In the Matter of Prime Consortium Finance Corporation

July 30, 2013 SEC ADMINISTRATIVE CASE NO. 04-12-151 IN THE MATTER OF PRIME CONSORTIUM FINANCE CORPORATION , ENFORCEMENT AND PROSECUTION DEPARTMENT , petitioner . ORDER Pending consideration by the Commission is a Petition (for Revocation of Certificate of Registration) with Prayer for Issuance of Cease and Desist Order (Petition) dated 12 April 2012 filed by the Enforcement and Prosecution Department (EPD) of this Commission against PRIME CONSORTIUM FINANCE CORPORATION (Prime Consortium). The EPD prays that the Certificate of Registration of Prime Consortium be revoked for violation of the Financing Company Act. 1 CcAHEI PRIME CONSORTIUM is a stock corporation duly registered with the Commission on 30 November 2004 under SEC Registration No. CS200320609. 2 Its primary purpose is to engage in the business of a financing company under Republic Act 8556. 3 However, its Certificate of Incorporation does not authorize it to engage in the business activities requiring a Secondary License such as financing. 4 The amount of capital stock subscribed by the stockholders is Php2,500,000.00 and the amount paid up by them is Php625,000.00. 5 EPD alleges that it received a phone call complaining that a car offered as collateral for a loan was repossessed by Prime Consortium. 6 The database of the Commission indicates that Prime Consortium was not issued the required Certificate of Authority to Operate as a Financing Company (CA) from the Commission. 7 In a Memorandum, 8 the CRMD stated that Prime Consortium's application for a CA filed on 16 September 2003 was approved, subject to the conditions that its present subscribed capital stock in the amount of P2,500,000.00 be fully paid before its CA is issued, and that within one year from the date of issuance thereof, Prime Consortium shall fully subscribe and pay up its authorized capital stock. 9 However, Prime Consortium did not fully pay its subscribed capital stock in the amount of Php2,500,000.00 nor did it fully subscribe its authorized capital stock. EPD was furnished, on 25 October 2011, a certified true copy of the Prime Consortium's Business Permit. The KIND OF BUSINESS stated in the Business Permit is characterized as "Financial Institutions-Banks, Pawnshops, Insurance, Security & Stocks Dealers Lending Investor capitalized at Php625,000.00". 10 Prime Consortium was notified that its Articles of Incorporation does not authorize it to undertake business activities requiring a Secondary License. In the same letter, Prime Consortium was further directed to secure within thirty (30) days the required CA and was ordered to refrain from operating as a financing company. 11 On 22 November 2011, the Commission received a letter from Ms. Elsa A. Go, president of Prime Consortium, requesting a thirty (30)-day extension to comply with the required CA since the CRMD informed her that its paid-up capital should be Ten Million Pesos (Php10,000,000.00) before it can operate as a financing corporation. 12 On 26 April 2012, the EPD filed this instant Petition against Prime Consortium praying that the latter's Certificate of Registration be revoked and that a Cease and Desist Order (CDO) be issued against the latter directing the corporation to cease and desist from engaging in the business of a financing company. On 31 May 2012, the Commission En Banc issued a CDO against Prime Consortium ordering it to cease and desist from further engaging in the business of operating as a financing company. The Commission En Banc found that Prime Consortium was engaged in the unauthorized business of operating as a financing company without securing the required CA, in violation of Section 7 of R.A. 8556. 13 Prime Consortium was not issued the CA since it has not satisfied the minimum paid-up capital of at least Php10,000,000.00 required under Sec. 6 of R.A. 8556. The amount paid-up by its stockholders was only Php625,000.00. cCHETI On 15 June 2012, Prime Consortium filed a Motion for Reconsideration 14 which stated that its Board of Directors authorized the issuance and sale of the unissued 75,000 shares of its capital stock. Moreover, Prime Consortium claims that on 11 June 2012, its stockholders fully subscribed to the 75,000 shares. Further, Prime Consortium claims that its shareholders have fully paid their respective subscriptions in the amount of Php7,500,000 and that the requirements of the Financing Company Act have been complied with. Thus, Prime Consortium prays that the CDO be reconsidered and set aside and that the application for the CA filed on 16 September 2003 be reinstated. On 28 June 2012, a hearing was conducted to determine whether to lift the CDO or to impose administrative sanctions. 15 During the hearing, the counsel for Prime Consortium manifested that the authorized capital stock of Php10,000,000.00 has been fully subscribed and fully paid-up. He presented the deposit slips on the amount deposited in its Allied Bank account in order to establish that its paid-up capital is Php10,000,000.00. The hearing officer issued an order directing Prime Consortium to file a Written Manifestation of the matters that were manifested by it during the hearing and such other matters they would like the Commission to consider. 16 Prime Consortium filed its Manifestation dated 11 July 2012 merely reiterated the matters stated in its Motion for Reconsideration and attached photocopies of the deposit slips in order to establish that the minimum paid-up capital of Php10,000,000.00 has been met. Prime Consortium requested that the prior approved application for a CA be reinstated. In response to the Manifestation, the EPD filed its Comment (To Respondent's Manifestation) . 17 The EPD prayed for the denial of the request for reinstatement claiming that Prime Consortium cannot simply apply for reinstatement of the application for CA as the same has been considered abandoned or denied for its failure to comply with the conditions for the issuance to it of a CA, pursuant to SEC Resolution No. 596, series of 2004. 18 On 13 August 2012, the EPD filed a Motion for Issuance of Permanent Cease and Desist Order praying that the Commission issue an order making the CDO permanent since it has not filed any formal request or motion for the lifting of the said CDO within five (5) business days. During the hearing conducted on 20 September 2012, the counsel of Prime Consortium manifested that the corporation is in the process of filing its General Information Sheet (GIS) and Audited Financial Statements (AFS). He further stated that it has taken steps towards procuring a CA. Prime Consortium was directed to file a Written Manifestation detailing all matters manifested during the hearing and the steps taken after the hearing towards procuring the CA. 19 On 30 October 2012, Prime Consortium filed its Written Manifestation dated 29 October 2012 stating the following: (i) that Prime Consortium is re-applying for a CA and had secured with the Corporate Finance Department (CFD) a checklist of the required documents to be submitted; (ii) that it had updated and filed its GIS for the years 2011 and 2012; (iii) that its officers have secured and prepared some of the requirements for submission; and (iv) that the other documentary requirements, such as AFS for the years 2011 and 2012 are still under preparation. On 4 March 2013, the Commission Secretary issued an Order directing the EPD, the CFD and the CRMD to comment on the Written Manifestation dated 29 October 2012 filed by Prime Consortium. In its Comment dated 12 March 2013, the CFD stated that it has not received any formal application for a CA from Prime Consortium. 20 In its Comment dated 13 March 2013, the EPD stated that the alleged re-application for CA by Prime Consortium is not an impediment to the issuance of a permanent CDO. 21 Furthermore, Prime Consortium's alleged efforts to comply with the requirements of the Financing Company Act do not cure the evil that the CDO sought to prevent, that is, its continued unauthorized operation as a financing company. 22 Thus, the EPD prays that the Commission issue an order making the CDO permanent. 23 In its Comment dated 27 March 2013, the CRMD stated that Prime Consortium filed the following reports in 2012: its 2011 GIS, 2012 GIS and Amended 2012 GIS. 24 However, it has not filed any financial statement for seven (7) consecutive years since its incorporation on 30 November 2004. 25 In view of its failure to file reports for at least five (5) consecutive years from 2005 to 2009 which was likewise construed as non-operation for five (5) consecutive years, its certificate of registration was effectively revoked on 29 July 2012 pursuant to SEC Order dated 18 July 2012 published in the Philippine Star on June 28, 2012. 26 The CRMD stated that said SEC Order had already become final and executory, and that it had corrected the status of Prime Consortium in the Commission's database from "registered" to "revoked". 27 Considering that the certificate of registration of Prime Consortium has been effectively revoked on 29 July 2012 pursuant to SEC Order dated 18 June 2012, the Petition for Revocation filed by EPD has become moot and academic. In view of the rule that only stock corporations registered with the Commission as such can engage in financing activities, Prime Consortium, its directors, officers, representatives, agents, and any and all persons, claiming and acting for and in its behalf should be permanently enjoined from engaging in the financing business. WHEREFORE, premises considered, the Petition (for Revocation of Certificate of Registration) filed by the Enforcement and Prosecution Department has become moot and academic and is hereby DISMISSED. The Cease and Desist Order dated 31 May 2012 issued by the Commission En Banc against Prime Consortium Financing Corporation, its directors, officers, representatives, agents, and any and all persons, claiming and acting for and in its behalf is hereby made PERMANENT. Let a copy of this Order be furnished to the Company Registration and Monitoring Department and the Enforcement and Prosecution Department for its information and appropriate action. HDTISa SO ORDERED. Mandaluyong City, July 30, 2013. (SGD.) TERESITA J. HERBOSA Chairperson On official business MA. JUANITA E. CUETO Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner (SGD.) ANTONIETA F. IBE Commissioner Footnotes 1. Petition , p. 8. 2. Id. , Annex "A" (Certificate of Incorporation). 3. Id. , Annex "C" (Articles of Incorporation). 4. Supra , Note 2. 5. Supra , Note 3. 6. Id. , Annex "B" (Memorandum of the Complaints and Investigation Division dated 15 September 2011). 7. Id. , Annex "G" (Memorandum of CRMD dated 4 January 2012). 8. Id. 9. SEC Resolution No. 596, series of 2004. 10. Id. , Annex "I" (Business Permit No. 11-006235 dated 9 May 2011, valid until 31 December 2011). 11. Id. , Annex "L" (Letter-Order of EPD dated 13 October 2011). 12. Id. , Annex "M" (Letter of President Elsa A. Go of Prime Consortium). 13. Section 7 of R.A. 8556, otherwise known as the "Financing Company Act" provides that no corporation shall hold itself out as doing business as a "financing company" or "finance and investment company" or any other title or name tending to give the public the impression that it is engaged in the operations and activities of a finance company, unless so authorized by this act . 14. Motion for Reconsideration dated 14 June 2012. 15. Pursuant to Sec. 15 of the Rules and Regulations to Implement the Provisions of Republic Act 8556. 16. Records, p. 115. 17. Comment (To Respondent's Manifestation) dated 6 August 2012. 18. Id. , par. 5. 19. Records, p. 218. 20. Comment of the CFD, par. 2. 21. Comment of the EPD, par 4. 22. Id. , par. 6. 23. Id. , p. 3. 24. Comment of the CRMD, par 2. 25. Id. 26. Id. , par. 3. 27. Id. , par. 5.