Cash dividends, as soon as they are declared, can be paid on the payment date set by the Board of Directors. The payment date can be set on any date.

For stock dividends, provided that there is sufficient unissued shares in the authorized capital stock of the corporation, the issue date may be set by the Board of Directors, and ratified by the stockholders representing 2/3 of the corporation's authorized capital stock. If the unissued shares are not sufficient to accommodate the stock dividend, an increase in the authorized capital stock is required. An application for increase in authorized capital will need to be filed with the SEC. It usually takes around 4 weeks from the filing of complete requirements with the SEC before such approval is issued. The issue t date (of the shares) may be set on any date, but if said date occurs before the approval of the SEC of the stock dividends, the stock dividends will only be issued upon such approval of the SEC.

For property dividends, the payment date may be set by the Board of Directors. However, SEC approval must be obtained for the SEC to confirm the valuation of the property declared as property dividends. It usually takes around 4 weeks from the filing of complete requirements with the SEC before such approval is issued.

Yes, there are timing restrictions on paying dividends.

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 stockholder until his unpaid subscription is fully paid. Further, stock corporations are prohibited from retaining surplus profits in excess of one hundred (100%) percent of their paid-in capital stock, except: (1) when justified by definite corporate expansion projects or programs approved by the board of directors; or (2) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; or (3) 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.

As a general rule, the accounts required to support payment of a dividend would be the audited financial statements for the preceding calendar or fiscal year. However, dividends may be declared on the basis of interim accounts or interim unaudited financial statements. In the latter case, SEC approval of the declaration of dividends must be obtained.

Yes, there are restrictions on the amount of dividends that can be paid. Under the Revised Corporation Code, the Board of Directors may declare dividends out of unrestricted retained earnings of the corporation.

"Unrestricted retained earnings" is defined under current SEC regulations as "the amount of accumulated profits and gains realized out of the normal and continuous operations of the corporation after deducting therefrom distributions to stockholders and transfers to capital stock or other accounts, and which is: (1) not appropriated by its Board of Directors for corporate expansion projects or programs: (2) not covered by a restriction for dividend declaration under a loan agreement; and (3) not required to be retained under special circumstances obtaining in the corporation such as when there is a need for a special reserve for probable contingencies.

Yes, it is possible to increase reserves.

Retained earnings is specifically defined under SEC regulations as the amount of accumulated profits and gains realized out of the normal and continuous operations of the company after deducting therefrom distributions to stockholders and transfers to capital stock or other accounts.

Retained earnings may be increased when there is an increase in the corporation's profit.

Dividends can only be declared if the corporation has sufficient unrestricted retained earnings. The amount of unrestricted retained earnings is based on the financial statements audited by the corporation's independent auditor. Under current SEC regulations, the audited financial statements must be approved by the Board of Directors.

The following are the corporate approvals required for declaration of dividends:

1. For cash and property dividends, unless the by-laws provide for a higher vote requirement, through a Board resolution authorizing the declaration of dividends approved by a majority of the Board of Directors present and constituting quorum;
2. For stock dividends, unless the by-laws provide for a higher vote requirement, by the affirmative vote of stockholders representing at least 2/3 of the outstanding capital stock of the corporation in a meeting called for the purpose. If the authorized capital stock will be increased, the approval of the SEC of such increase will also be required.

Potentially. Unless the foreign exchange needed to service the remittance of dividends which accrue from a foreign direct investment will be sourced from authorized agent banks ("AABs"), and/or their subsidiary/affiliate foreign exchange corporations, prior registration with the Bangko Sentral ng Pilipinas ("BSP") or the Philippine Central Bank of the foreign direct investment will be required.

If the foreign direct investment was not registered with the BSP, the foreign investor may source foreign exchange from foreign exchange dealers/money changers ("FXDs/MCs") subject to the presentation by the foreign investor (or its authorized representative) of certain supporting documents.

The foreign investor or investee firm may freely repatriate and/or outwardly remit cash in foreign currency (representing dividends/profits), however, if the amount is in excess of USD10,000 or its equivalent, the foreign investor or investee firm must declare the same to the BSP in writing and furnish information on the source and purpose of the transport of such currency or monetary instrument. The foreign investor or investee firm may also directly wire the foreign currency-denominated funds to the offshore account of the foreign investor since wiring of funds to an offshore account through a foreign currency deposit unit ("FCDU") account may be freely done without need of securing BSP approval or registration.

Yes.

Yes, there are no restrictions from a corporate law perspective on borrowing cash to settle a dividend.

However, there must be sufficient unrestricted retained earnings to cover the payment of dividends. Thin capitalization may be considered in an audit by the Philippine Bureau of Internal Revenue ("BIR"). While there is no prescribed debt-to-equity ratio, the existence of related party loans which are not arm's length may invite a closer tax audit.

Yes, dividends in kind are possible.

Dividends may be payable in cash, in property, or in stock.

No. Other than those described above, we are not aware of any other issues which may impact the payment of dividends.

No, there are no restrictions from a corporate law perspective on lending funds intra-group but cross-border.