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This web
page
contains the full text of
Republic
Act No. 8289
Amending
Republic Act No. 6977
MAGNA CARTA FOR SMALL ENTERPRISES
REPUBLIC
ACT NO. 8289
MAGNA
CARTA FOR SMALL
ENTERPRISES
Republic
Act No. 6977,
As
Amended by Republic
Act No. 8289
AN ACT
TO STRENGTHEN
THE PROMOTION AND DEVELOPMENT OF, AND ASSISTANCE TO SMALL AND MEDIUM
SCALE
ENTERPRISES, AMENDING FOR THAT PURPOSE REPUBLIC ACT NO. 6977, OTHERWISE
KNOWN AS THE "MAGNA CARTA FOR SMALL ENTERPRISES" AND FOR OTHER
PURPOSES.
CHAPTER 1
Section 1. Sec. 3 of
Republic Act No. 6977 is hereby amended to read as follows:
"Sec. 3.
Small
and Medium Enterprise as Beneficiaries. - 'Small and Medium
Enterprise'
shall be defined as any business activity or enterprise engaged in
industry,
agribusiness and/or services, whether single proprietorship,
cooperative,
partnership or corporation whose total assets, inclusive of those
arising
from loans butt exclusive of the land on which the particular
business
entity's office, plant and equipment are situated, must have value
falling
under the following categories:
| Micro |
less
than |
P
1,500,001 |
| Small |
P1,500,001
|
P15,000,000 |
| Medium |
P15,000,001 |
P60,000,000 |
"The
above
definitions shall be subject to review and adjustment by the said
Council moto proprio or upon recommendation of
sectoral
organization(s)
taking into account inflation and other economic indicators. The
Council may use as variables the number of employees, equity capital
and
asset size."
Sec. 2. Sec. 4 of
Republic Act No. 6977 is hereby amended to read as follows:
"Sec.
4. Eligibility
for Government Assistance. - To qualify for assistance,
counseling,
incentives and promotion under this Act, businesses falling under the
above
definition must be:
"(a) duly
registered
with
the appropriate agencies as presently provided by law: Provided,
That in the case of micro enterprises as defined herein, registration
with
the office of the municipal or city treasurer shall be deemed
sufficient
compliance with this requirement;
"(b) one
hundred
percent
(100%) owned and capitalized by Filipino citizens if single
proprietorship
or partnership. If the enterprise is a juridical entity, at least
sixty percent (60%) of its capital or outstanding stocks must be owned
by Filipino citizens.
"(c) a
business
activity
within the major sectors of the economy, namely: industry,
services,
including the practice of one's profession, the operation of
tourism-related
establishments, and agri-business, which for purposes of this Act
refers to any business activity involving the manufacturing,
processing,
and/or production of agricultural produce, excluding farm level
agriculture/crop
production; and
"(d) it
must not be
a branch,
subsidiary or division of a large scale enterprise nor may its policies
be determined by a large scale enterprise or by persons who are not
owners
or employees of the enterprise.
"However,
this
requirement
shall not prelude a small and medium enterprise from accepting
subcontracts
from large enterprise or firms joining in cooperative activities with
other
small and medium enterprises.
"Programs
of the
financing
corporation as provided in subsequent Sec.s of this Act shall
be exclusively targeted to medium, small, and micro-sized enterprises.
"Registered
small
enterprises
shall be entitled to a share of at least ten percent (10%) of total
procurement
value of goods and services supplied to the Government, its bureaus,
offices
and agencies annually: Provided, That prices and
quality
of goods offered by the registered small enterprises are competitive."
Sec. 3. Sec. 5 of
Republic Act No. 6977 is hereby amended to read as follows:
"SEC.
5 Guiding
Principles. - To set the pace for small and medium
enterprise
development, the State shall be guided by the following principles:
"(a)
Minimal
set
of rules and simplification of procedures and requirements. - All
government
agencies having to do with small enterprises shall pursue stability of
rules and to encourage entrepreneurial spirit among the
citizenry.
The agencies shall see to it that procedural rules and
requirements,
within their respective offices in coordination with other agencies,
are
minimized in the act of registration, availment of financing and
accessing
other government services and assistance.
"(b)
Role
of the
private sector. - In order to hasten growth and
expansion
of small and medium enterprises, the private sector throughout the
country
shall be encouraged to assist in the effective implementation of this
Act
by participating in government programs for small and medium
enterprises
strictly in accordance with the law, and consistent with the attainment
of the purposes hereof. To encourage private sector
participation,
the Council, in consultation with the concerned sector, may recommend
simplified
procedure and localized incentives to small enterprises. The
Government
shall encourage the organization and establishment of small and medium
enterprise industry associations at the local and regional levels
preferably
unified under a national federation/association.
"(c)
Coordination
of government efforts. - Government efforts shall be
coordinated
to achieve coherence in objectives. All appropriate offices,
particularly
those under the Departments of Trade and Industry, Finance, Budget and
Management, Agriculture, Agrarian Reform, Environment and Natural
Resources,
Labor and Employment, Transportation and Communication, Public Works
and
Highways, Science and Technology, Local Government and Tourism as well
as the National Economic and Development Authority and the Bangko
Sentral
ng Pilipinas, through their national, regional and provincial offices,
shall to the best of their effort and in coordination with local
government
units, provide the necessary support and assistance to small and medium
enterprises.
"(d)
Decentralization.
- The State shall accelerate the decentralization process by
establishing regional and provincial offices in order to enhance and
attain
greater efficiency in the provision of services to the countryside and
the implementation of this Act, in coordination with local government
units.
To this end, the government agencies shall effect a substantial
delegation
of authority to their regional and provincial offices to make
decisions,
particularly in the registration of beneficiaries of this law,
qualification
for availment of benefits, accreditation of private voluntary
organizations,
industry associations and cooperatives, and to resolve complaints for
violation
of applicable laws."
Sec. 4. Sec. 6 of
Republic Act. No. 6977 is hereby amended to read as follows:
"SEC. 6. Creation
of
a Small and Medium Enterprise Development Council. - To
effectively
spur the growth and development of small and medium enterprises
throughout
the country, and to carry out the policy declared in this Act, a Small
and Medium Enterprise Development (SMED) Council is hereby
created.
The Council shall be attached to the Department of Trade and Industry
and
shall be constituted within sixty (60) days after the approval of this
Act.
"The
Council shall be
the
primary agency responsible for the promotion, growth and development of
small and medium enterprises in the country by way of facilitating and
closely coordinating national efforts to promote the viability
and
growth of small and medium enterprises, including assisting
relevant agencies in the tapping of local and foreign funds for small
and
medium enterprise development, as well as promoting the use of existing
programs, as well as seeking ways to maximize the use of our labor
resources."
Sec. 5. Sec. 7 of
Republic Act No. 6977 is hereby amended to read as follows:
"Sec. 7. Composition.
- The Council shall be headed by the Secretary of Trade and
Industry
as Chairman, and may elect from among themselves a Vice-Chairman to
preside
over the Council meetings in the absence of the Chairman. The
members
shall be the following:
"(a)
Director
General of the National Economic and Development Authority;
"(b)
Secretary
of Agriculture;
"(c)
Secretary
of Labor and Employment;
"(d)
Secretary
of Environment and Natural Resources;
"(e)
Secretary
of Science and Technology;
"(f)
Secretary
of Tourism;
"(g)
The
Chairman of the Monetary Board;
"(h)
Chairman
of Small Business Guarantee and Finance Corporation;
"(i)
Chairman
of the small and medium enterprises promotion body which the President
shall undertake to establish under this Act; and
"(j)
Three
(3) representatives from the private sector at large, all Filipino
citizens,
to represent Luzon, Visayas and Mindanao, and one representative from
the
small and medium enterprises sector to be appointed by the President;
and
"(k) a
representative from the private banking sector to serve alternately
among
the Chamber of Thrift Bank; the Rural Bankers' Association of the
Philippines
(RBAP); and the Bankers' Association of the Philippines (BAP).
"Cabinet-rank ex
officio
members of the Council shall designate an undersecretary or assistant
secretary,
and the chairman of the Monetary Board or his representative, as their
permanent representative in case they fail to attend meetings of the
Council.
"The
private sector
members
of the shall initially receive per diem of One Thousand pesos (P1,000)
per meeting, for a maximum of twenty-four (24) meetings per year, which
per diem may be adjusted by the Council: Provided, that may such
adjustment
shall take effect upon approval of the President.
"The
Department of
Trade
and Industry shall allocate Five million pesos (P5,000,000) out of
its
savings for the initial operating expenses of the Council, after which,
the Council's budget shall be included in the annual
appropriation
of the Department of Trade and Industry.
"The
Council may,
from time
to time, call upon the participation of any government agency or
association
of local government officials in its deliberations especially when such
agency is directly or indirectly concerned with and/or affecting the
growth
and development of small and medium enterprises in any particular area
or manner.
"The
Council may
create
an Executive Committee of five (5) members elected by the Council from
among themselves or their designated permanent representatives, with at
least two (2) members representing the private sector, and with
authority
to act for and on behalf of the Council during intervals of council
meetings
representing the private sector, and with authority to act for and on
behalf
of the Council during intervals of council meetings, and within the
specific
authority granted by the Council."
Sec. 6. Sec. 9 of
Republic Act No. 6977 is hereby amended to read as follows:
"Sec.
9. Designation
of the Bureau of Small and Medium Business Development as a Council
Secretariat.
- The Bureau of Small and Medium Business Development is
hereby
designated to act as the Council Secretariat and shall have the
following
duties and functions:
"(1) to
prepare, in
coordination
with local government units and/or associations of local government
officials,
and recommend annual as well as medium-term small and medium
enterprises
development plans for approval of the Council;
"(2) to
coordinate the
preparation
of position papers and background materials for discussion or approval
during Council meetings;
"(3) to
assist the
Council
in coordinating and monitoring small and medium enterprise policies and
programs and activities of all government agencies with respect to
small
and medium enterprises;
"(4) to
prepare, collate
and integrate all inputs to the Council's yearly report on the status
of
small and medium enterprises in the country;
"(5) to
submit periodic
reports to the Council on the progress and accomplishment of its work
programs;
and
"(6) to
perform ad hoc
functions
as authorized by the Council."
Sec. 7. Sec. 10 of Republic
Act No. 6977 is hereby amended to read as follows:
"Sec. 10 Rationalization
of Existing Small and Medium Enterprise Programs and Agencies. -
The Council shall conduct continuing review of government
programs
for small and medium enterprises and submit to Congress and the
President
a report thereon together with its policy recommendations.
"The
President is
hereby
also empowered to establish a small a and medium enterprise promotion
body
which shall be the principal government agency that will formulate,
implement,
coordinate and monitor all non-financing government programs, including
fee-based services, to support and promote micro, small and medium
enterprises.
It shall be attached to the Department of Trade and Industry and shall
be under the policy, program and administrative supervision of the SMED
Council. The said office shall receive no less than fifty
percent
(50%) of the assets, and budgetary allocations of the agencies for
promotion,
development and financing of small and medium enterprises that may be
henceforth
dissolved and/or abolished and absorbed, incorporated and integrated
into
the SMED Council."
Sec. 8. Sec. 11
of Republic Act No. 6977 is hereby amended to read as follows:
"Sec. 11 Creation
of
Small Business Guarantee and Finance Corporation. - There is
hereby created a body corporate to be known as the Small Business
Guarantee
and Finance Corporation, hereinafter referred to as SBGFC, which shall
source and adopt development initiatives for globally competitive small
and medium enterprises in terms of finance, technology, production,
management
and business linkages, and provide, promote, develop and widen in both
scope and service reach various alternative modes of financing
for
small and medium enterprises, including but not limited to, direct and
indirect project lending, venture capital, financial leasing, secondary
mortgage and/or rediscounting of loan papers to small business,
secondary/regional
stock markets: Provided, That crop production financing
shall
not be serviced by the Corporation.
"The
Corporation
shall guarantee
loans obtained by qualified small and medium enterprises, local and/or
regional associations' small enterprises and industries, private
voluntary
organizations and/or cooperatives, under such terms and conditions
adopted
by its Board. It may guarantee loans up to one hundred percent
(100%).
It may also provide second level guarantee (i.e., reinsurance)
on
the credit and/or investment guarantees made by credit guarantee
associations
and other institutions in support of small entrepreneurs.
