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Currency in Which a Trust Receipt May Be Denominated

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Currency in Which a Trust Receipt May Be Denominated

Photo from Unsplash | Towfiqu barbhuiya

This article was originally published on February 5, 2021 and has been updated to reflect recent legal developments.

This article is provided for general informational purposes only and does not create, nor shall it be construed as creating, a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. For advice on specific legal concerns, you are encouraged to engage the services of a qualified lawyer. You may also directly consult Alburo Alburo and Associates Law Offices for proper guidance tailored to your situation.

The views and information presented herein are based on the laws, rules, and jurisprudence prevailing at the time of writing. They do not take into account subsequent legal developments and should not be relied upon as a substitute for professional legal advice.

AT A GLANCE:

Section 3(j) of Presidential Decree No. 115 provides that  “Trust Receipt” shall refer to the written or printed document signed by the entrustee in favor of the entruster containing terms and conditions substantially complying with the provisions of this Decree. No further formality of execution or authentication shall be necessary to the validity of a trust receipt.

In commercial practice, a trust receipt is more than a routine banking document, it is a vital tool that sustains the flow of goods in trade. It enables importers and retail dealers, particularly those with limited capital, to acquire merchandise by using the goods themselves as collateral.

 

What Law Governs Trust Receipts? 

Trust receipts transactions are governed by Presidential Decree No. 115, which lays down the legal framework for their creation, use, and enforcement. The law underscores the importance of trust receipts in supporting both domestic and commerce and international trade.

 

Currency of Denomination: What Does the Law Allow? 

A recurring question in commercial transactions is: In what currency may a trust receipt be denominated?

 

Under Section 6 of Presidential Decree No. 115, a trust receipt may be denominated in:

 

Section 6. Currency in which a trust receipt may be denominated. A trust receipt may be denominated in the Philippine currency or any foreign currency acceptable and eligible as part of international reserves of the Philippines, the provisions of existing law, executive orders, rules and regulations to the contrary notwithstanding: xxx

 

Take note that in case of trust receipts denominated in foreign currency, the same provision states that:


Section 6. Currency in which a trust receipt may be denominated. xxx. Provided, however, That in the case of trust receipts denominated in foreign currency, payment shall be made in its equivalent in Philippine currency computed at the prevailing exchange rate on the date the proceeds of sale of the goods, documents or instruments held in trust by the entrustee are turned over to the entruster or on such other date as may be stipulated in the trust receipt or other agreements executed between the entruster and the entrustee.

 

Related article: What Constitutes a Trust Receipt Transaction?

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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