SEC Issues Opinion Addressing Issues Regarding Liquidation, Certificate of Dissolution, Appointing Trustees, and Conveyance

On 18 April 2024, the Securities and Exchange Commission (“SEC”) Office of the General Counsel (“OGC”) issued SEC OGC Opinion No. 24-08 addressing issues related to liquidation beyond the 3-year winding-up period:

• Whether it is necessary for a corporation to request for a Certificate of Dissolution from the SEC even after the corporate term has expired.
• Can only one of the remaining directors take charge of winding up the corporation’s affairs? 
• Can the corporation use the alternative method of assigning its property to a “trustee” by legal implication, considering no such trustee was appointed during the 3-year period provided in Section 139 of the Revised Corporation Code?

Certificate of Dissolution is not required after the corporate term has expired

The SEC stated that once a corporation’s term has expired, the said corporate entity ceases to exist except insofar as to its liquidation or winding down of its business affairs and the settlement of the claim of its creditors is concerned.

Citing its earlier opinion, the SEC noted that upon the expiration of the corporate term, the corporation ceases to exist and is dissolved ipso facto. Consequently, a Certificate of Dissolution is no longer required after the corporate term has expired, as the corporation is automatically dissolved.

Therefore, a Certificate of Dissolution is unnecessary after the corporate term expires, as the corporation is dissolved by default.

Board of Directors as Trustees After Winding-Up Period

After the 3-year winding-up period expires without a trustee or receiver being appointed, the board of directors, by legal implication, acts as trustees to oversee the liquidation.

The Supreme Court, in the case of Clemente v. Court of Appeals, held that if the 3-year extended life has expired without a trustee or receiver being expressly designated by the corporation, the board of directors (or trustees) may continue as “trustees” by legal implication to complete the corporate liquidation. In the absence of a board of directors or trustees, those with any pecuniary interest in the assets, including shareholders and creditors, can make proper representations with the SEC for working out a final statement of the corporate concerns.

The SEC likewise previously opined that if the Board of Directors or a quorum thereof can still be convened, they should handle the winding up of the corporation without needing any additional proceedings.

Accordingly, the board of directors can legally act as trustees to oversee liquidation if no trustee or receiver is appointed within the 3-year winding-up period.

Conveyance to Trustee Must Be Made Within 3 Years

The conveyance to the trustee of the corporate assets for purposes of liquidation must be made within 3 years from the effective date of dissolution. Under Section 139 of the Revised Corporation Code, the conveyance to the trustee of the corporate assets for purposes of liquidation must be made within 3 years from the effective date of dissolution. 

Hence, corporate assets must be conveyed to a trustee within 3 years from the effective date of dissolution for liquidation purposes.