Draft of New Rules and Regulations to Implement the Provisions of R.A. 8556 (Financing Company Act of 1998)

March 17, 1998 SEC-MMOD * MEMORANDUM FOR : Commissioner Rosalinda U. Casiguran : Commissioner Fe Eloisa C. Gloria : Director Sonia M. Ballo FROM : Money Market Operations Department SUBJECT : Draft of New Rules and Regulations to Implement the Provisions of R.A.8556 (Financing Company A c t of 1998) Submitted for your comments is the draft rules and regulations to implement the Financing Company Act of 1998 which was recently signed into law by the President. Most of the original provisions of the existing Rules and Regulations to Implement R.A. 5980 (Financing Company Act) were retained although the following changes were made: 1. Introduced and/or adopted the definitions in R.A. 8556 of the terms 'financing companies', 'credit', 'financial leasing' and 'lease rentals'. The word 'leasing' was removed from the definitions substituted with 'financial leasing'. 2. Form of Organization Reduced the Filipino ownership from 60% of outstanding capital stock to 40% of the voting stock. Introduced the reciprocity requirement of R.A. 8556. Adopted the following minimum paid-up capital requirement for financing companies: P10,000,000.00 Metro Manila and 1st Class Cities 5,000,000.00 Other Classes of Cities 2,500,000.00 Municipalities Removed the citizenship requirements for members of the Board of Directors. 3. Added a section (Section 3) on rights and powers. 4. Removed the following requirements for registration: Projected balance sheet, income statement and cash flow statement for three (3) years, together with a schedule of discounting, factoring, leasing and other financing activities and all related income therefrom. Posting of Notice and Order in addition to the publication thereof in a newspaper of general circulation once a week for two consecutive weeks. 5. Increased from 90 days to 120 days the period within which a financing company must commence operations. The extension period was likewise extended to 120 days. The penalty for failure to operate within the said period has been increased from P2,000.00 to P10,000.00. 6. Removed the provision that financing companies may engage in direct lending only if authorized by the secondary purpose in its Articles of Incorporation. R.A. 8556 specifically includes direct lending as a financing company activity. For your reference, enclosed is a table comparing the provisions of R.A. 5980 (Financing Company Act) and R.A. 8556 (Financing Company Act of 1998)