Corpo
Corpo
DISSOLUTION
RA 11231 (as amended)
New: A verified request for dissolution shall be filed with the Commission
stating: (a) the reason for dissolution (b) the form, manner,and time when the
notices were given; (c) names of the stockholders and directors or members
and trustees who approved the dissolution; (d) the date, place,and time of the
meeting in whcih the vote was made; and details of publication.
Note: The SEC will not deny an application for dissolution when there are no
creditors involved because of the Constitutional prohibition against involuntary
servitude or the constitutional guarantee of association, and the right to refuse
to continue an association. Since other than the stockholders or members of the
corporation, no third parties are involved, the State through the SEC, will
generally grant the application for the dissolution of the Corporation
Section 135- Voluntary Dissolution Where Creditors
are Affected
• If there are creditors involved or who may prejudiced, there is a
need to file a formal petition for dissolution with the SEC. The
proceedings are quasi-judicial in nature and conducted to ensure
that the rights of the creditors are fully protected. In such
proceeding, the SEC is not mandated to dissolve the corporation,
especially when it would be detrimental to the interest of the
creditors, who may wish to rehabilitate the operations of the
Corporation to ensure that it would be able to pay-off all of its
debts. This authority of the SEC is also provided in PD 902-A
Voluntary Dissolution Where Creditors Are Affected:
How Effected
A. A petition for dissolution shall be filed with the SEC, signed by
the majority of the Corporation's BOD or Trustees verified by its
President or Secretary or one of its Directors or Trustees, and shall
set forth:
√ all claims and demand against it; and
√ That its dissolution was resolved upon by the
affirmative vote of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock or by at least
two-thirds (2/3) of the members, at a meeting called for
that purpose;
Voluntary Dissolution Where Creditors Are Affected:
How Effected
B.If the petition is sufficient in from and substance, the SEC, by an order
reciting the purpose of the petition, fix a deadline for filing objections
to the petition date shall not be less than thirty (30) days nor more than
sixty (60) days after the entry of the order;
C.Before such date, a copy of the order shall be published at least once a
week for three (3) consecutive weeks in a newspaper of general
circulation published in the municipality or city where the principal office
of the corporation is situated, or if the there be no such newspaper, then
in a newspaper of general circulation of the Philippines, and a similar
copy shall be posted for three (3) public places in such municipality or
city;
Voluntary Dissolution Where Creditors Are Affected:
How Effected
D. Upon five (5) days’ notice, given after the date on which the right to file
objections as fixed in the order has expired, the SEC shall proceed to
hear the petition and try any issue made by objections filed;and
E.If no such objection is sufficient,and the material allegations of the
petition are true, it shall render judgement dissolving the corporation and
directing such disposition of it assets as justice requires, and may appoint
a receiver to collect such assets and pay the debts of the corporation.
Steps in Voluntary Dissolution Where Creditors Are
Affected
Additional:
The petition shall likewise state: (a) reason for dissolution; (b) the form,
manner, and time when notices were given; and (c) the date, place, and
time of the meeting in which the vote was made. The Corporation shall
submit to the Commission the following: (1) a copy of the resolution
authorizing dissolution, certified by a majority of the board of directors or
trustees and countersigned by the secretary of the corporation; and (2)
list of its creditors.
The dissolution shall take effect only upon the issuance by the
Commission of a certificate of dissolution
Section 136- Dissolution by Shortening Corporate
Term
Under its Internal Rules, the SEC would require the following:
A. Notice of dissolution of the Corporation by shortening of the Corporate
term shall be published in a newspaper of general circulation for three (3)
consecutive weeks;
B. Filling of the list of the corporate directors, with their consent to the
shortening of the Corporate Term;
C. Submission of the following with SEC:
i. Undertaking under oath by the majority stockholders or principal
officers of the Corporation that they shall personally answer for any
outstanding obligations of the Corporation;
Section 136- Dissolution by Shortening Corporate
Term
ii.Latest audited financial statements of the Corporation which must must not be
earlier than the date of the stockholders’ or membership meeting approving the
amendment to the articles of incorporation;and
iii. BIR Clearance on the tax liabilities of the Corporation.
Under Section 136
Upon the expiration of the shortened term, as stated in the approved amended
articles of incorporation, the corporation shall be deemed dissolved without any
further proceedings, subject to the provisions of this code on liquidation.
In the case of expiration of corporate term, dissolution shall automatically take
effect on the day following the last day of the corporate term stated in the
articles of incorporation, without the need for the issuance by the Commission of a
certificate of dissolution.
Section 136- Dissolution by Shortening Corporate
Term
It is apparent from the above mentioned provision that it is only upon approval of
the amended articles of incorporation by the SEC that the corporation shall be
deemed dissolved. This means that if the shortened term, as proposed in the
amendment of the articles of incorporation, expires before the approval by the
SEC, the corporation will not be automatically dissolved upon such expiration but
only upon SEC approval of the amendment. On the other hand, if the SEC gives its
approval before such shortened term expires, the dissolution can take effect only
upon the expiration of such shortened term.
In the absence of a stipulation as to a shorter period, the life of a corporation is 50
years ( new perpetual existence). Hence, if you do not wish to continue the life of
a corporation, you may shorten its corporate term. In order to do so, you must
amend the Articles of Incorporation to reflect the new corporate term.
Section 137- Withdrawal of Request and Petition for
Dissolution (New Provision)
A withdrawal of the request for dissolution shall be made in writing, duly verified by any
incorporator, director, trustee, shareholder, or member and signed by the same number
of incorporators, director, trustees, shareholders, or members necessary to request
dissolution as set forth in the foregoing section. The withdrawal shall be submitted no
later than 15 days from receipt by the Commission of the request of the dissolution.
Upon receipt of the request of the withdrawal of dissolution, the commission shall
withhold action on the request for dissolution and shall, after investigation (a) make
pronouncement that the request for dissolution is deemed withdrawn; (b) direct a joint
meeting of the board of directors or trustees and the stockholders or members for the
purpose pf ascertaining whether to proceed with dissolution; or (c) issue such other
orders as it may deem appropriate.
A withdrawal of the petition for dissolution shall be in the form of a motion and similar in
substance to a withdrawal of request for dissolution but shall be verified and filed
during the deadline for filing to the petition.
Section 137- Involuntary Dissolution
• Except for banks, which shall be covered by the applicable provisions of the
Republic Act No. 7653, otherwise known as “The New Central Bank Act, as
amended, and RA 3591, otherwise known as the Philippines Deposit
insurance Corporation Charter, as amended, every corporation whose
charter expires pursuant to its articles of incorporation, is annulled by its
forfeiture, or whose corporate existence is terminated in any other manner,
shall nevertheless remain as a body corporate for three (3) years after the
effective date of dissolution, for the purpose of prosecuting and defending
suits by or against it and enabling it to settle and close its affairs, to
dispose of and convey its property and to distribute its assets, but not
for the purpose of continuing the business for which it was established.
Section 139. Corporate liquidation.
• At any time during said three (3) years, the corporation is authorized and empowered
to convey all of its property to trustees for the benefit of stockholders, members,
creditors, and other persons in interest. After any such conveyance by the corporation of
its property in trust for the benefit of its stockholders, members, creditors and others in
interest, all interest which the corporation had in the property terminates, the legal
interest vests in the trustees, and the beneficial interest in the stockholders, members,
creditors or other persons in interest.
• Except as otherwise provided for in Sections 93 and 94 of this code,upon the winding up
of the corporate affairs, any asset distributable to any creditor or stockholder or member
who is unknown or cannot be found shall be escheated in favor of the national
government..
• Except by decrease of capital stock and as otherwise allowed by this Code, no
corporation shall distribute any of its assets or property except upon lawful dissolution
and after payment of all its debts and liabilities.
METHODS OF LIQUIDATION OF DISSOLVED
CORPORATION
• Liquidation means the winding up of the affairs of the
corporation by getting its assets, settling with creditors
and debtors, and the amount of profit or losses.
• Any corporation contemplating dissolution must submit
tax return on the income earned by it from the beginning
of the year up to the date of dissolution or retirement and
pay the corresponding tax due upon demand by the
Commissioner of Internal revenue (BPI v CIR, 363 SCRA
840)
METHODS OF LIQUIDATION OF DISSOLVED
CORPORATION
• 1.Liquidation By Duly Appointed Receiver ( Sec 134 last par)
Under Section 6(c) of P.D 902-A, receivers may be appointed whenever: 1. necessary
in order to preserve the rights of the party-litigants; and or (2) protect the interest of the
investing public and creditors. A receivership is created by means of judicial or quasi
judicial appointment of the receiver. The appointment of a receiver operates to
suspend the authority of a corporation and of its directors and officers over its property
and effects, such authority being reposed in the receiver (YAM vs CA 303, SCRA 1)
The receiver is actually an officer of the court and must therefore be accountable to the
court. Under PD 902-a, the SEC is empowered to create or appoint a management
committee, board, or body to undertake the management of the Corporation. Such
management committee, board, or body shall have the power to take the custody of,
and control over, all the existing assets and property of the corporation.
METHODS OF LIQUIDATION OF DISSOLVED
CORPORATION
• The SEC may, on the basis of the recommendation and findings of the
committee, determine that the continuance in business of such
corporation would be feasible or profitable nor work to the best interest
of stockholders, parties litigants, creditors, or the general public. Again,
the three year period does not apply in such mode of liquidation
because the corporation is substituted by the receiver who may sue or
be sued.
METHODS OF LIQUIDATION OF DISSOLVED
CORPORATION
2.Liquidation By The Corporation Itself or its Board of Directors
(Section 139 1st par)
The Corporation during the winding-up may negotiate and transfer the
assets of the dissolved corporation, provided the stockholders give their
consent. (Chung v IAC, 163 SCRA 534). The time during which the
corporation, through its own officers, may conduct the liquidation of its
assets and sue and be sued as a corporation is limited to three years
from the time the period of dissolution commences; but there is no time
limit within which the trustee must complete a liquidation placed in their
hands.
Bar Question
• A group of stockholders of Sesame Corporation filed in court
against the members of the BOD to make good of
stockholders, in proportion to their shareholdings, the losses
incurred by the incorporation because of the defendant BOD's
management. While the case was pending, the corporation
was dissolved. During the three-year period from its
dissolution, the BODs decided to extend the corporate life by
amendment of its AOI. Can the BODs do so?
Sample Bar Question
Answer:
The BODs cannot pass a resolution to extend corporate life after the corporation was
dissolved, for the following reasons:
1. After the corporation is dissolved, corporate life terminates. So there is no more life
to extend;
2. If the board is given a 3 year grace period after its dissolution to wind up and
liquidate, that grace period can be utilized for nothing more than the liquidation of the
corporation. The Board cannot pass a resolution not germane to the liquidation
process.
3. Even if the extension was done by the board before its dissolution, the extension
and filing of an amendment to the AOI need the approval of stockholder holding at
least 2/3 of the outstanding capital stock of the corporation.
Bar Question
• X Corporation shortened its corporate life by
amending its articles of incorporation. It has no
debts but owns a prime property located in
Quezon City. How would the said property be
liquidated among the five stockholders of said
corporation?
Sample Bar Question
Answer:
The property of X corporation can be liquidated among the five
stockholders by selling the property to a third person and dividing
the proceeds, or selling the property to one or more of the
stockholders and paying the non-buying stockholder/s both in
proportion to the shareholdings of each stockholder.
METHODS OF LIQUIDATION OF DISSOLVED
CORPORATION
3.Liquidation By Trustees to Whom the Assets of the Corporation had been
Conveyed.
Under section 139 (second par) of the corporate code, at any time during the three (3)
years of liquidation, a corporation is authorized and empowered to convey all of its
property to trustees for the benefit of stockholders, members, creditors, and other
persons in interest. From and after any such conveyance by the corporation of its
property in trust, all interest which the corporation had in the property terminates, the
legal interest vests in the trustees, and the beneficial interest in the stockholders,
members, creditors or other persons in interest. In such cases, the three (3) year
limitation will not apply provided the designation of the trustee is made within said
period. Unless the trusteeship is limited in its duration by the deed of trust, there is no
time limit which trustee must finish the liquidation, and he may sue or be sued even
beyond the three (3)-year period.
METHODS OF LIQUIDATION OF DISSOLVED
CORPORATION
3.Liquidation By Trustees to Whom the Assets of the Corporation had been
Conveyed.
The dissolution of the corporation itself, or the expiration of its three-year period,
should not be a bar to the enforcement of its rights as a coprporation. One of these
rights includes the right to seek from the court the execution of a valid and final
judgment- through its trustee/liquidator- for the benefit of its stockholder, creditors and
any other person who may have legal claims against it.
Bar Question
The Corporation, once dissolved thereafter continues to be a
body corporate for three years for purposes of prosecuting and
defending suits by and against it and of enabling it to settle and
close its affairs, culminating in the final disposition and
distribution of its remaining assets. If the three- year extended
life expires without a trustee or receiver being designated by the
corporation within that period and by that time (expiry of three-
year extended term), the corporate liquidation is not yet over,
how, if at all, can a final settlement of the corporate affairs be
made?
Sample Bar Question
• Answer:
If the three year extended life has expired without a trustee or receiver
having been expressly designated by the corporation within that period,
the Board of Directors ( or Trustee) itself may be permitted to so
continue as trustees by legal implication to complete the corporate
liquidation. Still in the absence of Board of Directors, or Trustees, those
having any pecuniary interest in the assets, including not only the
shareholders but likewise the creditors of the corporation, acting for and
in its behalf, might make proper representation with the Securities and
Exchange Commission, for working out a final settlement of the
Corporate concerns ( Clemente V CA, 242, SCRA 717)
EFFECTS OF DISSOLUTION OF A CORPORATION