Opinion No. 19-04 Re: General Financing Activities.

Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

4 March 2019

Re: General Financing Activities SEC-OGC Opinion No. 19-04

MAMARIL LAW FIRM

Dela Costa cor. Valero Sts. Salcedo Village,Makati City 1227 Unit 512-514 Cityland 10 Tower 2

Attention: Atty. Mary Diana C. Mamaril

Gentlemen:

expand its corporate purpose by just simply adding financing activities to its primary purpose as stated in its Articles of Incorporation; and (2) it is allowed to retain its corporate name, "Wodel, Inc.", while being engaged in financing activities. opinion on whether (1) Wodel, Inc. ("Wodel"), a holding company, may This refers to your letter dated 28 February 2018 requesting for an

Rules and Regulations ("IRR")2 define financing companies as follows: The Financing Company Act of 1998 ("FCA")1 and its Implementing

are primarily organized for the purpose of extending credit associations, insurance companies, cooperatives, and other financial institutions organized or operating under other special laws, which agricultural enterprises, by direct lending or by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness, or by financial leasing of movable as well as immovable property; x x x" (Emphasis ours) "Financing corporations, except banks, investments houses, savings and loan facilities to consumers and to industrial, commercial, or companies' hereinafter called companies, are

highly regulated. Thus, no person, association, partnership or corporation shall engage in the business of a financing company and hold itself out as such unless so authorized by the Commission.3 Before a corporation can engage in financing activities, it must secure a Certificate of Authority to Being a business vested with public interest, financing activities are

1 Republic Act No. 8556, An Act Amending Republic Act No. 5980, As Amended, otherwise known as the 3 Ibid, Section 12b. Financing Company Act, 26 February 1998 2 Rules and Regulations to Implement the Provisions of Republic Act No. 8556 (The Financing Company Act of 1998), 20 May 1999

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been complied with and that no valid reason exists for the disapproval of the application.4 Commission if it finds that the requirements under the FCA and its IRR have Operate as a Financing Company ("Certificate") which shall be issued by the

leasing, as defined in the FCA, as one of its secondary purposes.6 corporation must have, as its primary purpose, general financing activities5 In fact, no corporation shall be allowed to include discounting, factoring and One of the conditions for the issuance of the Certificate is that the

would like to engage in and propose to add these activities to its other primary purpose as a holding company. This is not allowed since a financing company must be primarily organized for the purpose of extending credit facilities. Merely adding the said activities to Wodel's primary purpose would effectively make them as secondary purposes only. Pursuant to the aforementioned provisions of the FCA and IRR, in connection with Section 14 (2) of the Corporation Code7, these are prohibited. In your letter, you enumerated the financing activities that Wodel

assuming Wodel would engage primarily in financing activities, this is also not allowed under Section 2c of the IRR, which provides: On your question whether Wodel may retain its corporate name,

company" or other title or word(s) descriptive of its operations "financing company", finance company", or "finance and investment and activities as a financing company." (Emphasis ours) "Section 2. Form of Organization - X x x c. The corporate name of financing companies shall contain the term

solely to the particular issues raised therein and shall not be used in the rendered based solely on facts and circumstances disclosed and relevant nature of a standing rule binding upon the Commission in other cases or further inquiry and investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void. upon the courts whether of similar or dissimilar circumstances. 8 If, upon It shall be understood, however, that the foregoing opinion is

Please be guided accordingly.

CAMYLOS.CORREA General Counsel

6 Ibid, Section 12a. 4 Ibid, Section 4c in relation to Section 5a. 7 B.P. No. 68, The Corporation Code of the Philippines, Section14. "Contents of articles of incorporation. 5 Ibid, Section 1a xxx (2) The specific purpose or purposes for which the corporation is being incorporated. Where a corporation has more than one stated purpose, the articles of incorporation shall state which is the primary purpo SEC Memorandum Circular No.15,s.of 2003,No.7 and which is/are ndarypurpose or purposes.xxx(Emphasis ours)