Puruganan Chato Tan & Geronimo

August 29, 1995 Puruganan Chato Tan & Geronimo 8th Flr.,Strata 200 Bldg. Emerald Ave. Ortigas Center, Pasig, Metro Manila Attention : Attys . Yumina L . Francisco and Grace Eloisa J . Que S i r : This refers to your letter dated July 31, 1995 requesting opinion on whether or not your client, East Asia (AEA) Capital Corporation, an existing investment house can include "financing company business" in its primary purpose alongside with its investment house activities or should it be included in the secondary purpose clause. LibLex Please be advised that the Corporation Code requires corporations to specify in their articles of incorporation which is the primary purpose and which are the secondary purposes of the corporation. The Corporation Code provides: "SECTION 14. Contents of articles of incorporation . ... 2. The specific purpose or purposes for which the corporation is being incorporated. 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) The above requirement is necessary in the application of Section 42 of the Corporation Code which provides that investments of corporate funds in any other corporation or business or for any purpose other than the main purpose for which it was organized requires not only the approval of the Board of Directors but also by the stockholders. Hence, as a general rule ,it is necessary to specify the primary purpose and secondary purpose(s) in order to determine such investments of corporate funds as would require the authority of the stockholders. However ,the Commission, in an earlier opinion, allowed the situation wherein both the "financing company" and "investment house" activities would be included in the primary purpose of the articles of incorporation. ( Ltr. to Atty. Primer B. Leonen dated September 22, 1993 ,a xerox copy of which is herewith attached for ready reference) In view thereof, you may adopt said opinion or you may opt to classify them into primary and secondary purposes to comply with Section 14 of the Corporation Code by amending its articles of incorporation changing its present primary purpose from "investment house" to financing company" to comply with R.A. 5980 otherwise known as the Financing Company Act, which requires the latter business to be the primary purpose, and consequently transfer its investment house functions under the secondary purposes. Under P.D. 129 otherwise known as the Investment Houses Law, an investment house need not be primary purpose. It has to be emphasized, however, that in both cases, the operation of said business activities requires separate secondary licenses or authority to operate as such and shall be subject to favorable recommendation of the Bangko Sentral. Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner