Mr. Albert R. Dy Sun

July 5, 1994 Mr. Albert R. Dy Sun Yakult Philippines, Inc. 1461 Agoncillo St. cor. Escoda Sts., Ermita, Manila S i r : This refers to your letter of June 9, 1994 inquiring whether corporation can issue stock certificates equivalent to the paid-in capital in excess of par value. A stock certificate represents an interest in the corporation which is based on the number of shares owned by a stockholder regardless of the amount paid for such shares. Thus, the capital paid in excess of the par value cannot be again issued a stock certificate if the shares to which the paid-in surplus was applied as payment had already been previously issued with a stock certificate. However, the Commission, in a letter addressed to Mr. Ong Chee Han of Keppel Philippines Shipyards, Inc. dated October 19, 1989, quoted in part hereunder, has allowed declaration of dividend out of paid-in surplus. xxx xxx xxx Considering that when a corporation converts the premium or contributed surplus into capital by issuing to its stockholders shares of stock representing their respective participation, it actually parts with nothing but merely transfers the surplus to capital account and issues shares of stock to represent the same, the Commission en Banc in its Executive Meeting of October 17, 1989, resolved to allow the declaration of dividend from paid-in surplus subject to the following conditions: 1. That they be declared only as stock dividends and not as cash dividends; 2. That no creditor shall be prejudice therefrom; 3. That there shall be no resulting impairment of capital." Therefore, the moment the paid-in capital in excess of the par value of the shares is declared as stock dividend, such dividend declaration requires the issuance of stock certificates. llcd Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner