In the Philippine jurisdiction, a Representative Office (RO) is a foreign corporation that does not derive income from the Philippines and is fully subsidized by its head office. While setting up an RO is a streamlined process, "winding up" or dissolving one is a rigorous procedure involving multiple government regulatory bodies. Failure to formally dissolve a Representative Office can lead to the "blacklisting" of the foreign corporation and its directors, as well as the accumulation of heavy administrative fines.
The process is governed primarily by the Revised Corporation Code of the Philippines (RCC) and the implementing rules of the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR).
1. Corporate Authorization and Notice
The first step occurs within the foreign corporation (the Head Office). The Board of Directors must convene and pass a resolution authorizing the withdrawal of the license to operate a Representative Office in the Philippines.
- Board Resolution: Must explicitly state the intent to close the RO and appoint an authorized representative (Attorney-in-Fact) to handle the dissolution process.
- Authentication/Apostille: Since this document is executed abroad, it must be Apostilled (if the country is a member of the Hague Convention) or authenticated by the Philippine Consulate in the home country.
- Notice to the SEC: A formal notice of the intent to dissolve should be filed with the SEC to put the regulator on notice.
2. Tax Clearance: The Bureau of Internal Revenue (BIR)
The most time-consuming and critical phase of dissolution is obtaining a Tax Clearance Certificate. Even though a Representative Office is non-income-generating, it is still a registered taxpayer for withholding taxes (on employee compensation and office rentals).
Key Requirements for BIR Closure:
- Form 1905: Application for Registration Information Update (Closure of Business).
- Inventory of Unused Receipts: All unused Official Receipts (ORs) and invoices must be surrendered to the BIR for destruction.
- Audit of Books: The BIR will conduct an audit of the RO’s books of accounts for the last three years (or since inception) to ensure all withholding taxes were correctly remitted.
- Payment of Final Taxes: Any outstanding assessments or "open cases" (unfiled returns) must be settled.
- Submission of Board Resolution: A copy of the Apostilled resolution authorizing closure.
Only after a successful audit will the BIR issue the Tax Clearance Certificate, which is a mandatory prerequisite for the SEC.
3. Labor Compliance and Employee Separation
Under the Labor Code of the Philippines, the closure of a business is a legal ground for the termination of employment.
- 30-Day Notice: The RO must provide a written notice to the employees and the Department of Labor and Employment (DOLE) at least one month before the intended date of closure.
- Separation Pay: Employees are entitled to separation pay equivalent to at least one-half (1/2) month pay for every year of service, unless the closure is due to serious business losses (which is rarely applicable to an RO since it is subsidized).
- Quitclaims: It is standard practice to have employees sign a "Waiver, Release, and Quitclaim" upon receipt of their final pay and separation benefits to prevent future labor litigation.
4. Local Government Unit (LGU) and Statutory Agencies
The RO must cancel its registrations at the local level and with social agencies:
- Mayor’s Permit: The business permit must be retired at the City Hall where the office is located. This usually requires a final assessment of local business taxes.
- Statutory Benefits: The RO must notify and cancel its employer accounts with:
- Social Security System (SSS)
- Philippine Health Insurance Corporation (PhilHealth)
- Home Development Mutual Fund (Pag-IBIG)
5. SEC Petition for Withdrawal of License
Once the Tax Clearance is secured, the RO files a Petition for Withdrawal of License with the SEC.
Mandatory SEC Exhibits:
- Petition for Withdrawal: Signed under oath by the authorized representative.
- Tax Clearance Certificate: Issued by the BIR.
- Affidavit of Publication: The RO must publish a notice of its intent to withdraw its license in a newspaper of general circulation once a week for three (3) consecutive weeks.
- Affidavit of No Objection: A sworn statement that there are no pending claims or creditors against the RO in the Philippines.
- Audited Financial Statements (AFS): The latest AFS of the RO, showing no remaining liabilities.
6. Issuance of the Certificate of Withdrawal
The SEC will review the petition and all supporting documents. If the Commission finds that the withdrawal of the license is not prejudicial to the rights of any Philippine creditor, it will issue a Certificate of Withdrawal of License.
At this point, the Representative Office is legally dissolved, and its personality to operate in the Philippines is officially terminated.
Summary Table: Sequence of Events
| Phase | Agency | Key Document |
|---|---|---|
| I. Authorization | Home Country | Apostilled Board Resolution |
| II. Labor | DOLE / Employees | 30-Day Notice & Separation Pay |
| III. Tax | BIR | Tax Clearance Certificate |
| IV. Local | LGU (City Hall) | Certificate of Retirement of Business |
| V. Socials | SSS, PhilHealth, HDMF | Notice of Cessation of Operations |
| VI. Final | SEC | Certificate of Withdrawal of License |
Legal Consequences of Improper Dissolution
It is common for foreign companies to simply "abandon" an RO without following these steps. This is a high-risk strategy. The SEC and BIR maintain databases of directors and officers. Failure to formally close the office results in:
- Administrative Penalties: Continuing fines for non-filing of annual reports.
- Blacklisting: The foreign corporation and its designated officers may be barred from registering new entities in the Philippines in the future.
- Judicial Action: Potential civil suits from remaining creditors or employees if liabilities are not properly settled.