WHAT ARE THE MODES OF CORPORATE DISSOLUTION?

After reading “What are the Modes of Corporate Dissolution?”, read also “Involuntary Dissolution of a Corporation”.

• A corporation formed or organized under the provision of the Revised Corporation Code of the Philippines may be dissolved voluntarily or involuntarily.

• The methods of effecting dissolution as prescribed by law are exclusive.

• A corporation may be dissolved by the Securities and Exchange Commission motu proprio or upon filing of a verified complaint by any interested party.

A corporation formed or organized under the provision of the Revised Corporation Code of the Philippines may be dissolved voluntarily or involuntarily. (Section 133, Revised Corporation Code of the Philippines)

 

The methods of effecting dissolution as prescribed by law are exclusive, and a corporation cannot be dissolved except in the manner prescribed by law.

 

The types of voluntary dissolution include voluntary dissolution where creditors are affected, voluntary dissolution where creditors are not affected, shortening corporate term by amending the Articles of Incorporation, and through withdrawal of dissolution. (Sections 134-137, RCCP)

 

Jurisprudence says:

Statutes authorizing voluntary dissolutions are generally held to apply only to a dissolution brought about by the stockholders themselves, and 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. The court should only act on facts which have been proved by competent legal evidence. (China Banking Corp. v. M. Michelin & Cie., G.R. No. 36930, June 30, 1933)

 

On the other hand, a corporation may be dissolved by the Securities and Exchange Commission motu proprio or upon filing of a verified complaint by any interested party. (Section 138, RCCP)

 

What are the grounds for involuntary dissolution? The law says:

The following may be grounds for dissolution of the corporation:

1. Non-use of corporate charter as provided under Section 21 of this Code;
2. Continuous inoperation of a corporation as provided under Section 21 of this Code;
3. Upon receipt of a lawful court order dissolving the corporation;
4. Upon finding by final judgment that the corporation procured its incorporation through fraud;
5. Upon finding by final judgment that the corporation:
   1. Was created for the purpose of committing, concealing or aiding the commission of securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices;
   2. Committed or aided in the commission of securities violations, smuggling, tax evasion, money laundering, or graft and corrupt practices, and its stockholders knew; and

 

Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its directors, trustees, officers, or employees. (Section 138, RCCP)

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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