LAWRELEVANCETO CORPORATE FINANCESIGNIFICANT PROVISIONS OF THE LAW

Policy ConsiderationsRelevant/ Salient Defined TermsWho Enforces the LawWho are affected by the LawReportorial/Registration Requirements

The Financing Company Act (RA 8556)

Law governing the activities of financing and leasing companies Achieve a sound economic development Enumeration of rights and powers of a financing company

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)

Financing Companies Credit Finance Leasing Purchase Discount

Securities and Exchange Commission Monetary Board of the Bangko Sentral ng Pilipinas

Financing companies Consumers Industrial, commercial and agricultural enterprises Third persons or entities Enforcers of the law

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; 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.

LAWRELEVANCE TO CORPORATE FINANCESIGNIFICANT PROVISIONS OF THE LAW

Policy ConsiderationsRelevant/ Salient Defined TermsWho Enforces the LawWho are affected by the LawReportorial/Registration Requirements

The Lending Company Regulation Act(RA No. 9474)

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. 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; b. 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.Lending Companya 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.

Debtora 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 obligations.

Subsidiarya 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 lendingregulated by R.A. No. 9474 and its Implementing Rules and Regulations.

Monetary Assetstotal assets inclusive of valuation reserves and deferred income but shall not include investments in real estate, inshares of stock of real estate developmentcorporations or in real estate based projects,leasehold rights and improvements, fixed assets, foreclosed properties and prepayments.

Networth the excess of assetsover liabilities, net of appraisal surplus, unbookedvaluation reserves, capital adjustments, overstatement of assets and unrecorded liabilities.

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.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 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 lendingcompany with SEC together with the four (4) copies of a dulyaccomplished application form to operate as a lendingcompany, 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 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 ReceivablesShould be submitted every July 15 and January 15

LAWRELEVANCE TO CORPORATE FINANCESIGNIFICANT PROVISIONS OF THE LAW

Policy ConsiderationsRelevant/ Salient Defined TermsWho Enforces the LawWho are affected by the LawReportorial/Registration Requirements

The Securities Regulation Code (RA 8799)RA 8799 or the Securities Regulation Code plays indispensable role with regard to corporate finance as it develops the Philippine capital market, promotes self-regulation in the securities industry, ensures protection for all investors, encourages full and fair disclosure, and eliminates fraud and manipulation which create market distortions.

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 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. Securities -are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. It includes:(a) Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities;(b) Investment contracts, 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, 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.

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.

Section 4, Chapter II of the Code provides for the designation of theSecurities and Exchange Commission as Administrative Agency tasked with the enforcement of the Securities Regulation CodeAs far as the implementation of the RA 8799 is concerned, the following are covered by the provisions of the Securities Regulation Code, viz:

1. Issuer;2. Securities Market Professionals (broker, dealer, salesman, associated person of a broker or dealer);3. Clearing Agency;4. Exchange;5. Insider;6. Promoter;7. Underwriter; 8. Shareholder/Stockholder; and9. Self-regulatory Organizations (associations of securities brokers, dealers, and other securities related organizations)

Reportorial Requirements:1. Annual report which includes balance sheet, profit and loss statement and statement of cash flows for the last fiscal year, management discussion and analysis of results of operation; and2. Such other periodical reports for interim fiscal periods and current reports on significant developments of the issuer as the Commission may prescribe as necessary to keep current information on the operation of the business and financial condition of the issuer.

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); and6. Payment of filing fee prescribed by the Commission which shall not be more than one-tenth (1/10) of oneper centum(1%) of the maximum aggregate price at which such securities are proposed to be offered.

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