This article explains, end-to-end, how Philippine corporations may declare stock dividends and issue the corresponding stock certificates (or book-entry credits), including approvals, filing/fees, timing, documentation, taxes, treatment of special share classes, and practical checklists. It’s general information, not legal advice.

1) Legal foundation (high level)

Revised Corporation Code of the Philippines (RCC, R.A. 11232).
- Dividends may be declared only out of unrestricted retained earnings and upon the Board’s approval.
- Stock dividends additionally require stockholders’ approval representing at least two-thirds (2/3) of outstanding capital stock at a meeting called for that purpose.
- Shares may be certificated or uncertificated; corporations may adopt scripless/book-entry issuances, subject to their articles/bylaws and applicable regulations.
- Certificates for shares (when used) must be issued only for fully paid shares, signed by authorized officers, and recorded in the Stock and Transfer Book (STB).
Securities rules (public/listed companies).
- Listed issuers must follow SEC and PSE corporate action disclosure/timetable rules (board and shareholder approvals, record date, ex-date mechanics, PDTC clearing, etc.).
Tax statutes (NIRC).
- Documentary Stamp Tax (DST) is due on original issues of shares, which includes stock dividends.
- Proper withholding/reporting rules apply to any cash-in-lieu paid for fractional interests or special cases.

2) Substantive conditions to declare stock dividends

Unrestricted retained earnings (URE).
- There must be positive URE after accounting for any legal/contractual restrictions (e.g., loan covenants, statutory reserves, treasury share cost, appraisal right set-asides).
Board action.
- A Board resolution declaring stock dividends, stating the rate (e.g., 10%), record date (or delegation to set it), and confirming the source (URE) and compliance with law and bylaws.
Stockholder approval (2/3).
- Separate resolution of the stockholders holding at least two-thirds of outstanding capital stock approving the issuance of stock dividends.
- If the corporation lacks enough authorized but unissued shares, an increase in authorized capital stock (ACS) must also be approved (Board + 2/3 stockholders), then filed and approved by the SEC before shares can be issued as stock dividends.
Solvency/capital maintenance.
- The declaration must not impair stated capital or render the corporation insolvent.
Eligibility of recipients.
- As of the record date, holders of outstanding shares are entitled to the stock dividend pro rata.
- Treasury shares do not receive dividends.
- Delinquent subscriptions: dividends due on such shares are typically applied to unpaid subscriptions; issuance of additional shares as dividends generally waits until the status is cured.

3) Mechanics when no increase in ACS is needed

If the corporation has sufficient authorized but unissued shares:

Corporate actions
- Board resolution declaring stock dividends and setting (or authorizing officers to set) record date and payment date.
- Stockholder resolution (2/3) approving stock dividends.
Documentation package (internal)
- Certified Board and stockholder resolutions.
- Secretary’s Certificate attesting to quorum/approvals and record date.
- Computation of URE before/after, dividend rate, and number of shares to be issued per class.
- Updated cap table and draft STB entries.
Issuance
- On/after the payment date, issue certificates (or book-entry credits) to record-date holders pro rata.
- Certificates must indicate: shareholder’s name, certificate no., class/series, number of shares, fully-paid status, distinctive share numbers, and be signed by the authorized officers per the bylaws (commonly the President and Corporate Secretary).
- STB: post the issuance (date, certificate no., from/to, shares, remarks “Stock dividend – [rate]”).
- For uncertificated shares (bylaws or board-approved), issue written confirmations and perform book-entry posting through the registrar/transfer agent.
Taxes/fees
- DST on original issue of the stock dividend shares (computed on par value or as applicable to no-par). Pay and file within statutory timelines.
Post-action
- Update the General Information Sheet (GIS) and cap table.
- Maintain the Certificate Book and STB in good order for SEC inspection.

4) Mechanics when an increase in ACS is required

If authorized but unissued shares are insufficient to cover the stock dividend:

Two-step approvals
- Step 1: Board and 2/3 stockholders approve the increase in ACS and the stock dividend plan.
- Step 2: SEC filing for the ACS increase (amendment to Articles), including:
  - Amended Articles showing new ACS and share structure;
  - Board/stockholder resolutions;
  - Treasurer’s Affidavit on subscriptions and payments (if any);
  - Schedules of resulting ownership;
  - Payment of SEC filing fees and related charges.
After SEC approval
- Implement the stock dividend issuance (certificates or book-entry), post DST, update STB, and circulate confirmations.
For listed issuers
- Comply with PSE notice periods for record date, ex-date computation, PDTC arrangements, and public disclosures.

5) Share certificate (or book-entry) issuance specifics

Fully-paid requirement. Certificates are issued only for shares fully paid; where the law permits issuance to reflect partial payments, the amount unpaid must be stated on the face (practice: avoid for dividend shares—these are issued fully paid via capitalization of URE).
Signatories & seal. Follow the bylaws on who signs certificates (often President + Corporate Secretary). A corporate seal is used if the bylaws require it.
Numbering & control. Use pre-numbered certificates; log stubs and issuances; cancel and attach any surrendered certificates where exchanges are necessary.
Uncertificated shares. If adopted, provide transaction advice to each holder; keep a Register of Uncertificated Shares with unique control numbers equivalent to certificate control.
Lost/damaged certificates. Replace upon affidavit of loss, publication/bond if required by bylaws, and board/secretary approval; annotate the STB entry.

