Revised Guidelines on the Declaration and Payment of Cash Dividends by Government Owned and/or Controlled Corporations

September 13, 1990 DOF-DBM JOINT CIRCULAR NO. 004-90 FOR : Governing Boards, Chief Executive Officers, Controllers/Accounting Managers and Chiefs of Treasury/Cash Departments of Government-Owned and/or Controlled Corporations, National Treasurer, COA Corporate State Auditor and Others Concerned SUBJECT : Revised Guidelines on the Declaration and Payment of Cash Dividends by Government Owned and/or Controlled Corporations 1.0 Purpose This Circular is being issued to amend DBM-DOF Joint Circular No. 1-88, s. 1987, pursuant to Section 17 of Executive Order No. 518, s. 1979, and to implement Executive Order No. 399, s. 1990, and Section 4 of Administrative Order No. 173, s. 1990. 2.0 Coverage This Circular shall apply to all government-owned and/or controlled corporations and financial institutions, including subsidiaries, except the following: 2.1 The Government Service Insurance System; 2.2 The Social Security System; and 2.3 Corporations whose profit distribution and declaration and payment of dividends are provided for by their respective charters or by special laws. 3.0 Definition of Terms 3.1 Government-owned and/or controlled corporations, hereinafter referred to as GOCCs, are corporations created by law as agencies of the State for narrow and limited purposes, either wholly owned by the State or where government is a majority stockholder, in cases of stock corporations, or otherwise, agencies so created where no stocks are issued but whose affairs are conducted by a duly constituted board and which perform proprietary functions. This term shall include all corporations, including financial institutions, owned or controlled by the National Government performing proprietary functions, but excluding state universities and colleges. Acquired asset corporations and corporations sequestered by the Government shall likewise be excluded. 3.2 Subsidiary corporations are secondary corporations which are created and administered by a principal/parent agency for the purpose of helping achieve the objectives of the GOCC, and at least a majority of the capital or voting stock of which are owned by a parent GOCC or another subsidiary GOCC. 3.3 Net earnings refer to the audited Net Income as presented in the Profit and Loss Statement less subsidies received from the National Government but including dividend income from subsidiaries. 4.0 General Guidelines 4.1 Government-owned and/or controlled corporations, hereinafter referred to as GOCCs, shall declare and pay cash dividends to the national government equivalent to at least ten (10) percent of their net earnings. Subsidiary GOCCs shall likewise declare and pay their cash dividends equivalent to at least ten (10) percent of their net earnings to their parent companies. 4.2 The declaration and payment of cash dividends required under Section 4.1 hereto shall not preclude any stock dividends which may be declared by the governing boards of GOCCs in favor of the national government or the parent companies in the case of subsidiaries. 4.3 GOCCs with negative retained earnings in their capital account, as reflected in the audited balance sheet, may not declare and pay cash dividends as required in this Circular. 4.4 The Secretary of Finance, in consultation with the Secretary of Budget and Management, may recommend to the President an increase in the rate of dividends to be paid by GOCCs based on the review of their financial statements and other relevant financial and fiscal considerations. aisadc 5.0 Mode of Payment 5.1 GOCCs shall remit to the Bureau of the Treasury or to the parent GOCC, as the case may be, fifty (50) percent of their cash dividend payments on or before March 31 following the end of the year for which the dividend is being declared. Said payment shall be supported with the unaudited Profit and Loss Statement and with details of dividend computation duly attested by the Chief Executive and Finance Officers of the GOCC. The remaining fifty (50) percent of the cash dividend declared or the balance after any adjustments made on the net earnings in accordance to the COA audited financial statements must be remitted within forty-five (45) days after the issuance of the audit report. The second remittance shall be supported with a copy of the audited financial statements of the GOCC. 5.2 In the case of GOCCs which may encounter cash flow difficulties in remitting the cash dividends to the national government as provided in Section 5.1 hereto, the Secretary of Finance may approve an alternative schedule of payment based on the recommendation of the Corporate Affairs Group-Department of Finance. In this regard, said GOCCs are required to submit in writing to the Department of Finance not later than March 31 their proposed payment scheme for the cash dividends due to the national government together with the underlying justification. cd 5.3 The Bureau of the Treasury shall record the receipt of cash dividends paid by GOCCs as income to the General Fund. Without precluding the imposition of sanctions provided in this Circular, the Department of Budget and Management may cause the offsetting of the amount of dividends due to the National Government from any budgetary releases to the concerned GOCC, excluding loan proceeds, in case of the latter's failure to remit the same. 6.0 Responsibility and Sanctions 6.1 The governing board of the GOCC shall be responsible for approving the declaration of cash and/or stock dividends in compliance with this Circular. The chief executive and finance officers of the GOCC shall be responsible for the payment of cash dividends and/or issuance of stock dividends based on the declaration made by the governing board. 6.2 GOCCs which fail to remit cash dividends on the stipulated deadlines provided in Section 5.1 hereof shall be assessed a penalty charge for late payment equivalent to the prevailing 364-day regular Treasury Bill rate plus five (5) percent on the dividend due. However, GOCCs who made arrangement to reschedule their remittance based on Section 5.2 hereof shall be exempt from the penalty charge. 6.3 In addition, the members of the governing board and/or the chief executive and finance officers of GOCCs which fail to declare and/or pay cash dividends pursuant to this Circular shall be jointly and severally liable for violation of Section 17 of Executive Order No. 518. The said officials are hereby required to explain in writing to the President of the Philippines, through the Secretary of Finance, on or before June 30 the causes for their failure to declare and/or pay cash dividends. The Secretary of Finance shall thereafter review said explanation and, if warranted, shall recommend appropriate sanctions to the President. The sanctions shall include, but are not limited to, fines, suspension and removal of erring officials. 7.0 Transitory Clause For 1990, GOCCs are hereby directed to fully remit the cash dividends equivalent to at least ten (10) percent, or the adjusted dividend rate if applicable, of net earnings in 1989 to the Bureau of the Treasury or to their parent GOCCs in the case of subsidiaries within forty-five (45) days after the issuance of the corporation's audit report. 8.0 Repealing Clause DBM-DOF Joint Circular No. 1-88 and other circulars, issuances, rules and regulations or parts thereof which are inconsistent with any of the provisions of this Circular are hereby repealed, revoked or modified accordingly. 9.0 Effectivity This Circular shall take effect fifteen (15) days after its publication in the Official Gazette or any newspaper of national circulation. (SGD.) JESUS P. ESTANISLAO (SGD.) GUILLERMO N. CARAGUE Secretary of Finance Secretary of Budget and Management