Recogida de información

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A corporation cannot extend its life by amendment of its articles of incorporation effected during the three-year statutory period for liquidation when its original term of existence had already expired, as the same would constitute new business. Alhambra Cigar & Cigarette Manufacturing Company, Inc. v. SEC, 24 SCRA 269 (1968).

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When the period of corporate life expires, the corporation ceases to be a body corporate for the purpose of continuing the business for which it was organized. PNB v. Court of First Instance of Rizal, Pasig, Br. XXI, 209 SCRA 294 (1992).

Jack’s Lecture DISSOLUTION

There are different ways to dissolve a corporation one is voluntarily and the other involuntarily, under the law there are three provisions governing voluntary dissolution. The first one is if no creditors are affected. In all the methods of voluntary dissolution, you need a resolution approved by a majority of directors and a resolution approved by at least 2/3 of the stockholders In Section 118, where no creditors are affected the directors and the stockholders pass the resolution dissolving the corporation and that will be filed in the SEC for approval. In a case where a suit was filed and the corporation said, we have already been dissolved and they submitted a board resolution, the SC held that it is not enough to dissolve a corporation.

The Second one, is under Section 119 where creditors are affected. Here the board and the stockholders will approve the dissolution but a petition will be filed signed by the majority of the directors and verified by the president, secretary or one of the directors which will indicate the claims of creditors. That will be set for hearing and not less than thirty (30) days nor more than sixty (60) days after the entry of the issuance of the order and a copy of the order will be published once a week for three consecutive weeks in a newspaper of general circulation and that will also be posted for three weeks in three public places like the bulletin board of a municipal hall, post office, the plaza and then

the SEC will set that for hearing and determine w/n the corporation should be dissolved.

The third one you will just shorten the corporate life and this is the simplest and fastest way of dissolving the corporation voluntarily like when Ford Philippines decided to close its subsidiary they simply amended the articles of corporation that the corporation will exist until December 31, 1978.

The SEC will require to get a tax clearance from the BIR and the stockholders will be required to sign an undertaking that they will answer for the claim of the creditors to the extent of the liquidating dividends they will receive.

Then you can have a involuntary dissolution. This could be done by filing a quo warranto case under rule 66 of the ROC on the ground mentioned there or a corporation can be dissolved for certain violation of the corporation code as mentioned in the Corporation Code or PD 902-A and also a minority stockholder may file a petition to dissolve the corporation where the majority is mismanaging the assets of the corporation, dissipating its assets, and fraudulently disposing of its properties and a receiver may be appointed in an action for involuntary dissolution.

The SC held in the leading case of El Hogar Filipino, 50 Phil. 399(1927) the first corporation organized under the Corporation Act, the government filed a case to dissolve that corporation and invoked 17 grounds, the SC denied the petition.

Building and loans association like banks are required to dispose of within 5 years of any properties they foreclosed they disposed of the properties after 6 years but they exerted their best efforts, they hired real estate brokers, they advertised in newspapers but they just could not find buyers, they acquired this land and building, the SC held that it is not illegal, that they leased the space that they did not need for their office, that is not illegal they are maximizing their property, that they provide a provision in the by-laws that stockholders can be compelled to surrender their shares, to be bought out well the court said that that is void but that is not sufficient ground to dissolve the corporation. In other words the court is saying that you do not dissolve a corporation for every infraction, the infraction must be serious, because dissolution is imposing the death penalty upon the corporation.

The Court said the employees of a railroad are required to wear uniform indicating their positions in their nameplate, now tell me if one employee did not have such a nameplate you are going to dissolve a corporation because that is a legal requirement? It has to be a serious violation!

But in one case, the SC dissolved a corporation which was engaging in banking without authorization from the monetary board, it was accepting deposits from the public, the court considered that as a serious violation.

When a minority stockholder files a case and asks to dissolve the corporation, the court said that that is a harsh remedy unless the situation is really beyond redemption you should not impose that remedy.

The corporation has three years after it should have been dissolved for the purpose of winding up its affairs. The SEC has said the three year period should be counted from the time the dissolution was approved by the SEC even if the directors and stockholders pass a resolution dissolving the corporation that is not effective until it has been approved by the SEC.

For three years , the corporation will continue to exist it will no longer be a going concern but only for the purpose of winding up that is why the SC has said that the corporation cannot for example renew its contract of lease because it is no longer a going concern.

During the three year period, it should devote its time prosecuting and defending law suits, winding up its affairs disposing its properties so they can be used to pay off its creditors and to distribute balance to the stockholders.

There are two ways of providing for the winding up of its affairs under the law. This is voluntary either the directors themselves may take care of winding up the affairs of the corporation or they may appoint a trustee like when Ford Philippines decided to close its subsidiary here one of the last acts of the BOD was to pass a resolution appointing Ricardo Romulo as trustee vesting upon him legal title to all the assets of Ford Philippines to be used to pay off its creditors and to dispose of its properties of Ford Philippines. to distribute the balance as liquidating dividends.

Supposed to be, this was the rule before if any case is not finished within the three year period, the case will be abated whether the corporation is plaintiff or whether it is defendant but recent jurisprudence has rendered that obsolete. That rule is applicable if it is the directors winding up the corporation. if the corporation is under receivership, it is the receiver who may wind up the affair of the corporation. But if it is the trustee, that will not apply, the trust will subsist until the affairs of the corporation are wound up and until any creditor can sue the trustee provided that the applicable prescriptive period has not yet lapsed. So if his

cause of action is based on a written contract he has ten (10) years to sue the trustee.

The Court has said that the remedy there if the three years will end and there are still pending cases, is for the board to appoint a trustee but more recent jurisprudence has fashioned a practicable solution to that the lawyer handling the cases may be considered as trustee of the corporation and therefore the cases will not be abated but should continue.

In one case, the SC held that the directors may be considered as trustees after three years so that they can continue to wind up the affairs of the corporation and in effect the three year period has become ineffectual.

15.1 What are the various methods of dissolving corporations?

(a) Voluntary

(i) Requirements where no creditors are affected (Section 118)

Sec. 118. Voluntary dissolution where no creditors are affected If dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution may be effected by majority vote of the board of directors or trustees, and by a resolution duly adopted by the affirmative vote of the stockholders owning at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members of a meeting to be held upon call of the directors or trustees after publication of the notice of time, place and object of the meeting for three (3) consecutive weeks in a newspaper published in the place where the principal office of said corporation is located; and if no newspaper is published in such place, then in a newspaper of general circulation in the Philippines, after sending such notice to each stockholder or member either by registered mail or by personal delivery at least thirty (30) days prior to said meeting. A copy of the resolution authorizing the dissolution shall be certified by a majority of the board of directors or trustees and countersigned by the secretary of the corporation. The Securities and Exchange Commission shall thereupon issue the certificate of dissolution. (62a)

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When a corporation is contemplating dissolution, it must submit tax return on the income earned by it from the beginning of the year up to the date of its dissolution and pay the corresponding tax due. BPI v. Court of Appeals, 363 SCRA 840 (2001).

(ii) Requirements where creditors are affected (Section 119)

Sec. 119. Voluntary dissolution where creditors are affected Where the dissolution of a corporation may prejudice the rights of any creditor, the petition for dissolution shall be filed with the Securities and Exchange Commission. The petition shall be signed by a majority of its board of directors or trustees or other officers having the management of its affairs, verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members at a meeting of its stockholders or members called for that purpose.

If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person, which date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of general circulation published in the municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) consecutive weeks in three (3) public places in such municipality or city.

Upon five (5) day's notice, given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it shall render judgment dissolving the corporation and directing such disposition of its assets as justice

requires, and may appoint a receiver to collect such assets and pay the debts of the corporation. (Rule 104, RCa)

(b) Involuntary (Section 121)

Sec. 121. Involuntary Dissolution

A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on the grounds provided by existing laws, rules and regulations. (n)