Corporate Promissory Note (Philippines)

A Corporate Promissory Note in the Philippines documents a credit arrangement, recording how much is owed, when it falls due and the consequences of late payment.

Under Section 1 of the Negotiable Instruments Law, a promissory note is negotiable — capable of being transferred by endorsement or delivery — only if it: (1) is in writing and signed by the maker; (2) contains an unconditional promise to pay a certain sum in money; (3) is payable on demand or at a fixed or determinable future time; (4) is payable to order or to bearer; and (5) contains the name of the payee. A corporate promissory note that meets these requirements may be endorsed and transferred to a third-party holder in due course, who takes the note free from personal defenses of the maker under Section 57 of the Negotiable Instruments Law.

A corporate promissory note that does not meet all the requirements for negotiability is still a valid and enforceable written evidence of debt under the Civil Code. Under Article 1956 of the Civil Code, interest is due only if expressly stipulated in writing — the promissory note must state the agreed interest rate, or no interest is recoverable.

The Bureau of Internal Revenue imposes Documentary Stamp Tax on promissory notes and deeds of indebtedness at PHP 1.00 per PHP 200 of the face value of the note under Section 179 of the National Internal Revenue Code (NIRC, Republic Act No. 8424 as amended by the TRAIN Law, Republic Act No. 10963). The DST must be paid within 5 days after the close of the month in which the promissory note was executed using BIR Form 2000. An unstamped promissory note is not admissible in evidence in Philippine courts for its primary purpose under Section 201 of the NIRC.

For corporate makers, the promissory note must be authorized by the Board of Directors under Section 23 of the Revised Corporation Code (RA 11232). The signatory must be the corporate officer authorized in the Board Resolution to sign debt instruments on behalf of the corporation. Banks and financing companies regulated by the Bangko Sentral ng Pilipinas (BSP) require promissory notes as standard loan documentation under BSP Circular No. 706-2011 (Regulations on Loans and Other Credit Accommodations).

A Corporate Promissory Note in the Philippines is needed in every corporate borrowing transaction where the parties want a clean, stand-alone document evidencing the debt obligation separate from the main loan agreement.

A Corporate Promissory Note is needed when a Philippine corporation borrows from a bank or BSP-regulated financing company, as banks universally require a signed promissory note executed by the corporate borrower's authorized officers as the primary evidence of the loan obligation and the foundation for any subsequent demand for payment.

A Corporate Promissory Note is needed for intercompany loans within a corporate group — parent-to-subsidiary or between affiliates — where BIR transfer pricing rules under Revenue Regulations No. 2-2013 require arm's-length documentation of the interest rate and repayment terms.

A Corporate Promissory Note is needed when a corporation issues notes to multiple investors or lenders as part of a commercial paper program or private placement of debt instruments, regulated by SEC Memorandum Circular No. 5-2021 on the issuance of commercial papers.

A Corporate Promissory Note is needed when a corporation restructures existing debt — converting an overdue trade payable, an overdue installment purchase obligation, or an informal business credit into a formal documented loan with a new maturity schedule and agreed interest rate.

A Corporate Promissory Note is needed when a business needs collateral documentation for a secured loan — a promissory note is typically executed alongside a Deed of Real Estate Mortgage (Act No. 3135) or a Chattel Mortgage (Act No. 1508), as the note represents the primary obligation secured by the mortgage.

Parties in Philippines should prepare a Corporate Promissory Note (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.

A valid Corporate Promissory Note in the Philippines must contain the following elements to satisfy the Negotiable Instruments Law and BIR requirements.

Corporate Maker: The full legal name of the corporation as appearing in its SEC Certificate of Incorporation, its SEC Registration Number, and registered business address. The note must be signed by the corporate officer authorized in the Board Resolution — typically the President, Treasurer, or both for negotiable instruments exceeding a specified amount under the by-laws.

Unconditional Promise to Pay: The note must state an unconditional promise to pay — e.g., 'FOR VALUE RECEIVED, the undersigned promises to pay.' Any condition on the promise (e.g., 'payable only if the project is completed') destroys negotiability under Section 3 of the Negotiable Instruments Law.

Principal Amount: The exact principal amount in Philippine pesos (PHP ₱), stated in both figures and words. The figure and words must match — in case of conflict, words prevail over figures under Section 17(b) of the Negotiable Instruments Law.

Interest Rate: The annual interest rate expressed as a percentage per annum, computable from the date of the note until full payment. Per Article 1956 of the Civil Code, interest is due only if expressly stipulated in writing. The interest rate must not be unconscionable — the Supreme Court has reduced rates of 3% per month (36% per annum) or higher in numerous cases.

Maturity Date or Demand Provision: The note is payable either on a fixed date (term note) or on demand (demand note). For term notes, the exact maturity date must be stated. For demand notes, payment is due upon the payee's written demand.

Payee Identification: The full legal name of the payee — 'Pay to [Name]' (order note) or 'Pay to bearer' (bearer note). For corporate transactions, order notes are preferred as they identify the intended recipient.

Board Authorization: Attach or reference the Board Resolution authorizing the execution of the promissory note. BIR DST at PHP 1.00 per PHP 200 of face value under Section 179 of the NIRC must be paid and the BIR stamp affixed to the note.

Additional compliance elements for a Corporate Promissory Note (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.