Conflict of Interest Policy (Philippines)
CONFLICT OF INTEREST POLICY
Revised Corporation Code (RA 11232, 2019) — Sections 22, 30, and 31 | SEC Memorandum Circular No. 19, Series of 2016
Adopted by [Organization Name] ("Organization") on [Adoption Date].
1. PURPOSE
1.1 This Conflict of Interest Policy ("Policy") promotes ethical conduct, protects the interests of the Organization and its stakeholders, and ensures compliance with the duty of loyalty imposed on directors and officers under Sections 22 and 31 of the Revised Corporation Code (Republic Act 11232, 2019). It applies to [Covered Persons Scope].
2. WHAT CONSTITUTES A CONFLICT OF INTEREST
2.1 A conflict of interest arises when a covered person's personal, financial, or other private interests could — actually, potentially, or apparently — interfere with the person's duty to act in the best interests of the Organization.
2.2 Examples of conflicts include: (a) a director or officer having a material financial interest in a transaction involving the Organization under Section 31 of RA 11232; (b) employment or consulting arrangements with a competitor or counterparty of the Organization; (c) holding a directorship or significant shareholding in an entity that competes with or transacts with the Organization; (d) receiving gifts, entertainment, or personal benefits from third parties that transact with the Organization beyond customary and reasonable amounts; and (e) family relationships with persons involved in transactions with the Organization.
3. DISCLOSURE OBLIGATIONS
3.1 Annual Disclosure. All covered persons must complete and submit an Annual Conflict of Interest Disclosure Form by [Disclosure Deadline] each year to [Compliance Contact]. The form must disclose all actual, potential, and apparent conflicts.
3.2 Transaction-Specific Disclosure. Any covered person who becomes aware of a conflict in relation to a specific transaction, contract, or matter under consideration by the Organization must disclose that conflict at the earliest opportunity — and no later than before the matter is discussed or voted upon by the Board or management — consistent with Section 31 of RA 11232.
3.3 Disclosures are reviewed by: [Reviewing Body]
4. RECUSAL AND ABSTENTION
4.1 A covered person who has a conflict of interest in relation to a specific transaction or matter must: (a) disclose the conflict as required under Section 3 of this Policy; (b) recuse themselves from any discussion, deliberation, and voting on the matter; and (c) ensure that their recusal is recorded in the relevant meeting minutes or decision record.
4.2 For related-party transactions involving directors under Section 31 of RA 11232, Board approval by the vote of disinterested directors constituting a quorum — with the interested director excluded from voting — is required for the transaction to be valid and not voidable by the Organization.
5. ENFORCEMENT AND CONSEQUENCES
5.1 Violations of this Policy may result in: (a) disciplinary action up to and including termination of employment or removal as director or officer; (b) personal liability for damages under Section 30 of RA 11232 for directors and officers who breach the duty of loyalty; (c) voidance of the conflicted transaction at the option of the Organization under Section 31 of RA 11232; and (d) disclosure to the SEC or other regulatory authorities where required.
5.2 Questions about this Policy should be directed to: [Compliance Contact]
Chairperson of the Board
________________
Signature
Compliance Officer / Corporate Secretary
________________
Signature
What Is a Conflict of Interest Policy (Philippines)?
A Conflict of Interest Policy in the Philippines records the organisation's position on the matter, defining what is permitted, what is prohibited and how breaches are handled.
Under Section 31 of the Revised Corporation Code (RA 11232), a contract between a corporation and a director, trustee, or officer — or a corporation in which the director has a material interest — is voidable at the option of the corporation unless: the relationship is disclosed to and approved by the board of directors, with the interested director excluded from voting; the contract is fair and reasonable under the circumstances; and in the case of related-party transactions involving substantial assets, stockholder approval is obtained. The Supreme Court of the Philippines, in cases such as Filipinas Broadcasting Network v Ago Medical Center (G.R. No. 141994, 2005) and Prime White Cement Corporation v Intermediate Appellate Court (G.R. No. L-68555, 1990), has consistently applied the duty of loyalty to strike down self-dealing transactions that were not properly disclosed and approved.
For government officials and employees, the Code of Conduct and Ethical Standards for Public Officials and Employees (Republic Act 6713, 1989) imposes a thorough conflict of interest framework, prohibiting officials from engaging in any business or transaction that conflicts with their official functions, and requiring annual Statements of Assets, Liabilities and Net Worth (SALN) filed with the Office of the Ombudsman. The Anti-Graft and Corrupt Practices Act (Republic Act 3019, 1960) supplements RA 6713 by criminalizing specific corrupt acts by public officials that often arise from undisclosed conflicts of interest.
For publicly listed companies, the SEC Code of Corporate Governance (MC No. 19, Series of 2016) mandates a Related Party Transactions Committee and requires specific disclosure of RPTs in annual reports and definitive information statements filed with the SEC.
The legal framework governing the Conflict of Interest Policy (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Conflict of Interest Policy (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Revised Corporation Code (RA 11232, 2019) sets the foundational requirements.
When Do You Need a Conflict of Interest Policy (Philippines)?
A Conflict of Interest Policy is needed by any Philippine corporation, organization, or government body that wishes to prevent self-dealing, protect fiduciary relationships, and demonstrate good governance.
All corporations registered with the SEC under the Revised Corporation Code (RA 11232, 2019) should have a Conflict of Interest Policy because Section 31 of RA 11232 imposes statutory self-dealing restrictions on directors and officers, and a formal policy operationalizes these restrictions and creates a documented compliance framework.
Publicly listed companies on the Philippine Stock Exchange (PSE) must have a Conflict of Interest Policy as part of their corporate governance manual under SEC Memorandum Circular No. 19, Series of 2016, and must establish a Related Party Transactions (RPT) Committee to review material RPTs.
Banks, insurance companies, and other financial institutions supervised by the BSP or Insurance Commission need a Conflict of Interest Policy as part of their corporate governance frameworks under BSP Circular No. 1074 (2020) and IC Circular Letter No. 2020-77, respectively.
Non-profit organizations — including foundations, associations, and cooperatives registered with the SEC or the Cooperative Development Authority (CDA) — need a Conflict of Interest Policy to protect charitable assets from self-dealing by officers and trustees, and to satisfy requirements of foreign grant-making organizations and development agencies such as USAID, World Bank, and ADB.
Government-owned and controlled corporations (GOCCs) governed by the GOCC Governance Act of 2011 (RA 10149) must comply with the Governance Commission for GOCCs (GCG) codes of governance, which include conflict of interest and RPT disclosure requirements.
Parties in Philippines should prepare a Conflict of Interest Policy (Philippines) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Conflict of Interest Policy (Philippines)
A thorough Philippine Conflict of Interest Policy must include the following essential elements.
Definition of Conflict of Interest: Clear definition covering actual conflicts (where a personal interest directly conflicts with corporate duty), potential conflicts (where a personal interest may conflict in the future), and apparent conflicts (where a reasonable person would perceive a conflict even if none actually exists). The definition should align with SEC governance codes and the duty of loyalty under Section 22 of RA 11232.
Covered Persons: Identification of who is subject to the policy — directors, officers, employees, consultants, agents, and their immediate family members — and the specific relationships and interests that trigger disclosure obligations.
Annual Disclosure Requirement: Obligation for covered persons to complete and submit an annual disclosure form listing all actual and potential conflicts, including: directorships in other companies; shareholdings above a prescribed threshold; family relationships with company counterparties; and outside employment or consulting arrangements.
Transaction-Specific Disclosure: Requirement to disclose any conflict at the earliest opportunity when a specific transaction, contract, or matter is under consideration by the board or management, consistent with Section 31 of the Revised Corporation Code (RA 11232).
Recusal and Abstention: Procedures for conflicted persons to recuse themselves from discussion, deliberation, and voting on matters where they have a conflict, including documentation of recusals in board minutes.
Approval of Related-Party Transactions: Process for approving material related-party transactions, including review by the RPT Committee (for PLCs), approval by disinterested directors or stockholders as required under Section 31 of RA 11232, and disclosure in SEC filings.
Enforcement and Consequences: Penalties for violation, including potential personal liability under Section 30 of RA 11232 and disciplinary actions up to termination.
Governance of SALNs (for GOCCs): For government entities, cross-reference to the SALN requirements under RA 6713 and the Ombudsman's annual SALN submission deadlines.
Additional compliance elements for a Conflict of Interest Policy (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.
