DISSOLUTION OF A CORPORATION BEFORE THE SEC

To dissolve the corporation by shortening its corporate term. First,

you decide to shorten its corporate life which is set at 50 years by
default in the articles of incorporation. You set up a meeting
(together or separately) with at least a majority of the
directors/trustees and stockholders/members where the majority of
both directors/trustees and stockholders/members agree to amend
the articles of incorporation to shorten the corporate term. Note
that your by-laws may require a higher number of votes for such an
amendment. You must follow what your by-laws provide so you will
need to double-check that (whether its 2/3 vote, 3/4, etc.). Then,
submit the following Requirements to the SEC:
1. Amended Articles of Incorporation
2. Notarized directors certificate certifying (i) the
amendment of the Articles of Incorporation
shortening the corporate term, (ii) the votes of the
directors/trustees and stockholders/members, and
(iii) the date and place of the stockholders/members
meeting which shall be signed by the majority of
directors and corporate secretary;
3. List of creditors and the amount due to each, if any,
certified by the auditor or certified under oath by
the company accountant and the written consent of
each creditor, or certification as to non-existence of
creditors;
4. Certification signed by
Treasurer certifying that-

the

President

and

the

i.

The dissolution is not prejudicial to the interest

of the creditors; and

ii.

There is no opposition from any creditor from

the time of the last publication of the notice of
dissolution up to the filing of the application
for dissolution with the Commission;

5. BIR tax clearance

6. Affidavit of publication once a week for three [3]
consecutive weeks in a newspaper published in the
province or city where the principal office of the
corporation is located, or if no newspaper is
published in such place, in the business section of a
national newspaper of general circulation in the
Philippines of the notice of time, place and object of
the meeting where the dissolution of the
corporation was approved, and

7. Endorsement/clearance
agencies, if applicable

from

other

government

Additional Requirements ]
(1)Where the applicant has ceased operations for at least one
(1) year, it shall submita.

Audited Financial Statements as of last fiscal year of

operation; and

b.

Affidavit of non-operation certified under oath by the

President and Treasurer

(2)Where the applicant has no operation since incorporation,

it shall submita.

Balance Sheet certified under oath by Treasurer and

President;

b.

Affidavit of non-operation certified under oath by the

President and Treasurer; and

c.

Certificate of non-registration issued by the BIR.

(3)Where the applicant is a stock corporation with paid-up

capital of less that P50,000.00, it shall submit its Balance
Sheet as of last preceding fiscal year certified under oath
by the President and Treasurer.
(4)Where the applicant is a non-stock corporation with gross
receipts of less than P100,000.00 or total assets less than
P500,000, it shall submit its Balance Sheet as of last
preceding fiscal year certified under oath by the President
and Treasurer.
(5)For cases not covered by I to IV above, it shall submit its
Audited Financial Statements as of last fiscal year of
operation.
Note: In cases where there are creditors and the consent of
the creditors was not secured, the application should be in
the form of a petition to be filed with Office of General
Counsel of the SEC.

Upon completion of the above mentioned documentary

requirements for dissolution of corporation in the Philippines and
such other requirements the SEC may require, the process of
evaluation and approval may come within less than a month.

Finally, note that there is a short corporate afterlife of 3 years from

the time the corporation 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
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property and to distribute its assets, but not for the purpose of
continuing the business for which it was established.

CLOSING A BUSINESS WITH THE BIR

BIR TAX CLEARANCE REQUIREMENTS
The dissolution or reorganization of a corporation shall, prior to the
issuance by the Securities and Exchange Commission of the Certificate
of Dissolution or Reorganization, secure a certificate of tax clearance
from the BIR which certificate shall be submitted to the Securities and
Exchange Commission.
The Tax Code further states that every corporation shall, within thirty
(30) days after the adoption of a resolution or plan for its dissolution,
render a correct return to the Commissioner, verified under oath,
setting forth the terms of such resolution or plan and such other
information as the Secretary of Finance, upon recommendation of the
commissioner, shall, by rules and regulations, prescribe. In line with
this, BIR-SEC Regulation No. 1 provides that every dissolving
corporation shall, within the said period, file their short period
income tax returns covering the income earned by them from the
beginning of the taxable year up to the date of such dissolution.
Furthermore, the BIR requires that the following documents are be
attached to the application for the issuance of tax clearance (BIR
Form No. 1905):
a. Letter of Intent stating the reason for the dissolution of
the corporate term;
b. Notice of Dissolution and Board Resolution authorizing
the dissolution;
c. Books of Accounts
d. Audited Financial Statements for the last 3 years;
e. Copy of the Articles of Incorporation and By Laws or
license to operate issued by the SEC;
f. Original Certificate of Registration;
g. Balance sheet as of the date of dissolution and income
statement covering the period from the beginning of the
taxable year to the date of dissolution;
h. Annual Income Tax Returns and VAT returns for the last
three (3) taxable years;
i. Latest Annual Registration Fee Return (BIR Form No.
0605);
j. Inventory List of used and unused official receipts,
invoices, etc. including the last booklets,
used and
unused booklets and latest authority to print; and
k. The unused official receipts and invoices;
File the application for issuance of tax clearance within ten (10) days
from the closure or dissolution with the RDO where the corporation was
registered. After submitting the enumerated documents, the BIR will
then issue either a Letter of Authority (LOA) or a Tax Verification Notice
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(TVN) authorizing its revenue officers to determine whether the

applicant has any deficiency tax liability before it issues the tax
clearance.
Thirty (30) days after the adoption of a resolution or plan for its
dissolution, render a correct return to the Commissioner, verified under
oath, setting forth the terms of such resolution or plan and such other
information as the Secretary of Finance, upon recommendation of the
commissioner, shall, by rules and regulations, prescribe. In line with
this, BIR-SEC Regulation No. 1 provides that every dissolving
corporation shall, within the said period, file their short period
income tax returns covering the income earned by them from the
beginning of the taxable year up to the date of such dissolution.
Simultaneous with the processing of the application for the issuance of
tax clearance, the dissolving corporation may file a notice with the
LGU before whom it is registered to request for the cancellation of its
registration. Similar to the BIR, the LGU likewise determines whether
the applicant has any deficiency on local taxes and requires its
settlement before it stamps the word retire on the application for
retirement.
Only after the BIR has approved the dissolution of the applicant by
issuing the tax clearance can the owner proceed to the SEC to cause
the deregistration of its business with the Commission. The most
common means used to dissolve a company is by amending its Articles
of Incorporation to shorten its corporate term. This requires the
approval of the majority of the members of the board with the
concurrence of at least 2/3 of the shareholders or as stated in the bylaws
BIR TAX CLEARANCE PROCEDURE
1.
2.
3.

4.
5.
6.
7.
8.
9.

Taxpayer applicant files BIR Form 1905, together with the

attachments at the RDO where they are registered within ten
(10) days from retirement of business.
Taxpayer files short period return for income tax purposes.
RDO verifies if taxpayer has open cases reflected in the
Integrated Tax System (ITS). If YES, ask taxpayer to submit
required returns and pay the corresponding tax due/s and
penalties if any.
RDO verifies if taxpayer has delinquent cases at the
Assessment, Collection, and Legal Divisions of the Region;
RDO verifies if taxpayer has delinquent cases at the Collection
Enforcement Division, BIR National Office
RDO requests for Letter of Authority to investigate internal
revenue taxes for all un-audited taxable years prior to
cancellation of business.
Assigned Case officer conducts investigations for period/s
covered in the issued Letter of Authority.
Taxpayer complies with requirements of audit and pays
corresponding deficiency taxes resulting from audit using Form
0605.
RDO issues tax clearance for closure of business.

10.
RDO updates ITS and cancels TIN of taxpayer (for nonindividual taxpayer).

CLOSING A BUSINESS AT DTI

According to the DTI, we still have to inform the office when we

voluntarily close our business, and apply for cancellation of our
registered business name (BN).

For Corporation and Partners, the

requirements for Voluntary Cancellation.

following

are

the

If dissolved at the Securities and Exchange Commission (SEC):

1. Letter request signed by the authorized signatory (Board
Resolution for the authorized signatory);
2. Certified photocopy of the SEC certificates of dissolution of the
corporation/partnership;
3. 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,

Corporate Name:
1. Letter request signed by the authorized signatory (Board
Resolution for the authorized signatory)
2. 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)
3. 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)
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Adopted Name:
1. Letter request signed by the authorized signatory (Board
Resolution for the authorized signatory)
2. 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
3. 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 BARANGAY, 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. The typical requirements for business closure at
the LGUs are the following:
1. Affidavit of Gross (reason for and date of closure
2. Mayors Permit
3. Business Plate
4. Financial Statement/ ITR
5. Sketch
6. Latest Payment
7. Certificate of Closure from the Barangay Captain indicating date
of closure

For more complete and accurate procedures and requirements, you

may visit and inquire the City or Municipal Office where your business
is registered.
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CLOSING A BUSINESS AT DOLE

If your business has employees or was required to be registered with

the DOLE, you also have to ensure that you notify the DOLE office and
comply with the labor requirements to avoid labor relation liabilities.
The following are the basic requirements in closing a business and be
cleared at the DOLE office:
1. Service of a written notice to the employees and the DOLE at
least one (1) month before the intended date of closure/cessation
2. The closure or cessation of business operations is bona fide in
character.
3. Payment to the employees of termination pay amounting to at
least one-half (1/2) month pay for every year of service, or one
(1) month pay whichever is higher, per Philippine Labor Code
mandate.

OTHER NOTES TO REMEMBER

When closing a business in the Philippines, we have to formally close

the business in the government agencies where it is registered. We
have to notify those offices and comply with their requirements to get
a clearance or certificate of termination (cancellation of registration) of
our business. Thus, a business owner has to ensure that his or her
business is cleared in every government agency it is registered aside
from the ones discussed above.

For businesses registered and regulated by the Bangko Sentral ng

Pilipinas (BSP), such as pawnshops, money changers, banks, and
financing companies, they have to comply with the closure
requirements of the office. For cooperatives, instead of closure at the
SEC, it should comply with the CDA (Cooperative Development
Authority) Office for cessation or dissolution.
Furthermore, if your business employs people and is contributing to
SSS (Social Security System), PHIC (Philippine Health Insurance
Corporation) and HDMF (Home Development Mutual Fund) for
employees as mandated by our laws, then you also have to apply for
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cancellation of your business or employers registration when you close

your business to stop your obligation as a contributing employer.