IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO.

11057
(PERSONAL PROPERTY SECURITY ACT)

RULE I
Preliminary Provisions
SECTION 1.01. Title. — These Rules shall be known and cited as the
Implementing Rules and Regulations of Republic Act No. 11057, otherwise
known as the "Personal Property Security Act" or the "PPSA."
SECTION 1.02. Purpose. — These Rules are hereby promulgated to
prescribe the procedures and guidelines for the implementation of
the PPSA in order to facilitate compliance therewith and to achieve the
objectives thereof.
SECTION 1.03. Interpretation Clause. — These Rules shall be liberally
construed to ensure the fulfillment of the policy objectives of the PPSA.
SECTION 1.04. Declaration of Policy. — It is the policy of the State to
promote economic activity by increasing access to least cost credit,
particularly for micro, small, and medium enterprises, by establishing a
unified and modern legal framework for securing obligations with
personal property.
SECTION 1.05. Definition of Terms. — As used in these Rules, the
following terms shall mean:
a) Commodity contract — a commodity futures contract, an option
on a commodity futures contract, a commodity option, or
another contract if the contract or option is:
(i) Traded on or subject to the rules of a board of trade that
has been designated as a contract market for such a
contract; or
(ii) Traded on a foreign commodity board of trade, exchange,
or market, and is carried on the books of a commodity
intermediary for a commodity customer;
b) Competing claimant — a creditor of a grantor or other person with
rights in an encumbered asset that may be in competition
 with the rights of a secured creditor in the same encumbered
asset;
c) Consumer goods — Goods that are used or acquired for use
primarily for personal, family or household purposes;
d) Control agreement — an agreement in writing between the
grantor and the secured creditor which perfects the security
interests over intangible asset.
(i) With respect to intermediated securities, the control
agreement is among the issuer or the intermediary, the
grantor and the secured creditor, according to which the
issuer or the intermediary agrees to follow instructions
from the secured creditor with respect to the security,
without further consent from the grantor;
(ii) With respect to rights to a deposit account, the control
agreement is among the deposit-taking institution, the
grantor and the secured creditor, according to which the
deposit-taking institution agrees to follow instructions
from the secured creditor with respect to the payment
of funds credited to the deposit account without further
consent from the grantor;
(iii) With respect to commodity contracts, the control
agreement is among the grantor, secured creditor, and
intermediary, according to which the commodity
intermediary will apply any value distributed on account
of the commodity contract as directed by the secured
creditor without further consent by the commodity
customer or grantor.
e) Default — the failure of a debtor to pay or otherwise perform a
secured obligation, and any other event that constitutes
default under the terms of an agreement between the grantor
and the secured creditor;
f) Deposit account — consists of deposits in deposit-taking
institutions;
g) Deposit-taking institution — refers to a bank as defined
under Republic Act No. 8791, otherwise known as the
"General Banking Law," a non-stock savings and loan
association as defined under Republic Act No. 8367, or the
"Revised Non-stock Savings and Loan Association Act of 1997,"
or a cooperative as defined under Republic Act No.
9520 otherwise known as the "Philippine Cooperative Code";
h) Equipment — means a tangible asset other than inventory or
consumer goods, or livestock, that is primarily used or
intended to be used by the grantor in the operation of its
business;
i) Financial lease — "financial leasing" of movable properties as
defined in Section 3 (d) of Republic Act No. 5980, as amended
by Republic Act No. 8556, or the "Financing Company Act of
1998";
j) Fixtures — property attached to an immovable or a movable;
k) Future property — moans any movable property which does not
exist or which the grantor does not have rights in or the
power to encumber at the time the security agreement is
concluded;
l) Grantor —
(i) The person who grants a security interest in collateral to
secure its own obligation or that of another person;
(ii) A buyer or other transferee of a collateral that acquires its
right subject to a security interest;
(iii) A transferor in an outright transfer of an accounts
receivable; or
(iv) A lessee of goods.
m) Intangible asset — means any movable property other than a
tangible asset including, but not limited to, investment
property, deposit accounts, commodity contracts and
receivables;
n) Intellectual property — shall refer to "intellectual property rights"
defined in Section 4.1 of Republic Act No. 8293 or the
"Intellectual Property Code of the Philippines." It shall include
copyright, trademarks, service marks, patents, industrial
designs and trade secrets;
o) Intermediary — a person, including, but not limited to, a bank,
trust entity, depositary, broker, or central securities
depositary, that in the ordinary course of business or regular
activity maintains an account for such securities or assets, for
another person, and is acting in that capacity;
p) Intermediated securities — means securities credited to a
securities account and rights in securities resulting from the
credit of securities to a securities account;
q) Inventory — means tangible assets held by the grantor for sale or
lease in the ordinary course of the grantor's business,
including raw materials and work in process;
r) Investment property — means any property right arising from an
investment. The term shall include but will not be limited to
property in securities and commodity contracts;
s) Lien — a qualified right or a proprietary interest, which may be
exercised over the property of another;
t) Non-intermediated securities — means securities other than
Intermediated Securities;
u) Notice — a statement of information that is registered in the
Registry relating to a security interest or lien. The term
includes an initial notice, amendment notice, and termination
notice;
v) Operating lease — an agreement by which the owner temporarily
grants the use of his property to another who undertakes to
pay rent therefor;
w) Perfection — any act authorized by the PPSA and these Rules that
makes a security interest binding as against third parties;
x) Possession — the holding of a thing or the enjoyment of a right;
y) Priority — the right of a person in an encumbered asset in
preference to the right of a competing claimant;
z) Proceeds — any property received upon sale, lease or other
disposition of collateral, or whatever is collected on or
distributed with respect to collateral, claims arising out of the
loss or damage to the collateral, as well as a right to insurance
payment or other compensation for loss or damage of the
collateral;
aa) Product — a tangible asset which results when a tangible asset is
so physically associated or united with one or more other
tangible asset of a different kind, or when one or more
tangible assets are so manufactured, assembled or processed,
that they have lost their separate identities;
bb) Purchase money security interest — a security interest in goods
taken by the seller to secure the price or by a person who
gives value to enable the grantor to acquire the goods to the
extent that the credit is used for that purpose;
cc) Receivable — means a right to payment of a monetary obligation,
excluding a right to payment evidenced by a negotiable
instrument, a right to payment of funds credited to a bank
account and a right to payment under a non-intermediated
security;
dd) Recognized market — an organized market in which large
volumes of similar assets are bought and sold between many
different sellers and buyers, and accordingly one in which
prices are set by the market and not negoiated between
individual sellers and buyers;
ee) Registration — the process of filing a notice as defined under
these Rules with the Registry;
ff) Registry — the centralized and nationwide electronic registry
established in the Land Registration Authority (LRA) where
notice of a security interest and a lien in personal property
may be registered;
gg) Secured creditor — a person that has a security interest. For the
purposes of registration and priority only, it includes a buyer
of an account receivable and a lessor of goods under an
operating lease for not less than one (1) year;
hh) Securities account — an account maintained by an intermediary
to which securities may be credited or debited;
ii) Security — shares, participation or interests in a corporation or in
a commercial enterprise or profit-making venture and
evidenced by a certificate, contract, instruments, whether
written or electronic in character. It includes but is not limited
to:
(i) Shares of stocks, bonds, debentures, notes as evidence of
indebtedness, asset-backed securities;
(ii) Investment contracts, certificates of interest or
participation in a profit-sharing agreement, certificates
of deposit for a future subscription;
(iii) Fractional undivided interests in oil, gas or other mineral
rights;
(iv) Derivatives like options and warrants;
(v) Certificates of assignments, certificates of participation,
trust certificates, voting trust certificates or similar
instruments;
(vi) Proprietary or nonproprietary membership certificates in
corporations; and
(vii) Other instruments as may in the future be determined by
the Securities and Exchange Commission.
jj) Security interest — a property right in collateral that secures
payment or other performance of an obligation, regardless of
whether the parties have denominated it as a security
interest, and regardless of the type of asset, the status of the
grantor or secured creditor, or the nature of the secured
obligation; including the right of a buyer of accounts
 receivable and a lessor under an operating lease for not less
than one (1) year;
kk) Tangible asset — means any tangible movable asset. Except in
Rules 3.07, 3.08, 4.09, and 6.05, this term includes money,
negotiable instruments, negotiable documents and
certificated non-intermediated securities but only if the mere
possession of such instruments results in the ownership of
the underlying rights or property embodied by them, in
accordance with the laws governing such instruments;
ll) Writing — for the purpose of the PPSA and these Rules, includes
electronic records.
RULE II
Scope of Application
SECTION 2.01. Scope. — These Rules shall apply to all transactions of
any form that secure an obligation with personal property, whether it is a
tangible or an intangible asset, except interests in aircraft subject
to Republic Act No. 9497, or the "Civil Aviation Authority Act of 2008," and
interests in ships subject to Presidential Decree No. 1521, or the "Ship
Mortgage Decree of 1978."
