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The role of technology continues to rise especially in this time of the pandemic, where people are advised to work and learn from home and minimize face-to-face contacts and instead communicate through remote arrangements.  Even settlement of legal disputes is now being encouraged, if not mandated, to be done online.

With this, the Intellectual Property Office of the Philippines (IPOPHL) has mandated the conduct of mediation services online from end-to-end to settle IP disputes.  While parties may still opt for face-to-face mediations, this is subject to the Bureau of Legal Affairs (BLA) Director’s approval.

IPOPHL may be the first government agency to implement an end-to-end online mediation from referral or filing of requests up to the submission of settlement agreement or termination, according to BLA Director Nathaniel Arevalo. 

IPOPHL has also said that the World Intellectual Property Organization (WIPO) Option for mediation has been revived, which would benefit those with IP-related disputes in multiple jurisdictions. The WIPO-Arbitration and Mediation Center (AMC) has waived its $100 administration fee and reduced the mediators’ fee to Php 4,000, same rate as IPOPHL’s mediation fee, to encourage more parties to avail of the WIPO option. 

Please check these out:

Memorandum Circular (MC) 2020-047 or the Amendments to the Revised Rules on Mediation:

MC 2020-048 or the Amendment to the Rules of Procedure for IPOPHL Mediation Outside of Litigation:



To promote further transparency, the SEC issued Memorandum Circular No. 1, Series of 2021, providing for the guidelines on the reporting of beneficial ownership of corporations. This is pursuant to the mandate of the law that corporations shall be organized only for legitimate purposes and not be used for anything irregular or illegal. Under the guidelines, incorporators, directors, shareholders and trustees of corporations applying for registration are obligated to confirm that they are not mere nominees, such that, if they are mere nominees, then they have to disclose the names and other information of their respective principals. Likewise, nominee directors, shareholders and trustees of existing corporations are required to make the same disclosure. Check these out for the details of the circular and the complete requirements:

To further ease the reportorial compliance of corporations during this time of Enhanced Community Quarantine and Public Health Emergency brought about by COVID-19, the Securities and Exchange Commission issued Memorandum Circular (MC) No. 10 on March 20, 2020 allowing the electronic filing of not only of General Information Sheet, which is already covered by MC No. 9, but Audited Financial Statements and other documents and forms, as well.

Check the following for the complete requirements:


In a Notice dated 30 March 2020, the SEC likewise allowed the remote filing of the monitoring clearance for amendments to articles of incorporation and by-laws. 

Check this out.


Check the following for other SEC Issuances:

SEC MC on BOD meetings and ASM by Remote Communications  

SEC Guidelines on the filing of a complaint for violation of the right of the stockholder to inspect corporate records.

The right of a stockholder to inspect corporate records remains guaranteed even under the Revised Corporation Code.  Pursuant to this, the Securities and Exchange Commission issued Memorandum Circular (MC) No. 25, Series of 2020 providing for the guidelines on the filing, investigation and resolution of complaints for violation of the right to inspect or reproduce corporate records.  Subject to the rule against forum-shopping, the aggrieved stockholder may file a complaint directly with the SEC.  Note, however, that while the stockholder has the right to inspect corporate records, the right is not absolute as any request for inspection may be denied, if it is shown that the same is being done in bad faith or for an unlawful purpose.   

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Pursuant to the Revised Corporation Code, the SEC has issued the guidelines for the conversion of a corporation to a one person corporation or to an ordinary stock corporation. Check these out:



A regular employment is an arrangement where the employee has been engaged to perform work which is usually necessary in the business of the employer. If the work is usually necessary in the business of the employer, the presumption is that the employment is one of regular employment, unless there is an arrangement to the contrary, like that of a probationary employment or that of a project employment. 

A probationary employment is that where the employee is on a trial basis, during which he has to meet the reasonable standards made known to him at the time of hiring, in order to qualify for regularization.  A project employment is that where the employee is engaged for a specific project, the completion or termination of which has been determined at the time of hiring.  While a probationary employment should not exceed a period of 6 months, a project employment is coterminous with the duration or completion of the project.  

In a probationary employment, the employer, before or upon the end of the probation, has to make a decision whether or not to regularize the probationary employee based on the former’s assessment of the latter’s performance. In a project employment, the completion of the project shall bring about the end of the project employment. 

Indeed, consistent with the employer’s prerogative to select whom to hire, the employer has the discretion to put a new employee under probation first before giving him regular status. In certain cases, the employer is also allowed to hire an employee on a temporary basis, such as for a particular project or a limited undertaking.

To be clear, the employer should specifically spell out the employment status at the time of hiring, especially when the arrangement is one for probation or for project, and then  see to it that the terms of the arrangement are being observed from the time of hiring up to the end of the contract or employment.  In the end, the validity of the arrangement shall be tested based on its consistency with our labor laws.  



The law allows the re-organization of two or more corporations to either merge into a single corporation which shall be one of the constituent corporations, or consolidate into a single new corporation, which shall be the consolidated corporation. Title IX of the Revised Corporation Code covers the rules on mergers and consolidation in the Philippines.

1. What is a Merger/Consolidation?

A Merger is defined as the re-organization of two or more corporations that results in their consolidating into a single corporation, which is one of the constituent corporations, one disappearing or dissolving and the other surviving.   

On the other hand, a Consolidation is the union of two or more existing corporations to form a new corporation called the consolidated corporation.

2. What are the requirements of the SEC for the completion of a merger or consolidation?

The Corporation Code provides the following steps for merger or consolidation: 

(1)   The board of each corporation draws up a plan of merger or consolidation. Such plan must include any amendment, if necessary, to the articles of incorporation of the surviving corporation, or in case of consolidation, all the statements required in the articles of incorporation of a corporation. 

(2)   Submission of plan to stockholders or members of each corporation for approval. A meeting must be called and at least two (2) weeks’ notice must be sent to all stockholders or members, personally or by registered mail. A summary of the plan must be attached to the notice. The vote of two-thirds of the members or of stockholders representing two thirds of the outstanding capital stock will be needed. Appraisal rights, when proper, must be respected. 

(3)   Execution of the formal agreement, referred to as the articles of merger or consolidation, by the corporate officers of each constituent corporation. These take the place of the articles of incorporation of the consolidated corporation, or amend the articles of incorporation of the surviving corporation. 

(4)   Submission of said articles of merger or consolidation to the SEC for approval. 

(5)   If necessary, the SEC shall set a hearing, notifying all corporations concerned at least two weeks before. 

(6)   Issuance of certificate of merger or consolidation.

3. What are the effects of a merger or consolidation?

Section 79 of the Revised Corporation Code, provides for the effects of a merger or consolidation, as follows: 

(1)   The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation; 

(2)   The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation; 

(3)   The surviving or the consolidated corporation shall possess all the rights, privileges, immunities, and powers and shall be subject to all the duties and liabilities of a corporation organized under this Code; 

(4)   The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and franchises of each constituent corporation; and all real or personal property, all receivables due on whatever account, including subscriptions to shares and other choses in action, and every other interest of, belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed; and 

(5)   The surviving or consolidated corporation shall be responsible for all the liabilities and obligations of each constituent corporation as though such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any constituent corporation may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of such constituent corporations shall not be impaired by the merger or consolidation. 

4. When is the effectivity of the merger/ consolidation?

The merger/consolidation takes effect upon the issuance of the SEC of a certificate approving the plan of merger/ consolidation.

5. What are the tax implications of a merger/consolidation?

A. On “Tax- Free” Exchanges

As a general rule, the gain or loss on the sale or exchange of property shall be recognized and will be taxable. The rule provides for exceptions such as the “tax-free” exchanges which refer to those instances enumerated in Section 40(C)(2) of the National Internal Revenue Code (NIRC) of 1997 that are not subject to Income Tax, Capital Gains Tax, Documentary Stamp Tax and/or Value-added Tax, as the case may be.

In general, there are two kinds of “tax-free” exchange: (1) transfer to a controlled corporation; and, (2) merger or consolidation.

In the first instance, no gain or loss shall be recognized if property is transferred to a corporation by a person in exchange for stock or unit of participation in such corporation of which as a result of such exchange said person, alone or together with others, not exceeding four persons, gains or maintains control of said corporation.

In the second instance, no gain or loss shall be recognized if in pursuance of a plan of merger or consolidation — (a) a corporation, which is a party to a merger or consolidation, exchanges property solely for stock in a corporation, which is a party to the merger or consolidation; or, (b) a shareholder exchanges stock in a corporation, which is a party to the merger or consolidation, solely for the stock of another corporation also a party to the merger or consolidation; or, (c) a security holder of a corporation, which is a party to the merger or consolidation, exchanges his securities in such corporation, solely for stock or securities in another corporation, a party to the merger or consolidation.  

A subsequent sale or disposition of the shares of stock will be taxable based on the historical or original cost or “Substituted basis” of the shares. Thus, to that extent, the said “tax-free” exchange, is not really tax-free, but merely a deferral. In determining the gains or losses in subsequent transfers, the BIR issued guidelines under Revenue Regulation No. 18-2001 provides that the “Substituted Basis” or the original or historical cost of the properties or shares are considered in determining the taxable gains or losses in later transfers.  

With the above requirements, the taxpayer must prove in a very clear manner that it is entitled to such exemption, and must obtain a certification or ruling signed by the Commissioner of Internal Revenue on the availment of “tax-free” exchange. The rules provide for penalties in case of non-compliance with the guidelines.             

B. Common Taxes imposed on mergers & consolidations not covered under the “tax- free” exchanges           

Capital Gains Tax on the purchase of shares

The shares of a target Philippine company may be acquired through a direct purchase. Gains from the sale are considered Philippine-source income and are thus taxable in the Philippines regardless of the place of sale. A Capital gains tax (CGT) of 15% of the gain is imposed on both domestic and foreign sellers.  

Value added tax

In asset acquisitions, a 12% Value Added Tax (VAT) is imposed on the gross selling price of the assets purchased in the ordinary course of business or of assets originally intended for use in the ordinary course of business.

Documentary Stamp Tax            

In “tax-free” exchanges, no DST is due on the deed transferring the property. However, the shares of stock issued in exchange for the property is subject to DST if it is for the purpose of an original issuance of shares.   

6. Are there any Notification Thresholds imposed by the Government for certain Mergers?

Yes. On 11 February 2020, the Philippine Competition Commission (“PCC”) issued its Resolution No. 02-2020 which adjusted the compulsory notification of mergers & acquisitions (“M&As”) pursuant to Memorandum Circular No. 18-001.

In the said resolution, the PCC adjusted the M&As’ notification thresholds, effective on 1 March 2020, as follows:

A. When the Size of Party exceeds Six Billion Pesos (Php 6,000,000,000.00)

The adjusted rate shall also apply to the joint venture transactions under Rule 4, Section 3(b) of the IRR.

Based on the Guidelines on the Computation of Merger Notification Thresholds (the “Guidelines”), issued by the PCC, the Size of Party pertains to the computation of the aggregate value of the assets in the Philippines and revenues from sales in, into, or from, the Philippines of the filing Ultimate Parent Entity (“UPE”), including all entities that it controls, directly or indirectly.

On the other hand, the Size of Transaction pertains to the computation of the value of the assets being acquired or/and gross revenues generated by the assets being acquired, or of the acquired entity and entities it controls, depending on the type of transaction provided under Rule 4, Section 3(b) and (d), as amended.  A copy of the Guidelines may be accessed here –



As its dictionary meaning goes, to hire is to employ, to engage, to appoint, to enlist, to sign up or to secure the services of someone. Hiring refers to the process of engaging somebody for his service. Whatever relationship will result from that hiring will depend on the agreement and its execution. Any businessman can definitely run a business without hiring anyone. It is a given that he and his partners can do everything on their own if they choose to. 

But can the businessman run his business with the help of another without having to be an employer? Still definitely yes.

Hiring somebody in running your business does not necessarily have to be hiring him as an employee. Indeed, the businessman has the prerogative of hiring the services of freelancers and consultants, without having to shoulder the obligations of an employer under the Labor Code. While the relationship between an employer and an employee is specifically governed by the Labor Code, engaging freelancers and consultants should be subject to the provisions of contract law in general.

The only concern is this. How can you tell if the person you are hiring will not be considered by law as an employee? How can you be so sure that he will not come to you later and invoke his rights to labor benefits and to security of tenure?

Employee or not, the person you are hiring, of course, has rights. The only difference is that, in simple terms, the rights of an employee are defined by the Labor Code while the rights of a non- employee are defined by the terms of his contract. In general, we can say that an employment relationship is more restrictive in nature while a consultancy or freelance agreement has more leeway.

Control is the single most important factor in determining whether the person you hired is an employee. This pertains to control over the means and methods of doing the work. Generally, the employee’s work performance is subject to your control while a consultant’s service is not, except only as to the desired result. While the employee does his work under your supervision, the consultant renders service using his own means, styles and methods, free from your control; your only concern is the delivery of the result. To otherwise ensure which kind of relationship you are getting into, it is important to define everything under a written contract, especially if your intention is to enter into a consultancy agreement. Not only that, you have to make sure that the actual execution is consistent with what is written.



To hire someone as an employee or a consultant will depend on three important factors. 

First is control. An employee is someone you supervise from the get go, from the processing of the work all the way up to the delivery of the output. A consultant is someone you control only with respect to the output. An employee reports in your office on a regular basis, say for at least 8 hours, and is subject to your company policy including rules on attendance and punctuality. A consultant is not required to report at your office on a regular basis. He may have his own office and may service other clients. So deciding whether to hire an employee or to engage the services of a consultant depends on how much control you want to exercise. 

Second is professional expertise. A consultant is generally perceived to be an expert in a particular area. He is usually a professional with vast experience in his field of expertise, like a lawyer, an accountant, an engineer, etc. While this may also be true with respect to an employee, an employee is usually someone who needs further guidance, training and close supervision. 

Third is your hiring goal. What type of service do you want to get by hiring? What particular need do you want to address? If you need someone on a regular basis for at least 8 hours a day under your close supervision, then hire an employee. But if you need someone for his known expertise, without necessarily having to be supervised, then engage a consultant.



The preferential use of voluntary modes in settling disputes between workers and employers for the promotion of industrial peace is well recognized in the Constitution and the labor laws. 

Any labor issue may be settled by the company and the employee between themselves. They can do the settlement right at the workplace, often times with the assistance of a notary public to make the agreement under oath. The only concern here is that there are instances where an employee still files a labor case, even after the settlement to question its validity by raising issues on voluntariness of the settlement, sufficiency of the consideration, etc. Once a labor case is filed, the Labor Arbiter cannot just dismiss the case by reason of the previous settlement signed before a notary public, as he is still mandated to look into the complaint and evaluate its merits, unless the complainant withdraws the case.

This is where the process of “walk-in settlement” at the National Labor Relations Commission comes in. This can be completed on the same day that it is initiated. If the company and the employee have already decided to settle, it may not be enough to execute the settlement before a notary public. Just to put aside the possibility that the employee will still file a case after signing a quitclaim, the company has the option of presenting the settlement agreement to the Labor Arbiter’s Office right away precisely for the purpose of executing the settlement there and asking the Labor Arbiter to approve it. The parties need only to go to the NLRC, where the employee will fill out the usual complaint form but with the note that it is for “walk-in settlement”.