6) Financial accounting entries (illustrative)

On declaration (if immediately issuable):
- Dr Retained Earnings
- Cr Share Capital (par or stated value)
- Cr Additional Paid-in Capital (if any, for excess over par).
If the ACS increase is pending, some entities record a memorandum until issuance is authorized.

7) Treatment by share class and special cases

Preferred shares. Check the Articles for dividend preferences, participation, cumulative features, and convertibility. Stock dividend participation depends on each class’s rights; common practice is to declare per class or specify the participating classes in the resolutions.
No-par value shares. Record and DST are based on stated value or consideration rules; ensure Articles/bylaws allow no-par issuance and that stated capital is maintained.
Fractional shares. If the stock dividend rate creates fractions, corporations may:
- issue scrip/rights evidencing fractional interests (often non-voting);
- aggregate and sell fractional interests and distribute cash in lieu; or
- round per a board-approved rounding policy disclosed to shareholders.
Treasury shares. Not entitled to dividends. Consider re-issuance before record date if the intent is to expand entitlement.
Delinquent/partly-paid subscriptions. Cash dividends are applied to unpaid balances; issuance of stock dividends typically waits until the subscription is regularized, unless the bylaws set a different but compliant treatment.
Restrictions/covenants. Loan or investment agreements may restrict dividends. Obtain consents/waivers where applicable and disclose in resolutions.

8) Public (listed) company timetable (quick map)

Board approval of stock dividend and record date (or delegation).
Immediate disclosure to the PSE/SEC.
Stockholders’ approval (2/3).
If needed, SEC approval of ACS increase.
PSE ex-date auto-calculated from record date (observe lead times).
Payment/allotment date: PDTC credit for scripless shares; registrar/transfer agent issues confirmations.
DST filing; update outstanding shares and free float disclosures.

9) Taxes and fees (overview)

Documentary Stamp Tax (DST) on original issue (including stock dividends), generally computed per statutory rate applied to par/stated value (or rules for no-par).
Income tax: proportionate stock dividends are generally not subject to income tax upon receipt; tax consequences may arise on subsequent sale or redemption, or if a corporate action alters proportionate interests in certain ways.
Local fees: notarization, registry, and incidental fees for filings/affidavits.
SEC filing fees if an ACS increase is involved.

Practical tip: Coordinate early among Finance, Tax, Corporate Secretary, and Transfer Agent to align DST computation, filing dates, and supporting schedules.

10) Required records and corporate books

Stock and Transfer Book (STB): primary ledger for issuances/transfers; keep up to date and ready for SEC inspection.
Certificate Book: stubs, cancellations, and control log.
Minutes Book: board and stockholders’ minutes, attendance, quorum, vote tallies.
Register of Uncertificated Shares (if applicable).
Cap table and beneficial ownership records (for public interest entities and listed issuers).

11) Model resolutions (condensed language)

Board Resolution (excerpt):

Declares a [X%] stock dividend out of unrestricted retained earnings as of [cut-off date];
Sets record date [____] and payment date [____] (or authorizes officers to fix dates and perform filings);
Recommends stockholder approval of the issuance of stock dividends;
Confirms compliance with the RCC, Articles, and bylaws;
Authorizes officers to file DST, update the STB, and issue certificates/book-entries; and, if needed, to process the increase in ACS with the SEC.

Stockholders’ Resolution (excerpt):

Approves the issuance of stock dividends at [X%];
(If needed) Approves the increase in ACS to [amount] and the corresponding amendment to the Articles;
Authorizes officers to complete regulatory filings and issuances.

12) Compliance checklists

A. Substantive pre-checks

Positive URE after restrictions/reserves
No solvency/covenant breach
Sufficient authorized but unissued shares (or prepare ACS increase)
Finalized rate, class participation, handling of fractions

B. Approvals and filings

Board resolution
Stockholders (2/3) approval for stock dividends
SEC approval for ACS increase (if applicable)
PSE/SEC disclosures (listed)
DST computation and filing

C. Issuance & recording

Fix record/payment dates
Prepare certificates/confirmations and STB postings
Deliver notices/advices to shareholders
Update GIS, cap table, registrar records

13) Common pitfalls & how to avoid them

Declaring beyond URE. Tie declarations to audited or management accounts with CFO certification.
Forgetting stockholder approval. Remember: stock dividends require 2/3.
Issuing before SEC approval of ACS increase. Wait for the SEC Certificate of Filing of Amended Articles.
DST slippage. Coordinate timelines so DST is filed and paid promptly.
Fractional chaos. Adopt a clear rounding or cash-in-lieu policy in the board resolution and shareholder materials.
STB gaps. Keep contemporaneous entries; reconcile certificate numbers and book-entry controls.
Preferred share terms. Read the Articles/Terms Sheet; not all classes participate equally.

14) Quick Q&A

Do we need physical certificates? Not if the corporation has adopted uncertificated issuance (common for listed firms through PDTC). Private corporations may also go scripless if allowed by their governance documents and law.
Can we declare stock dividends if we have losses this year? Yes if you still have unrestricted retained earnings from prior periods sufficient to cover the issuance.
Are treasury shares entitled? No.
Can we choose only some holders to receive stock dividends? No—must be pro rata to holders of the participating class as of record date.

Bottom line

To validly issue stock certificates (or book-entry credits) for stock dividends in the Philippines, ensure: (1) URE exists, (2) the Board declares and 2/3 stockholders approve, (3) authorized shares are sufficient (or SEC-approved ACS increase is obtained first), (4) DST and disclosures are handled, and (5) proper issuance and STB recording are completed—clean, compliant, and audit-ready.