How to Register a Lending Company in the Philippines with the SEC

A lending company in the Philippines must be organized as a corporation and must secure an authority to operate from the Securities and Exchange Commission (SEC). No lending company may conduct business without it. Registration therefore involves two steps: incorporating with the SEC, then obtaining the authority to operate. The minimum paid-in capital is One million pesos (P1,000,000.00), and at least a majority of the voting capital stock must be owned by Filipino citizens. Operating without a valid authority to operate exposes the corporation and its officers to fines and imprisonment under Republic Act No. 9474.

What counts as a lending company under Philippine law

Under Section 3 of Republic Act No. 9474, also known as the Lending Company Regulation Act of 2007, a lending company is a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. The term is synonymous with "lending investor."

The law excludes institutions already regulated under other regimes — banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives, and other credit institutions. If the business falls within one of these regulated categories, a different licensing track applies.

Step 1: Incorporate as a corporation

Section 4 requires that a lending company be established only as a corporation. Existing lending investors organized as single proprietorships or partnerships were disallowed from engaging in the business of granting loans to the public one year after the law took effect.

This means a sole proprietor cannot simply apply for a lending company license. The incorporators must form a corporation first, and only then pursue the authority to operate.

Step 2: Comply with the capital requirement

Section 5 sets the minimum paid-in capital at One million pesos (P1,000,000.00) for any lending company established after the effectivity of the Act. The SEC may prescribe a higher minimum capitalization if warranted by circumstances, so the applicable figure should be confirmed with the SEC before filing.

Lending companies already established and operating before the law took effect were given time to comply, but that period could not be less than three years from effectivity.

Step 3: Meet the citizenship requirements

Section 6 requires that, upon effectivity of the Act, at least a majority of the voting capital stock be owned by citizens of the Philippines.

For lending companies existing before the law, foreign-owned voting stock in excess of forty-nine percent (49%) could not be increased, though it could be reduced — and once reduced, it could not be raised again beyond 49%. Foreign ownership percentages are computed based on the citizenship of individual stockholders; where a corporation holds shares, the citizenship of that corporation's individual voting stockholders is the basis.

No foreign national may own stock unless the country of which the national is a citizen accords reciprocal rights to Filipinos.

Step 4: Obtain the authority to operate from the SEC

Section 4 is explicit: no lending company shall conduct business unless granted an authority to operate by the SEC. This is the license that legitimizes the business.

Under Section 9, the SEC is authorized to regulate and supervise lending companies, issue implementing rules and regulations, require reports of condition, exercise visitorial powers, and impose administrative sanctions — including suspension or revocation of the authority to operate and the imposition of fines for violations.

Section 10 directed the SEC to promulgate the necessary implementing rules and regulations within three months after the Act's approval. Applicants should work from the current SEC rules and filing checklists, since these operationalize the statutory requirements.

Ongoing compliance obligations

Registration is not the end of the process. Section 8 requires every lending company to maintain books of accounts and records as required by the SEC and prescribed by the Bureau of Internal Revenue and other government agencies. A lending company engaged in other businesses must keep separate books of accounts for those businesses.

Lending companies must also issue the appropriate instruments and documents to evidence their lending and borrowing transactions.

On loan terms, Section 7 allows a lending company to grant loans in amounts and at reasonable interest rates and charges agreed upon with the debtor — provided the agreement complies with Republic Act No. 3765 (the Truth in Lending Act) and Republic Act No. 7394 (the Consumer Act of the Philippines). The Monetary Board, in consultation with the SEC and the industry, may prescribe interest rates warranted by prevailing economic and social conditions.

Who supervises a lending company

Section 11 places lending companies under the supervision and regulation of the SEC. However, lending companies that are subsidiaries or affiliates of banks and quasi-banks are subject to Bangko Sentral ng Pilipinas (BSP) supervision and examination under Republic Act No. 7653. The Monetary Board may also order an examination of a lending company's books and accounts where there is reasonable ground to believe it is being used as a conduit by a bank or quasi-bank to circumvent BSP rules.

Penalties for operating without authority

Section 12 imposes a fine of not less than Ten thousand pesos (P10,000.00) and not more than Fifty thousand pesos (50,000.00), or imprisonment of not less than six months but not more than ten (10) years, or both, at the court's discretion. This applies to any person engaging in the business of a lending company without a validly subsisting authority to operate, and to presidents, treasurers, and other officers who knowingly and willingly do so, hold the corporation out as a lending company without authority, or use a trade name containing "lending company" or "lending investor" without authority.

Frequently asked questions

Can a sole proprietor register as a lending company in the Philippines? No. Section 4 requires a lending company to be established only as a corporation.

How much capital is needed to register a lending company with the SEC? The minimum paid-in capital is One million pesos (P1,000,000.00) under Section 5, though the SEC may prescribe a higher amount if warranted by circumstances.

Can foreigners own a lending company in the Philippines? At least a majority of the voting capital stock must be owned by Filipino citizens, and no foreign national may own stock unless their country accords reciprocal rights to Filipinos.

Practical takeaways

• A lending company must be a corporation and must hold an authority to operate from the SEC before conducting business.
• Minimum paid-in capital is One million pesos (P1,000,000.00), subject to a higher amount if the SEC requires it.
• At least a majority of voting capital stock must be Filipino-owned, with reciprocity required for any foreign stockholder.
• Books of accounts must be maintained as required by the SEC and the BIR, with separate books for other businesses.
• Operating without a valid authority to operate carries fines of P10,000 to P50,000, imprisonment of six months to ten years, or both.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 9474 - AN ACT GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF LENDING COMPANIES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.