A voluntary dissolution may be effected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of this Code. A copy of the amended articles of incorporation shall be submitted to the Securities and Exchange Commission in accordance with this Code. Upon approval of the amended articles of incorporation of the expiration of the shortened term, as the case may be, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation. (n)
SEC Internal rules require the following:
(1) Notice of the dissolution to be published in a newspaper of general circulation for 3 consecutive weeks;
(2) List of corporate creditors, with their consent to the shortening of corporate term;
(3) Submission by majority stockholders/principal officers an Undertaking to personally answer for any outstanding corporate obligations of the corporation; and
(4) Latest financial statements which must not be earlier than the date of the stockholders’ meeting approving amendment to the articles of incorporation, and a BIR clearance on the tax liabilities of the corporation.(SEC Opinion, July 5, 1979)
15.2 What is liquidation? (Section 122)
Sec. 122. Corporate liquidationEvery corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.
At any time during said three (3) years, the corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.
Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such
assets are located.
Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. (77a, 89a, 16a)
Liquidation is a process by which all the assets of the corporation are converted into liquid assets (cash) in order to
facilitate the payment of obligations to creditors, and the remaining balance if any is to be distributed to the stockholders.
UP Class Notes
What is liquidation? Process of converting corporate assets / properties into cash for proper distribution to persons entitled thereto. It begins on the day after the approval of the SEC of the dissolution. In the meantime, where a petition for dissolution has already been submitted, but the SEC has not yet approved, the BOD may make advances to the SHs and other persons-in-interest.
Methods of Liquidation
Liquidation, in corporation law, connotes a winding up or settling with creditors and debtors. It is the winding up of a corporation so that assets are distributed to those entitled to receive them. It is the process of reducing assets to cash, discharging liabilities and dividing surplus or loss. PVB Employees Union-N.U.B.E. v. Vega, 360 SCRA 33 (2001).
There can be no doubt that under Secs. 77 and 78 of Corporation Law, the Legislature intended to let the shareholders have the control of the assets of the corporation upon dissolution in winding up its affairs. The normal method of procedure is for the directors and executive officers to have charge of the winding up operations, though there is the alternative method of assigning the property of the corporation to the trustees for the benefit of its creditors and shareholders. ―While the appointment of a receiver rests within the sound judicial discretion of the court, such discretion must, however, always be exercised with caution and governed by legal and equitable principles, the violation of which will amount to its abuse, and in making such appointment the court should take into consideration all the facts and weigh the relative advantages and disadvantages of appointing a receiver to wind up the corporate business.‖ China Banking Corp. v. M. Michelin & Cie, 58 Phil. 261 (1933)
There is nothing in Sec. 122 which bars an action for the recovery of the debts of the corporation against the liquidator thereof, after the lapse of the said three-year period. ―Is immaterial that the present action was filed after the
expiration of the three years . . . for at the very least, and assuming that judicial enforcement of taxes may not be initiated after said three years despite the fact that actual liquidation has not terminated and the one in charge thereof is still holding the assets of the corporation, obviously for the benefit of all the creditors thereof, the assessment aforementioned, made within the three years, definitely established the Government as a creditor of the corporation for whom the liquidator is supposed to hold assets of the