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Guidelines on Corporate Dissolution under Sections 134, 136, and 138 of the Revised Corporation Code

The Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 5 series of 2022 (“MC No. 5”)  to standardize the procedure on corporate dissolution found in the Revised Corporation Code (“RCC”). The Company Registration and Monitoring Department (“CRMD”) and SEC Extension Offices are the offices authorized to process corporate dissolution.

I. Voluntary dissolution under Section 134 of the RCC

If the dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution shall be initiated by filing, with the CRMD or SEC Extension Office, a verified request for dissolution in accordance with the required averments, signed by the corporation’s duly authorized representative.

The Verified Request for Dissolution shall contain a Certification Against Forum Shopping and shall be supported with the following documents:

  1. Notarized copy of the board resolution or directors’/trustees’ certificate authorizing the dissolution and designating an authorized representative to file the verified request for dissolution;
  2. Publisher’s affidavit of Publication of the Notice of Meeting;
  3. Latest due General Information Sheet (“GIS”);
  4. Audited Finance Statement (“AFS”) as of last fiscal year, except:
    1. Where the applicant has ceased operations of at least one (1) year, the applicant should submit:
      1. the AFS of the last year of operation; and 
      2. the Affidavit of Non-Operation certified under oath by the President and Treasurer;
    2. Where the applicant has no operation since incorporation, the applicant should submit:
      1. Balance sheet certified under oath by the Treasurer and President;
      2. Affidavit of Non-Operation certified under oath by the President and Treasurer; and
      3. Certificate of Non-Registration issued by the Bureau of Internal Revenue (“BIR”)
    3. Where the applicant corporation’s (stock or nonstock) total assets or liabilities amounts to less than Six Hundred Thousand Pesos (PHP 600,000.00), it shall submit its Balance Sheet as of the last preceding fiscal year certified under oath by the President and Treasurer.
  5. Affidavit executed under oath by the President and Treasurer that:
    1. The dissolution is not prejudicial to the interest of the creditors; and
    2. There is no opposition from any creditors from the time of publication of the notice of dissolution up to the filing of the dissolution with the SEC.
  6. BIR Tax Clearance Certificate;
  7. Notarized Secretary’s Certificate of no pending case involving intra-corporate dispute; and
  8. Clearance/ Favorable recommendation from other Departments of the SEC or from appropriate regulatory agency, when necessary. 

Withdrawal of request for dissolution

Within fifteen (15) days from receipt by the SEC of the Verified Request for Dissolution, a withdrawal of request for dissolution may be made by filing a Verified Withdrawal of Request for Dissolution. Upon receipt of a Verified Withdrawal of Request for Dissolution, the SEC shall withhold action on the request for dissolution and shall, after investigation:

  1. Make a pronouncement that the request for dissolution is deemed withdrawn; or
  2. Direct a joint meeting of the board of directors or trustees and the stockholders or member for the purpose of ascertaining whether to proceed with dissolution; or
  3. Issue such other orders as it may deem appropriate.

Should there be changes in the ownership, membership, and/or composition of the board of directors or trustees prior to the filing of withdrawal, supporting documentary evidence of such changes must be filed with the withdrawal of request for dissolution.

The verified withdrawal of request for dissolution shall contain an affidavit by any incorporator, director, trustees, shareholder, or member, which shall allege the following attestations:

  1. The allegations are true and correct based on his/her personal knowledge, or based on authentic documents;
  2. That it is not filed to harass, cause unnecessary delay, or needlessly increase the cost of regulation/or litigation; and
  3. The factual allegations therein have evidentiary support or, if specifically identified, will likewise have evidentiary support after reasonable opportunity for discovery.

After fifteen (15) days from receipt of the Verified Request for Dissolution, in the absence of any withdrawal within the said period, the SEC shall approve the request and issue the Certificate of Dissolution. The dissolution shall take effect only upon the issuance of the Certificate of Dissolution. 

II. Shortening of Corporate Term under Section 136 of the RCC

It must be noted that the proposed expiration of corporate term under Section 136 must contemplate a future date. The application shall be denied if the proposed expiration date had already lapsed at the time of filing of the application.

It must be noted that the proposed expiration of corporate term under Section 136 must contemplate a future date. The application shall be denied if the proposed expiration date had already lapsed at the time of filing of the application.

Where the proposed expiration is one year or more than one year from approval of the application of amendment under Corporate and Partnership Registration División (“CPRD”) of the CRMD or SEC Extension Office, the following documents must be submitted:

  1. Cover sheet;
  2. Notarized Directors’ Certificate signed by majority of the directors or trustees and the corporate secretary, attesting the following matters:
    1. The dissolution by shortening of corporate term was approved by majority of the board of directors/trustees and ratified by at least 2/3 vote of the stockholders representing the outstanding capital stock including the holders of non-voting shares/members of the corporation;
    2. The date and place of the stockholders’ or members’ meeting; and
    3. The tax identification number of the signatories which shall be placed under their names.
  3. Amended Articles of Incorporation;
  4. Compliance Monitoring Division (“CMD”) Monitoring Clearance;
  5. Notarized Secretary’s Certificate of no pending case involving intra-corporate dispute; and 
  6. Clearance/favorable recommendation from other Departments of the Commission or from the appropriate regulatory agency when necessary.

On the other hand, where the proposed expiration is less than one year from approval of the application for amendment under Financial Analysis and Audit Division (“FAAD”) of CRMD or SEC Extension Office, the applicant should submit the following documents:

  1. Cover sheet;
  2. Notarized Directors’ Certificate signed by majority of the directors or trustees and the corporate secretary, attesting the following matters:
    1. The dissolution by shortening of corporate term was approved by majority of the board of directors/trustees and ratified by at least 2/3 vote of the stockholders representing the outstanding capital stock including the holders of non-voting shares/members of the corporation;
    2. The date and place of the stockholders’ or members’ meeting; and
    3. The tax identification number of the signatories which shall be placed under their names.
  3. Amended Articles of Incorporation;
  4. The AFS as of the last fiscal year, except:
    1. Where the applicant has ceased operations of at least one (1) year, the applicant should submit:
      1. the AFS of the last year of operation; and 
      2. the Affidavit of Non-Operation certified under oath by the President and Treasurer;
    2. Where the applicant has no operation since incorporation, the applicant should submit:
      1. Balance sheet certified under oath by the Treasurer and President;
      2. Affidavit of Non-Operation certified under oath by the President and Treasurer; and
      3. Certificate of Non-Registration issued by the Bureau of Internal Revenue (“BIR”)
    3. Where the applicant corporation’s (stock or nonstock) total assets or liabilities amounts to less than Six Hundred Thousand Pesos (PHP 600,000.00), it shall submit its Balance Sheet as of the last preceding fiscal year certified under oath by the President and Treasurer.
  5. Affidavit executed under oath by the President and Treasurer that:
    1. The dissolution is not prejudicial to the interest of the creditors;
    2. There is no opposition from any creditors from the time of publication of the notice of dissolution up to the filing of the dissolution with the SEC;
  6. BIR Tax Clearance Certificate;
  7. Publisher’s Affidavit of Publication of the Notice of Meeting;
  8. Notarized Secretary’s Certificate of no pending case involving intra-corporate dispute; and
  9. Clearance/favorable recommendation from other Departments of the SEC or from the appropriate regulatory agency, when necessary.

If the SEC approves the amended AOI, the corporation shall be deemed dissolved upon the expiration of the shortened term, without any further proceedings, subject to the provisions on liquidation. Dissolution shall automatically take effect on the day following the last day of the corporate term without the need for the issuance of a certificate of dissolution.

III. Involuntary Dissolution under Section 138 of the RCC and Section 6(i) of Presidential Decree 902-A 

The SEC may, motu proprio, or upon filing of a verified complaint by any interested party, dissolve a corporation based on the following grounds:

Under Sec. 138 of the RCC:

  1. Non-use of corporate charter; 
  2. Continuous inoperation of a corporation;
  3. Upon receipt of a lawful court order dissolving the corporation;
  4. Upon finding by final judgment that the corporation procured its incorporation through fraud; and
  5. Upon finding by final judgment that the corporation:
    1. 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;
    2. Committed or aided in the commission of the above illegal acts, and its stockholders knew; and
    3. Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers, or employees.

However, when another agency or tribunal has been identified by law as the primary regulator, investigative or administrative body for specific cases, all complaints or petitions for revocation based on the commission of acts in ( e) of item C above shall be endorsed to said agency or tribunal. 

Under Sec. 6(i) of PD 902-A:

  1. Fraud in procurement of certificate of registration; and
  2. Failure to file or register, for a period of at least five (5) years: 1) Financial Statements; 2) GIS; or 3) Stock and Transfer Book or Membership Book.

Verified complaints filed by interested parties based on the foregoing grounds must be submitted to the CRMD and SEC Extension Offices, along with the following documents:

  1. Certificate against Forum Shopping;
  2. Secretary’s Certificate authorizing the filing of the complaint, if filed by a corporation; and
  3. Affidavits and other documentary evidence.

If the involuntary dissolution was commenced by the Commission motu proprio, the provisions on investigation proceedings and administrative actions under Part II of the 2016 Rules of Procedure of the SEC shall apply. On the other hand, if the involuntary dissolution was filed through a verified complaint/petition, the provisions on adjudicative actions under Part III of above Rules of Procedure shall apply. 

Should dissolution be ordered by final judgment, the assets, after payment of liabilities, shall be forfeited in favor of the national government, upon petition of the SEC with the appropriate court, without prejudice to the rights of innocent stockholders and employees for services rendered, and to the application of other penalty or sanction under the RCC or other laws. 

The SEC shall give reasonable notice to, and coordinate with, the appropriate regulatory agency prior to the involuntary dissolution of companies under their special regulatory jurisdiction. 

Other SEC Rules of Procedure and other relevant rules and regulations promulgated by the SEC shall be complied with as far as practicable.
The full text of MC No. 5 shall be accessed here.