SEC Company Registration and Monitoring Department Director Gerardo del Rosario confirmed during Day 28 of Vice President Sara Duterte’s impeachment trial on Tuesday that a corporation’s failure to declare dividends is not, by itself, illegal.
During cross-examination, defense counsel Justin Nicol Gular asked Del Rosario about Section 42 of the Revised Corporation Code, which governs the declaration and retention of corporate profits.
“Kapag walang dineklara, hindi naman po illegal ’yung mga ginagawa ng korporasyon? Tama po ba?” Gular asked.
“Hindi naman po,” Del Rosario replied.
Gular also pointed out that the provision prohibits corporations from retaining surplus profits exceeding 100% of their paid-in capital, rather than simply prohibiting the non-declaration of dividends. Del Rosario agreed.
Under Section 42, exceptions allow corporations to retain surplus profits in excess of the 100% threshold for approved expansion projects, loan restrictions that prevent dividend declarations without creditor consent, or special circumstances requiring reserves for probable contingencies.
Del Rosario further agreed that corporations invoking these exceptions should report the circumstances in their audited financial statements.
The exchange came as the prosecution examines corporate earnings, retained earnings and dividend records in relation to allegations concerning Duterte’s business interests and declared wealth.
WATCH LIVESTREAM