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note = {Free legal document template. Based on Revised Corporation Code (RA 11232, 2019)}
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Frequently Asked Questions
The duty of loyalty is a core fiduciary obligation imposed on directors, trustees, and officers of Philippine corporations under the Revised Corporation Code (Republic Act 11232, 2019). Under Section 22 of RA 11232, directors must act in good faith and in the best interests of the corporation, placing the corporation's interests above their own personal or financial interests. The duty of loyalty specifically prohibits self-dealing — transacting with the corporation on one's own behalf without disclosure and approval. Section 31 of RA 11232 provides that a contract between a corporation and a director, or a company in which the director has a material interest, is voidable at the option of the corporation unless: (a) the director's interest is disclosed in good faith to the board; (b) the board approves the contract with the interested director excluded from voting and the vote of disinterested directors constituting a quorum; and (c) the contract is fair and reasonable. For transactions involving corporate funds or property above thresholds set by the SEC, stockholder ratification may also be required. A director who breaches the duty of loyalty may be held personally liable for damages under Section 30 of RA 11232, and in cases of fraud, may face criminal liability. The Supreme Court in Prime White Cement Corporation v Intermediate Appellate Court (G.R. No. L-68555, 1990) established that a director acting in a transaction adverse to the corporation can be held personally liable for the damage caused.
A related-party transaction (RPT) under Philippine law is any dealing or arrangement between a corporation and a related party — a concept defined by the SEC and the Bangko Sentral ng Pilipinas (BSP) in their respective governance codes. Under SEC Memorandum Circular No. 19, Series of 2016 (Code of Corporate Governance for Publicly Listed Companies), related parties include: directors, officers, and significant stockholders (those owning 10% or more of outstanding shares) of the corporation; their spouses and relatives within the fourth degree of consanguinity or affinity; entities controlled by or under common control with the corporation; subsidiaries and affiliates; and key management personnel. RPTs include loans, guarantees, property sales or purchases, service arrangements, and any other transaction where a related party has a material interest. For PLCs, the SEC requires: disclosure of all material RPTs in the Annual Corporate Governance Report (ACGR) and definitive information statements; review by the RPT Committee; and board approval with interested directors recused. The BSP similarly requires banks to disclose RPTs and observe the single borrower's limit and DOSRI (Directors, Officers, Stockholders and Related Interests) regulations under Section 36 of the General Banking Law (RA 8791) and BSP Circular No. 423. BSP Circular No. 915 (2016) on DOSRI regulations caps total outstanding credit to DOSRI at 15% of the bank's total loan portfolio.
The Statement of Assets, Liabilities and Net Worth (SALN) is a mandatory annual disclosure document required of all public officials and employees in the Philippines under Section 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees (Republic Act 6713, 1989). The SALN must be filed on or before April 30 of every year — or within 30 days after assumption of office for new officials — and must disclose: all assets (real property, personal property, investments, and cash on hand or in bank); all liabilities (loans, mortgages, and other obligations); business interests and financial connections; and relatives in government service within the fourth degree of consanguinity or affinity. The SALN form was revised by the Office of the Ombudsman in 2015 and is available at ombudsman.gov.ph. Under Republic Act 3019 (Anti-Graft and Corrupt Practices Act), SALNs that reveal a disproportionate accumulation of wealth may trigger a lifestyle check investigation by the Office of the Ombudsman, the Commission on Audit (COA), or the Civil Service Commission (CSC). The Sandiganbayan — the anti-graft court — has jurisdiction over plunder, graft, and ill-gotten wealth cases involving public officials, including those arising from undisclosed conflicts of interest in government contracts. The Supreme Court has ruled that failure to disclose assets in the SALN constitutes dishonesty and is grounds for dismissal from public service.
A Conflict of Interest Policy (Philippines) does not legally require a lawyer in Philippines, and individuals and businesses may draft and execute the document independently. The Revised Corporation Code (RA 11232, 2019) does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified Philippines lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of the Philippines has jurisdiction over disputes arising from this type of document, and Securities and Exchange Commission (SEC Philippines) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
A Conflict of Interest Policy (Philippines) does not legally require a lawyer in the Philippines, though legal advice is recommended. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contracts. The Securities and Exchange Commission (SEC) regulates corporate documents. The Department of Labor and Employment (DOLE) oversees employment agreements. The Data Privacy Act of 2012 (Republic Act No. 10173) and National Privacy Commission (NPC) impose data protection obligations. The Bureau of Internal Revenue (BIR) requires tax compliance. Forms-legal.com provides this template as a starting point — always review with a qualified Philippine attorney for significant transactions. Under Philippines law, Revised Corporation Code (RA 11232, 2019), parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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