Section 1. This Act shall be known as the "Financing Company
Act of 1998."
Sec. 2. Declaration of Policy. — It is hereby
declared to be the policy of the State to regulate and promote the
activities of financing and leasing companies to place their operations
on a sound, competitive, stable and efficient basis as other financial
institutions, to recognize and strengthen their critical role in
providing medium and long-term credit for investments in capital goods
and equipment especially by small and medium enterprises particularly
in the countryside and to curtail and prevent acts or practices
prejudicial to the public interest so that they may be in a better
position to extend efficient service in a fair manner to the general
public and to industry, commerce and agriculture and thereby more fully
contribute to the sound development of the national
economy.
Sec. 3. Sec. 3 of the same Act is hereby
amended to read as follows:
"Sec. 3. Definition of Terms. — As used in this
Act, the term:
"(a) 'Financing companies' hereinafter called
companies, are corporations, except banks, investments houses, savings
and loan associations, insurance companies, cooperatives, and other
financial institutions organized or operating under other special laws,
which are primarily organized for the purpose of extending credit
facilities to consumers and to industrial, commercial, or agricultural
enterprises, by direct lending or by discounting or factoring
commercial papers or accounts receivable, or by buying and selling
contracts, leases, chattel mortgages, or other evidences of
indebtedness, or by financial leasing of movable as well as immovable
property;
"(b) 'Securities and Exchange Commission' shall mean
the office of the Securities and Exchange Commission of the Philippines;
"(c) 'Credit' shall mean any loan, mortgage,
financial lease, deed of trust, advance or discount, any conditional
sales contract, contract to sell, or sale or contract of sale of
property or service, either for present or future delivery, under
which, part of all or the price is payable subsequent to the making of
such sale or contract; any contract, any option, demand, lien or
pledge, or to the other claims against, or for the delivery of,
property or money, any purchase, or other acquisition of or any credit
upon the security of, any obligation or claim arising out of the
foregoing, and any transaction or series of transactions having similar
purpose or effect; and
"(d) 'Financial leasing' is a mode of extending
credit through a non-cancelable lease contract under which the lessor
purchases or acquires, at the instance of the lessee, machinery,
equipment, motor vehicles, appliances, business and office machines,
and other movable or immovable property in consideration of the
periodic payment by the lessee of a fixed amount of money sufficient to
amortize at least seventy (70%) of the purchase price or acquisition
cost, including any incidental expenses and a margin of profit over an
obligatory period of not less than two (2) years during which the
lessee has the right to hold and use the leased property with the right
to expense the lease rentals paid to the lessor and bears the cost of
repairs, maintenance, insurance and preservation thereof, but with no
obligation or option on his part to purchase the leased property from
the owner-lessor at the end of the lease contract.
"(e) 'Purchase discount' is the difference between
the value of the receivable purchased or credit assigned, and the net
amount paid by the finance company for such purchases or assignment,
exclusive of fees, services, charges, interest and other charges
incident to the extension of credit.
"(f) 'Lease rentals' shall refer to the periodic
payments made by the lessee to the lessor under Sec. 3(d), above."
Sec. 4. Sec. 4 of the same Act is hereby
amended to read as follows:
"Sec. 4. Grant of Authority to Securities and
Exchange Commission. — The Securities and Exchange Commission is hereby
empowered to enforce the provisions implementing regulations except
insofar as the Bangko Sentral may have supervisory authority under the
provisions of Republic Act No. 7653 with respect to financing companies
licensed to perform quasi-banking functions, and insofar as the
Monetary Board has authority to prescribe financing company rates and
charges under section 5 hereof."
Sec. 5. Sec. 5 of the same Act is hereby
amended to read as follows:
"Sec. 5. Limitation on Purchase Discounts, Lease
Rentals, Fees, Service and Other Charges. — The Monetary Board of the
Bangko Sentral ng Pilipinas is hereby empowered to prescribe, in
consultation with financing companies and the Securities and Exchange
Commission, the maximum rate or rates of purchase discounts, lease
rentals, fees, service and other charges of financing companies, and to
change, eliminate or grant exemptions from or suspend the effectivity
of such rules whenever warranted by prevailing economic and social
conditions."
Sec. 6. Sec. 6 of the same Act is hereby
amended to read as follows:
"Sec. 6. Form of Organization and Capital
Requirements. — Financing companies shall be organized in the form of
stock corporations at least forty percent (40%) of the voting stock of
which is owned by citizens of the Philippines and shall have a paid-up
capital of not less than Ten million pesos (P10,000,000) in case the
financing company is located in Metro Manila and other first class
cities, Five million pesos (P5,000,000) in other classes of cities and
Two million five hundred thousand pesos (P2,500,000) in municipalities:
provided, however, that no foreign national may be allowed to own stock
in any financing company unless the country of which he is a national
accords the same reciprocal rights to Filipinos in the ownership of
financing companies or their counterpart entities in such country: and
Provided, further, that financing companies duly existing and in
operation before the effectivity of this Act shall comply with the
minimum capital requirement within one (1) year from the date of the
said effectivity."
Sec. 7. Sec. 7 of the same Act is hereby
amended to read as follows:
"Sec. 7. Requirement for Registration. — Aside
from requiring compliance with the provisions of the Corporation Code,
the Securities and Exchange Commission shall not register the articles
of incorporation of any financing company unless its office is
satisfied on the evidence submitted to it, that:
"(a) All the requirements of existing laws to engage
in the business for which the applicant is proposed to be incorporated
or organized have been complied with;
"(b) The organization, direction and administration,
as well as the integrity and responsibility of the organizers and
administrators reasonably assure the protection of the interest of the
general public;
"(c) All the requirements of this Act have been
complied with: provided, that financing companies duly incorporated or
registered prior to the approval of this Act, and which are actually
existing and operating as such, shall file an information sheet with
the Securities and Exchange Commission in the form to be prescribed by
the Securities and Exchange Commission within sixty (60) days after
notice from the said Commission. No person, association, partnership,
or corporation shall hold itself out as doing business as a 'financing
company' or 'finance and investment company' or any other title or name
tending to give the public the impression that it is engaged in the
operations and activities of a financing company, unless so authorized
under this Act."
Sec. 8. Sec. 8 of the same Act is hereby
repealed.
Sec. 9. Sec. 9 of the same Act is hereby
renumbered as Sec. 8.
Section 10. There is hereby inserted after Sec. 8
as renumbered, new Section s 9, 10, 11, 12 and 13 to read as follows:
"Sec. 9. Rights and Powers. — Financing companies
shall have the following powers, in addition to those granted by this
Act and by other laws:
"(a) Engage in quasi-banking and money market
operations with the prior approval of the Bangko Sentral ng Pilipinas;
"(b) Engage in trust operations subject to the
provisions of the General Banking Act upon prior approval by the Bangko
Sentral ng Pilipinas;
"(c) Issue bonds and other capital instruments subject to pertinent
rules and regulations of the Bangko Sentral ng Pilipinas;
"(d) Rediscount their paper with government financial
institutions subject to relevant laws, rules and regulation;
"(e) Participate in special loan or credit programs
sponsored by or made available through government financial
institutions; and
"(f) Provide foreign currency loans and leases to
enterprises who earn foreign currency by exports or other means,
subject to existing laws and rules and regulations promulgated by the
Bangko Sentral ng Pilipinas.
"Nothing in this section shall be construed as precluding a financing
company from performing such services or exercising such powers as may
be granted by the Bangko Sentral ng Pilipinas or the Securities and
Exchange Commission or as may be incidental to its activities as a
corporation.
"Section 10. Applicability of Incentives and
Exemptions to Financial Leases. — Any incentive, exemption or benefit,
including tax credits and investment incentives granted by law or
regulation to any purchaser, importer, borrower or other eligible
person in connection with any purchase, importation, acquisition, or
other transaction shall not be lost, diminished or impaired when the
associated financing is through a financial lease rather than through
borrowing or other conventional method of financing. Financing
companies providing the financial lease in such cases shall be entitled
to any incentive, exemption, benefit or privilege available to lenders,
importers, purchasers or other eligible person in such transactions
under the applicable law or regulation.
"Section 11. Parity Clause. — When providing medium
and long-term credit to small and medium enterprises, financing
companies shall enjoy such other rights, powers, benefits and
privileges as may be granted by the law or regulation to other non-bank
financial institutions when they provide similar credit to such
enterprises."
"Section 12. Liability of Lessors. — Financing
companies shall not be liable for loss, damage or injury caused by a
motor vehicle, aircraft, vessel, equipment, machinery or other property
leased to a third person or entity except when the motor vehicle,
aircraft, vessel, equipment or other property is operated by the
financing company, its employees or agents at the time of the loss,
damage or injury.
"Section 13. Registry of Financial Lease. — The
Register of Deeds shall open and maintain a register of financial
leases, as an adjunct to the chattel mortgage registry.
"Said lease register shall contain the following particulars:
"(1) Name or description of property, including:
"(a) Brand name or name of manufacturer;
"(b) Name of model, if any;
"(c) Year of model, or manufacture, if available; and
"(d) Serial number, if any.
"(2) Acquisition cost;
"(3) Name of owner or finance company lessor;
"(4) Name of lessee;
"(5) Date of lease agreement or schedule;
"(6) Date of expiry of lease; and
"(7) Date of entry in lease registry."
Section 11. Section 10 of the same Act is hereby
renumbered as Section 14. As renumbered, Section 14 is hereby amended
to read as follows:
"Section 14. Penalty. — A fine of not less than Ten
thousand pesos (P10,000.00) and not more than One hundred thousand
pesos (P100,000.00) or imprisonment for not more than six (6) months or
both, at the discretion of the court, shall be imposed upon:
"(1) Persons, associations, partnerships or
corporations, including the managing officer thereof, that shall:
"(a) Engage in the business of a financing company
without authority from the Securities and Exchange Commission;
"(b) Hold themselves out to be financing companies,
either through advertisement in whatever form, whether in its
stationery, commercial paper or other document, or through other
representations without authority;
"(c) Make use of trade or firm name containing the
words 'Financing Company' or 'Leasing Company' or 'Finance and Leasing
Company or 'Finance and Investment Company' or any other designation
that would give the public the impression that it is engaged in the
business of a financing company or leasing company as defined in this
Act without authority; and
"(d) Violate the provisions of this Act.
"(2) Any officer, employee, or agent of a financing
company who shall:
"(a) Knowingly and willingly make any statement in
any application, report or document required to be filed under this
Act, which statement is false or misleading with respect to any
material fact; or
"(b) Overvalue or aid in overvaluing any securities
for the purpose of influencing in any way the action of the company on
any loan, or discounting line.
"(3) Any officer, employee or examiner of the
Securities and Exchange Commission directly charged with the
implementation of this Act who shall commit, connive, aid or assist in
the commission of acts enumerated under subsections 1 and 2 of this
section."
Section 12. Section s 11 and 12 of the same Act are
hereby renumbered as Section s 15 and 18, respectively.
Section 13. Effectivity. — This Act shall take effect
fifteen (15) days following the completion of its publication in the
Official Gazette or in two newspapers of general circulation.
Approved: February 26, 1998
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