DISSOLUTION PROCESS

METHODS: (Voluntary; Involuntary)

VOLUNTARY
1) Where no creditors are affected
2) Where creditors are affected
3) By shortening of corporate term
4) In case of a corporation sole, by submitting to the SEC for approval, a verified declaration of
dissolution (Sec.115). This merely needs the affidavit of the presiding elder. No need for a board
resolution.
5) By merger or consolidation, whereby the constituent corporations automatically cease upon
issuance by the SEC of the certificate of merger or consolidation, except the surviving or
consolidated corporation which shall continue to exist. (Secs. 79 and 80)

Where no a. Majority vote of the board of directors

creditors are or trustees; and
affected b. Resolution duly adopted by the
affirmative vote of the stockholders
owning at least 2/3 of the outstanding
capital stock or at least 2/3 of the
members at a meeting duly called for
that purpose.
c. A copy of the resolution authorizing
the dissolution shall be certified by a
majority of the board of directors or
trustees and countersigned by the
secretary of the corporation.
d. Such copy shall be filed with SEC.
(Sec. 118)

Where creditors a. Filing a petition for dissolution with the

are affected SEC
b. Such petition must be signed by
majority of the board of directors or
trustees
c. Must also be verified by the president
or secretary or one of its directors
d. The dissolution was resolved upon by
the affirmative vote of the stockholders
representing at least 2/3 of the
outstanding capital stock or at least 2/3
of the members at a meeting duly called
for that purpose.
e. If there is no sufficient objection, and
the material allegations of the petition
are true, a judgment shall be rendered
dissolving the corporation and directing
such disposition of its assets as justice
requires, and may appoint a receiver to
 collect such assets and pay the debts of
the corporation. (Sec. 119)

By shortening of Amendment of Articles of *easiest method

corporate term Incorporation

A voluntary dissolution may be effected

by amending the AOI to shorten its
corporate term pursuant to the
provisions of the Code. A copy of the
amended AOI shall be submitted to the
SEC. Upon approval of the amended
AOI of the expiration of the shortened
term, the corporation shall be deemed
dissolved without any further
proceedings, subject to the provisions of
the Code on liquidation.

As an additional requirement, the SEC

requires to submit the final audited
financial statement not older than 60
days before the application for
shortening the corporate term.

INVOLUNTARY

1. By expiration of corporate term

2. Failure to organize and commence transaction of its business within 2 years from
date of incorporation (Sec. 22).
3. Continuous inoperation for a period of at least 5 years.
4. Legislative dissolution. In this case, a corporation created by special law is dissolved also by
a special law.
5. Dissolution of SEC on grounds under existing laws.

Regardless of the mode of dissolution, a corporation shall remain a body corporate for a limited
purpose, despite the revocation of its license or termination of its corporate existence. Once
dissolved, a corporation’s existence continues only for purposes of liquidation and winding up of
its affairs and can no longer conduct the usual business provided in its primary purpose.

PERIOD OF LIQUIDATION: Three (3) years1

1 Sec. 122. Corporate liquidation. - Every corporation whose charter expires by its own limitation or is annulled by
forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall
nevertheless be continued as a body corporate for three (3) years after the time when it 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.
SEC REQUIREMENTS:

1. Directors' certificate - notarized and signed by majority of the directors certifying the (i)
amendment of the articles of incorporation reclassifying/declassifying/converting the
shares of stock (ii) votes of the directors and the stockholders, (iii) date and place of
stockholders' meeting and (iv) the tax identification number of the signatories which
shall be placed below their names.
2. Amended Articles of Incorporation
3. Audited financial statements (AFS) as of last fiscal year, except
a. Where the applicant has ceased operations for at least one (1) year, submit:
i. AFS as of last fiscal year of operation; and
ii. Affidavit of non-operation certified under oath by the President and Treasurer
b. Where the applicant has no operation since incorporation, submit:
i. Balance Sheet certified under oath by the Treasurer and President
ii. Affidavit of non-operation certified under oath by the President and Treasurer
iii. Certificate of non-registration by the BIR
c. Where the applicant is a stock corporation with paid-up of less than P50,000,
submit its Balance Sheet as of last preceding fiscal year certified under oath by
the President and Treasurer
d. Where the applicant is a non-stock corporation with gross receipts of less than
P100,000 or a total assets of less thanP500,000, submit its Balance Sheet as of
last preceding fiscal year certified under oath by the President and Treasurer
4. Certification executed under oath by the President and Treasurer certifying that:
a. The dissolution is not prejudicial to the interest of the creditors
b. There is no opposition from any creditor from the time of the last publication of the
notice of dissolution up to the filing of the application for dissolution with the
Commission
5. BIR tax clearance2
6. Publisher's Affidavit of publication of notice of dissolution (once a week for three [3]
consecutive weeks)
7. Notarized Secretary's Certificate on no pending case of intra-corporate dispute
NOTES: If there is opposition from the creditors, the application should be in the form
of petition to be filed with the Office of the General Counsel of the SEC.

2 A condition precedent to the filing of the Petition for Dissolution is the BIR Tax Clearance. The process of securing
the Tax Clearance is most difficult and time-consuming since it requires the audit of the company’s open taxable
years. Generally, the process takes a period of at least six months to two years depending on the results of the
audit.
BIR REQUIREMENTS:
1. Submission of a return (FINAL TAX RETURN/SHORT PERIOD RETURN, as the case
may be) to the BIR with 30 days from the adoption by a corporation of a resolution for its
dissolution3;
2. BIR Tax Clearance

3 The tax law requires that every corporation shall, within 30 days after the adoption by the corporation of a resolution
or plan for its dissolution, or for the liquidation of the whole or any part of its capital stock, including a corporation
which has been notified of possible involuntary dissolution by the SEC, or for its reorganization, render correct return
to the commissioner. Essentially, this imposes upon a dissolving or a dissolved corporation the obligation to submit a
return to the BIR within 30 days from the adoption by the corporation of a resolution for its dissolution. Such return is
usually referred to as a “final tax return” (since this should be the last income-tax return to be filed precisely because
the corporation is dissolving). It is also often referred to as a “short period return” (because the taxable year is
shortened as it covers only the period from the beginning of the taxable year up to the date of dissolution). There is
no requirement to file the usual annual income-tax return.