Radiowealth Finance Company

July 24, 1984 Radiowealth Finance Company Guevent Building II Ortigas Avenue cor. Wilson St. Greenhills, San Juan Metro Manila Attention : Mr . Reynaldo S . Guevara Gentlemen: This refers to your letter dated July 5, 1984 requesting for a ruling that Radiowealth Finance Company, as a general financing company, can engage in "direct lending" and that such activity is not covered by the Cease and Desist Order issued by this Commission on May 3, 1983. llcd Under the Basic Rules and Regulations to Implement the Provisions of Republic A c t No. 5980 , otherwise known as An Act Regulating the Organization and Operation of Financing Companies particularly Section 8 thereof, "direct lending" was impliedly considered as a financing activity. The rule provides, thus: "SECTION 8. In the case of direct loans, the pertinent rates provided for the Usury Law, Act No. 2655, shall be applicable." A careful restudy of R.A. 5980, however, reveals that "direct lending" is not a financing activity. The law defines "financing companies", to wit: "(a) "Financing Companies",hereinafter called companies, are corporations or partnerships except those regulated by the Central Bank of the Philippines, the Insurance Commissioner and the Cooperatives Administration Office which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages and other evidences of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines, equipments, appliances and other movable property." (Emphasis supplied) The aforecited definition does not include "direct lending" as one of the activities which can be undertaken by a financing company. Applying the principle of "Expressio Unius Est Exclusio Alterius", "direct lending", therefore, would not be included as a financing activity within the purview of R.A. 5980. The foregoing ruling, however, is without prejudice to the power of the corporation to engage in direct lending if so authorized in the secondary purposes of the articles of incorporation. LibLex A perusal of the purposes in the amended articles of incorporation of your corporation approved by the Commission on May 29, 1975 disclosed that the provisions thereof include "direct lending".The amended articles of incorporation provides, thus: "Second. That the purposes for which said corporation is formed are the following: xxx xxx xxx 5. To provide or extend finance in the form of long, medium or short term loans, on the security or real estate mortgages over lands, buildings and other improvements, or chattel mortgages or pledges over machinery and equipment, indentures, merchandise and other personal properties." xxx xxx xxx It is well settled that a corporation can lawfully engage in the business/es for which the corporation was lawfully organized and which are stated in the articles of incorporation. Considering that "direct lending" is included as one of your purposes, the same can be legally engaged in by the corporation. It was observed, however, that the primary purpose of the corporation as stated in the articles of incorporation comprise several unrelated purposes including the business of "direct lending". In connection therewith, Section 14 of the Corporation Code provides, to wit: "SECTION 14. Contents of articles of incorporation . ...Where a corporation has more than one stated purpose ,the articles of incorporation shall state which is the primary purpose and which is/are the secondary purpose or purposes." ..(Emphasis supplied) In view thereof, the corporation is hereby advised to amend its articles of incorporation in accordance with Section 48 of the Corporation Code in such a manner that it will clearly indicate the corporation's primary purpose and secondary purposes. If the corporation intends to have "financing business" as its primary purpose, "direct lending" should be transferred under the second purposes to conform with the present policy of the Commission. Please be advised accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman