LEGAL AND COMPLIANCE REQUIREMENTS : OPENING OF NEW BRANCHES (FINANCING COMPANY w/ quasi-bank license)
As any business enterprise progresses a number of its potential clients increases. The company has to expand to enable its products to reach the maximum number of potential clients. The need to broaden the reach of its products is increasingly becoming urgent. Establishment of branch office is inevitable.
Upon my assumption of office as legal counsel for corporate affairs of a financing company based in Makati City, the company was expanding its clients’ base and the company’s management wanted to reach the most number of clients all over the Philippines especially in the countryside. One of the strategies was to open as many possible branches as the company can accommodate to operate in the countryside.
Before a branch office could be opened for business there are legal requirements that need to be accomplished. The company has to secure a clearance or authority from the Bangko Sentral ng Pilipinas (BSP) and a certificate of authority to operate branch office from the Securities and Exchange Commission (SEC). When the SEC’s certificate of authority is released, securing business permits from the city/municipality of the proposed branch and registering the branch and its operations with the Bureau of Internal Revenue follow.
Following is a basic guideline in securing clearance and authority from government agencies in connection with the opening of branch office:
A. Preparation and Filing of Documents – two Sets of Documents should be prepared:
1. For BSP. One of the requirements of the SEC before it issues a branch certificate of authority to a financing company is BSP clearance. In securing the BSP clearance, there are set of documents which the applicant company has to complete and submit.
2. The documentary requirements for BSP Clearance are as follows:
2.1. Letter application for clearance. It must be signed by the president of the company or any authorized officer stated in the secretary’s certificate;
2.2. Information sheet of the proposed branch office – It is a document containing details / information of the branch. The information include among others: capitalization assigned to the branch; names, address and personal circumstances of the personnel who will be assigned to the branch; and, branch’s address;
2.3. Organizational structure of the branch;
2.4. Duties and responsibilities of the proposed branch officers and staff;
2.5. Personal information sheets (a brief and detailed bio-data) of branch officers and staff;
2.6. National Bureau of Investigation (NBI) clearances of branch officers and staff;
2.7. Answers to questionnaire for the financing company applying for a certificate of authority to open a branch and Annex “A” thereto containing statements / information regarding:
- services to be offered
- areas to be served
- business and/or economic justifications for the establishment of the branch and
- number of financial institutions in the area
2.8. A document duly signed by the president of the company or its duly authorized officer certifying the ability of the company to conduct operations from its head office as not be a cause for delayed submission of reports to the BSP and/or recording transactions in the head office;
2.9. Memorandum Certification on the correspondent banking and audit arrangements between the branches and the head office to ensure effective and efficient cash/money transactions in the head office duly signed by the president of the company or its duly authorized officer;
2.10. Certification on days and hours to be observed in the branch office duly signed by the president of the company or its duly authorized officer;
2.11. Copy of the resolution of the company’s Board of Director or secretary’s certificate authorizing the establishment of the branches mentioned therein;
2.12. Latest Audited Financial Statement of OMLFC.
3. Thereafter, the applicant shall submit one set of duly completed documents to BSP CASG at the 5th floor of multipurpose building at A. Mabini Street, Malate, Manila.
4. BSP CASG will then forward the application to BSP Central Application Licensing Group (CALG) the office which will evaluate the application.
5. BSP will release the clearance within 45 days from the date of receipt of the application. Constant follow up with BSP CALG is advised.
6. For SEC. Once the BSP clearance is issued, the applicant company has to prepare another set of documents that will be submitted to the SEC. Following are documents that should be prepared:
6.1. Cover Sheet – SEC provides hard copy of this document to be filled up by the applicant. It is not uncommon for the SEC to revise this document. And once you submitted a form not in conformity with their latest revision, SEC personnel will ask the applicant to replace it.
6.2. Duly accomplished and notarized application form for a Certificate of Authority to Operate branch office.
6.3. Information Sheet of the registrant / applicant.
6.4. National Bureau of Investigation (NBI) Clearance of the designated officers of the proposed branch (branch head, branch cashier, branch credit investigator/appraiser).
6.5. Personal Data Sheet of the designated officers/staff of the proposed branch. Again, applicant should ensure that it is submitting the latest PDS form.
6.6. Location map of the branch certified to by the president and corporate secretary of the applicant.
6.7. Long term lease contract. This refers to the lease contract between the applicant and the owner of the office premises where the branch will be established. Particular attention should be paid so that the specific address and identification of the building or its number shall be written in the contract. SEC requires that it should be specific. Likewise the term or period of lease must be at least three years with renewal clause.
6.8. SEC questionnaire duly accomplished / answered, signed by the applicant’s authorized officer and duly notarized. SEC requires that information regarding the maximum loanable amount, interest rate, term loan and mode of payment shall be included in the questionnaire.
6.9. Feasibility study of the proposed branch office. SEC provides a Q&A format which should be followed by the applicant. This must also be duly signed by the applicant’s authorized officer and notarized.
6.10. Audited financial statement of the applicant duly submitted to the SEC.
6.11. Income statement of the applicant as of the month immediately preceding the submission of the requirements.
7. Applicant shall then submit four sets of the duly completed documents to the licensing division of the SEC located at third floor of the SEC building in EDSA, Mandaluyong.
8. SEC examiner may have some modification or instruction. The secret would be to simply follow the instruction if it will not affect the rights of the applicant. Processing before the SEC will take about five days. Thereafter, SEC issues the certificate of authority signed by the director of the Company Registration and Monitoring Department (CRMD). But the certificate will be release by the licensing division.
9. When the Certificate of Authority has been duly issued by the SEC, the applicant is given 120 days from the date of the certificate within which to commence the branches business operations. Failure to start business within the period will be penalized with fine.
10. Applicant shall then register the branch with the BIR office where the branch is located and secure business permits from the local government. Likewise the branch shall register with the DOLE – Occupational Safety Office (DOLE regional office where the branch is located).
11. After the branch started its regular business operations, the applicant shall secure a certified true copy of the Certificate of Authority from the SEC, prepare the branch’s location map, and complete the bio-data of all officers and personnel assigned to the branch. All these documents will be submitted to the BSP for the latter to designate a branch code