Mr. Winthrop Wee

May 21, 1996 Mr. Winthrop Wee Sherwel Enterprises 133 F. Roxas St., Caloocan City Zip Code 1400 S i r : This refers to your letter dated May 17, 1996 requesting clarification on whether a corporation can hold fractional shares resulting from a declaration of stock dividend by not releasing or distributing it in a form of cash or otherwise. A corporation may, pursuant to Section 41 of the Corporation Code, purchase or acquire fractional shares arising out of a stock dividend declaration, provided that it has the necessary unrestricted retained earnings in its books to cover the shares to be purchased or acquired. Under this situation the corporation should pay the owner of the fractional share the cash value thereof. In the absence of unrestricted retained earnings, fractional scrip certificates, which will entitle the stockholders owning the fractional shares to the payment of the cash value thereof when the company is in a position to do so, may be issued to them instead of stock certificates covering such fractional shares; or the stockholders concerned negotiate for the sale or purchase of their fractional shares with the other stockholders also owning fractional shares, so as to convert them into full shares. ( SEC opinion dtd. August 1, 1961 addressed to Republic Telephone Company ) llcd Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner