2021 24 February

Philippines: The FIST Law


On 16 February 2021, President Duterte signed into law Republic Act No. 11523, otherwise known as the “Financial Institutions Strategic Transfer (FIST) Act” (the “FIST Law”), which aims to reduce the non-performing loans (“NPL”) of banks due to the COVID-19 pandemic. Under the FIST Law, certain incentives and privileges will allow banks and financial institutions (“FI”) to easily dispose of their non-performing assets (“NPA”) to FIST Corporations (“FISTC”). 


The FISTC must be a stock corporation and not a one-person corporation. If FISTC will acquire lands, at least sixty percent (60%) of its outstanding capital stock shall be owned by Filipino citizens. It must have a minimum capital stock of Five Hundred Million Pesos (P500,000,000.00), with a minimum subscribed capital stock of One Hundred Twenty-Five Million Pesos (P125,000,000.00), and a minimum paid-up capital of Thirty-One Million Two Hundred Fifty Thousand Pesos (P31,250,000.00). 

To be entitled to the privileges of the FIST Law, an application must be filed with the Securities and Exchange Commission (“SEC”) within thirty-six (36) months from the effectivity of the FIST Law. Further, entities created under Republic Act No. 9182, otherwise known as “The Special Purpose Vehicle (SPV) Act of 2002,” are qualified to avail of the privileges of the FIST Law.

The FISTC shall have the power, among others, to: (a) invest in or acquire NPAs of FIs, (b) engage third parties to manage, operate, collect, and dispose of the NPAs, (c) in case of NPLs, to restructure debt, condone debt and undertake other restricting related activities, and (d) spend funds to renovate, improve, complete, or alter its NPAs acquired from an FI.

Transfer of assets to FISTC

All sales or transfer of NPAs to a FISTC shall be in the nature of a true sale without need of the borrower’s consent; provided, that in transfer of NPLs, the right of the debtor to reimburse the assignee or transferee under Article 1634 of the Civil Code shall not apply. No court, other than the Court of Appeals and the Supreme Court, may issue temporary restraining orders, preliminary injunctions, and other injunctive relief against the transfer of NPAs.

No transfer of NPL to a FISTC shall take effect unless the FI concerned gives prior notice to the borrower of the NPL, who shall be given thirty (30) days to restructure or renegotiate the loan. Prior notice must also be given to all persons holding prior encumbrances upon the assets. On the other hand, NPAs must be certified through the issuance of a Certificate of Eligibility by the appropriate regulatory authority, otherwise the incentives and exemption privileges under the FIST Law cannot be availed.

The FISTC Plan

The FISTC must submit a FISTC Plan to the SEC for approval. The FISTC Plan shall include, among others, the investments policies of the FISTC, contribution plan, features of Investment Unit Instruments (“IUI”), rights of the holders of IUIs, and method for liquidation and distribution of assets to holders of IUIs. If the FISTC Plan is incomplete or inaccurate, it may be amended. If the FISTC Plan is not compliant with the FIST Law, it may be rejected by the SEC. The SEC may also suspend or revoke, after due notice and hearing, an already approved FISTC Plan if: (a) the FISTC violated the FIST Law or any orders of the SEC, (b) the FISTC has been, or is engaged, or is about to engage in fraudulent transactions, (c) the FISTC made any false or misleading representation of material facts, (d) the FISTC failed to comply with any requirements of the SEC, or (e) the FISTC Plan is incomplete or inaccurate in any material respect.

Issuance of IUIs

IUIs are participation certificates, debt instruments, or similar instruments issued by the FISTC and subscribed by permitted investors or qualified buyers such as a bank, registered investment house, or insurance company. Qualified buyers may acquire or hold IUIs issued by the FISTC in the minimum amount of Ten Million Pesos (P10,000,000.00), provided that a FISTC cannot acquire the IUIs of another FISTC, and provided further, that the parent, subsidiaries, affiliates, stockholders, directors, officers, or any related interest of the selling FI, or the parent’s subsidiaries, affiliates, stockholders, directors, officers, or any related interest cannot acquire or hold, directly or indirectly, the IUIs of the FISTC.

Tax Incentives and Fee Privileges

The transfer of NPAs from the FI to a FISTC, and from a FISTC to a third party or dation in payment by the borrower or by the third party in favor of the FI or FISTC shall enjoy the following incentives and privileges: 

  1. Exemption from Documentary stamp tax; 
  2. Exemption from Capital gains tax; 
  3. Exemption from creditable withholding tax; 
  4. Exemption from value-added tax or gross receipts tax (whichever is applicable); and
  5. Reduced rates in lieu of applicable fees:
  • Fifty percent (50%) of the registration and transfer fees on transfer of real estate mortgage and security interest to and from the FISTC; 
  • Fifty percent (50%) of the filing fees for any foreclosure proceeding; and 
  • Fifty percent (50%) of the land registration fees.

All sales or transfer of NPAs from FIs to a FISTC or transfers by way of dation in payment by the borrower or by a third party to the FI shall be entitled to the enumerated privileges for two (2) years from the date of effectivity of the FIST Law. In addition, transfer of NPAs from a FISTC to a third party within such two (2)-year period, or within such extended period, or transfers by way of dation in payment by a borrower or by a third party to the FISTC shall enjoy the privileges for five (5) years from the date of acquisition by the FISTC.

The enumerated privileges may be extended to any individual, provided that: (a.) the transaction is limited to a Real or Other Property Acquired, a property acquired by an FI in settlement of a loan, or NPL secured by a real estate mortgage, (b.) there shall only be one (1) transaction consisting of one (1) residential unit or empty lot per individual, and (c.) The two (2)-year transfer period, including its extension, and five (5)-year entitlement period granted to the NPA shall also apply to said single family residential unit or empty lot.

The following privileges may also apply for five (5) years from the date of acquisition of NPL by FISTC: 

  1. The FISTC shall be exempt from income tax on net interest income, documentary stamp tax, and mortgage registration fees on new loans in excess of existing loans extended to borrowers with NPLs which have been acquired by the FISTC; and
  2. In case of capital infusion by the FISTC to the borrower with NPLs, the FISTC shall be exempt from documentary stamp tax.

Lastly, in addition to the foregoing privileges, any loss of an FI as a result of the transfer of an NPA within the two (2)-year period shall be treated as an ordinary loss. Such loss may be carried over for five (5) consecutive taxable years.

As of writing, the SEC, the primary implementing agency, is yet to finalize the Implementing Rules and Regulations of the FIST Law. These rules shall provide, among others, for the rules regarding the issuance of IUIs and submission of FISTC Plans to SEC for approval.

The full text of Republic Act No. 11523 can be accessed here.


Jude Ocampo
Partner, Ocampo & Suralvo Law Offices


The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


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