After accomplishing the complaint form, the matter will be raffled off to a Labor Arbiter, who shall then meet the parties, ask questions to confirm that the complainant is entering into a settlement voluntarily and that he understands the terms of the settlement, including the effect of receiving any compromise amount from the company. Once the Labor Arbiter is satisfied that the settlement is voluntary, reasonable and valid, he will ask the complainant to sign a quitclaim in favor of the company, waiving all his rights in relation to the complaint. The quitclaim will then be the basis for the Labor Arbiter to issue an Order recognizing and approving the settlement. This Order shall be binding on the parties and shall be considered as “with prejudice”, which serves to prevent the complainant from pursuing any further action against the company with respect to the issues raised in the complaint. 

Indeed, while a settlement between the company and the employee before a notary public is always welcome, if given a choice, there is nothing better than having the settlement executed right before the Labor Arbiter if only to remove any chance that the issue that has been settled will only be raised again in a labor complaint.

In essence, a “walk-in settlement” has the same effect as any other settlement of labor complaints executed before the Labor Arbiter. The only difference is that in a “walk-in settlement”, the complainant has already decided to enter into a settlement at the time that he is filing the complaint and he, along with the company, would merely want the Labor Arbiter to sign off on it. This cannot be said of the usual labor complaints where the complainant and the company have yet to explore the possibility of settlement.



May an employer be exempt from paying 13th month pay on the ground of financial losses brought about by the COVID-19 pandemic?

It is provided under the 13th Month Pay Law that employers are required to pay covered employees their 13th month pay which is equivalent to 1/12 of the basic salary earned by the employee within the calendar year.  Note, however, that in the Rules Implementing the Law, which is as old as the Law itself, it is provided that distressed employers, or those suffering from financial losses, may apply with the Department of Labor and Employment for exemption.

The Supreme Court itself recognized the existence, if not the legality, of the exemption being extended to distressed employers.  In Central Azucarera de Tarlac vs. Labor Union G.R. No. 188949, 26 July 2010, the Supreme Court denied the employer’s claim of exemption from the payment of 13th month pay on the ground that it did not get any authorization from the Secretary of Labor.  In so ruling, the Court, citing the 1989 case of Dentech Manufacturing vs. NLRC, G.R. No. 81477, 19 April 1989, declared that under Section 7 of the Rules and Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of the Decree only upon prior authorization by the Secretary of Labor.

In the end, any application for exemption on account of financial losses brought about by the pandemic shall depend on the discretion of the Secretary of Labor who shall evaluate the supporting documents such as the audited financial statements, subject to the final determination by the Court in case the legality of the exemption is questioned.

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In a recent development, however, the Secretary of Labor issued Labor Advisory No. 28 dated 16 October 2020 disallowing any exemption from or deferment of the payment of 13th month pay for 2020. 

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The Department of Labor and Employment has issued guidelines on remedial measures in view of the COVID-19 outbreak.  Aside from prescribing work from home arrangements, the Department shall be extending financial support to affected workers in the lump sum amount of P5,000.00 each.  Indeed, workers’ wages will be reduced during this time by reason of temporary closure of the establishment or adoption of irregular work arrangements, and leave credits will not be enough to compensate. Thus, financial support from our government is most welcome.

For the complete set of requirements, check these out:

Check the following for other DOLE Issuances:


The Anti-Red Tape Authority (ARTA) has issued recommendations in order to further fasttrack government procedures while the country is in a state of calamity brought about by COVID-19. Among the measures recommended to be adopted by government agencies are extending the validity of permits and accepting online applications and payments.

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In line with the mandate of the Anti-Red Tape Law, and more importantly, in order to improve the telco services in the country, the government is targeting to fasttrack the construction of new common cell towers by reducing the number of required permits.

9 government agencies signed a memorandum circular that speeds up the process of securing permits needed to build new cell towers.  From the long period of 200 days, the process will now be down to 16 days.  Check this out: