Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
First Regular Sessi

HOUSE BILL NO.

Introduced by Honorable Damian Gaviola Mercado

EXPLANATORY NOTE

We all know that in an ordinary investor’s view, a publicly listed company’s price
per share could become attractive given the right price-to-earnings ratio in accordance
with commonly available information. A fact that could lead someone to invest in a
particular shares of stock of a listed company.

However, with the present practice of publicly listed corporations of holding on
their net earings under the guise of business expansion, minority shareholders which
mostly consists of unsuspecting investors are often left to the disadvantage against
majority stockholders whose management actions often serve their own interests like
keeping the corporate earnings among their favored banks, overpricing expansion cost to
enrich their favored contractors and other undesirable practices. Under this condition, the
rights of minority stockholders to eam their fair share (as expected based on the price-to-
earnings ratio) of the corporation’s income are grossly being neglected.

To protect the rights of the minority shareholders against the above-cited
wrongdoings, a measure to compel the management of publicly listed corporations to
declare fifty percent (50%) of the corporation’s annual net earnings, as cash dividend is
needed. Under this set-up, the said corporations could still hold on up to fifty percent
(50%) of their yearly net income for legitimate expansion and other business plans while
handing to the stockholders the earnings due them.

In view of the foregoing, passage of this bill is hereby being earnestly sought.

IAN GAVIOLA MERCADO


Republic of the Pt
House OF REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
First Regular Session

House BILLNo._1749

Introduced by Honorable Damian Gaviola Mercado

AN ACT
MANDATING PUBLICLY LISTED CORPORATIONS TO SET ASIDE 50% OF
THEIR ANNUAL NET INCOME AS CASH DIVIDEND

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Definition of Terms. For purposes of implementing this
act, the following terms shall be interpreted as follows:

a.) Corporation- a juridical entity created under Philippine laws duly
registered with the Securities and Exchange Commission and listed
at the Philippine Stock Exchange.

b.) Income- duly audited corporate net income as reflected in the
books of the corporation and reported to the Securities and
Exchange Commission in compliance of regulations thereat or the
net income that may have been discovered by a post audit of the
books as a result of an inquiry or an investigation.

SECTION 2. Dividend. The Board of Directors shall declare the
award of cash dividends to all stockholders of a corporation of not less than
fifty percent (50%) of the annual corporate net income within 30 days from
the time the corporation have ascertain the amount of their yearly net income
from the immediately preceding calendar year.


a.) The management of the corporation shall see to it that the audited
financial statement that reflects the income or loss of the corporation shall be
completed not later than ninety (90) days from the end of the immediately
preceding calendar year.

b.) Should the corporation be newly listed, the income that should be
due for award as cash dividend shall include the corporate income for the
whole year of its listing regardless of the date of its listing at the stock
exchange.

¢.) The management of the corporation shall pay to the stockholders
the cash dividend due within thirty (30) days from the declaration of the
Board of Directors of the amount and record date of the payout.

SECTION 3. Penal Clause. Failure of the Board of Directors or any
officer of the corporation to comply or have caused non-compliance with
any of the provisions of this law shall be meted an imprisonment of not less
than six (6) months and one (1) day and not more than two (2) years.