M a n i l a
PRESIDENTIAL DECREE No. 251 July 21, 1973
AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NUMBERED THREE THOUSAND EIGHT HUNDRED FORTY-FOUR, AS AMENDED, ENTITLED "THE CODE OF AGRARIAN REFORM IN THE PHILIPPINES"
WHEREAS, there is imperative need for immediate implementation of agrarian reform envisioned under Presidential Decree Nos. 27 and 85 dated October 21, 1972 and December 25, 1972, respectively;
WHEREAS, the implementation of such a revolutionary program of rural change demands an effective administrative machinery financially and organizationally equipped to mobilize and harness properly all available government resources for the realization of desired agrarian reform;
WHEREAS, the Land Bank, the only financial institution established for agrarian reform, is presently deficient and inadequate both in capitalization and in organization structure to meet the implementation requirements of the agrarian reform program;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines and pursuant to Proclamation No. 1081 dated September 21, 1972, and General Order No. 1, dated September 22, 1972, as amended, do hereby order and decree:
Section 1. Section seventy-four of Republic Act Numbered Three thousand eight hundred and forty-four, as amended, is hereby further amended to read as follows:
"Sec. 74. Creation. To provide timely and adequate financial support in all phases involved in the execution of needed agrarian reform, there is hereby established a body corporate and government instrumentality to be known as the "Land Bank of the Philippines," hereinafter called the "Bank," which shall have its principal place of Business in Greater Manila. The legal existence of the Bank shall be for a period of fifty (50) years from the date of approval hereof."
Section 2. Section seventy-five of the same Act is hereby amended to read as follows:
"Sec. 75. Powers in General. The bank shall have the power.
"1. To prescribe, repeal and alter its own by-laws to determine its operating policies, and to issue such rules and regulations as may be necessary;
"2. To adopt, alter and use a corporate seal;
"3. To hold, purchase, acquire and own real and personal property, introduce necessary improvements thereon to enhance and develop their social and economic values, and to sell, mortgage or otherwise dispose of the same;
"4. To sue and be sued, make contracts, negotiate and secure loans from both local and foreign sources. Before undertaking any such credit operation, the Bank, through the Secretary of Finance, shall request the opinion, in writing, of the Monetary Board on the monetary implications of the contemplated action. All loans from foreign sources shall be subject to approval by the President of the Philippines and shall be fully guaranteed by the Philippine Government;
"5. To grant short, medium and long term loans and advances against security of real estate and/or other acceptable assets for the establishment, development or expansion of agricultural, industrial, home building or home financing projects and other productive enterprises;
"6. To grant loans to farmers' cooperatives/associations to facilitate production, marketing of crops and acquisition of essential commodities;
"7. To finance and/or guarantee the acquisition, under Presidential Decree No. 85 dated December 25, 1972, of farm lots transferred to tenant-farmers pursuant to Presidential Decree No. 27 dated October 21, 1972;
"8. To underwrite, hold, own, purchase, acquire, sell, mortgage, dispose or otherwise invest or reinvest in stocks, bonds, debentures, securities and other evidences of indebtedness of other corporations and of the government or its instrumentalities which are issued for or in connection with any project or enterprise;
"9. The provision of any law to the contrary notwithstanding, to guarantee acceptance(s), credits, loans, transactions or obligations of any person, co-partnership, association or corporation in favor of any financing or banking institution, whether foreign or domestic: Provided, That the proceeds of such acceptances, credits, loans, transactions or obligations are utilized or earmarked for the development and/or expansion of agriculture and industry;
"10. To borrow from, or rediscount notes, bills of exchange and other commercial papers with, the Central Bank. The rate of interest to be charged and the conditions on such obligations or borrowings shall be subject to the rules and regulations of the Monetary Board;
"11. To act as trustee, or administer any trust or hold property in trust in accordance with the provisions of law governing trust corporations; and
"12. To exercise the general powers mentioned in the Corporation Law and the General Banking Act, as amended, insofar as they are not inconsistent or incompatible with this Decree."
Section 3. Section seventy-six of the same Act is hereby amended to read as follows:
"Sec. 76. Issuance of Bonds. The bank shall, upon recommendation of the Secretary of Finance and after consultation with the National Economic and Development Authority and the Monetary Board, and with the approval of the President of the Philippines, issue bonds, debentures, securities, collaterals and other evidences of indebtedness, rates and conditions as the Bank may determine, up to an aggregate amount not exceeding, at any one time, ten times its paid-in capital and surplus. These bonds and other obligations shall be redeemable at the option of the Bank at or before maturity and in such manner as may be stipulated therein and shall bear such rate of interest as may be fixed by the Bank. Such obligations shall be secured by the assets of the Bank including the stocks, bonds, debentures, and other securities underwritten, purchased or held by it under the provisions of this Decree. Such obligations may be issued in payment and/or replacement of certain assets transferred to the Bank and/or offered for sale at such price or prices as the Bank may determine, and shall be exempt from taxation both as to principal and interest, and shall be fully guaranteed by the Government of the Republic of the Philippines, and such guarantee shall be expressed on the face thereof. These instruments of indebtedness shall be negotiable and may be mortgaged in accordance with established banking procedures and practices with the government institutions, their existing charters and/or laws to the contrary notwithstanding, to enable the holders of such bonds to make use of them in investments in productive enterprises. The Board of Directors shall have the power to prescribe rules and regulations for the issuance, reissuance, servicing, placement and redemption of the bonds herein authorized to be issued as well as the registration of such bonds at the request of the holders thereof.
Section 4. Section seventy-seven of the same Act is hereby amended to read as follows:
"Sec. 77. Issuance of Preferred Shares of Stock to Finance Acquisition of Farm Lots and Other Assets. The Bank shall issue, from time to time, preferred shares of stock in such quantities as may be necessary to pay the landowners in accordance with Section eighty and eighty-one of this Code, and for acquisition of other assets should the seller elect to accept such payment. The amount of shares that the Bank may issue shall not exceed the aggregate amount needed to pay the landowners in the proportion prescribed in said Section eighty of this Code. The Board of Directors shall include as a necessary part of the by-laws that it shall issue under Section seventy-five of this Code, such formula as it deems adequate for determining the net asset value of its holdings as a guide and basis for the issuance of preferred shares. The shares of stock issued under the authority of this provision shall be guaranteed a rate of return of at least six per centum. In the event that the earnings of the Bank for any single fiscal year are not sufficient to enable the Bank, after making reasonable allowance for administration, contingencies and growth, to declare dividends at the guaranteed rate, the amount equivalent to the difference between the Bank's earnings available for dividends and that necessary to pay the guaranteed rate shall be paid by the Bank out of its own assets but the government shall, on the same day that the Bank make such payment, reimburse the latter in full, for which purpose such amounts as may be necessary to enable the Government to make such reimbursements are hereby appropriated out of any moneys in the National Treasury not otherwise appropriated. The Bank shall give sufficient notice to the Budget Commissioner and the Secretary of Finance in the event that it is not able to pay the guaranteed rate of return on any fiscal period. The guaranteed rate of return on these shares shall not preclude the holders thereof from participating at a percentage higher than six per centum should the earnings of the Bank for the corresponding fiscal period exceed the guaranteed rate of return. The Board of Directors shall declare and distribute dividends within three months after the close of each fiscal year at the guaranteed rate unless a higher rate of return is justified by the Bank's earnings after making reasonable allowance for administration, contingencies and growth, in which case, dividends shall be declared and distributed at a higher rate. The capital gains derived from the sale or transfer of such shares and all income derived therefrom in the form of dividends shall be fully tax-exempt."
Section 5. Section seventy-eight of the same Act is hereby amended to read as follows:
"Sec. 78. Special Guaranty Fund. In the event that the Bank shall be unable to pay the bonds, debentures and other obligations issued by it, a fixed amount thereof shall be paid from a special guaranty fund to be set up by the Government, to guarantee the obligation of the Bank, and established in accordance with this Section and, thereupon, to the extent of the amounts so paid, the Government of the Republic of the Philippines shall succeed to all rights of the holders of such bonds, debentures or other obligations: Provided, however, That the Government shall pay into the guaranty fund the sum of five million pesos each year until the cumulative total of such guaranty fund is no less than twenty per cent of the outstanding net obligation of the Bank at the end of any calendar year.
"The special guaranty fund shall be administered by the Central Bank of the Philippines in the manner most consistent with its charter. For the purpose of such funds, the sum of five million pesos is hereby appropriated annually out of any moneys in the National Treasury not otherwise appropriated, until the total amount of one hundred million pesos shall have been attained therefrom."
Section 6. Section seventy-nine of the same Act is hereby amended to read as follows:
"Sec. 79. Receipts of Deposits. The Bank, subject to the provisions of the General Banking Act, as amended, is authorized to receive demand, savings and time deposits.
"The Secretary of Finance, the National Treasurer and his authorized representatives, city and municipal treasurers as well as custodians of funds or those belonging to government-owned or controlled corporations, may be authorized by the Monetary Board to make and actually maintain deposits of any government or corporate funds with the Land Bank.
"Sec. 79-A. Administration of Agricultural Guarantee Funds. All agricultural guarantee funds shall be converted into a trust fund to be administered by the Bank."
Section 7. Section eighty of the same Act is hereby amended to read as follows:
"Sec. 80. Modes of Payment. The Bank shall finance the acquisition of farm lots under any of the following modes of settlement:
"1. Cash payment of 10% and balance in 25-year tax-free 6% Land Bank bonds;
"2. Payment of 30% in preferred shares of stock issued by the Bank and balance in 25-year tax-free 6% Land Bank bonds;
"3. Full guarantee on the payment of the fifteen (15) equal annual amortizations to be made by the tenant/farmer;
"4. Payment through the establishment of annuities or pensions with insurance;
"5. Exchange arrangement for government stocks in government-owned or controlled corporations or private corporations where the government has holdings;
"6. Such other modes of settlement as may be further adopted by the Board of Directors and approved by the President of the Philippines.
In the event there is existing lien or encumbrance on the land in favor of any Government lending institution at the time of acquisition by the Bank, the landowner shall be paid the net value of the land (i.e., the value of the land determined under Proclamation No. 27 minus the outstanding balance/s of the obligation/s secured by the lien/s or encumbrance/s), and the outstanding balance/s of the obligations to the lending institution/s shall be paid by the Land Bank in Land Bank bonds or other securities; existing charters of those institutions to the contrary notwithstanding. A similar settlement may be negotiated by the Land Bank in the case of obligations secured by liens or encumbrances in favor of private parties or institutions.
"Whenever the Bank pays the whole or a portion of the total cost of farm lots, the Bank shall be subrogated by reason thereof, to the right of the landowner to collect and receive the yearly amortizations on farm lots or the amount paid including interest thereon, from tenant/farmers in whose favor said farm lots had been transferred pursuant to Presidential Decree No. 27, dated October 21, 1972.
"The profits accruing from payment shall be exempt from tax on capital gains."
Section 8. Section eighty-one of the same Act is hereby amended to read as follows:
"Sec. 81. Capital. The authorized capital stock of the Bank shall be three billion pesos, divided into one hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. These preferred shares shall be non-voting. The Board, upon the recommendation of the Secretary of Finance and with the approval of the President of the Philippines, may increase the capitalization of the Bank up to such an amount as may be necessary to attain the objectives of this Act. The total capital stock subscribed by the Government shall be paid by the Agrarian Reform Fund Commission created under Presidential Decree No. 85, hereinafter referred to as the "Commission," as follows: four hundred million pesos within sixty (60) days from the approval of this Decree, and at least one hundred million pesos every year thereafter until the total subscription of the Government is fully paid: Provided, That the common and preferred shares of the Bank which have been issued, including those already subscribed, shall form part of the increased capitalization of the Bank: Provided, further, That the Government is authorized to appropriate funds out of the National Treasury for this purpose."
Section 9. Section eighty-three of the same Act is hereby amended as follows:
Section 83. Preferred Shares. All preferred shares or stock issued under Section seventy-seven of this Code shall be entitled to the income earned by the Bank on its investments and other operations: Provided, That the holders of such preferred shares of stock shall not bring derivative suits against the Bank. Such preferred shares shall be fully transferrable: Provided, further, That upon the liquidation of the Bank, the redemption of such preferred shares shall be given priority."
Section 10. Section eighty-four of the same Act is hereby amended to read as follows:
"Sec. 84. Voting of Shares. The voting power of all the common shares of stock of the Bank owned and controlled by the Government shall be vested in the President of the Philippines or in any ex-officio member of the Board of Directors of the Bank as he may designate."
Section 11. Section eighty-five of the same Act is hereby amended to read as follows:
"Sec. 85. Use of Bonds. The bonds issued by the Bank may be used by the holder thereof and shall be accepted for any of the following:
"1. Payment for agricultural lands or other real properties purchased from the Government.
"2. Payment for the purchase of shares of stock or assets or government-owned or controlled corporations.
"Upon offer by the bondholders, the corporation owned or controlled by the Government shall, through its Board of Directors, negotiate with such bondholder with respect to the price and other terms and conditions of the sale. In case there are various bondholders making the offer, the one willing to purchase under terms and conditions most favorable to the corporation shall be preferred. If no price is acceptable to the corporation, the same shall be determined by the Committee of Appraisers composed of three members, one to be appointed by the corporation, another by the bondholder making the highest or only offer, and the third by the two members, so chosen. The expense of appraisal shall be borne equally by the corporation and the successful purchaser.
"Should the Government offer for sale to the public any or all the shares of stock or the assets of any of the Government-owned or controlled corporations, the bidder who offers to pay in bonds of the Land Bank shall be preferred, provided that the various bids be equal in every respect except in the medium of payment.
"3. Surety, bail bonds for the provisional release of accused person or performance bonds in all cases where the Government may require or accept real property as bonds.
"4. Security for loans applied with the Philippine National Bank of the Philippines, Government Service Insurance System, Social Security System, and other governmental financial institutions, existing charters of these institutions to the contrary notwithstanding.
"5. Payment for reparations goods the provisions of Republic Act Nos. 1700 and 90, as amended, to the contrary notwithstanding.
Section 12. Section eighty-six of the same Act is hereby amended to read as follows:
"Sec. 86. Board of Directors; Membership; Per Diem. The affairs and business of the Bank shall be directed and its property managed and preserved by a Board of Directors consisting of seven (7) members to be composed of the Secretary of Finance as Chairman, the President of the Bank as Vice-Chairman, the Secretary of Agrarian Reform and the Secretary of Labor as ex-officio members, and three members to be elected as hereinafter provided.
"Annually, on the first Tuesday after the first Monday in December, the stockholders shall meet to take up, among others, the election of two (2) members of the Board of Directors for the succeeding year, each common shareholder or proxy to be entitled to as many votes as he may have shares of stock registered in his name on the 31st day of October last preceding and held by him at the time of the election.
"The Board shall convene as frequently as is necessary to discharge its responsibilities properly, but shall meet at least once every two weeks. The Board may be convoked either by the Chairman or, in his absence, the Vice-Chairman.
"The presence of four (4) members shall constitute a quorum.
"All decisions of the Board shall require the concurrence of at least four (4) members.
"The Chairman and the members of the Board shall receive a per diem of two hundred fifty pesos for each session of the Board attended, but in no case to exceed two thousand pesos a month.
"Sec. 86-A. Powers and Responsibilities of the Board. The Board of Directors shall have, among others, the following specific powers and responsibilities:
"1. Formulate policies, rules and regulations for the effective operation of the Bank;
"2. Take decisions concerning loans as well as fix the rates of interest thereon, guarantees, investments, borrowing by the Bank, furnishing of technical assistance and other operations of the Bank;
"3. Establish such branches and agencies as may be deemed necessary and convenient;
"4. Provide for the appointment and removal and fix the reasonable compensation of such personnel as may be necessary for the expeditious conduct of the business of the Bank; and
"5. Approve the budget of the Bank."
Section 13. Section eighty-seven of the same Act is hereby amended to read as follows:
"Sec. 87. Executive Officers; Compensation. The Chief Executive of the Bank shall be the President, who shall be chosen and may be removed by the Board of Directors with the advice and consent of the President of the Philippines. His salary shall be fixed by the Board of Directors with the approval of the President of the Philippines. The President shall be assisted by Vice-Presidents as may be required, whose appointments and removal shall be approved and whose salaries shall be fixed by the Board of Directors upon recommendation of the President of the Bank.
"Sec. 87-A. Duties and Powers of the President. The President of the Bank shall, among others, execute the policies, measures, orders and resolutions promulgated by the Board of Directors and supervise and administer the operation of the Bank. He shall be the legal representative of the Bank and shall make all contracts, enter into all necessary obligations on behalf of the bank, and recommend changes of policies which may to him seem best. He shall furnish, upon request of the President of the Philippines, any information in his possession regarding the operations of the bank.
Section 14. Section eighty-eight of the same Act is hereby amended to read as follows:
"Sec. 88. Qualifications of Executive Officers. No person shall be appointed to any executive position in the Bank mentioned in the preceding section unless he be of good moral character and unquestionable integrity and responsibility, and who is of recognized competence in the field of economics, agriculture, industry, banking and/or finance, at least thirty-five (35) years of age and possessed of demonstrated administrative skill and ability."
Section 15. Section eighty-nine of the same Act is hereby amended to read as follows:
"Sec. 89. Withdrawal of Person Having Personal Interest. Whenever any member attending a meeting of the Board has a personal interest of any sort in the discussion or resolution of any given matter, or any of his relatives within the fourth degree of consanguinity or a second degree of affinity has such interest, said member shall not participate in the discussion or resolution of the matter and must retire from the meeting during the deliberations thereon. The subject matter, when resolved, and the fact that a member had a personal interest in it, shall be made available to the public. The minutes of the meeting shall note the withdrawal of the member concerned."