"The
Corporation
shall become
liable under its guarantees upon proof that the loan has become
past
due under such terms and guidelines adopted by its Board and printed on
the contract of guarantee.
"The Small
Business
Guarantee
and Finance Corporation shall:
"(a)
be
attached to
the Department of Trade and Industry and shall be under the policy,
program
and administrative supervision of the SMED Council;
"(b)
have its
principal
place of business in Metro Manila and endeavor to have one or more
branch
offices in every province of the country;
"(c)
exercise
all the
general powers conferred by law upon corporation under the Corporation
Code as are incidental or conducive to the attainment of the objectives
of this Act;
"(d) have a
board of
directors upon to which the powers of the Corporation shall be vested,
to be composed of nine (9) members including:
"(1)
three (3)
members
of the private sector appointed by the President upon recommendation of
the SMED Council and from among whom the Chairman of the Board shall be
appointed by the President to serve on a full-time basis;
"(2)
the
Secretary
of Trade and Industry or his Undersecretary; and
"(3)
a
representative
from each of the five (5) government financial institutions mandated in
this Act to provide the initial capital of the Corporation, who shall
be
designated, under guidelines agreed upon by the Board Chairmen of said
institutions;
"(e)
Notwithstanding the
provisions of Republic Act No. 6758, and Compensation Circular No. 10,
series of 1989 issued by the Department of Budget and Management, the
Board
of Directors of SBGFC shall have the authority to extend to the
employees
and personnel thereof the allowance and fringe similar to those
extended
to and currently enjoyed by the employees and personnel of other
government
financial institutions."
Sec. 9. Sec. 13 of Republic
Act No. 6977 is hereby amended to read as follows:
"SEC. 13. Mandatory
Allocation
of Credit Resource to Small and Medium Enterprises. - For the
period
of ten (10) years from the date of the effectivity of this Act, all
lending
institutions as defined under Bangko Sentral ng Pilipinas rules,
whether
public of private, shall set aside at least six (6%) and at least two
percent
(2%) for small and medium enterprises, respectively, of their total
loan
portfolio based on their balance sheet as of the end of the previous
quarter,
and make it available for small and medium enterprises credit as
herein contemplated.
"The Bangko
Sentral
ng Pilipinas,
in consultation with the Council, shall formulate rules for the
effective
implementation of this provision: Provided, That
the
purchase of government notes, securities and other negotiable
instruments,
with the exemptions of such instruments as may be offered by the SBGFC
which do not pay market rates, shall not be deemed compliance with the
foregoing provision: Provided, further, That the Bangko
Sentral
ng Pilipinas shall establish an incentive program to encourage lending
to small and medium industries beyond mandatory credit allocation to
said
enterprises, such as possible reduction in bank's reserve requirement.
"The SMED
Council
shall set
up the appropriate systems to monitor all loan applications of small
and
medium enterprises in order to account for the absorptive capacity of
the
small and medium enterprises sector.
"The Bangko
Sentral
ng Pilipinas
shall require lending institutions covered by this Act to furnish to
the
Small and Medium Enterprise Development Council on a quarterly basis
regular
reports on their compliance with the above provisions on the mandatory
credit allocations for small and medium enterprises and expeditiously
act
on the Council's reports of non-compliance therewith."
Sec. 10. Sec. 14 of Republic
Act No, 6977 is hereby amended to read follows:
"SEC. 14. Penalty
Clause. - The Bangko Sentral ng Pilipinas shall impose
administrative
sanctions
and other penalties on the lending institutions for non-compliance with
provision of this Act including a fine of not less than Five hundred
thousand
pesos (P500,000)."
Sec. 11. Separability
Clause. - The provision of this Act are hereby declared to be
separable.
If any provision of this Act shall be held unconstitutional, the
remainder
of the Act not other wise affected shall remain in full force and
effect.
Sec. 12. Repealing
Clause. - All laws, executive orders, rules and regulations, or
parts
thereof, inconsistent herewith are hereby repealed or modified
accordingly.
Sec. 13. Effectivity.
- This Act shall take effect upon its approval.
Approved: September
30, 1997.
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