Corporate Disillusion (How to Dissolve your Corporation)

By Siesta-friendly

You’ve realized one reason or another that the corporation you’ve given life to needs to say goodbye to the world. It will not be that easy as you have to go through the notorious Philippine government red tape. But, it will be clean and will (it is hoped) not give you sleepless nights.

Here’s how the corporation can say goodbye properly. First, you decide to shorten its corporate life which is set at 50 years by default in the articles of incorporation. You set up a meeting (together or separately) with at least a majority of the directors/trustees and stockholders/members where the majority of both directors/trustees and stockholders/members agree to amend the articles of incorporation to shorten the corporate term. Note that your by-laws may require a higher number of votes for such an amendment. You must follow what your by-laws provide so you will need to double-check that (whether it’s 2/3 vote, 3/4, etc.).

Then you will need to get a Tax Clearance from the BIR. First, obtain BIR Form No. 1905 (Application for Registration Information Update). Then, submit that together with the following:[1]

1. Letter of request stating the reason for termination of business (which is shortening of corporate term in this case)

2. Original BIR Certificate of Registration

3. Books of Accounts

4. Inventory List of Unused Receipts and Invoices

5. Unused Receipts and Invoices for cancellation

6. Proof of payment of existing liabilities

7. Board Resolution / Notice of Dissolution (if Corporation / Partnership)

Then wait (we hope, not endlessly) for the issuance of the Tax Clearance.

Don’t rejoice too soon once you get the Tax Clearance. There’s more. If your corporation was accredited with some government agency, you will have to get an Indorsement/Clearance from them regarding your corporate dissolution. The SEC will require submission of this Indorsement/Clearance.

Now, to the SEC where you will need to submit the following:[2]

1. Directors’/Trustees’ (if non-stock) Certificate – a notarized document signed by a majority of the directors/trustees and the corporate secretary, certifying the amendment of the Articles of Incorporation shortening the corporate term, the votes of the directors/trustees and stockholders/members, and the date and place of the stockholders’/members’ meeting

2. Amended Articles of Incorporation indicating the change in the corporate term

3. Audited financial statements as of date of the stockholders’ meeting approving the dissolution or any date thereafter but not earlier than 60 days prior to the date of filing of the application

4. List of creditors, if any, and the consent of the creditors; or certification as to non- existence of creditors

5. BIR tax clearance

6. Publisher’s affidavit of the publication of the notice of dissolution of the corporation (once a week for 3 consecutive weeks)

7. Indorsement/Clearance from other government agencies, if applicable

In cases where there are creditors and the consent of the creditors was not secured, the application should be in the form of a petition to be filed with Office of General Counsel of the SEC.

And, that’s it! Although don’t be fooled by the relative short list of requirements; don’t forget what we cited earlier: the notorious red tape. Also, since government agencies are incorrigibly indecisive about their requirements and/or procedures, be sure to get the latest list of requirements always.

Finally, note that there is a short corporate afterlife of 3 years from the time the corporation would have been so dissolved, “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.”[3]

[1] Taken from http://www.bir.gov.ph/reginfo/regriu.htm. Accessed October 4, 2007.
[2] Taken from http://www.sec.gov.ph/. Accessed October 4, 2007.
[3] Sec. 122, Batas Pambansa Blg. 68 (The Corporation Code Of The Philippines). May 1, 1980.

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