Life is tough. So is business. So when the going gets tough, sometimes corporations need to close down. However, it is not as simple as packing up your things and leaving. A formal process must be done to legally close a corporation. One method is through the shortening of the corporate term.
In the absence of a stipulation as to a shorter period, the life of a corporation is 50 years. Hence, if you do not wish to continue the life of a corporation, you may shorten its corporate term. In order to do so, you must amend the Articles of Incorporation to reflect the new corporate term.
The first thing you have to do is to have the resolution for shortening of the corporate term approved by a majority of the board of directors which must be subsequently ratified by at least 2/3 vote of the stockholders representing the outstanding capital stock. According to the Corporation Code, written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally.
The details as to the shortening of the corporate term must be published in a newspaper of general circulation once a week for 3 consecutive weeks.
It doesn’t stop there. You must likewise secure clearances from the local government where your business permit was issued, Social Security System, Philhealth, Pag-ibig and the Bureau of Internal Revenue (“BIR”). Oh, BIR. Just a caveat, securing a clearance from the BIR can take years! BIR will examine your corporation and its respective papers. For this stage, you are lucky if a clearance is issued in a year. The procurement of the BIR clearance usually takes around 1 to 3 years. Yup, you heard it right – as long as 3 years. So brace yourself and set realistic goals of accomplishing the whole process in 2 to 3 years.
Once these clearances are secured, you need to submit the following documents with the Securities & Exchange Commission (SEC):
1. Cover Sheet
2. Directors’ Certificate
3. Amended Articles of Incorporation
4. Audited financial statements as of the last fiscal year (subject to certain exceptions and requirements)
5. Certification under oath executed by the President and Treasurer of the corporation certifying that the dissolution is not prejudicial to the interests of creditors and that there is no opposition from creditors.
6. BIR Tax clearance certificate
7. Publisher’s Affidavit of Publication
8. Clearances from other government agencies
9. Secretary’s Certificate as to no pending case involving intra-corporate disputes
Upon payment of the pertinent government fee and after examination by the SEC, the shortening of the corporate term will thereafter be approved.
Whew! That is how to close a corporation by shortening its corporate term in the Philippines.
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