COVID-19: BUSINESS UNUSUAL

DOING BUSINESS IN THE PHILIPPINES IN THE TIME OF COVID-19

The novel coronavirus disease 2019 (COVID-19) pandemic does not just pose a threat to the health and security of the Philippine people but it has caused and is continuing to cause tremendous disruption to Philippine business and economy. What does this mean for you, our dear clients? How do you do business in the Philippines in the time of COVID-19? To aid you in navigating the various issues affecting businesses that have arisen from the pandemic, we have prepared this short primer on the current regulations in key practice areas including Labor & Employment, Corporate Law & Governance, Taxation, Intellectual Property, Maritime & Shipping, Litigation, and Immigration.

BACKGROUND

In an attempt to prevent the further spread of COVID-19 throughout the country, President Rodrigo Duterte placed the entire Luzon Island under Enhanced Community Quarantine (ECQ) effective 16 March 2020. It was initially planned to last until 12 April 2020, however, the ECQ has since been further extended to 15 May 2020 and there are indications that it might be extended further. Other cities and provinces outside of Luzon likewise implemented their own versions of the ECQ. Movement in and out of the quarantine zone is restricted except for health workers and others working in essential services. Only private establishments engaged in providing basic necessities and activities such as relating to food and medicine production, food preparation and delivery services, water refilling stations, manufacturing and processing plants of basic food products and medicines, banks, money transfer services, power, energy, water and telecommunications supplies and facilities, are allowed to open. Business Process Outsourcing (BPO) and export-oriented enterprises are also allowed to remain operational with skeletal workforce subject to observance of social distancing measures and subject to provision of temporary accommodation arrangements by 18 March 2020. All other businesses not falling under the above categories are ordered to remain closed. Mass public transport facilities have been suspended and land, air and sea travel are restricted. Police and military presence is heightened to ensure general compliance with the ECQ measures.

As of 23 April 2020, the Philippine Department of Health (DOH) has reported a total of 6,981 COVID-19 positive cases. Out of this number, there have been 722 reported recoveries and 462 reported deaths. Mass testing has not been possible because of the limited supply of test kits. To this end, a new law was passed – the Bayanihan Act of 2020 – which granted the Office of the President such emergency powers to, among others, enable the quick procurement of the necessary test kits and personal protection equipment for the health frontliners to help in the fight against this deadly COVID-19 disease.

DOMESTIC EMPLOYMENT:

The Department of Labor and Employment (DOLE) issued a Labor Advisory encouraging employers affected by the ECQ measures of the National Government to utilize Flexible Working Arrangements (FWA) as analternative to termination of employment of affected workers or closure of establishment

Among the allowed FWA are reduction in work days and/or work hours (with corresponding reduction in pay), rotation of workers, forced leaves, telecommuting, work from home arrangement, or any other alternate work arrangement to cushion or mitigate the effect of loss of income. Both employer and employees must agree to the FWA as this is a voluntary arrangement

Employers who wish to utilize FWA are required to file the Establishment Report to DOLE prior to implementing the FWA

There is no moratorium on retrenchment (even as DOLE urges employers not to do so for humanitarian reasons) therefore if necessary to prevent serious business losses as a result of the COVID-19 crisis, this is an option of the employer. Normal rules on written notice to the employee and DOLE and payment of statutory separation pay shall continue to apply

Employees whose regular wages are reduced as a result of the implementation of an FWA, are entitled to a one-time, non-conditional, lumpsum and tax-free financial assistance of Php5,000 from DOLE under the COVID-19 Adjustment Measure Program (CAMP). The employer is required to submit the Establishment Report and other supporting documents for the employees to be covered by CAMP

Employers are given until 01 June 2020 to pay for the SSS contributions that were due for February, March, and April 2020

CORPORATE GOVERNANCE:

The Philippine Securities and Exchange Commission (SEC) Main Office, Extension Offices and Satellite Offices are closed

Applications for incorporation of new corporations and partnerships shall continue to be accepted via the SEC Company Registration System (CRS) online portal

SEC has set up an interim online registration system for the processing of One Person Corporations

Branch Offices are given an extension of 30 days from lifting of the ECQ to file the Security Deposit that was originally due within the ECQ

Companies doing domestic operations only are given until 30 June 2020 to file their audited financial statements (AFS). For companies doing both domestic and international operations, are given until 30 June 2020 or 60 days from lifting of travel restrictions, whichever comes later, to file their AFS

Hearings and conferences before the Office of the General Counsel is suspended. Once ECQ is lifted, the relevant parties shall be advised of the new schedule of hearings

IMMIGRATION:

All tourist visas are deemed cancelled
Other visas (9g, EO 226, etc.) shall remain valid until their expiry. Visa holders whose visas expired during the ECQ shall be given 30 days from lifting of the ECQ to file extension or renewal without penalties

Entry of foreigners (except foreign spouses and children of returning Filipinos and diplomatic personnel) is temporarily barred
Foreigners who wish to depart shall be allowed to do so and they may obtain their emigration clearance certificate at the airport

LITIGATION:

All courts are physically closed until 30 April 2020;

All hearings before the courts nationwide are suspended except for urgent matters;

“Urgent Matters” are defined as petitions, motions and pleadings in relation to bail and habeas corpus, promulgation of judgments of acquittals, reliefs for those who may be arrested and detained during this period, and other related actions that may be filed in relation to measures imposed at the local or national levels to address the declared health emergency;

Court submissions that fall due up to 30 April 2020 is automatically extended for 30 calendar days counted from 1 May 2020. This notwithstanding, a party may still opt to file pleadings and other court submissions within the reglementary period on or before 30 April 2020 through electronic means, if available;

Work at the National Labor Relations Commission (NLRC) and the offices of the Labor Arbiters are suspended. Pending cases before the NLRC or the Labor Arbiters are deemed suspended;

Filing of Motions for Reconsideration, Petitions for Extraordinary Remedies, and appeals before the NLRC are suspended;

Single-Entry Approach (SEnA) conferences, conciliation and mediation conferences shall be terminated. SEnA Conciliator-Mediator will issue order referring matter to compulsory arbitration or to the respective office having jurisdiction over the issues once NLRC resumes office;

All NLRC mandatory conciliation and mediation conferences shall be terminated. Parties shall file their respective Position Papers within 15 days from resumption of regular offices;

CONTRACT LAW:

The COVID-19 pandemic and the ECQ measures implemented to contain its spread has affected the ability of parties to comply with contractual obligations

“Force Majeure”, also known as “fortuitous event” or “acts of God”, refers to events which could not be foreseen, or which, though foreseen, were inevitable. The COVID-19 pandemic qualifies as force majeure

Under the law, a case of force majeure generally excuses a person from performing its obligations under a contract, subject to observance of the following:

a) the cause for non-compliance with the obligation must be independent of the will of the person mandated to comply with the obligation;

b) the event must be either unforeseeable or unavoidable;

c) the event must be such as to render it impossible to fulfill the obligation in a normal manner; and

d) the person mandated to comply with the
obligation must be free from any participation in, or aggravation of the injury to the person to whom the obligation shall be rendered.

There are exceptions, though, to the rule that force majeure excuses a person from performing obligations under a contract, such as when the law or a provision of the contract says otherwise, in case the party is already in delay, or when the nature of the obligation requires the assumption of risk.

OVERSEAS EMPLOYMENT:

Philippine Overseas Employment Administration (POEA) has suspended processing of applications for accreditation of principals, renewal of licenses, manual contract processing and other services

Processing of applications for new licenses and branch offices, renewals, and like services shall resume on the next working day after lifting of the ECQ

Contract processing for land-based and sea-based workers shall be done solely through the POEA Online Processing System

Automatic 30-day extension of accreditation of principals of the Licensed Land-based Recruitment Agencies and Licensed Sea-based Manning Agencies

Outbound overseas Filipino workers (OFW) shall be allowed to depart from any PH international airport subject to compliance with COVID-19 safety guidelines

For seafarers with consummated contracts who cannot disembark or be repatriated due to the COVID-19 pandemic, their contracts can be extended for a period of 60 days provided that the seaman’s book and passport are still valid, the principal and seafarer voluntarily agreed on the extension, the seafarer is COVID-19 negative, and the extension is duly reported to the POEA

Deployment of health care workers overseas (except for those with existing contracts) is temporarily suspended

Manning agencies are required to regularly and closely monitor the status of the deployed seafarers, provide housing and food assistance to seafarers with cancelled or deferred flights or who were stranded in Metro Manila due to the ECQ, and report and coordinate with DOH on matters concerning health protocols and in compliance with the checklist for mass repatriation

TAXATION:

Deadline for filing of Corporate Income Tax Return is extended to 15 June 2020

Deadline of filing of other BIR returns have likewise been extended. For details of the respective deadlines for specific tax returns, please visit http://tiny.cc/2whhnz

Deadline to avail tax amnesty on delinquencies is extended to 8 June 2020.

Deadline for filing VAT refund is extended to 30 May 2020 or 30 days from lifting of the ECQ, whichever comes later

No documentary stamp tax (DST) shall be due on credit extensions and credit restructuring of loans by banks and financial institutions who have granted grace period on payment of loans pursuant to Bayanihan Act

The filing of any Position Paper to the Notice of Informal Conference, Position Paper on a Preliminary Assessment Notice, or Protest Letter to Final Assessment Notice and Formal Letter of Demand is extended to 30 days from lifting of the ECQ

If ECQ is extended further after 30 April 2020, the deadlines shall be further extended by 30 days from lifting of the extended ECQ

INTELLECTUAL PROPERTY:

As per IPO Circular No. 2020-011, deadlines for papers, pleadings, documents, and payments falling due from 16 March 2020 to 15 May 2020 shall be extended as follows:

a. For deadlines falling from 16 March 2020 to 31 March 2020, submissions may be filed until 31 May 2020.

b. for deadlines falling from 01 April 2020 to 15 May 2020 are extended for a period of sixty (60) calendar days from the due date

New applications for patents, utility model, industrial design, and trademark which claims a priority date must be filed through the IPOPHL electronic filing system. Filing fees for said applications including those that do not claim a priority date is deemed extended for a period of 60 days from online filing date

All scheduled hearings, including mediation, are suspended until 30 April 202

SHIPPING:

Passenger shipping operations in all ports in Luzon are suspended during ECQ;

Cargo transport via sea shall continue to facilitate movement of basic goods and commodities. ROPAX vessels shall continue in their authorized routes for the carriage of rolling cargoes;

Transportation of cargo shall remain unhampered during the ECQ;

For areas outside of Luzon, sea travel shall be subject to quarantine measures and/or travel restrictions of LGUs and observe 50% reduced capacity;

All applications pertaining to the Shipyards Regulation Service (SRS), Domestic Shipping Service (DSS) and Maritime Safety Service (MSS) shall filed with the nearest available MARINA Regional Office (MRO) or e-mail;

All applications filed with the Overseas Shipping Service (OSS) shall be processed through e-mail;

All applications for issuance and amendment of Certificate of Public Convenience (CPC) or issuance of Special Permit (SP) or Provisional Authority (PA), petition for approval and confirmation of the sale and transfer of ships shall be filed by the applicants/petitioners with the MRO where the ship is homeported. However, for ships homeported in MARINA Central Office (MCO), applications may be filed with the nearest MRO where the shipping company/operator is having a branch office;

All MSS and SRS requiring inspection or audit shall be delegated to the nearest MRO where the vessel is located or where the shipping company/operator is having a branch office;

OTHER MATTERS:

Micro, Small and Medium Enterprises (MSME) – defined as one whose total assets do not exceed Php100,000,000 – that have ceased operations due to the ECQ are entitled to a grace period of at least 30 days on commercial rents falling due during the ECQ

Cumulative amount of rents due within the ECQ shall be amortized over 6 months following the end of the ECQ

The Bangko Sentral ng Pilipinas (BSP) has ordered all banks and financial lending institutions to automatically extend a grace period of 30 days on all loan payments due within the ECQ

IN CONCLUSION:

Much has to happen before the ECQ will be lifted and Philippines can reopen for business. The government expects to see a significant drop in the number of new positive cases and an uptick in the number of recoveries before it will consider lifting the ECQ. Despite the pressure this COVID-19 crisis is putting on the Philippine economy, President Duterte is adamant that he will continue to keep the country under lockdown until the curve is flattened. The health and security of the Filipinos is top priority.

Once the ECQ is lifted – whenever that may be – we can expect that business operations will resume slowly. Since the courts and most of the government agencies including the SEC, BIR, IPOPHL, POEA, and MARINA, among others, that we deal with on your behalf were closed during the ECQ, an amount of backlog will be expected upon resumption of office. Please note further that the deadlines we listed above are subject to adjustment as new issuances come in. We will update you as soon as new information comes in. We can reasonably expect some delays in the processing of your applications and resolution of your pending cases. We don’t know how long after the lifting of the ECQ will foreigners be allowed to travel to the Philippines. And even once the ECQ is done, until a cure has for COVID-19 has been found, it is normal to expect a certain apprehension to go about our social and business activities as usual. Social distancing will likely continue to be the norm.

It is undeniable that this COVID-19 crisis has changed the way we do business forever. It certainly looks like it will be business unusual in the time of COVID-19 for a long time to come. We urge our clients to be patient and to cooperate with government directives for now as we strive to find our new normal. We are hopeful that we will get through this crisis together.

Should you have any other concerns, you may send us an email at veralaw@veralaw.com.ph and we would be glad to assist.