Corporate Dissolution and Liquidation

When a corporation has been dissolved, it ceases to possess a juridical personality except for purposes
of liquidating its affairs. Dissolution refers to the process which ends the capacity of the body corporate
to act as such and extinguishes all the legal relations existing in respect of the corporate enterprise.

The causes of dissolution are various. It may either be voluntary or not.

Once the corporate franchise has been revoked and the corporation dissolved, the corporation must
undergo corporate liquidation. It is mandatory for a dissolved corporation to commence liquidation of
its affairs, settle its liabilities, and distribute and dispose of its corporate assets within three years after
its corporate term had elapsed.

The law provides that every corporation whose charter expires pursuant to its articles of incorporation,
is annulled by forfeiture, or whose corporate existence is terminated in any other manner, shall remain
for a period of three (3) years to dispose of and convey its property and distribute its assets. During the
said three 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. While the law gives a
dissolved a corporation three years to continue as a body corporate for purposes of liquidation, the
distribution of the remaining undistributed assets necessarily continues even after said period.

During the liquidation, the remaining properties of the expired corporation are considered to be held in
trust by either the court-appointed receiver or, in the event that there is none, the directors and
trustees of the corporation at the time of the expiration of the corporate term. Clemente v. CA provides
that if the three-year extended life has expired without a trustee or receiver having been expressly
designated by the corporation within said period, the board of directors or trustees itself may be
permitted to continue as “trustees” by legal implication to complete the corporate liquidation. 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, in case of the death,
resignation, inability, or refusal to act of the directors as trustees, or the survivors, the court may
appoint trustees to fill the vacancy, upon the application of any person interested.

Once all the claims of creditors are settled, the remaining assets of the corporation should be divided
between and among the stockholders of the defunct corporation depending on their interest in the
corporation and other contractual agreements they may have entered into. The distribution of the
corporate assets may be through sale or other modes of assignment, and all the proceeds from the
assignment or sale of the properties shall be divided accordingly among all those with remaining interest
in the said corporation.

The approval of the Securities and Exchange Commission, insofar as the distribution or liquidation of
assets is concerned, is not required.