DOJ OPINION NO. 054, s.

2010 November 23, 2010

Atty. Juan de Zuiga, Jr. Assistant Governor and General Counsel Bangko Sentral ng Pilipinas A. Mabini St., Malate 1004 Manila Dear Atty. Zuiga : This refers to your request for opinion on the query stated therein relative to the interpretation of the provisions of Section 2-A of the Anti-Dummy Law (C.A. No. 108), as amended, vis--vis the provisions of Section 6 of the Financing Company Act of 1998 (R.A. No. 8556), which amended Section 6 of the Financing Company Act (R.A. No. 5980).
EIASDT

Specifically, opinion is requested on whether activities of financing companies should be considered as having been taken out of the coverage of the Anti-Dummy Law, as amended, in the light of the passage of the Financing Company Act of 1998, such that the requirement to secure an authorization from the Department of Justice for employment of expatriates should be dispensed with. The provisions of C.A. No. 108, as amended, adverted to pertinently read:
Section 2-A. Unlawful use, Exploitation or enjoyment. Any person, corporation, or association which, having in its name or under its control, a right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, . . . in any manner permits or allows any person, . . . to intervene in the management, operation, administration or control thereof, whether as an officer, employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice, . . . . (emphasis supplied)

Upon the other hand, the pertinent provisions of financing company laws,
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i.e., R.A. No. 5980 and R.A. No. 8556, insofar as material, respectively state:
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: . . . . (R.A. No. 5980) (underscoring added) xxx xxx xxx

Sec. 6 of the same Act is hereby amended to read as follows: "Sec. 6. Form of organization and capital requirements. 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 and 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: . . ." (R.A. No. 8556) (stress ours)
HAICcD

The request, it appears, precipitates from your view that Section 6 of "R.A. No. 8556 effectively liberalized the conduct of financing business in the Philippines by allowing foreign nationals to own up to sixty percent (60%) of the equity of financing company," and that said amendment "may possibly be taken to mean that financing companies are taken out from the coverage of the Anti-Dummy Law. We agree. Basic is the rule in interpretation of statutes that a new statute should be construed in connection with those already existing in relation to the same subject matter and all should be made to harmonize and stand together, if they can be done by any fair and reasonable interpretation. This is grounded upon the presumption that new statutes are not intended to interfere with or abrogate existing ones, unless there is a clear indication that such is the intent of Congress (Sec. of Justice Op. No. 13, s. 2007) Equally basic is the rule that when the law is clear, plain and free from ambiguity, it must be given its literal meaning without attempted interpretation (Ramos vs. Court of Appeals, 108 SCRA 728, 733). Known as the plain meaning rule, or verba legis, this rule, which was derived from the maxim index animi sermo est (speech is the index of intention), rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will
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and preclude a different construction (see also, PNB vs. Garcia, 388 SCRA 485, 491). The rationale is because the legislature is presumed to know the meaning of the words, to have used the words advisedly, and to have expressed its intent by the use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure (Globe-Mackay Cable and Radio Corporation vs. NLRC, 206 SCRA 701, 711). (Ibid., Nos. 39, 28 & 23, current series; Nos. 41, 27 & 17, s. 2009) The legislative intent to effect a change in the requirements for the organization of financing companies in the country is clear and explicit from a comparative reading of the original financing law and the amendatory law. While Section 6 of R.A. No. 5980 imposed a sixty percent (60%) Filipino-owned capital requirement, Section 6 of R.A. No. 8556, amending the said Section 6 of R.A. No. 5980, reduced the percentage requirement for the firm's organization from sixty to forty percent of the corporate stocks and changed the organizational requirement from "capital" to "voting stock". As applied corporations, "capital" broadly refers to the entire property or assets of the corporation which includes the amount invested by the stockholders plus the undistributed earnings less losses and expenses (De Leon, The Corporation Code of the Philippines, Annotated, 2002 ed., p. 71, citing National Telecommunications Corporation vs. Court of Appeals, 311 SCRA 508). In the corporate world, it is synonymously used with "capital stock" which refers to the amount fixed in the articles of incorporation, to be subscribed and paid in or agreed to be paid in by the stockholders of a corporation, in money, property, services, or other means at the organization of the corporation or afterwards and upon which it is to conduct its business (De Leon, supra, pp. 68-69, citing 2 Fletcher, p. 12). It is distinguished from a "voting stock" which is a stock that entitles the holder thereof the right to vote in the election of the directors of the corporation and on matters that are put to vote (ibid., pp. 79-80).
CScTDE

Evidently, the new law (R.A. No. 8556) effectively removed the limitation imposed under R.A. No. 5980, the original law, such that, as you rightfully opined, financing companies may now be owned by foreign nationals up to sixty percent (60%) of the corporation's equity. Moreover, the amendment may be construed not only as having been intended to take out financing companies from the coverage of Section 2-A of the Anti-Dummy Law which, as earlier stated categorically limits the exercise or exercise of certain right, privilege, franchise, property or business only to Filipino citizens, or corporations or associations "at least sixty percent (60%) of the capital of which is owned by Filipino citizens," thereby dispensing the need for prior
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authorization from this Department, as required by the Anti-Dummy, for the employment of foreign nationals in said financing companies. This conclusion is in complete agreement with our cited Opinion (No. 16, s. 2004) on a similar issue involving laws affecting certain banking activities. Please be guided accordingly.

Very truly yours, (SGD.) LEILA M. DE LIMA

Secretary

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