Mr. Florencio R. Arcenal

May 30, 1994 Mr. Florencio R. Arcenal 569 P. Burgos St., Mandaluyong City S i r : This refers to your letter of May 17, 1994 requesting opinion on the following queries: For how long will the subscription receivables remain unpaid and still be entitled to dividends; and when shall the "call" for payment for unpaid subscription be made? The pertinent provision of the Corporation Code 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 clear from the above provision that holders of unpaid subscriptions which are not yet declared delinquent are entitled to all rights of a stockholder, including the right to receive dividends, and even if the subscription is declared delinquent, the stockholder does not lose his right to dividends. The Corporation Code further provides, thus: "SECTION 71. Effect of delinquency . No delinquent stock shall be voted for or be entitled to vote or to representation at any stockholders' meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to dividends in accordance with the provisions of this Code, until and unless he pays the amount due on his subscription with accrued interest, and the costs and expenses of advertisement, if any. (Emphasis supplied) "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: Provided, That any cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses, while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid ....." (Emphasis supplied) The procedure for the call payment of unpaid subscription is found in Section 67 of the Corporation Code, quoted hereunder: "SECTION 67. Payment of balance of subscription . Subject to the provisions of the contract of subscription, the board of directors of any stock corporation may at any time declare due and payable to the corporation unpaid subscriptions to the capital stock and may collect the same or such percentage of said unpaid subscriptions, in either case with accrued interest, if any, as it may deem necessary. Payment of any unpaid subscription or any percentage thereof, together with the interest accrued, if any, shall be made on the date specified in the contract of subscription or on the date stated in the call made by the board. Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different rate of interest is provided in the by-laws, computed from such date until full payment. If within thirty (30) days from the said date no payment is made, all stocks covered by said subscription, shall thereupon become delinquent and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise." Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner