Atty. Ma. Melva Evangelista-Valdez

April 23, 1991 Atty. Ma. Melva Evangelista-Valdez Bengzon Zarraga Narciso Cudala Pecson & Bengson 6th Floor, SOL Building Amorsolo St.,Legaspi Village Makati, Metro Manila Madam: This refers to your letter of February 21, 1991 requesting clarification on the interpretation of Sec. 43 of the Corporation Code which provides that "stock corporation are prohibited from retaining surplus profit in excess of 100% of their paid-in capital", particularly on the following queries: 1. Does paid-in capital includes payment on subscriptions in excess of par (premium)? LibLex 2. Does surplus profits include from subsidiaries and affiliates? Relative to your first query, the Commission in its Executive Meeting of April 16, 1991 resolved as a matter of policy, to construe "paid-in capital" as used under Section 43 of the Corporation Code to include payments on subscriptions in excess of par. Anent your second query, the term "surplus profits" as used under Section 43 of the Corporation Code does not includes participation or share of the parent company in the profits of its subsidiaries and affiliates unless and until such profits are actually received in the form of cash or property dividends. Since your letter-query states that the profits are yet to be received as dividends your query is answered in the negative. Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA G. GLORIA Associate Commissioner