SPL Capital Markets Corporation

January 22, 1991 SPL Capital Markets Corporation Suite 323 Makati Stock Exchange Bldg. Ayala Avenue, Makati Metro Manila Attention : Mr . Rolando L . Justo (Corporate Secretary) Gentlemen : This refers to your letter of December 14, 1990 inquiring whether your corporation can borrow and lend money. prcd The general rule is that the management of a corporation, in the absence of express restrictions, has discretionary authority to enter into contracts and transactions which may be deemed reasonably incidental to its business purposes. (Ballantine on Corporations, Sec. 83 at 224) The exercise of implied powers is expressly recognized by the Corporation Code, particularly under Paragraph Eleven of Section 36 thereof. The law provides thus: "SECTION 36. Corporate Powers and Capacity . Every corporation incorporated under this Code has the power and capacity. xxx xxx xxx 11. To exercise such other powers as may be essential or necessary to carry out its purposes as stated in its articles of incorporation." In the light of the foregoing, your corporation, when necessary in the pursuit of its business, may borrow money. As to whether it can lend money, please be advised that in corporations other than those formed to engage in the business of loaning money, like for instance your company, the loaning of money is but an incidental power, and cannot be extended to purposes foreign to the business and objects for which the corporation was created. (6 Fletcher, Sec. 2619, citing Leigh v. American Brake-Bean Co.,205 Ill. 147, 68 NE 713, affg. 107 Ill. App. 444) However, while a corporation, other than one created for that purpose, cannot engage in the business of making loans, this does not mean that it may not make temporary use of its surplus funds, and by lending them, make them productive. Whenever a corporation has the right to hold funds for which there is no present use, it may loan them in the absence of express restrictions, in order to invest them, instead of allowing them to remain idle and unproductive. (6 Fletcher, Sec. 2620 citing several cases) However, in making loans, a corporation should observe whatever provisions or limitations there may be in regard to the security to be taken, or the parties to whom the loan may be made. (6 Fletcher 2622) Corporate funds may be temporarily loaned provided the following conditions are complied with: 1. That the funds are not presently used by the company and the loaning is not made on a regular basis; 2. That by lending the funds, it will make them productive instead of allowing them to remain idle; 3. That there is no express restrictions in the articles of incorporation or by-laws; 4. That there must be a collateral or assurance that the party to whom the loan may be made is capable of returning or paying them at maturity date; 5. That the lending of the funds is not used as a scheme to prejudice corporate creditors or result in the infringement of the Trust Fund Doctrine; and 6. That Section 42 of the Corporation Code be complied with. ( SEC letter dated January 11, 1991 addressed to Atty. Emmanuel Paras ) LibLex Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner