PERSONAL PROPERTY SECURITY ACT 6.

Proceeds- Property received from the sale,

(RA 11507) lease, or disposition of collateral, including
insurance or compensation for collateral loss
An Act Strengthening the Secured Transactions Legal or damage.
Framework in the Philippines, Which Shall Provide for 7. Purchase Money Security Interest - Security
the Creation, Perfection, Determination of Priority, interest in goods taken by the seller or lender
Establishment of a Centralized Notice Registry, and to secure the price or enable acquisition, used
Enforcement of Security Interests in Personal for that purpose.
Property, and for Other Purposes
8. Registry - Centralized electronic registry at
CHAPTER 1 the Land Registration Authority (LRA) for
DEFINITIONS AND SCOPE registering security interests and liens in
personal property.
Section 1. Title.
"Personal Property Security Act". 9. Secured Creditor - Person with a security
interest, including buyers of accounts
Section 2. Declaration of Policy. receivable and lessors of goods under long-
The state aims to boost economic activity by term leases (≥1 year).
enhancing access to affordable credit for micro, small,
and medium enterprises (MSMEs) through a unified 10. Security Interest - Property right in collateral
and modern legal framework for securing obligations securing an obligation, regardless of how it's
with personal property. named, the asset type, or the nature of the
obligation; includes rights of buyers of
Section 3. Definition of Terms accounts receivable and long-term lessors.
1. Commodity Contract - contracts or options
traded on a designated market or foreign 11. Writing - Includes electronic records for this
commodity board, carried on the books of a Act.
commodity intermediary.
Section 4. Scope of the Act
2. Control Agreement GR: Applies to all transactions securing obligations
Written agreements where: with movable collateral
(a) Securities: Issuer or intermediary ETR: Interests in aircraft under Republic Act No. 9497
follows the secured creditor's (Civil Aviation Authority Act of 2008) and interests in
instructions. ships under Presidential Decree No. 1521 (Ship
(b) Deposit Accounts: Deposit-taking Mortgage Decree of 1978)
institution follows the secured
creditor's instructions for payments. CHAPTER 2
(c) Commodity Contracts: Intermediary CREATION OF SECURITY INTEREST
applies value as directed by the
secured creditor.
Section 5. Creation of a Security Interest
3. Grantor  A security interest is created by a security
Person or entity that: agreement.
(a) Grants a security interest.  A security interest in future property is created
(b) Buys or transfers collateral subject to when the grantor acquires rights or the power
a security interest. to encumber it.
(c) Transfers accounts receivable
outright. Section 6. Security Agreement
(d) Leases goods.  Must be in a written contract signed by the
parties.
4. Non-intermediated Securities - Securities
 Can consist of multiple writings showing intent
not credited to a securities account.
to create a security interest.
 Should specify the language for agreements
5. Notice - Information registered in the Registry
and notices, with an option for Filipino.
about a security interest or lien, including
 The Department of Finance (DOF) will prepare
initial, amendment, and termination notices.
model agreements in plain English and
Filipino.
Section 7. Description of Collateral (b) Secured creditor taking possession of the
 A description is sufficient if it reasonably collateral.
identifies the collateral, whether specific or (c) Secured creditor having control of
general (e.g., "all personal property," "all investment property and deposit accounts.
equipment").
Tangible assets Investment property
Section 8. Right to Proceeds and Commingled and deposit accounts
Funds Perfected by registration Perfected by registration
 Security interest extends to identifiable or or possession or control.
traceable proceeds of the collateral.
 For commingled funds: Section 13. Perfection by Control
1. Security interest extends to the (a) Security interest in deposit accounts or investment
commingled funds if traceable. property is perfected by control through:
2. Limited to the amount of proceeds 1. Creating the security interest in favor
before commingling. of the deposit-taking institution or
3. If the commingled amount drops, the intermediary.
security interest is limited to the lowest 2. Concluding a control agreement.
balance during that period. 3. Notation of the security interest in the
issuer’s books for electronic securities
Section 9. Continuity of Security Interest not held with an intermediary.
 A security interest continues in collateral even (b) Deposit-taking institutions or intermediaries are not
after sale, lease, exchange, or other required to enter into control agreements or
disposition, unless otherwise specified or confirm their existence unless requested by the
agreed upon. grantor.

Section 10. Contractual Limitation on the Creation Section 14. Perfection in Proceeds
of a Security Interest (a) Security interest automatically extends to
 Any stipulation limiting the grantor’s right to proceeds (money, accounts receivable,
create a security interest is void. negotiable instruments, or deposit
 Security interest in an account receivable is accounts) and remains perfected.
effective despite agreements limiting the
grantor's right to create it. (b) If proceeds are in a different form, the
 Grantor remains liable for breaching such security interest must be perfected by
agreements. relevant means within 15 days of receiving
 Applies to accounts receivable from: the proceeds, or it won't be effective
1. Contracts for the supply or lease of against third parties.
goods/services (excluding financial
services). Section 15. Change in Means of Perfection
2. Construction contracts or real property  A security interest stays perfected despite
sale/lease. changes in the means of perfection, provided
3. Sale, lease, or license of intellectual there’s no period when the security interest is
property. unperfected.

CHAPTER 3 Section 16. Assignment of Security Interest

PERFECTION OF SECURITY INTEREST  If a perfected security interest is assigned, an
amendment notice can be registered to reflect
Section 11. Perfection of Security Interest the assignment.
 A security interest is perfected when created
and the secured creditor takes action CHAPTER 4
according to Section 12. PRIORITY OF SECURITY INTEREST
 Once perfected, a security interest is effective
against third parties. Section 17. Priority Rules
 Priority of security interests and liens is based
Section 12. Means of Perfection on the time of registration or perfection, not
A security interest can be perfected by: the order of creation.
(a) Registering a notice with the Registry.
Section 18. Priority for Perfection by Control b. Written notification given to conflicting
1. Deposit-taking institution or intermediary’s interest holders before possession.
security interest in a deposit account has the
highest priority. (d) Priority over buyers, lessees, or lien holders
2. Security interest perfected by a control from delivery to registration of notice for
agreement has priority over other methods equipment or consumer goods.
except for the deposit-taking institution or
intermediary. Section 24. Livestock
3. Among control agreements, priority is based  Priority for securing food/medicine obligations,
on the time they were concluded. if written notice is given to conflicting interest
4. A deposit-taking institution's right to set-off has holders before possession, except for
priority over any security interest. perfected purchase money security interests.
5. Possession of a security certificate gives
priority over registration. Section 25. Fixtures, Accessions, and Commingled
6. Notation in issuer’s books for electronic Goods
securities not with an intermediary has the  A security interest continues in fixtures,
highest priority. accessions, or commingled goods if traceable,
7. Control agreements for electronic securities following Civil Code provisions for determining
not with an intermediary have priority over ownership.
registration.
8. Among control agreements for electronic CHAPTER 5
securities not with an intermediary, priority is REGISTRATION – REGISTRY
based on the time they were concluded.
Section 26. Establishment of Electronic Registry
Control, Possession, Registration (a) The Land Registration Authority (LRA) will set
Section 19. Priority for Instruments and Negotiable up and manage the Registry.
Documents (b) The Registry will allow electronic registration
 Possession of an instrument or negotiable and searching of notices.
document gives priority over registration.
Section 27. Public Record
Section 20. Priority and Plight of Retention by  Registered notices are public records.
Operation of Law  Anyone can search notices in the Registry.
 Service or material providers who retain  Electronic records in the Registry are official.
possession of goods have priority over
perfected security interests until paid. Section 28. Sufficiency of Notice
1. Initial notice of security interest shall not be
Section 21. Transferee Exceptions rejected:
 Buyers in good faith during ordinary business o Grantor's identification number as per
take property free of security interests, unless regulations
the interest was registered before acquisition. o Secured creditor's name or agent's
o Address of grantor and secured
Section 22. Effect of the Grantor’s Insolvency on creditor or its agent
the Priority of a Security Interest o Description of the collateral
 A perfected security interest before insolvency
o Payment of prescribed fee or agreed
proceedings retains its priority during
payment method.
insolvency, subject to insolvency laws.
2. If rejected, the reason must be given.
Section 23. Purchase Money Security Interest
3. Grantor’s authorization is needed for notice
(a) Priority in equipment and proceeds if notice is
registratio
registered within 3 business days of
4. Notices can be registered before a security
possession.
agreement is finalized.
(b) Priority in consumer goods if notice is
5. Lien holders can register a notice without the
registered within 3 business days of
grantor’s consent.
possession.
6. Collateral description in notices must be in
(c) Priority in inventory, intellectual property, or
English.
livestock if:
a. Perfected upon possession or
acquiring rights.
Section 29. One Notice for Multiple Security Section 36. Search of Registry Records and
Agreements Certified Report
 One notice can cover security interests from  Registry provides search results to requesters.
multiple agreements.  Certified reports of searches can be obtained
upon request.
Section 30. Effectiveness of Notice
(a) Notice is effective when recorded in the Section 37. Disclosure of Information
Registry.  Secured creditors must provide certain
(b) It remains effective for the specified duration information to grantors upon request.
unless renewed by a continuation notice  Fees may be charged for requests, except for
(c) Notice must be accurate to be effective. one free request every six months.
(d) If not retrievable from the Registry, notice is  Deposit account security interests don’t affect
ineffective. deposit-taking institutions' rights.

Section 31. Seriously Misleading Notice Section 38. Fees Set by Regulation
 Not providing the grantor's identification  Fees for Registry services are set by the
number in a notice is considered seriously Department of Finance (DOF).
misleading.  Fee structure must not burden lenders or
grantors.
Section 32. Amendment of Notice  No fee for electronic searches or termination
 Notices can be amended by registering an notices.
amendment notice.  Additional services may have fees.
 Grantor authorization is required for certain
amendments. Section 39. Grantor's Demand for Notice
Amendment or Termination
Section 33. Continuation of Notice  Grantors can demand notice amendment or
 Notice can be continued by registering a termination under certain conditions.
continuation notice before expiry.
Section 40. Matters That May be Required by
Section 34. Termination of Notice Demand
 Notice can be terminated by registering a  Secured creditors must register amendments
termination notice. or terminations within 15 working days of
receiving a demand.
Section 35. Registry Duties
(a) Upon registration of a notice, the Registry Section 41. Procedure for Noncompliance with
must: Demand
1. Allocate a unique registration number.  If secured creditors fail to comply with
2. Create a record indicating the demands, court orders can be sought for
assigned number and the registration amendment or termination.
date and time.
3. Maintain this record for public access. Section 42. Compulsory Amendment or
(b) Notices shall be categorized by the grantor's Termination by Court Order
identification number and, for motor vehicle
 Courts can order notice amendment or
notices, by serial number.
termination upon grantor application.
(c) The Registry is obligated to furnish the
 The Land Registration Authority (LRA) must
submitter with an electronic copy of the notice
comply with court orders.
record, inclusive of registration details.
(d) Retrieval capability shall be maintained using
Section 43. No Fee for Compliance of Demand
the grantor's identification number and the
 Secured creditors can't charge fees for
motor vehicle's serial number.
complying with demands.
(e) Records of lapsed notices shall be retained for
ten years following their lapse.
Section 44. Penalties for Misuse of Registry
(f) Registry responsibilities are purely
 Misusing the Registry for frivolous, malicious,
administrative. The act of registering or
or criminal purposes carries civil and criminal
rejecting a notice doesn't validate, verify, or
penalties.
assess the contents' accuracy or sufficiency.
 CHAPTER 6 (b) Even if a different method or time
ENFORCEMENT OF SECURITY INTEREST could yield better results, it doesn't
SECURED CREDITOR’S RIGHTS render the disposition unreasonable.
(c) Court-approved methods are deemed
Section 45. Right of Redemption commercially reasonable.
(a) Anyone entitled to receive a notification of
disposition has the right to redeem the Section 51. Notification of Disposition:
collateral by settling the secured obligation  The creditor must notify specified parties ten
entirely, including enforcement costs. days before disposition.
(b) This right exists unless the entitled party has  Grantors may waive notification rights.
waived it in writing after the default, the  Notification should identify parties, describe
collateral has been disposed of by the creditor, the collateral, and detail the intended
or the creditor has retained the collateral. disposition.
 Notification isn't required for perishable or
Section 46. Right of Higher-Ranking Secured rapidly declining assets or those traded on
Creditor to Take Over Enforcement: recognized markets.
(a) A higher-ranking secured creditor may take
over enforcement even if another creditor has Section 52. Application of Proceeds:
begun it, provided it has priority.  Proceeds are applied to expenses, the
(b) This right can be exercised before the enforcing creditor's obligation, and then
collateral is disposed of or retained by the subordinate interests.
creditor.  Any surplus must be returned to the grantor,
(c) The higher-ranking creditor can enforce its while the debtor is liable for any deficiency
rights using any method available under the unless agreed otherwise.
law.
CHAPTER 7
Section 47. Expedited Repossession of the TRANSITIONAL PROVISIONS
Collateral
(a) The creditor can take possession without legal Section 55. Interpretation of Transitional Provision
action if the agreement allows and without For this Chapter, unless the context otherwise
causing disturbance. requires:
(b) For fixtures, if the creditor has priority, it can (a) Existing secured creditor – means a secured
remove them from the property without legal creditor with a prior security interest;
action. (b) Prior law – means any law that existed or in
(c) If peaceful repossession isn't possible, the force before the effectivity of this Act;
creditor may seek a court order promptly, (c) Prior interest – means a security interest
following specified procedures. created or provided for by an agreement or
other transaction that was made or entered
Section 48. Recovery in Special Cases: into before the effectivity of this Act and that
Upon default, the creditor may: had not been terminated before the effectivity
(a) Instruct debtors to pay directly to them and of this Act, but excludes a security interest that
apply it to the secured obligation. is renewed or extended by a security
(b) Proceed with negotiable documents or goods. agreement or other transaction made or
(c) Apply deposits in their accounts to the secured entered into on or after the effectivity of this
obligation. Act; and
(d) Instruct institutions to transfer the deposit (d) Transitional period - means the period from the
balance to them in specific cases. date of effectivity of this Act until the date
when the Registry has been established and
Section 49. Right to Dispose of Collateral operational.
(a) After default, the creditor can sell or dispose of
the collateral publicly or privately.
(b) Buying collateral at public sale is permitted but
must align with market practices.

