Primer on Republic Act No. 11469, the “Bayanihan To Heal As One Act”
(Picazo Law, 8 April 2020)
Following the declaration of a state of public health emergency and a state of calamity throughout the Philippines and the imposition of an Enhanced Community Quarantine (“ECQ” or lockdown) for the entire Luzon, Republic Act No. 11469 (“RA 11469” or the “Bayanihan Act”) was enacted granting emergency power to the President. Below are the salient points of the law and some of the questions which may be raised as regards the extent, application and reliefs which may be granted under said law.
1) What is the effectivity date of RA 11469?
The law, signed by the President on 24 March 2020 takes effect immediately after publication in a newspaper of general circulation or in the Official Gazette and shall be in full force and effect only for three (3) months, unless extended by Congress. RA 11469 was published in Manila Bulletin, a newspaper of general circulation, on 25 March 2020, hence became effective on said date.[Section 9, RA 11469]
2) What are the powers granted to the President under RA 11469?
Section 4 of RA 11469 enumerates the emergency powers granted to the President. Generally, these emergency powers allow the President to adopt measures to combat COVID-19, including, among others: reallocation of government funds, provision of social amelioration programs, granting benefits to healthworkers, procurement of goods without public bidding, regulation of transportation, directing operations of private hospitals, health facilities, passenger vessels and establishments to house health workers and serve as quarantine areas, medical, and relief distribution location, public transportation to ferry frontline personnel, regulating transportation, regulating supply and distribution of goods, providing for grace period of at least 30-days for rentals and loans, and undertaking other reasonable and necessary measures, subject to Bill of Rights and other constitutional guarantees.
3) What are the acts punishable under RA 11469?
a) Disobedience by local government officials (“LGU”) officials of national government policies or directives in imposing quarantines;
b) Unjustifiable refusal of owners and possessors of privately-owned hospitals, medical and health facilities, including passenger vessels, and other establishments to operate pursuant to the directive of the President;
c) Engaging in hoarding, profiteering, injurious speculations, manipulation of prices, product deceptions, and cartels, monopolies or other combinations in restraint of trade, or other pernicious practices affecting the supply, distribution and movement of food, clothing, hygiene and sanitation products, medicine and medical supplies, fuel, fertilizers, chemicals, building materials, implements, machinery equipment and spare parts required in agriculture, industry and other essential services, and other articles of prime necessity, whether imported or locally produced or manufactured
d) Refusal to prioritize and accept contracts for materials and services necessary to promote the herein declared national policy;
e) Refusal to provide thirty (30)-day grace periods for the payment of all loans, credit card payments, and residential rents due within period of ECQ
f) Individuals or groups creating, perpetrating, or spreading false information regarding the COVID-19 crisis on social media and other platforms, such false information having no valid or beneficial effect on the population, and are clearly geared to promote chaos, panic, anarchy, fear, or confusion; Individuals or groups participating in cyber incidents that make use or take advantage of the current crisis situation to prey on the public through scams, phishing, fraudulent emails, or other similar acts;
g) Failure to comply with reasonable limitations on the operation of certain transportation sectors or sectors, whether land, sea or air, be it private or public; and
h) Impeding access to roads, streets and bridges; putting-up prohibited encroachments or obstacles; and maintenance of illegal constructions in public places that have been ordered to be removed;
4) What is the penalty for violating provisions of RA 11469?
Imprisonment of two (2) months or a fine ranging from Ten Thousand Pesos to One Million Pesos (Php10,000-Php 1,000,000), or both
5) Who are the lenders required to provide the 30-day grace period under RA 11469?
Lenders, for loans with principal and/or interest falling due within the period 17 March 2020 to 30 April 2020 (or the “ECQ Period” which was originally set to end on 12 April 2020 but was extended to 30 April 2020 by order of the President on 7 April 2020), include, but are not limited to, banks, quasi-banks, non-stock savings and loan associations, credit card issuers, pawnshops and other credit granting financial institutions under the supervision of the Bangko Sentral ng Pilipinas (“BSP”), Securities and Exchange Commission (“SEC”), and Cooperative Development Authority, public or private, including the Government Service Insurance System and the Social Security System (“Covered Institutions”). [Section 2.01 (a), IRRs of Section 4(aa) of RA 11469]
These Covered Institutions shall not charge or apply interest on interest, fees, and other charges during the grace period. [Section 3.02, IRRs of Section 4(aa) of RA 11469]
6) Are banks abroad required to give a grace period to loans obtained by Filipino residents?
