Voluntary Dissolution of Corporations

8/3/2019 Voluntary Dissolution of Corporations

1/20


2/20

PROCEEDINGS

Presidential Decree 902-A and Corporation Code(BP 68)

Jurisdiction: Regional Trial

Court

R.A No. 8799 since July 19,

2000

Presidential Decree 902-A and Corporation Code(BP 68)

Jurisdiction:Securities and Exchange

Commission(SEC)

RULE 104

Jurisdiction:Court of First

Instance(Regional Trial Court)


3/20

Appeal

Decisions of the courts in the foregoing

cases are appealable to the Court of

Appeals, as provided by Section 70 of

Rep. Act No. 8799, which is an

affirmation of Rule 43, 1997 Rules of

Civil Procedure.


4/20

Dissolution of a corporation

signifies the extinguishment ofits franchise and the termination

of its corporate existence.

A corporation formed ororganized under the provisions

of the Corporation Code of the

Philippines may be dissolvedvoluntarily or involuntarily.


5/20

3 Modes of VoluntaryDissolution

1. Where no creditors are affectedbythe dissolution bythedissolution, byan administrative

application for dissolution filed withthe Securities and ExchangeCommission (SEC);

2. Wherecreditors are affected

bydissolution filed with the SEC, withdue notice and hearing to be dulyconducted; and


6/20

3. Shortening of a

corporate term by theamendment of the

articles of incorporation.


7/20

A. Voluntary dissolution where no

creditors are affected When no creditors are involved, only a SEC

application for dissolution is required. The

process is equivalent to the application for the

amendment of the articles of incorporation,except that in addition, publication of the notice

of dissolution must also be complied with.

Under Section 118 of the Corporation Code, in

case the dissolution of a corporation does notprejudice the rights of any creditor having a

claim against such a corporation, the dissolution

may be affected by complying with the following

procedural requirements:


8/20

1. Majority vote of the board of directors or

trustees adopting a resolution for the

dissolution of the corporation;

2. Sending notices to each stockholder or

member either by registered mail or bypersonal delivery, of the time, place and

object of the meeting calling for the

approval of the dissolution of thecorporation, at least thirty (30) days prior

to said meeting;


9/20

3. Publication of such notice of meeting for

three (3) consecutive weeks in a

newspaper published in the place where

the principal office of said corporation is

located; and if none, in a newspaper of

general circulation in the Philippines; and4. The resolution duly adopted by the

affirmative vote of the stockholders

owning at least two-thirds (2/3) of theoutstanding capital stock, or of at least

two-thirds (2/3) of the members, at a

meeting held on the call of the directors or

trustees.


10/20

A copy of the resolution authorizing thedissolution shall be certified by a majorityof the board of directors or trustees andcountersigned by the secretary of thecorporation and filed with the SEC. TheSEC shall thereupon issue the certificate of

dissolution. The SEC will not deny an application for

dissolution when there are no creditorsinvolved because of the constitutional

prohibition against involuntary servitude orthe constitutional guarantee of association,and the right to refuse to continue anassociation.


11/20

B. Voluntary dissolution where

creditors are affected If there are no creditors involved, there is a need to file

a formal petition for dissolution with the SEC. Theproceedings are quasi-judicial in nature andconducted to ensure that the rights of the creditors are

fully protected. In such proceedings, the SEC is notmandated to dissolve a corporation, especially when itwould be detrimental to the interests of the creditors,who may wish to rehabilitate the operations of thecorporation to ensure that it would be able to pay-off

all of its debt.

Under Section 119 of the Corporation Code, where thedissolution may prejudice the rights of any creditor, thefollowing procedure shall be complied with:


12/20

1. A petition for dissolution shall be filed withthe SEC, signed by a majority of its board

of directors or trustees or other officershaving the management of its affairs,verified by its president or secretary or oneof its directors or trustees, and shall setforth all claims and demands against it, andthat its dissolution was resolved upon bythe affirmative vote of the stockholdersrepresenting at least two-thirds (2/3) of theoutstanding capital stock or by at least two-

thirds (2/3) of the members at a meeting ofits stockholders or members called for thatpurpose.


13/20

2. If the petition is sufficient in form

and substance, the SEC, by anorder reciting the purpose of the

petition, shall fix a date on or

before which objections theretomay be filed by any person,

which date shall not be less than

thirty (30) days nor more thansixty (60) days after the entry of

the order.


14/20

3. 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 thecorporation is situated, or if there be no

such newspaper, then in a newspaper of

general circulation in the Philippines,

and a similar copy shall be posted forthree (3) consecutive weeks in three (3)

public places in such municipality or city.


15/20

4. Upon five (5) days notice, given afterthe date on which the right to file

objections as fixed in the order hasexpired, the Commission shall proceedto hear the petition and try any issuemade by the objections filed; and if no

such objection is sufficient, and thematerial allegations of the petition aretrue, it shall render judgment dissolvingthe corporation and directing such

disposition of its assets as justicerequires, and may appoint a receiver tocollect such assets and pay the debts ofthe corporation.


16/20

C. Dissolution by shortening

corporate termA voluntary dissolution may be effected by

amending the articles of incorporation to shorten

the corporate term. A copy of the amended articles

of incorporation shall be submitted to the SEC inaccordance with the Corporation Code. Upon

approval of the amended articles of incorporation

of the expiration of the shortened term, as the

case may be, the corporation shall be deemeddissolved without any further proceedings, subject

to the provisions for corporate liquidation.

The following requirements must be submitted to

the SEC:


17/20

1. Notice of the dissolution of

the corporation by shorteningits corporate term be

published in a newspaper of

general circulation for three(3) consecutive weeks;

2. List of corporate creditors,with their consent to the

shortening of corporate term;


18/20

3. Submission by the majority stockholders

or principal officers of the corporation of

an undertaking under oath that theyshall be personally answer for any

outstanding obligations of the

corporation; and4. Latest audited financial statements of

the corporation which must not be

earlier than the date of the stockholders

or membership meeting approving theamendment to the articles of

incorporation;


19/20

5. BIR Tax Clearance

6. Directors' Certificate - A Notarized

document signed by majority of the

directors and corporate secretary

certifying the amendment of the articles

of incorporation shortening the corporateterm, the votes of the directors and

stockholders thereto, and the date and

place of the stockholders meeting

7. Indorsments/clearances from other

government agencies, if applicable.


20/20

Dissolution by expiration of

corporate term This is another mode of voluntary

dissolution, when the corporate life of

the corporation as stated in its articles ofincorporation is allowed to expire,

without extension, then the corporation

is deemed dissolved by such expiration

without the need of further action on thepart of the corporation or the State.

(Section 11).

Documents

Voluntary Dissolution of Corporations