Single ownership, partnership not allowed for lending biz

THE Securities and Exchange Commission (SEC) Davao Extension Office (DEO) said single proprietorship or partnership for lending businesses is no longer allowed, instead it should be a lending corporation with at least five owners involved and a minimum of P1 million capital.

In line with President Rodrigo R. Duterte’s campaign against shark loans or the 5-6 lending scheme, the SEC no longer allows small scale lending or the underground economies.

According to SEC DEO Director lawyer Javey Paul D. Francisco, existing individual lenders have the option to form themselves into a small lending corporation with at least five members and a minimum P1 million capital.

In Davao City, since this new order had been passed, Francisco said a lot of Indian lenders have been registering and grouping themselves together, sometimes with Filipinos in order to be a lending corporation already.

However, he clarified that SEC does not have the authority to control the percentage of interest that the lending companies have.

“We do not have the authority to regulate the amount of interest that these lending companies impose upon in their businesses… But the advantage of this is when the lending companies have a certificate of authority (CA) and there are complaints about them addressed to us, it is much easier to monitor because we know where and who to go to,” Francisco said.

Around 2007, CAs were made compulsory for all corporations who are to operate as a lending company. Initially, those from Davao City secure this certificate from SEC Central Office but in October 2010, the SEC-DEO was given authority to release CAs to the lending companies under them including those in Davao Region, Soccsksargen, and the Autonomous Region in Muslim Mindanao (Armm).

SEC-DEO warns lending companies with Certificate of Incorporation but without securing Certificate of Authority (CA) of possible suspension after only a total of 256 CAs had been issued by the office since October 2010.

“All corporations are required to get a primary franchise. The primary franchise or the certificate of incorporation gives the corporation legal personality to transact. But the CA is given to an already registered corporation to operate as a lending company. There are additional requirements and disclosures for CA. Upon application for CA, they are to declare the policies, there is more transparency. If they operate in several branches, they should disclose the officers per branch and the allocated capital per branch,” Francisco said.

He added they had been in close contact with the local government units, asking them for the list of those that have applied for business permits for lending in their localities and SEC-DEO compares it with their masterlist to check whether they have CAs or not. The LGUs are also advised to not renew the business permits of these businesses if they still fail to secure CAs.