Section 50. Commercial Reasonableness Required:

(a) Disposal must be commercially Section 56. Creation of Prior Interest
reasonable and conform to industry
 Creation of prior interest shall be determined
practices.
by prior laws.
  A prior interest remains effective between the (b) For purposes of subsection (a)(2) of
parties notwithstanding its creation did not this section, the priority status of a
comply with the creation requirements of this prior interest has changed only if:
Act. (1) It was perfected when this Act
took effect, but ceased to be
Section 57. Perfection of Prior Interest.— perfected; or
(a) A prior interest that was perfected (2) It was not perfected under
under prior law continues to be prior law when this Act took
perfected under this Act until the effect, and was only perfected
earlier of: under this Act.
(1) The time the prior interest
would cease to be perfected Section 59. Enforcement of Prior Interest.
under prior law; and  If any step or action has been taken to enforce
(2) The expiration of the a prior interest before the effectivity of this Act,
transitional period. enforcement may continue under prior law or
(b) If the perfection requirements of this may proceed under this Act.
Act are satisfied before the perfection  Subject to subsection (a) of this section, prior
of a prior interest ceases in law shall apply to a matter that is the subject of
accordance with subsection (a) of this proceedings before a court before the
section, the prior interest continues to effectivity of this Act.
be perfected under this Act from the
time when it was perfected under the CHAPTER 8
prior law. CONGRESSIONAL OVERSIGHT AND
(c) If the perfection requirements of this MISCELLANEOUS PROVISIONS
Act are not satisfied before the
perfection of a prior interest ceases in Section 60. Congressional Oversight and Periodic
accordance with subsection (a) of this Review:
section, the prior interest is perfected A Congressional Oversight Committee, composed of
only from the time it is perfected under relevant congressional committee members, shall
this Act. conduct a review every five years starting from this
(d) A written agreement between a Act's effectivity.
grantor and a secured creditor
creating a prior interest is sufficient to Section 61. Interpretation:
constitute authorization by the grantor In case of conflict between this Act and another law,
of the registration of a notice covering this Act prevails unless the other law specifically
assets described in that agreement addresses or alters the conflicting provisions.
under this Act.
(e) If a prior interest referred to in Section 62. Implementing Rules and Regulations:
subsection (b) of this section was Within six months of this Act's passage, the DOF, with
perfected by the registration of a the Department of Justice's coordination through the
notice under prior law, the time of LRA, shall issue rules for effective implementation.
registration under the prior law shall
be the time to be used for purposes of Section 63. Rules on Enforcement Procedure:
applying the priority rules of this Act. Proceedings, subject to Section 47, shall be conducted
promptly and in line with this Act's policies, following
Section 58. Priority of Prior Interest. Supreme Court procedural rules.
(a) The priority of a prior interest as
against the rights of a competing Section 64. Sourcing of Funds:
claimant is determined by the prior law Funds for this Act's implementation shall come from
if: the LRA's Special Account without further government
(1) The security interest and the approval.
rights of all competing
claimant arose before the
effectivity of this Act; and
(2) The priority status of these Section 65. Separability Clause:
rights has not changed If any provision is declared unconstitutional, other parts
since the effectivity of this of this Act remain valid.
Act.
Section 66. Repealing Clause:
This Act repeals or amends inconsistent laws,
including sections of various acts and decrees.

Section 67. Effectivity:

This Act takes effect fifteen days after publication in
two newspapers of general circulation.

Section 68. Implementation:

Despite enactment, implementation is contingent upon
the Registry's establishment and operation.