Mr. Alberto V. Pefianco

March 30, 1982 Mr. Alberto V. Pefianco President San Carlos Financing Corp. Sta. Clara Subdivision Mandalagan, Bacolod City Negros Occidental Dear Mr. Pefianco: This is relative to your letter-query dated March 9, 1982 seeking clarification on the minimum paid-up capital for financing companies/corporation. According to your letter, the renewal of your certificate of authority (CA) for 1981 was held in a abeyance pending the increase of your paid-up capital to P500,000.00; that the present subscribed capital stock of the San Carlos financing Corporation is P400,000.00 out of an authorized capital stock of P500,000.00; that as of February 28, 1982, the subscribed capital stock of P400,000.00 has been fully paid; that said paid-up capital is enough to meet the normal credit requirements of your borrowers in the locality; that the credit facilities offered by your corporation in the form of loans to salaried employees do not require an enlarged capital base; and that for said reason, you now request for the renewal of your CA without increasing the present paid-up capital of P400,000.00 or if that is not possible, to grant you a one-year reprieve within which to increase your paid-up capital to P500,000.00. RA No. 5980, as amended, otherwise known as an "An Act regulating the Organization and Operation of Financing Companies" and approved on August 4, 1969, made it a declared policy of the State to regulate, monitor, and supervise the activities of Financing companies and to place their operation on a sound, stable and efficient basis, to wit: SECTION 2. Declaration of Policy . It is hereby declared to be the policy of the State to regulate the activities of financing firms to place their operations on a sound, stable and efficient basis, so that they may be in a better position to extend effective service in a fair manner to the general public and to industry, commerce and agriculture; to curtail and prevent acts or practices prejudicial to the public interests. Cognizant of the possible changes in economic and social conditions of the times, the law then used the phrase "paid-up capital of not less than five hundred thousand pesos" to provide for flexibility in capitalizing financing companies, to wit: prcd SECTION 6. Form of Organization . Financing companies shall be organized in the form of stock corporations or general partnerships . . . and shall have a paid-up capital of not less than five hundred thousand pesos. . . Today, however, because of the worldwide inflation and spiralling costs of production, a minimum paid-in capital of P500,000.00 for financing firms has become impractical, unrealistic, unsound and cannot keep them viable to the detriment of public interest. In line with the mandate of the law, the Securities and Exchange Commission, which is the agency empowered by said law to enforce the provision thereof, laid down the policy of increasing the minimum initial paid-up capital requirement for applicant financing firms to P2,000,000.00 in metropolitan cities; P1,000,000.00 in provincial cities and P500,000.00 anywhere else in the country (Trends in Leasing Regulations, Speech of Chairman Manuel G. Abello, March 26, 1982); and providing for a capital adequacy for existing firms. These new capital requirements are embodied in the new implementing rules and regulations of RA 5980, as amended, which will be promulgated at any time in the very near future. (Cf., Financial News, March 27, 1982). In the light of the foregoing, the renewal of the Certificate of Authority of your financing firm was held in abeyance pursuant to the above present policy of the SEC in order not to undermine the new implementing rules and regulations of RA 5980, as amended, which are expected to be passed soon. We believe that your problem will be solved by a section therein providing for the capital adequacy and capital build-up program of operating financing firms. Please be advised accordingly. LibLex Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner