SEC Admin Case No. 11-11-138 In the matter of Lovprit Lending & Trading Co. For Revocation of Certificate of Partnership

Republic of the Philippines

Securities and Exchange Commission Department of Finance

SEC Bldg., EDSA, Greenhills, Mandaluyong City

In the Matter of: LOVPRITLENDING & TRADING CO.

SEC ADMIN. CASE NO. 11-11-138 FOR: Revocation of Certificate of Partnership

ENFORCEMENT AND PROSECUTION DEPARTMENT, now known as the Enforcement and Investor Protection Department Petitioner.

DECISION

For the consideration of the Commission En Banc is the Petition (For Revocation of Certificqte of Registration of Partnership) (Petition) dated 16 November 2011 filed by petitioner Enforcement and Prosecution Department (EPD), now the Enforcement and Investor Protection Department (EIPD) of the Commission, praying for the revocation of the Certificate of Registration of Partnership of LOVPRIT LENDING & TRADING CO. (LOVPRIT):

LOVPRIT is a partnership duly formed and recorded in the SEC Book of Partnership and was issued SEC Registration No. A199817348 on 19 November 1998.3 The purpose of LOVPRIT is "to engage in the business of lending investor, lending money to persons and entities under the terms and conditions allowed by the laws of the Republic of the Philippines, provided that the company shall not engage in financial activities under R.A. 5980 as amended nor pawnbroking activities under P.D. 114, and likewise, borrowing shall be sourced or derived from not more than nineteen (19) lenders. The partners of LOVPRIT include Erlinda Doroga, Harbans Singh Rai, Jagtar Singh and Mukand Singh3

The EPD alleges that on 30 November 2010, it received a Memorandum from the Corporation Finance Department (CFD), now the Corporate Governance and Finance Department (CGFD) of the Commission, endorsing cases of various companies, including LOVPRIT, that are allegedly engaged in lending business activities without

! Filed on 23 November 2011. 2 Petition, Annex "A", (Certificate of Registration of LOVPRIT) 3Id., Annex B (Articles III and V of the Articles of Partnership of LOVPRIT).

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Republic A$t (R.A) No. 9474, otherwise known as the Lending Company Regulation Act of 2007.4 securing from the Commission the required Certificate of Authority (CA) in violation of

principal office of LOVPRIT to determine if it is still engaged in lending business. TheEPD alleges that, on 21 January 2011, it conducted a surveillance on the

at the principal office address but there was an establishment with a lotto outlet. The However, upon arrival, there was no indication that any lending company was operating

surveillance team noticed a gate next to the establishment in which several rows of

there is a lending company in one of the apartments and the latter responded that there is surveillance team inquired from the Indian national if he is still engaged in the business that he may lend money "when business is good again". apartments existed. The surveillance team inquired from a cashier of the lotto outlet if an Indian national residing therein who is engaged in lending.5 Thereafter, the of lending under the LOVPRIT. The Indian national confirmed that it is the address of LOVPRIT but he is currently not lending money due to financial difficulties. He stated

On 10 February 2011, Harbans Singh Rai, a partner of LOVPRIT, was called to a conference to discuss matters pertaining to the alleged failure of LOVPRIT to secure a CA but he failed to appear on the said date. Another conference was set on 22 March 2011 directing Jagtar Singh, a partner of LOVPRIT, to appear at the conference but he failed to appear.'

A Subpoena Duces Tecum/Ad Testificandum dated 2 May 2011 was issued by the EPD directing Harbans Singh Rai to appear before the EPD to discuss such matters.

On16 May 2011, the accountant of LOVPRIT appeared and explained that the partners thereof formed a new corporation distinct from LOVPRIT. The accountant admitted that that they have not dissolved the LOVPRIT but signified their willingness to do so. Further, the accountant confirmed that LOVPRIT engaged in lending activities but has stopped operations. Thereafter, the accountant was advised to file an application for the dissolution of LOVPRIT since it should have incorporated within one (1) year after the effectivity of R.A 9474 in 2007.

The EPD alleges further that, in a Letter dated 8 June 2011, LOVPRIT, through its partner$ Harbans Singh Rai and Mukand Singh, was ordered to pay the maximum penalty as$essed under R.A. 9474 and its IRR in the amount of Php 50,000.00 for failing

5 Id., par. 8. Id., Annex 'G" (Subpoena Duces Tecum/Ad Testificandum). 4 Petition, par. 5. Id. , AnnexH" (Summary of Conference). OId. Id., par. 9 and Annex "E" (Notice of Conference dated 2 February 2011) and Annex "F" (2d Notice of Conference dated 7 March 2011).

LOVPRIT LENDING & TRADING CO. Page 3 of 5 For: Revocation of Certificate of Partnership

made. fo to incorporate it as a stock corporation. However, LOVPRIT failed to settle the assessed penalty and it was given another opportunity to do so. Again, no such payment was

Hence, the instant Petition.

Harbans Singh Rai12 and Mukand Singh.13 Summons dated 29 November 2011 were served and issued to LOVPRIT,1 However, LOVPRIThas not entered its appearancenor filed its Answer within the fifteen (15)-day period mandated in the Summons, or until 21 December 2011. The Commission declared, in an Order dated 27

Commission (Rules).14 February 2013, LOVPRIT in default for failing to file its Answer within the required period pur$uant to Sec. 3-12 of Rule III of the 2006 Rules of Procedure of the

more thannineteen (19) persons.Clearly, LOVPRIT was organized as a lending engaged in granting loans from its own capital funds or from funds sourced from not company. Under its Articles of Partnership, the purpose of LOVPRIT is "to engage in the business of lending investor, lending money to persons and entities x x x". Moreover, A lending company is defined under Section 3(a) of R.A. 9474 as a corporation

2011 that IOVPRIT is engaged in lending activities. the accountant explicitly confirmed during the hearing before the Commission on 16 May

As a lending company, it is obliged to operate as a corporation, not as a partnershipl and must obtain a CA from the Commission, pursuant to Section 4 of R.A. 9474, to wit:

"Sec. 4. Form of Organization. - A lending company shall be established only

single proprietorships or partnerships shall be disallowed from engaging in as a CORPORATION: Provided that existing lending investors organized as the]business of granting loans to the public one vear after the date of effectivity of this Act.

No lending company shall conduct business unless granted an authority to operate by the SEC." (Emphasis ours)

provides: Rule 3 of the Implementing Rules and Regulations of R.A. 9474 (IRR) likewise

"(@a) Form of Organization

10 Petition, par. 12 and Annexes "T", "", "K", "L", "M" and "N" (Letters of the EPD dated 8 June 2011). 12 Affidavit Of Service executed on 5 January 2012, Id., p. 46. 11 Affidavit Of Service executed on 5 January 2012, Records, p. 52 13 Affidavit of Service executed on 5 January 2012, Id., Records. 43. 14 Sec. 3-12 bf Rule III of the Rules provides that if the respondent FAILS TO ANSWER the complaint

within the above-stated period, he shall be considered as in default

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A lending company shall be established as a stock corporation

capitalization prescribed under the Act and secure a Certificate of Authority to operate a lending company. Otherwise, they shall be disallowed from engaging in the business of granting loans to the public." partnerships shall, within a period of one (1) year from the effectivity of the Act,organize themselves as a stock corporation with the minimum Existing Lending Companies organized as single proprietorships or

In short, the business of lending money can no longer be carried on under a partnershipand must be done through a corporation pursuant to Section 4 of R.A. 9474 and Rule 3|of its IRR. Moreover, those existing partnerships engaged in the business of lending must organize themselves as a stock corporation within one (1) year from the effectivity of R.A. 9474 in 2007, and must secure the required CA from the Commission

May 2011 that the corporation has been engaging in lending activities. Thus, LOVPRIT had to organize itself as a corporation pursuant to Section 4 of R.A. 9474 and Rule 3 of In the case at bar, the accountant of LOVPRIT admitted during the hearing on 16

its IRR. However, despite several notices, LOVPRIT failed to organize itself as a corporation and failed to secure the required CA from the Commission. As a consequence thereof, LOVPRIT was ordered by the EPD to pay the maximum penalty assessed under R.A. 947415 and its IRR16 in the amount of Php 50,000.00 for failing to incorporate it as a corporation. However, despite opportunities to do so, LOVPRIT, to date, has not obtained or applied for a CA nor paid the afore-said penalty.

misrepresentation as to what a corporation can do and for its refusal to comply and pursuant to Section 6(l)(2) and (3) of Presidential Decree No. 902-A for serious defiance of the lawful order of the Commission. Here, LOVPRIT has practically misrepresented to the public that it can lawfully engage in the business of lending, despite the fact that it did not obtain a CA from the Commission. Further, the EPD gave In which case, the Certificate of Registration of LOVPRIT must be revoked

LOVPRITopportunities to settle the assessed penalty by ordering, in a Letter dated 8 June 2011] to do so prior to the filing of this instant Petition. In fact, LOVPRIT was warned that "otherwise the EPD will be constrained to take enforcement and/or administrative action against the former". LOVPRIT, however, did not comply with the

CA, or to otherwise remedy the situation, nor pay the assessed the penalty stated in the lawful order of the Commission since it did not take action to incorporate and obtain a Orders of the Commission.

15 Section 12 16 Rule 8. I7 See Note 10

For: Revocation of Certificate of Partnership LOVPRIT LENDING & TRADING CO Page 5 of 5

A199817348 is hereby REVOKED pursuant to Section 6(l)(2) and (3) of Presidential Certificate|of Registration) is hereby GRANTED against LOVPRIT LENDING & TRADINGCO. Its Certificate of Registration bearing SEC Registration No. Decree No.902-A. WHEREFORE, premises considered, the instant Petition (for Revocation of

Research and Information Department for their information and appropriate action. Department, the Enforcement and Investor Protection Department, and the Economic Let a copy of this Order be furnished the Company Registration and Monitoring

SO ORDERED.

Mandaluyong City, 6 November 2014.

A TERESITA J. HERBOSA

Chairperson

atmiesMent MANU GAITE ANTONIETA F. IBE

Commissioner Commissioner

EPHYRO LUIS B/AMATONG Commissioner ASJAMES G.VITERBO aa Commissioner