Regulatory Framework for Business Transactions (RFBT) tests your knowledge of business laws and their application to accounting practice. Unlike computational subjects, RFBT requires understanding legal principles, memorizing key provisions, and applying them to business scenarios.
Understanding RFBT's Structure
Per BOA Resolution No. 30, Series of 2022, RFBT is administered on Day 2 (Afternoon Session) of the CPALE:
- Questions: 100 MCQs (highest among all CPALE subjects)
- Duration: 3 hours (approximately 1.8 minutes per question)
- Mix: Theory-based, application/case-based, distinguishing characteristics
Why RFBT Matters for CPAs
Beyond passing the exam, CPAs encounter these laws daily:
- Corporation Code - Auditing corporate clients, understanding governance
- Obligations & Contracts - Evaluating client agreements
- Negotiable Instruments - Banking transactions, treasury audits
- AMLA - CPA reporting obligations as covered persons
- Data Privacy Act - Client data handling requirements
The Revised Corporation Code (RA 11232) - 30% of Exam
The Revised Corporation Code, signed February 20, 2019, is the highest-weighted topic in RFBT. Understanding its major changes from the old code (BP 68) is essential.
Major Changes from the Old Corporation Code
One Person Corporation (OPC) - Major Innovation
Sections 116-131 of RA 11232 introduced the OPC:
Who can form an OPC:
- Natural persons (Filipino or foreign resident)
- Trusts
- Estates
Who CANNOT form an OPC:
- Banks and quasi-banks
- Preneed, trust, insurance companies
- Public and publicly-listed companies
- Non-chartered GOCCs
- Natural persons already forming another OPC
OPC Requirements:
- Single stockholder who is also the sole director
- Must designate a nominee and alternate nominee (takes over if stockholder dies/incapacitated)
- "OPC" must appear in corporate name
- Minimum capital may be required for certain industries
Exam Tip: OPC questions frequently ask about who can/cannot form one, and the nominee requirement.
Corporate Term - Perpetual Existence
Under RA 11232:
- New corporations: Have perpetual existence unless AOI specifies a term
- Existing corporations: Automatically deemed to have perpetual existence
- Opt-out available: Corporations can elect to retain a specific term via board/stockholder action
Mandatory Corporate Officers
Per Section 24 of RA 11232, every corporation must have:
Note: One person may hold two or more positions, except that the President cannot be Secretary or Treasurer at the same time.
Corporations Vested with Public Interest
These require heightened governance (independent directors, compliance officers):
- Listed corporations
- Banks and quasi-banks
- Preneed, trust, insurance, investment houses
- Publicly-held corporations (assets ≥ PhP 50M and ≥ 200 stockholders with ≥ 100 shares each)
- GOCCs
- Others as SEC determines
Key Stockholders' Rights
Appraisal Right (Section 81) Right to demand payment of fair value of shares when dissenting from:
- Amendment of AOI that adversely affects stockholder
- Sale of all or substantially all corporate assets
- Merger or consolidation
- Investment in another corporation/business beyond corporate powers
- Corporate term extension/shortening
Pre-emptive Right (Section 38) Right to subscribe to new share issuances in proportion to current holdings. May be denied by AOI or by 2/3 stockholder vote.
Obligations and Contracts (Civil Code) - 12% of Exam
Sources of Obligations (Article 1157)
Memorize the five sources: "LCQDQ"
- Law
- Contracts
- Quasi-contracts
- Delicts (crimes)
- Quasi-delicts (negligence)
Essential Requisites of Contracts
Per Article 1318, valid contracts require:
- Consent - Meeting of minds between parties
- Object - Subject matter (determinate or determinable)
- Cause - Consideration or reason for the contract
Types of Defective Contracts
Delay (Mora) - Article 1169
When is demand NOT required?
- When obligation expressly provides
- When law provides
- When time is of the essence
- When demand would be useless
Damages
Negotiable Instruments Law (Act No. 2031)
Requisites of Negotiability (Section 1)
For an instrument to be negotiable, it must be:
- In writing and signed by maker/drawer
- Contain an unconditional promise or order to pay
- A sum certain in money
- Payable on demand or at a determinable future time
- Payable to order or to bearer
- Where addressed to a drawee, the drawee must be named with reasonable certainty
Memory Aid: "WUSDO" - Writing, Unconditional, Sum certain, Demand/determinable, Order/bearer
Promissory Note vs. Check
Holder in Due Course (Section 52)
A holder in due course is one who takes an instrument:
- Complete and regular on its face
- Before overdue and without notice of prior dishonor
- In good faith and for value
- Without notice of any defect in title
Importance: A holder in due course takes the instrument free from personal defenses and claims.
