Mr. Steve G. Cosico

September 25, 2002 SEC OPINION Mr. Steve G. Cosico Chairman San Pablo City Water District Employee Provident Fund Association, Inc. San Pablo City S i r : This refers to your letter dated August 14, 2002 requesting opinion on the legality of the payment of cash dividends and interest rebates to the members of San Pablo City Water District Employees Provident Fund Association, Inc.,a non-stock corporation. As defined in Section 87 of the Corporation Code, "a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, . . ." Cash dividends and interest rebates form part of the income of the corporation. Therefore, the distribution of dividends and rebates to the members would be in direct contravention of the aforementioned provision." Incidental profits obtained from its operation shall, whenever necessary or proper, be used exclusively for the furtherance of the purpose or purposes for which the corporation was organized". (SEC Opinion dtd May 16, 1990) As regards the right of the Board of Directors of San Pablo City Water District to suspend the release of payment of the employer's share, the provisions of the provident fund agreement will determine the propriety of the Board's action. In the absence of any agreement between the parties, the provisions of the Civil Code of the Philippines will apply, thereby vesting jurisdiction over the subject matter raised in your query with the regular Courts. ESHcTD Very truly yours, (SGD.) BENITO A. CATARAN Director