SECTION 2.02. Forms of Security Arrangements. — Contracting parties
are free to enter into any form of security arrangements over movable
property, as long as the security arrangement covering the same is not
inconsistent with the PPSA or these Rules. Subject to existing law, parties
may also apply these Rules to other functional equivalents of security
interest, including fiduciary transfers of title, financial lease; assignment or
transfer of receivables; and sale with retention of title.
SECTION 2.03. Security Interests in Personal Property. — A security
interest may be created over all forms of tangible or intangible asset or
personal property as defined by the Civil Code, including but not limited
to:
(a) Rights arising from contracts, including but not limited to:
1. Securities
2. Commodity contracts
 3. Lease of goods including financial leases and operating
leases for a period of not less than one (1) year
(b) Equipment
(c) Inventory
(d) Deposit accounts
(e) Negotiable instruments
(f) Negotiable documents of title
(g) Consumer goods
(h) Intellectual property
(i) Livestock
(j) Fixtures, accessions, and commingled goods, or
(k) Future property or after-acquired assets.
Provided, that a security interest can only be created on the asset
over which the grantor has a legal right.
RULE III
Creation of Security Interest
Creation of a Security Interest
SECTION 3.01. Creation of Security Interest. — A security interest shall
be created by a security agreement or the lease of an operating lease for
not less than one (1) year. A security agreement is likewise created by the
sale of an account receivable, unless otherwise stipulated by all the
parties in the document of sale.
Section 3.02. Continuity of Security Interest. — A security interest
created under the PPSA shall continue in the collateral notwithstanding
sale, lease, license, exchange, or other disposition of the collateral, except
as otherwise provided in these Rules, or as agreed upon by the parties.
Form of the Security Agreement
SECTION 3.03. Form of Security Agreement. — A security agreement
must be contained in a written contract signed by the parties. It must
identify the collateral and the secured obligation. It may consist of one or
more writings that, taken together, establish the intent of the parties to
create a security interest.
The security agreement shall likewise provide for the language to be
used in agreements and notices. The grantor shall be given the option to
have the agreement and notices in Filipino. The Department of Finance
(DOF) shall prepare model security agreements in plain English and
Filipino provided in Annex "A" of these Rules.
SECTION 3.04. Description of Collateral. — A description of collateral
in the security agreement and/or in registration notices shall be
considered sufficient if it reasonably identifies the collateral. A specific
description of the collateral shall not be required in constituting the
security interest. A description such as "all personal property," "all
equipment," "all inventory," or "all personal property within a generic
category" of the grantor shall be sufficient.
Asset-Specific Rules
SECTION 3.05. Security Interests Over Future Property. —
(a) A security agreement may provide for the creation of a security
interest in future property or after-acquired assets, but the security
interest in that property is created only when the grantor acquires rights
in it or the power to encumber it.
(b) A security agreement may provide that a security interest in a
tangible asset that is transformed into a product extends to the product. A
security interest that extends to a product is limited to the value of the
encumbered asset immediately before it became part of the product.
(c) A security agreement may provide that a security interest in a
tangible asset extends to its replacement. A security interest that extends
to a replacement is limited to the value of the encumbered asset
immediately before it was replaced.
SECTION 3.06 Security Interests Over Right to Proceeds and
Commingled Funds. —
(a) A security interest in personal property shall extend to its
identifiable or traceable proceeds.
 (b) Where proceeds in the form of funds credited to a deposit
account or money are commingled with other funds or money:
(i) The security interest shall extend to the commingled money or
funds, notwithstanding that the proceeds have ceased to be
identifiable to the extent they remain traceable;
(ii) The security interest in the commingled funds or money shall be
limited to the amount of the proceeds immediately before
they were commingled; and
(iii) If at any time after the commingling, the balance credited to the
deposit account or the amount of the commingled money is
less than the amount of the proceeds immediately before
they were commingled, the security interest against the
commingled funds or money shall be limited to the lowest
amount of the commingled funds or money between the time
when the proceeds were commingled and the time the
security interest in the proceeds is claimed.
SECTION 3.07. Security Interest Over Tangible Assets Commingled in a
Mass. —
(a) A security interest in a tangible asset that is commingled in a
mass extends to the mass.
(b) A security interest that extends to a mass is limited to the same
proportion of the mass as the quantity of the encumbered asset bore to
the quantity of the entire mass immediately after the commingling.
SECTION 3.08. Security Interest in Certain Accounts Receivable. —
(a) A security interest in an account receivable shall be effective
notwithstanding any agreement between the grantor and the account
debtor or any secured creditor limiting in any way the grantor's right to
create a security interest; Provided: Nothing in this section affects the right
of a buyer to create a security interest over the account
receivable. Provided, further: that any release of information is subject to
agreements on confidentiality.
(b) Nothing in this section shall affect any obligation or liability of the
grantor for breach of the agreement in subsection (a).
 (c) Any stipulation limiting the grantor's right to create a security
interest shall be void.
(d) This section shall apply only to accounts receivable arising from:
(i) A contract for the supply or lease of goods or services other than
financial services;
(ii) A construction contract or contract for the sale or lease of real
property; and
(iii) A contract for the sale, lease or license of intellectual property.
SECTION 3.09. Protection of Account Debtor. — Except as otherwise
provided in the PPSA and these Rules, the creation of a security interest in
a receivable does not, without the consent of the debtor of the receivable,
affect its rights and obligations, including the payment terms contained in
the contract giving rise to the receivable. A payment instruction may
change the person, address or account to which the debtor of the
receivable is required to make payment.
SECTION 3.10. Rights to Payment of Funds Credited to a Bank
Account. — A security interest in a right to payment of funds credited to a
bank account is effective notwithstanding an agreement between the
grantor and the deposit-taking institution limiting in any way the grantor's
right to create a security interest.
SECTION 3.11. Tangible Assets with Respect to which Intellectual
Property is Used. — A security interest in a tangible asset with respect to
which intellectual property is used does not extend to the intellectual
property and a security interest in the intellectual property does not
extend to the tangible asset.
Extinguishment of Security Interest
SECTION 3.12. Extinguishment of Security Interest. — A security
interest is extinguished when all secured obligations have been
discharged and there are no outstanding commitments to extend credit
secured by the security interest.
RULE IV
Perfection of Security Interests
Perfection of Security Interest
 SECTION 4.01. Perfection of Security Interest. —
(a) On perfection, a security interest becomes effective against third
parties.
(b) A security interest shall be perfected when it has been created
and the secured creditor has taken one of the actions in
accordance with these Rules.
Means of Perfection
SECTION 4.02. Means of Perfection — Tangible Assets. — A security
interest in tangible assets may be perfected by either:
(a) Registration of a notice as defined under these Rules with the
Registry: Provided, that a security that is not registered
remains valid between the parties; or
(b) Possession, whether actual or constructive, of the tangible asset
either by the secured creditor or a depositary acting for the
secured creditor. Provided, that the debtor or the grantor
cannot possess the collateral on behalf of the secured creditor
for purposes of perfecting and maintaining the security
interest over such collateral.
If a security interest in a tangible asset is effective against third
parties, a security interest in a mass to which the security interest extends
is effective against third parties without any further act.
SECTION 4.03. Means of Perfection — Intangible Assets. — A security
interest in intangible assets may be perfected by either:
(a) Registration of a notice as defined under these Rules with the
Registry: Provided, that a security that is not registered
remains valid between the parties; or
(b) Conclusion of a control agreement. For purposes of determining
the time of perfection of the security interest, the control
agreement shall be executed under oath, and shall indicate
the date and time of its execution.
 SECTION 4.04. Perfection of Security Interest in Intermediated Securities
or Deposit Accounts. — A security interest in intermediated securities or
deposit accounts may be perfected by:
(a) Registration of a notice as defined under these Rules with the
Registry: Provided, that a security that is not registered
remains valid between the parties;
(b) Creation of a security interest in favor of the deposit-taking
institution or the intermediary; or
(c) Conclusion of a control agreement.
For purposes of determining the time of perfection of the security
interest, the security agreement or control agreement shall be executed
under oath, and shall include the date and time of its execution.
Nothing in these Rules shall require a deposit-taking institution or
an intermediary under sub-section (b) to enter into a control agreement,
even if the grantor so requests. A deposit-taking institution or an
intermediary that has entered into such an agreement shall not be
required to confirm the existence of the agreement to another person
unless requested to do so by the grantor.
SECTION 4.05. Perfection of Security Interest in Electronic Securities. —
A security interest in electronic non-intermediated securities may be by:
(a) Registration of a notice as defined under these Rules with the
Registry: Provided, that a security that is not registered
remains valid between the parties;
(b) The execution of a control agreement between the grantor and
secured creditor; or
(c) Control, through notation of a security interest in the books
maintained by or on behalf of the issuer for the purpose of
recording the name of the holder of the securities.
SECTION 4.06. Perfection of Security Interest in Intermediated
Electronic Securities. — A security interest in investment property that is
electronic (i.e., a scripless or uncertificated) security held by an
intermediary may be by:
 a) Registration of a notice as defined under these Rules with the
Registry: Provided, that a security that is not registered
remains valid between the parties;
b) The execution of a control agreement between the intermediary,
the grantor and secured creditor.
For purposes of determining the time of perfection of the security
interest, the control agreement shall be executed under oath, and shall
include the date and time, specifying the hour and minute of its execution.
SECTION 4.07. Parties to, Form and Contents of a Control Agreement.
—
(a) With respect to intermediated securities, a control agreement
shall:
(i) Be executed in writing by the issuer or the intermediary, the
grantor and the secured creditor;
(ii) Stipulate that the issuer or the intermediary agrees to
follow instructions from the secured creditor with
respect to the security, without further consent from the
grantor.
(b) With respect to rights to deposit account, a control agreement
shall:
(i) Be executed in writing among the deposit-taking institution,
the grantor and the secured creditor;
(ii) Stipulate that the deposit-taking institution agrees to follow
instructions from the secured creditor with respect to
the payment of funds credited to the deposit account
without further consent from the grantor.
(c) With respect to commodity contracts, a control agreement shall:
(i) Be executed in writing among the grantor, secured creditor,
and intermediary;
(ii) Stipulate that the commodity intermediary will apply any
value distributed on account of the commodity contract
 as directed by the secured creditor without further
consent by the commodity customer or grantor.
Continuity of Perfected Security Interest
SECTION 4.08. Change in Means of Perfection. — A security interest
shall remain perfected despite a change in the means for achieving
perfection: Provided, that there was no time when the security interest
was not perfected.
SECTION 4.09. Disposition of Perfected Security Interest before Default.
—
(a) Transferee Exceptions. — Any party who obtains, in the ordinary
course of business, any movable property containing a
security interest shall take the same free of such security
interest provided he was in good faith. No such good faith
shall exist if the security interest in the movable property was
registered prior to his obtaining the property.
(b) Perfection in Proceeds. —
(i) Before default, upon disposition of the collateral, a security
interest shall extend to proceeds of the collateral
without further act and be continuously perfected, if the
proceeds are in the form of money, accounts receivable,
negotiable instruments or deposit accounts.
(ii) Before default, upon disposition of the collateral, if the
proceeds are in a form different from money, accounts
receivable, negotiable instruments or deposit accounts,
the security interest in such proceeds must be perfected
by one of the means applicable to the relevant type of
collateral within fifteen (15) days after the grantor
receives such proceeds; otherwise, the security interest
in such proceeds shall not be effective against third
parties.
SECTION 4.10. Fixtures, Accessions, and Commingled Goods. — A
perfected security interest in a movable property which has become a
fixture, or has undergone accession or commingling shall continue
provided the movable property involved can still be reasonably traced. In
determining ownership over fixtures, accessions, and commingled goods,
the provisions of Book II of Republic Act No. 386 or the "Civil Code of the
Philippines" shall apply.
RULE V
The Registry
Operation of Registry
SECTION 5.01. Establishment. — The LRA, within six (6) months from
the publication of these Rules, shall establish and administer the
centralized, nationwide Registry, which shall contain, among others, the
following information:
(a) Initial notice of security interest and lien in personal property;
(b) Amendment notice providing new information or continuing the
period of effectiveness of an initial notice;
(c) Termination notice.
The Registry shall provide electronic means for registration and
searching of notices. The LRA shall issue the necessary guidelines on the
use and management of the Registry.
SECTION 5.02. Sourcing of Funds. — The funds needed for the
implementation of these Rules shall be taken from the Special Account
arising from revenues collected by the LRA under Section 111
of Presidential Decree No. 1529, without need for any further government
approval.
SECTION 5.03. Fees Set by Regulation. — The fees for registering a
notice and for requesting a certified search report shall be set by
regulations issued by the DOF for the recovery of reasonable costs of
establishing and operating the Registry. Such regulations must take into
consideration the following requirements:
(a) Fees imposed must not be burdensome to either lender or
grantor.
(b) There shall be no fee for electronic searches of the Registry
records or for the registration of termination notices.
 (c) The Registry may charge fees for services not mentioned above.
SECTION 5.04. Registry Duties. —
(a) The Registry shall, for each registered notice:
(i) assign a unique registration number;
(ii) create a record that bears the number assigned to the
initial notice and the date and time of registration; and
(iii) maintain the record for public inspection.
(b) The Registry shall index notices by the identification number of
the grantor, except for notices containing a serial number of a
motor vehicle, which shall be indexed by serial number.
(c) The Registry shall provide a copy of the electronic record of the
notice, including the registration number and the date and
time of registration to the person who submitted it.
(d) The Registry shall maintain the capability to retrieve a record by
the identification number of the grantor, and by serial number
of a motor vehicle.
(Implementing Rules and Regulations of Republic Act No. 11057 (Personal
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Property Security Act), IRR of RA 11057, [October 10, 2019])