Corporate Loan Agreement (Philippines)
CORPORATE LOAN AGREEMENT
This Corporate Loan Agreement ("Agreement") is entered into as of [Agreement Date], at [Notarization Place], Philippines, by and between:
BORROWER: [Borrower Name], a corporation duly organized under the laws of the Philippines with SEC Registration No. [Borrower SEC], with principal office at [Borrower Address] (hereinafter, the "Borrower"); AND
LENDER: [Lender Name], with address at [Lender Address] (hereinafter, the "Lender").
1. LOAN AMOUNT AND DISBURSEMENT
1.1 The Lender agrees to lend to the Borrower, and the Borrower agrees to borrow from the Lender, the principal sum of [Loan Amount Words] ([Loan Amount]) (the "Loan"), subject to the terms of this Agreement.
1.2 The Loan shall be disbursed by the Lender to the Borrower on [Disbursement Date] by bank transfer to the Borrower's designated bank account.
2. INTEREST
2.1 The Loan shall bear interest at [Interest Rate], computed on the outstanding principal balance on a 365-day year basis, from the date of disbursement until full payment of the Loan.
2.2 Interest is expressly stipulated in writing as required by Article 1956 of the Civil Code of the Philippines (Republic Act No. 386).
3. REPAYMENT
3.1 The Borrower shall repay the Loan principal and accrued interest in accordance with the following schedule: [Repayment Schedule], with final maturity on [Maturity Date].
3.2 The Borrower may prepay the Loan in whole or in part at any time without penalty, provided the Borrower gives 5 business days' prior written notice to the Lender.
4. SECURITY
4.1 The Borrower's obligations under this Agreement shall be secured by: [Security].
5. EVENTS OF DEFAULT
5.1 Each of the following constitutes an Event of Default:
[Default Events]
5.2 Upon an Event of Default, the entire outstanding balance of the Loan shall become immediately due and payable at the option of the Lender, without further notice or demand.
6. TAXES
6.1 Documentary Stamp Tax at PHP 1.00 per PHP 200 of the Loan amount under Section 179 of the National Internal Revenue Code shall be paid by the Borrower. All withholding taxes applicable to interest payments shall be deducted and remitted to the BIR by the party legally obligated to withhold.
7. GOVERNING LAW
7.1 This Agreement is governed by the laws of the Republic of the Philippines. Any dispute shall be resolved by the appropriate court having jurisdiction.
IN WITNESS WHEREOF, the parties have signed this Agreement on the date first above written.
[Borrower Name]
Borrower (By Authorized Representative)
[Lender Name]
Lender
Borrower (Authorized Representative)
________________
Signature
Lender
________________
Signature
What Is a Corporate Loan Agreement (Philippines)?
A Corporate Loan Agreement in the Philippines sets out the conditions on which money is lent, including the rate of interest, any security taken and what happens on default.
Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing. A verbal agreement on interest is unenforceable. The agreed interest rate must be stated as an annual percentage rate (APR) in the loan agreement. The Supreme Court of the Philippines, in Nacar v. Gallery Frames (G.R. No. 189871, August 13, 2013), established the current legal interest rate of 6% per annum applicable to money judgments where no rate is stipulated in the contract, superseding the earlier 12% rate.
The Usury Law (Act No. 2655) technically set interest rate ceilings but was effectively suspended by Central Bank Circular No. 905, Series of 1982, which removed the ceiling on interest rates for all types of loans. However, the Supreme Court of the Philippines under the doctrine of unconscionable interest rates retains the power to reduce excessive, iniquitous, unconscionable, or exorbitant interest rates under Article 1229 of the Civil Code. In Spouses Albos v. Spouses Embisan (G.R. No. 210831, November 26, 2014), the Court reduced a 5% per month rate to 12% per annum as unconscionable.
For corporate borrowers from banks, the General Banking Law (RA 8791) and BSP Circular No. 1048-2019 (Regulations on Credit Risk) require that loan agreements comply with credit risk management standards including proper documentation of collateral, credit evaluation, and loan covenants. BSP-supervised financial institutions must report large exposures to the BSP Credit Risk Database.
Interest income earned by a Philippine corporation on a loan is subject to regular income tax at 25% (or 20% for domestic corporations with net taxable income not exceeding PHP 5 million) under Section 27(A) of the NIRC as amended by the CREATE Law (Republic Act No. 11534). Documentary Stamp Tax of PHP 1.00 per PHP 200 of the loan amount applies under Section 179 of the NIRC.
The legal framework governing the Corporate Loan Agreement (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 Corporate Loan Agreement (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Civil Code of the Philippines (RA 386), Art. 1933 sets the foundational requirements.
When Do You Need a Corporate Loan Agreement (Philippines)?
A Corporate Loan Agreement in the Philippines is needed whenever a Philippine corporation borrows funds from any lender and the parties want a formal written record of the loan terms, repayment schedule, and security arrangements.
A Corporate Loan Agreement is needed when a Philippine corporation borrows from a bank or financing company regulated by the Bangko Sentral ng Pilipinas (BSP) or the Securities and Exchange Commission (SEC), as the bank will require a signed loan agreement as a primary loan document before releasing funds.
A Corporate Loan Agreement is needed for intercompany loans — when a parent corporation lends to a subsidiary, or when related corporations lend to each other — to document the arm's-length interest rate and repayment terms required for transfer pricing compliance under BIR Revenue Regulations No. 2-2013 on Transfer Pricing.
A Corporate Loan Agreement is needed when a corporation's Board of Directors authorizes a shareholder, director, or officer loan to the corporation, confirming the transaction is documented and the interest rate is at least the prevailing market rate to avoid BIR imputed interest issues under Section 50 of the NIRC.
A Corporate Loan Agreement is needed when a foreign corporation lends money to a Philippine affiliate, as Bangko Sentral ng Pilipinas (BSP) Foreign Borrowings Registration under BSP Circular No. 1072-2020 requires registration of foreign loans with the BSP if the borrower wishes to service the debt using foreign exchange purchased from the Philippine banking system.
A Corporate Loan Agreement is needed when a Philippine corporation receives a loan from a private individual, to evidence that the transaction is a bona fide loan and not a capital contribution or equity investment — the distinction affecting the corporation's debt-to-equity ratio, tax treatment, and SEC reporting obligations under Section 177 of the Revised Corporation Code.
What to Include in Your Corporate Loan Agreement (Philippines)
A valid and enforceable Corporate Loan Agreement for a Philippine corporation must contain the following essential elements.
Parties: Full legal names, SEC Registration Numbers, and addresses of the borrowing corporation and the lender. For corporate lenders and corporate borrowers, include the name and title of the authorized signatory and attach the Board Resolution authorizing the loan transaction — required by the Revised Corporation Code (RA 11232) Section 23 which restricts ultra vires acts. For bank lenders, the credit officer's signature authority must be within BSP-prescribed limits.
Loan Amount and Drawdown: The principal loan amount in Philippine pesos (PHP ₱), the date and method of disbursement (lump sum or tranches), and the bank account details for the transfer. State whether this is a revolving credit facility or a term loan under BSP credit classification rules.
Interest Rate: The agreed annual interest rate stated as a percentage per annum, the basis of computation (365-day or 360-day year), and whether the rate is fixed or floating (e.g., benchmarked against the BSP overnight rate plus a spread). Per Article 1956 of the Civil Code, interest must be expressly stipulated in writing or none is due.
Repayment Schedule: The maturity date, whether repayment is in equal monthly installments (amortization schedule) or in a bullet payment at maturity, and the due date for each payment. Grace periods, prepayment rights, and prepayment penalties (if any) must be specified.
Events of Default: Specific events that trigger acceleration of the entire loan balance — failure to pay principal or interest, insolvency, cross-default on other obligations, change of control, breach of financial covenants, or material adverse change in the borrower's financial condition.
Security and Collateral: Description of any collateral (real property mortgage, chattel mortgage, pledge of shares, assignment of receivables) supporting the loan, with reference to the separate security document (Deed of Real Estate Mortgage under Act No. 3135, Chattel Mortgage under Act No. 1508, or Pledge under Articles 2085-2123 of the Civil Code). BIR Documentary Stamp Tax of PHP 1.00 per PHP 200 of loan amount applies under Section 179 of the NIRC.
Additional compliance elements for a Corporate Loan Agreement (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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}Frequently Asked Questions
Philippine corporations may charge any agreed interest rate on loans because Central Bank Circular No. 905, Series of 1982 effectively suspended the Usury Law (Act No. 2655) interest rate ceilings. However, the Supreme Court of the Philippines retains jurisdiction to reduce unconscionable interest rates under Article 1229 of the Civil Code. The Court has consistently struck down rates of 3% per month (36% per annum) or higher as excessive and contrary to morals and public policy, reducing them to 12% per annum in cases such as Spouses Albos v. Spouses Embisan (G.R. No. 210831, November 26, 2014). Where no interest rate is specified in a written agreement, Article 1956 of the Civil Code provides that no interest is due — the lender cannot claim interest as a matter of right. For money judgment interest (where a court orders the borrower to pay), the current legal rate is 6% per annum from finality of judgment under Nacar v. Gallery Frames (G.R. No. 189871, August 13, 2013). For bank loans, the Bangko Sentral ng Pilipinas publishes the Philippine Reference Rate (PhRR) as a benchmark.
A corporate loan agreement in the Philippines requires board of directors approval when the borrowing exceeds the ordinary course of business or when the corporation's by-laws require board approval for loans above a certain amount. Under Section 23 of the Revised Corporation Code (RA 11232), the board of directors exercises the corporate powers and manages the business of the corporation. A corporate act beyond the authority of the officers who signed the agreement may be challenged as ultra vires unless ratified by the board. Standard practice for Philippine banks is to require a Board Resolution certified by the Corporate Secretary authorizing the borrowing, the specific amount, the terms, the authorized signatories, and the collateral to be pledged. The Board Resolution must be consistent with the corporation's articles of incorporation and by-laws. For loans from BSP-supervised financial institutions, the bank's own credit manual typically requires a board resolution for all corporate loans regardless of amount. Loans between related parties — parent-subsidiary or among affiliated corporations — also require separate board approval from each corporate entity involved to avoid conflicts of interest under Section 31 of the Revised Corporation Code.
Several taxes apply to corporate loan transactions in the Philippines. Documentary Stamp Tax (DST) of PHP 1.00 per PHP 200 of the loan principal applies to loan agreements, promissory notes, and deeds of indebtedness under Section 179 of the National Internal Revenue Code (NIRC). The DST must be paid to the BIR using Form 2000 within 5 days after the close of the month of execution. Interest income earned by the lender is subject to income tax: Philippine corporations pay regular corporate income tax at 25% (or 20% for qualified SMEs) on interest income under Section 27(A) of the NIRC as amended by the CREATE Law (RA 11534). If the lender is a Philippine bank, a 20% final withholding tax applies to interest payments under Section 27(D)(1) of the NIRC. For loans from foreign lenders, interest payments to non-resident foreign corporations are subject to a 20% final withholding tax under Section 28(B)(5)(b) of the NIRC, which may be reduced under an applicable tax treaty (e.g., the Philippines-Japan Tax Treaty provides for a 10% rate). Documentary Stamp Tax and withholding tax compliance are verified by the BIR during corporate tax audits.
A Philippine corporation may lend money to its shareholders, directors, or officers under specific conditions, but these transactions are subject to restrictions and scrutiny. Under Section 31 of the Revised Corporation Code (RA 11232), directors and officers who contract with the corporation are required to act in good faith and with the diligence of a good father of a family; any contract they enter with the corporation must be fair and reasonable. Loans from the corporation to its officers, directors, or shareholders must be approved by the board and made on arm's-length terms (market interest rate, documented repayment terms) to avoid being characterized as disguised dividends or illegal corporate donations. The Bureau of Internal Revenue under Section 50 of the NIRC on transfer pricing may impute an interest rate equal to the prevailing market rate on below-market or interest-free loans to related parties, subjecting the deemed interest income to corporate income tax. For banks and quasi-banks, the General Banking Law (RA 8791) Section 36 prohibits directors and officers from obtaining loans from their own bank unless approved by a majority of the board with the interested director abstaining.
A Corporate Loan Agreement (Philippines) does not legally require a lawyer in Philippines, and individuals and businesses may draft and execute the document independently. The Civil Code of the Philippines (RA 386), Art. 1933 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.
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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