How to Register a Financing Company in the Philippines

In this article, we will give you guidelines on how to register a financing company in the Philippines. Financing companies are required to be registered as a corporation and therefore must obtain a certificate of registration from the Securities and Exchange Commission. Furthermore, financing companies which are subsidiaries and affiliates of a bank or non-bank financial institutions with quasi-banking license are subject to regulations set by the Bangko Sentral ng Pilipinas (BSP) and should obtain a clearance from the BSP before the Commission grant them a certificate to operate as a financing company. As a financial institution, financing companies are highly regulated in the Philippines. Such laws and regulations involve special requirements on capitalization, ownership and others things that aim to protect the interest of the general public. Thus, starting, forming and running a financial company shall mean having a responsible and reputable business.

Registering a financing company with the SEC is different from an ordinary corporation. But it is usually the same with other corporations when it comes to getting registered with the BIR and with the Local Government Unit (LGU) or Mayor’s Office. Thus we will exclusively discuss how to register a financing company with the SEC. The following are the things and steps you should remember in the registration of a financial company in the Philippines.

What is a financing company?

Financing 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 (Sec. 3. of Republic Act No. 8556 known as the Financing Company Act of 1998).

Take note that a financing company is different from a lending company for the latter is defined as a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. It doesn’t include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. A lending company is a term synonymous with lending investors. – (Lending Company Regulation Act of 2007-Republic Act No. 9474).

Rights and powers of financing companies

According to Section 9 of the Republic Act No. 8556 known as the Financing Company Act of 1998, 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.

Registration of financing companies

The following are the requirements to form a financing company in the Philippines.

Form and ownership of organization

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. Moreover, 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 (Sec. 6 RA No. 8556)

Capital requirements

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 (Sec. 6 RA No. 8556).

Name requirement

The corporate name of financing companies shall contain the term “financing company”, “finance company”, or finance and investments company” or other title or word(s) descriptive of its operations and activities as a financing company.

Registration papers to be submitted to the SEC

Any stock corporation may be registered as a financing company by filing with the Commission five (5) copies of an application to operate as a financing company under R.A. 8556, signed under oath by its President, together with the following documents in the prescribed forms:

1. All documents required for the registration as a corporation; please read our article on “how to register a stock corporation in the Philippines.”

2. Information Sheet of registrant company;

3. Personal Information Sheet of each the directors, officer with the rank of Vice President and up of the equivalent managing partners;

4. Answer to the questionnaire of the Commission;

5. Documents required of each Filipino director, officer t be appointed from the rank of Vice-President and up or their equivalent, such as the following:

(i). Police clearance from local police of the city or municipality of which he is a resident;

(ii). NBI clearance;

(iii). Certificate of good moral character to be executed under oath at least (2) reputable and disinterested persons in the community; and

(iv) Bank credit information to be issued by his depository or creditor banks(s), if any;

In lieu of Items (ii) and (iii), a foreign director or officer shall submit a clearance from the Bureau of Immigration and Deportation and photocopies of passport and Alien Certificate of Registration (ACR).

6. Clearance from the Bangko Sentral ng Pilipinas, if the applicant financing company is a subsidiary or affiliate of a bank and/or non-bank financial institution with quasi-banking license.

7. Such other documents as may be required by the Commission;

For other requirements, such as the prescribed period to commence the operation, requirements for branches (agency or extension offices), other capital requirements, reportorial requirements, licensing fees, fines for failure to comply with the this act or other applicable laws and other requirements, please download and read the copies of the following:

Republic Act No. 8556 known as the Financing Company Act of 1998

Rules and Regulations to Implement the Provisions of Republic Act no. 8556 (The Financing Act of 1998)

After securing a certificate of registration and certificate to operate as a Financing Company from the SEC, you still need to register it with other government agencies. For securing a Mayor’s business permit, please read “How to get Mayor’s Business Permit in the Philippines. For registering it with the Bureau of Internal Revenue, please read “How register business with the BIR.”