I. Overview

Dissolving a non-stock nonprofit corporation in the Philippines is not merely a matter of stopping operations, closing the office, or informing members that the organization has ended. A Philippine nonprofit organized as a non-stock corporation continues to exist until it is properly dissolved under the Revised Corporation Code of the Philippines, its tax registration is closed with the Bureau of Internal Revenue, and its local and regulatory registrations are cancelled where applicable.

A non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers; any incidental profit must be used to further the purposes for which the corporation was organized. (ChanRobles) This definition matters because dissolution of a nonprofit is governed not only by the general rules on corporate dissolution, but also by special rules on the distribution of assets of non-stock corporations.

In practical terms, dissolution usually involves four layers:

Internal corporate approval by the board of trustees and members;
SEC dissolution or amendment process;
Liquidation and asset distribution;
Tax, local government, labor, donor, and regulatory closure.

II. Legal Nature of a Non-Stock Nonprofit Corporation

A non-stock nonprofit corporation has no capital stock and does not distribute profits as dividends. Its members do not own shares in the way stockholders do. Their rights are generally governed by the articles of incorporation, bylaws, membership rules, and the Revised Corporation Code.

A nonprofit may be organized for charitable, religious, educational, civic, cultural, scientific, social welfare, professional, trade, industry, agricultural, recreational, or similar purposes. The word “nonprofit” does not mean the corporation cannot receive money, earn income, own property, pay salaries, or accumulate surplus. It means that income or surplus may not be distributed as private profit to members, trustees, or officers, and must instead be used for the corporation’s stated purposes.

This distinction becomes critical upon dissolution. Members do not automatically receive the remaining property of the nonprofit. The assets must first satisfy liabilities, donor restrictions, return conditions, statutory restrictions, and any valid plan of distribution.

III. Modes of Dissolution

The Revised Corporation Code recognizes voluntary and involuntary dissolution. Section 133 provides that a corporation may be dissolved voluntarily or involuntarily. (Tax Accounting Center) For a non-stock nonprofit, the relevant voluntary methods are usually:

A. Voluntary dissolution where no creditors are affected

This is used when the nonprofit has no unpaid creditors whose rights will be prejudiced by the dissolution. It is generally the simplest route.

Under Section 134, dissolution may be effected by:

majority vote of the board of trustees; and
approval by majority of the members in a meeting called for that purpose. (P&L Law Firm | Philippines)

At least 20 days before the members’ meeting, notice must be given to each member of record, and the notice must state that the purpose of the meeting is to vote on dissolution. Notice of the time, place, and object of the meeting must also be published once before the meeting in a newspaper published where the principal office is located, or if none, in a newspaper of general circulation in the Philippines. (P&L Law Firm | Philippines)

The corporation then files a verified request for dissolution with the SEC, together with the required resolutions, proof of publication, and, where necessary, a favorable recommendation from the appropriate regulatory agency. The SEC issues the certificate of dissolution if the requirements are met and no proper withdrawal is made. Dissolution takes effect only upon issuance of the SEC certificate of dissolution. (P&L Law Firm | Philippines)

B. Voluntary dissolution where creditors are affected

This applies when the corporation has creditors or obligations that may be prejudiced by dissolution. Under Section 135, a verified petition for dissolution must be filed with the SEC. The petition must be signed by a majority of the board of trustees, verified by the president, secretary, or a trustee, and must set forth all claims and demands against the corporation. Approval requires at least two-thirds of the members at a meeting called for that purpose. (P&L Law Firm | Philippines)

If the petition is sufficient, the SEC fixes a deadline for objections, which must be not less than 30 days and not more than 60 days after entry of the SEC order. The order must be published once a week for three consecutive weeks and posted for three consecutive weeks in three public places in the city or municipality where the principal office is located. The SEC may hear objections and, if appropriate, render judgment dissolving the corporation and directing the disposition of assets, including appointment of a receiver where necessary. (P&L Law Firm | Philippines)

C. Dissolution by shortening the corporate term

A nonprofit corporation may voluntarily dissolve by amending its articles of incorporation to shorten its corporate term. Upon expiration of the shortened term, the corporation is deemed dissolved without further proceedings, subject to liquidation rules. (P&L Law Firm | Philippines)

This method is often used where the corporation wants a definite end date and prefers to dissolve through an amendment rather than through a petition-type proceeding. SEC Memorandum Circular No. 5, Series of 2022 standardized procedures for dissolution, including voluntary dissolution, shortening of corporate term, and involuntary dissolution. (Philippine News Agency)

D. Involuntary dissolution

The SEC may dissolve a corporation motu proprio or upon verified complaint by an interested party. Grounds include non-use of corporate charter, continuous inoperation, lawful court order, fraudulent incorporation, or use of the corporation for unlawful purposes such as securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices. (P&L Law Firm | Philippines)

Involuntary dissolution is not the ordinary path for a nonprofit that simply wishes to wind up. It is usually regulatory, punitive, or creditor/member-driven.

IV. Preliminary Matters Before Dissolution

Before filing anything with the SEC, the trustees should conduct a legal and financial review.

A. Review the articles and bylaws

The corporation should examine:

voting rights of members;
quorum requirements;
notice periods;
special voting thresholds;
restrictions on disposition of assets;
donor or founder rights;
provisions on dissolution;
provisions on the distribution of remaining assets;
requirements for special meetings;
proxy, remote voting, or in absentia voting rules.

For non-stock corporations, membership rights are personal and nontransferable unless the articles or bylaws provide otherwise. Termination of membership extinguishes rights in the corporation or its property unless otherwise provided. (ChanRobles)

B. Determine who the voting members are

A common problem in nonprofit dissolution is uncertainty over who may vote. The corporation should update its membership records and determine:

members in good standing;
members with voting rights;
members whose rights are suspended or terminated;
proxies authorized under the bylaws;
classes of members, if any;
quorum requirements.

The Revised Corporation Code requires non-stock corporations to keep a list of members and proxies, updated to reflect members and proxies of record before scheduled elections. (ChanRobles) While that provision specifically refers to elections, sound practice is to maintain reliable membership records for any major corporate act, including dissolution.

C. Determine whether creditors are affected

The corporation must classify its liabilities, including:

loans;
unpaid rent;
salaries and benefits;
separation pay or final pay;
tax obligations;
professional fees;
supplier accounts;
utilities;
lease restoration obligations;
grants subject to refund;
unliquidated advances;
pending claims;
lawsuits or threatened claims.

If creditors exist but will be fully paid or adequately provided for before dissolution, the corporation may still be able to proceed under the “no creditors affected” route. If dissolution may prejudice creditors, the safer route is the petition procedure under Section 135.

D. Identify restricted assets

Nonprofits often hold funds or property subject to restrictions. These include:

donations restricted to a specific project;
grant funds with unspent balances;
property donated on condition that it be returned if the project ends;
endowment funds;
assets held for charitable, religious, educational, benevolent, or similar purposes;
government grants;
funds raised from the public for a specific cause.

Restricted funds cannot simply be distributed to members or used to pay unrelated obligations if the restriction prohibits such use.

V. Board and Member Approval

The board of trustees should first meet and approve the proposed dissolution. The board resolution should ideally state:

the reason for dissolution;
the recommended mode of dissolution;
whether creditors are affected;
authority to call a members’ meeting;
authority to publish notices;
authority to sign and file SEC documents;
authority to appoint liquidators, if applicable;
approval or recommendation of a plan of distribution;
authority to close BIR, LGU, bank, employer, and other registrations.

The members’ meeting should be properly called. The notice should clearly state that dissolution is on the agenda. For dissolution where no creditors are affected, approval by a majority of the members is required. For dissolution where creditors are affected, approval by at least two-thirds of the members is required. (P&L Law Firm | Philippines)

Minutes should be carefully prepared. The minutes should show notice, quorum, voting results, objections, abstentions, approval of dissolution, and approval of related matters such as liquidation and asset distribution.

VI. SEC Requirements and Filing

The filing depends on the mode of dissolution.

A. If no creditors are affected

The usual SEC filing includes:

verified request for dissolution;
board resolution approving dissolution;
members’ resolution approving dissolution;
proof of notice to members;
proof of publication;
secretary’s certificate;
affidavit that dissolution will not prejudice creditors;
statement that there are no creditor objections;
latest general information sheet and financial statements, where required;
favorable endorsement from a supervising agency, where applicable.

SEC Memorandum Circular No. 5, Series of 2022 requires applications for voluntary dissolution where no creditors are affected to be filed with the SEC Company Registration and Monitoring Department or the appropriate SEC Extension Office. The verified request must include corporate information, the reason for dissolution, notice details, approving members and trustees, and a statement concerning pending intra-corporate disputes, among others. (Philippine News Agency)

B. If creditors are affected

The filing is more formal and adversarial. The petition must disclose claims and demands and include the list of creditors. The SEC may require publication, posting, hearings, and may appoint a receiver. (P&L Law Firm | Philippines)

C. If by shortening corporate term

The corporation amends its articles of incorporation to shorten the corporate term. The amendment must be approved in accordance with the Revised Corporation Code and filed with the SEC. Upon expiration of the shortened term, the corporation is deemed dissolved, subject to liquidation. (P&L Law Firm | Philippines)

VII. When Dissolution Takes Effect

For voluntary dissolution under Sections 134 and 135, dissolution takes effect only upon issuance by the SEC of a certificate of dissolution. (P&L Law Firm | Philippines)

For dissolution by shortening the corporate term, dissolution takes effect upon expiration of the shortened term stated in the approved amended articles of incorporation. No separate SEC certificate of dissolution is required for the expiration itself, but liquidation obligations remain. (P&L Law Firm | Philippines)

This distinction is important. A nonprofit that merely passes a board resolution or stops operating is not yet dissolved.

VIII. Liquidation and Winding Up

Dissolution is not the same as liquidation. Dissolution ends or begins the end of corporate existence; liquidation winds up the corporation’s affairs.

During winding up, the nonprofit should:

collect receivables;
sell or transfer assets as authorized;
settle liabilities;
terminate leases;
close programs;
notify donors and grantors;
complete reports;
pay employees;
file tax returns;
close bank accounts;
distribute remaining assets according to law;
preserve corporate records.

The corporation should avoid new activities unrelated to winding up. It should not start new programs or incur new obligations except those necessary to liquidate, preserve assets, comply with law, and close its affairs.

IX. Distribution of Assets of a Non-Stock Nonprofit

This is the most distinctive part of dissolving a nonprofit.

Under Section 93 of the Revised Corporation Code, the assets of a dissolving non-stock corporation must be applied and distributed in this order:

First, all liabilities and obligations must be paid, satisfied, discharged, or adequately provided for. (ChanRobles)

Second, assets held on a condition requiring return, transfer, or conveyance upon dissolution must be returned, transferred, or conveyed according to that condition. (ChanRobles)

Third, assets received and held subject to limitations permitting their use only for charitable, religious, benevolent, educational, or similar purposes must be transferred to one or more corporations, societies, or organizations engaged in substantially similar activities in the Philippines, according to a valid plan of distribution. (ChanRobles)

Fourth, other assets may be distributed according to the articles of incorporation or bylaws if these documents determine distributive rights or provide for distribution. (ChanRobles)

Fifth, in any other case, assets may be distributed to such persons, societies, organizations, or corporations, whether or not organized for profit, as specified in a plan of distribution adopted under the Code. (ChanRobles)

Plan of distribution

A plan of distribution may be adopted by:

majority vote of the board of trustees recommending the plan and submitting it to voting members;
written notice to each voting member containing the proposed plan or summary; and
approval by at least two-thirds of the voting members present or represented by proxy at the meeting. (ChanRobles)

For a nonprofit, the safest practice is to transfer remaining charitable or restricted assets to another Philippine nonprofit with substantially similar purposes, especially if the assets came from donations, grants, public fundraising, or tax-exempt activities.

X. Tax Closure With the BIR

SEC dissolution does not automatically close BIR registration. A dissolved or inactive corporation may continue to receive tax notices, open cases, and penalties if its BIR registration remains active.

The corporation should file for cancellation of registration or closure of business with the Revenue District Office where it is registered. Common requirements include BIR Form 1905, letter-request for closure, original Certificate of Registration, books of accounts, inventory of unused receipts or invoices, unused receipts or invoices for cancellation, and board resolution or notice of dissolution for corporations. (Forms Philippines)

The nonprofit should also prepare:

final income tax return or short-period return;
final withholding tax returns;
final VAT or percentage tax returns, if applicable;
final alphalists;
audited financial statements, if required;
proof of payment of open cases;
proof of cancellation of invoices/receipts;
tax clearance or closure confirmation.

If the nonprofit had tax exemption, donee institution status, VAT issues, withholding obligations, employees, or grant income, the tax closure should be handled carefully. Tax exemption does not mean exemption from all filing and withholding obligations.

XI. Local Government Closure

If the nonprofit had a mayor’s permit, barangay clearance, office, signage, or local business registration, it should close with the city or municipality. Requirements vary by local government unit, but commonly include:

letter of closure;
board resolution;
barangay clearance;
latest mayor’s permit;
proof of payment of local taxes and fees;
inspection clearance, if required;
BIR closure documents or proof of SEC dissolution, depending on LGU practice.

Failure to close with the LGU may result in continuing local assessments, penalties, or difficulty securing future clearances.

XII. Employees and Labor Obligations

If the nonprofit has employees, dissolution usually results in authorized termination due to closure or cessation of operations. The organization should comply with the Labor Code, DOLE rules, employment contracts, and company policies.

Key matters include:

written notice to affected employees;
notice to DOLE where required;
final pay;
unpaid salaries;
proportionate 13th month pay;
unused leave benefits if convertible to cash;
separation pay if legally or contractually required;
release, quitclaim, and clearance documents;
SSS, PhilHealth, and Pag-IBIG reporting;
certificates of employment.

Closure due to serious business losses may have different separation pay consequences from closure not due to losses. Nonprofits should obtain specific labor advice before issuing termination notices.

XIII. Donors, Grantors, Beneficiaries, and Restricted Programs

A nonprofit must treat donor and grant obligations seriously. Before dissolution, it should review:

grant agreements;
donation deeds;
memoranda of agreement;
government funding contracts;
project liquidation reports;
unspent funds;
equipment purchased with grant money;
reporting deadlines;
clawback or refund provisions;
intellectual property or data obligations.

If a donation was made for a restricted purpose, the remaining funds should not be diverted unless the donor, grant agreement, court, or applicable law permits it. If a grant requires return of unused funds, the corporation must return them before distributing any residual assets.

XIV. Regulatory Endorsements and Special Nonprofits

Some non-stock nonprofits are subject to additional regulators. Examples include:

schools and educational institutions;
religious corporations;
foundations with SEC or tax-related accreditation concerns;
NGOs with Philippine Council for NGO Certification accreditation;
social welfare organizations;
health-related nonprofits;
homeowners’ associations;
cooperatives, which are not ordinary non-stock corporations;
entities with government grants or permits;
corporations vested with public interest.

The SEC may require a favorable recommendation from the appropriate regulatory agency in certain cases. Section 134 expressly requires favorable recommendation for specified regulated entities such as banks, quasi-banks, preneed, insurance and trust companies, NSSLAs, pawnshops, and other financial intermediaries. (P&L Law Firm | Philippines) While most nonprofits are not in those categories, sector-specific endorsements may still arise from special laws, licenses, or grant conditions.

XV. Pending Cases, Claims, and Intra-Corporate Disputes

A nonprofit should check whether it has:

pending SEC cases;
intra-corporate disputes;
labor cases;
civil cases;
tax audits;
donor disputes;
collection cases;
administrative complaints;
unresolved board or membership controversies.

SEC dissolution filings may require statements about pending intra-corporate disputes. (Philippine News Agency) If there are pending claims, dissolution may need to proceed under the creditor-affected route or with adequate provision for the claim.

XVI. Records Preservation

Even after dissolution, the corporation should preserve records for legal, tax, audit, donor, and regulatory purposes. These include:

articles and bylaws;
board and member minutes;
notices and proofs of service;
SEC filings;
tax returns;
books of accounts;
audited financial statements;
payroll records;
grant agreements;
donation records;
asset transfer documents;
bank statements;
liquidation reports;
employment records;
BIR and LGU closure documents.

The board should designate a custodian of records and ensure records remain accessible if later required by the SEC, BIR, courts, donors, or former employees.

XVII. Practical Step-by-Step Checklist

Step 1: Conduct a legal and financial review

Identify members, trustees, creditors, employees, assets, liabilities, donor restrictions, tax obligations, and pending disputes.

Step 2: Decide the mode of dissolution

Use voluntary dissolution without creditors if no creditor rights will be prejudiced. Use the creditor-affected procedure if claims exist or may be prejudiced. Consider shortening the corporate term if appropriate.

Step 3: Prepare board documents

Draft the board resolution approving dissolution, authorizing the members’ meeting, approving notices, and appointing authorized representatives.

Step 4: Notify members and publish notice

Serve notices at least 20 days before the meeting where required. Publish the meeting notice as required by the Revised Corporation Code.

Step 5: Hold the members’ meeting

Secure the required vote. Prepare minutes, attendance, proxies, ballots, and secretary’s certificate.

Step 6: Prepare the plan of distribution

For non-stock nonprofits, adopt a plan of distribution if assets remain after liabilities. Obtain board approval and two-thirds member approval where required.

Step 7: File with the SEC

Submit the verified request, petition, or amended articles depending on the mode of dissolution.

Step 8: Liquidate

Collect receivables, pay liabilities, settle employees, close projects, sell or transfer assets, and prepare liquidation accounts.

Step 9: Close with the BIR

File BIR closure documents, settle open cases, cancel receipts and invoices, file final returns, and secure closure or clearance.

Step 10: Close LGU and other registrations

Cancel mayor’s permit, barangay clearance, employer registrations, licenses, accreditations, and bank accounts.

Step 11: Preserve records

Designate a records custodian and keep dissolution, tax, labor, donor, and accounting records.

XVIII. Common Mistakes

The most common mistakes are:

treating non-operation as dissolution;
failing to secure member approval;
using the wrong voting threshold;
ignoring creditor claims;
distributing assets to members without checking Section 93;
failing to honor donor restrictions;
closing SEC registration but leaving BIR registration active;
failing to cancel unused receipts and invoices;
ignoring employee separation obligations;
failing to close LGU permits;
dissolving while intra-corporate disputes remain unresolved;
failing to preserve books and records.

XIX. Legal Effect of Dissolution

Once dissolved, the corporation may no longer carry on its ordinary activities. Its remaining authority is generally limited to winding up, liquidation, settlement of debts, distribution of remaining assets, and acts necessary to close its affairs.

Dissolution does not erase liabilities. Creditors, employees, the BIR, donors, and regulators may still pursue claims against the corporation’s remaining assets, and in some cases against responsible officers or trustees if there is fraud, bad faith, unlawful distribution, tax liability, or violation of fiduciary duties.

XX. Conclusion

Dissolving a non-stock nonprofit corporation in the Philippines requires more than an SEC filing. It is a coordinated legal, tax, accounting, labor, donor, and governance process. The trustees must secure proper board and member approvals, determine whether creditors are affected, comply with SEC procedures, liquidate assets in the statutory order, respect donor restrictions, close BIR and LGU registrations, settle employees, and preserve records.

The most important rule is that nonprofit assets are not private property of the members. Upon dissolution, liabilities come first, restricted assets must follow their restrictions, charitable or similar assets generally go to organizations with substantially similar purposes in the Philippines, and any residual distribution must follow the articles, bylaws, and a properly approved plan of distribution.