Romulo, Mabanta, Buenaventura Sayoc & De Los Angeles

February 1, 1991 Romulo, Mabanta, Buenaventura Sayoc & De Los Angeles 4th Floor, King's Court 2129 Pasong Tamo Makati, Metro Manila Attention : Attys . Vilma M . Valdemoro-Cua and Ma . Elena P . Hernandez-Cueva Gentlemen : This refers to your letter of January 22, 1991 requesting a ruling on whether or not, under the circumstances described therein, cash dividends may be declared by a corporation on the basis of shareholders' paid-up capital. In connection therewith, please be advised that the Commission, in an en banc meeting of October 22, 1987, has previously ruled in Re: Federal Phoenix Assurance Co., Inc. that dividends cannot be declared on the basis of the stockholders' paid-up capital applying the following provisions of the Corporation Code: SECTION 43. Power to declare dividends . The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall 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 dividend due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses, while stock dividend shall be withheld from the delinquent stockholders until his unpaid subscription is fully paid: ...." (Emphasis supplied) The Corporation Code further provides: "SECTION 72. Rights of unpaid shares . Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a stockholder ." (Emphasis supplied) It is very clear from the aforecited provisions that the stockholder's participation in dividends is based on his total subscription and not on the amount paid by him on account thereof. It is a cardinal rule of statutory construction that where the terms of the statute are clear and unambiguous, no interpretation is called for, and the law is applied as written. cdlex Please be advised accordingly. Very truly yours, (SGD.) ARMANDO Z. GONZALES Associate Commissioner