SEC drafts guidelines on corporate dissolution

YIBEI GENG /UNSPLASH

THE Securities and Exchange Commission (SEC) has released a draft memorandum circular covering the guidelines for corporate dissolution either voluntarily or involuntarily, as well as through the shortening of the corporate term.

The proposed circular, which outlines the rules and documentary requirements for corporate dissolution, does not cover banks, banking, and quasi-banking institutions.

It also does not cover preneed, insurance and trust companies, non-stock savings and loan associations, pawnshops, and other financial intermediaries, unless their dissolution is accompanied by “a favorable recommendation of the appropriate government agency.”

Should no creditor be affected, corporate entities voluntarily dissolving must submit a verified request for dissolution and a verification and certification against forum shopping.

“The voluntary dissolution of a corporation, where none of its creditors are affected, shall be initiated by filing a verified request for dissolution, signed by a duly authorized representative, with the Company Registration and Monitoring Department or SEC Extension Office,” the commission said.

The verified request for dissolution must include details such as the corporation’s name, SEC registration number, and the address of its head office, as well as details of the authorized representative.

It should include the reason for dissolution, and the form, time, and manner of how the notices were given to each shareholder or member.

The verified request should also give details of the names of the stockholders, directors, or members and trustees who approved of the dissolution.

Verification and certification against forum shopping will be submitted via an affidavit signed by the corporation’s authorized representative, stating that all of the documents and information presented in the verified request for dissolution “are true and correct based on his or her personal knowledge.”

Documents supporting the request should also be submitted.

“Within 15 days from receipt of the verified request for dissolution including complete and correct supporting documents and in the absence of any withdrawal within said period, the commission shall approve the request and issue the Certificate of Dissolution,” the SEC said.

The dissolution of the company will only take place once the certificate has been issued.

Meanwhile, should creditors be affected by the voluntary dissolution of a corporate entity, a verified petition must first be filed with the Office of the General Counsel.

The request and petition for corporate dissolution may be withdrawn within 15 days from the commission’s receipt of the verified request.

“A withdrawal of the said request may be made in writing, duly verified by any incorporator, director, trustee, shareholder, or member, and signed by the majority of the directors or trustees, and at least majority of the outstanding capital stock or majority of the members who voted for the dissolution of the corporation,” the commission added.

A corporation may also be dissolved by shortening its corporate term through amending its articles of incorporation pursuant to the provisions of the Revised Corporation Code (RCC).

Once the end of the shortened term is reached, “the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this code on liquidation.”

A certificate of dissolution from the commission will not be needed.

Corporate entities may be involuntarily dissolved through a verified complaint based on Section 138 of the RCC.

The provision details that a company may be involuntarily dissolved for the following reasons, namely: it does not adhere to the RCC’s corporate charter, for continuous inoperation, it was served a lawful court order dissolving the corporation, it was found to have been incorporated through fraud, and if it was proven to be created for illegal activities.

Assets of the company will be forfeited, if the complaint based on the rules of involuntary dissolution is proven.

“Such forfeiture shall be 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 of other laws,” the commission said.

Supporting documents must be submitted to the SEC’s Company Registration and Monitoring Department and SEC Extension Office.

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

The commission is accepting comments regarding the proposed guidelines on corporate dissolution. Inputs may be e-mailed to Atty. Eunice G. Dalisay-Salazar via mail to: egdsalazar@sec.gov.ph. A copy of the draft memorandum circular is published on the SEC website. — Keren Concepcion G. Valmonte