a) registration and switch charges on the switch of actual property mortgage and safety curiosity to and from the FISTC; (b) submitting charges for any foreclosures initiated by the FISTC in relation to any NPA acquired from an FI; and (c) land registration charges.
The incentives are time certain. For instance, transfers of NPAs from FIs to an FISTC have to be achieved with two (2) years from effectiveness of the FIST Act, whereas transfers from a FISTC to 3rd events are given a 5 (5)-year window from the acquisition of NPAs to eliminate the identical with incentives.
The FIST Act additionally provides tax exemptions and privileges to FISTCs, together with exemption from earnings tax, documentary stamp tax, and mortgage registration charges on sure new loans. FISTCs are additionally exempt from documentary stamp tax in case of capital infusion to a borrower with nonperforming loans.
FIST Act v. SPV Act
Because the FIST Act mirrors the provisions of the SPV Act, it stays to be seen if this measure might be simpler than its predecessor in addressing the issues of the monetary sector with nonperforming property.
One provision of the FIST Act that will present aid to FIs and FISTCs is the prohibition on the issuance of injunctive reliefs by courts, aside from the Supreme Courtroom and the Courtroom of Appeals, in opposition to sure transfers of property involving FISTCs and taking part FIs. This provision was not within the SPV Act.
One other issue that favors this new measure is that it’s going to function below a distinct insolvency regime, the Monetary Rehabilitation and Insolvency Act, which permits extra choices for, and expedites, the rehabilitation of distressed corporations. The SPV Act operated below the Insolvency Act, an archaic authorized framework that was handed in 1909.
Just like the SPV Act, the interval to determine a FISTC and the incentives offered below the FIST Act stay time-bound. FIs might even see this as a damaging characteristic of the legislation, given the sluggish judicial processes within the nation and the assorted approval and regulatory necessities to arrange and function a FISTC and to switch property.