Published — June 1, 2022
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Read also: Tax Exemption for Nonstock Nonprofit Corporation
A nonstock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers and any profit which it may obtain incidental to its operations shall be used for the furtherance of its purpose.
In case of dissolution, a nonstock corporation may be dissolved either voluntarily or involuntarily and their assets shall be distributed as follows:
- All liabilities and obligations of the corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefor;
- Asset held by the corporation upon a condition requiring return, transfer or conveyance, and which condition occurs by reason of the dissolution, shall be returned, transferred or conveyed in accordance with such requirements;
- Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution, shall be transferred or conveyed to one (1) or more corporations, societies or organizations engaged in activities in the Philippines substantially similar to those of the dissolving corporation according to a plan of distribution adopted;
- Assets other than those mentioned in the preceding, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the bylaws, to the extent that the articles of incorporation or the bylaws determine the distributive rights of members, or any class or classes of members, or provide for distribution.
- In any other case, assets may be distributed to such persons, societies, organizations or corporations, whether or not organized for profit, as may be specified in a plan of distribution adopted.
In the process of dissolution, a plan for the distribution of assets may be adopted by a nonstock corporation in the following manner:
- The board of trustees shall, by majority vote, adopt a resolution recommending a plan of distribution and directing the submission thereof to a vote at a regular or special meeting of members having voting rights;
- Each member entitled to vote shall be given a written notice setting forth the proposed plan of distribution or summary thereof and the date, time and place of such meeting within the time and in the manner provided in Revised Corporation Code for the giving of notice of meetings; and,
- Such plan of distribution shall be adopted upon approval of at least two-thirds (2/3) of the members having voting rights present or represented by proxy at such meeting.
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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