LYKA Philippines recently urged the Securities and Exchange Commission (SEC) to hasten the approval of its business registration so it can resume operations in the country.
In a statement, the company pointed out that before it can apply for an Operator of Payment System (OPS) registration, it needs to establish a wholly-owned local company with SEC and for the said entity to register as an OPS with Bangko Sentral ng Pilipinas (BSP).
LYKA Philippines reiterated that they have submitted all the requirements and had attended several hearings with SEC regarding its application. After several follow-up calls, SEC finally accepted the payment for the incorporation of LYKA PHILIPPINES INC. The Company Registration and Monitoring Department of the SEC received the registration payment amounting to P1,014,591.00 on March 8, 2022.
In July 2021, an order was issued by the BSP for LYKA and Digital Spring, the promoter of LYKA in the Philippines, to cease and desist from all of its financial transactions and merchant accreditations. The motion for reconsideration filed by Digital Spring was denied by the BSP reiterating that it should be the mother company itself that should apply for an OPS registration.
BSP invited the mother company in Hong Kong to register as an OPS instead of its marketing arm in the country. Last year, BSP announced that it welcomes the move of LYKA to establish its wholly-owned subsidiary in the Philippines and for the new entity to register as an OPS.
LYKA Philippines applied for business registration on October 23, 2021 – through SEC”s Electronic Simplified Processing of Application for Registration of Company (ESPARC). Moreover, LYKA Philippines said the new company is a 100% wholly-owned subsidiary of the main company of LYKA and it will be established in compliance with the BSP requirement.
However, the SEC still has not issued the registration papers to LYKA Philippines. It usually takes more or less two weeks upon payment for the registration papers to be issued. As a response, LYKA Philippines requested another meeting with SEC’s Enforcement and Investor Protection Department (EIPD).
On March 31, 2022, another meeting with EIPD was held. However, EIPD asked LYKA to submit additional documents even after the payment has already been received on March 8, 2022.
LYKA Philippines said it had a final meeting with EIPD on June 15, 2022, and the legal counsel of LYKA Philippines was informed by SEC that their recommendations will be brought up to the higher office.
LYKA Philippines wrote a letter to President Ferdinand Marcos Jr. requesting to expedite their SEC registration. The letter was received by the Office of the President on July 27, 2022.
“It is evident that LYKA wants to comply with the requirements set by the Philippine regulatory bodies to establish a company based in the Philippines,” LYKA CEO Ryan Baird said in a press statement.
Because of the BSP order, LYKA Philippines said there will be complications if it tries to settle its merchants as it will violate the provisions of the circular issued by the Monetary Board.
To settle the issue, LYKA Philippines said it should register as a local company, as recommended by the BSP, and apply for an OPS to lift the cease-and-desist order that would finally allow them to settle its merchant partners. This means LYKA cannot cash out the GEMS of the merchants until the OPS registration has been issued.
LYKA GEMS, its digital gift cards, were previously honored and accepted as payment in more than 28,000 merchants. This includes international brands such as Ford, Maserati, BOSE, and Resorts World, just to name a few.
“We cannot apply for an OPS without a company based in the Philippines. But how can we do that if SEC will not allow us to establish a local entity? Why is the SEC not issuing the company registration despite the efforts of LYKA Philippines and even after our payment for registration has been accepted?” Baird pointed out.
During the height of the pandemic, LYKA Philippines was able to help millions of Filipinos earn and thousands of its partner merchants survive.
However, it seems that the government did not consider all of LYKA Philippines’ efforts to comply with the rules and regain its dominance.
“Our SEC application has been pending since October 2021. Does it take more than one year to register a new company in the Philippines? Is the pressure coming from our competitors who are threatened by the popularity of the app? The government makes us look bad in the eyes of Filipinos because of such delay. When people call BSP to ask about LYKA’s OPS license, of course, the BSP will inform them that we have no pending applications. But how can we apply if SEC will not allow us to register a company first and more so despite acceptance of our payment?”
LYKA was once ranked third among all social media apps in the Philippines based on average time spent per user, next only to Facebook and TikTok. According to the July 2021 report that was generated from App Annie, a reputable data analytics company, Filipino users spend more time in LYKA than on Instagram, Twitter, and Viber combined.
Also, the generated data has shown that on average, more time is spent by Filipinos using LYKA’s e-commerce feature than Shopee or Lazada. It even became the number one trending among all apps in the country for some time.
It was so popular that it was able to acquire 10 million users in a span of one year considering that it’s only available in the test country, the Philippines.
“We diligently attended all the scheduled hearings. We were even transparent when asked about the directors and the ultimate beneficial owner of LYKA PH. All we ask is to be treated fairly.”
“We even terminated our partnership agreement with our local marketing arm just to prove a point. However, during the last meeting, SEC surprisingly asked us to submit the financial documents of our former partner which has nothing to do with the new company that we are trying to register. SEC might say that we have not submitted the additional documents that they requested during the last hearing. Asking for more unusual requirements despite the acceptance of payment is for us a bit unfair. We will not fall into the trap of submitting never-ending requirements given to us on a piecemeal basis. More so, documents that were never asked from other companies applying for registration.”
“The Ease of Doing Business Law aims to make it easier for businesses to start operating in the country. How can we do that if SEC makes it difficult, if not impossible for us?” Baird added.
The company said it was doing well until July 23, 2021, when the BSP issued a circular to all banks in the Philippines and to LYKA ordering the company to “cease and desist from performing cash-in service, merchant accreditation and settlement process among others” until it properly registers as an Operator of Payment System (OPS).