No. Only Covered Institutions established in the Philippines are required to provide the grace period.
7) Will there be another grace period for loans if the ECQ is extended?
The initial 30-day grace period shall automatically be extended if the ECQ is extended by the President. [Section 3.01, IRRs of Section 4(aa) of RA 11469] Given the extension of the ECQ by the President from 12 April 2020 to 30 April 2020, the grace period shall likewise be extended. No rules have been promulgated yet as of date as to the length of extension of the grace period.
8) Are corporate borrowers qualified to avail of the 30-day grace period under RA11469 for their corporate loans?
Yes. The benefits of the grace period are applicable to individuals, households, micro, small and medium enterprises (“MSMEs”), and corporate borrowers.[Section 4.01, IRRs of Section 4(aa) of RA 11469]
9) Are loan accounts covered by post-dated checks, auto-debit or auto-deduct arrangements with lending financial institutions regulated by the BSP entitled to avail of the grace period?
Yes. Financial institutions regulated by the BSP are advised to coordinate with their clients if they wish to proceed with the arrangement despite the mandatory grace period granted by RA 11469. Financial institutions shall also coordinate with their clients if they wish to reverse checks cleared or payments debited/deducted prior to the enactment of RA 11469 and its IRRs, during the grace period. The reversal shall be done without the corresponding fees and charges.
10) A lender bank required our company to execute a waiver of the application of the grace period to our corporate loan. Is this waiver valid?
No. Covered institutions are prohibited from requiring their clients to waive the application of RA 11469, including the mandatory grace period. No waiver previously executed by borrowers covering payments falling due during the ECQ Period shall be valid. [Section 3.03), IRRs of Section 4(aa) of RA 11469]
11) Can I pay the amount due on my credit card or loan even during the ECQ Period?
Yes. If you have the mobility and capacity to pay, you can opt to pay even during the ECQ Period.
12) Will the grace period apply to multiple loans?
Yes. The grace period shall apply to each loan [Section 4.02, IRRs of Section 4(aa) of RA 11469]
13) Can a credit card company suspend a credit card during the grace period?
If the ground is for non-payment during ECQ, no. All banks, quasi-banks, financing companies, lending companies, and other financial institutions, public and private, must provide a minimum of thirty (30)-day grace period for the payment of all loans, including but not limited to salary, personal, housing, and motor vehicle loans, as well as credit card payments, falling due within the period of the ECQ without incurring interests, penalties, fees, or other charges. [Section 4(aa), RA 11469]
As mentioned above, refusal to provide the grace period is a punishable offense under RA 11469.
14) Is it illegal to declare a borrower in default within the grace period provided under RA 11469?
Yes. Refusal to provide the grace periods provided under RA 11469 shall be punishable with imprisonment of two (2) months or a fine of not less than Ten Thousand Pesos (Php10,000.00) but not more than One Million Pesos (Php1,000,000.00), or both, at the discretion of the court. [Section 6, RA 11469]
15) When does the amount subject of the grace period for loans/credit card payments fall due? Is it on the day after the grace period expires?
The amount subject to the grace period shall be due thirty (30) days after the original due date falling within the ECQ Period. If your original due date falls on 21 March 2020, your extended deadline is on 20 April 2020. However, given the extension of the ECQ Period, this would further be extended. No guidelines have been provided yet on this matter as to the length of extension but it could be argued that you may pay thirty (30) days from the extended deadline, or until 20 May 2020, without incurring interests (except for credit card revolvers, i.e., borrower that do not pay in full every payment period, whose interest will continue to accrue and which will be payable on the next due date, following the grace period, either in lump sum or on a staggered basis), penalties, fees, or other charges. Again, there may be further guidelines to be set forth regarding this matter by the regulators.
