Opinion No. 22-11 Re: License to Transact Business

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PHILIPPINES Securities and Commission Exchange

OFFICE OF THE GENERAL COUNSEL

SEC OGC Opinion No._22- i Re: License to transact business

I9 August 2022

36th Floor, GT Tower International 6813 Ayala Avenue, Bel-Air 1209 MITSUI & CO (ASIA PACIFIC) PTE. LTD. Makati City, Philippines

Attn: ATTY. LIZA C. SATO Deputy General Manager L.Sato@mitsui.com

Dear Atty. Sato:

transact business in the Philippines of Mitsui & Co. (Asia Pacific) Pte. Ltd. (MAP). This refers to your e-mail dated 06 April 2022, requesting for an opinion regarding the license to

In your e-mail, you disclosed the following:

a) MAP was incorporated in Singapore and is 100% owned by Mitsui Co. Ltd of Japan b C Pursuant to the authority granted to MAP under Singaporean law: Under Singaporean law, MAP is allowed to engage in any kind of business in general except for business activities that require special license which MAP may be qualified to In this context, the term "Mitsui Group" pertains to Philippine-based companies in which Mitsui owns shares of stock; (Mitsui). MAP serves as the regional office of the Mitsui Group in the Asia Pacific region. apply for:

d e f g MAP has already lent money to members of the Mitsui Group, and it intends to continue MAP established a branch office in the Philippines which is registered as Mitsui & Co. (Asia MAP would like to have its MAP Manila Branch to be able to lend money in Philippine Peso lending money to companies within the Mitsui Group whenever necessary; Mitsui has several investments in Philippine-incorporated companies as of date; Pacific) Pte. Ltd Manila Branch (MAP Manila Branch); and (PHP) to any member of the Mitsui Group based in the Philippines if the need arises. 2 It is allowed to lend money to corporations; and It is exempt from getting any license to lend money as long as MAP does not lend to individuals;

In connection thereto, you seek our opinion on the following queries:

a) Whether or not MAP Manila Branch may lend money to companies within the Mitsui b If SEC license needs to be amended, whether MAP Manila Branch can include lending of Group (i.e. Philippine-based companies in which MAP Manila Branch's parent company, MAP, owns shares of stock) without amending MAP Manila Branch's attached SEC license;

money as a business activity; and

www.sec.gov.ph | imessagemo@sec.gov.ph M 14/F The SEC Headquarters, 7907 Makati Avenue (+63 2) 8818 5348 / (+63 2) 8818 5418 Saicedo Village, Bel-air, Makati City TovRheinta ad C ISC 1:O15 B Oo OO N

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C Whether or not there is any prerequisite for MAP Manila Branch before it can apply to SEC

for such amendment of license.

Nature of a branch office of a foreign company

which are under its supervision and control. Hence, branches have no separate juridical personality.2 of a foreign company carries out the business activities of the head office and derives income from the host country.1 While branches are treated as separate business units for commercial and financial reporting purposes, in the end, the head office remains responsible and answerable for the liabilities of its branches At the outset, we note that MAP Manila Branch has no separate juridical personality. A branch office

Branch office's authority, powers, and duties

Sections 140 and 141 of the Revised Corporation Code of the Philippines (RCCP)3 provide:

Section 140. Definition and Rights of Foreign Corporations. -- For purposes of this Code, a foreign corporation is one formed, organized or existing under laws other than those of the Philippines' and whose laws allow Filipino citizens and corporations to do business in its own country or State. It shall have the right to transact business in the Philippines after obtaining a license for that purpose in accordance with this Code and a certificate of authority from the appropriate government agency. Section 141. Application to Existing Foreign Corporations. -- Every foreign corporation which, on issued to it shall continue to have such authority under the terms and conditions of its license. subject to the provisions of this Code and other special laws (Emphasis supplied) the date of the effectivity of this Code, is authorized to do business in the Philippines under a license

Iending funds to other members of the Mitsui Group. of the License to Transact Business4 of MAP Manila Branch reveals that it does not expressly provide for Philippines, such as a branch office, are therefore derived from its License to Transact Business. A reading The authority, powers, and duties of a foreign corporation which intends to do business in the

purposes conferred by the RCCP6 and by the corporation's articles of incorporation.7 under the law or articles of incorporation or those committed outside the object for which a corporation is created are ultra vires except when acts are necessary and incidental to carry out a corporation's incorporators in accordance with law. As such, corporate acts that are outside.those express definitions As a rule, corporations are artificial entities granted legal personalities upon their creation by their

necessary for the purpose of carrying out its express power, to wit: as are expressly granted in its charter or in the statutes under which it is created or such powers as are In SEC-0GC Opinion No. 22-08,8 the Commission opined that a corporation has only such powers

It is the corporation's purpose clause that confers, as well as limits, the powers that a corporation may exercise. Express powers include the general powers which are enumerated in Section 35 of the RCCP and those which are sanctioned by the State in the corporation's Articles of Incorporation. Implied or

2 Philippine Deposit Insurance Corporation vs. Citibank NA and Bank of Americ GS 4 a] vised Corpnration Code o Export, import, and wholesale of various kinds of commodities, agency business of all kinds i(c) of the Implementing Rules and Regulati Manufacturing of all types of mach Export, import, and +he Philippines (RCCP),Republic Act No.11232,February 20,2 Ins {IRR} of Republic Act (R.A.] No. 7042, also k Gfcoitie ca ST& NA, G.R. No. 170290, 11 April 2012 d by law such as ign Investments Act (FIA), as amended, 9 july 1996.

and non.

GG Develop Acquisition, plann ient.tatiifacur all kinds of chemical products cerealssugar,oil,fee textile products and the lumner cer ng.r ment and other building materials, rubber pulp paper igpr Is, processed food stuffs and drinks, cessing.scrap w materials on, and disposition of copyrights, patent right, other intellectual property rights, i g, and recyclin harmaceuticals husiness relating to the above-mentionedcommocities he Te1yo00 IYE0 low-how, system technology, and other ddrinl ing water

G f Sawing busir g supply, translation, and production and wholesale of audio and visual copyright products: er nrocessinp business: h transactions

M sets leasins bu Ware Leasing and d shousira y ndwna veopne le of secondhand goo acting as an intermediary in such transactions:

S 3 SEC-OGC Opinion No.22-08 addressed to Gammad Law Office dated 30 May 2022. Gee Universicy ofMindanaa Inc. v. Bangko Sentral ng Pilipinas {BSP), et. al., G.R. No. 194964-65, 11 January 2016. D ction35RCCPibid 0 ction 44,RCCP,supr O Mai intenance and management of buildings; ang ning, administration and imp ntion and management of sports facilities, hotel business, and travel business: ancy husiness relating to the foregoing items. aghusiness s f relating to hand, [land] sea, sky {sic]} mentation of various events;

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incidental powers, on the other hand, are those which are "essential or necessary to carry-out its purpose or purposes as stated in the Articles Incorporation. The power to "exercise such other powers as may be essential or necessary to carry out its purpose or purposes stated in the articles of incorporation" is an implied power of a corporation as recognized under paragraph (k) of Section 35 of the RCCP. Clearly, the implied powers of a corporation pertain only to such powers as are reasonably necessary to enable a corporation to carry out the express powers granted.

determination of what business or activities are covered by a branch license: In SEC-0GC 0pinion No. 07-12 9, the following rules and principles were applied in the

The rules governing the construction of charters of corporations are, for the most part, the same as those which govern the construction and interpretation of statutes, contracts and other written instruments.10

to its charter, and unless the power to carry on a particular business is either expressly or In the determination of what business may be carried on by a corporation, reference must be had impliedly conferred thereby, it does not exist.i

In SEC-OGC Opinion No. 19-39, 12 the Commission opined that:

There will always he instances when doubts may arise as to whether an act may be reasonably draftsmanship or lack of foresight on the part of the original incorporators or their legal counsel or, implied from the purposes of the corporation. These doubts will sometime he due to poor as is oftentimes the case, situations or circumsta avrc up which could not have been foreseen at the time of the incorporation. Many times, the purpose clause can be reasonably 'stretched' as to impliedly cover these new and unexpected situations. But in those cases where it cannot, a proper amendment thereof would be necessary.

the logical relation of the act to the corporate purpose expressed in the charter, i.e. whether the act in question is in direct and immediate furtherance of the corporation's business, fairly incident to the express powers and reasonably necessary to their exercise. The following requisites must concur: The test to determine whether a corporate act is in accordance with its purposes is a question of

a the act is one which is lawful in itself, and not otherwise prohibited; b) C the act is done for the purpose of serving corporate ends; and the act is reasonably tributary to the promotion of those ends, in a substantial, and

not in a remote and fanciful sense.13

Engagement in lending activities

enter into contracts and transactions which may be deemed reasonably incidental to its business purposes. members of the Mitsui Group without amending its license since the said act is fairly incidental to the express powers granted to the MAP Manila Branch under its License to Transact Business. The management of a corporation, in the absence of express restrictions, has the discretionary authority to Based on the foregoing discussion, MAP Manila Branch may lend a part of its corporate funds to

business activity. It should be resorted to only when need arises and should only be done for the purpose of serving corporate ends. be strictly limited to the members of the Mitsui Group and should not be pursued as a regular and a separate It must be noted, however, that the lending activity to be undertaken by MAP Manila Branch should

letters (b) and (c) of your query. However, should MAP Manila Branch intend to pursue lending as a regular business activity, we recommend consulting with the Corporate Governance and Finance Department (cgfd@sec.gov.ph) as the operating department which has jurisdiction over lending companies. Since there is no need to amend the License to Transact Business, there is no more need to answer

solely to the particular issues raised therein.14 It shall not be used in the nature of a standing rule binding The foregoing opinion is rendered based solely on facts and circumstance es disclosed and relevant

12 SEC-OGC Opinion addressed to Mr. Amado J. Lansang Jr. dated 24 March 1982 as cited in SEC-OGC Opinion No. 19-39 addressed to Mr. Romualdo I. Katigbak dated 18 12.ibi SEC-OGC Opinion No. 07-12, addressed to Manabat Delgado Amp EC-OGC Opinion addressed to Atty. Milnar T. Lammawin, Omengan Construction & Development Corporation dated 11 December 1989 as cited in SEC-0GC Opinion No. 07 OGConinion.addrecsed toChemics 201 Def al. v. Bacolod-Murcia Miling Co, inc, G.R. No.-15092, 18 May 1962, as cited in University of Mindanao Inc. v. BSP, ibid. criec.ol the Philippines, Inc. dated 10 Sep per & Co. dated 3 May 201 mber 1992 as cited in SEC-OGC Opinion No. 07-12, ibid.

14 SEC Memorandum Circular No. 15, Series of 2003,16 December 2003

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upon further inquiry or investigation, it will be disclosed that the facts relied upon are different, this upon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances. If opinion shall be rendered void.

Please be guided accordingly. Very truly yours,

G M ROMUAL C.YADLA General Counsel