Central Bank of the Philippines

June 19, 1986 Central Bank of the Philippines Manila Attention : Director R . P . Lirio SES Department IV Sir : This relates to your letter, dated May 27, 1986, requesting the opinion of this Commission as to whether Villaflores College, Inc. may engage in business as a lending investor. A perusal of the record of Villaflores College, Inc. shows that said corporation was registered in this Commission on May 6, 1976, for the purpose of owning, operating, managing and maintaining an educational institution in Tanjay, Negros Oriental, offering technical, industrial, agricultural and vocational courses, as well as primary, intermediate, collegiate and post graduate education. From the minutes of the meeting of the Board of Trustees of Villaflores College, Inc., it appears that a resolution was approved authorizing the school to branch out to lending business. Hence, the present request. It is well settled that a corporation has only such powers as are expressly granted in its charter or in the statutes under which it is created or such powers as are necessary for the purpose of carrying out is express powers. (13 Am. Jur., sec. 739). Thus, the court ruled: "In the determination of what business may be carried on by a corporation, reference must be had to its charter, and unless the power to carry on a particular business is either expressly or impliedly conferred thereby, it does not exist." (Chewacla Lime v. Dismukes, 87 Ala. 344, 6 So. 122, 5 L.R.A. 100, cited in 13 Am. Jur., sec. 743). The corporate business is limited by the corporation's charter, and " it is illegal for a corporation to apply either its capital or its profits to objects not contemplated by its charter ". (Am. Jur. supra. sec. 739, citing Dodge v. Woolsey, 18 How. (U.S.) 331, 14 L. ed. 401). Likewise, only such powers as are reasonably necessary to enable corporation's to carry out the express powers granted and the purposes of their creation are to be implied or are to be deemed to be incidental. (Am. Jur., sec. 740). Powers merely convenient or useful are not implied if they are not essential, having in view the nature and object of incorporation. (Ibid., citing Planters Bank v. Sharp, 6 How. (U.S.) 301, 12 L. ed. 447). LexLib In view of the foregoing, and considering that direct lending is not one of the purposes of Villaflores College, Inc., as limited in its articles of incorporation, and neither is direct lending necessary to carry out its express powers, it is opined that said educational institution cannot undertake such purpose. Our answer, therefore, to your query is in the negative. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman