More than two years after the effectivity of the Revised Corporation Code (RCC), the Securities and Exchange Commission (SEC) issued Memorandum Circular 5, Series of 2022, providing the guidelines for corporate dissolution, either voluntary or involuntary, as well as the procedure for dissolution through the shortening of the corporate term.
One of the highlights of the RCC is the decrease in the affirmative votes needed to effect a voluntary dissolution where no creditors are affected. The votes needed decreased from two-thirds (2/3) to a mere majority of the outstanding capital stock or majority of the members of the meeting.
The RCC provides that an application for voluntary dissolution shall be filed with the SEC through a verified request, accompanied by a certified and countersigned copy of the board resolution authorizing the dissolution. The application must also include proof of publication, and favorable recommendation from the appropriate regulatory agency.
The newly issued guidelines are now more specific, stating that the dissolution of corporations shall pass through the SEC Company Registration and Monitoring Department (CRMD) or the SEC Extension Offices (EO).
For voluntary dissolutions where no creditors are affected, or if a dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, a corporation must file the verified request with the CRMD or the EO whose territorial jurisdiction includes the principal office address of the corporation.
The verified request must be signed by its duly authorized representative containing the details of the corporation, such as its registered corporate name, SEC registration number, and address of its principal office. The request must also include a statement requesting corporate dissolution, and the reason for the dissolution.
Furthermore, the verified request must contain details of the notice given to the shareholders or members 20 days prior to the meeting where the vote on the corporation’s dissolution occurred. It must also include the details of the stockholders and directors, or members and trustees, who approved the dissolution of the corporation.
The request must be accompanied by supporting documentation such as: Notarized copies of the board resolution or directors’ or trustees’ certificate authorizing the dissolution and designating an authorized representative to file the verified request; the latest due general information sheet; audited financial statements; and tax clearance from the Bureau of Internal Revenue.
The guidelines also require a statement and a notarized secretary’s certificate showing that the corporation has no pending case involving intra-corporate disputes.
When necessary, the verified request must be supported by clearance or favorable recommendation from other SEC departments or from the appropriate regulatory agency. In connection with this, 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 the application is accompanied by a favorable recommendation from the appropriate government agency.
To further justify a voluntary dissolution, the corporation’s president and treasurer must also submit with the CRMD or the EO an affidavit stating that the dissolution of the corporation is not prejudicial to the interest of its creditors, and that there is no opposition coming from any creditors from the time the notice of dissolution was published up to the time of its filing with the SEC.
Note, however, that any incorporator, director, trustee, shareholder, or member of the corporation may request a withdrawal of the application for voluntary dissolution. The withdrawal must be submitted within 15 days from the SEC’s receipt of the verified request.
After the lapse of the 15-day period, and no request for withdrawal has been filed, the SEC shall approve the request and issue the Certificate of Dissolution to the corporation. The dissolution takes effect only upon the issuance of the said Certificate.
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
