Majalco Finance and Investment, Inc.

July 29, 1986 Majalco Finance and Investment, Inc. c/o Mr. Ernie B. Manlapaz Ground Flr., Majalco Bldg. Trasierra cor. Benavidez Sts. Legaspi Vill., Makati, MM Gentlemen: This refers to your letter dated July 10, 1986 requesting for an opinion on whether your corporation, a financing company, can legally engage in "fund management" operation. A perusal of the articles of incorporation of Majalco Finance and Investment, Inc. disclosed that its purpose clause expressly prohibits the corporation from engaging in "fund management". The articles of incorporation provides in part, thus: "h. . . .; provided, however, that the corporation shall not manage the funds, securities, portfolios and similar assets of its client enterprise." It is well settled that a corporation has only such powers as are expressly granted in its charter or in the statutes under which it is created or such powers as are necessary for the purpose of carrying out its express powers. (13 Am. Jur., sec. 739). Thus, the court ruled: "In the determination of what business may be carried on by a corporation, reference must be had to its charter, and unless the power to carry on a particular business is either expressly or impliedly conferred thereby it does not exist." (Chewacla Lime v. Disnukes, 87 Ala 344,6 So. 122, 5 LRA. 100, cited in 13 Am. Jur., sec. 743). The Corporate business is limited by the corporation's charter, and " it is illegal for a corporation to apply either its capital or its profits to objects not contemplated by its charter ." (Am. Jur., Supra., sec. 739, citing Dodge v. Voolsey, 18 How. (U. S.) 331, 15 L. ed. 401). Likewise, only such powers as are reasonably necessary to enable corporations to carry out the express powers granted and the purposes of their creation are to be implied or are to be deemed to be incidental. (Am. Jur., sec. 740). Powers merely convenient or useful are not implied if they are not essential , having in view the nature and object of incorporation. (Ibid., citing Planters Bank v. Sharp, 6 Han. (U. S.) 301, 12 L. ed. 447). Considering that "fund management" operation is not permitted under the articles of incorporation of Majalco Finance and Investment, Inc. and neither is the same necessary to carry out its express powers/purposes, it is opined that subject corporation cannot undertake such business activity. It is to be noted further that the operation of "fund management" business requires prior authority of the Central Bank. It is worth mentioning that under Section 2-B of the General Banking Act (RA 337, as amended), "financial intermediaries" are subject to the regulation by the Central Bank of the Philippines. The law provides, thus: "SECTION 2-B. The operation and activities of non-bank financial intermediaries , except insurance companies, shall be subject to regulation by the Monetary Board ." . . . (emphasis supplied) As to what "non-bank financial intermediaries" include, the Manual of Regulations for banks and other Financial Intermediaries of the Central Bank provides: "Non-banking financial intermediaries shall include the following: 1. A person or entity licensed and/or registered with any government regulatory body as a non-bank financial intermediary such as investment house, investment company, financing company, securities dealer/broker, lending investor, pawnshop, money broker, fund manager , cooperative, insurance company, non-stock savings and loan association." (Sec. 401 Q.I.) (emphasis supplied) Considering that "fund manager" is considered a "non-banking financial intermediary", the same is subject to regulation by the Central Bank of the Philippines. Thus, before a corporation can legally engage in fund management operation, said line of business must be expressly stated in the articles of incorporation and prior authority must be secured from the Central Bank of the Philippines. Please be advised accordingly. Very truly yours, (SGD.) JESUS J. VALDES Associate Commissioner