Accounting Alerts

Revised Guidelines on the Declaration and/or Distribution of Dividends for IC-Regulated Entities

This Accounting Alert is issued to circulate Insurance Commission (IC) Circular Letter (CL) 2021-02 dated January 7, 2021 on the revised guidelines on the declaration and/or distribution of dividends of all IC-regulated entities.

Applicability

Pursuant to Section 437 of the Amended lnsurance Code, Section 6 of the Pre-Need Code, and Section 4 of the Executive Order No. 192, Series of 2015, IC has promulgated the guidelines on the distributions and/or declarations of cash, property and stock dividend of all IC-regulated entities.

Regulatory Measures

All IC-regulated entities authorized to do business in the Philippines shall meet the regulatory measures, enumerated in the circular per entity type, at all times, without regulatory relief, and which shall be duly attested by the President and Treasurer of the company before declaration and/or distribution of dividends out of the unrestricted retained earnings.

The declaration of dividends shall require no prior approval or clearance from the IC in accordance with Section 201 of the lnsurance Code, as amended by Republic Act. No. 10607, The Insurance Code.

Post Distribution Reportorial Requirement

Covered IC-regulated entities shall report the dividend declaration and/or distribution to the IC, through the lnvestment Services Division, within thirty (30) days after such declaration or distribution. Said report shall be accompanied by the following documents subject to evaluation:

  • approved Annual Statement as of the last fiscal year;
  • certification under oath by the Corporate Secretary on the Board of Directors' resolution declaring dividends;
  • interim unaudited financial statements certified under oath by the President and Finance Officer;
  • notarized Secretary's Certificate of the Board resolution for the reversal of restricted retained to unrestricted retained earnings, if applicable; and,
  • notarized Secretary's Certificate of no pending case of intra-corporate dispute.

There are also additional requirements enumerated in the CL that need to be complied depending on the type of dividends declared.

Effect in Case of Violation

Any IC-regulated entity which has declared or distributed any such dividend in violation of IC CL 2021-02 may be ordered to cease and desist from doing business until the amount of such dividend or the portion thereof in excess of the amount allowed under the CL has been restored.

IC CL 2021-02 is effective immediately.

 

See attached IC Circular Letter 2021-02 for further details.