Dividend declaration should be in compliance with
Section 43,143 and 62(item no. 5) of the
Corporation Code of the Phils. , SEC Memo Circular
No. 11 series of 2008 and Sec Resolution No. 450
series of 2005.
Dividends may be declared from the unrestricted or
unappropriated retained earnings of the company
upon approval by majority vote of the board of
directors( for cash and property div.) and by the
stockholders representing at least two-thirds (2/3) of
the outstanding capital stock (for stock div)
Dividends
refers to the corporate profits allocated, lawfully declared
and ordered by the directors to be paid to the stockholders
on demand or at a fixed time.
Retained earnings
refers to the accumulated profits realized out of the normal
and continuous operations of the company after deducting
therefrom distribution to stockholders and transfer to capital
stock or other accounts. (unappropriated or free retained
earnings and appropriated retained earnings)
Outstanding Shares
means the total shares of stocks issued to the
subscribers or stockholders whether or not fully or
partially paid (as long as there is a binding subscription
agreement) except treasury shares.
1. Cash Dividend
2. Stock Dividend
(maybe declared from the unissued capital stock
and from the increase in authorized capital stock)
3. Property Dividend
(ex. Investment in shares of stocks, Treasury
Stocks, Land)
1. To establish sufficiency of unrestricted
retained earnings
2. To establish that the retained earnings
will not be impaired
3. Distribution is proportionate
4. To establish that there are enough shares
to be issued
1. Certification under oath by the Corporate
Secretary on the board of directors
resolution declaring the dividend(cash or
stock)
2. Audited financial statements as of the last
fiscal year stamped received by BIR and
SEC
3. Reconciliation of unappropriated retained
earnings available for dividend declaration (in
accordance with SEC Memo Circular No. 11)
4. List of stockholders with their respective
subscribed capital stock as of the date of meeting
approving the declaration of stock dividend
together with the allocation of stock dividend
certified by under oath by the Corporate Secretary
(for stock dividend only)
5. Analysis of capital structure certified
under oath by the Treasurer (for stock
dividend)
6. Clearance from other departments or
other government agency.
7. Secretary’s Certificate on no pending
case of intra-corporate dispute.
1. Cover sheet
2. Certificate of Increase of capital stock
3. Treasurer’s Affidavit certifying the
increase of capital stock, the amount
subscribed and the amount received as
payment thereto
4. Amended articles of incorporation
(Article VII)
5. Directors Certificate- a notarized document
signed by majority of the directors and the
Corporate Secretary certifying the amendment of
the Articles of Incorporation increasing the ACS,
the majority vote of the directors and the
stockholders representing two-thirds(2/3) of the
outstanding capital stock, and date and place of
the stockholders meeting.
6. Notarized Secretary’s Certificate on no pending
case of intra-corporate dispute.
1. List of stockholders of record as of the date of
meeting approving the increase, indicating their
nationalities and their respective subscribed and
paid-up capital on the present authorized capital
stock certified under oath by the Corporate Secretary
or Secretary’s Certificate indicating the total no. of
shares subscribed, amount subscribed and paid as of
the stockholders meeting approving the increase and
the percentage of foreign equity before the
increase and likewise state that the stock dividend will be
allocated pro-rata to the stockholders( if the applicant
is a listed company)
2. List of stockholders entitled to stock dividend
with their respective outstanding shares and
the allocation of stock dividend certified by
the Corporate Secretary.
3. Audited financial statements as of the last
fiscal year stamped received by BIR and SEC.
4. Audited financial statements used as the
basis of such dividend declaration (if the
basis is other than item No.3)
5. Undertaking under oath by a company officer
stating that in the event that the retained
earnings at year end is not sufficient to cover the
stock dividend under consideration, any
deficiency will be replaced by other form of
payment allowable by the Commission(if the
basis is item No. 4
6. Certification by the Corporate Secretary as to
the treatment of fractional shares, if any
7. Reconciliation of retained earnings for
dividend declaration in accordance with SEC
Memorandum Circular No.11 Series of 2008
8. Notarized Secretary’s Certificate on the
reversal of appropriated retained earnings, if
necessary
9. Clearance from other department or other
government agency, if necessary
Example of stock dividend allocation applied as
payment for subscription to increase in capital stock:
ABC CORPORATION has an increased in
authorized capital stock from P100,000 divided
into 1,000 shares at P100 par value to P600,000
divided into 6,000 shares at P100 par value, of
the net increase of P500,000 divided into 5,000
shares, the amount of P125,000 divided into
1,250 shares has been subscribed and fully paid.
Assuming the company has an unappropriated
retained earnings of P150,000 sufficient to cover
the stock dividend declaration of P125, 000.
List of stockholders as of_______________. ALLOCATION
No. of
Name Nationality Amount
shares Name Stock Dividend
Subs & Paid
subscribed
A Fil 160 P 16,000 A 250
B Fil 160 16,000
B 250
C Fil 160 16,000
D Fil 160 16,000
C 250
E Fil 160 16,000 D 250
Outstanding 800 P 80,000
E 250
Treasury
200 20,000
shares
TOTAL 1,250
TOTAL 1,000 P 100,000
Formula: Individual Subs./Outstanding shares x stock div. =
allocated stock div.
160/800 x 1,250 = 250 shares x P100 par value = P 25,000
1. Cover sheet
2. Certification under oath by the
Corporate Secretary on the board of
directors resolution declaring the
property dividend
3. Audited financial statements as of the
last fiscal year stamped received by BIR
and SEC
4. List of stockholders with their respective
subscribed capital stock as of the date of
meeting approving the declaration of
property dividend together with the
allocation of the property dividend certified
under oath by the Corporate Secretary
5. Detailed schedule of the property account
appearing in the audited financial statement
certified by Company Accountant.
6. Certification by the President that the property is
no longer needed in the operation of the
company
7. Reconciliation of retained earnings available for
dividend declaration
8. Notarized Secretary’s Certificate on no pending
case involving intra-corporate dispute
9. Clearance from other departments or other
government agency
Section 1 – All corporations that have declared
and/or issued property dividends in accordance with
the provisions of the Corporation Code of the
Philippines shall send notice of such dividends within
thirty (30) days from the date of the declaration
thereof.
The notice of the declaration and/or issuance of the
property dividends shall show, in scheduled form, the
nature of property declared dividends, their
individual book value, market value, if any, and the
manner in which such property shall be distributed
to the stockholders.
Section 2 – The issuance of the property
dividends shall conform with the following
conditions:
a) That the property to be distributed as
dividends shall consist only of property
which are no longer intended to be used in
the operation of the business of the
corporation and which are practicable to be
distributed as dividends;
b) That the issuance of the property dividends shall
not result in an inequitable distribution of property to
the stockholders in terms of the book values and
market values, if any, of the property distributed; and
c) That when the distribution of dividends is made
where some stockholders will receive cash and the
others will receive property, the prevailing market
value of the property, as agreed upon by the
stockholders shall be considered in determining the
equitable distribution of the total dividends.
Section 3 – No property dividends in the
form of land shall be issued to a foreign
individual or foreign-owned corporation
which will violate the provision of the
constitution of the Philippines on land
ownership.
Section 4 – No actual distribution of
property dividends shall be made unless
approved by the Commission.
Section 5 – The issuance of property dividend
shall be supported by the following:
a) Board resolution approving the issuance
of property dividend.
b) List of stockholders (certified by the
corporate secretary) as of record date
showing the corresponding subscription
of each stockholder and the allocation of
the proposed dividend.
c) Audited financial statements as of the
fiscal year prior to the declaration of
property dividend
d) Detailed schedule of the property account,
(certified by the company accountant), which
shall include the property to be distributed as
dividend, showing the cost and the book value
of the property as of the date coinciding with
the aforecited audited financial statements.
e) When the distribution of dividend
involves property and cash, such that
some stockholders will receive
property and the others will receive
cash, the detailed schedule of the
value of property as agreed upon by
the stockholders.
Section 6 – Any violation of these rules
shall be penalized by a fine of 1/10 of 1
per centum of the amount declared as
dividend but not less than Two
Thousand (P2,000.00) Pesos and such
other sanctions as provided for under
Section 144 of the Corporation Code of
the Philippines.
