Mr. Dante B. Adeva

August 20, 2001 SEC OPINION Mr. Dante B. Adeva No. 9 Narcissus St., Roxas District, Quezon City Dear Mr. Adeva : This refers to your letter dated June 01, 2001 inquiring (1) whether a stockholder whose subscription was declared delinquent is entitled to cash or stock dividends, and (2) whether the paid-up portion of his subscription shall be considered forfeited in favor of the corporation. Anent the first question, the Commission is of the opinion that stockholders are entitled to cash or stock dividends despite the declaration of delinquency, pursuant to Sections 43 & 71 of the Corporation Code, to wit: (Section 43) The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which may be payable in cash, in property or in stock to all stockholders on the basis of outstanding capital stock held by them: Provided, that any cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses, while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid. (Emphasis ours) (Section 71) Effect of Delinquency. No delinquent stock shall be voted for or be entitled to vote or to representation at any stockholder's meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the rights to dividends in accordance with the provisions of this Code, until and unless, he pays the amount due on his subscription with accrued interest, any the cost and expenses of advertisement, if any. (Emphasis Ours) In connection with your second question, the Commission maintains that "the partial payment shall be deemed forfeited and the whole subscription declared delinquent upon failure to pay on the date fixed in the contract of subscription or on the date fixed by the board on call of the directors". (SEC opinions dtd. February 23, 1982, Mr. Gregorio Ponce citing Balbin & Gloria, The Corporate Organization: New Dimensions, p. 80, 1981 ed.; September 3, 1982, Mr. Adolfo Martinez and June 26, 1984, Atty. Manuel Antonio). For your information. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner