A New Era of Foreign Ownership in Philippine Lending and Financing Companies
The removal of full foreign ownership restrictions on lending and financing companies, as well as investment houses, has attracted foreign investors, positioning the Philippines as a key investment destination in Southeast Asia.
Republic Act No. 10881 allows one hundred percent (100%) foreign ownership of lending and financial companies, and investment houses. The law also amends investment restrictions in laws pertaining to adjustment, lending, and financial companies, as well as investment houses listed in the foreign investment negative list.
A lending corporation is a corporation that provides loans using its own money or money from no more than 19 individuals. A lending company may give loans with agreed-upon amounts, interest rates, and charges if they comply with the Truth in Lending Act and the Consumer Act of the Philippines. The Monetary Board, in consultation with the SEC and the industry, can also set interest rates based on current economic and social conditions.
Capital Requirements: Setting Up Lending and Financing Companies
Lending and Financing companies must be set up as stock corporations and can be fully owned by foreign nationals. They need to have a minimum paid-up capital of:
- Php 10,000,000.00, if located in Metro Manila or other first-class cities;
- Php 5,000,000.00, if located in other cities; and
- Php 2,500,000.00, if located in municipalities.
The Securities and Exchange Commission can change these minimum capital requirements if necessary for regulatory reasons.[1]
Due to numerous documentations needed to apply for Certificate of Authority (CA), the Securities and Exchange Commission (SEC) has revoked the registration certificates of 2,084 lending and financing companies for their failure to secure the requisite certificate of authority. Additionally, the SEC has canceled the CAs of 39 financing and lending companies due to various violations of applicable rules and regulations.[2]
It is vital for companies to seek the services of a corporate lawyer who can navigate the complex requirements set forth by the law and SEC, ensuring compliance with regulatory standards and safeguarding against potential legal drawbacks.
Written by: Atty. Marc Renzo Mandocdoc
[1] Republic Act No. 9474, 2007.
[2] Philstar Business. (2023, February 10). SEC removes 33 online lending apps from Google Play Store. Philstar. Retrieved June 24, 2024, from https://www.philstar.com/business/2023/02/10/2243790/sec-removes-33-online-lending-apps-google-play-store
