SEC Opinion No. 21-11: Re: Primary and Secondary Purpose of Domestic Corporation

In SEC-OGC Opinion No. 21-11 dated 03 November 2021, the Securities and Exchange Commission (“SEC”) was asked whether Toyota Financial Services Philippines Corporation (“TFSPC”) a domestic corporation primarily engaged in the business of financing by extending credit facilities to customers of Toyota vehicle dealers in the Philippines, may provide assistance to its clients in the transfer of ownership of the vehicle and/or cancellation of mortgage before the Land Transportation Office upon settlement of the latter’s loan/rental obligations.

TFSPC is of the opinion that the assistance in transferring the ownership of and/or the cancellation of mortgage over the motor vehicle of TFSPC clients is necessary, useful, incidental, and conducive to the accomplishment of the purposes of the corporation. The SEC affirmed this position.

The SEC cited Section 9 of the Republic Act No. 598, as amended by R.A. No. 8556, or the Financing Company Act of 1998, to wit:

Section 9.  Rights and powers. – Financing companies shall have the following powers, in addition to those granted by this Act and by other laws: 

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Nothing in this Sec. shall be construed as precluding a financing company from performing such services or exercising such powers as may be granted by the Bangko Sentral ng Pilipinas or the Securities and Exchange Commission or as may be incidental to its activities as a corporation. 

Based on the provision above, financing companies such as TFSPC, are allowed to engage in and/or perform such other services or activities as may be granted by the SEC, or which may be incidental to its activities as a corporation.

The SEC proceeded to state that a corporation has only such powers as are expressly granted in its charter or in the statutes under which it is created or such powers as are necessary for the purpose of carrying out its express power. A corporation has both express and implied or incidental powers. Express powers are those which are enumerated in Section 35 of the Revised Corporation Code, and those which are sanctioned by the State in the corporation’s Articles of Incorporation (“AOI”). Implied or incidental powers, on the other hand, are the corporation’s powers, attributes, and properties which are incidental to its existence which may be essential or necessary to carry out its purpose or purposes as stated in the AOI.

Considering that TFSPC’s primary purpose, as laid down in its latest AOI, mainly involves financing of motor vehicles, the intended service of transferring ownership of and/or the cancellation of mortgage over the motor vehicles of its clients who have availed of its financial services, is incidental to its primary purpose as the same is reasonably necessary for it to comply with its obligations under its financial service contracts, i.e. ensure the proper and expeditious transfer of title of the vehicle from TFSPC to its clients once the latter’s financial obligations have been fully settled.