LAW

The Financing
Company Act
(RA 8556)

RELEVANCE
TO CORPORATE
FINANCE
Law governing the
activities of financing
and leasing
companies
Achieve a sound
economic

development
Enumeration of rights
and powers of a
financing company

Policy
Considerations
to regulate and
promote the
activities of
financing and
leasing companies
to recognize and
strengthen their
critical role in
providing medium
and long term credit
for investments
to curtail and
prevent acts or
practices prejudicial
to the public
interest (Sec. 2, RA
8556)

Relevant/ Salient
Defined Terms
Financing
Companies
Credit
Finance
Leasing
Purchase
Discount

SIGNIFICANT PROVISIONS OF THE LAW

Who Enforces the
Who are affected by the Law
Law

Securitie
Financing companies

s and Exchange
Consumers
Commission

Industrial, commercial and

Monetary
agricultural enterprises
Board of the

Third persons or entities

Bangko Sentral

Enforcers of the law

ng Pilipinas

Reportorial/
Registration Requirements
Financing companies shall
be organized in the form of
stock corporations at least
forty percent (40%) of the
voting stock of which is
owned by citizens of the
Philippines. Moreover, no
foreign national may be
allowed to own stock in any
financing company unless
the country of which he is a
national accords the same
reciprocal rights to Filipinos
in the ownership of
financing companies or their
counterpart entities in such
country (Sec. 6, RA 8556)
The financing
companies shall have a
paid-up capital of:
Not less
than Ten million pesos
(P10,000,000) If the
financing company is
located in Metro Manila and
other first class cities;
Five
million pesos (P5,000,000)
in other classes of cities;
and
Two
million five hundred
thousand pesos
(P2,500,000) in
municipalities (Sec. 6, RA
8556)
The corporate name of
financing companies shall
contain the term financing

company, finance
company, or finance and
investments company or
other title or word(s)
descriptive of its operations
and activities as a financing
company.
Any stock
corporation may be
registered as a financing
company by filing with the
Commission five (5) copies
of an application to operate
as a financing company
under R.A. 8556, signed
under oath by its President,
together with the following
documents in the prescribed
forms:

All documents
required for the registration
as a corporation
Information Sheet of
registrant company;
Personal
Information Sheet of each
the directors, officer with
the rank of Vice President
and up of the equivalent
managing partners;
Answer to the
questionnaire of the
Commission;
Documents required of
each Filipino director, officer
to be appointed from the
rank of Vice-President and
up or their equivalent, such
as the following:
Police clearance from local
police of the city or
municipality of which he is a
resident;

LAW

RELEVANCE TO

NBI clearance;
Certificate of good moral
character to be executed
under oath at least (2)
reputable and disinterested
persons in the community;
and Bank credit information
to be issued by his
depository or creditor
banks(s), if any;
In lieu of Items (a) and (b),
a foreign director or officer
shall submit a clearance
from the Bureau of
Immigration and
Deportation and
photocopies of passport
and Alien Certificate of
Registration (ACR).
Clearance from the
Bangko Sentral ng Pilipinas,
if the applicant financing
company is a subsidiary or
affiliate of a bank and/or
non-bank financial institution
with quasi-banking license.
Such other
documents as may be
required by the
Commission;
Other requirements,
such as the prescribed
period to commence the
operation, requirements for
branches (agency or
extension offices), other
capital requirements,
reportorial requirements,
licensing fees, fines for
failure to comply with the
this act or other applicable
laws and other
requirements.

SIGNIFICANT PROVISIONS OF THE LAW

The Lending
Company
Regulation Act
(RA No. 9474)

CORPORATE
FINANCE
Every decision made
in a business has
financial implications,
and any decision that
involves the use of
money is a corporate
financial decision.
Everything that a
business does fits
under the rubric of
corporate finance.
Furthermore it may
also be a business of
getting money from
those who have it to
lend or invest to
companies that can
put their money to
work.
The law is relevant to
corporate finance
since it lays down the
laws and rules that
regulate the
establishment of
lending companies
and to place their
operation on a sound,
efficient and stable
condition to derive the
optimum advantages
from them as an
additional source of
credit.

a.

b.

Policy
Considerations
to regulate the
establishment of
lending
companies and to
place their
operation on a
sound, efficient
and stable
condition to
derive the
optimum
advantages from
them as an
additional source
of credit;
to prevent and
mitigate, as far as
practicable,
practices
prejudicial to
public interest;
and to lay down
the minimum
requirements and
standards under
which they may
be established
and do business.

Relevant/ Salient
Defined Terms
Lending Company
a corporation engaged in
granting loans from its
own capital funds or from
funds sourced from not
more than nineteen (19)
persons. It shall not be
deemed to include
banking institutions,
investment houses,
savings and loan
associations, financing
companies, pawnshops,
insurance companies,
cooperatives and other
credit institutions already
regulated by law. The
term shall be
synonymous with lending
investors.
Debtor
a borrower or person
granted a loan by the
lending company.
Quasi-Bank
a non-bank financial
institution authorized by
the BSP to engage in
quasi-banking functions
and to borrow funds from
more than nineteen (19)
lenders through the
issuance, endorsement
or assignment with
recourse or acceptance
of deposit substitutes as
defined in Sec. 95 of
Republic Act No. 7653
(the New Central Bank
Act) for purposes of
relending or purchasing
of receivables and other

Who Enforces the

Law
Powers and
Authorities of SEC
conferred by RA
9474:
1. Create a new
division or bureau
within its control
2. Issues rules and
regulation to
implement the
provisions of this
act
3. Issue rules and
regulations on,
among other things,
minimum
capitalization
4. Require from
lending companies
reports of condition
to determine
compliance
5. Exercise visitorial
powers whenever
deemed
necessary
6. Impose such
administrative
sanctions including
suspension or
revocation.

Who are affected by the Law

The ones primarily affected by
the law are the lending
companies. However, equally
affected are the Quasi-banks,
Affiliates and persons who are
granted loans by lending
companies.

Reportorial/
Registration Requirements
REPORTORIAL
REQUIREMENTS:
Every lending company shall
maintain books of accounts
and records as may be
required by the SEC and
prescribed by the Bureau of
Internal Revenue and other
government agencies. In case
a lending company engages
in other businesses, it shall
maintain separate books of
accounts for these
businesses.
What reports and manuals
of the Lending Company are
needed to be filed with the
SEC?
1. General Information Sheet
(GIS)
2. Audited Financial
Statements prepared by an
external auditor accredited by
the SEC
3. Special Forms for Financial
Statements in Electronic
Format
4. Interim semi-annual
financial statements (using
Special Form)
REGISTRATION
REQUIREMENTS:
Documents to be filed by a
lending company with SEC
together with the four (4)
copies of a duly accomplished
application form to operate as

obligations.
Subsidiary
a corporation more than
fifty percent (50%) of the
voting stock of which is
owned by a bank or
quasi-bank.
Affiliate
a corporation, the voting
stock of which, to the
extent of fifty percent
(50%) or less, is owned
by a bank or quasi-bank
which is related or linked
to such institution through
common stockholders or
such other factors as may
be determined by the
Monetary Board of the
BSP.
Certificate of Authority
(CA)
a certificate issued by the
SEC in favor of a lending
company to engage in
the business of
lending regulated by R.A.
No. 9474 and its
Implementing Rules and
Regulations.
Monetary Assets
total assets inclusive of
valuation reserves and
deferred income but shall
not include investments
in real estate, in shares of
stock of real estate
development corporation
s or in real estate based
projects, leasehold rights
and improvements, fixed
assets, foreclosed

a lending company, which

must be signed under oath by
the President:
1. Information Sheet
2. NBI Clearance for each
director and/or officer
3. Foreign directors/officers,
shall also submit a clearance
from the Bureau of
Immigration (BI)
4. Presidents Sworn
Statement and Undertaking
5. For an existing lending
investor, it shall submit an
external auditors sworn
statement and undertaking
6. Business plan including
method of marketing .

Did you know that?

There are two Licensing Fees
needed to be paid by a
lending company. These are:
a.
Initial Application
Fees shall be paid to SEC
at the time of filing of
application by the Head
Office, Branch, extension
office, unit or satellite
office which is equal to
1/10 of 1% of the paid-up
capital of the lending
company shall be paid for
the issuance of a
Certificate of Authority to
Operate as a Lending
Company; and
b.
and Annual fee
shall be paid not later than

properties and
prepayments.
Networth
the excess of assets over
liabilities, net of appraisal
surplus, unbooked
valuation reserves,
capital adjustments,
overstatement of assets
and unrecorded liabilities.

LAW

The Securities
Regulation Code
(RA 8799)

RELEVANCE TO
CORPORATE
FINANCE

RA 8799 or the
Securities Regulation
Code plays

indispensable role with

regard to corporate
finance as it develops
the Philippine capital
market, promotes selfregulation in the
securities industry,
ensures protection for

Policy
Considerations
to establish a socially
conscious, free
market that
regulates itself
to encourage the
widest
participation of
ownership in
enterprises
to enhance the
democratiza-tion
of wealth
to promote the
development of
the capital market
to protect investors
to ensure full and fair

forty five (45) days before

the anniversary date of the
CA by the Head and
Branch offices which is
equal to 1/8 of 1% of the
required paid-up capital.

Documents Needed to be
Attached to the Application
Form in Securing Certificate
of Authority
Interim semi-annual financial
statements (using Special
Form) including the following:
Balance Sheet;
Income and Expense
statement;
Cash flow
Statement of Changes in
Equity
Schedule of Liabilities
List of Directors and Officers
Aging of Receivables
Should be submitted every
July 15 and January 15

SIGNIFICANT PROVISIONS OF THE LAW

Relevant/ Salient
Who Enforces the
Who are affected by the Law
Reportorial/
Defined Terms
Law
Registration Requirements
Securities -are shares,
Section 4, Chapter
Reportorial Requirements:
participation or interests
II of the Code
1. Annual report which
As far as the implementation of
includes balance sheet,
in a corporation or in a
provides for the
profit and loss statement
the RA 8799 is concerned, the
commercial enterprise or
designation of the
and statement of cash
profit-making venture and
Securities and
following are covered by the
flows for the last fiscal
evidenced by a
Exchange
year, management
provisions of the Securities
certificate, contract,
Commission as
discussion and analysis of
Regulation
Code,
viz:
instruments, whether
Administrative
results of operation; and
2. Such other periodical
written or electronic in
Agency tasked with
reports for interim fiscal
character. It includes:
the enforcement of
periods and current reports
(a) Shares of stocks,
the Securities
on significant
bonds, debentures, notes
Regulation Code
developments of the issuer
1. Issuer;
evidences of
as the Commission may
indebtedness, assetprescribe as necessary to
backed securities;
keep current information
2. Securities Market
on the operation of the
(b) Investment contracts,

all investors,
encourages full and
fair disclosure, and
eliminates fraud and
manipulation which
create market
distortions.

disclosure about
securities
to minimize if not
totally eliminate
insider trading and
other fraudulent or
manipulative
devices and
practices which
create distortions
in the free market.

certificates of interest or
participation in a profit
sharing agreement,
certifies of deposit for a
future subscription;
(c) Fractional undivided
interests in oil, gas or
other mineral rights;
(d) Derivatives like option
and warrants;
(e) Certificates of
assignments, certificates
of participation, trust
certificates, voting trust
certificates or similar
instruments
(f) Proprietary or
nonproprietary
membership certificates
in corporations; and
(g) Other instruments as
may in the future be
determined by the
Commission.
Issuer - is the originator,
maker, obligor, or creator
of the security.
Broker - is a person
engaged in the business
of buying and selling
securities for the account
of others.
Dealer - means many
person who buys/sells
securities for his/her own
account in the ordinary
course of business.
Associated person of a
broker or dealer - is an
employee therefor whom,
directly exercises control
of supervisory authority,

Professionals (broker,

business and financial

condition of the issuer.

dealer, salesman,
associated person of a
broker or dealer);
3.

Clearing Agency;

4.

Exchange;

5.

Insider;

6.

Promoter;

7.

Underwriter;

8.

Shareholder/Stockholder;
and

9.

Self-regulatory
Organizations
(associations of securities
brokers, dealers, and
other securities related
organizations)

Registration Requirements:
1. Sworn registration
statement of the securities
containing information and
document as the
Commission may
prescribe which includes
any prospectus to be
delivered as may be
required or permitted by
the Code;
2. Any such requirements the
Commission may
dispense including
additional information or
documents such as written
information from an
expert, depending on the
necessity thereof or their
applicability to the class of
securities sought to be
registered;
3. Additional information on
the effect of the securities
issue on ownership, on the
mix of ownership,
especially foreign and
local ownership;
4. The written consent of the
expert named as having
certified any part of the
registration statement or
any document used in
connection therewith;
5. Written certification by the
selling shareholders as to
the accuracy of any part of
the registration statement
contributed to by such
selling shareholders (in
case the registration
statement shares are to be
sold by the selling
shareholders); and
6. Payment of filing fee
prescribed by the
Commission which shall

but does not include a

salesman, or an agent or
a person whose functions
are solely clerical or
ministerial.
Clearing Agency - is any
person who acts as
intermediary in making
deliveries upon payment
effect settlement in
securities transactions.

not be more than onetenth (1/10) of one per

centum (1%) of the
maximum aggregate price
at which such securities
are proposed to be
offered.

Exchange - is an
organized market place
or facility that brings
together buyers and
sellers and executes
trade of securities and/or
commodities.
Insider - means (a) the
issuer; (b) a director or
officer (or any person
performing similar
functions) of, or a person
controlling the issuer;
gives or gave him access
to material information
about the issuer or the
security that is not
generally available to the
public; (d) A government
employee, director, or
officer of an exchange,
clearing agency and/or
self-regulatory
organization who has
access to material
information about an
issuer or a security that is
not generally available to
the public; or (e) a person
who learns such
information by a
communication from any
forgoing insiders.

Pre-need plans - are

contracts which provide
for the performance of
future services of or the
payment of future
monetary considerations
at the time actual need,
for which plan holders
pay in cash or installment
at stated prices, with or
without interest or
insurance coverage and
includes life, pension,
education, interment, and
other plans which the
Commission may from
time to time approve.
Promoter - is a person
who, acting alone or with
others, takes initiative in
founding and organizing
the business or
enterprise of the issuer
and receives
consideration therefor.
Prospectus - is the
document made by or an
behalf of an issuer,
underwriter or dealer to
sell or offer securities for
sale to the public through
registration statement
filed with the
Commission.
Registration statement is the application for the
registration of securities
required to be filed with
the Commission.
Salesman - is a natural
person, employed as

such as an agent, by a
dealer, issuer or broker to
buy and sell securities.
Uncertificated security is a security evidenced by
electronic or similar
records.
Underwriter - is a person
who guarantees on a firm
commitment and/or
declared best effort basis
the distribution and sale
of securities of any kind
by another company.

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