Dissolving a corporation in the Philippines is often described by practitioners as "harder than getting married and more tedious than starting the business." While the Securities and Exchange Commission (SEC) is the primary regulator, the process involves a multi-agency "clearing" procedure to ensures that all tax liabilities are settled and creditor rights are protected.

Here is a comprehensive legal guide on the dissolution and liquidation of an SEC-registered corporation under the Revised Corporation Code (RCC) of the Philippines (Republic Act No. 11232).

1. Modes of Dissolution

Under the RCC, dissolution can be classified into two main categories: Voluntary and Involuntary.

Voluntary Dissolution

Where no creditors are affected: This is the simplest route. It requires a majority vote of the board and a resolution adopted by at least a majority of the outstanding capital stock.
Where creditors are affected: This requires a formal petition filed with the SEC, a higher voting threshold (two-thirds of the outstanding capital stock), and a public hearing to allow creditors to file their objections.
By Shortening of Corporate Term: A common "shortcut" where the corporation amends its Articles of Incorporation to move the expiry date to an earlier period. Once the amended date passes, the corporation is dissolved automatically by operation of law.

Involuntary Dissolution

The SEC may, motu proprio or upon a filed complaint, dissolve a corporation based on grounds such as:

Fraud in procuring its certificate of incorporation.
Serious misrepresentation.
Failure to file Bylaws or formalize its organization within two years of incorporation.
Continuous inoperation for at least five years.

2. The Step-by-Step Process

Closing a business is not a single event but a sequence of clearances. You must "reverse-engineer" the permits you acquired during the startup phase.

Phase I: The Internal Corporate Action

Board and Stockholder Approval: Hold a meeting to approve the dissolution.
Notice of Dissolution: File the notice with the SEC within 15 days of the board/stockholder approval.

Phase II: The Multi-Agency Clearance (The "Gauntlet")

Before the SEC issues the final Certificate of Dissolution, you must settle accounts with other agencies:

Bureau of Internal Revenue (BIR): This is the most rigorous step. You must file for a Tax Clearance. The BIR will audit the company’s books for the last three years to ensure all taxes have been paid.
Local Government Unit (LGU): You must retire your Business Permit at the City or Municipal Hall where your office is located.
Labor Department (DOLE): You must file a notice of termination of employees at least 30 days before the effective date, ensuring separation pay is settled according to the Labor Code.
Statutory Benefits: Clearances from SSS, PhilHealth, and Pag-IBIG are required to prove that all employee contributions were remitted.

Phase III: The SEC Final Filing

Once the BIR Tax Clearance is secured, you submit the following to the SEC:

Articles of Dissolution.
Affidavit of Publication (proof that the notice of dissolution was published in a newspaper for three consecutive weeks).
The Tax Clearance Certificate.

3. Liquidation: The 3-Year Wind-Down

Dissolution does not mean the company vanishes instantly. Under Section 139 of the RCC, a corporation continues to exist for three (3) years after dissolution for the sole purpose of:

Prosecuting and defending suits by or against it.
Settling and closing its affairs.
Disposing of and conveying its property.
Distributing its assets.

Important Note: During these three years, the corporation cannot continue the business for which it was established (e.g., it cannot enter into new sales contracts).

4. Order of Distribution of Assets

When liquidating, the corporation must follow a strict legal priority:

Preferred Creditors: Taxes due to the government and unpaid wages to employees.
Ordinary Creditors: Suppliers, lenders, and contractors.
Stockholders: Any remaining assets are distributed to stockholders in proportion to their shareholdings (unless preferred shares have specific liquidation preferences).

5. Potential Pitfalls

The "De Facto" Trap: Many owners simply stop operating and stop filing reports. This leads to the corporation being placed on "Delinquent Status" or revoked by the SEC. This does not legally end the entity and can lead to massive accumulated penalties for the directors and officers.
Piercing the Veil: If a corporation is dissolved to evade debts or defraud creditors, the courts may "pierce the corporate veil," making directors and stockholders personally liable for corporate debts.

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