PNL Leasing Company, Inc.

May 16, 1988 PNL Leasing Company, Inc. 4th Flr.,PPL Building 1000 United Nations Ave. cor. San Marcelino Manila Gentlemen: This refers to your letter, dated February 26, 1988, requesting the opinion of this Commission on the following queries: 1. Whether or not PNL Leasing Company, Inc. is subject to the provisions of Sections 117-122 of the Corporation Code. cdlex 2. Whether or not PNL as transferee can exercise the functions of PNL Leasing as enumerated in its articles of incorporation. 3. What steps do we take to formalize the abolition of PNL Leasing Company and the transfer of functions, etc. to PNL. It appears that PNL Leasing Company, Inc. was registered with this Commission on June 28, 1978, primarily to undertake financing activities under RA 5980, otherwise known as "The Financing Company Act". On January 20, 1987, Executive Order No. 125, "reorganizing the Ministry of Transportation and Communications, defining its powers and functions and for other purposes" was issued by the President of the Philippines. Section 17(b) thereof reads as follows: "(b) PNL Leasing, Inc. is hereby abolished and its functions are transferred to Philippine National Lines, Inc. subject to the provisions of Section 19(b) hereof." Section 19(b) of E.O. No. 125 provides thus: "The transfer of functions which results in the abolition of the government unit that has exercised them shall include the appropriations, funds, records, equipment, facilities, choses in action, rights, other assets and personnel as may be necessary to the proper discharge of the transferred functions. The abolished unit's remaining appropriations and funds, if any, shall revert to the General Fund and its remaining assets, if any, shall be allocated to such appropriate units as the Minister shall determine or shall otherwise be disposed in accordance with the Government Accounting Code and other pertinent laws, rules, and regulations. ..." Section 28 of E.O. 125 expressly provided that it shall take effect immediately upon approval, which was January 30, 1987. Accordingly, PNL Leasing, Inc. was dissolved as of said date. In this connection, it would seem that Section 122 of the Corporation Code would apply to said financing company. The law provides, thus: "SECTION 122. Corporate liquidation . Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner ,shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. xxx xxx xxx." In connection with your second query, it appears that Philippine National Lines is a corporation created by a special charter, P.D. No. 900, issued on March 4, 1976, specifically to engage in transportation business. Section 2 of PD 900 provides as follows: "Purposes of PNL. The PNL, by itself or through its subsidiary/subsidiaries, shall undertake all manner of business activity for the establishment of a reliable shipping services that shall include but not limited to: a. Ownership, lease, charter, management and operation of merchant vessels, whether cargo or passengers on a basis domestic and/or international scale; b. Ship brokerage and other related or supportive activities; c. Ownership, establishment, management and operation of ship building and ship repair facilities in order to provide adequate services to the shipping industry." On the other hand, RA 5980, otherwise known as "The Financing Company Act" explicitly defines financing companies as those corporations or partnerships, "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, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." Our Revised Rules and Regulations to implement the Provisions of RA 5980, as amended, under Section i(b) thereof define the term "primarily organized" to mean organized for the primary purpose of operating as a financing company and that more than 50% of its funds shall be used or invested in financing company activities." In the light of the foregoing, and in reply to your second query, please be advised that it is not legally permissible for the Philippine National Lines to undertake the functions of the defunct PNL Leasing, Inc. Anent your third query, please be informed that no other formalities relative to the dissolution of PNL Leasing, Inc. need be filed with this Commission. By virtue of Section 17, EO 125, abolishing PNL Leasing, Inc., the corporate existence of said company is dissolved by operation of the law. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner