Law Report

INSOLVENCYDISSOLUTIONLIQUIDATIONReported by:

Balio, Ma. Blessilda Trinidad

Bautista, Jennan

Ventura, Ham

INSOLVENCYFinancial Rehabilitation and Insolvency Act (FRIA) of 2010

INSOLVENCY

The inability or failure to pay debts as they become due.

Initiation Proceedings

Proceedings for an insolvent debtor.

1. Voluntary Proceedings

2. Involuntary Proceedings Proceedings for any creditor or group of creditors.

REQUIREMENTS TO INITIATE PROCEEDINGS:

Voluntary Proceedings by Debtor Involuntary Proceedings by Creditor/sIdentification of the debtor, its principal activities and its addresses.

The specific relief sought.A Rehabilitation Plan.

The names of at least three (3) nominees to the position of rehabilitation receiver.Statement of the fact and the cause of the

debtor’s insolvencyThe circumstances sufficient to support a petition to

initiate involuntary rehabilitation proceedings.

Schedule of the debtor’s debts and liabilities including a list of creditors with their

addresses, amounts of claims and collaterals, or securities

Inventory of all its assets including receivables and claims against third parties

Qualifications of a Rehabilitation

Receiver(a) A citizen of the Philippines or a resident of the Philippines in the six (6) months immediately preceding his nomination;

(b) Of good moral character and with acknowledged integrity, impartiality and independence;

(c) Has the requisite knowledge of insolvency and other relevant commercial laws, rules and procedures, as well as the relevant training and/or experience that may be necessary to enable him to properly discharge the duties and obligations of a rehabilitation receiver; and

(d) Has no conflict of interest

Powers, Duties and Responsibilities of

Rehabilitation receiver(a)To verify the accuracy of the factual allegations in the petition and its annexes;(b)To verify and correct, if necessary, the inventory of all of the assets of the debtor, and their valuation;(c)To verify and correct, if necessary, the schedule of debts and liabilities of the debtor;(d)To evaluate the validity, genuineness and true amount of all the claims against the debtor;(e)To take possession, custody and control, and to preserve the value of all the property of the debtor;(f)To sue and recover, with the approval of the court, all amounts owed to, and all properties pertaining to the debtor;

SALE OR DISPOSAL OF ENCUMBERED PROPERTYAND ASSETS OF THIRD PARTIES HELD BY DEBTOR

The court may authorize the sale, transfer, conveyance or disposal of encumbered property of the debtor, or property of others held by the debtor if, upon application of the rehabilitation receiver and with the consent of the affected owners of the property, or secured creditor/s in the case of encumbered property of the debtor and, after notice and hearing, the court determines that:

(a) such sale, transfer, conveyance or disposal is necessary for the continued operation of the debtor's business; and

(b) the debtor has made arrangements to provide a substitute lien or ownership right that provides an equal level of security for the counter-party's claim or right.

ASSETS OF DEBTOR HELD BY THIRD PARTIES

The rehabilitation receiver may also:

(a) demand the surrender or the transfer of the possession or control of such property to the rehabilitation receiver or any other person, subject to payment of the claims secured by any possessory lien/s thereon;

(b) allow said third parties to retain possession or control, if such an arrangement would more likely preserve or increase the value of the property in question or the total value of the assets of the debtor; or

(c) undertake any otI1er disposition of the said property as may be beneficial for the rehabilitation of the debtor, after notice and hearing, and approval of the court.

ASSETS SUBJECT TO RAPID OBSOLESCENE, DEPRECIATION AND DIMUNITION OF VALUEIf depreciation cannot be avoided and such depreciation is jeopardizing the

security or property interest of the secured creditor or owner, the court shall: (a) allow the encumbered property to be foreclosed upon by the secured creditor

according to the relevant agreement between the debtor and the secured creditor. (b) upon motion of, or with the consent of the affected secured creditor or interest

owner. order the conveyance of a lien against or ownership interest in substitute property of the debtor to the secured creditor: Provided. That other creditors holding liens on such property, if any, do not object thereto, or, if such property is not available;

(c) order the conveyance to the secured creditor or holder of an ownership interest of a lien on the residual funds from the sale of encumbered property during the proceedings; or

(d) allow the sale or disposition of the property: Provided. That the sale or disposition will maximize the value of the property for the benefit of the secured creditor and the debtor, and the proceeds of the sale will be distributed in accordance with the order prescribed under the rules of concurrence and preference of credits.

A plan by which the financial well-being and viability of an insolvent debtor can be restored.

REHABILITATION PLAN

EFFECTS OF CONFIRMATION OF REHABILITATION PLAN

(a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and all persons who may be affected by it, including the creditors, whether or not such persons have participated in the proceedings or opposed the Rehabilitation Plan or whether or not their claims have been scheduled;

(b) The debtor shall comply with the provisions of the Rehabilitation Plan and shall take all actions necessary to carry out the Plan;

(c) Payments shall be made to the creditors in accordance with the provisions of the Rehabilitation Plan;

(d) Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the extent that they do not conflict with the provisions of the Rehabilitation Plan;

(e) Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors regardless of whether or not the Plan is successfully implement; and

(f) Claims arising after approval of the Plan that are otherwise not treated by the Plan are not subject to any Suspension Order.

DISSOLUTION

What is Dissolution?

Dissolution

Extinguishment of corporation’s franchise to be a corporation.

Termination of its corporate existence

Sec. 117. Methods of dissolution

A corporation formed or organized under the provisions of this Code may be dissolved voluntarily or involuntarily. (n)

What are the 2 Legal Steps in Corporate Dissolution?

2 Legal Steps in Corporate Dissolution

Termination of the corporate existence at least as far as the right to go on doing ordinary business is concerned

Winding up of its affairs, the payment of its debts, and the distribution of its assets among the shareholders or members and other persons in interest.

Methods or Causes of Corporate Dissolution Voluntary – it may be effected:

by the vote of the BOD/BOT and the stockholders/members, where no creditors are affected

by the judgement of the SEC after hearing of petition for voluntary dissolution, where no creditors are affected

By amending the articles of incorporation to shorten the corporate term

If corporation sole, by submitting to the SEC a verified declaration of dissolution for approval

Methods or Causes of Corporate Dissolution

Involuntary – it may be effected: Expiration of term from original Articles of

Incorporation Legislative enactment Failure to formally organize and commence within

2 years from date of incorporation By order of SEC

Does the change of name of a corporation result in dissolution?

Does the change of name of a corporation result in dissolution?

ANSWER:

No, Changing of Corporation name is included in the

Amended Articles of Incorporation.

Sec. 118. Voluntary dissolution where creditors are not affected

If dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution may be effected by majority vote of the board of directors or trustees, and by a resolution duly adopted by the affirmative vote of the stockholders owning at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members of a meeting to be held upon call of the directors or trustees after publication of the notice of time, place and object of the meeting for three (3) consecutive weeks in a newspaper published in the place where the principal office of said corporation is located;

Sec. 118. Voluntary dissolution where creditors are not affected

and if no newspaper is published in such place, then in a newspaper of general circulation in the Philippines, after sending such notice to each stockholder or member either by registered mail or by personal delivery at least thirty (30) days prior to said meeting. A copy of the resolution authorizing the dissolution shall be certified by a majority of the board of directors or trustees and countersigned by the secretary of the corporation. The Securities and Exchange Commission shall thereupon issue the certificate of dissolution. (62a)

Voluntary dissolution where Creditors are not Affected

How Effected Can be dissolved without going to the SEC or the court. Effected by mere vote of the BOD/BOT and the resolution

duly adopted by the stockholders or members.(Sec.118)

Issuance of Certificate of Dissolution

SEC is now required to issue COD

Sec. 119. Voluntary dissolution where creditors are affected.

Where the dissolution of a corporation may prejudice the rights of any creditor, the petition for dissolution shall be filed with the Securities and Exchange Commission. The petition shall be signed by a majority of its board of directors or trustees or other officers having the management of its affairs, verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members at a meeting of its stockholders or members called for that purpose.


If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person, which date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of general circulation published in the municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) consecutive weeks in three (3) public places in such municipality or city.


Upon five (5) day's notice, given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it shall render judgment dissolving the corporation and directing such disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation. (Rule 104, RCa)

Voluntary Dissolution where Creditors Affected

Requirement: hearing before the SEC SEC appoints a receiver – to take charge of the liquidation

of the corporation If creditors’ consent can’t be obtained, the petition for

dissolution must be filed with SEC which shall render judgment after due notice and hearing in accordance with the said section.

Sec. 120. Dissolution by shortening corporate term

A voluntary dissolution may be effected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of this Code.

A copy of the amended articles of incorporation shall be submitted to the Securities and Exchange Commission in accordance with this Code.

Upon approval of the amended articles of incorporation of the expiration of the shortened term, as the case may be, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation. (n)

Publication of Notice of Dissolution

Affidavit of Publication of Notice of Dissolution of the Corporation - must be executed by the publisher of the print medium.

Publication of Notice of Dissolution of the Corporation – serves as a protection of the rights of existing creditors of the dissolving corporation who, under the law, enjoy the preference in the distribution of assets before the stockholders are finally entitled to a return of their investments.

Dissolution by expiration of Term

How Effected Corporation is dissolved upon the expiration of the

period as fixed in the original Articles of Incorporation, unless it is extended by amendment.

Extension of Corporate Existence from Corporation

Upon expiration of corporate term, the corporation ceases to exist except only for the purposes connected with winding up or liquidation.

Juridical Personality – no longer be extended


Stockholders may reincorporate the expired corporation by complying with the requisites for incorporation under Sections 5 to 15 of the Corporation Code.

It is not necessary to seek the aid of SEC or court to terminate the corporation, since it is automatically terminated upon expiration of term.

Dissolution by Legislative Enactment

Legislative Enactment

The act of passing an rule or statute by a legislature.

Reserved Power of Congress to Dissolve Corporations

Provided by the former Corporation Law, any or all corporations created by the virtue of this Act may be dissolved by legislative enactment


Limitations on the Power

Under the constitution, the amendment, alteration or repeal of the corporate franchise of a public utility shall be made only “when common good so requires”

Under Sec.145 of the Code, it is provided that: “No right or remedy in favor of or accrued against any corporation, its stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent amendment or impaired either by this Code or any portion thereof.”

Dissolution by Failure to Formally Organize

If the corporation does not formally organize within 2 years from the date of its incorporation, its corporate powers cease and it shall be deemed dissolved

Exception: When such failure is due to causes beyond its control

Collateral Attack of a Dissolved Corporation

A corporation who had duly organized itself but failed to exercise its corporate rights and franchise within 5 years from the date of incorporation is not automatically dissolved.

Can be dissolved by quo warranto proceedings instituted by the Solicitor General.

Inoperation for 5 years – ground for the suspension or revocation of its registration by the SEC.

Effect of Insolvency on Corporate Existence

Inability to exercise its corporate powers by reason of insolvency might constitute such non user as warrant a decree of dissolution.

Sec. 121. Involuntary dissolution

A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on the grounds provided by existing laws, rules and regulations. (n)

Dissolution by order of the SEC

1. Violations by a Corporation 2. Deadlocks in a Close Corporation 3. Mismanagement of a Close Corporation

Dissolution by order of the SEC

4. Suspension or Revocation of Certificate of Registration of a Corporation Fraud Serious misrepresentation Defiance of laws 5 years continuous inoperation Failure to file by laws within the required period Failure to file required reports in appropriate forms

A business should be closed in which

government agencies/offices?

Usually a business should be closed in the following government agencies/offices.

• Department of Trade and Industry (DTI) office• The local City/Municipal Office, where the business is registered• Department of Labor and Employment (DOLE) office, if the company has employees• Bureau of Internal Revenue (BIR) office• Bangko Sentral ng Pilipinas (BSP), if the business is registered with the office• Securities and Exchange Commission (SEC) for partnership and corporation• Other agencies or offices where the business is registered, such as SSS, PHIC and HDMF

For Sole Proprietor, the following are the requirement for Voluntary Cancellation.

• Letter request signed by the owner

• Affidavit of cancellation of the registered BN, stating the reason/s for the cancellation and that the registered owner has no outstanding financial obligation at the time of closure of establishment

• Original copy of the BN certificate and the duplicate copy of the application form (affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

For Corporation and Partners, the following are the requirements for Voluntary Cancellation.If dissolved at the Securities and Exchange Commission (SEC),

• Letter request signed by the authorized signatory (Board Resolution for the authorized signatory)

• Certified photocopy of the SEC certificates of dissolution of the corporation/partnership

• Original copy of the business name certificate of registration and the duplicate copy of the application form. (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

If BN Registration Only,

a. Corporate Name:• Letter request signed by the authorized signatory (Board Resolution for the authorized signatory)• Board resolution/partnership agreement for the cancellation of the registered business name stating that the Corporation/Partnership is retiring from business; surrendering the business name certificate for cancellation and that at the time of closure of establishment the business has no outstanding financial obligation, or a certified copy of the Certificate of Dissolution (if applicable)• Original copy of the business name certificate and the duplicate copy of the application form (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

If BN Registration Only,

b. Adopted Name:• Letter request signed by the authorized signatory (Board Resolution for the authorized signatory)• Board Resolution/Partnership agreement for the cancellation of the registered business name, stating the reason/s for the cancellation that the corporation/partnership has no outstanding financial obligation at the time of closure in connection with the operation of the said business and if there were creditors copy of notice to them• Original copy of the business name certificate and the duplicate copy of the application form (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

Closing a business at the local City/Municipal Office

The procedures and requirements on closing a business may vary among different LGUs (Local Government Units). This means that the requirements for business cessation in Makati City can be different in Manila or Pasay City.

Closing a business at the local City/Municipal Office

The typical requirements for business closure at the LGUs are the following: Affidavit of Gross (reason for and date of closure)

• Mayor’s Permit• Business Plate• Financial Statement/ ITR• Sketch• Latest Payment• Certificate of Closure from the Barangay Captain indicating date of closure

Dissolution ( by shortening corporate term ) 1. Directors' Certificate - A Notarized document signed by

majority of the directors and corporate secretary certifying the amendment of the articles of incorporation shortening the corporate term, the votes of the directors and stockholders thereto, and the date and place of the stockholders meeting

2. Amended Articles of Incorporation 3. Audited financial statements as of date of the stockholders

meeting approving dissolution or any date thereafter 4. List of creditors, if any, and their consent, or certification as

to non- existence of creditors

Dissolution ( by shortening corporate term ) 5. BIR Tax Clearance 6. Publisher's affidavit of the publication of the dissolution of

the corporation (once a week for three (3) consecutive weeks) 7. Endorsements/clearances from other government agencies,

if applicable Note: If there are creditors and their consent was not secured,

the application should be in the form of a petition to be filed with Office of General Counsel of the SEC

“May a dissolved corporation continue to operate its business?”

“May a dissolved corporation continue to operate its business?”

No, a covered corporation may not continue to operate its business. Section 122 of the Corporation Code expressly provides that a. corporation, whose corporate franchise was revoked, may continue as a body corporate for liquidation purposes only and not for the purpose of continuing the business for which it was established.

However, while the dissolved entity is prohibited from continuing its operation as a "corporation," it may operate to continue to undertake the purposes for which it was organized but its status is only that of an ordinary "association" which has no juridical personality.

“May a dissolved corporation issue new shares of stock?

“May a dissolved corporation issue shares of stock?

No, a covered corporation may not issue shares of stock. Again, Section 122 of the Corporation Code expressly provides that a corporation, whose. corporate franchise was revoked, may continue as a body corporate for liquidation purposes. The issuance of shares of stock, which necessarily implies the infusion of further investment or new capital into the corporation, is obviously inconsistent with the liquidation or winding up of the corporate affairs.

“May a dissolved corporation sell its assets or purchase properties?”

“May a dissolved corporation sell its assets or purchase properties?”

Yes, a covered corporation may sell its assets pursuant to Section 122 of the Corporation Code, which expressly provides that a corporation may dispose of and convey its properties and assets for purposes of liquidation.

On the other hand, a covered corporation may only purchase properties if such a purchase would be consistent with the purpose of liquidation. However, for obvious reasons, it is rare for a liquidating entity to further .acquire more non-liquid assets.

“May a dissolved corporation sue another person or entity for purposes of recovering its property?

“May a dissolved corporation sue another person or entity for purposes of recovering its property?

Yes, a covered corporation may sue for purposes of recovering its property. The corporation's dissolution, or even the expiration of its three-year liquidation period, is not a bar to the enforcement of its rights as a corporation.

LIQUIDATIONSEC. 122

LIQUIDATION

Winding up of the affairs of the corporation Reducing its assets into money Settling with creditors and debtors Apportioning the amount of profit and loss

the settlement of the affairs of a corporation [which] consists of adjusting the debts and claims, that is, of collecting all that is due the corporation, the settlement and adjustment of claims against it and the payment of its just debts

Sec. 122 - Corporate liquidation. - Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.

At any time during said three (3) years, 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. From and 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.

Cont.Upon the winding up of the corporate affairs, any

asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. (77a, 89a, 16a)

LIQUIDATION BY THE CORPORATION ITSELF

(1) As the law (Sec. 122.) grants it a period of three years after the time when it would have been so dissolved within which to wind-up its affairs, the claims by and against it not presented and settled within that period become unenforceable as there exists no longer a corporate entity against which they can be enforced.

(2) It is to be noted that there is nothing in Section 122 (par. 1.) which bars an action for the recovery of the debts of the corporation against the liquidator thereof after the lapse of the winding-up period of three (3) years. (Republic of the Philippines vs. Marsman Dev. Co., 44 SCRA 418.)

LIQUIDATION BY A RECEIVER

(1) The receivership, unless otherwise specifically limited in its duration, shall exist indefinitely until the affairs of the dissolved corporation shall have been completely settled and liquidated. During its continuance, claims can be presented and allowed if they are not barred by the statute of limitations. In other words, the period of three (3) years prescribed by Section 122 is not applicable. (see Summers vs. Valencia, 67 Phil. 721 [1939].)

(2) The appointment of a receiver is discretionary with the court and the Securities and Exchange Commission and is not made except upon proper showing that such appointment is necessary. Even without dissolution, the court has the authority to appoint a receiver for a corporation to protect and preserve its properties for the use and benefit of its creditors and others who may have similar interests in the property as where there is already a final and executory judgment against the corporation which is in a precarious financial condition. (Central Sawmills, Inc. vs. Alto Surety and Insurance Co., 27 SCRA 247 [1969].)

(3) Where corporate directors are guilty of breach of trust, minority stockholders may ask for receivership. (Chase vs. Court of First Instance, supra.)

LIQUIDATION BY A TRUSTEE

(1) By the terms of Section 122 (par. 2.), the effect of the conveyance is to make the trustee the legal owner of the property, subject to the beneficial interest therein of the creditors, stockholders/members, and other persons in interest. The trustee may sue and be sued as such in all matters connected with the liquidation.

(2) The same rules governing duration and the time for filing of claim where the liquidation is done by a receiver apply to liquidation effected by a trustee. (see Board of Liquidators vs. Heirs of Maximo Kalaw, 20 SCRA 987 [1967].)

General rule: No corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.

Exception: 1. By decrease of capital stock; or 2. As otherwise allowed the Code.

• Pending actions by or against a corporation are abated upon expiration of the period allowed by law for the liquidation of its affairs

• Upon dissolution of the corporation its assets are held for the benefit of its stockholder after payment of its debts and will be so distributed to the said stockholder in accordance with their proportionate interest in the corporation or their contracts of subscription.

General rule: The board of directors of a dissolved corporation is not permitted to undertake any activity outside of the usual liquidation of the corporation.

