RA 11232 - Dissolution and Liquidation of Corporation

Question 1

Dissolution
* Definition of corporate dissolution

Answer 1

It refers to the extinguishment of the corporate franchise and the termination of corporate existence. It legally affects
more the nature and capacity of the juridical being of the corporate being.

Question 2

• Modes of dissolution

Answer 2

✓ Voluntary modes
▪ Where creditors are not affected - By administrative application to SEC submitting the board resolution and ratification by the stockholders.
➢ At least majority vote of the board of directors with ratification of at least majority of stockholders.
▪ Where creditors are affected - By formal petition to SEC with notice and hearing with creditors
➢ At least majority vote of the board of directors with ratification of at least 2/3 of stockholders.
▪ By shortening of corporate term - By amending the articles of incorporation and submitting such amendment to
SEC.
▪ By merger or consolidation - By submitting the Board resolution and ratification of the merging or consolidating corporation.

✓ Involuntary modes
▪ By expiration of corporate term.
▪ Failure to formally organize within 5 years from incorporation.
▪ Legislative dissolution.
▪ Dissolution by SEC on grounds under existing laws.

Question 3

• Ground for automatic dissolution of a corporation or ipso facto corporate dissolution by operation of law?

Answer 3

✓ By expiration of corporate term although the corporation may file an application for revival of corporation.
✓ Failure to formally organize within 5 years from incorporation.
✓ Approval by SEC of shortened corporate term.
✓ Approval by SEC of certificate of merger or consolidation.

Question 4

• Grounds which will not automatically dissolve a corporation but will require court order or SEC decision?

Answer 4

✓ Being De facto.
✓ Violation of laws or rulings of SEC.
✓ Failure to submit annual report or financial statements to SEC.
✓ Continuous inoperation for a period of at least 5 years.
✓ Failure to submit by-laws within 30 days from incorporation.

Question 5

o Liquidation
* Definition of Liquidation?

Answer 5

It refers to the process of converting non-cash assets of a liquidation corporation into cash and distributing the net proceeds to creditors first and then the remainder to stockholders.

Question 6

Period of Liquidation

Answer 6

It shall be finished within a recommendatory period of 3 years counted from the dissolution of a corporation.