The Legal Requirements for Company Dissolution in the Philippines
TL;DR (Summary Box)
Dissolving a company in the Philippines requires clearances from the BIR, SEC, and LGU. You’ll need to settle all taxes, debts, and obligations, liquidate assets, and file Articles of Dissolution with the Securities and Exchange Commission. The process takes around 3–6 months, depending on compliance and document readiness.
Introduction: Closing a Company the Right Way
Just like business registration, closing a company in the Philippines involves a legal process — one that must be handled carefully to avoid future tax liabilities or penalties.
Whether you’re shutting down due to restructuring, economic reasons, or strategic pivots, understanding the legal requirements for company dissolution is crucial. It ensures your business exits cleanly, with no lingering issues from the Bureau of Internal Revenue (BIR) or Securities and Exchange Commission (SEC).
In this guide, we’ll walk you through the complete company dissolution process in the Philippines, including the required documents, clearances, timelines, and key takeaways for business owners.
What Is Company Dissolution?
Company dissolution is the formal process of legally ending a corporation’s existence in the eyes of Philippine law. Once approved by the SEC, your company will no longer exist as a legal entity and will not be liable for taxes or compliance obligations.
It’s important to note that dissolution is not the same as liquidation:
- Dissolution means officially terminating your company’s legal status.
- Liquidation means selling off assets and settling liabilities before final closure.
Both steps must be completed to properly close a business in the Philippines.
Legal Basis for Company Dissolution
Company dissolution is governed by:
- Republic Act No. 11232 or the Revised Corporation Code of the Philippines
- SEC Memorandum Circulars related to voluntary and involuntary dissolution
- BIR Revenue Regulations for tax clearance and business closure
These laws ensure that all corporate, financial, and tax responsibilities are properly settled before a business ceases operations.
Types of Company Dissolution in the Philippines
There are two main ways to dissolve a company:
1. Voluntary Dissolution
Initiated by the corporation itself, usually due to:
- Business closure or inactivity
- Mergers or corporate restructuring
- Financial difficulties or strategic decisions
Voluntary dissolution requires board and stockholder approval.
2. Involuntary Dissolution
Imposed by the government due to:
- Continuous non-operation
- Non-filing of reports for several years
- Legal violations or revocation by the SEC
This type is less common and often involves penalties or investigations.
Step-by-Step Process for Company Dissolution in the Philippines
Step 1: Board Resolution and Stockholder Approval
- Pass a Board Resolution approving the intent to dissolve the company.
- Secure at least two-thirds (2/3) approval from stockholders.
- Publish the notice of dissolution in a newspaper of general circulation (if required).
Step 2: Settle Debts, Liabilities, and Employee Obligations
Before filing for dissolution, ensure:
- All creditors have been paid.
- Employee salaries, 13th-month pay, and benefits are settled.
- All company assets have been liquidated properly.
This is part of the liquidation process that precedes formal dissolution.
Step 3: Secure BIR Clearance
The BIR tax clearance is one of the most crucial requirements. Here’s what you’ll need to do:
- File a Request for Closure of Business with your BIR Revenue District Office.
- Submit all financial statements, inventory, and tax returns.
- Return unused official receipts and invoices.
- Pay any outstanding taxes, penalties, or fees.
Once approved, the BIR will issue a Tax Clearance Certificate—a prerequisite for SEC filing.
Step 4: Obtain LGU and Other Agency Clearances
You may also need clearances from:
- Local Government Unit (LGU) for business permit cancellation.
- Social Security System (SSS), PhilHealth, and Pag-IBIG Fund for compliance.
- Any industry-specific agencies (if applicable, e.g., BOI, PEZA).
Step 5: Prepare and File Articles of Dissolution with the SEC
After all debts and taxes are cleared:
- Draft the Articles of Dissolution.
- Include a summary of the liquidation process.
- Attach supporting documents like the Board Resolution and BIR Tax Clearance.
- File your application through the SEC Company Registration and Monitoring Department (CRMD).
Once approved, the SEC will issue a Certificate of Dissolution, officially terminating your corporation’s existence.
Required Documents for Company Dissolution
Here’s a checklist to guide your documentation process:
- Board Resolution approving dissolution
- Articles of Dissolution
- Latest Audited Financial Statements
- BIR Tax Clearance Certificate
- SEC and LGU clearances
- Proof of publication (if required)
- Affidavit of Publication and Liquidation
- General Information Sheet (GIS)
Timeline and Costs for Company Dissolution
The company dissolution process in the Philippines typically takes 3 to 6 months, depending on the complexity of your case and the responsiveness of government agencies.
Estimated Costs:
- Legal and professional fees: ₱10,000 – ₱50,000
- Publication fees: ₱5,000 – ₱10,000
- BIR and SEC filing fees: ₱5,000 – ₱20,000
- Miscellaneous expenses (clearances, documentation, etc.): ₱5,000+
Common Mistakes to Avoid
- Not settling tax obligations first. The BIR must approve closure before SEC filing.
- Incomplete documentation. Missing even one clearance can delay approval.
- Ignoring employee and creditor settlements. This can lead to legal disputes.
- Failing to cancel business permits. You may still be billed for local taxes.
- Skipping professional advice. Consulting a CPA or corporate lawyer ensures compliance.
Why Proper Company Dissolution Matters
Closing a business properly protects you from:
- Future tax liabilities
- Corporate name misuse
- Government penalties
- Legal issues with partners or employees
It’s a safeguard for business owners who want to exit cleanly and responsibly.
Frequently Asked Questions (FAQs)
1. What does company dissolution mean in the Philippines?
It’s the legal process of terminating a corporation’s existence, ensuring it’s no longer liable for taxes or government obligations.
2. What are the legal requirements for dissolving a company in the Philippines?
You must obtain clearances from the BIR, SEC, and LGU, settle all debts and taxes, liquidate assets, and file Articles of Dissolution with the SEC.
3. What are the steps to dissolve a corporation in the Philippines?
The process involves board approval, settling obligations, securing clearances, and submitting dissolution documents to the SEC.
4. How do I get a BIR clearance for business closure?
Submit a closure request to your BIR RDO, return unused receipts, and settle unpaid taxes. The BIR will then issue a Tax Clearance Certificate.
5. What is the difference between dissolution and liquidation?
Dissolution ends a company’s legal status; liquidation is the process of settling debts and assets before that happens.
6. How long does a company dissolution take in the Philippines?
Typically between 3 and 6 months, depending on document readiness and agency approvals.
7. Can a company be dissolved with unpaid taxes or debts?
No. All financial obligations must be settled before SEC approval is granted.
8. How much does it cost to dissolve a company in the Philippines?
On average, ₱20,000 to ₱100,000, including filing, professional, and publication fees.
9. Can foreign-owned companies be dissolved in the Philippines?
Yes. The same process applies, but foreign-owned firms must also comply with foreign exchange and fund remittance regulations.
10. What happens after a company is dissolved?
Once approved, the company’s legal existence ends, and its name is removed from SEC records. All licenses and registrations are also canceled.
Conclusion: Close Responsibly and Legally
Dissolving a company may seem complex, but following the proper steps ensures peace of mind and compliance.
By obtaining clearances from the BIR, SEC, and LGU, settling debts, and completing all filings, you protect yourself and your stakeholders from future issues.
If you’re planning to close your business, consult a corporate lawyer or accounting professional to guide you through the process — ensuring your company exits legally, cleanly, and confidently.