Dissolution and Liquidation of Corporations in the Philippines Not Not all all corp corpor orat atio ions ns are are succ succes essf sful ul in its its busi busine ness ss oper operat atio ions ns in the the Philippines and not all domestic corporations in the Philippines are meant forever. Like humans, corporate life comes to an end and this is what is techni technical cally ly referre referred d to as dissolu dissolutio tion n and liquida liquidatio tion. n. Dissolu Dissolutio tion n in the Phil Philip ippi pine nes s is the the stag stage e of term termin inat atin ing g the the life life of a corp corpor orat atio ion n and and liqui liquida dati tion on in the the Phili Philipp ppin ines es is the the proc proces ess s of wi wind ndin ing g up the the aai aairs, rs, settlement of corporate obligations debts and distribution of remaining corporate assets through liquidating dividends in the Philippines. Dissolution of a corporation in the Philippines under the !orporation !ode of the the Phili Philipp ppin ines es "#at "#atas as #a #amb mban ansa sa #il #ilan ang g $% or #P No. No. $%& $%& coul could d be involuntary upon 'ecurities and ()change !ommission*s "'(!& complaint coupled with a prescribed process of notice and hearing or voluntary based on the application of the corporation with the '(!. +oluntary dissolution of corporation in the Philippines come in a number of ways as follows -.
+olun olunta tary ry dis disso solu luti tion on whe where re no no cred credit itor ors s are are aec aecte ted d
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+olun olunta tary ry dis disso solu luti tion on whe where re cre credi dito tors rs are are ae aect cted ed or
0.
Diss Dissol olut utio ion n by by sho short rten enin ing g cor corp porat orate e ter term m
1f the above ways of dissolving a domestic corporation in the Philippines, the most common is the dissolution be shortening corporate term. 2pon appr approv oval al of the the '( '(! ! of the the amen amende ded d arti articl cles es of inco incorp rpor orat atio ion n wi with th the the shor shorten tened ed corp corpor orat ate e term term,, the the corp corpor orat atio ion n shal shalll be deem deemed ed diss dissolv olved ed witthout wi hout any any furt furthe herr proc procee eedi ding ngs. s. 3ere 3ereun unde derr are are the the norm normal al '(! requirements for dissolution of corporations in the Philippines -.
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Dire Direct ctor ors* s* !ert !erti4 i4ca cate te 5 6 Notar Notari7 i7ed ed docu docume ment nt sign signed ed by ma8 ma8or orit ity y of the directors and corporate secretary certifying the amendment of the articles articles of incorporati incorporation on shortening shortening the corporate corporate term, the votes of the dire direct ctor ors s and and stoc stockh khol older ders s ther theret eto, o, and and the the date date and and plac place e of the the stockholders meeting 6mended 6r 6rticles of 9n 9ncorp orporation
0.
6udi 6udite ted d 4nanc 4nancia iall state stateme ment nts s as of date date of the stoc stockh khol olde ders rs meet meetin ing g approving dissolution or any date thereafter
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List List of cre credi dito tors rs,, if any any, and the their ir cons consen ent, t, or cer certi ti4c 4cat atio ion n as to non; non; e)istence of creditors. 9f there are creditors and their consent was not
secured, the application should be in the form of a petition to be 4led with 1ice of
#9> ?a) !learance
$.
Publisher*s aidavit of the publication of the dissolution of the corporation "once a week for three "0& consecutive weeks&
@.
(ndorsements clearances applicable
from
other
government
agencies,
if
?he 4rst two "/& of the above documentary requirements for '(! dissolution by shortening corporate term is for the corporate secretary*s preparation. ?he third is for the independent certi4ed public accountant "!P6& in the Philippines. ?he fourth is for the accounting department to provide. ?he 4fth one, #9> clearance, is quite technical for the dissolving corporation because before the #9> will issue a ta) clearance, it will see to it that the corporation has no ta) liabilities by conducting a ta) e)amination for at least the three "0& ta)able years preceding the year of dissolution which has not yet been e)amined. Publisher*s aidavit is not much of a problem while the endorsement only applies to those corporations with secondary license. 2pon completion of the above documentary requirements for dissolution of corporation in the Philippines and such other requirements the '(! may require, the, process of evaluation and approval may come within less than a month. 9n the preparation and processing of the application for corporate dissolution, we would suggest you secure services of professional to facilitate the preparation of such documents.
Disclaimer : This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specic details applicable to your circumstances. For comments, you may please send mail at
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#usinesses can also be closed voluntarily or involuntarily. +oluntary closure generally means the business owner close the business in his or her own will, usually complying with applicable business regulations. 1n the other hand, involuntary closure means the business is closed due to events, such as failure to comply with the law or regulations and the government or court has ordered to close the business. 9n this article, we assume that the business owner is voluntarily closing the business.
2sually a business should be closed in the agenciesoices.
following government
A Department of ?rade and 9ndustry "D?9& oice A ?he local !ityBunicipal 1ice, where the business is registered A Department of Labor and (mployment "D1L(& oice, if the company has employees A #ureau of 9nternal >evenue "#9>& oice A #angko 'entral ng Pilipinas "#'P&, if the business is registered with the oice A 'ecurities and ()change !ommission "'(!& for partnership and corporation A 1ther agencies or oices where the business is registered, such as ''', P39! and 3DBC ?o guide you on the formal cessation of your business, here are some of the basic steps, procedures and requirements on how to close a business in the Philippines. Closing a business at DTI 6ccording to the D?9, we still have to inform the oice when we voluntarily close our business, and apply for cancellation of our registered business name "#N&. For Sole Proprietor, the following are the requirement for Voluntary Canellation! A Letter request signed by the owner A 6idavit of cancellation of the registered #N, stating the reasons for the cancellation and that the registered owner has no outstanding 4nancial obligation at the time of closure of establishment A 1riginal copy of the #N certi4cate and the duplicate copy of the application form "aidavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost& For Corporation and Partners, the following are the requirements for Voluntary Canellation! 9f dissolved at the 'ecurities and ()change !ommission "'(!&,
A Letter request signed by the authori7ed signatory "#oard >esolution for the authori7ed signatory& A !erti4ed photocopy of the '(! certi4cates of dissolution of the corporationpartnership A 1riginal copy of the business name certi4cate of registration and the duplicate copy of the application form. "6idavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost& If "# $egistration %nly , a. Corporate Name: A Letter request signed by the authori7ed signatory "#oard >esolution for the authori7ed signatory& A #oard resolutionpartnership agreement for the cancellation of the registered business name stating that the !orporationPartnership is retiring from business surrendering the business name certi4cate for cancellation and that at the time of closure of establishment the business has no outstanding 4nancial obligation, or a certi4ed copy of the !erti4cate of Dissolution "if applicable& A 1riginal copy of the business name certi4cate and the duplicate copy of the application form "6idavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost& b. Adopted Name: A Letter request signed by the authori7ed signatory "#oard >esolution for the authori7ed signatory& A #oard >esolutionPartnership agreement for the cancellation of the registered business name, stating the reasons for the cancellation that the corporationpartnership has no outstanding 4nancial obligation at the time of closure in connection with the operation of the said business and if there were creditors copy of notice to them A 1riginal copy of the business name certi4cate and the duplicate copy of the application form "6idavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost&
&ow to Close a "usiness in the Philippines 'tarting, formali7ing, legali7ing, and registering a business in the Philippines could take time depending on the type of your company. #ut if the process of business registration takes time, business closure or cessation is even more diicult and could take longer time to actually accomplish, depending on the status of the business.
?here are many reasons why a certain business will come to its end. 9t could be that the business is already causing the owner signi4cant losses and decided to 8ust stop the business or it could be that the business needs to be terminated in order to transform into a new type of business. Not all business closure brings negative news. Cor e)ample, a single proprietorship business that is transforming into a corporation is required to be closed as a proprietorship. ?hus, business closure could also mean e)pansion. ?he process of business closure in the Philippines depends on the type of the company to be ceased. Cor corporations and partnerships, they should be formally close in the 'ecurities and ()change !ommission "'(!& where they are also registered, unlike sole proprietorship businesses that are not. ?here are also businesses that should comply with the closure requirements of other government agencies, where they are specially regulated. Cor e)ample, pawnshops are also required to be closed in #angko 'entral ng Pilipinas "#'P&, where they are also governed or regulated. #usinesses can also be closed voluntarily or involuntarily. +oluntary closure generally means the business owner close the business in his or her own will, usually complying with applicable business regulations. 1n the other hand, involuntary closure means the business is closed due to events, such as failure to comply with the law or regulations and the government or court has ordered to close the business. 9n this article, we assume that the business owner is voluntarily closing the business. 2sually a business should be closed in the agenciesoices.
following government
A Department of ?rade and 9ndustry "D?9& oice A ?he local !ityBunicipal 1ice, where the business is registered A Department of Labor and (mployment "D1L(& oice, if the company has employees A #ureau of 9nternal >evenue "#9>& oice A #angko 'entral ng Pilipinas "#'P&, if the business is registered with the oice A 'ecurities and ()change !ommission "'(!& for partnership and corporation A 1ther agencies or oices where the business is registered, such as ''', P39! and 3DBC ?o guide you on the formal cessation of your business, here are some of the basic steps, procedures and requirements on how to lose a business in the Philippines!
Closing a business at DTI 6ccording to the D?9, we still have to inform the oice when we voluntarily close our business, and apply for cancellation of our registered business name "#N&. For Sole Proprietor, the following are the requirement for Voluntary Canellation! A Letter request signed by the owner A 6idavit of cancellation of the registered #N, stating the reasons for the cancellation and that the registered owner has no outstanding 4nancial obligation at the time of closure of establishment A 1riginal copy of the #N certi4cate and the duplicate copy of the application form "aidavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost& For Corporation and Partners, the following are the requirements for Voluntary Canellation! 9f dissolved at the 'ecurities and ()change !ommission "'(!&, A Letter request signed by the authori7ed signatory "#oard >esolution for the authori7ed signatory& A !erti4ed photocopy of the '(! certi4cates of dissolution of the corporationpartnership A 1riginal copy of the business name certi4cate of registration and the duplicate copy of the application form. "6idavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost& If "# $egistration %nly , a. Corporate Name: A Letter request signed by the authori7ed signatory "#oard >esolution for the authori7ed signatory& A #oard resolutionpartnership agreement for the cancellation of the registered business name stating that the !orporationPartnership is retiring from business surrendering the business name certi4cate for cancellation and that at the time of closure of establishment the business has no outstanding 4nancial obligation, or a certi4ed copy of the !erti4cate of Dissolution "if applicable& A 1riginal copy of the business name certi4cate and the duplicate copy of
the application form "6idavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost& b. Adopted Name: A Letter request signed by the authori7ed signatory "#oard >esolution for the authori7ed signatory& A #oard >esolutionPartnership agreement for the cancellation of the registered business name, stating the reasons for the cancellation that the corporationpartnership has no outstanding 4nancial obligation at the time of closure in connection with the operation of the said business and if there were creditors copy of notice to them A 1riginal copy of the business name certi4cate and the duplicate copy of the application form "6idavit of loss if either the business name certi4cate andor the duplicate copy of the application form was lost&
Closing a business at the loal City'(uniipal %)ie ?he procedures and requirements on closing a business may vary among dierent L<2s "Local
A 'ketch A Latest Payment A !erti4cate of !losure from the #arangay !aptain indicating date of closure Cor more complete and accurate procedures and requirements, you may visit and inquire the !ity or Bunicipal 1ice where your business is registered. Closing a business at D%L* 9f your business has employees or was required to be registered with the D1L(, you also have to ensure that you notify the D1L( oice and comply with the labor requirements to avoid labor relation liabilities. ?he following are the basic requirements in closing a business and be cleared at the D1L( oice
A 'ervice of a written notice to the employees and the D1L( at least one "-& month before the intended date of closurecessation A ?he closure or cessation of business operations is bona 4de in character. A Payment to the employees of termination pay amounting to at least one; half "-/& month pay for every year of service, or one "-& month pay whichever is higher, per Philippine Labor !ode mandate. Closing a business at the "I$ ?he process of business cessation at the #9> is perhaps the most tedious one among others. 6nd if you have unpaid ta) liabilities or delinquencies due to the government, the process could even get more problematic. 6mong the government oices, where your business is registered, the #9> is the one which records and monitors your internal revenue ta)es, such as income and business ta)es "+alue 6dded ?a) or Percentage ?a)&. 6nd to formally close and clear your business with the #9>, the bureau has to ensure that you have already paid all your ta) obligations. #9> Corm -E= "6pplication for >egistration 9nformation 2pdate& is the ta) form used in applying for closure of a business. ?he following are the requirements and procedures for closure of business at the #9>. Doumentary $equirements -& Letter of request stating reason for termination of business /& 1riginal !erti4cate of >egistration 0& #ooks of 6ccounts :& 9nventory List of 2nused >eceipts and 9nvoices =& 2nused >eceipts and 9nvoices for cancellation $& #oard >esolution Notice of Dissolution "if !orporation Partnership& +dditional $equirements in Case of Death of Indiidual Ta-payer. -&Death !erti4cate /& Payment of (state ?a), if any Proedures -& ?a)payer applicant 4les #9> Corm -E=, together with the attachments at the >D1 where they are registered within ten "-E& days from retirement of business. /& ?a)payer 4les short period return for income ta) purposes. 0& >D1 veri4es if ta)payer has open cases reFected in the 9ntegrated ?a) 'ystem "9?'&. 9f G(', ask ta)payer to submit required returns and pay the corresponding ta) dues and penalties if any. :& >D1 veri4es if ta)payer has delinquent cases at the 6ssessment,
!ollection, and Legal Divisions of the >egion =& >D1 veri4es if ta)payer has delinquent cases at the !ollection (nforcement Division, #9> National 1ice $& >D1 requests for Letter of 6uthority to investigate internal revenue ta)es for all un;audited ta)able years prior to cancellation of business. @& 6ssigned !ase oicer conducts investigations for periods covered in the issued Letter of 6uthority. %& ?a)payer complies with requirements of audit and pays corresponding de4ciency ta)es resulting from audit using Corm E$E=. & >D1 issues ta) clearance for closure of business. -E& >D1 updates 9?' and cancels ?9N of ta)payer "for non;individual ta)payer&. Closing a business at S*C Cor corporations and partnerships, they cannot process closure of business with the '(! if they are not yet done in securing ta) clearance from the #9> and endorsements or certi4cate of registration cancellation from other government oices, if applicable. ?hus, even though the business is already non;operating, it still remains as a registered business. ?hough, the business owners, partners, or shareholders can already start the liquidation process of its assets, sub8ect to applicable ta)es. Cor corporations, corporate dissolution can be voluntary or involuntary. 9n this discussion, we assume that we are voluntarily dissolving a corporation. Boreover, voluntary dissolution of a corporation may have dierent procedures, depending on whether the dissolution will aect creditors or not. 1ne way to voluntarily dissolve a corporation with the '(! is by shortening its corporate term. ?he following are the requirements for corporate dissolution by shortening its term. -. Directors* !erti4cate 5 6 Notari7ed document signed by ma8ority of the directors and corporate secretary certifying the amendment of the articles of incorporation shortening the corporate term, the votes of the directors and stockholders thereto, and the date and place of the stockholders meeting /. 6mended 6rticles of 9ncorporation 0. 6udited 4nancial statements as of date of the stockholders meeting approving dissolution or any date thereafter :. List of creditors, if any, and their consent, or certi4cation as to non; e)istence of creditors =. #9> ?a) !learance $. Publisher*s aidavit of the publication of the dissolution of the
corporation "once a week for three "0& consecutive weeks& @. (ndorsementsclearances from other government agencies, if applicable ?ake note that if there are creditors and their consent was not secured, the application should be in the form of a petition to be 4led with 1ice of