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installment amounts with or without

Republic Act No. 9829 interest or insurance coverage and


includes life, pension, education,
AN ACT ESTABLISHING THE PRE-NEED interment and other plans, instruments
CODE OF THE PHILlPPlNES contracts or deeds as may in the future he
determined by the Commission.
Be it enacted by the Senate and House of
Representatives of the Philippines in (c) "Pre-need company" refers to any
Congress assembled: corporation registered with the
Commission and authorized/licensed to
CHAPTER I sell or offer to sell pre-need plans. The
GENERAL PROVISIONS term "pre-need company" also refers to
schools, memorial chapels, banks,
Section 1. Title. - This Act shall be known nonbank financial institutions and other
as the "Pre-need Code of the Philippines". entities which have also been
authorized/licensed to sell or offer to sell
Section 2. Declaration of Policy. - It is the pre-need plans insofar as their pre-need
policy of the State to regulate the activities or business are concerned.
establishment of pre-need companies and
to place their operation on sound, efficient (d) "Planholder" refers to any natural or
and stable basis to derive the optimum juridical person who purchases pre-need
advantage from them in the mobilization plans from a pre-need company for whom
of savings and to prevent and mitigate, as or for whose beneficiaries' benefits are to
far as practicable, practices prejudicial to be delivered, as stipulated and
public interest and the protection of guaranteed by the pre-need company. The
planholders. term includes the assignee, transferee and
any successor - in - interest of the
The State shall hereby regulate, through planholder.
an empowered agency, pre-need
companies based on prudential principles (e) "Beneficiary" refers to the person
to promote soundness, stability and designated by the planholder as the
sustainable growth of the pre-need recipient of the benefits in the pre-need
industry. plan.

Section 3. Construction. - Any doubt in the (f) "Contract price" refers to the stipulated
interpretation and implementation of any price in the pre-need plan.
provision in this Code shall be interpreted
in favor of the rights and interests of the (g) "Benefits" refers to the payment of
planholder. monetary considerations and/or
performance of future services which the
Section 4. Definition of Terms. - Whenever pre-need company undertakes to deliver
used in this Code, the following terms shall either to the planholder or his beneficiary
have their respective. meanings; at the time of actual need or agreed
maturity date, as specified in the_ pre-
(a) "Commission" "refers to the Insurance need plan.
Commission.
(h) "Sales counselors" refers to natural
(b) "Pre-need plans" are contracts, persons who are engaged in the sale of, or
agreements, deeds or plans for the benefit offer to sell, or counsel of prospective
of the planholders which provide for the planholders for the purpose of selling,
performance of future service/s, payment whether or not on commission basis, pre-
of monetary considerations or delivery of need plans upon the authority of the pre-
other benefits at the time of actual need need company.
or agreed maturity date, as specified
therein, in exchange for cash or
(i) "Affiliate of, or affiliated with, a contract, counted from the expiry of the
specified person" refers to a person that grace period provided for in the plan or
directly or indirectly, through one (1) or contract.1avvphi1
more intermediaries, controls, or is
controlled by, or is under common control (q) "Scheduled benefit plans" refers to
with, the person specified. Exercising plans the date of availment of the benefits
control over a legal entity shall mean any of which is set at the inception or
one of the following; (1) owning either purchase of the plan.
solely or together with affiliated persons
more than twenty - five percent (25%) of (r) "Contingent benefit plans" refers to
the outstanding capital stock of a legal plans the timing of the provision of the
entity; and (2) being an officer or director benefits of which is conditional on the
of such legal entity. occurrence of the contingency.

(j) "Trust fund" refers to a fund set up from (s) "Risk - based capital" refers to a
the planholders' payments to pay for the method to measure the minimum amount
cost of benefits and services, termination of capital that a pre-need company needs
values payable to planholders and other to support its overall business operation. It
costs necessary to ensure the delivery of is used to set capital requirements,
benefits or services to planholders as considering the size and degree of risk
provided for in the contracts. taken by the pre-need company.

(k) "Pre-need reserve liabilities" refers to (t) "BSP" refers to "Bangko Sentral ng
the measure of the liabilities of the pre- Pllipinas".
need company for its in - force plans or
lapsed plans as of valuation date. The terms not otherwise defined under
this Code shall be construed in their usual
(l) "Liquidity reserve" refers to a portion of and commonly understood trade,
the trust fund set aside by the trustee to business, commercial or investment
cover benefits due to planholders for the meaning.
ensuing year.
CHAPTER II
(m) "Fixed value plans" refers to pre-need AUTHORITY OF THE COMMISSION
plans whose 'benefits and costs are fixed
and predetermined at the inception or Section 5. Supervision. - All pre-need
purchase of the plan. companies, as defined under this Act, shall
be under the primary and exclusive
(n) "In - force plan" refers to a plan for supervision and regulation of the
which the pre-need company has an Insurance Commission. The Commission is
outstanding obligation for the delivery of hereby authorized to provide for its
benefits or services or payment of reorganization, to streamline its structure
termination value. and operations, upgrade its human
resource component to enable it to
(o) "Lapsed plan" refers to a plan that is effectively and efficiently perform its
delinquent in payment of installments functions and exercise its powers under
provided for in the contract, the this Code.
delinquency, of which extends beyond the
grace period provided for in the plan or All - positions of the - Commission shall be
contract. governed by compensation and position
classification systems and qualification
(p) "Cancelled plan" refers to a plan that standards approved by the Commission
can no longer be reinstated by reason of based on a comprehensive job analysis
delinquency in the payment of and audit of actual duties and
installments for more than two (2) years or responsibilities. The compensation plan
a longer period as provided in the shall be comparable with the prevailing
compensation plan in the Bangko Sentral (1) Revoking or nullifying investments
ng Pilipinas (BSP) and other government made and/or entered into by a - pre-need
financial institutions and shall be subject company or a trustee which are contrary
to periodic review by the Commission no to existing laws, rules and regulations;
more than once every two (2) years
without prejudice to yearly merit reviews (2) Demanding for the conversion of the
or increases based on productivity and investments made by the trustee to cash
efficiency. The Commission shall, or other liquid assets to protect the
therefore, be exempt from laws, rules and interest of the planholders; and
regulations on compensation, position
classification and qualification standards. (3) Regulating, investigating or
The Commission shall, however, endeavor supervising activities of pre-need
to make its system conform as closely as companies, their officers, employees,
possible with the principles under the sales counselors, consultants or agents;
Compensation and Position Classification
Act of 1989 (Republic Act No. 6758, as (d) Issue cease and desist orders to
amended). prevent fraud and injury to the investing
public;
The salary and allowances or personal
services expense of the employees of the (e) Issue subpoena duces tecum and ad
Insurance Commission shall be sourced testificandum, order the examination,
from the retained amount of the fees, search and seizure of documents, papers,
charges and other income derived from files, tax returns, books of accounts and
the regulation of pre-need companies and other records, in whatever form, of any
from the Insurance Fund under Section entity or person under investigation;
418 of the Insurance Code of the
Philippines (Presidential Decree No. 612, (f) Punish for contempt of the Commission,
as amended) and Section 286 of the both direct and indirect, in accordance
National Internal Revenue Code. If the with the pertinent provisions of and
personal services expense cannot be penalties prescribed by the Rules of Court;
covered by the retained amount and the
Insurance Fund, it shall be appropriated in (g) Impose sanctions, institute cases
the General Appropriations Fund. and/or prosecute offenders for violation of
this Code, related laws, rules, regulations
Section 6. Powers and Functions of the and orders issued pursuant thereto;
Commission. - The Commission shall, at all
times, act with transparency and dispatch (h) Suspend or revoke licenseslawph!l
and shall have, among others, the
following powers and functions; (i) Enlist the aid and support of and/or
deputize any and all enforcement
(a) Approve, amend, renew or deny any agencies of the government in the
license, registration or certificate issued implementation of its powers and in the
under this Code; exercise of its functions under this Code;

(b) Fix and assess fees and/or charges as (j) Take over pre-need companies which
it may find reasonable in the exercise of fail to comply with this Code, related laws,
regulation; rules, regulations and orders issued
pursuant thereto, either through the
(c) Regulate, supervise and monitor the appointment of a conservator, receiver or
operations and management of pre-need liquidator;
companies to ensure compliance with the
provisions of this Code, existing laws, rules (k) Prepare, approve, amend or repeal
and regulations including, but not limited rules, regulations and orders, and issue
to: opinions and provide guidance on and
supervise compliance with such rules, companies shall comply with the following
regulations and orders; minimum unimpaired paid - up capital:

(l) Formulate policies and (a) One Hundred million pesos (P100,
recommendations on issues concerning 000,000.00) for companies selling at least
the pre-need industry, including proposed three(3) types of plan;
legislations;
(b) Seventy - five million pesos (P75,
(m) Retain and utilize, in addition to its 000,000.00) for companies selling two (2)
annual budget, an amount up to One types of plan; and
hundred million pesos (Pl00, 000,000.00)
of the fees, charges and other income (c) Fifty million pesos (P50, 000,000.00)
derived from the regulation of the pre- for companies selling a single type of
need companies; and plan.1avvphi1

(n) Exercise such other powers as may be Existing pre-need companies with
provided by law as well as those which traditional education plans shall have a
may be implied from, or which are minimum unimpaired paid-up capital of
necessary or incidental to carry out the One hundred million pesos (P100,
express powers granted the Commission 000,000.00)
to achieve the objectives and purposes of
the law. The Commission may adopt risk - based
principles on capital adequacy based on
CHAPTER III internationally accepted standards. In the
ORGANIZATION, LICENSING AND exercise of its authority under this
MANAGEMENT OF PRE-NEED COMPANIES paragraph, the Commission may prescribe
a higher minimum unimpaired paid - up
Section 7. Prerequisites to Incorporation. - capital for pre-need companies.
Except upon favorable recommendation of
the Commission, the Securities and Section 10. Licensing of Pre-need
Exchange Commission (SEC) shall not Companies. No person shall operate as a
accept or approve the articles of pre-need company or engage in the
incorporation and bylaws of any pre-need business of a pre-need company unless
company. licensed by the Commission in accordance
with this Code.
A foreign corporation may be allowed to
engage in a pre-need business in the The license under this section shall expire
Philippines: Provided, That it shall comply one (1) year from the time of the
with the pertinent laws, rules and registration. It may be renewed upon
regulations. compliance with the prescribed
requirements of the Commission. Such
Section 8. Amendment of the Articles of renewal shall be deemed approved if not
Incorporation and Bylaws. - Amendments acted upon within thirty (30) days from
to the articles of incorporation and bylaws the time of filing of the application for
of a pre-need company, including merger, renewal.
consolidation and dissolution, shall not be
approved by the SEC without the favorable Section 11. Qualification and
recommendation from the Commission. Disqualification of Directors and Officers. -
To maintain the quality of management of
Section 9. Paid-up Capital. - A pre-need pre-need companies and afford better
company incorporated after the effectivity protection to planholders and
of this Code shall have a minimum paid - beneficiaries, the Commission shall
up capital of One hundred million pesos prescribe, pass upon and review the
(P100, 000,000.00). Existing pre-need qualifications and disqualifications of
individuals elected or appointed directors
or officers of pre-need companies,
including its actuaries, and disqualify Section 12. Independent Directors. Pre-
those found unfit. The Commission may need companies shall have at least two (2)
disqualify, suspend or remove any director independent directors or twenty percent
or officer who commits or omits an act (20%) of the members of the board,
which renders him unfit for the position. whichever is higher. For this purpose an
"independent director" shall refer to a
In determining whether an individual is fit person other than an officer, employee or
and proper to hold the position of a any person having a fiduciary relation to
director or officer of a pre-need company, the pre-need company, its parent or
regard shall be given to his integrity, subsidiaries, or any other individual
experience, education, training and having a relationship therewith, which
competence. The following persons, and may interfere with the exercise of
those determined by the Commission to independent judgment in carrying out the
be unfit, shall in no case be allowed to responsibilities of a director.
serve or act in the capacity of an officer,
employee, director, consultant or sales Section 13. Investment Restrictions of
counselor of any pre-need company: Directors and Officers. No director or
officer of any pre-need company shall,
(a) Any person convicted of any crime after his election or appointment as such,
involving any pre-need plan, security or directly or indirectly, for himself or as the
financial product; representatives or agent of others, have
an investment in excess of Five million
(b) Any person convicted of an offense pesos (P5, 000,000.00) in any corporation
involving moral turpitude or involving or business undertaking in which the pre-
fraud or embezzlement, theft, estafa or need companys trust fund has an
other fraudulent acts or transactions; investment in or has a financial interest
with. No relatives of directors or officers of
(c) Any person who, by reason of any the pre-need company within the fourth
misconduct, is enjoined by order, degree of consanguinity or affinity shall,
judgment or decree by any court, quasi - directly or indirectly, have an investment
judicial body or administrative agency of of more than Five million pesos (P5,
competent jurisdiction from acting as a 000,000.00) in any corporation or business
director, officer, employee, consultant, undertaking in which the pre-need
agent or occupying any fiduciary position; companys trust fund has an investment in
or has a financial interest with during the
(d) Any person found by the Commission incumbency or term of the director or
to have willfully violated or willfully aided, officer involved.
abetted, counseled, commanded, induced
or procured the violation of this Code, the CHAPTER IV
Insurance Code, the Securities Regulation REGISTRATION OF PRE-NEED PLANS
Code or any related laws and any rules or
orders thereunder; Section 14. Registration of Pre-need
Contracts/Plans. Within a period of forty -
(e) Any person judicially declared to be five (45) days after the grant of a license
insolvent or incapacitated to contract; and to do business as a pre-need company,
and for every pre-need plan which the pre-
(f) Any person found guilty by a foreign need company intends to offer for sale to
court, regulatory authority or government the public, the pre-need company shall file
agency of the acts or violations similar to with the Commission a registration
any of the acts or misconduct enumerated statement for the sale of pre-need plans
in the foregoing paragraphs: Provided, pursuant to this Code. The Commission
That conviction in the first instance shall shall promulgate rules governing the
be considered as sufficient ground for registration of pre-need plans and the
disqualification. required documents which include, among
others, the viability study with shall at the same time be a stockholder or
certification, under oath, of a pre-need serve as a director of the board, chief
brochure, a copy of the pre-need plan, and executive officer or chief financial officer
information and documents necessary to of the company or any such position that
ensure the protection of planholders and the Commission may determine to have
the general public. Said rules shall further an inherent conflict of interest to the
set forth the conditions under which such position of an actuary.
registration may be denied revoked,
suspended or withdrawn, and the Section 17. Approval of Contract Forms. All
remedies of pre-need companies in such forms, including amendments thereto,
instances. relating to the pre-need plans shall be
approved by the Commission. No pre-need
Section 15. Registration Requirements. contracts or certificates shall be issued or
The Commission shall set forth the delivered within the Philippines unless in
requirements for registration of pre-need the form previously approved by the
plans and shall require the following Commission.
documents, among others;
Section 18. Pre-need Advertising Rules. -
(a) Duly accomplished Registration Pre-need plans shall be advertised and
Statements; sold in an appropriate non - misleading
manner in accordance with the rules to be
(b) Board resolution authorizing the prescribed by the Commission.
registration of applicants pre-need plans;
It shall be unlawful for any pre-need
(c) Opinion of independent counsel on the company to advertise itself or its pre-need
legality of the issue; plans unless the Commission has
approved such advertising material. The
(d) Audited financial statements; Commission shall have a period of ten (10)
working days to approve or deny the
(e) Viability study with certification, under advertising material and failure to act
oath, of pre-need actuary accredited by within the said period shall cause the
the Commission; advertising material to be approved. For
purposes hereof, the Commission shall
(f) Copy of the proposed pre-need plan; have the power to define the scope of its
and advertising rules to appropriately cover
advertising or other communications to
(g) Sample of sales materials. the public.

Such registration statements and sales Any person who sells or offers to sell any
materials required under this section shall pre-need plan or contract by any means or
contain the appropriate risk factors as instruments of communication in violation
may be determined by the Commission. of this section shall be liable to the person
purchasing such pre-need contract who
Section 16. Accreditation of Actuary. - The may sue to recover the consideration paid
Commission shall have the power to set for such pre-need contract with interest
standards for the accreditation of thereon. In addition hereto, the
actuaries directly responsible for the Commission shall have the power to
preparation and certification of the pursue the erring pre-need company in an
viability study of the pre-need plan administrative or criminal proceeding.
submitted by the pre-need company for
registration or amendment with the A fine of One hundred thousand pesos
Commission. It shall further have the (P100, 000,000.00) shall be imposed on
power to define the obligations and any pre-need company found to have
liabilities of actuaries accredited by it. No violated this section: Provided, That a
actuary engaged by a pre-need company second violation of this section shall, in
addition to the fine imposed, result in the Commission and may be accordingly
suspension of the license of the pre-need renewed.
company.
Section 21. Denial, Suspension,
Section 19. Disclosures to Prospective Revocation of License. - An application for
Planholders. - No registered pre-need plan the issuance or renewal of a license to act
shall be sold to prospective planholders as sales counselor may be denied, or such
unless an information brochure, which has license, if already issued, shall be
been filed with the Commission, has been suspended or revoked based on the
provided to the purchaser. The information following grounds:
brochure shall contain an explanation of
the principal features of the pre-need plan, (a) Materially misrepresented statements
a statement that the planholder may avail in the application requirements;
of a default or reinstatement period within
which to reinstate his lapsed plan, and the (b) Obtained or attempted to obtain a
conditions of the same and the rates of license by fraud or misrepresentation;
return for scheduled benefit plans and
illustrative yields for contingent benefit (c) Materially misrepresented the terms
plans; and such other information that the and conditions of pre-need plan which he
Commission shall require by rule. sold or offered to sell;

CHAPTER V (d) Solicited, sold or attempted to solicit or


LICENSING OF SALES COUNSELORS AND sell a pre-need plan by means of false or
GENERAL AGENTS misleading representation and other
fraudulent means;
Section 20. Licensing of Sales Counselors.
- No sales counselor shall be allowed to (e) Terminated for cause from another pre-
solicit, sell or offer to sell pre-need plans need company;
under this Code without being licensed as
such by the Commission. No license shall (f) Similar grounds found in Section II of
be issued unless the following this Code;
qualifications have been complied with:
(g) Willfully allowing the use of one's
(a) The applicant must be of good moral license by a non - licensed or barred
character and must not have been individual; and
convicted of any crime involving moral
turpitude; (h) Analogous circumstances.

(b) The applicant has undergone a training Section 22. Licensing of General Agents. -
program approved by the Commission and If the issuer should contract the services
such fact has been certified under oath by of a general agent to undertake the sales
a duly authorized representative of a pre- of its plans, such general agent shall be
need company; and required to be licensed as such with the
Commission, in accordance with the
(c) The applicant has passed a written requirements imposed by the Commission.
examination administered by the.
Commission: Provided, That the CHAPTER VI
administration of the examination may be DEFAULT AND TERMINATION BY
delegated to an independent organization PLANHOLDERS
under the supervision of the Commission.
Section 23. Default; Reinstatement Period.
Such license shall automatically expire - The pre-need company must provide in
every thirtieth (30th) day of June or such all contracts issued to planholders a grace
date of every year as may be fixed by the period of at least sixty (60) days within
which to pay accrued installments,
counted from the due date of the first by its plans nor shall any such company
unpaid installment. Nonpayment of a plan engage in unfair claim settlement
within the grace period shall render the practices. Any of the following acts by a
plan a lapsed plan. Any payment by the pre-need company, if committed without
planholder after the grace period shall be just cause, shall constitute unfair claims
reimbursed forthwith, unless the settlement practices:
planholder duly reinstates the plan. The
planholder shall be allowed a period of not (1) Knowingly misrepresenting to
less than two (2) years from the lapse of claimants pertinent facts or plan
the grace period or a longer period as provisions relating to coverages at issue;
provided in the contract within which to
reinstate his plan. No cancellation of plans (2) Failing to acknowledge with reasonable
shall be made by the issuer during such promptness pertinent communications
period when reinstatement may be with respect to claims arising under its
effected. plan;

Within thirty (30) days from the expiration (3) Failing to adopt and implement
of the grace period and within thirty (30) reasonable standards for the prompt
days from the expiration of the investigation of claims arising under its
reinstatement period, which is two (2) plan;
years from the lapse of the grace period,
the pre-need company shall give written (4) Failing to provide prompt, fair and
notice to the planholder that his plan will equitable settlement of claims submitted
be cancelled if not reinstated within two in which liability has become reasonably
(2) years. Failure to give either of the clear; or
required notices shall preclude the pre-
need company from treating the plans as (5) Compelling planholders to institute
cancelled. suits or recover amounts due under its
plan by offering, without justifiable reason,
Section 24. Termination of Pre-need Plans. substantially less than the amounts
- A planholder may terminate his pre-need ultimately recovered in suits brought by
plan at any time by giving written notice them.
to the issuer.
(b) Evidence as to the number and types
A pre-need plan shall contain a schedule of valid and justifiable complaints to the
of termination values to which the Commission against a pre-need company
planholder is entitled to upon termination. shall be deemed admissible in an
Such schedule of termination value shall administrative or judicial proceeding
be required for all in - force pre-need plans brought under this section.
and shall be fair, equitable and in
compliance with the Commission (c) Any violation of this section shall be
issuances. The termination value of the considered sufficient cause for the
pre-need plan shall be predetermined by suspension or revocation of the company's
the actuary of the pre-need company upon certificate of authority.
application for registration of the pre-need
plans with the Commission and shall be Section 26. Payment of Plan Proceeds. - In
disclosed in the contract. the case of scheduled benefit plans, the
proceeds of the plan shall be paid
CHAPTER VII immediately upon maturity of the
CLAIMS SETTLEMENT contract, unless such proceeds are made
payable in installments or as an annuity,
Section 25. Unfair Claims Settlement in which case the installments or annuities
Practices. - (a) No pre-need company shall shall be paid as they become due. Refusal
refuse, without just cause, to pay or settle or failure to pay the claim within fifteen
claims arising under coverages provided (15) days from maturity or due date will
entitle the beneficiary to collect interest
on the proceeds of the plan for the (a) One hundred percent (100%) of the
duration of the delay at the rate twice the capital stock;
legal interest unless such failure or refusal
to pay is based on the ground that the (b) An amount sufficient to pay all net
claim is fraudulent: Provided, That the losses reported, or in the course of
planholder has duly complied with the settlement, and all liabilities for expenses
documentary requirements of the pre- and taxes; and
need company.
(c) Trust fund.
In the case of contingent benefit plans, the
benefits shall be paid by the pre-need Any dividend declared under the
company thirty (30) days upon submission preceding paragraph shall be reported to
of all necessary documents. the Commission within thirty (30) days
after such declaration.
Section 27. Recovery of Investment. The
planholder may institute the necessary CHAPTER VIII
legal action in court to recover his/her TRUST FUND
investment in the pre-need company thirty
(30) days upon submission of all Section 30. Trust Fund. - To ensure the
necessary documents. delivery of the guaranteed benefits and
services provided under a pre-need plan
However, in case the insolvency or contract, a trust fund per pre-need plan
bankruptcy is a mere cover - up for fraud category shall be established. A portion of
or illegality, the planholder may institute the installment payment collected shall be
the legal action directly against the deposited by the pre-need company in the
officers and/or controlling owners of the trust fund, the amount of which will be as
said pre-need company. determined by the actuary based on the
viability study of the pre-need plan
Section 28. Consequences of Delay or approved by the Commission. Assets in
Default. In case of any litigation for the the trust fund shall at all times remain for
enforcement of any pre-need plan, it shall the sole benefit of the planholders. At no
be the duty of the Commission to time shall any part of the trust fund be
determine whether the payment of the used for or diverted to any purpose other
claim of the planholder has been than for the exclusive benefit of the
unreasonably denied or withheld. If found planholders. In no case shall the trust fund
to have unreasonably denied or withheld assets be used to satisfy claims of other
the claim, the pre-need company shall be creditors of the pre-need company. The
liable to pay damages, consisting of actual provision of any law to the contrary
damages, attorneys fees and legal notwithstanding, in case of insolvency of
interest, to be computed from the date the the pre-need company, the general
claim is made until it is fully satisfied: creditors shall not be entitled to the trust
Provided, That the failure to pay any such fund.
claim within the time prescribed in Section
26 hereof shall be considered prima facie Except for the payment of the cost of
evidence of unreasonable delay in benefits or services, the termination
payment. values payable to the planholders, the
insurance premium payments for
Section 29. Distribution of Profits. A pre- insurance - funded benefits of memorial
need company may declare divided: life plans and other costs necessary to
Provided, That the following shall remain ensure the delivery of benefits or services
unimpaired, as certified under oath by the to planholders, no withdrawal shall be
president and the treasurer with respect to made from the trust fund unless approved
items (a) and (b); and in the case of item by the Commission. The benefits received
(c), by the trust officer: by the planholders shall be exempt from
all taxes and the trust fund shall not be trust fund deposit shall subject the pre-
held liable for attachment, garnishment, need company to administrative liability
levy or seizure by or under any legal or as provided for under this Code.
equitable processes except to pay for the
debt of the planholder to the benefit plan (c) Should the Commission discover a
or that arising from criminal liability deficiency in the trust fund, it shall give
imposed in a criminal action. notice of the same to the pre-need
company and require the said company to
The trust fund shall at all times be make additional deposits. The pre-need
sufficient to cover the required pre-need company shall have thirty (30) days from
reserve. receipt of notice to make the said deposits
and correct the deficiency. Failure to pay
Section 31. Deposits to the Trust Fund. (a) the deficiency inspite of notice by the
The pre-need company shall make Commission shall subject the pre-need
monthly deposits to the trust fund in an company to the payment of a penalty, in
amount determined by the accredited addition to other sanctions imposable
actuary, sufficient to pay the benefits under this Code.
promised under the contract. For plans
paid for in full, the pre-need company shall (d) For plans sold prior to the effectivity of
deposit into the trust fund at least forty - this law, the minimum contributions to the
five percent (45%) for life plans and fifty - trust fund shall be governed by rules and
one percent (51%) for education and regulations in force at the time of sale.
pension plans of said full payment or such
higher amount as determine by the Section 32. Terms and Conditions of a
actuary. Trust Fund. - A trust fund must be
established separately for each type of
In case of installment payments, the pre-need plan with the trust department of
minimum limits of the deposit a trust company, bank or investment
contributions to the trust fund, unless the house doing business in the Philippines.
viability study done by the actuary No trust fund shall be established by a
requires otherwise, shall be in accordance pre-need company with an affiliate trust
with the following schedule: entity subject to Section 38 hereof.
Life Plans Other Plans
Collection of the 1st 20% of Contract Price The trust agreement shall be submitted to
5% 5% the Commission for approval before
Collection of the 2nd 20% of Contract execution and shall contain the following
Price 10% 10% salient provisions, among others:
Collection of the 3rd 20% of Contract Price
70% 80% (a) The manner in which the trust fund is
Collection of the 4th 20% of Contract Price to be operated;
70% 80%
Collection of the 5th 20% of Contract Price (b) Investment powers of the trustee with
70% 80% respect to trust deposits, including the
character and kind of investment;
Contributions to the trust fund shall not
form part of the income or gross receipts (c) Auditing and settlement of accounts of
of the pre-need company and, therefore, the trustee with respect to the trust fund;
shall not be available for dividend
declaration or payment to creditors. (d) Basis upon which the trust fund may
be terminated;
(b) The deposits to the trust fund shall be
made within twenty (20) days from the (e) Provisions for withdrawals from the
end of each reference month for payments trust fund;
received from plans whether paid for in
full or in installments. Failure to make the
(f) That the trustee shall submit to the (a) Fixed income instruments. - These may
power of the Commission to examine and be classified into short - term and long -
verify the trust fund; term instruments. The instrument is short
- term if the maturity period is three
(g) An undertaking by the trustee that it hundred sixty - five (365) days or less.
shall abide by the rules and regulations of This category includes:
the Commission with respect to the trust
fund; and (1) Government securities which shall not
be less than ten percent (10%) of the trust
(h) An undertaking by the trustee that it fund amount;
shall submit such other data or
information as may be prescribed by the (2) Savings/time deposits and unit
Commission. investment trust funds maintained with
and managed by a duly authorized bank
Section 33. Responsibilities of the Trustee. with satisfactory examination rating as of
- The trustee shall: the last examination by the BSP;

(a) Administer and manage the trust fund (3) Commercial papers duly registered
with utmost good faith, care and prudence with the SEC with a credit rating of "1" for
required by a fiduciary relationship; short - term and "A.AA" for long - term
based on the rating scale of an accredited
(b) The trustee shall have the exclusive Philippine Rating Agency or its equivalent
management and control over the funds at the time of investment.
and the right at any time to sell, convert,
invest, change, transfer or otherwise The maximum exposure to long - term
change or dispose of the assets commercial papers shall not exceed
comprising the funds within the fifteen percent (15%) of the total trust
parameters prescribed, by the pre-need fund amount while the exposure to each
company and provided these parameters commercial paper issuer shall not exceed
are compliant with the Commission's ten percent (10%) of the allocated
regulations; and amount; and

(c) Not use the trust fund to invest in or (4) Direct loans to corporations which are
extend any loan or credit accommodation financially stable, profitable for the last
to the pre-need company, its directors, three (3) years and have a good track
officers, stockholders, and related record of paying their previous loans.
interests as well as to persons or
enterprises controlling, owned or These loans shall be fully secured by a real
controlled by, or under common control estate mortgage up to the extent of sixty
with said company, its directors, officers, percent (60%) of the zonal valuation of the
stockholders and related interests except property at the time the loan was granted.
for entities which are direct providers of
pre-need companies. The property shall be covered by a
transfer certificate of title registered in the
Section 34. Investment of the Trust Fund. - name of the mortgagor and free from liens
To ensure the liquidity of the trust fund to and encumbrances.
guarantee the delivery of the benefits
provided for under the plan contract and The maximum amount to be allocated for
likewise obtain sufficient capital growth to direct loans shall not exceed five percent
meet the growing actuarial reserve (5%) of the total trust fund amount while
liabilities, all investments of the trust the amount to be granted to each
fund/s of a pre-need company shall be corporate borrower shall not exceed ten
limited to the following and subject to percent (10%) of the amount allocated.
limitations, to wit:
The maximum term of the loan should be the name of the trustee in trust for the
no longer than four (4) years. planholders unless the seller/transferor is
the pre-need company wherein an
Direct loans to planholders are exempt annotation to the TCT relative to the
from the limitations set forth under this sale/transfer may be allowed. It shall be
section: Provided, That such loans to recorded at acquisition cost.
planholders shall not exceed ten percent
(10%) of the total trust fund amount. However, the real estate shall be
appraised every three (3) years by a
(b) Equities. - Investments in equities shall licensed real estate appraiser, accredited
be limited to stocks listed on the main by the Philippine Association of Real
board of a local stock exchange. Estate Appraisers, to reflect the increase
or decrease in the value of the property. In
Investments in duly registered collective case the appraisal would result in an
investment instruments such as mutual increase in the value, only sixty percent
funds are allowed hereunder: Provided, (60%) of the appraisal increase is allowed
That such funds are invested only in fixed to be recorded in the books of the trust
income instruments and blue chips fund but in case of decline in value, the
securities, subject to the limitations entire decline shall be recorded. Appraisal
prescribed by laws, rules and regulations. increment should not be used to cover up
the required monthly contribution to the
These investments shall include stocks trust fund.
issued by companies that are financially
stable, actively traded, possess good track The total recorded value of the real estate
record of growth and have declared investment shall not exceed ten percent
dividends for the past three (3) years. (10%) of the total trust fund amount of the
Notwithstanding the prohibition against pre-need company. In the event that the
transactions with directors, officers, existing real estate investment exceeds
stockholders and related interests, the the aforesaid limit, the same shall be
trustee may invest in equities of leveled off to the prescribed limit within
companies related to the trustee provided three (3) years from the effectivity of this
these companies comply with the Code. I
foregoing criteria provided in this
paragraph for equity investments. Investment of the trust fund, which is not
in accordance with the preceding
The amount to be allocated for this paragraphs, shall not be allowed unless
purpose shall not exceed thirty percent the prior written approval of the
(30%) of the total trust fund while the Commission had been secured: Provided,
investment in any particular issue shall further, That no deposit or investment in
not exceed ten percent (10%) of the any single entity shall exceed fifteen
allocated amount. The investment shall be percent (15%) of the total value of the
recorded at the aggregate of the lower of trust fund: Provided, finally, That the
cost or market. Commission is authorized to adjust the
percentage allocation per category set
Existing investments which are not in forth herein not in excess of two
accordance herewith shall be disposed of percentage (2%) points upward or
within three (3) years from the effectivity downward and no oftener than once every
of this Act. five (5) years. The first adjustment
hereunder may be made no earlier than
(c) Real Estate. - These shall include real five (5) years from the effectivity of this
estate properties located in strategic areas Act. The pre-need company shall not use
of cities and first class municipalities. The the trust fund to extend any loan to or to
transfer certificate of title (TCT) shall be in invest in its directors, stockholders,
the name of the seller, free from liens and officers or its affiliates.
encumbrances and shall be transferred in
Section 35. Valuation of Reserve Liabilities trustee a summary of benefits payable for
of the Pre-need Company. - To determine the succeeding year.
the sufficiency and adequacy of the fund,
an annual pre-need reserve valuation The following shall qualify as investments
report establishing the reserve for the liquidity reserve:
requirement and contractual liabilities of
the pre-need company shall be made and (a) Loans secured by a hold - out on
submitted to the Commission, within one assignment or pledge deposits maintained
hundred twenty (120) days from end of either with the trustee or other banks, or
the calendar year. The valuation report of deposit substitute of the trustee itself or
shall contain the assumptions, mortgage and chattel mortgage bonds
methodology, formulas used, a summary issued by the trustee;
of the pre-need plans that were subject of
valuation and the results of such (b) Treasury notes or bills, other
valuation. government securities or bonds, and such
other evidences or indebtedness or
The report shall be duly certified to by a obligations the servicing and repayment of
professional as may be determined by the which are fully guaranteed by the Republic
Commission. Upon approval by the of the Philippines;
Commission of the reserve computation,
any deficiency in the fund shall be covered (c) Repurchase agreements with any of
by the pre-need company, in the manner those mentioned in Item "b" above, as
as may be prescribed by the Commission. underlying instruments thereof; and
In case of an excess of the fund over the
reserve liability, the excess shall be (d) Savings or time deposits with
credited for future deposit requirements. government - owned banks or commercial
banks.
Section 36. Trust Fund Deficiencies. - Upon
approval by the Commission of the pre- Section 38. Trustees. - Upon approval of
need reserve computation submitted in the Commission or when the Commission
the preceding section, any deficiency in requires for the protection of planholders,
the trust fund, when compared to the the pre-need company shall entrust the
reserve liabilities as reported in the pre- management and administration of the
need reserve valuation report, shall be trust fund to any reputable bank's trust
funded by the pre-need company within department, trust company or any entity -
sixty (60) days from such approval. Failure authorized to perform trust functions in
to cover the deficiency in an appropriate the Philippines: Provided, That no director
manner within the time required shall and/or officer of the affiliate or related
subject the pre-need company to the trust entity: Provided, further, That no
payment of a penalty, in addition to other trust fund shall be established by a pre-
remedies exercisable by the Commission, need company with a subsidiary, affiliate
as provided for in this Code. Any excess of or related trust entity. However, such may
the trust fund over the actuarial reserve be allowed: Provided, That the following
liabilities may be credited to future deposit conditions are complied with:
requirements.
(a) A written approval of the Commission
Section 37. Liquidity Reserve. - The has been previously obtained; and
trustee shall at all times maintain a
liquidity reserve which shall be sufficient (b) Public disclosure of the affiliation with
to cover at least fifteen percent (15%) of the trust entity be included in all materials
the trust fund but in no case less than one in whatever form.
hundred twenty - five percent (125%) of
the amount of the availing plans for the The Commission shall have the authority
succeeding year. For this purpose, the pre- to prescribe appropriate rules that shall
need company shall timely submit to the ensure that the yield of the trust fund is
maximized, consistent with the
requirements of safety and liquidity. (c) Failure to disclose conflict of interest;

CHAPTER IX (d) Failure to comply with the Code of


ACTUARIES FOR PRE-NEED COMPANIES Conduct of the Actuarial Society of the
Philippines; or
Section 39. Required Actuarial Reports. -
The following documents which are from (e) Such other grounds that may be
time to time submitted to the Commission determined by the Commission.
by a pre-need company shall be duly
certified by an Insurance Commission CHAPTER X
accredited actuary: REPORTS AND EXAMINATION

(a) Actuarial valuation of all Iiabilities Section 41. Annual Pre-need Reserve
pertaining to pre-need contracts; Valuation Report. Every pre-need company
shall annually determine its reserve
(b) Asset share studies when applying for requirement and contractual liabilities,
approval of new products or enhancement and submit to the Commission an annual
or repricing of existing products; pre-need reserve valuation report within
one hundred twenty (120) days from the
(c) Accounts in the financial statement of end of the fiscal year of the pre-need
the pre-need company pertaining to company. The valuation report shall
actuarial reserve liabilities and other contain the assumptions, methodology,
actuarial reserve items; formulas used, a summary of the pre-need
plans that were the subject of the
(d) Financial projections showing the valuation and the results of such
probable income and reserve valuation. The report should be duly
requirements, enumerating the actuarial certified by an actuary accredited by the
assumptions and bases of projections; and Commission in the case of contingent
plans such as memorial/life plans and by
(e) Such other reports as may be required the pre-need company's external auditors
by the Commission. or by a qualified actuary in the case of
scheduled - benefit plans such as pre-need
It shall be the duty of an actuary to pension and education plans, the liabilities
immediately report to the Commission any of which are not actuarial in nature. The
matter contained in arising out of or in reserving formula, bases and limits of the
relation to the above reports requiring assumptions to be used in the valuation of
intervention of the Commission to protect reserves shall be prescribed by the
the interests of planholders: Provided, Commission.
That the actuary shall not be liable to the
pre-need company for any acts done The Commission may require any pre-
under this paragraph, unless there is a need company to submit an interim pre-
clear showing of bad faith, malice or gross need reserve valuation report if any of the
negligence. following events occurred:

Section 40. Disaccreditation of an Actuary. (a) When there is sufficient evidence that
- An actuary shall be disaccredited by the a subsequent event or transaction
Commission on the following grounds: occurred after the end of the fiscal year
and such event would materially affect the
(a) Failure to adequately perform his computation of the pre-need reserve
required functions and duties under this valuation report submitted; and
Code;
(b) When the company ceased operation
(b) Failure to meet the requirements of six (6) months after the end of the fiscal
Section 11 of this Code; year.
exercise significant roles in internal
Section 42. Annual Audited Financial controls."
Statements. - Every pre-need company
shall terminate its fiscal period on the "The board of directors reviews the
thirty - first (31") day of December every financial statements before such
year. Within one hundred twenty (120) statements are approved and submitted to
days after the calendar or fiscal year, the the stockholders of the company.
pre-need company shall render to the
Commission annual financial statements "The (name of the auditing firm), the
signed and sworn to by its chief executive independent auditors appointed by the
officer, chief finance officer and external stockholders, has examined the financial
auditors in accordance with a uniform statements of the company in accordance
accounting system that shall be with generally accepted auditing
prescribed by the Commission, showing in standards in the Philippines and has
such form and details the exact condition expressed its opinion on the fairness of
of its affairs. the presentation upon completion of such
examination, in its report to the board of
The audited financial statements should directors and stockholders."
be accompanied by the Statement of
Management's Responsibility signed under Any material omission of disclosures,
oath by the companys chairman of the misstatement or misleading information
board, chief executive officer and chief found in the financial statements, whether
financial officer, containing the following interim or annual, shall constitute a
declaration: violation of this Code and the officer
signing such statement shall be subject to
"The management of (name of the pre- the penalty provided for under this Code
need company) is responsible for all and such other sanctions as may be
information and representations contained imposed by the Commission.
in the financial statements for the year(s)
ended (date). The financial statements Section 43. Annual Statement of Trust
have been prepared in conformity with Fund. - Every pre-need company shall file
rules and regulations of the Commission with the Commission an annual statement
on accounting and reflect amounts that of its trust fund for each type of plan. Such
are based on the best estimates and statement shall be in a form prescribed by
informed judgment of management with .the Commission and shall include details
an appropriate consideration to as to all of the income, disbursements,
materiality." assets and liability items of and associated
with the said trust fund accounts. Said
"In this regard, management maintains a statement shall be made under oath by
system of accounting and reporting which two (2) officers of the company and shall
provides for the necessary internal be filed simultaneously with the annual
controls to ensure that transactions are statement required by the preceding
properly authorized and recorded, assets section.
are safeguarded against unauthorized use
or disposition and liabilities are Where the trust fund is managed and
recognized. The management likewise administered by a trustee as provided
discloses to the company's audit under Section 80 - of this Code, an annual
committee and to its external auditor: (i) statement of trust fund for each type of
all significant deficiencies in the design or plan shall instead be filed with the
operation of internal controls that could Commission. It shall include details such
adversely affect its ability to record, as the income, disbursements, assets and
process, and report financial data; (ii) liability items, and shall be certified under
material weaknesses in the internal oath by at least two (2) of the highest
controls; and (iii) any fraud that involves ranking officers of the trustee.
management or other employees who
Section 44. Publication of Annual make, amend and rescind such accounting
Statement. - Within thirty (30) days after rules and regulations applicable for pre-
receipt of the annual statement approved need companies. The Commission may
by the Commission, every pre-need prescribe, among other things, the form or
company shall publish in two (2) forms in which required information shall
newspapers of general circulation a full be set forth, the items or details to be
synopsis of its annual financial shown in the components of the financial
statements, including the trust fund statements, and the recognition and
annual statement showing fully the measurement basis to be adopted for
conditions of its business, and setting each account, after considering the nature
forth its resources and liabilities in a of the operation of the pre-need industry.
standardized format to be designed by the Pre-need companies shall strictly comply
Commission. with such accounting rules and regulations
as prescribed by the Commission.
The Commission may require pre-need
companies to create and maintain a CHAPTER XII
website wherein its planholders may SUSPENSION OR REVOCATION OF
readily access updated information AUTHORITY
pertaining to the status of financial
condition and results of information of the Section 48. Suspension; Grounds. - If the
company. The sufficiency and truthfulness Commission is of the opinion, upon
of the contents of such website shall be examination or other evidence, that any
the responsibility of the company. pre-need company is in an unsound
condition, or that it has failed to comply
Section 45. Keeping of Records. - The with the provisions of law or regulations,
Commission shall require every pre-need or that its condition or method of business
company to keep its books, records, is such as to render its proceedings
accounts and vouchers in such manner hazardous to the public or to its
that the Commission's authorized planholders, or that its paid - up capital
representatives may readily verify the stock is impaired or deficient, the
company's annual statements and Commission is authorized to suspend or
ascertain whether the company is solvent revoke all certificates of authority granted
and has complied with the provisions of to such pre-need company, its officers and
this Code or the circulars, instructions, agents, after due notice or hearing. No
rulings or decisions of the Commission. new business shall thereafter be done by
such company or for such company by its
Section 46. Examination. The Commission agent in the Philippines.
shall, at least once a year and whenever it
considers that the public interest so The Commission may not lift the order of
demands, cause an examination to be suspension or revocation of the said
made into the affairs, financial condition authority until the concerned pre-need
and method of business of every pre-need company shall have submitted a viable
company, and of any other person, firm or business plan showing the companys
corporation managing the fund or affairs estimated receipts and disbursements, as
and/or property of such pre-need well as the basis therefor for the next
company. Such examination shall be succeeding three (3) years.
carried in a manner prescribed by the
Commission by rule. CHAPTER XIII
CONSERVATORSHIP AND PROCEEDINGS
CHAPTER XI UPON INSOLVENCY
FINANCIAL ACCOUNTING STANDARDS
Section 49. Appointment of Conservator.
Section 47. Accounting Rules and If at any time before or after the
Regulations for Pre-need Plans. - The suspension or revocation of the license of
Commission shall have the authority to a pre-need company as provided in
Section 27 hereof, the Commission finds planholders and creditors, the Commission
that such company is in a state of shall forthwith order the company to cease
continuing inability or unwillingness to and desist from transacting business and
comply with the requirements of the Code shall designate a receiver to immediately
and/or orders of the Commission, a take charge of its trust fund, assets and
conservator may be appointed to take liabilities, as expeditiously as possible
charge of the assets, liabilities, and the collect and gather all the assets and
management of such company, collect all administer the same for the benefit of its
moneys and debts due the company and planholders and creditors, and exercise all
exercise all powers necessary to preserve the powers necessary for these purposes
the assets of the company, reorganize its including, but not limited to, bringing suits
management, and restore its viability. The and foreclosing mortgages in the name of
conservator shall have the power to the pre-need company.
overrule or revoke the actions of the
previous management and board of The Commission shall thereupon
directors of the said company, any determine within thirty (30) days whether
provision of law, or of the articles of the pre-need company may be
incorporation or bylaws of the company, to reorganized or otherwise placed in such
the contrary notwithstanding, and such condition so that it may be permitted to
other powers as the Commission shall resume business with safety to its
deem necessary. The conservator may be planholders and creditors and shall
another pre-need company, by officer or prescribe the conditions under which such
officers of such company, or any other resumption of business shall take place as
competent and qualified person, firm or well as the time for fulfillment of such
corporation. The remuneration of the conditions. In such case, the expenses and
conservator and other expenses attendant fees in the collection and administration of
to the conservation shall be borne by the the pre-need company shall be
pre-need company. The conservator shall determined by the Commission and shall
not be subject to any action, claim or be paid out of the assets of such company.
demand by, or liability to, any person in If the Commission shall determine and
respect of anything done or omitted to be confirm within the said period that the pre-
done in good faith in the exercise, or in need company is insolvent, as defined
connection with the exercise, of the hereunder, it shall, if the public interest so
powers conferred on the conservator. requires, order its liquidation, indicate the
manner of its liquidation and approve a
The conservator appointed shall report liquidation plan and implement it
and be responsible to the Commission immediately. The Commission shall
until such time as the Commission is designate a competent and qualified
satisfied that the pre-need company can person as liquidator who shall take over
continue to operate .on its own and the the functions of the receiver previously
conservatorship shall likewise be designated and, with all convenient speed,
terminated should the Commission, on the distribute the trust fund exclusively to the
basis of the report of the conservator or of planholders in proportion to termination
his own findings, determine that the values of their respective pre-need plans,
continuance in business of the pre-need convert the assets of the pre-need
company would be hazardous to company to cash, or sell, assign or
planholders and creditors, in which case otherwise dispose of the same to the
the provisions of Chapter XVI shall apply. planholders, creditors and other parties for
the purpose of settling the liabilities or
Section 50. Proceedings upon Insolvency. - paying the debts of such company and he
Whenever, upon examination or other may, in the name of the company.
evidence, it shall be disclosed that the institute such actions as may be
condition of any pre-need company is one necessary in the appropriate court to
of insolvency, or that its continuance in collect and recover accounts and assets of
business would be hazardous to its the pre-need company, and to do such
other acts as may be necessary to Commission shall pay all allowed claims
complete the liquidation as ordered by the against such company, under order of the
Commission. court, in accordance with their legal
priority.
The provisions of any law to the contrary
notwithstanding the actions of the The receiver or the liquidator, as the case
Commission under this section shall be may be, designated under the provisions
final and executory, and can be set aside of this title shall not be subject to any
by the court upon petition by the company action, claim or demand by, or liability to,
and only if there is convincing proof that any person in respect of anything done or
the action is plainly arbitrary and made in omitted to be done in good faith in the
bad faith. The Commission shall then file exercise, or in connection with the
the corresponding answer reciting the exercise, of the powers conferred on such
proceeding taken and praying for the receiver or liquidator.
assistance of the court in the liquidation of
the company. No restraining order or Section 51. Commission's Power to
injunction shall be issued by the court Assume Trustee Functions. - In cases
enjoining the Commission from where the Commission has ordered the
implementing his actions under this liquidation of the pre-need company, the
section, unless there is convincing proof Commission may immediately take
that the action of the Commission is custody of the trust fund established by
plainly arbitrary and made in bad faith and the pre-need company, and the pre-need
the petitioner files a bond in favor of the company shall forthwith deliver custody
Commission with the court in an amount and an accounting of the same.
fixed by it. The restraining order or Henceforth, the Commission shall have
injunction shall be refused or, if granted, the full power and control over the fund to
shall be dissolved upon filing by the satisfy the pre-need company's obligations
Commission, if he so desires, of a bond in to planholders.
an amount twice the amount of the bond
of the petitioner conditioned that it will Section 52. Liquidation. - (a) In cases
pay the damages which the petition may where the Commission determines that
suffer by the refusal or the dissolution of the pre-need company shall be liquidated,
the injunction. it shall have the power to commence
insolvency proceedings in the appropriate
The court shall give preference to all court which shall have jurisdiction over the
proceedings under this chapter. The assets of the pre-need company,
Commission shall not be required to pay excluding trust fund assets that have been
any fee to any public officer for filing, established exclusively for the benefit of
recording or in any manner authenticating planholders.
any paper or instrument relating to the
proceedings. (b) Proceedings in court shall proceed
independently of proceedings in the
As used in this title, the term "insolvency" Commission for the liquidation of claims,
shall refer to the financial condition of a and creditors of the pre-need company
pre-need company that is generally shall have no personality whatsoever in
unable to pay its liabilities as they fall due the Commission proceedings to litigate
in the ordinary course of business or that their claims against the trust funds.
has liabilities that are greater than its
assets. (c) In liquidating claims of planholders, the
Commission shall ensure that all
In case of liquidation of a pre-need planholders receive an equitable
company, after payment of the cost of the distribution of their claims, considering the
proceedings, including reasonable amounts each has paid into their plans,
expenses and fees incurred in the the termination values due each
liquidation to be allowed by the court, the planholder, the present value of their
claims and other equitable considerations. (2) Suspension of License. - The
The only other claims which may be Commission shall issue a suspension order
satisfied by the Commission out of the against the pre-need company if it fails to
trust funds are the claims for trustees comply with the CDO within thirty (30)
fees which are reasonable and can be days from issuance thereof;
shown to have been incurred in the
administration of the trust fund, and taxes (3) Revocation of License. - The
incurred under trust. Commission may issue a revocation order
of the license of the pre-need company
CHAPTER XIV under suspension for a period of ninety
ADMINISTRATIVE SANCTIONS AND (90) days;
CRIMINAL PENALTIES
(4) A fine of not less than Ten thousand
Section 53. Administrative Sanctions. (a) pesos (P10, 000.00) nor more than One
The Commission, after proper notice and million pesos (P1, 000,000.00) plus not
hearing, may impose any or all of the more than Two thousand pesos (P2,
sanctions provided in subparagraph (b) of 000.00) for each day of continuing
this section for the following offenses: (1) violation;
the making of any untrue statement of a
material fact in a registration statement, (5) Disqualification from being an officer, a
information brochure and its supporting member of the board of directors or
papers and other reports required to be principal stockholders of a pre-need
filed with the Commission; (2) the failure company; or
to disclose any material fact required to be
stated therein; (3) the refusal to permit (6) Other penalties within the power of the
any lawful examination into its affairs; and Commission under existing laws.
(4) any violation of this Code or its
implementing rules and regulations. (c) The unauthorized sale of pre-need
plans shall subject the issuer to a fine as
(b) The imposition of the foregoing follows:
administrative sanctions shall be without
prejudice to the filing of criminal charges (1) First violation - thirty percent (30%) of
against the individual responsible for the the aggregate gross pre-need price of the
violation: plans sold;

(1) Cease and Desist Order. - The (2) Second violation - forty percent (40%)
Commission may, motu proprio or upon of the aggregate gross pre-need price of
verified complaint by any party, issue a the plans sold; and
cease and desist order (CDO) against any
pre-need company upon proof, after due (3) Third violation - suspension or
notice and hearing, of violation of any revocation of license.
provision of this Code: Provided, That such
CDO may be issued ex parte if the Failure to pay fines within three (3)
violation is clearly apparent, injurious to a months from receipt of notice to pay will
number of planholders and requires cause the Commission to issue a
immediate intervention by the suspension order.
Commission. The CDO shall specifically
enjoin the pre-need company from Section 54. Criminal Penalties. - The
performing certain activities and shall following acts are criminal in nature:
impose fines and state the required
remedial actions. All proceedings before (a) Selling or offering to sell a pre-need
the issuance of the CDO shall be plan by unregistered persons shall be
confidential; penalized by imprisonment of one (1) year
and a fine equivalent to triple the contract
price;
discretion of the court. Should the offense
(b) Selling or offering to sell an be committed by a juridical person, the
unregistered pre-need plan or any product penalty may, in the discretion .of the
that has pre-need plan features shall be court, be imposed on such juridical entity
penalized by imprisonment of one (1) year and upon the officer or officers of the
and a fine equivalent to triple the juridical entity responsible for the
indicated price; violation. If such officer is an alien, he
shall, in addition to the penalties
(c) Soliciting, selling or offering to sell a prescribed, be deported without further
pre-need plan by means of false or proceedings after service of sentence.
misleading representation and other
fraudulent means shall be penalized by CHAPTER XV
imprisonment of six (6) years and one (1) MISCELLANEOUS PROVISIONS
day to twelve (12) years and a fine in the
amount of Fifty thousand pesos Section 55. Claims. - The Commission shall
(P50,000.00) to Five hundred thousand have the primary and exclusive power to
pesos (P500, 000.00); adjudicate any and all claims involving
pre-need plans. If the amount of benefits
(d) Any negligent act or omission that is does not exceed One hundred thousand
prejudicial or injurious to the planholder pesos (P100, 000.00), the decision of the
shall be penalized by imprisonment of one Commission shall be final and executory.
(1) year and one (1) day to six (6) years
and a fine in the amount of Fifty thousand Section 56. Review of Commission Orders
pesos (P50, 000.00) to Five hundred or Decisions. - Any person aggrieved by an
thousand pesos (P500,000.00); order or decision of the Commission,
whether in relation to its settlement of a
(e) Any fraudulent act or omission that is claim of a planholder or in the exercise of
prejudicial or injurious to the planholder its regulatory authority, may appeal the
shall be penalized by imprisonment of six order or decision to the Court of Appeals
(6) years and one (1) day to twelve (12) by petition for review in accordance with
years and a fine in the amount of One the pertinent provisions of the Rules of
hundred thousand pesos (P100, 000.00) to Court.
One million pesos (P1, 000,000.00); and
Section 57. Transitory Provisions. - Any
(f) Willful violation of the provisions of this pre-need company who, at the time of the
Code or orders of the Commission: effectivity of this Code has been registered
Provided, That repeated violations shall and licensed to sell pre-need plans and
constitute prima facie evidence against similar contracts, shall be considered
the offender and shall be penalized by registered and licensed under the
imprisonment of six (6) years and one (1) provision of this Code and its
day to twelve (12) years and a fine in the implementing rules and regulations and
amount of One hundred thousand pesos shall be subject to and governed by the
(P100, 000.00) to One million pesos (P1, provisions hereof: Provided, however, That
000,000.00). compliance for all sections with the
exception of Section 21, may be deferred
Any person who violates any other for such reasonable time as the
provisions of this Code or rules and Commission may determine but not to
regulations promulgated by the exceed one (1) year unless otherwise
Commission under authority thereof shall, specifically provided in this Code. With
upon conviction, be punished by a fine of respect to Chapter IV, compliance will
not less than Fifty thousand pesos (P50, cover all new plans sold one hundred
000.00) nor more than Five million pesos twenty (120) days after the effectivity of
(P5,000,000.00) or imprisonment of not this law. Violations committed prior to the
less than one (1) year nor more than effectivity of this Code shall be punished
fourteen (14) years, or both, at the
in accordance with the provisions of the plan, authorized, licensed or registered by
laws then in force. the SEC under the Securities Regulation
Code shall be deemed to have been
The Commission shall constitute forthwith licensed or registered under the provisions
a special team of experts to handle all of this Code. Such person or plan shall,
matters related to the pre-need industry unless otherwise herein provided, be given
and shall secure and transfer all the files a period of one (1) year from the
and records of the SEC to the Insurance effectivity of this Code within which to
Commission within ninety (90) days after comply with the same. The rights and
the effectivity of this Code. remedies provided by this Code shall be in
addition to any and all other rights and
Notwithstanding any provision to the remedies that exist under existing laws.
contrary, all pending claims, complaints
and cases filed with the SEC shall be Section 60. Separability Clause. - Should
continued in its full and final conclusion. It any provision of this Act or the application
shall also assist the Department of Justice thereof to any person or circumstance be
in criminal cases involving matters related held invalid, the other provisions or
to the pre-need industry. sections of this Act shall not be affected
thereby.
Section 58. Implementing Rules and
Regulations. - The Commission shall adopt Section 61. Repealing Clause. - All acts,
such rules and regulations for the proper laws, executive orders and/or rules and
and effective implementation of this Code regulations or any part thereof that are
within sixty (60) days from approval inconsistent with the provisions of this
hereof. The Commission shall publish once Code are hereby repealed or modified
a week for two (2) consecutive weeks in accordingly.
two (2) newspapers of general circulation
the, rules and regulations promulgated Section 62. Effectivity. - This Act shall take
pursuant to the preceding section. effect upon its approval.

Section 59. Effect on Existing Law. Any Approved,


person, natural or juridical, or pre-need