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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.
AT A GLANCE:
No corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities except in case of decrease in capital stock and otherwise allowed by the Revised Corporation Code. (Section 139, Revised Corporation Code)
Consequence of dissolution
When the period of corporate life expires, the corporation ceases to be a body corporate for the purpose of continuing the business for which it was organized. But it shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its assets. (PNB v. Court of First Instance of Rizal G.R. No. 63201, May 27, 1992)
The Revised Corporation Code (RCC) provides that every corporation whose corporate existence is terminated in any manner shall remain as a body corporate for three (3) years after the effective date of dissolution, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, dispose of and convey its property, and distribute its assets, but not for the purpose of continuing the business for which it was established. (Section 139, RCC)
The Revised Corporation Code further provides that at any time during said three (3) year period, the corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. After any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons-in-interest. (Section 139, RCC)
Assets of the corporation
The Revised Corporation Code provides that no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. This is subject to the exception of decrease of capital stock and as otherwise allowed by the Revised Corporation Code. (Section 139, RCC)
The assets of the corporation shall be used to pay off the claims of various creditors following the law on concurrence and preference of credit. The corporation’s remaining assets shall then be distributed to the stockholders with preferred shares, if any; then, it shall be distributed to the stockholders with common shares in proportion to their respective shareholdings in the corporation or depending on their agreement.
Upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated in favor of the national government. (Section 139, RCC)
Read also: Rules on distribution of assets upon dissolution of a nonstock corporation
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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