SEC issues guidelines for corporate dissolution

The Securities and Exchange Commission (SEC) has issued the standard procedures for the voluntary and involuntary dissolution of corporations which took effect Wednesday, March 9.

The Commission released SEC Memorandum Circular No. 5, Series of 2022, providing the Guidelines on Corporate Dissolution under Sections 134, 136, and 138 of the Revised Corporation Code of the Philippines (RCC).

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Sections 134, 136, and 138 of the RCC govern the voluntary dissolution where no creditor is affected, dissolution through the shortening of a corporation’s corporate term, and involuntary dissolution, respectively.

Under the newly issued guidelines, the dissolution of corporations shall pass through the SEC Company Registration and Monitoring Department (CRMD) or the SEC Extension Offices (EOs).

In instances where no creditors are affected, corporations may apply for voluntary dissolution with the CRMD or the EO whose territorial jurisdiction includes the principal office address of the corporation.

A corporation seeking voluntary dissolution shall submit a verified request signed by its duly authorized representatives containing the corporate name, SEC registration number, principal office, a statement requesting for the dissolution, and reason for the dissolution.

The corporation must submit the verified request together with a notarized copy of the board resolution or directors’ or trustees’ certificate authorizing the dissolution and designating an authorized representative to file the verified request.

Supporting documents for the verified request also include the latest due General Information Sheet (GIS); audited financial statement (AFS) as of last fiscal year, where applicable; a tax clearance certificate from the Bureau of Internal Revenue (BIR); notarized secretary’s certificate of no pending case involving intra-corporate dispute; and clearance or favorable recommendation from other SEC departments or from the appropriate regulatory agency, when necessary.

The SEC will not approve applications for dissolution from banks, banking and quasi-banking institutions, preneed, insurance and trust companies, non-stock savings and loan associations, pawnshops, and other financial intermediaries, unless accompanied by a favorable recommendation of the appropriate government agency.

Meanwhile, a corporation may proceed with voluntary dissolution by amending its articles of incorporation to shorten its corporate term.

The dissolution shall automatically take effect on the day following the last day of the corporate term stated in the amended articles of incorporation, without the need for the issuance of a certificate of dissolution by the SEC.

The Commission may motu proprio, or upon filing of a verified complaint by any interested party, dissolve a corporation for non-use of their corporate charter and continuous inoperation, as provided under Section 21 of the RCC; upon receipt of a lawful court order dissolving the corporation; and upon finding by final judgment that it procured its incorporation through fraud.

A corporation may also be dissolved by the SEC upon finding by final judgement that it was created for the purpose of committing, concealing, or aiding the commission of securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices; if they were found to have committed or aided in such acts; and if they repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers, or employees.

Additionally, the Commission may revoke the certificate of registration of a corporation if it committed fraud in the procurement of such certificate, and if it failed to file or register its financial statements, GIS, and stock and transfer book or membership book for at least five years, pursuant to Section 6(i) of Presidential Decree No. 902-A.

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