Arellano University

School of Law

COMPILATION OF LEGAL FORMS

In partial fulfillment of the requirements

for the subject:

LEGAL FORMS (SUN, 10:00-12:00PM)

Respectfully Submitted to:

Atty. Ma. Jesusa Eleanor Siquijor Magbanua

Submitted By:

GROUP 5

De Leon, Nathan
Promissory Note — with and without Interest

Chua, Al Anthony
Bills of Exchange and Checks

Hernandez, Aizel Angelique

Secretary’s Certificate

Custodio, Reyna
Board Resolution Approving Declaration of Dividends
I. PROMISSORY NOTE — WITH AND WITHOUT
INTEREST
A. Nature of the Document or Form

A promissory note is essentially a written contract whereby one party unconditionally obligates
himself to pay another party a sum certain at a later date. It can be used in lieu of cash as
agreed upon by the parties in order to discharge an obligation to pay, such as when one party is
short on cash at the moment, to encourage commercial transactions. A negotiable promissory
note means the payment can be made to whoever bears the note, who acquires possession
thereof through indorsement or delivery, as the case may be.

B. Legal Basis

The format and usage of negotiable promissory notes is governed by the Negotiable
Instruments Law, Act. No. 2031.

Sec. 184. Promissory note, defined. – A negotiable promissory note within the meaning
of this Act is an unconditional promise in writing made by one person to another, signed
by the maker, engaging to pay on demand, or at a fixed or determinable future time, a
sum certain in money to order or to bearer. Where a note is drawn to the maker's own
order, it is not complete until indorsed by him.

Other elements of validity and negotiability are discussed in Secs. 1 through 50 and are also
applicable to bills of exchange and other negotiable papers. Rights and liabilities of parties are
discussed in Secs. 51 through 69, while presentation, dishonor, and discharge are covered in
Secs. 70 through 125.

If the promissory note is not negotiable due to defects or intent, general provisions of the New
Civil Code are applied suppletorily, particularly those on Obligations and Contracts, Sales,
Credit Transactions, and others, inasmuch as they relate to the obligation to pay encapsulated
in the promissory note.

C. Grounds

As a simple contract, it is perfected by mere consent on the basis of the payor’s unilateral and
unconditional promise to pay and the payee’s receipt thereof. It is not a mandatory form, as
cash or other commercial papers can be used as payment for a wide variety of transactions, but
the promissory note can be considered a simple type of loan agreement, which can be further
altered into other forms for credit transactions as needed, such as by securing it with a
mortgage. As such, there are no strict grounds for its commercial use.
 D. Contents

A negotiable promissory note contains the following elements, as stated in the Negotiable
Instruments Law:

Sec. 1. Form of negotiable instruments. – An instrument to be negotiable must conform

to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

Interest may be applied to the sum payable as stated in the note, which can run from a specified
date or from the date indicated or date of issue of the note if ambiguous.

In relation to the case of KT Construction Supply, Inc., v. PSBank, an acceleration clause is one
of the permissible additions to the promissory note, whereby the whole value of the note
becomes immediately due and demandable in the event that the payor is unable to comply with
stated installments as scheduled in the note.

E. Who May and When to File

As a simple contract, there are no particular rules on who may execute a promissory note and
when, apart from the general provisions of the New Civil Code on juridical capacity, capacity to
act, and validity of contracts.

F. Where to File

As a commercial paper that is the sole and best evidence of the contract, it is kept in the
possession of the bearer or payee for security. As a private document, it need not be notarized
or filed with any registry of civil records.

G. Effects

A promissory note can be executed on its own or in fulfillment of a separate obligation. By itself,
if binds the payor to pay the payee or bearer as a unilateral obligation similar to a donation. In
conjunction with another obligation, it serves to fulfill the payor’s reciprocal obligation to the
payee or bearer for sales or services, essentially extinguishing the main contract by fulfillment
and replacing it with a subsequent contract.
H. Sample Form
II. BILL OF EXCHANGE AND CHECKS

A. Nature of the Document or Form

Although they do not constitute legal tender, they are used as a substitute for money.
Negotiable papers, particularly checks, constitute, at the present, the media of exchange for
most commercial transactions.

B. Legal Basis

These are governed by the Negotiable Instruments Law (Act No. 2031) and B.P. 22 or the
Bouncing Checks Law.

i) Negotiable Instruments Law

Sec. 126. Bill of exchange, defined. – A bill of exchange is an unconditional order in

writing addressed by one person to another, signed by the person giving it, requiring the
person to whom it is addressed to pay on demand or at a fixed or determinable future
time a sum certain in money to order or to bearer.

Sec. 185. Checks, defined. – A check is a bill of exchange drawn on a bank payable on
demand. Except as herein otherwise provided, the provisions of this Act applicable to a
bill of exchange payable on demand apply to a check.

Sec. 1. Form of negotiable instruments. –  An instrument to be negotiable must conform

to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.

ii) B.P. 22 or The Bouncing Checks Law

A check often serves as a substitute for money. It allows transactions to proceed without money
actually switching hands. This law punishes the issuance of “worthless” checks. These checks
are deemed to have pernicious effects on the integrity of banking and other financial
transactions and therefore, injurious to public interest.

The following essential elements must be present in order to be liable under BP 22:

(1) the person accused of violating the law makes, draws or issues any check for
account or for value;
(2) he has knowledge at the time he issued the check that he does not have
sufficient funds in or credit with the drawee bank for the payment of the check
when presented for payment; and,
(3) the drawee bank dishonors the check because of insufficiency of funds, or it
would have dishonored the check for the same reason if the issuer did not order
the bank to stop payment for no valid reason.

The law presumes that the issuer knew of the insufficiency of his funds if the check is
dishonored within 90 days from the date of the check. This presumption is overcome only if the
issuer pays or makes arrangements for payment of the full amount of the check within five
banking days after receiving a notice of its dishonor. Further, there must be proof that that the
issuer was notified of the fact of dishonor, and proof that the issuer had received such notice of
dishonor.

RA 7691 amended BP 129 and conferred exclusive jurisdiction of BP 22 cases to Metropolitan

Trial Courts.

A. Parties
Bill of Exchange Checks
Drawer Drawer
Payee Payee
Drawer/Acceptor Drawee Bank

B. Types and Comparisons

i) Promissory Note vs. Bill of Exchange

Promissory Note Bill of Exchange

Promise to Pay Order to Pay
3 Parties – DRAWER, DRAWEE, and
2 Parties – MAKER, PAYEE
PAYEE
No Acceptance Necessary. The maker is Acceptance by the DRAWEE is absolutely
absolutely liable to pay. necessary to make him liable to pay.
Liability of maker – PRIMARY and Liability of drawer – SECONDARY and
ABSOLUTE CONDITIONAL
Written by the DEBTOR. Drawn by a CREDITOR
 Maker and Payee are in IMMEDIATE
RELATION to each other.
Cannot be made payable to maker himself
Drawer of the bill stands in immediate
relationship with the DRAWEE/ACCEPTOR
and PAYEE
Drawee and Payee may be one and the
same person

Other Types of Bill of Exchange

1. Draft – sometimes called a bill of exchange and normally refers to bills of exchange
used in documentary exchanges, like letters of credit transactions.

2. Inland and Foreign Bill – inland bills are bills that are drawn and payable in the
Philippines. If the bill is drawn and payable elsewhere, it's a foreign bill.

3. Time Draft – drafts payable at a fixed date.

4. Sight/Demand Draft: draft payable when the holder presents is for payment.

5. Trade Acceptance – bill used in sales contracts where the seller (as drawer) orders the
buyer (as drawee) to pay the seller a certain sum (as payee.)

6. Banker's Acceptance – time draft where the drawee has written "accepted" on its face.

7. Check – the most common negotiable instrument. Bill of exchange drawn on a bank and
payable on demand

ii) Check vs. Bill of Exchange

Check Bill of Exchange

Always drawn upon a bank or banker May or may not be drawn against a bank

May be payable on demand or at a fixed or

Always payable on demand
determinable future time

Not necessary that it be presented for Necessary that it be presented for

acceptance acceptance

Drawn on a deposit Not drawn on a deposit

The death of a drawer of a check, with

The death of the drawer of the ordinary bill of
knowledge by the banks, revokes the
exchange does not
authority of the banker to pay
 Must be presented for payment within a May be presented for payment within a
reasonable time after its issue (6 months) reasonable time after its last negotiation.

Other Types of Checks

1. Open Check
 Pay to Bearer – When the words "or bearer" appearing on the face of the cheque
are not cancelled, the cheque is called a bearer cheque. The bearer cheque is
payable to the person specified therein or to any other else who presents it to the
bank for payment.
 Pay to Order – Such a cheque is payable to the person specified therein as the
payee, or to any one else to whom it is endorsed (transferred).

2. Crossed Check – For issuers of checks who would want their financial transactions to
be limited between them and the payees, they avail of the safeguard of “crossing” their
checks. It is done by drawing two parallel lines or across its face or across the corner
thereof.

3. Certified Check – A certified check is a check for which payment has been guaranteed
by a bank. The bank only issues its guarantee after obtaining full payment from
the issuer of the check, thereby eliminating its risk.

4. Manager’s Check – A manager's check is a secure check that a bank issues for an
individual who has purchased it. The person who purchases the check pays the bank the
amount of money for which the check is issued either in cash or from his bank account.
He is then guaranteed acceptance of his check by the party receiving it.

5. Overdraft Check – An overdraft usually refers to a checking account where the amount

of checks presented to the bank for payment exceeds the amount on deposit. When this
occurs we say that the checking account customer has overdrawn its account.
The overdraft means that the bank's records indicate a negative checking account
balance. There are several reasons why drawee banks dishonor checks upon
presentment for payment. Among these reasons are DAUD “Drawn Against Uncollected
Deposits,” and DAIF “Drawn Against Insufficient Funds.”. DAUD means that the account
has, on its face, sufficient funds but not yet available to the drawer because the deposit,
usually a check, had not yet been cleared. DAIF, on the other hand, is a condition in
which a depositor’s balance is inadequate for the bank to pay a check.

6. Bouncing Check – Bouncing checks are checks which are returned by the bank
because their issuers do not have sufficient funds on deposit. In the Philippines, Art 315
 of the RPC and the BP 22 are two laws which criminalize and punish the issuance of
bouncing checks.

7. Stale Check – A stale check is one which is not presented for payment within a
reasonable time after its issue. It is valueless and, therefore, should not be paid. Failure
of a payee to encash a check for more than ten years undoubtedly resulted in the check
becoming stale. The Supreme Court referred to the banking practice which considers a
check becoming stale after more than six (6) months (Pacheco, et. al. vs. Court of
Appeals). Thus, holders of checks should make sure that these are presented within six
(6) months from their due date.

8. Post Dated Check – The post-dated check is the most common means of payment for a
loan. It is a check that is written and issued by the debtor for a date in the future and
may not be encashed or deposited until such time. Debtors use post-dated checks to
avoid missing payments on their loans.

E. Sample Form

Sample Bill of Exchange

Php 50,000,000.00 Quezon City

August 20, 2019

One month after date, pay to Mr. Marcelo Del Pilar or his order the sum of Fifty Million Pesos
Only, for value received.

TO: (Signed)
Andres Bonifacio Jose Rizal
13 Main Ave 189 Province St
Quezon City Makati City
 F. Case

BENJAMIN EVANGELISTA v. SCREENEX, INC., represented by ALEXANDER G.

YU

FACTS: Evangelista obtained a loan from Screenex which was secured by 2 open-
dated checks, both pay to order of Screenex. From the time it was issued, they were
held in safekeeping together with the other documents and papers of the company by
Philip Gotuaco, Sr., father-in-law of respondent Alexander Yu, until the former’s death.
Before the checks were deposited, there was a personal demand from the family for
Evangelista to settle the loan and a demand letter was sent by the family lawyer.
Evangelista was charged with violation of BP 22 in a criminal case filed with the MeTC
of Makati. The MeTC found that the prosecution had indeed proved the first 2 elements
of cases involving BP 22 but failed to prove the 3rd element. Also, there was failure on
the part of Yu to prove that the demand letter had actually been received by the
addressee and there was no way to determine when the 5-day period should start to
toll, there was failure to establish prima facie evidence of knowledge of insufficiency of
funds, hence, the court acquitted Evangelista of the criminal charges. Ruling on the civil
aspect, the court held that while Evangelista admitted to having issued and delivered
the checks to Gotuaco and having fully paid the amount, no evidence of payment was
presented. In the end, Evangelista was declared liable for the civil obligation.
Timely appeal was made to the RTC raising two errors of the MeTC, to wit: 1) Lower
court erred in not appreciating the fact that the prosecution failed to prove the civil
liability and 2) any civil liability attributable to Evangelista had been extinguished by
prescription. RTC held that the checks should be taken as evidence of Evangelista’s
indebtedness to prove that the obligation subsisted. Also, the alleged payment by
Evangelista was an affirmative defense that he had the burden of proving but that he
failed to discharge.
CA, upon petition for review, denied the same. It held that the reckoning time for the
prescriptive period began when the instrument was issued and the corresponding check
returned by the bank to its depositor; that the issue of prescription was raised for the
first time on appeal; and that the loan obligation was never denied by Evangelista, who
claimed it was already settled, but failed to show any proof of payment.

ISSUE: Whether or not Evangelista is still liable for the total amount indicated in the 2
checks

HELD: NO. By definition, a check is a bill of exchange drawn on a bank payable on

demand. It is an undertaking that the drawer will pay the amount indicated thereon. Sec
119 of the NIL, however, states that a negotiable instrument like a check may be
discharged by any other act which will discharge a simple contract for the payment of
money. A check is therefore subject to a 10-year prescription of actions upon a written
contract. If the check is undated as in the present case, the cause of action is reckoned
from the issuance of the check. Assuming that Yu had authority to insert the dates in the
checks, the fact that he did so after the lapse of more than 10 years cannot qualify as
changes made within a reasonable period. The cause of action on the checks has
become stale, hence time-barred. Prescription has indeed set in.
Therefore there is no other recourse but to grant the petition on the ground of
prescription. Even if the defense was belatedly raised before the RTC for the first time
on appeal from the ruling of MeTC, the supreme court nonetheless dismissed the
complaint seeking to enforce civil liability of Evangelista based on the undated checks.
The acceptance of a check implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such diligence, it
will be held to operate as actual payment of the debt or obligation for which it was given.
The SC held that the delivery of the checks, despite the subsequent failure to encash
them within a period of 10 years or more, had the effect of payment. Petitioner is
considered discharged from his obligation to pay and can no longer be pronounced
civilly liable for the amounts indicated thereon.
III. SECRETARY'S CERTIFICATE

A. Nature of the Document or Form

A contract is defective if the individual that signed the contract did not have the
authority. Officers of a corporation have implied authority to sign agreements because
of their position as an officer. They may also have authority that the company has
delegated to them. What about other individuals in the company or individuals that may
not even work for the company? How do you check their authority?

The best way is to ask for what is called a "Secretary's Certificate". A “Secretary's
Certificate” is a document that is signed and sealed by the Secretary of the
Corporation that states that the Board of Directors has voted to delegate authority to a
specific individual or group and whether they have the right to further delegate that
authority. The Secretary's Certificate would need to be stamped with their seal for it to
be an official corporate document.

If you have a sealed Secretary's Certificate stating that they have delegated authority to
that individual any contract signed by that individual would be binding. If you had a
statement that a specific individual is authorized to delegate authority for certain actions,
you would also want a signed statement from that individual that documents the
delegation. Without proof of the delegation and/or the right to delegate, the company
could simply void the bid or contract saying that the person didn't have the authority.

For example, a corporation could delegate authority to their general counsel to sign
documents and allow the general counsel to further delegate that authority to outside
law firms where that delegation would be subject to specific parameters. Creating an
agent that can bind the corporation would also require a delegation of authority by
someone in the corporation that both has been granted the authority and has the right to
further delegate it.

A Secretary's Certificate is a written document by an officer of a corporation called the

Corporate Secretary which is used to certify corporate acts or records.

B. Applicable Laws

Generally, the format or content of a Secretary's Certificate is not governed by any laws
in the Philippines. However, the Corporate Code of the Philippines and the Securities
and Exchange Commission require certain acts of the Corporation to be certified by the
Corporate Secretary.

C. When Required
A Secretary's Certificate is required when amending the Articles of Incorporation to
show that the amendments or amendments have been duly approved by the required
vote of the stockholders or members of the corporation. Likewise, it is required in the
increase or decrease of the authorized capital stock.

“SEC. 15. Amendment of Articles of Incorporation. – X X X

The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Amendments to the
articles shall be indicated by underscoring the change or changes made, and a
copy thereof duly certified under oath by the corporate secretary and a majority
of the directors or trustees, with a statement that the amendments have been
duly approved by the required vote of the stockholders or members, shall
be submitted to the Commission. X X X ”
“SEC. 37. Power to Increase or Decrease Capital Stock; Incur, Create
or Increase Bonded Indebtedness. – No corporation shall increase or
decrease its capital stock or incur, create or increase any bonded indebtedness
unless approved by a majority vote of the board of directors and by two-
thirds (2/3) of the outstanding capital stock at a stockholders’ meeting duly
called for the purpose. ... X X X
A certificate must be signed by a majority of the directors of the
corporation and countersigned by the chairperson and secretary of the
stockholders’ meeting, setting forth: (a) That the requirements of this section
have been complied with; (b) The amount of the increase or decrease of the
capital stock… X X X”

“SEC. 45. Adoption of Bylaws. – For the adoption of bylaws by the

corporation, the affirmative vote of the stockholders representing at least a
majority of the outstanding capital stock, or of at least a majority of the
members in case of nonstock corporations, shall be necessary. The bylaws
shall be signed by the stockholders or members voting for them and shall be
kept in the principal office of the corporation, subject to the inspection of the
stockholders or members during office hours. A copy thereof, duly certified by a
majority of the directors or trustees and countersigned by the secretary of
the corporation, shall be filed with the Commission and attached to the
original articles of incorporation. X X X”

“SEC. 47. Amendment to Bylaws. – … X X X

Whenever the bylaws are amended or new bylaws are adopted, the
corporation shall file with the Commission such amended or new bylaws
and, if applicable, the stockholders’ or members’ resolution authorizing the
delegation of the power to amend and/or adopt new bylaws, duly certified
under oath by the corporate secretary and a majority of the directors or
trustees. X X X”
 “SEC. 77. Articles of Merger or Consolidation. – After the approval by
the stockholders or members as required by the preceding section, articles of
merger or articles of consolidation shall be executed by each of the
constituent corporations, to be signed by the president or vice president
and certified by the secretary or assistant secretary of each corporation setting
forth: … X X X

D. Contents: (PeRF-Jur)

i. Personal Circumstances of Secretary and that of the Corporation

The user will be asked to provide the name and address of the Corporate Secretary.
They should be a resident and citizen of the Philippines (Section 24 of the Revised
Corporation Code). Thereafter, information regarding the corporation shall also be
asked, specifically, its name, principal address, and the type of corporation it is
formed as (stock or non-stock corporation). The user will then be asked for
the purpose of the Secretary's Certificate.

ii. Resolution/s of the Board of Directors

A Secretary Certificate is also needed in order to effectuate Board Resolutions which

has an effect of increasing or decreasing the authorized capital stock. Specifically, it is
needed to certify that:

 The list of stockholders at the date of approval of the increase or decrease of the
authorized capital stock;
 The increase was approved by the board of directors and the stockholders;
 Stockholders who did not subscribe to the increase waived their pre-emptive
rights
o (Pre-emptive right is a right granted to the stockholders of a corporation
to be granted the first option to subscribe to any opening of the unissued
capital stock or to any increase in the authorized capital stock of a
corporation);
 There is no pending case involving intra-corporate dispute.

A Secretary's Certificate may also be needed to show the authority of a person who
will enter into transactions, such as contracts, on behalf of a corporation.

iii. Fact that the said Board Resolutions are still in Force

This only means that the resolutions of the board contained in the Secretary Certificate
have not been revoked, amended or in any manner modified and accordingly, the same
may be relied upon until notice to the contrary has been issued by the corporation.

iv. Jurat
The user will also be asked to provide information to notarize the document such as the
province, city or municipality where it will be notarized and the proof of identification that
will be presented to the notary public. The proof of identification must have been issued
by an official agency bearing the Corporate Secretary's photograph and signature.

E. Who may File and Where to File

Once the document is completed, the user should print at least three (3) original copies
of the document. The Corporate Secretary should present themselves to a notary public
where they will swear to the truth of the contents of the Secretary's Certificate and sign
the document in front of the notary public. The notary public will then affix their seal and
signature on the document. The notary public will usually keep one original copy of the
document. Once notarized, the document may be used as necessary.

F. Uses and/or Variations of a Secretary Certificate: Examples

i. Secretary’s Certificate to Sell Real Property

ii. Secretary’s Certificate to Purchase Property
iii. Secretary’s Certificate to File Cases with Full Pre-trial Authority
iv. Secretary’s Certificate to Apply for a Loan Credit Accommodation
v. Secretary’s Certificate Designating Depositary Bank
vi. Secretary’s Certificate for Authorized Representative in Bureau of
Internal Revenue (BIR) / PAG-IBIG etc.
vii. Secretary’s Certificate
viii. Any other corporate acts contained in a Board Resolution

G. Sample Form

Republic of the Philippines )

Makati City ) S.S.

SECRETARY’S CERTIFICATE

I, JUAN C. DELA CRUZ, of legal age, with office address at 30 th flr., ABC Bldg., Rufino St., Makati
City, on the basis of corporate records, do hereby certify under oath that:

1. I am the corporate Secretary of XYZ Corporation, a corporation duly organized and existing
under the laws of the Philippines, with the same office address given above.

2. At the meeting of the Board of Directors of the corporation held on January 31, 2020, at which
meeting a quorum was present and obtained throughout, the following resolution was
unanimously approved and adopted:

“RESOLVED, as it is hereby resolved that the corporation shall open and maintain an
Account with Banco De Oro (BDO) Ayala Triangle 1 Branch, located at G/F Tower 1, Ayala
 Triangle, Ayala Avenue, Makati City.”

“RESOLVED FURTHER, that any one of the following signatories whose specimen
appears below is authorized to execute and deliver any and all documents, to transact and to
sign for and in behalf of the said corporation the pertinent papers in relation to the Account, to
wit:
Name Position Signature
Pedro A. Santos President Pedro A. Santos
Maria B. Cabrera Treasurer MB. Cabrera
Asuncion D. De Castro Chief Accounting Officer Asuncion D. De Castro”

3. The foregoing resolution has not been revoked, amended or in any manner modified and
accordingly, the same is now in full force and in effect, until a written notice to the contrary has
been issued by the corporation.

4. I am executing this Certificate for whatever legitimate purpose it may serve.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 28 th day of February, 2020 at
Makati City.

(Sgd.) JUAN C. DELA CRUZ

Corporate Secretary
ATTESTED:

(Sgd.) PEDRO A. SANTOS

President

Subscribed and sworn to before me this 28 th day of February, 2020 at Makati City, affiant exhibiting to
me his Driver’s License issued on September 30, 2019 at Pasay City.

Doc. No. ____;

Page No. ____;
Book No. ____;
Series of ______.
IV. BOARD RESOLUTION APPROVING
DECLARATION OF DIVIDENDS

A. Legal basis
Republic Act No. 11232
Sec. 42. 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, 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 stockholders until
their unpaid subscription is fully paid: Provided, further, That no stock
dividend shall be issued without the approval of stockholders
representing at least two-thirds (2/3) of the outstanding capital stock at
a regular or special meeting duly called for the purpose.
Stock corporations are prohibited from retaining surplus profits in
excess of one hundred percent (100%) of their paid-in capital stock,
except: (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.

SEC. 61. Consideration for Stocks. – Stocks shall not be issued for a
consideration less than the par or issued price thereof. Consideration
for the issuance of stock may be:
xxx
(e) Amounts transferred from unrestricted retained earnings to stated
capital;
xxx
Sec. 179. Powers, functions, and jurisdiction of the Commission. – The
Commission shall have the power and authority to:
a) Exercise supervision and jurisdiction over all corporations and
persons acting on their behalf, except as otherwise provided
under this Code;
b) Pursuant to Presidential Decree 902-A, retain jurisdiction over
pending cases involving intracorporate disputes submitted for
final resolution. The Commission shall retain jurisdiction over
pending suspension of payment/rehabilitation cases filed as of
30 June 2000 until finally disposed.
c) Impose sanctions for the violation of this Code, its implementing
rules, and orders of the Commission;
d) Promote corporate governance and the protection of minority
investors, through, among others, the issuance of rules and
regulations consistent with international best practices;
e) Issue opinions to clarify the application of laws, rules, and
regulations;
f) Issue cease and desist orders ex parte to prevent imminent fraud
or injury to the public;
g) Hold corporations in direct and indirect contempt;
h) Issue subpoena duces tecum and summon witnesses to appear
in proceedings before the Commission;
i) In appropriate cases, order the examination, search and seizure
of documents, papers, files and records, and books of accounts
of any entity or person under investigation as may be necessary
for the proper disposition of the cases, subject to the provisions
of existing laws;
j) Suspend or revoke the certificate of incorporation after proper
notice and hearing;
k) Dissolve or impose sanctions on corporations, upon final court
order, for committing, aiding in the commission of, or in any
manner furthering securities violations, smuggling, tax evasion,
money laundering, graft and corrupt practices, or other fraudulent
or illegal acts;
l) Issue writs of execution and attachment to enforce payment of
fees, administrative fines, and other dues collectible under this
Code;
m) Prescribe the number of independent directors and the minimum
criteria in determining the independence of a director;
n) Impose or recommend new modes by which a stockholder,
member, director, or trustee may attend meetings or cast their
votes, as technology may allow, taking into account the
company’s scale, number of shareholders or members, structure,
 and other factors consistent with the basic right of corporate
suffrage;
o) Formulate and enforce standards, guidelines, policies, rules, and
regulations to carry out the provisions of this Code; and
p) Exercise such other powers provided by law or those, which may
be necessary or incidental to carrying out, the powers expressly
granted to the Commission.
In imposing penalties and additional monitoring and supervision
requirements, the Commission shall take into consideration the size,
nature of the business, and capacity of the corporation. No court below
the Court of Appeals shall have jurisdiction to issue a restraining order,
preliminary injunction, or preliminary mandatory injunction in any case,
dispute, or controversy that directly or indirectly interferes with the
exercise of the powers, duties and responsibilities of the Commission
that falls exclusively within its jurisdiction.

SEC Memo Circular no. 11, series of 2008- RE: Guidelines on the
Determination of Retained Earnings Available for Dividend Declaration

SEC Resolution no. 450, series of 2005- TO: All Corporate

Secretaries

The concept of dividends

The term “dividend” as applied to corporate stock may be defined as that portion of the
profits and surplus funds of a corporation that has been actually set apart by the board
of directors for distribution among the stockholders in proportion to their respective
shareholdings, and thus from being the corporation’s property becomes that of the
stockholders.
Dividends therefore are the returns to the stockholder’s investment in the corporation,
and the right thereto arises from stock ownership.

Shareholder’s rights to dividends

All persons who own shares of stock at the time dividends are declared have the right to
receive dividends in proportion to the amount of their shareholdings. The right to share
in the dividend applies regardless of the time when the shareholder acquired the
shares, without regard to the time during which the dividend is earned. In other words, it
is the stockholder of the record who receives the dividend. And the declaration of
dividends creates a det against the corporation in favor of each stockholder to the
amount due him.
Moreover, all shareholders of the same class are entitled to participate in dividends on a
pro-rated basis, i.e., in proportion to their shareholdings. Even delinquent shareholders
have right to dividend, as no stockholder may be excluded from participation, but said
right is subject to what the law provides as earlier mentioned.
The shareholders’ right to dividends notwithstanding, there must be a declaration of
dividends by the Board before the surplus of profits become dividends; otherwise the
profits remain part of corporate assets.

Board’s discretion to declare dividends

As a general rule, the declaration of dividends rests on the Board’s discretion, and if so
declared, its amount rests on the directors’ discretion and decision. Thus, the mere fact
that a corporation has funds from which dividends could legally be paid, even if the
funds were huge, does not oblige its directors to declare dividends.
Corporations are prohibited by the Code, however, from retaining surplus profits in
excess of one hundred percent (100%) of their paid-in capital stock, thus implying an
obligation for the distribution of their profits to the stockholders in the form of dividends.
The distribution of stock dividends, however, requires the prior approval of stockholders
representing no less than two-thirds (2/3) of the outstanding capital stock at a regular or
special meeting duly called for the purpose.
If there are stockholders with delinquent stocks or shares, cash dividends due them
shall first be applied to the unpaid balance of their subscription (including costs and
expenses) and the remainder, if any, will be given to said stockholders. On the other
hand, if stock dividends are issued, said dividends will be withheld until the delinquent
stockholder’s unpaid subscription is fully paid.
The fact that a corporation earns profit in a particular year will not justify payment of
dividends if capital impairment or deficit from losses incurred in the previous years
exists. Dividends may be paid, however, from surplus accumulated out of profits of
previous years, even though there is no actual profit for the year in which dividends are
declared and paid.

Forms of dividends
Dividends may be distributed in the forms of cash, stock, and property.
In cash dividend, the stockholders will receive cash from the corporation in accordance
with the board resolution declaring cash dividends.
 Requirements for Cash Dividend Declaration:
1. Certification under oath by the Corporate Secretary on the board of
directors resolution declaring cash dividends
2. Audited financial statements as of the last fiscal year stamped
received by BIR and SEC;
3. Interim unaudited financial statements certified by the Finance Officer
(if the basis of determining the sufficiency of retained earnings is other
than end of fiscal year)
4. Reconciliation of retained earnings available for dividend declaration
in accordance with SEC Memorandum Circular No. 11, series of 2008
5. Notarized Secretary's Certificate of the Board resolution as of the
reversal of appropriated retained to unappropriated retained earnings,
6. Secretary's Certificate on no pending case of intra-corporate dispute
7. Compliance Monitoring Division (CMD) Clearance and/or clearance
from other Department of the Commission or other government
agencies.

Stock dividends are shares of stock, the consideration for which is the amount of
unrestricted retained earnings converted into equity in the corporation books.
In stock dividend, the stockholder will receive the shares of stock of such corporation
declaring the dividends. In effect, the stockholder will own more shares after the stock
dividend declaration in the Philippines but its percentage of ownership or equity in such
corporation may not increase. Source of stock dividend could be unissued shares of
stock of the corporation requiring an application for exemptions from the Securities
Regulation Code or from the increase of capitalization in the Philippines requiring as
SEC approval on the increase of authorized capital stock.

Requirements for Stock Dividend Declaration:

1. Certification under oath by the Corporate Secretary on the
declaration of stock dividends by majority of the directors and the
stockholders representing 2/3 of the outstanding capital stock
2. Audited financial statements as of the last fiscal year stamped
received by BIR and SEC
3.Interim Audited Financial Statements certified under oath by the
Finance Officer (if the basis of determining the sufficiency of retained
earnings is other than end of fiscal year)
4. List of stockholders with their respective subscribed capital stock as
of the date meeting approving the declaration of stock dividend together
with the allocation of stock dividend certified under oath by the
Corporate Secretary
5. Analysis of capital structure certified under oath by the Treasurer

Requirements for Stock Dividend Declaration on Unissued

Authorized Capital Stock
1. Certification under oath by the Corporate Secretary on the
declaration of stock dividends by majority of the directors and the
stockholders representing 2/3 of the outstanding capital stock
2. Audited financial statements as of the last fiscal year stamped
received by BIR and SEC
3. Interim Audited Financial Statements certified under oath by the
Finance Officer (if the basis of determining the sufficiency of retained
earnings is other than end of fiscal year)
4. List of stockholders with their respective subscribed capital stock as
of the date meeting approving the declaration of stock dividend together
with the allocation of stock dividend certified under oath by the
Corporate Secretary
5. Analysis of capital structure certified under oath by the Treasurer
6. Reconciliation of retained earnings available for dividend declaration
I accordance with SEC Memorandum Circular No. 11 series of 2008
7. Notarized Secretary's Certificate of the Board Resolution as to the
reversal of appropriated retained earnings to unappropriated retained
earnings, if applicable
8. Secretary's Certificate on no pending case of intra-corporate dispute
9. Notarized Secretary’s Certificate certifying that on the basis of the
computation of the Finance Officer, the allocation of stock dividend as
indicated in the list of stockholders of record (item 4) is in proportion to
the shareholdings of stockholders as of date of declaration/record date
and the treatment of resulting fractional shares (if any), are true and
correct
10. Compliance Monitoring Division (CMD) Clearance and/or clearance
from other Department of the Commission or other government
agencies
Under property dividend, the stockholder will receive assets of the corporation, other
than cash.

Requirements for Property Dividend Declaration:

1. Certification under oath by the Corporate Secretary on the board of
directors resolution declaring the property dividend
2. Audited financial statements as of the last fiscal year received by BIR
and SEC
3. List of stockholders with their respective subscribed capital stock as
of the date meeting approving the declaration of property dividend
together with the allocation of stock dividend certified under oath by the
Corporate Secretary
4. Detailed schedule of the property account appearing in the audited
financial statements
5. Certification by the President that the property(ies) for dividend
declaration is/are no longer needed in the operation of the company
6. Reconciliation of retained earnings available for dividend declaration
7. Notarized Secretary's Certificate on no pending case involving intra-
corporate dispute
8. Compliance Monitoring Division (CMD) Clearance and/or clearance
from other Department of the Commission*

Among the three forms, it is only the declaration of stock dividends that requires
approval of stockholders.

*Liquidating dividend is distributed during the dissolution and liquidation

of a domestic corporation in the Philippines. This would mean a final
distribution of the stockholder’s share in the assets of the corporation
after paying corporate creditors with preference over stockholders.
Amount received in excess of its capital considered is considered its
final share in the earnings of the corporation. A separate SEC
application and approval is required.

Requisites for the exercise of power to declare dividends

 a. Voting requirement

1. Stock dividends- The declaration thereof must be approved by a:

i) Majority vote of the directors present provided there is a quorum (not
the majority of the total number of directors in the articles of
incorporation), and
ii) Two-thirds (2/3) of the outstanding capital stock entitled to vote in a
meeting called for the purpose.

2. Cash dividends- The declaration thereof requires only the majority vote of
the directors present provided there is a quorum.

b. Source of dividends

1. Surplus profits
Dividends are generally declared out of the surplus profits or retained
earnings.

2. Paid-in surplus (paid in capital in excess of par value).

However, paid-in surplus may be declared only as stock dividends but not
cash dividends, per SEC ruling.

Note: If the shares do not have par value, the entire consideration thereof
shall be treated as capital and no part thereof shall be available for
distribution ans dividends.

When dividends need not be declared

There are three instances, however, when a corporation may retain surplus profits
beyond one hundred percent (100%) of their paid-in capital stock, and these are:
1. Justified by corporate expansion projects or programs approved by the Board;
2. When the corporation is prohibited under a load agreement with a financial
institution or creditor from declaring dividends without its consent and such
consent has not yet been secured; and
3. When it is clearly shown that such retention is necessary under special
circumstances such as the need for a special reserve for probable contingencies.

What is a Board Resolution?

A Board Resolution, or Corporate Resolution, is a way of documenting a decision made
by a Corporation's Board of Directors or Shareholders on behalf of the Corporation.

When are Board Resolutions required?

Board Resolutions can cover a wide variety of actions. Commonly, they are written
when a new member of board is voted in, but they can also be created when the
company wants to hire employees, sell shares of the corporation, purchase an existing
patent, among other big decisions. They serve as important compliance documents as
well as giving your company a concrete record of the choices your directors or
shareholders have made.

Where are Board Resolutions filed?

Generally, Corporate Resolutions do not need to be submitted to a government agency,
oversight body, or anything of the sort. They should be kept with your books so you can
furnish them if, for example, an important shareholder wants to know what actions the
board took on his or her behalf.

General Contents of a Board Resolution Approving Declaration of Dividends

1. Company Header/ Letterhead

2. Board Resolution number and Series number

3. Form a title of the resolution that speaks to the issue that you want to document.
4. Whereas clause/s which provides the basic facts and reasons for the resolution

5. Resolved clause/s which are the conclusions

6. Names and signatures of the Board of Directors; and attestation of the Corporate
Secretary
Ex.
Sample Form: Board Resolution

BOARD RESOLUTION NO. ________

Series of _______

WHEREAS,________________________________________________., a corporation duly

established under the laws of the Philippines with principal office address at
_____________________________________________________________________________________

WHEREAS, in the meeting of ________________________ held at __________________ it was

agreed and unanimously approved by the Board of Directors
to______________________________________________________________________________________
_________________________________________________________________

WHEREAS, the Board further agreed that authority is granted to

____________________________________ to _____________________________________, to
________________________________, and to ____________________________________

NOW THEREFORE, in view of the foregoing, the following resolutions were passed and
unanimously approved by all the Directors present:

RESOLVED, that ______________________________________________________________

RESOLVED FURTHER that __________________________________________________

RESOLVED FINALLY that _______________________________________________________

_____________________ _____________________
(Name) (Name)
Director Director

_____________________ _____________________
(Name) (Name)
Director Director

Attested by:

(Name)
Corporate Secretary
Sample of Board Resolutions of FERN Realty Corporation Declaration of Cash
and Stock Dividends

BOARD RESOLUTION NO. 110741

SERIES of 2014

WHEREAS, the Board of Directors of FERN Realty Corporation (the “Corporation”)

authorize and approve the declaration of cash dividend of 10% per share to all stockholders
on record as of 25 July 2014, payable on 04 August 2014. The total cash dividend amounts
to P17,792,000.00;

WHEREAS, the Board of Directors of the Corporation authorize the Corporation to close
its books from 26 July to 03 August 2014, both dates inclusive, for purposes of the above
cash dividend declaration.

NOW THEREFORE, in view of the foregoing, the following resolutions were passed and
unanimously approved by all the Directors present:
RESOLVED, That the Board of Directors of FERN Realty Corporation (the
“Corporation”) authorize and approve, as it is hereby authorized and approved, the
declaration of cash dividend of 10% per share to all stockholders on record as of 25 July
2014, payable on 04 August 2014. The total cash dividend amounts to P17,792,000.00.

RESOLVED, FURTHER, That the Board of Directors of the Corporation authorize, as it

hereby authorizes, the Corporation to close its books from 26 July to 03 August 2014, both
dates inclusive, for purposes of the above cash dividend declaration.

_____________________________
DR. MANUELA LUZVIMINDA ARAULLO MR. CARLO DALISAY
Director Director
 _____________________ _____________________________
MR. CARDO AQUINO MS. ENCARNACION IGNACIO-
Director SY
Director

Attested by:

ANGELINA P. JOSE
Corporate Secretary

BOARD RESOLUTION NO. 110742

SERIES of 2014

WHEREAS, FERN Realty Corporation (the “Corporation”) currently has an authorized

capital stock of Two Hundred Million (P200,000,000.00) Pesos, divided into 200,000
shares with a par value of P1,000.00 per share, almost all of which are fully paid, issued
and outstanding;

WHEREAS, the Corporation has earned surplus and it is desirable that such surplus be
retained by the Corporation as working capital in connection with the expansion of its
primary business and, to that end, it is the intention of the Corporation to increase its
authorized capital stock from P200,000,000.00 to P500,000,000.00 and to declare a 50%
stock dividend of 88,960 shares with a total par value of P88,960,000.00 out of such
increase;

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the

Corporation authorize, as it hereby authorizes, the Corporation to increase its authorized
capital stock from P200,000,000.00, divided into 200,000 shares with a par value of
P1,000.00 per share, to P500,000,000.00, divided into 500,000 shares with a par value of
P1,000.00 per share;
RESOLVED, FURTHER, that the Board of Directors of the Corporation authorize,
empower, and direct, as it hereby authorizes, empowers, and directs, the Directors and proper
officers of the Corporation to transfer out of the surplus of the Corporation to the capital
account thereof the sum of P88,960,000.00, thereby increasing the subscribed and capital
account of the Corporation and to declare a 50% stock dividend of P88,960,000.00 or
88,960 shares and to distribute such stock dividend among the stockholders as of record
date to be fixed by order of the Securities and Exchange Commission, in proportion to their
respective shareholdings, such dividend to be issued as soon as thereafter as the necessary
government permit or authorization shall have been issued;

RESOLVED, FURTHERMORE, That all fractional shares resulting from said stock
dividend shall be paid in cash by the Corporation at par value.

RESOLVED, FURTHERMORE, that to reflect the increase in the authorized capital

stock of the Corporation, the Board of Directors of the Corporation authorize, as it hereby
authorizes, the amendment of Article Seventh of the Amended Articles of Incorporation of
the Corporation to read as follows:

SEVENTH: That the capital stock of the Corporation is Five Hundred Million
Pesos (P500,000,000.00), Philippine Currency, divided into Five Hundred
Thousand (500,000) shares at the par value of One Thousand Pesos
(P1,000.00) per share.

RESOLVED, FURTHERMORE, that Board of Directors of the Corporation authorize,

empower, and direct, as it hereby authorizes, empowers, and directs, the Directors and proper
officers of the Corporation to do any and all things necessary to effect the foregoing
resolutions.

RESOLVED, FINALLY, that the Board of Directors of the Corporation authorize, as it

hereby authorizes, that the foregoing resolutions be submitted for the consideration and
approval of the stockholders of the Corporation at the Annual Stockholders’ Meeting
scheduled to be held on August 12, 2014.

_____________________________
DR. MANUELA LUZVIMINDA ARAULLO MR. CARLO DALISAY
Director Director

_____________________ _____________________________
MR. CARDO AQUINO MS. ENCARNACION IGNACIO-
Director SY
Director

Attested by:
 ANGELINA P. JOSE
Corporate Secretary

Sample of Board Resolution of Jolliville Holdings Corporation Declaration of

Property Dividends

BOARD RESOLUTION NO. 2019-067-111

WHEREAS, the Board in its special meeting held today, 04 January 2019, approved to
increase the rate of the property dividends of JOH from 65.85% to 66.03% with a total
amount from One Hundred Eighty Five Million Three Hundred Sixty Seven Thousand
Seven Hundred Fifty Pesos (Php 185,367,750.00) to One Hundred Eighty Five Million
Eight Hundred Sixty Two Thousand Seven Hundred Fifty Pesos (Php 185,862,750.00)
comprising of shares of Philippine Hydro Electric Ventures, Inc. (“Phil. Hydro”) from 76,
005,000 to 76,500,000 shares carried at Php 1.00 per share and 42,225,000 shares of Tubig
Pilipinas Corp. (“Tubig Pilipinas” carried at Php 2.59 per share. Carrying values are
computed based on interim financial statements of both subsidiaries as of 30 September
2018. Entitled shareholder will receive 27 shares of Phil Hydro and 15 shares of Tubig
Pilipinas for every 100 shares of JOH;

WHEREAS, Fractional shares shall be converted into cash and be released to the
shareholders at the same time as the property dividend.

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the

Corporation authorize, as it hereby authorizes, approve to increase the rate of the property
dividends of JOH from 65.85% to 66.03% with a total amount from One Hundred Eighty
Five Million Three Hundred Sixty Seven Thousand Seven Hundred Fifty Pesos (Php
185,367,750.00) to One Hundred Eighty Five Million Eight Hundred Sixty Two Thousand
Seven Hundred Fifty Pesos (Php 185,862,750.00) comprising of shares of Philippine
Hydro Electric Ventures, Inc. (“Phil. Hydro”) from 76, 005,000 to 76,500,000 shares
carried at Php 1.00 per share and 42,225,000 shares of Tubig Pilipinas Corp. (“Tubig
Pilipinas” carried at Php 2.59 per share. Carrying values are computed based on interim
financial statements of both subsidiaries as of 30 September 2018. Entitled shareholder will
receive 27 shares of Phil Hydro and 15 shares of Tubig Pilipinas for every 100 shares of
JOH;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the
Corporation authorize, as it hereby authorizes, Fractional shares be converted into cash and
be released to the shareholders at the same time as the property dividend.

_____________________________
MS. NATALIA L. SINAG- LAWIN MS. ALBA R. BITUIN-SINAG
Director Director

_____________________ _____________________________
MS. SABELA RAMIL MS. JULIA MEDINA
Director Director

Attested by:

FAMOUS OBEROGO
Corporate Secretary