Opinion No. 19-34 Re: Rights of a corporation under liquidation

Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

09 September 2019

SEC-OGC Opinion No. 19-34 Re: Rights of a corporation under liquidation

FIRST PROVINCIAL FINANCE CORPORATION First Provincial House 1 Gatuslao corner Nueva Streets Bacolod City 1600

Attention: Mr. Conrado P. Lo, Jr., CPA, MBE, Ph.D.

Executive Vice-President

Dear Mr. Lo:

This refers to your letter dated 14 September 2018, requesting for our opinion on whether or not your client, Arca & Company, Inc. (ARCA)) whose corporate term has expired, is allowed to continue selling and transferring the ownership of its remaining assets.

Commission's opinion on whether or not ARCA could still demand payment In your letter, you stated that you have previously requested the

from the Land Bank of the Philippines (LBP) for land acquired by the Agrarian Reform Program, considering that the corporation's corporate Department of Agrarian Reform (DAR) in 1988 under the Comprehensive

through SEC-OGC Opinion 09-19 (the "Opinion") dated 28 July 2009. term had long expired, to which the Commission opined affirmatively

You further stated that to complete ARCA's liquidation, it is now in

which were returned to it only in 2014. However, the Bureau of Internal the process of titling and selling portions of the land rejected by the DAR

Revenue requests for a similar opinion allowing ARCA to continue selling and transferring its remaining assets. Hence, your query.

The Commission answers your query in the affirmative.

is related, a corporation whose corporate existence is terminated, shall As previously discussed in the Opinion, to which your current query

liquidation. The corporation's dissolution or expiration of the three-year liquidation period is not a bar to the enforcement of its right as a continue as a body corporate for three (3) years for the purpose of

corporation. Thus, in said Opinion, the Commission ruled that the corporation may still demand payments from the LBP despite its dissolution.

1391 of the Revised Corporation Code (RCC), a corporation whose The same holds true under the present circumstances. Under Section

1 Essentially the same with Section 122 of the Old Corporation Code

corporate existence is terminated, shall continue as body corporate for three (3) years for the purpose of liquidation to enable it to settle and Page 2 of 2

assets. close its affairs, dispose of and convey its property, and distribute its

held: To reiterate, in the case of Sumera v. Valencia2, the Supreme Court in their hands. It is provided only (Corp. Law, Sec. 78 [now Sec suits by or against a corporation abate when it ceased to be an but trustees to whom the corporate assets have been conveyed Sec. 139]) may sue and be sued as such in all matters connected with the liquidation ..... the time the period of dissolution commences; but there is no time limit within which the trustees must complete a liquidation placed three-year period. It may be found impossible to complete the pursuant to the authority of Sec. 78 (Old Corp. Code, Sec. 122 [now "It is to be noted that the time during which the corporation. through its own officers, may conduct the liquidation of its assets work of liquidation within the three-year period or to reduce disputed claims to judgment. The authorities are to the effect that entity capable of suing or being sued (7 R.C.L., Corps., par. 750);l and sue and be sued as a corporation is limited to three years from 139]) that the conveyance to the trustees must be made within the

subsequent amendment or repeal of this Code or of any part thereof. in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation or by any Relatedly, Section 1843 of the RCC provides that "no right or remedy

the expiration of its corporate term. Within such period, ARCA may convey There is no time limit within which the trustees must complete the remaining assets of ARCA are acts in line with the purpose of its liquidation. Thus, ARCA, as a corporate entity, may validly do so within 3 years after all of its property to trustees for the purpose of completing the liquidation. liquidation. Applying the foregoing to your query, the sale and transfer of the

cases of similar or dissimilar circumstances.4 If upon investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void. solely 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 the courts, or upon the Commission in other It shall be understood that the foregoing opinion is rendered based

Please be guided accordingly

LAMMUS.C SORRE

General Counsel

4 SEC Memorandum Circular 2003-15, No. 7. 2 67 Phil 721. 726 (1939). 3 Formerly Section 145 of the Old Corporation Code.