Anti-Money Laundering Act (AMLA) - 6% of Exam
Per RA 9160, as amended:
Covered Persons
CPAs are covered persons when they prepare or carry out transactions for clients involving:
- Buying/selling of real estate
- Management of client money/securities
- Management of bank/securities accounts
- Organization of contributions for company formation
- Creation/management of legal persons or arrangements
Covered and Suspicious Transactions
Covered Transactions (must be reported within 5 banking days):
- Single cash transaction ≥ PhP 500,000
- Equivalent foreign currency transactions
Suspicious Transactions (must be reported within 5 banking days):
- No underlying legal or trade obligation
- Client not properly identified
- Amount not commensurate with client's business
- Deviates from client's profile
- Related to an unlawful activity
CPA Obligations Under AMLA
- Customer identification and due diligence
- Record keeping (5 years from date of transaction)
- Reporting covered and suspicious transactions
- No "tipping off" the client about reports
Data Privacy Act (RA 10173) - 3% of Exam
Key Definitions
Rights of Data Subjects
- Right to be informed
- Right to access
- Right to object
- Right to erasure ("right to be forgotten")
- Right to rectification
- Right to data portability
- Right to damages
CPA Implications
CPAs handle sensitive personal information (tax returns, financial records) and must:
- Implement reasonable security measures
- Obtain consent for data processing
- Report data breaches to NPC within 72 hours
- Retain records only as long as necessary
Other Important Laws
BP 22 (Bouncing Checks Law) - 2%
Elements of violation:
- Making, drawing, or issuing a check
- For account or for value
- Knowing insufficiency of funds
- Check is subsequently dishonored
Ease of Doing Business Act (RA 11032) - 2%
Key provisions:
- Processing time limits (simple: 3 days, complex: 7 days, highly technical: 20 days)
- Zero-contact policy
- Anti-red tape measures
FRIA (RA 10142) - 5%
Financial Rehabilitation and Insolvency Act covers:
- Court-supervised rehabilitation
- Pre-negotiated rehabilitation
- Out-of-court rehabilitation
- Liquidation proceedings
High-Yield Topic Prioritization
Based on exam weight and frequency:
Study Strategies for RFBT
1. Understand Principles Before Memorizing Articles
Legal provisions follow logical principles:
- Contracts require consent → Vitiated consent makes contracts voidable
- Corporations have separate personality → Limited liability follows
- Negotiability requires certainty → That's why sum must be certain, time determinable
2. Use Comparative Tables
Create comparison tables for frequently confused concepts:
Corporation vs. Partnership:
3. Memorize Key Article Numbers
Some articles appear frequently:
- Article 1156 - Definition of obligation
- Article 1157 - Sources of obligations (LCQDQ)
- Article 1159 - Contracts have force of law
- Article 1169 - Delay (mora)
- Article 1318 - Essential requisites of contracts
- Section 1, NIL - Requisites of negotiability
4. Create Mnemonics
- Sources of obligations: LCQDQ (Law, Contracts, Quasi-contracts, Delicts, Quasi-delicts)
- Requisites of negotiability: WUSDO (Writing, Unconditional, Sum certain, Demand/determinable, Order/bearer)
- Contract requisites: COC (Consent, Object, Cause)
5. Practice Distinguishing Characteristics Questions
Common comparisons:
- Rescissible vs. voidable contracts
- General partner vs. limited partner
- Promissory note vs. check
- Solidary vs. joint obligations
- Stock corporation vs. non-stock corporation
Time Management Strategy
With 100 questions in 3 hours (1.8 min/question):
- First pass (90 minutes): Answer confident questions, flag uncertain ones
- Second pass (60 minutes): Return to flagged questions
- Final pass (30 minutes): Review and verify answer sheet
Don't get stuck: If a question confuses you, flag it and move on. Many RFBT questions have subtle word choices that become clearer on second reading.
Recent Updates to Monitor
SEC Memorandum Circulars (2024-2025)
- MC 01-2024: PFRS adoption guidelines
- MC 06-2024: Updated fines for late/non-submission of AFS (PhP 5,000 to PhP 2,000,000)
- MC 01-2025: Annual filing schedule for AFS and GIS
Important Reminder
Per BOA Resolution 30, new laws effective as of the examination date will be included unless BOA issues an advisory to the contrary. Stay updated through:
Official References
- Revised Corporation Code (RA 11232)
- Philippine Accountancy Act (RA 9298)
- Civil Code of the Philippines
- Negotiable Instruments Law (Act 2031)
- Anti-Money Laundering Act
- Data Privacy Act (RA 10173)
RFBT rewards systematic study and understanding of legal principles. Focus on the Revised Corporation Code (highest weight), master the distinguishing characteristics between concepts, and practice applying law to business scenarios. With thorough preparation, you can confidently tackle this unique subject.
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