Over the last few years, the Philippines has become a friendly place for business owners. Business conditions have improved, investments in infrastructure have increased, and red tape has been significantly reduced. Now more than ever is the best time to start a company in the Philippines. 

That said, despite the favorable conditions, some businesses simply have run their course. If you are a business owner looking to dissolve their operation in lieu of a better prospect, you have come to the right place. This article explores the process of dissolution and liquidation of corporations in the Philippines. 

 

Corporate Code of the Philippines or Batas Pambasa Bilang 68

The Corporate Code of the Philippines outlines the dissolution process companies have to take to close their business and liquidate their assets. Dissolution of companies may be done voluntarily or involuntary. In cases of voluntary dissolutions, three scenarios may play out:

• Voluntary Dissolution with No Creditors Affected
• Voluntary Dissolution with Creditors Affected
• Dissolution by Shortening Corporate Term

It is important to note that the process and requirements of company dissolution and liquidation are based on its scenario. 

 

Voluntary Dissolution with No Creditors Affected

Voluntary Dissolution with No Creditors Affected is a situation wherein company closure does not affect any person with stakes in the operation. As such, businesses that endeavor in this type of liquidation can expect the process to be less challenging and time-consuming. 

• Process

A majority vote from the company’s board of directors is required to dissolve a corporation. At least twenty days prior to the vote, a notice is sent to the stockholders regarding the intent to dissolve the operation. 

If the board decides to move forward with the process, a notice of the dissolution meeting shall be published once a week for three weeks in a local newspaper. After three weeks, another conference is organized with the board of directors and stockholders. 

If stockholders owning at least 75% of the company vote in favor of the dissolution, requirements can be submitted to the Securities and Exchange Commission or SEC. When the documents are verified and approved, the SEC releases the certificate of dissolution. 

• Required Documents

• • Cover Sheet
  • A resolution containing the affirmative vote of the stockholders owning at least 75% of the outstanding capital. 
  • A directors’ certificate with the signature of at least 51% of the majority directors with a countersignature from the secretary 
  • Certification that no rights of creditor will be affected by the dissolution
  • Affidavit from directors/stockholders/principal officers claiming that they shall personally assume any outstanding obligations of the corporation
  • Recent audited financial statements, which must not be earlier than the date of the meeting of the stockholders approving the dissolution
  • Affidavit from the publisher containing the notice of time, place, and object of the stokcholder’s meeting approving the dissolution decision
  • BIR tax clearance certificate, which requires the submission of the following documents:
    • BIR Form No. 1905
    • Letter-request for cancellation of registration (stating the reasons for dissolution); 
    • Original copy of the BIR Registration Certificate;
    • Dissolution papers (resolutions approving the dissolution)
    • Notice of Dissolution
    • Inventory list of unused official receipts/invoices;
    • Unused official receipts/invoices for cancellation; and
  • If applicable, copies of the following documents: 
    • VAT Returns
    • Non-VAT Returns
    • Withholding Tax Returns
    •  Quarterly Income Tax Returns
    • . Percentage Income Tax Returns
    • Income Tax Returns for the past three years
    • Financial Statements for the past three years
    • Latest Annual Registration Fee Return
    •  SEC Registration
  • Filing Fee payment 

 

Voluntary Dissolution with Creditors Affected

Voluntary Dissolution with Creditors Affected is a situation wherein a company may be liable to creditors in the instance of closing and liquidation. 

• Process

The process of applying for dissolution with creditors affected is similar to the steps for scenarios without complications in creditors. However, there are several more steps following the stockholder’s vote. 

Once the company files the required documents to the SEC, the SEC would determine a date on or before which objections may be filed by any creditors with claims within the company. The notice for dissolution is published in a local newspaper and posted in three public places for three consecutive weeks. If no objections are made, the SEC approves the dissolution of the company. 

• Required Documents

• • Cover Sheet
  • Resolution containing the affirmative vote of the stockholders owning at least 75% of the outstanding capital. 
  • A directors’ certificate with the signature of at least 51% of the majority directors with a countersignature from the secretary 
  • Certification that no rights of creditor will be affected by the dissolution
  • Affidavit from directors/stockholders/principal officers claiming that they shall personally assume any outstanding obligations of the corporation
  • Recent audited financial statements which must not be earlier than the date of the meeting of the stockholders approving the dissolution
  • Affidavit from the publisher containing the notice of time, place, and object of the stockholder’s meeting approving the dissolution decision
  • List of creditors
  • Latest audited financial statements as of the date of approval/dissolution/any date thereafter.
  • BIR tax clearance certificate
  • Dissolution Fee Payment

 

Dissolution by Shortening Corporate Term

In this scenario, a predetermined date of dissolution is agreed upon by the key members of the company. Upon the expiration of the previously agreed term, the company is dissolved without further proceedings. 

• Process

The process of dissolution by shortening corporate terms is similar to the process of other dissolution scenarios. The only difference is the board of directors and stakeholders must agree on the corporate term expiration before filing the required documents to the SEC. 

• Required Documents

• • Cover Sheet
  • Resolution containing the affirmative vote of the stockholders owning at least 75% of the outstanding capital. 
  • A directors’ certificate with the signature of at least 51% of the majority directors with a countersignature from the secretary 
  • Certification that no rights of creditor will be affected by the dissolution
  • Affidavit from directors/stockholders/principal officers claiming that they shall personally assume any outstanding obligations of the corporation
  • Recent audited financial statements which must not be earlier than the date of the meeting of the stockholders approving the dissolution
  • Affidavit from the publisher containing the notice of time, place, and object of the stokcholder’s meeting approving the dissolution decision
  • List of creditors and their signed consent to shortening the corporate term 
  • Latest audited financial statements as of the date of approval/dissolution/any date thereafter
  • BIR tax clearance certificate
  • Dissolution Fee Payment

 

The process of dissolving and liquidating a company can be complex and challenging. Thankfully, Loft is here to help! Our expert legal team can take the burden off of your shoulders, Learn more about the process and contact us today!