Published 4 April 2022, The Daily Tribune
In the last article, we focused on the guidelines on voluntary dissolution of a corporation. We now tackle the guidelines on involuntary dissolution and dissolution by shortening of corporate term.
For involuntary dissolution, Section 138 of the Revised Corporation Code (RCC) provides that the Securities and Exchange Commission (SEC) may motu proprio, or upon filing of a verified complaint by any interested party, dissolve a corporation for the following grounds: Non-use of their corporate charter; continuous inoperation of the corporation; 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 upon finding by a final judgment that the corporation 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; committed or aided in such acts, and its stockholders knew; and repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers, or employees.
As mentioned in the previous article, the newly issued guidelines provide that the dissolution of corporations shall pass through the SEC Company Registration and Monitoring Department (CRMD) or the SEC Extension Offices (EO).
Thus, interested parties who want to file for a corporation’s dissolution must submit to the CRMD and EO a verified complaint or petition; certificate against forum shopping; secretary’s certificate authorizing the filing of the complaint if filed by the corporation; and affidavits and other documentary evidence to support the claim.
The guidelines distinguish the rules of procedure to be applied depending on how involuntary dissolution is commenced or initiated. It provides that the provisions on investigation proceedings and administrative actions under the SEC’s 2016 rules of procedure shall be applied where the dissolution was commenced by the SEC motu proprio. The provisions on adjudicative actions under the commission’s 2006 rules of procedure shall be applied, in turn, in involuntary dissolution instituted through a verified complaint or petition.
For the last mode of dissolution, a corporation may be dissolved by shortening its corporate term through amending its articles of incorporation pursuant to the provisions of the RCC.
The guidelines provide that with respect to amendments to the corporate term made more than one year from its proposed expiration, corporations must submit to the CRMD Corporate and Partnership Registration Division or the concerned EO a notarized directors’ certificate attesting the approval of by the majority of the board and ratified by at least two-thirds of the stockholders representing the outstanding capital stock, including holders of non-voting shares/members and the amended articles of incorporation, among others.
With respect to amendments to the corporate term made less than one year from its proposed expiration, the application must be made with the Financial Analysis and Audit Division of the CRMD or the concerned EO.
Similar to the guidelines on voluntary dissolution, a corporation must also provide supporting documents such as its audited financial statements and tax clearance certificate from the Bureau of Internal Revenue, among others.
Furthermore, 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 filling with the SEC.
The RCC distinguishes the effectivity of dissolution in case of expiration of shortened term and expiration of the original term. Upon the expiration of the shortened term, as stated in the approved amended articles of incorporation, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of the RCC on liquidation.
In the case of expiration of corporate term, dissolution shall automatically take effect on the day following the last day of the corporate term stated in the articles of incorporation, without the need for the issuance by SEC of a certificate of dissolution.
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