Opinion No. 15-07 Re: Corporate Liquidation

SEC Building,EDSA,Greenhills,Mandaluyong City Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

SEC-OGC Opinion No.15-07 Re:Corporate Liquidation 21 July 2015

No.35 Narra St.,Northview Homes Subdivision Batasan Hills,Quezon City ATTY.NILO L.GEONZON GEONZON LAW OFFICE

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corporate liquidation of the defunct Roxas Colleges, Inc.(RCl This is in response to your letter,dated 18 August 2014, pertaining to the

registered with the Commission on 24 July 1950. Sometime in 1999, RCI was left legal dissolution RCI ceased operation and left its school campus idle for a long buildings, facilities and improvements were destroyed.Except for some copies of stockholder of the RCI. Since Estela Sison could no longer personally perform the benefit of the stockholders. unattended until its corporate existence has expired on July 24,2000. After its time. A 2.6396 hectare of land is the only tangible asset left by RCI as its its Certificate of Registration, Articles of Incorporation and a General Information Sheet,all other corporate records were either lost or destroyed. In 2010,Arnulfo Sison,the Chairman of the Board and the school President,died.He was survived by his wife Estela Sison, a member of the Board and the remaining majority rigors of liquidation due to old age, she decided to appoint her two children Vicente P. Sison and Buenaflor S. Yason to act as Trustee/Liquidators for the As stated in your letter, RCI was a private educational institution

The queries raised in your letter are as follows

1. Whether or not Estela Sison, a member of the Board and the remaining majority stockholder, can legally initiate corporate liquidation of the defunct RCI beyond the winding up period where no trustees were designated?

2.Whether or not the children who are appointed by Estela Sison are qualified to act as Trustees for purposes of liquidation?

3. Whether or not the said Trustees can sell or dispose of the land covered by OCT No.RO-160 (319,for the purpose of remaining asset of the defunct RCI consisting of a parcel of liquidation?

4. Whether or not the certificate of title of the defunct may be registered in the name of the appointed Trustees for the corporation's real asset covered by OCT No.RO-160 (319 purpose of liquidation?

litigated in the future in an intra-corporate and/or civil case such as matters which involve the substantive and contractual rights of private parties who would, in all probability,contest the same in court if the opinion turns out to be adverse to their interest, and on matters which would necessarily require a review and interpretation of contracts or an opinion on the validity of contracts since legal examination of contract on a general legal basis and not on specific legal interpretation of contracts is justiciable in nature and contract review calls for Issues. policy, render categorical opinions on litigious issues which may eventually be Please be advised that the Commission does not, as a matter of settled

Planters Development Bank, to wit: Also, please find instructive the case of Consuelo Metal Corporation v.

However, the SECs 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.

(Emphasis and underscoring supplied)

However, for purposes of information only, we impart the following: Hence, we are constrained from categorically answering your queries.

Section 122 of the Corporation Code provides:

1 Pursuant to Section 5.2 of the Securities Regulation Code SRC, the Commissions jurisdiction over all intra-corporate disputes under Section 5 of Presidential Decree No.902-A has been transferred to the courts of general jurisdiction or the appropriate Regional Trial Courts. SEC Memorandum Circular No.15,Series of 2003 G.R.No.152580, June 26,2008

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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. Section 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

all interest which the corporation had in the property terminates, the legal after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest. 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

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As to your first and second queries, it has been opined that

or receiver having been expressly designated by the corporation following the rationale of the Supreme Court's decision in Gelano vs. within that period, the Court of Appeals (103 SCRA 90 may be permitted to so continue as "trustees"by legal implication to complete the corporate liquidation. (emphasis ours)xxx If the three-year extended life has expired without a trustee board of directors or trusteesitsclf,

the survivors, the court may appoint trustees to fill the vacancy, regarding the consequences of the death of a director, acting as trustee in liquidation during the liquidation or winding up period. In some to their tenancy. In other words, when one or more directors die, the surviving trustees take the whole title subject to the trust, and the latter may exercise the powers and duties of the deceased director- trustee. However, it is also provided that in case of the death, resignation inability or refusal to act, of the directors as trustees, or American jurisdictions, directors who become trustees of the corporation on dissolution hold on as joint tenants with right of survivorship incident upon the application of any person interested. In our jurisdiction, the statutes and jurisprudence are silent

prejudice to the right of a person in interest to petition the courts for the from which our corporation law was patterned, we opine that Mr. Victor U. Lopez may act as trustee in liquidation. However, this is without appointment of a different trustee in liquidation on account of Mr.Victor Adopting these legal principles from American corporation law

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U. Lopez's refusal or inability to wind up the affairs of the dissolved corporation within a reasonable period

Northern Luzon Transportation Inc. Isabela Cultural Corporation, petitioner, three (3 years to continue as a body corporate for purposes of liquidation, the after such period. Following the SEC Commission En Bane decision in the case of SECAC No.347 October 7,1991,quoted in part hereunder disposition of the remaining undistributed assets must necessarily continue even While Section 122 of the Corporation Code gives a dissolved corporation

Section 122 simply means that after the expiration of the three-year corporation are abated.Section 122 should not,however, be construed to prevent a corporation from pursuing activities which would complete the final liquidation of a dissolved corporation. In this case, Northern Luzon Section 122. Accordingly, it should be allowed to continue liquidating its from said disposition to its stockholders or creditors if any. A contrary Corporation Inc. which term has long expired, was unable to dispose of its remaining assets even during the three-year period granted it by remaining assets in order to complete the process of dissolving the corporation. Likewise,it should be allowed to distribute the proceeds interpretation would have unjust and absurd results. winding-up period, pending actions by or against the dissolved

Previously, the Commission has opined

completed its liquidation and there are numerous real properties still through sale or other mode of assignment, in order to fully liquidate the that all proceeds from the sale or assignment of the properties shall be divided accordingly among all those with remaining interest in the said under its name. The obligation to dispose of the said real properties, corporation falls upon the directors of the said expired corporation so expired corporation. In your case, it appears that the expired corporation has not

122 of the Corporation Code, upon the appointment of a trustee, legal title over the property of the corporation and acting as liquidator, has the duty to possess and disposc the properties of the defunct corporation for the benefit of the stockholders, creditors or other persons in interest, in accordance with the corporatc property passes to the trustee. Hence,the trustee,having legal title over liquidation plan. As to your third and fourth queries,under the second paragraph of Section

SEC-OGC Opinion No.14-29 dated 22 October 2014 addressed to Ms.Theresita M.Ceralde citing Clemente v.CA,G.R.No.82407 March 27,1995,and SEC-OGC Opinion No.10-06 dated SEC Opinion No.33-03 dated 14 May 1996 addressed to Atty.Nita G.UntalanSEC-OGC Opinion No.09-31 dated 9 December 2009 addresscd to Ms.Liza BautistaSEC-OGC Opinion No.14-22 dated 8 August 2014 addressed to Mr.Manuel T.Hing SEC-OGC Opinion No.14-29,22 October 2014 addressed to Ms.Theresita M.Ceralde 29 January 2010 addressed to Chato & Vinzons-Chato

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trustee. However, should there be substantial issues, the same may be brought to of this Commission is not required in the distribution or liquidation of assets. within the power of the directors and stockholders or duly appointed liquidation court, pursuant to the Consuelo Metal case afore-mentioned. There is nothing in Section 122 of the Corporation Code which requires this Commission's approval of distribution or liquidation of assets of a dissolved corporation. The same is a matter of internal concern of the corporation and falls Lastly,it should be emphasized that under the existing law, the approval

on the facts disclosed in the query and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule binding upon circumstances. If upon investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void. the courts, or upon the Commission in other cases of similar or dissimilar It shall be understood that the foregoing opinion is rendered based solely

CAMILO/S.QORREA GUneral Gouhsel N A

SEC Memorandum Circular 2003-15,No.7 SEC-OGC Opinion No.14-22 dated 8 August 2014 addressed to Manuel T.Hing