Non-declaration of dividends not illegal, Sara Duterte’s camp points out

MANILA, Philippines – The non-declaration of dividends by a corporation is not illegal and prohibited under the Revised Corporation Code of the Philippines, the camp of Vice President Sara Duterte pointed out on Tuesday.

Defense lawyer Justin Nicol Gular cited the law during his cross-examination of prosecution witness Securities and Exchange Commission (SEC) Company Registration and Monitoring Department Director Gerardo del Rosario.

READ: 10 of 18 firms linked to VP Duterte, husband paid no dividends – witness

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Del Rosario’s testimony on Monday revealed that 10 of 18 companies allegedly linked to Duterte and her husband, lawyer Manases Carpio, had no declared dividends.

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But during Tuesday’s proceedings, Gular read Section 42 of the Revised Corporation Code, which states that “The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, property, or in stock to all stockholders on the basis of outstanding stock held by them.”

“So as a lawyer and as an officer of the SEC, you confirm that just because a corporation has unrestricted retained earnings, it’s not automatically required by law para mag-declare ng dibidendo. Tama po ba?” the lawyer asked.

(So, as a lawyer and as an officer of the SEC, you confirm that just because a corporation has unrestricted retained earnings, it is not automatically required by law to declare dividends. Is that correct?)

When the witness confirmed this statement, Gular went on, further pointing out that the same provision only prohibits stock corporations “from retaining surplus profits in excess of 100% of their paid-in capital stock.”

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“Under Section 42, hindi naman prohibited ang hindi pag-declare ng dibidendo, di ba?” the defense lawyer further asked.

(Under Section 42, the failure to declare dividends is not prohibited, correct?)

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“Opo dahil sa word na ‘may,’” del Rosario said.

(Yes, because of the word ‘may.)

“So pag walang dineklara, hindi naman po illegal yung ginagawa ng mga korporasyon. Tama po ba?” Gular pressed on.

(So if no dividends are declared, what the corporations are doing is not illegal, correct?)

“Hindi naman po,” the witness answered.

(No, not really.)

Still citing the same provision, the lawyer pointed out that even if the surplus profits have already exceeded the paid-in capital, corporations may still withhold the declaration of dividends under the following circumstances:

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• When justified by definite corporate expansion projects or programs approved by the board of directors;
• When the corporation is prohibited under any loan agreement with financial institutions or creditors, whether local or foreign, from declaring dividends without their consent, and such consent has not yet been secured;
• When it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is a need for a special reserve for probable contingencies.

Duterte’s alleged ownership of several businesses has been the focus of the proceedings as the prosecution seeks to prove allegations that she amassed unexplained wealth, failed to disclose all her assets, and failed to divest herself of her business interests even after assuming the vice presidency. /jpv

NOTE: The English translations in the article were AI-generate