Social Benefits Corporation Act

Senate Office of the Soccetary TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES FEB -5 P1:07 First Regular Session SENATE 53 RECEIVED BY: S.B. No. Introduced by SENATOR IMEE R. MARCOS AN ACT AMENDING REPUBLIC ACT NO. 11232 OTHERWISE KNOWN AS, "AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES," AND FOR OTHER PURPOSES EXPLANATORY NOTE Article II Section 23 of the 1987 Constitution provides that, "the State shall encourage non-governmental, community based, or sectoral organizations that promote the welfare of the nation." Section 20 of the same article further states that, "the State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments". According to the Family Income and Expenditure Survey (FIES) 2023, 15.5 percent of Filipinos, and roughly 10.9% of Filipino families, live below the poverty line. This translates to 17.54 million Filipinos. While these values are lower from the 18.1% of Filipinos and 13.2% of Filipino families living below the poverty line in 2021, there is still much that needs to be done to meet one of our 2030 Sustainable Development Goals, which is ending poverty. One of the ways in which the problem of poverty can be addressed is through the promotion of social enterprises. Social enterprises are social mission-driven organizations that conduct economic activities directly related to the improvement of the economic well-being of the poor and marginalized sectors. The primary problem faced by social enterprises is lack of access to capital. This is due to the antiquated division of corporations as either non-profit or profit. Social enterprises share characteristics of both corporations, with the ability to generate profit crucial to the sustainability of social enterprises. The ability to retain profit is also important for investors and lenders to extend funding to social enterprises.

This bill seeks to address the funding gap of social enterprises by creating a special entity to be known as "Social Benefit Corporation" under R.A. No. 11232, otherwise known as "An Act Providing for The Revised Corporation Code of The Philippines." It facilitates qualification and approval of entities as social benefit corporations by providing a precise definition and simplifying the application procedure to the Securities and Exchange Commission (SEC). It also provides benefits, including access to capital and other forms of financing, among others. In view of the foregoing, the approval of this bill is earnestly sought. Fee h. Marca JIMEE R. MARCOS

Senate DOtice of the Beretary TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES FEB -5 P1:07 First Regular Session SENATE S.B. No. 1753 RECEIVED BY: Introduced by SENATOR IMEE R. MARCOS AN ACT AMENDING REPUBLIC ACT NO. 11232 OTHERWISE KNOWN AS, "AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES," AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Social Benefit Corporation Act"

Sec. 2. Social Benefit Corporation. - A new Chapter in Title XIII of Republic Act No.

11232 otherwise known as "An Act Providing For The Revised Corporation Code Of The Philippines' is inserted as Chapter III, to read as follows: CHAPTER III SOCIAL BENEFIT CORPORATION

SEC. 115. SOCIAL BENEFIT CORPORATION. -

A SOCIAL BENEFIT CORPORATION IS A CORPORATION THAT CONDUCTS ECONOMIC ACTIVITIES AND PROVIDE GOODS OR SERVICES DIRECTLY RELATED TO ITS PRIMARY PURPOSE OF IMPROVING THE WELL-BEING OF THE UNSKILLED AND MINIMUM WAGED WORKERS, CHILDREN, POOR, AND MARGINALIZED, INCLUDING THE PROMOTION AND DEVELOPMENT OF THE FOLLOWING SECTORS: HEALTH, EDUCATION, ENVIRONMENT, AGRICULTURE, CLIMATE CHANGE, NATURAL AND MAN-MADE DISASTER RECOVERY,

PEACE PROCESS OR NEGOTIATION, AND OTHER SIMILAR PURPOSES. PROVIDED THAT, BANKS AND QUASI-BANKS, PRE-NEED, TRUST, INSURANCE, PUBLIC AND PUBLICLY-LISTED COMPANIES, AND NON-CHARTERED GOVERNMENT-OWNED AND - CONTROLLED CORPORATIONS MAY NOT BE INCORPORATED AS SOCIAL BENEFIT CORPORATIONS. PROVIDED FURTHER THAT, AT LEAST SIXTY PERCENT (60%) OF THE SOCIAL ENTERPRISE'S TOTAL EXPENDITURES AND PROFITS SHALL BE USED EXCLUSIVELY FOR THE CORPORATION THAT WILL OPTIMIZE THE BENEFITS TO WHICH THE CORPORATION WAS ESTABLISHED. SEC. 116. INCORPORATION AND REGISTRATION. - A GROUP OF PERSONS, NOT LESS THAN THREE (3), DESIRING TO INCORPORATE AS A "SOCIAL BENEFIT CORPORATION" SHALL SUBMIT THE INTENDED CORPORATE NAME TO THE COMMISSION FOR VERIFICATION OF ITS NAME, PURPOSES, INCORPORATORS, AND DIRECTORS. THE INCORPORATORS SHALL THEN SUBMIT THEIR ARTICLES OF INCORPORATION, AS PROVIDED IN

SEC. 118, AND BYLAWS TO THE COMMISSION.

PROVIDED THAT, THE REGISTRATION OF SOCIAL BENEFIT CORPORATIONS SHALL NOT REQUIRE A MINIMUM CAPITAL STOCK.

SEC. 117. DISPLAY OF CORPORATE NAME. - A

SOCIAL BENEFIT CORPORATION SHALL INDICATE THE LETTERS "SBC" EITHER BELOW OR AT THE END OF ITS CORPORATE NAME.

SEC. 118. ARTICLES OF INCORPORATION. - A

SOCIAL BENEFIT CORPORATION SHALL FILE ARTICLES OF INCORPORATION IN ACCORDANCE WITH THE REQUIREMENTS UNDER SECTION 14 OF THIS CODE.

SEC. 119. MINUTES BOOK. - A SOCIAL

BENEFIT CORPORATION SHALL MAINTAIN A MINUTES BOOK WHICH SHALL CONTAIN ALL ACTIONS, DECISIONS, AND RESOLUTIONS TAKEN BY THE CORPORATION.

SEC. 120. REPORTORIAL REQUIREMENTS. -

THE SOCIAL BENEFIT CORPORATION SHALL SUBMIT THE FOLLOWING WITHIN SUCH PERIOD AS THE COMMISSION MAY PRESCRIBE: 1. ANNUAL FINANCIAL STATEMENTS; 2. A DISCLOSURE OF ALL SELF-DEALINGS AND RELATED PARTY TRANSACTIONS ENTERED INTO BETWEEN THE CORPORATION AND THE STOCKHOLDERS; AND 3. OTHER REPORTS AS THE COMMISSION MAY REQUIRE.

SEC. 121. SOCIAL BENEFIT CORPORATION

DEVELOPMENT FUND. - THERE SHALL BE INCLUDED IN THE BUDGET OF THE DEPARTMENT OF TRADE AND INDUSTRY (DTI) UNDER THE ANNUAL GENERAL APPROPRIATIONS ACT (GAA) AN INITIAL AMOUNT OF NINE HUNDRED MILLION PESOS (P 900,000,000.00) FOR THE ESTABLISHMENT OF A SOCIAL BENEFIT CORPORATION DEVELOPMENT FUND (SBCDF) WHICH SHALL BE ALLOCATED FOR THE FOLLOWING: 1. SIX HUNDRED MILLION PESOS (P 600,000,000.00) FOR VALUE-CHAIN FINANCING; AND 2. THREE HUNDRED MILLION PESOS 300,000,000.00) FOR ENTERPRISE DEVELOPMENT SERVICES. AFTER THE FIRST YEAR OF IMPLEMENTATION, SUCH SUMS AS MAY BE NECESSARY TO FUND THE SBCDF SHALL BE

INCLUDED IN THE BUDGET OF THE DTI UNDER THE ANNUAL GAA.

SEC. 122. SPECIAL CREDIT WINDOWS. - THE

DEVELOPMENT BANK OF THE PHILIPPINES AND OTHER GOVERNMENT FINANCIAL INSTITUTIONS SHALL ESTABLISH SPECIAL CREDIT WINDOWS FOR THE FOLLOWING PURPOSES: 1. CREDIT LINE FOR BUSINESS DEVELOPMENT LOAN OR WORKING CAPITAL LOAN TO COVER THE OPERATIONAL AND MANAGEMENT EXPENSES OF AN EXISTING BUSINESS OR INCOME GENERATING PROJECT, INCLUDING RECEIVABLE FINANCING OR PURCHASE OF ADDITIONAL INVENTORY, SOFT, OR INTANGIBLE INVESTMENTS SUCH AS TRADE FAIR PARTICIPATION OR ACQUISITION OF SOFTWARE OR FRANCHISE DEVELOPMENT PACKAGES; 2. FIXED ASSETS FINANCING TO COVER ACQUISITION OF FIXED ASSETS LIKE MACHINERIES AND EQUIPMENT, MOTOR VEHICLE, OR ACQUISITION OF SITE OR LOT FOR PROJECT CONSTRUCTION OF A PLANT AND BUILDING AND THE IMPROVEMENT THEREOF; 3. VALUE CHAIN FINANCING TO COVER ANY OF THE VALUE CHAIN ACTIVITIES SUCH AS PRODUCTION, PROCESSING, AND MARKETING; 4. DOMESTIC LETTER OF CREDIT OR TRUST RECEIPT TO PROVIDE A STAND- BY-CREDIT FACILITY FOR THE SOCIAL ENTERPRISE BORROWER FOR THE PURCHASE OF PRODUCT INPUTS, MACHINERY, EQUIPMENT, IMPLEMENTS, AND SPARE PARTS, WHEREBY PAYMENT OF WHICH IS GUARANTEED AND TO BE MADE TO THE

SELLER BY THE LENDING INSTITUTION, PROVIDED ALL DOCUMENTS CONFORM WITH THE TERMS AND CONDITIONS OF THE CREDIT; AND 5. REVOLVING CREDIT LINE FOR RE- LENDING TO FINANCE THE LIVELIHOOD PROJECT REQUIREMENTS OF END- BORROWERS.

SEC. 123. ROLE OF LOCAL GOVERNMENT

UNITS (LGUS) IN SOCIAL BENEFIT CORPORATION DEVELOPMENT. - LGUS SHALL BE ENCOURAGED TO INCORPORATE VIABLE SOCIAL BENEFIT CORPORATION DEVELOPMENT PROGRAMS IN THEIR LOCAL PLANS AND COLLABORATE WITH SOCIAL BENEFIT CORPORATIONS.

Sec. 3. The chapters and sections in R.A. No. 11232 shall be renumbered accordingly.

Sec. 4. Implementing Rules and Regulations. - Within ninety (90) days from the

effectivity of this Act, the DTI and the Securities and Exchange Commission (SEC) shall promulgate the necessary rules and regulations for the effective implementation of this Act.

Sec. 5. Separability Clause. - If any provision, or part hereof, is held invalid or

unconstitutional, the remainder of the law or the provision not otherwise affected shall remain valid and subsisting.

Sec. 6. Repealing Clause. - Any law, presidential decree or issuance, executive order,

letter of instruction, administrative order, rule or regulation contrary to or inconsistent with, the provisions of this Act is hereby repealed, modified, or amended accordingly.

Sec. 7. Effectivity Clause. - This Act shall take effect fifteen (15) days after its

publication in at least two (2) newspapers of general circulation. Approved,