Exception: The stockholders of a dissolved corporation may convey their respective shareholdings toward the creation of a new corporation to continue the business of the old. Winding up is the sole activity of a dissolved corporation that does not intend to incorporate a new. (Chung Ka Bio vs. IAC)

“What if the three year period of liquidation has elapsed and no effort to finally settle or close the corporate affairs was undertaken?”

“What if the three year period of liquidation has elapsed and no effort to finally settle or close the corporate affairs was undertaken?”

ANSWER: Those having pecuniary interest in the

corporate assets, including not only the stockholders but likewise the creditors, acting for and its behalf, may make proper representations with the SEC for working out a final settlement of the corporate concern. (Clemente vs. CA)

XYZ Company was revoked by the Commission on September 30, 2014 for non-filing of its annual reports

"Is XYZ Company automatically dissolved upon revocation of its Certificate of Registration/Incorporation last September 30, 2014? Or does it have to secure a Certificate of Dissolution from the SEC?"

"Is XYZ Company automatically dissolved upon revocation of its Certificate of Registration/Incorporation last September 30, 2014? Or does it have to secure a Certificate of Dissolution from the SEC?"

Yes, because at any rate, once a corporate franchise is revoked, the corporation is dissolved. In short, the effect of the Order of Dissolution is automatic in that there is no more need for the Commission to issue any Certificate of Dissolution.

"Assuming it is automatically dissolved last September 30, 2014, can XYZ Company still undergo the process of liquidation by disposing of its remaining assets even beyond the three-year period of liquidation required by the Corporation Code? xxx"


Yes, because even though Section 122 of the Corporation Code gives a dissolved corporation three (3) years to continue as a body corporate for purposes of liquidation, the disposition of the remaining undistributed assets must necessarily continue even after such period

"Can the directors and remaining stockholders appoint a trustee/liquidator among themselves even beyond the three-year period of liquidation required by the Corporation Code?"


Yes, If the three-year extended life has expired without a trustee or receiver, having been expressly designated by the corporation within that period, the board of directors itself may be permitted to so continue as "trustees'' by legal implication to complete the corporate liquidation. Thus, the surviving Board of Directors may act or appoint themselves as "trustees" for XYZ Co. in order to carry out the liquidation of the corporation. (Clemente v. CA)

"Can the directors and remaining stockholders appoint a trustee/liquidator to solely undertake the liquidation process and dispose of the remaining assets of the corporation without filing a petition to the courts (or SEC) for the appointment of the trustee-in-liquidation/ liquidator?

"Can the directors and remaining stockholders appoint a trustee/liquidator to solely undertake the liquidation process and dispose of the remaining assets of the corporation without filing a petition to the courts (or SEC) for the appointment of the trustee-in-liquidation/ liquidator?

"However, the SEC's jurisdiction does not extend to the liquidation of a corporation. While the SEC has jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of the corporation now pertains to the appropriate regional trial courts.“ (Consuela Metal Corporation v. Planters Development Bank)

Yes, because under the existing law, the approval of the SEC is not required in the distribution of and liquidation of assets.

“If one of the directors/stockholders of XYZ Company is already deceased, can the remaining directors appoint a trustee/liquidator among themselves or perform other acts of corporate liquidation without filling the vacancy in the board, assuming that they still constitute a quorum?"

“If one of the directors/stockholders of XYZ Company is already deceased, can the remaining directors appoint a trustee/liquidator among themselves or perform other acts of corporate liquidation without filling the vacancy in the board, assuming that they still constitute a quorum?"

Yes, If the Board of Directors or a quorum thereof can still be convened, then they should take care of the winding up of the corporation without need of any proceeding.

PRIORITY OF APPLICATION OF ASSETS. (1) When the corporation is insolvent, the creditors of the

corporation are entitled to have all its assets distributed first among them according to their rights and priorities.

(2) Stockholders/members, directors/trustees, or officers of the corporation who are also its creditors as a result of a legitimate or proper loan or claim must be paid next.

(3) The remaining assets are then to be distributed among the stockholders or members in proportion to their shareholdings or interest in the absence of any provision to the contrary.

(4) Upon winding-up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such assets are located. (Sec. 122, par. 3.)

END OF REPORTThank you!

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