Re : Educational Program of a non-stock,non-profit corporation not covered byFinancing Company Act

May 4, 2004 SEC OPINION NO. 24-04 Re : Educational Program of a non-stock, non-profit corporation not covered by Financing Company A c t Quisumbing Torres Law Offices 12th Floor, Net One Center, 26th Street corner 3rd Avenue, Crescent Park West, Bonifacio Global City Taguig, Metro Manila Attention: Atty. Natividad B. Kwan Atty. Lourdes C. Echavez-de Leon Gentlemen : This refers to your letter dated April 1, 2004 requesting confirmation of your opinion that: 1. Your client, Perpetual Education Fund, Inc. ("PEF"),a non-stock and non-profit religious, educational and charitable corporation organized and operating under U.S. laws may register a Philippine branch with the Securities and Exchange Commission ("SEC"). 2. The implementation of an Educational Program pursuant to which PEF will provide financial assistance exclusively to members of the Church to assist church members in completing education will not be deemed as engaging in the business of a financing company under R.A. 8556 ("The Financing Company Act"), hence, will not be required to register as such with the SEC. As to the first query, the answer is in the affirmative. A foreign corporation may establish an office in the Philippines provided it secures first the necessary license from the Commission. Section 123 of the Corporation Code of the Philippines requires all foreign corporations, stock or non-stock, to secure the necessary license before it can be allowed to transact business in the country. The pertinent provision is hereunder quoted: "Section 123. Definition and rights of foreign corporation . For the purposes of this Code, a foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state . It shall have the right to transact business in the Philippines after it shall have obtained a license in this country in accordance with this Code and a certificate of authority from the appropriate government agency. (Emphasis supplied)" Hence, PEF should first secure from the Commission a license to establish a branch office before it can carry out its purposes and objectives in this country. As to the second query, the answer is also in the affirmative. "Non-stock corporations by their nature are not empowered to engage in business with the object of making income or profit, hence, it cannot include a purpose in its articles of incorporation which would change or contradict its nature as such." 1 The purpose of a non-profit organization is something other than earning profits. Generally, it is to render as much service as possible with given resources, or to use as few resources as possible to render a given amount of service. 2 The extension of financial assistance of PEF exclusively to its church members is well within its purpose, being a corporation organized for religious, educational and charitable purposes. It must be understood however that any revenue that may be obtained by PEF shall be used to carry out the purposes set forth in its articles of incorporation and is not distributed to its members. "The SEC has ruled that the mere fact that a non-stock corporation may earn profit does not make it a profit-making corporation where such profit or income is used to carry out the purposes set forth in the articles of incorporation and is not distributed to its incorporators, member, trustees or officers." 3 Under the proposed educational program disclosed in your letter, PEF in our view does not need to register as a financing company considering that the financial assistance will be extended exclusively to the church members and the same is undertaken not as a financing business but is in pursuance of the educational and charitable nature of the corporation. This opinion shall not be interpreted as an automatic approval of the application for license that may be filed by PEF in the future. The application must conform with all the requirements under the law and shall still be processed in accordance with law and the rules and regulations of the Commission. Finally, please be reminded that the foregoing opinion is based solely on the facts disclosed in your query and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule binding upon the Commission in other cases whether of similar or dissimilar circumstances. 4 DHEaTS Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel Footnotes 1. Villanueva, Philippine Corporate Law, 2001 ed.,p. 748. 2. SEC Opinion 04-13. 3. Ibid. ,p. 739. 4. SEC Memorandum Circular No. 15, dated December 16, 2003.