SEC witness: Law does not require firms to declare dividends

The Corporation Code does not require companies to declare dividends it paid to its stockholders, a witness from the Securities and Exchange Commission (SEC) said Tuesday.

SEC Company Registration and Monitoring Department Director Gerardo del Rosario made the testimony during Day 28 of Vice President Sara Duterte’s impeachment trial.

Cross-examined by defense lawyer Justin Gular, Del Rosario said Section 42 of the Corporation Code 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.”

Asked if the phrase “may declare” means such declaration is not mandatory, Del Rosario said, “Tama po.” (You are correct.)

Del Rosario earlier testified 10 of the 18 firms which the Vice President or her husband Manases Carpio have interest in did not declare dividends in multiple years covering years 2004 to 2025.

He also said that eight of the 18 firms did not submit any annual financial statements, meaning the SEC did not have information to determine if these companies paid dividends.

On Tuesday, Del Rosario testified that Section 42 of the Corporation Code provides certain exemptions in declaring dividends such as:

• (a) when justified by definite corporate expansion projects or programs approved by the board of directors; or
• (b) 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; or
• (c) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is need for special reserve for probable contingencies.

Gular then argued that Section 3.i of the Code of Conduct for Public Officials and Employees states that the crime of conflict of interest is only committed when a public official is a substantial shareholder or has substantial interest in the firm.

Asked by Gular if he is in the position to determine whether the Vice President is a substantial shareholder or has substantial interest in the 18 firms discussed, Del Rosario said “No.”

Gular also asked the SEC official if he has access to information on inheritance, sale of properties, appraised value of land, which could account for the assets of the Vice President other than the dividends from the 18 firms, and Del Rosario replied no since these records are outside of the SEC’s mandate. —AOL, GMA News