An act providing for the revised corporation code of the philippines

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
. 

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SEC. 43. Power to Enter into Management Contract. – No corporation shall conclude a 
management contract with another corporation unless such contract is approved by the board of 
directors and by stockholders owning at least the majority of the outstanding capital stock, or by 
at least a majority of the members in the case of a nonstock corporation, of both the managing and 
the managed corporation, at a meeting duly called for the purpose: Provided, That (a) where a 
stockholder or stockholders representing the same interest of both the managing and the managed 
corporations own or control more than one-third (1/3) of the total outstanding capital stock entitled 
to vote of the managing corporation; or (b) where a majority of the members of the board of 
directors of the managing corporation also constitute a majority of the members of the board of 
directors of the managed corporation, then the management contract must be approved by the 
stockholders of the managed corporation owning at least two-thirds (2/3) of the total outstanding 
capital stock entitled to vote, or by at least two-thirds (2/3) of the members in the case of a nonstock 
corporation. 
These shall apply to any contract whereby a corporation undertakes to manage or operate all 
or substantially all of the business of another corporation, whether such contracts are called service 
contracts, operating agreements or otherwise: Provided, however, That such service contracts or 
operating agreements which relate to the exploration, development, exploitation or utilization of 
natural resources may be entered into for such periods as may be provided by the pertinent laws 
or regulations. 
No management contract shall be entered into for a period longer than five (5) years for any 
one (1) term.