Rules for lending firms OK’d

REPORT FROM BUSINESSWORLD The Securities and Exchange Commission (SEC) approved in an en banc meeting on Thursday last week the implementing rules and regulations for Republic Act No. 9474 — or the Lending Company Act of 2007 that was signed into law last May 22. Among others, RA 9474 requires lending companies that are either single proprietorships or partnerships to organize themselves as stock corporations with a minimum P1-million capitalization. The SEC can prescribe higher minimum capitalization "if warranted by circumstances." A lending company is defined as a "corporation engaged in granting loans from its own capital funds or from funds sourced from not more than 19 persons." Hence, RA 9474 does not cover banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. "Lending companies established and in operation with a lower paid-up capital prior to the effectivity of the Act shall comply with the capital requirement within three years from the date of effectivity of the Act," the 18-page IRR read. "Said lending companies shall, within 60 days from effectivity of these rules, provide the SEC a sworn statement by the president, indicating the schedule of their capital build-up within the three-year period." The rules added that excess of the required minimum paid-up capital may be applied to the additional capital requirement for a proposed branch, extension, satellite office or unit: P300,000 for those operating in Metro Manila and other first class cities; P150,000 for those in second class and other cities; and P75,000 for those in municipalities. The rules also state that "a corporation/company that has been duly registered and granted a certificate of authority to operate as a lending company shall commence operations within 120 days from date of grant of such authority. Failure to commence operations within said period shall be a ground for the suspension of its certificate of authority." The rules said these companies have to use at least 51% of their funds for direct lending. — Ruby Anne M. Rubio/BusinessWorld