Magna Carta for Micro, Small and Medium Enterprises

Section 10

The MSMED Council shall conduct continuing review of government programs for MSMEs and submit to Congress and the President a report thereon together with its policy recommendation. (as amended by RA No 8289, 9501)

Section 11

There is hereby created a body corporate to be known as the Small Business Guarantee and Finance Corporation, hereinafter referred to as the Small Business Corporation (SB Corporation), which shall be charged with the primary responsibility of implementing comprehensive policies and programs to assist MSMEs in all areas, including but not limited to finance and information services, training and marketing. (as amended by RA No 8289, 9501)

Section 11-A

The SB Corporation corporate powers shall be vested on a Board of Directors composed of eleven (11) members which shall include the following: a) The Secretary of Trade and Industry; b) The Secretary of Finance; c) A private sector representative to be appointed by the President upon the recommendation of the MSMED Council; d) Seven (7) representatives of the SB Corporation common stock shareholders who shall be elected based on proportional distribution, in accordance with Section 24 of the Corporation Code; and e) The president of the SB Corporation as ex-officio member and to serve as vice chairman of the Board. The President shall appoint the chairman of the Board from among its members. All members of the Board so appointed, except for the ex-officio members, shall serve for a term of three (3) without reappointment. The person so appointed to replace a member who has resigned, died, or been removed for cause shall serve only for the unexpired portion of the term. The Board of Directors shall have, among others, the following specific powers and authorities: a) Formulate policies necessary to carry out effectively the provisions of this charter and to prescribe, amend and repeal by-laws, rules and regulations for the effective operations of the small business corporation; b) Establish such branches, agencies and subsidiaries as may be deemed necessary and convenient; c) Compromise or release, in whole or in part, any claim or liability whatsoever for or against the SB Corporation, including interest, penalties, fees and/or charges in accordance to its own by-laws and Bangko Sentral ng Pilipinas rules; d) Fix the features on non-voting preferred shares which shall be printed on the stock certificates evidencing the same; e) Exercise all such other powers as may be necessary or incidental to carry out the SB Corporation's purposes; and f) Notwithstanding the provisions of Republic Act No. 6758 and Compensation Circular No, 10, Series of 1989 issued by the Department of Budget and Management, the Board shall have the authority to provide for the organizational structure and staffing pattern of SB Corporation and to extend to the employees and personal thereof salaries, allowances and fringe benefits similar to those extended to and currently enjoyed by employees and personal of other financial institutions. (as created by RA No 9501) Section 11-B Corporate Structure and Powers. - The SB Corporation shall: a) be administratively attached to the Department of Trade and Industry and shall be under the policy and program supervision of the MSMED Council; b) have its principal offices in Metro Manila and whenever necessary, establish branch office in the provinces; and c) exercise all the general powers expressly conferred by law upon corporations under the Corporation Code, including those powers that are incidental or necessary to the attainment of the objective of this Act. For this purpose, the SB Corporation subject to compliance with the rules and regulations to be issued by the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission, shall have the following functions and duties: a) Source and adopt development initiatives for globally competitive MSMEs in finance and business technologies; b) To extend all forms of financial assistance to eligible MSMEs. SB Corporation may also engage in wholesale lending. The SB Corporation shall be given two (2) years from the effectivity of this Act to comply with this requirement; c) Guarantee loans obtained by qualified MSMEs under such terms and conditions adopted by the SB Corporation Board of Directors; d) Hold, purchase, lease or otherwise acquire and own real and personal property, introduce necessary improvements thereon and to sell, mortgage, encumber or otherwise dispose of the same as may be necessary in the normal course of business; e) Formulate means and methods of accepting alternative collaterals and implementing alternative loan evaluation models; f) Apply for, receive and accept grants and donations from sources within and outside the country; and g) Hold, own, purchase, acquire, sell, mortgage, dispose or otherwise invest or reinvest in stocks, bonds, treasury bills, debentures, securities and similar forms of indebtedness of the government, its agencies and instrumentalities or any government financial institution. (as created by RA No 9501)

Section 12

The SB Corporation shall have an authorized capital stock of Ten billion pesos (P10,000,000,000.00). The initial capital of One billion pesos (10,000,000,000.00) shall be established from a pool of funds to be contributed in the form of equity investment in common stock by the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), in the amount of Two hundred million pesos (P200,000,000.00) each. the Social Security System (SSS) and the Government Service Insurance System (GSIS) shall also set aside Two hundred million pesos (P200,000,000.00) each for the SB Corporation. Authorized capital stock of the small business corporation shall be divided into 80,000,000 common shares and 20,000,000 preferred shares with a par value of One hundred pesos (P100.00) per share: Provided, That common shares, which have been issued, including those issued against assets of the KKK Guaranty Fund consolidated under the small business corporation by virtue of Executive Order No. 233, Series of 2000 and Executive Order No. 19, Series of 2001 and including those already subscribed, shall form part of the capitalization of the corporation: Provided, further, That holders of preferred shares issued under Republic Act No. 6977, as amended, shall have the option to convert the same into common shares. Additional equity shall come from trust placements of excess and unused funds of existing government agencies, bilateral and multilateral official development assistance funds, subscriptions from government owned or controlled corporations, and investments of private financial institutions and corporations: Provided, finally, That any investment from the private sector shall only be in the form of preferred shares. To allow for capital build-up, SB Corporation shall be given a five (5) year grace period on dividend commitments beginning on the date of effectivity of this amendment. Thereafter, it may only declare as dividend not more than thirty percent (30%) of its net income and the rest withheld as retained earnings. (as amended by RA No 9501)

Section 13

The SB Corporation shall be subject to the supervision and examination of the Bangko Sentral ng Pilipinas taking into consideration its development objectives. (as created by RA No 9501)

Section 14

The SB Corporation may set aside an amount of money to encourage the setting up of a venture capital and micro finance trust fund for the purpose of promoting business opportunities available of MSME sector. The Venture Capital Fund shall be used mainly for venture capital finance especially in technology-oriented industries. The micro finance trust fund shall be used to provide collateral-free fixed and working capital loans to micro and small enterprises run by those emerging out of poverty. (as created by RA No 9501)

Section 15

For the period of ten (10) years from the date of the effectivity of this amendatory Act, all lending institutions as defined under Bangko Sentral ng Pilipinas rules, whether public or private, shall set aside at least eight percent (8%) for micro and small enterprises of their total loan portfolio based on their balance sheet as of the end of the previous quarter, and make it available for MSME credit as herein contemplated. Compliance of this provision shall be: a) actual extension of loans to eligible MSMEs; or b) actual subscription of preferred shares of shares of stock of the SB Corporation; or c) wholesale lending to Participating Financial Institutions (PFIS) for on-lending to MSMEs; or d) purchase/discount of MSMEs receivables; or e) loans granted to export, import, and domestic traders subject to compliance with Section 3 of this Act; or f) subscribed/purchase of liability instruments as may be offered by the SB Corporation. The Bangko Sentral ng Pilipinas shall formulate rules for the effective implementation of this provision: Provided, That the purchase of government notes, securities and other negotiable instruments shall not be deemed compliance with the foregoing provisions: Provided, further, That the Bangko Sentral ng Pilipinas shall establish an incentive program to encourage lending to micro, small and medium industries beyond the mandatory credit allocation to said enterprises, such as possible reduction in bank's reserve requirement. The MSMED Council shall set up the appropriate systems to monitor all loan applications of MSMSEs in order to account for the absorptive capacity of the MSME sector. The Bangko Sentral ng Pilipinas shall furnish to the MSMED Council on a quarterly basis comprehensive reports on the banks' compliance, noncompliance and penalties of the above provisions on the mandatory credit allocation for MSMEs. Lending institutions which are not qualified to acquire or hold lands of the public domain in the Philippines shall be permitted to bid and take part in sales of mortgaged real property in case of judicial r extra-judicial foreclosure, as well as avail of receivership, enforcement and other proceedings, solely upon default of a borrower, and for a period not exceeding five (5) years from actual possession: Provided, That in no event shall title to the property be transferred to such lending institution. If the lending institution is the winning bidder, it may, during said five (5) year period, transfer its rights to a qualified Philippine national, without prejudice to a borrower's right under applicable laws. (13a) (as amended by RA No 8289, 9501)

Section 16

In order to institute continuing awareness of the primacy of small business in nation-building and in people empowerment, and to celebrate and espouse the firm commitment of the State in the promotion, growth and development of small business, the second week of July of every year shall be declared as the "Micro, Small, and Medium Enterprise Development Week". the MSMED Council, the Department of Trade and Industry, and the SB Corporation shall be jointly responsible in organizing activities for the event. (as created by RA No 9501)

Section 17

Presidential awards for outstanding MSMEs and good MSME practices, consisting of rewards in cash or in kind shall be granted to one hundred percent (1005) Filipino-owned companies and development partners during the MSME development week. (as created by RA No 9501)

Section 18

To monitor and oversee the implementation of this Act, there shall be a Congressional Oversight Committee on Micro, Small and Medium Enterprise Development (COC-MSMED) composed of the chairpersons of the Senate Committee on Economic Affairs and the House Committee on Small Business and Entrepreneurship Development as chairperson and co-chairperson, respectively; five (5) members of each of the Senate and House of Representatives to include the chairpersons of the Senate committees on Trade and Commerce; and Banks, Financial Institutions and Currencies; and the chairpersons of the House of committees on Trade and Industry, Banks and Financial Intermediaries, and Appropriations: Provided, That two (2) of the five Senators and two (2) of the five House members shall be nominated by the respective minority leaders of the Senate and the House of Representatives. The COC-MSMED shall set the guidelines and overall framework for the monitoring of the implementation of this Act and shall adopt its internal rules of procedure. The Secretariat of the COC-MSMED shall be drawn from the existing personnel of the Senate and House of Representatives committees compromising the COC-MSMED. (as created by RA No 9501)

Section 19

The Bangko Sentral ng Pilipinas shall impose administrative sanctions and other penalties on the lending institutions for non-compliance with provision of this Act including a fine of not less than Five hundred thousand pesos (P500,000). Penalties on non-compliance shall be directed to the development of the MSME sector. Ninety percent (90%) of the penalties collected should go to the MSMED Council Fund, while the remaining ten percent (10%) should be given to the BSP to cover for administrative expenses. (14a) (as amended by RA No 8289, 9501)

Section 20

The Department of Trade and Industry, through the Bureau of Micro, Small and Medium Business Development in consultation with other concerned government agencies, non-government organizations and private sector involved in the promotion of MSMEs, shall formulate the implementing Rules and Regulations (IRR) necessary to implement the provisions of this Act within ninety (90) days from the approval of this Act. The IRR issued pursuant to this Section shall take effect thirty (30) days after publication in a national newspaper of general circulation. (as created by RA No 9501)