Section 16. Section ninety of the same Act is hereby amended to read as follows:
"Sec. 90. Personnel. The Board of Directors shall provide for an organization and staff of officers and employees of the Bank and upon recommendation of the President of the Bank, appoint and fix their remunerations and other emoluments, and remove such officers and employees; Provided, That the Board shall have exclusive and final authority to promote, transfer, assign or reassign personnel of the Bank, any provisions of existing law to the contrary notwithstanding.
"The Bank officers and employees, including all members of the Board, shall not engage directly or indirectly in partisan activities or take part in any election except to vote.
"No officer or employee of the Bank subject to the Civil Service Law and regulations shall be removed or suspended except for cause as provided by law."
Section 17. Section ninety-one of the same Act is hereby amended to read as follows:
"Sec. 91. Legal Counsel. Any provision of existing law or executive order to the contrary notwithstanding, the Bank shall have its own Legal Department, the chief and members of which shall be appointed by the Board of Directors."
Section 18. Section ninety-two of the same Act is hereby amended to read as follows:
"Sec. 92. Auditor. The Chairman of the Commission on Audit shall act as the ex-officio Auditor of the Bank and, as such, he is empowered and authorized to appoint a representative who shall be the auditor in charge of the auditing office of the Bank and in accordance with law, fix his salary, and to appoint and fix the salaries and number of personnel to assist said representative in his work, but in all cases subject to the approval of the Board of Directors. The salaries and all other expenses of maintaining the auditor's office shall be paid by the Bank. The Auditor of the Bank and personnel under him may be removed only by the Commission on Audit."
Section 19. Section ninety-three of the same Act is hereby amended to read as follows:
"Sec. 93. Report on Condition of the Bank. The representative of the Commission on Audit shall make a quarterly report on the condition of the Bank to the President of the Philippines, to the Secretary of Finance, to the Chairman of the Commission on Audit, and to the Board of Directors of the Bank. The report shall contain, among other things, a statement of the resources and liabilities, including earnings and expenses, the amount of capital stock, surplus, reserve and profits, as well as losses, bad debts, and suspended and overdue paper carried in the books and assets of the Bank."
Section 20. Section ninety-five of the same Act is hereby repealed.
Section 21. Section ninety-seven of the same Act is hereby amended to read as follows:
"Sec. 97. Central Bank Supervision. The Bank shall be under the supervision and regulation of the Central Bank of the Philippines."
Section 22. Section ninety-eight of the same Act is hereby amended to read as follows:
"Sec. 98. Tax Exemptions. The Land Bank shall be exempt from all national, provincial, municipal, and city taxes and assessment now enforced or hereinafter established.
"The exemption authorized in the preceding paragraph of this section shall apply to all property of the Bank, to the resources, receipts, expenditures, profits and income of the Bank, as well as to all contracts, deeds, documents and transactions related to the conduct of the business of the Bank, Provided, That said exemptions shall apply only to such taxes and assessments payable by persons or other entities doing business with the Bank."
Section 23. Section ninety-nine of the same Act is hereby amended to read as follows:
"Sec. 99. Reorganization of the Bank. The Bank shall be reorganized within ninety (90) days from the date this Decree take effect. The present personnel complement of the Bank shall in the interim continue to discharge their respective functions. Officials and personnel whose services may be dispensed with as a result of this reorganization shall be paid the usual gratuities to which they may be entitled under existing law."
Section 24. Section one hundred of the same Act is hereby amended to read as follows:
"Sec. 100. Penalty for Violation of the Provisions of this Chapter. Any director, officer, employee or agent of the Bank who violates or permits the violation of any of the provisions of this Chapter or any person aiding or abetting the violation of any of the provisions of this Chapter, shall be punished by a fine of not to exceed ten thousand pesos or by imprisonment of not more than five years, or both, such fine and imprisonment at the discretion of the Court."
Section 25. Applicability of Republic Act. No. 337 as amended, and Presidential Decree No. 129. The provisions of the General Banking Act (Republic Act No. 337, as amended) and of Presidential Decree No. 129 insofar as they are not in conflict or inconsistent with the provisions of this Act shall apply to this Bank.
Section 26. Repealing Clause. All laws, executive orders, rules and regulations or parts thereof inconsistent with this Decree are hereby repealed and/or modified accordingly.
Section 27. Effectivity. This Decree shall take effect immediately.
Done in the City of Manila, this 21st day of July, in the year of Our Lord, nineteen hundred and seventy-three.
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