Mrs. Jaena T. Laguda

April 22, 1983 Mrs. Jaena T. Laguda Cinema Drug Center V. Gustillo Street, San Carlos City, Negros Occidental Madam : This is to acknowledge receipt of your letter dated March 21, 1983, requesting information on how to form a business organization with "lending investor" as its purpose. LexLib In connection therewith, allow us first to discuss the connotation of the phrase, "lending investor". In one of the opinions that we have rendered, we were able to trace these words to have a specific meaning in Taxation, and defined in Section 187(u) of the National Internal Revenue Code of 1977 * to include "all persons who make a practice of lending money for themselves or others at interest." Furthermore, although the Financing Company Act of 1969 (RA 5980) did not include the term "lending investor", its implementing Rules and Regulations included "direct loan" as financing activity. This was in effect ratified by PD 1738 and PD1739 (both issued on September 17, 1980) when it expressly included the granting of direct loan as one of the purposes of a finance company. In view thereof, the purpose of "lending investor" may only be engaged in by a financing company within the purview of RA No. 5980. Attached is the checklist of requirements for the organization of a stock corporation (items checked must be complied with) and the Basic Rules and Regulations to implement the provisions of RA No. 5 98 0 . As regards the minimum paid-up capitalization, the Chairman of the Securities and Exchange Commission has this to say, viz: "In line with the mandate of the law, the Securities and Exchange Commission, which is the agency empowered by said law to enforce the provisions 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 everywhere else in the country," (Trends in Leasing Regulations, speech of Chairman Manuel G. Abello on March 26, 1982.) Please be guided accordingly. Very truly yours, (SGD.) JESUS J. VALDES Associate Commissioner * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .