SUBJECT : Ownership of Cash Dividends

June 2, 2003 SEC OPINION NO. 29-03 Mr. Vicente G. Javier 1041 Teres Street Makati City SUBJECT : Ownership of Cash Dividends S i r : This refers to your letter dated 14 March 2003 requesting opinion on the ownership of cash dividends, based on the following facts: On 9 January 2002, the board declared cash dividends of P3.2 million for the year ending 31 December 2001 to be given on 17 January 2002. On 15 January 2002, the stockholders received their partial dividends. ATESCc On 30 January 2002, a stockholder sold some of his shares. Again, on 15 March 2002, the same stockholder sold some of his remaining shares. On 1 August 2002, during the board meeting when the amounts of the remaining dividends were to be read, the transferee of the subject sold shares contested the ownership of the dividends. It s settled that, in the absence of agreement to the contrary, or where the resolution declaring the dividend specifies a record date, all persons who own shares of stock in a corporation at the time the dividend is declared are entitled, as matter of absolute right, to share ratably in the dividend in proportion to their respective shares. [11 Fletcher Cyclopedia of the Law of Private Corporations 912 (1986)] In case there is transfer of shares, dividends declared before a transfer belong to the transferor and those declared after the transfer belong to the transferee, unless the parties have agreed otherwise or there is statutory or other controlling provision changing the rule. [SEC Opinion dated 12 November 1986] Note however that Section 63 of the Corporation Code provides that no transfer of shares shall be valid, except between the parties, until the transfer is recorded in the corporate books of the corporation. Hence, in case of unrecorded transfer of shares, the transferor has the right to dividends as against the corporation without notice of the transfer but the transferor is deemed the trustee of the real owner of the dividends. [H. De Leon, The Corporation C od e of the Philippines Annotated (1993) p. 350] Inasmuch as the declaration of dividends was made prior to the aforesaid transfers of shares, the recording of said transfers in the stock and transfer book has no bearing for your purpose. In this case, there is nothing to indicate the declaration of a record date. In the absence of record date, the subject dividends, in our view, belong to the stockholder who owns the stock at the time when the dividends are declared, that is, the stockholder as of 9 January 2002. We hope we satisfactorily answered your query. Very truly yours, (SGD.) VERNETTE UMALI PACO General Counsel