Question & AnswerQ&A (BSP MEMORANDUM NO. M-2012-009)
The primary corporate franchise of a bank serves as the authority for the bank to continue as a corporate entity and is essential for the bank to obtain other licenses, such as its banking license.
The expiration of a bank's primary corporate franchise results in the withdrawal or revocation of all its outstanding licenses, and the bank may be placed under receivership for its inability to continue business without probable loss to depositors or creditors.
Banks must timely initiate the extension of their corporate terms before the expiration of their corporate franchise to avoid revocation of licenses and possible receivership.
Section 11 of the Corporation Code governs the filing of amendments of Articles of Incorporation to extend the corporate term of a bank.
A bank can file an amendment to extend its corporate term as early as five (5) years prior to the expiry date of its corporate term.
The application for extension of a bank's corporate term filed with the SEC must be accompanied by a favorable endorsement or recommendation from the Bangko Sentral ng Pilipinas (BSP).
No, a bank cannot obtain a banking license if its primary corporate franchise has expired because the franchise is the primary authority that allows it to continue as a corporate entity and secure other licenses.
The BSP provides the required favorable endorsement or recommendation that must accompany the bank's application for the extension of its corporate term filed with the SEC.
The bank may be placed under receivership due to its inability to lawfully continue business and to protect its depositors or creditors from probable loss.
Adhering to the timing requirements prevents the expiration of the corporate franchise, thereby ensuring uninterrupted corporate existence, maintaining valid licenses, and avoiding regulatory sanctions such as receivership.