Mr. Joven T. Pulido

January 21, 1981 Mr. Joven T. Pulido Asst. Vice President Land Bank of the Philippines 319 Buendia Ave. Ext. Makati, Metro Manila Sir : This refers to your letter dated 8 June 1979 relative to the request of the Rural Bank of Hinigaran, Inc. to the above-named bank to refund the amount of P8,028.00 representing excess payment of dividends for 1973 and 1974 on the ground that preferred shares held by Land Bank are not entitled to cumulative dividends. cdll The classes of shares of stocks which a corporation may issue vary "with such rights, voting powers, preferences, and restrictions as may be provided for in the articles of incorporation" (Sec. 5, Act No. 1459, as amended). This provision is reiterated in Section 6 of the Corporation Code of the Philippines. Thus, the articles of incorporation must specifically state whether the preferred shares of stocks shall be entitled to cumulative or non-cumulative dividends. In the absence of an express provision, dividends on preferred shares shall be equal to other shares, i.e. non-cumulative. Quoted hereunder is the pertinent Corporation Code of the Philippines (Sec. 6) on this matter: " Except as otherwise provided by the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share." (Emphasis supplied) The article of incorporation of the Rural Bank of Hinigaran, Inc. filed in this Commission are silent on whether preferred shares of stocks shall be cumulative or not. In view of the foregoing, as well as on the reasons cited in the letter of the rural bank, as attached in your letter, it is submitted that the preferred shares held by Land Bank in the Rural Bank of Hinigaran, Inc. are not entitled to cumulative dividends. Please be guided accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department