Dissolution and Liquidation of Corporations in the Philippines

Not all corporations are successful in its business operations in the

Philippines and not all domestic corporations in the Philippines are meant
forever. Like humans, corporate life comes to an end and this is what is
technically referred to as dissolution and liquidation. Dissolution in the
Philippines is the stage of terminating the life of a corporation and
liquidation in the Philippines is the process of winding up the affairs,
settlement of corporate obligations / debts and distribution of remaining
corporate assets through liquidating dividends in the Philippines.
Dissolution of a corporation in the Philippines under the Corporation Code
of the Philippines (Batas Bambansa Bilang 68 or BP No. 68) could be
involuntary upon Securities and Exchange Commissions (SEC) complaint
coupled with a prescribed process of notice and hearing or voluntary based
on the application of the corporation with the SEC. Voluntary dissolution of
corporation in the Philippines come in a number of ways as follows:
1.

Voluntary dissolution where no creditors are affected;

2.

Voluntary dissolution where creditors are affected; or

3.

Dissolution by shortening corporate term

Of the above ways of dissolving a domestic corporation in the Philippines,

the most common is the dissolution be shortening corporate term. Upon
approval of the SEC of the amended articles of incorporation with the
shortened corporate term, the corporation shall be deemed dissolved
without any further proceedings. Hereunder are the normal SEC
requirements for dissolution of corporations in the Philippines:
1.

2.

Directors Certificate A Notarized document signed by majority of

the directors and corporate secretary certifying the amendment of the
articles of incorporation shortening the corporate term, the votes of the
directors and stockholders thereto, and the date and place of the
stockholders meeting
Amended Articles of Incorporation

3.

Audited financial statements as of date of the stockholders meeting

approving dissolution or any date thereafter

4.

List of creditors, if any, and their consent, or certification as to nonexistence of creditors. If there are creditors and their consent was not

secured, the application should be in the form of a petition to be filed

with Office of General Counsel of the SEC
5.

BIR Tax Clearance

6.

Publishers affidavit of the publication of the dissolution of the

corporation (once a week for three (3) consecutive weeks)

7.

Endorsements /clearances
applicable

from

other

government

agencies,

if

The first two (2) of the above documentary requirements for SEC
dissolution by shortening corporate term is for the corporate secretarys
preparation. The third is for the independent certified public accountant
(CPA) in the Philippines. The fourth is for the accounting department to
provide. The fifth one, BIR clearance, is quite technical for the dissolving
corporation because before the BIR will issue a tax clearance, it will see to
it that the corporation has no tax liabilities by conducting a tax examination
for at least the three (3) taxable years preceding the year of dissolution
which has not yet been examined. Publishers affidavit is not much of a
problem while the endorsement only applies to those corporations with
secondary license.
Upon completion of the above documentary requirements for dissolution of
corporation in the Philippines and such other requirements the SEC may
require, the, process of evaluation and approval may come within less than
a month. In the preparation and processing of the application for corporate
dissolution, we would suggest you secure services of professional to
facilitate the preparation of such documents.

Disclaimer: This article is for general conceptual guidance only and is not
a substitute for an expert opinion. Please consult your preferred tax and/or
legal
consultant
for
the
specific
details
applicable
to
your
circumstances. For
comments,
you
may
please
send
mail
at info@taxacctgcenter.org.
Businesses can also be closed voluntarily or involuntarily. Voluntary closure
generally means the business owner close the business in his or her own
will, usually complying with applicable business regulations. On the other
hand, involuntary closure means the business is closed due to events, such
as failure to comply with the law or regulations and the government or
court has ordered to close the business. In this article, we assume that the
business owner is voluntarily closing the business.

Usually a business
agencies/offices.

should

be closed in

the

following

government

Department of Trade and Industry (DTI) office

The local City/Municipal Office, where the business is registered
Department of Labor and Employment (DOLE) office, if the company has
employees
Bureau of Internal Revenue (BIR) office
Bangko Sentral ng Pilipinas (BSP), if the business is registered with the
office
Securities and Exchange Commission (SEC) for partnership and
corporation
Other agencies or offices where the business is registered, such as SSS,
PHIC and HDMF
To guide you on the formal cessation of your business, here are some of the
basic steps, procedures and requirements on how to close a business in the
Philippines.
Closing a business at DTI
According to the DTI, we still have to inform the office when we voluntarily
close our business, and apply for cancellation of our registered business
name (BN).
For Sole Proprietor, the following are the requirement for Voluntary
Cancellation.
Letter request signed by the owner
Affidavit of cancellation of the registered BN, stating the reason/s for the
cancellation and that the registered owner has no outstanding financial
obligation at the time of closure of establishment
Original copy of the BN certificate and the duplicate copy of the
application form (affidavit of loss if either the business name certificate
and/or the duplicate copy of the application form was lost)
For Corporation and Partners, the following are the requirements for
Voluntary Cancellation.
If dissolved at the Securities and Exchange Commission (SEC),

 Letter request signed by the authorized signatory (Board Resolution for

the
authorized
signatory)
Certified photocopy of the SEC certificates of dissolution of the
corporation/partnership
Original copy of the business name certificate of registration and the
duplicate copy of the application form. (Affidavit of loss if either the
business name certificate and/or the duplicate copy of the application form
was lost)
If BN Registration Only,
a. Corporate Name:
Letter request signed by the authorized signatory (Board Resolution for
the authorized signatory)
Board resolution/partnership agreement for the cancellation of the
registered business name stating that the Corporation/Partnership is
retiring from business; surrendering the business name certificate for
cancellation and that at the time of closure of establishment the business
has no outstanding financial obligation, or a certified copy of the Certificate
of Dissolution (if applicable)
Original copy of the business name certificate and the duplicate copy of
the application form (Affidavit of loss if either the business name certificate
and/or the duplicate copy of the application form was lost)
b. Adopted Name:
Letter request signed by the authorized signatory (Board Resolution for
the authorized signatory)
Board Resolution/Partnership agreement for the cancellation of the
registered business name, stating the reason/s for the cancellation that the
corporation/partnership has no outstanding financial obligation at the time
of closure in connection with the operation of the said business and if there
were creditors copy of notice to them
Original copy of the business name certificate and the duplicate copy of
the application form (Affidavit of loss if either the business name certificate
and/or the duplicate copy of the application form was lost)
How to Close a Business in the Philippines
Starting, formalizing, legalizing, and registering a business in the
Philippines could take time depending on the type of your company. But if
the process of business registration takes time, business closure or
cessation is even more difficult and could take longer time to actually
accomplish, depending on the status of the business.

There are many reasons why a certain business will come to its end. It could
be that the business is already causing the owner significant losses and
decided to just stop the business or it could be that the business needs to be
terminated in order to transform into a new type of business. Not all
business closure brings negative news. For example, a single proprietorship
business that is transforming into a corporation is required to be closed as a
proprietorship. Thus, business closure could also mean expansion.
The process of business closure in the Philippines depends on the type of
the company to be ceased. For corporations and partnerships, they should
be formally close in the Securities and Exchange Commission (SEC) where
they are also registered, unlike sole proprietorship businesses that are not.
There are also businesses that should comply with the closure requirements
of other government agencies, where they are specially regulated. For
example, pawnshops are also required to be closed in Bangko Sentral ng
Pilipinas (BSP), where they are also governed or regulated.
Businesses can also be closed voluntarily or involuntarily. Voluntary closure
generally means the business owner close the business in his or her own
will, usually complying with applicable business regulations. On the other
hand, involuntary closure means the business is closed due to events, such
as failure to comply with the law or regulations and the government or
court has ordered to close the business. In this article, we assume that the
business owner is voluntarily closing the business.
Usually a business
agencies/offices.

should

be closed in

the

following

government

Department of Trade and Industry (DTI) office

The local City/Municipal Office, where the business is registered
Department of Labor and Employment (DOLE) office, if the company has
employees
Bureau of Internal Revenue (BIR) office
Bangko Sentral ng Pilipinas (BSP), if the business is registered with the
office
Securities and Exchange Commission (SEC) for partnership and
corporation
Other agencies or offices where the business is registered, such as SSS,
PHIC and HDMF
To guide you on the formal cessation of your business, here are some of the
basic steps, procedures and requirements on how to close a business in
the Philippines.

Closing a business at DTI

According to the DTI, we still have to inform the office when we voluntarily
close our business, and apply for cancellation of our registered business
name (BN).
For Sole Proprietor, the following are the requirement for Voluntary
Cancellation.
Letter request signed by the owner
Affidavit of cancellation of the registered BN, stating the reason/s for the
cancellation and that the registered owner has no outstanding financial
obligation at the time of closure of establishment
Original copy of the BN certificate and the duplicate copy of the
application form (affidavit of loss if either the business name certificate
and/or the duplicate copy of the application form was lost)
For Corporation and Partners, the following are the requirements for
Voluntary Cancellation.
If dissolved at the Securities and Exchange Commission (SEC),
Letter request signed by the authorized signatory (Board Resolution for
the
authorized
signatory)
Certified photocopy of the SEC certificates of dissolution of the
corporation/partnership
Original copy of the business name certificate of registration and the
duplicate copy of the application form. (Affidavit of loss if either the
business name certificate and/or the duplicate copy of the application form
was lost)
If BN Registration Only,
a. Corporate Name:
Letter request signed by the authorized signatory (Board Resolution for
the authorized signatory)
Board resolution/partnership agreement for the cancellation of the
registered business name stating that the Corporation/Partnership is
retiring from business; surrendering the business name certificate for
cancellation and that at the time of closure of establishment the business
has no outstanding financial obligation, or a certified copy of the Certificate
of Dissolution (if applicable)
Original copy of the business name certificate and the duplicate copy of

the application form (Affidavit of loss if either the business name certificate
and/or the duplicate copy of the application form was lost)
b. Adopted Name:
Letter request signed by the authorized signatory (Board Resolution for
the authorized signatory)
Board Resolution/Partnership agreement for the cancellation of the
registered business name, stating the reason/s for the cancellation that the
corporation/partnership has no outstanding financial obligation at the time
of closure in connection with the operation of the said business and if there
were creditors copy of notice to them
Original copy of the business name certificate and the duplicate copy of
the application form (Affidavit of loss if either the business name certificate
and/or the duplicate copy of the application form was lost)
Closing a business at the local City/Municipal Office
The procedures and requirements on closing a business may vary among
different LGUs (Local Government Units). This means that the requirements
for business cessation in Makati City can be different in Manila or Pasay
City. The typical requirements for business closure at the LGUs are the
following:
Affidavit of Gross (reason for and date of closure)
Mayors Permit
Business Plate
Financial Statement/ ITR
Sketch
Latest Payment
Certificate of Closure from the Barangay Captain indicating date of
closure
For more complete and accurate procedures and requirements, you may
visit and inquire the City or Municipal Office where your business is
registered.
Closing a business at DOLE
If your business has employees or was required to be registered with the
DOLE, you also have to ensure that you notify the DOLE office and comply
with the labor requirements to avoid labor relation liabilities. The following
are the basic requirements in closing a business and be cleared at the DOLE
office:

 Service of a written notice to the employees and the DOLE at least one (1)
month
before
the
intended
date
of
closure/cessation
The closure or cessation of business operations is bona fide in character.
Payment to the employees of termination pay amounting to at least onehalf (1/2) month pay for every year of service, or one (1) month pay
whichever is higher, per Philippine Labor Code mandate.
Closing a business at the BIR
The process of business cessation at the BIR is perhaps the most tedious
one among others. And if you have unpaid tax liabilities or delinquencies
due to the government, the process could even get more problematic.
Among the government offices, where your business is registered, the BIR is
the one which records and monitors your internal revenue taxes, such as
income and business taxes (Value Added Tax or Percentage Tax). And to
formally close and clear your business with the BIR, the bureau has to
ensure that you have already paid all your tax obligations.
BIR Form 1905 (Application for Registration Information Update) is the tax
form used in applying for closure of a business. The following are the
requirements and procedures for closure of business at the BIR.
Documentary Requirements
1) Letter of request stating reason for termination of business
2) Original Certificate of Registration
3) Books of Accounts
4) Inventory List of Unused Receipts and Invoices
5) Unused Receipts and Invoices for cancellation
6) Board Resolution / Notice of Dissolution (if Corporation / Partnership)
Additional Requirements in Case of Death of Individual Taxpayer:
1)Death Certificate
2) Payment of Estate Tax, if any
Procedures
1) Taxpayer applicant files BIR Form 1905, together with the attachments at
the RDO where they are registered within ten (10) days from retirement of
business.
2) Taxpayer files short period return for income tax purposes.
3) RDO verifies if taxpayer has open cases reflected in the Integrated Tax
System (ITS). If YES, ask taxpayer to submit required returns and pay the
corresponding tax due/s and penalties if any.
4) RDO verifies if taxpayer has delinquent cases at the Assessment,

Collection, and Legal Divisions of the Region;

5) RDO verifies if taxpayer has delinquent cases at the Collection
Enforcement Division, BIR National Office
6) RDO requests for Letter of Authority to investigate internal revenue taxes
for all un-audited taxable years prior to cancellation of business.
7) Assigned Case officer conducts investigations for period/s covered in the
issued Letter of Authority.
8) Taxpayer complies with requirements of audit and pays corresponding
deficiency taxes resulting from audit using Form 0605.
9) RDO issues tax clearance for closure of business.
10) RDO updates ITS and cancels TIN of taxpayer (for non-individual
taxpayer).
Closing a business at SEC
For corporations and partnerships, they cannot process closure of business
with the SEC if they are not yet done in securing tax clearance from the BIR
and endorsements or certificate of registration cancellation from other
government offices, if applicable. Thus, even though the business is already
non-operating, it still remains as a registered business. Though, the
business owners, partners, or shareholders can already start the liquidation
process of its assets, subject to applicable taxes.
For corporations, corporate dissolution can be voluntary or involuntary. In
this discussion, we assume that we are voluntarily dissolving a corporation.
Moreover, voluntary dissolution of a corporation may have different
procedures, depending on whether the dissolution will affect creditors or
not. One way to voluntarily dissolve a corporation with the SEC is by
shortening its corporate term. The following are the requirements for
corporate dissolution by shortening its term.
1. Directors Certificate A Notarized document signed by majority of the
directors and corporate secretary certifying the amendment of the articles
of incorporation shortening the corporate term, the votes of the directors
and stockholders thereto, and the date and place of the stockholders
meeting
2. Amended Articles of Incorporation
3. Audited financial statements as of date of the stockholders meeting
approving dissolution or any date thereafter
4. List of creditors, if any, and their consent, or certification as to nonexistence of creditors
5. BIR Tax Clearance
6. Publishers affidavit of the publication of the dissolution of the

corporation (once a week for three (3) consecutive weeks)

7. Endorsements/clearances from other government agencies, if applicable
Take note that if there are creditors and their consent was not secured, the
application should be in the form of a petition to be filed with Office of
General Counsel of the SEC.
Other notes to remember
When closing a business in the Philippines, we have to formally close the
business in the government agencies where it is registered. We have to
notify those offices and comply with their requirements to get a clearance
or certificate of termination (cancellation of registration) of our business.
Thus, a business owner has to ensure that his or her business is cleared in
every government agency it is registered aside from the ones discussed
above.
For businesses registered and regulated by the Bangko Sentral ng Pilipinas
(BSP), such as pawnshops, money changers, banks, and financing
companies, they have to comply with the closure requirements of the office.
For cooperatives, instead of closure at the SEC, it should comply with the
CDA (Cooperative Development Authority) Office for cessation or
dissolution.
Furthermore, if your business employs people and is contributing to SSS
(Social Security System), PHIC (Philippine Health Insurance Corporation)
and HDMF (Home Development Mutual Fund) for employees as mandated
by our laws, then you also have to apply for cancellation of your business or
employers registration when you close your business to stop your
obligation as a contributing employer.