Supervision and Examination Section

March 28, 1985 Supervision and Examination Section Department IV Central Bank of the Philippines Manila Attention : Director R . P . Lirio Gentlemen: This relates to your letter dated March 6, 1985, seeking the comments of this Commission on the following issue: cdlex "May pawnshops organized as corporations and partnerships be allowed the ancillary activity of directly purchasing or selling goods and articles?" A perusal of P.D. No. 114, otherwise known as the Pawnshop Regulation Act, fails to show any provision limiting the business of pawnshops to such activity. By implication therefore, their scope may be extended to other unrelated businesses unless clearly prohibited by the language of P.D. No. 114. The above drawn conclusion is further affirmed by Section 4175P of the Central Bank Manual of Regulations for Banks and other Financial Intermediaries, Book IV, which provides thus: "Separation of Pawnshop Business from other Businesses. Any person or entity engaged in the pawnshop business and at the same time, engaged in other businesses not directly related nor incidental to the business of pawnshop, shall keep such businesses distinct and separate from his pawnshop operations." However, where a corporation has more than one stated purpose, the articles of incorporation shall state which is the primary purpose and which are the secondary purpose or purposes. (Sec. 14, par. 2, Corporation Code of the Philippines). No such disclosure is required in the case of partnership. Furthermore, Section 42 of the Corporation Code provides in part as follows: llcd "...a private corporation may invest its funds in any other ...business or for any purpose other than the primary purpose for which it was organized when approved by a majority of the board of directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock ...." It is therefore our view that pawnshops organized as corporations and partnerships may be allowed the ancillary activity of directly purchasing or selling goods and articles. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman