REPUBLIC ACT No. 5980
AN ACT REGULATING THE ORGANIZATION AND OPERATION OF
FINANCING COMPANIES
Section 1
This Act shall be known as the "Financing
Company Act"
Section 2
Declaration of Policy
It is hereby declared to be the policy of the State to regulate the
activities of financing companies to place their operations on a sound, stable
and efficient basis, so that they may be in a better position to extend
effective service in a fair manner to the general public and to industry,
commerce and agriculture; to curtail and prevent acts or practices prejudicial
to the public interests.
Section 3
Definition of Terms
As used in this Act, the term:
(a) "Financing companies," hereinafter
called companies, are corporations, or partnerships, except those regulated by
the Central Bank of the Philippines, the Insurance Commissioner and the
Cooperatives Administration Office, which are primarily organized for the
purpose of extending credit facilities to consumers and to industrial,
commercial, or agricultural enterprises, either by discounting or factoring
commercial papers on accounts receivable, or by buying and selling contracts,
leases, chattel mortgages, or other evidences of indebtedness, or by leasing of
motor vehicles, heavy equipment and industrial machinery, business and office
machine and equipment, appliances and other movable 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, deed of trust, advance, or discount; any conditional sales contract,
any contract to sell, or sale or contract of sale of property or service,
either for present or future delivery, under which, part or all the price is
payable subsequent to the making of such sale or contract; any rental-purchase
contract; any option, demand, lien, pledge, or other claim 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 a similar
purpose or effect; and
(d) "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 purchase or assignment,
exclusive of fees, service charges, interests and other charges incident to the
extension of credit.
Section 4
Grant of Authority to the
Securities and Exchange Commission
The Securities and Exchange Commission of the Philippines is hereby
empowered to enforce the provisions of this Act.
Section
5
Limitation on Purchase
Discount, Fees, Service and Other Charges
In the case of assignments of credit or the buying of installment
papers, accounts, receivables and other evidences of indebtedness by financing
companies, the purchase discount, exclusive of interest and other charges shall
be limited to fourteen (14%) per cent of the value of the credit assigned or
the value of the installment papers, accounts receivable and other evidence of
indebtedness purchased based on a period of twelve (12) months or less, and to
one and one-sixth (1 1/6%) per cent of each additional month or fraction
thereof in excess of twelve months, regardless of the terms and conditions of
the assignment or purchase.
In the case of assignment of credit or the buying of installment
papers, accounts receivable and other evidence of indebtedness pertaining to
appliances, furniture, and office equipment, the purchase discount, exclusive
of interest charges, shall be limited to eighteen (18%) per cent of the value
at maturity of the credit assigned or receivable purchased, based on a period
of twelve months or less, and to one and one-half (1 1/2%) per cent for each
additional month or fraction thereof in excess of twelve months, regardless of
the terms and conditions of the assignment or purchase.
In case of factoring of accounts receivables or other evidences of
indebtedness, the discounting rate that can be charged, exclusive of interest
and other charges, shall not exceed two per cent of the value of the credit
assigned or receivable purchased for every thirty days, regardless of the terms
and conditions of the factoring agreement.
The Securities and Exchange Commission, in consultation with the
financing companies, shall prescribe reasonable limitations on fees, service
and other charges which shall be uniform for all financing companies, taking
into consideration the nature of the transaction or service and the cost
thereof to the financing companies.
Section 6
Form of Organization
Financing companies shall be organized in the form of stock
corporations or general partnerships at least sixty per centum of the capital
of which is owned by citizens of the Philippines and shall have a paid-up
capital of not less than five hundred thousand pesos: Provided, however, That
financing companies duly existing and operating before the approval of this Act
shall comply with the requirement that sixty (60%) per centum of the capital be
owned by citizens of the Philippines within one year from the date of said
approval.
Section 7
Requirement for Registration
Aside from requiring compliance with the provisions of the Corporation
Law and the New Civil Code in case of partnership the Securities and Exchange
Commission shall not register the articles of incorporation or the articles of
partnership of any financing company unless his 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 assume the protection of the interest of the general public; and
(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.
Section 8
Citizenship Requirement of
the Board of Directors
In the case of a corporation, at least two-thirds of all members of the
Board of Directors of any financing company which may be established after the
approval of this Act, shall be citizens of the Philippines. In the case of
partnerships, all the managing partners must be citizens of the Philippines. In
the case of corporations and partnerships existing before the approval of this
Act compliance with this provision shall be required within the period of one
year from the date of said approval.
Section 9
Revocation and Suspension of
Registration
The Securities and Exchange Commission may revoke or suspend the
registration of any financing company by entering an order to this effect
together with its findings in respect thereto, if upon investigation into the
affairs of said financing company or complaint by any person, it shall appear
that:
(a) It is insolvent; or
(b) It has violated any provision of this Act.
Section 10
Penalty
A fine of not less than five thousand pesos (P5,000.00) and not more
than ten thousand pesos (P10,000.00) or imprisonment for not more than six
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 a financing company,
either through advertisement in whatever form, whether in its stationary,
commercial paper, or other document, or through other representations without
authority;
(c) Make use of a trade or firm name containing the
words "financing company" or "finance 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 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 security 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 11
Separability of Clause
If any provision or section of this Act or the application thereof to
any person or circumstances is held invalid, the other provisions or sections
hereof and the application of such provisions or sections to other persons or
circumstances shall not be affected thereby.
Section 12
Repealing Clause
All Acts inconsistent with this Act are hereby repealed.
Section 13
Effectivity
This Act shall take effect upon its approval.
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