Dissolution of a corporation
THE Dissolution of a corporation signifies the extinguishment or the cancellation of its franchise and the termination of its corporate existence for business purpose. And consequently the termination of any obligation to pay taxes as a corporate entity. The fact that the corporation has ceased to do business does not necessarily constitute dissolution under the law.
A corporation formed or organized under the Corporation Code may be dissolved either voluntarily or involuntarily (Sec. 117, Corporation Code). There are three (3) types of voluntary dissolution:
Where no creditors are affected by the dissolution, by an administrative application for dissolution filed with the SEC (Securities and Exchange Commission) (Sec. 118, Corporation Code);
Where creditors are affected by dissolution, by a formal petition for dissolution filed with the SEC, with due notice and hearing (Sec. 119, Corporation Code); and
Shortening of corporate term by the amendment of the articles of incorporation (Sec. 120, Corporation Code).
On the other hand, a corporation may also be dissolved by the SEC upon filing of a verified complaint and after proper notice and hearing on grounds provided by existing laws, rules and regulations (Sec. 121, Corporation Code). Among the grounds for involuntary dissolution include the situation where the corporation has become inoperative for a period of at least five (5) years (Sec. 22, Corporation Code), and the failure of the corporation to file the required reports in appropriate forms as prescribed by the SEC within the prescribed period (Sec. 6(I)(6), Pres. Decree 902-A).
Upon revocation or cancellation of the certificate of registration, the SEC issues a corresponding Revocation Order, in which event the corporation is prohibited to continue its operation and shall be subject to Section 122 of the Corporation Code, that provides that it shall 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.
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