The accrued interest for the grace period may be paid by the borrower on a staggered basis over the remaining life of the loan. [Section 5.02, IRRs of Section 4(aa) of RA 11469]
16) Will the principal amount payable during the grace period be added to the principal amount due in the next payment due date or will the final due date of the entire loan be adjusted by 30 days?
The last payment due date will move by 30 days. We note that this may further be extended given the extension of the ECQ, following guidelines as may be issued by the regulators.
17) Apart from the mandatory grace period, do I have any other remedy that I may avail of to excuse delay in performance of obligations during the lockdown period?
You may refer to the terms of your contract and check on the provisions on force majeure.
"Force Majeure", also known as "fortuitous event" or "acts of God", refers to events which could not be foreseen, or which, though foreseen, were inevitable. [Civil Code, Article 1174].
Under the law, a case of force majeure generally excuses a person from performing its obligations under a contract, provided that the following conditions are met:
a) the cause for non-compliance with the obligation must be independent of the will of the person mandated to comply with the obligation;
b) the event must be either unforeseeable or unavoidable;
c) the event must be such as to render it impossible to fulfill the obligation in a normal manner; and
d) the person mandated to comply with the obligation must be free from any participation in, or aggravation of the injury to the person to whom the obligation shall be rendered.
The ECQ (lockdown) which was caused by a widespread disease and which resulted in the suspension of operations of nearly all enterprises could rightfully be invoked as a fortuitous event, thereby excusing delay or non-performance of contractual obligations, provided that the above conditions are met.
There following are exceptions to the rule that force majeure excuses a person from performing obligations under a contract: (1) cases specified by law; (2) the nature of the obligation requires the assumption of risk; (3) stipulation by the parties; (4) the debtor is guilty of dolo, malice or bad faith, or has promised the same thing to two or more persons who does not have the same interest; (5) the debtor contributed to the loss; 6) the possessor is in bad faith; and (7) the obligor is guilty of fraud, negligence, delay, or if he contravened the tenor of the obligation.
18) May a bank refuse to pay interest on deposits made by its clients?
There is no express provision in RA 11469 allowing banks to exempt themselves from paying interest on deposits made by its clients.
As of this date, there are no issuances regarding this matter from the BSP or other government agencies. Hence, absent any specific exemption granted by RA 11469, it is more prudent for banks to continue paying interests on deposits made by its clients.
19) Are public utilities covered by the mandatory 30-day grace period?
RA 11469 does not impose a mandatory grace period on public utilities. Under RA 11469 the President has the power to ensure the conservation and regulation of the distribution and use of power, fuel, energy, and water, and ensure adequate supply of the same and thus the President may create certain regulations on the same. A number of utilities such as MERALCO, PLDT, Maynilad, Manila Water, have provided for grace period even absent a directive.
Further, on 26 March 2020, the Energy Regulatory Commission (“ERC”) issued an advisory directing:
a) All Distribution Utilities (DUs) and Retail Electricity Suppliers (RES) to provide a 30-day extension of payments for customer electricity bills falling due on 15 March to 14 April 2020, however, payments received during the said period are still required to be immediately remitted proportionately to the concerned entities.
b) Payment of all fees due to the generation companies, Power Sector Assets and Liabilities Management Corporation (PSALM), National Power Corporation (NPC), National Transmission Corporation (TransCo), National Grid of the Philippines (NGCP) and the Market Operator (MO) from 15 March 2020 to 14 April 2020 are extended for thirty (30) days from 14 April 2020, without interest and penalties;
c) For the safety of the meter readers and to comply with the physical distancing directive for the containment of COVID-19, Section 3.5.4 of the Distribution Services and Open Access Rules (DSOAR) on the utilization of estimated billing may be applied, provided that the word “ESTIMATE” be clearly written on the consumer bill and that corresponding adjustments be made as soon as practicable;
d) All DUs are reminded of their obligation to procure their power requirements in the least cost manner, taking into consideration all attendant circumstances, including the approved contract’s minimum contracted capacity and fixed costs, and to ensure efficient and equitable utilization of their approved power supply contracts; and
e) All DUs are required to submit their power supply contract utilization report covering the period 15 March to 14 April 2020 not later than 30 April 2020.
Given the extension of the ECQ Period to 30 April 2020, we expect that a further extension of the grace period will likewise be directed by the ERC.
20) Are real estate companies required to give a 30-day grace period for installment payments of their buyers?
On 3 April 2020, the Department of Human Settlements and Urban Development declared a moratorium on in-house financing plans or credit intermediation extended by real estate developers to buyers of lots/house-and-lot in subdivision projects and units in condominium projects and other projects required to be registered with said Department, effective 17 March 2020 for the duration of the ECQ period plus one month thereafter. The unpaid amortizations during the moratorium shall be payable within six (6) months thereafter without incurring penalties.
21) What is the concession provided for rents falling due during the ECQ?
A minimum of thirty (30)-days grace period (reckoned from the last due date of the rent which fell due during the ECQ) shall be granted for residential rents and commercial rents falling due upon MSMEs that have temporarily ceased operations within the period of ECQ, without incurring interests, penalties, fees and other charges.
22) Given the extension of the ECQ Period to 30 April 2020, will there also be an adjustment on the grace period for rents?
There are no issuances yet on the matter to date. We expect that there should be a clarification and issuance made in the following days to allow for an extension of the grace period.
23) Who are considered as MSMEs?
MSMEs are those engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of land on which the particular business entity’s office, plant and equipment are situated, must have a value falling under the following categories:
Micro : not more than Php3,000,000
Small : Php3,000,000 to Php15,000,000
Medium : Php15,000,001 to Php100,000,000
24) When will the accrued rent be payable?
Cumulative rents falling due within the ECQ shall be equally amortized in six (6) months following the end of the ECQ, and shall be added to the rents due on those succeeding months, without interest, penalties, fees and charges.
25) Is there a similar grace period provider for payment of insurance premiums?
RA 11469 does not provide for a similar grace period for payment of insurance premiums. However, the Insurance Commission, in its Circular Letter No. 2020-18, has strongly encouraged all regulated entities to extend the grace period for the payment of insurance premiums/contributions, installment amounts and/or membership fees, falling due from 15 March 2020 to 13 April 2020 (or to such later date as may be determined by the insurance company), by at least thirty-one (31) days.
Given the extension of the ECQ Period to 30 April 2020, we expect that a further extension of the grace period will likewise be directed by the Insurance Commission.
26) What will happen to my insurance coverage which will expire during the ECQ?
For insurance policies or HMO agreements which are about to expire during the effectivity of the ECQ, Insurance or HMO Companies shall issue an extension of coverage for such existing policies or agreements for at least thirty (30) days subject to the written request or consent, electronically or otherwise, of the insured, client or their respective authorized representatives, as the case may be.
For insurance policies, pre-need agreements or HMO Agreements, which are the subject of new or renewal application during the effectivity of the ECQ, Insurance, Pre-Need and HMO Companies may issue a hold cover or temporary cover for insurance, pre-need plan or HMO Agreement for at least thirty (30) days. Issuance of such hold cover or temporary cover shall be subject to the written request or consent, electronically or otherwise of the insured, planholder, client, or their respective authorized representatives, as the case may be. [Section 2, IC Circular Letter No. 2020-25]
27) What are the terms of the extended policy or hold cover/temporary cover policy?
Insurance policies or HMO Agreements which are extended during the ECQ, as discussed above, shall contain the same terms and conditions of the existing policy or HMO Agreements and shall only become effective once applicable pro-rata premium payment has been made, unless a credit term has been agreed upon.
The hold cover or temporary cover used by insurance, pre-need and HMO companies shall be subject to the basic terms and conditions for such product/service as the Insurance Commission would normally approve for such standard products/services. It shall be effective once payment of the applicable pro-rata premiums has been made, unless a credit term has been agreed upon. The parties may, however, modify such basic terms and conditions for the issuance of the hold cover/temporary cover subject to the corresponding adjustment of the applicable premiums. [Section 3, IC Circular Letter No. 2020-25]
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