Mr. Pelagio M. Achacoso

October 30, 1990 Mr. Pelagio M. Achacoso Mivinto Investment Corporation P.O. Box 2042 M a n i l a S i r : This refers to your letter dated June 5, 1990 requesting for a ruling on the proposal of Mivinto Investment Corporation to distribute, in equal shares to its stockholders, its investments in shares of stocks of Allied Brokerage Corporation. llcd As stated, Mivinto Investment Corporation has investments in the form of stocks in Allied Brokerage Corporation amounting to P781,800.00 as of April 30, 1990. It has retained earnings of P885,771.00 as of December 31, 1989. In the meeting of the Board of Directors on May 23, 1990, two directors submitted a proposal to distribute said investments in equal shares to the stockholders of Mivinto. Hence, your request for a ruling. The pertinent provision of the Corporation Code provides: "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 stock held by them; ...." (Emphasis supplied) The proposal of the company is in the nature of property dividend. Considering that subject corporation allegedly has the necessary retained earnings to cover the dividend declaration, the same may be allowed, subject to the condition that no creditor shall be prejudiced therefrom and there shall be no resulting impairment of capital. Likewise, it has to be emphasized that all stockholders at the time the dividend is declared, are entitled as a matter of right to share ratably in the dividend in proportion to their respective shares. LibLex (SGD.) RODOLFO L. SAMARISTA Associate Commissioner