June 16, 2003

SEC OPINION NO. 33-03

Atty. Teresita A.M. Villaruz

Romulo Mabanta Buenaventura Sayoc
& De Los Angeles 30th Floor Citibank
Tower, Citibank Plaza, 8741 Paseo de
Roxas, Makati City, Philippines

Madame:

This is in response to your letter seeking confirmation of your position

that the board of liquidators-trustees of the subject Northern Mindanao
Colleges, Inc. may be allowed to continue the process of winding up even
beyond the statutory limit of three years set by the Corporation Code.
Section 122 of the Corporation Code provides:
"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."

Usually, by express statutory provision, the existence of corporations

created for a limited time is prolonged or extended either for a period of
three years or indefinitely for the limited purpose of winding up their
business affairs, paying debts, distributing assets and of suing and being
sued. (Ballantine on Corporations, p. 718)
Within Philippine jurisdiction, the general rule is that there is no
juridical personality after dissolution. If there is, it is only a juridical
personality to serve but one purpose- for all transactions pertaining to
liquidation, culminating in the disposition and distribution of the dissolved
corporation's remaining assets. Any matter entered into that is not for the
purpose of liquidation will be a void transaction because of the non-existence
of the corporate party.
Section 122 of the Corporation Code further provides:
"At any time during the three years of liquidation, a 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 such conveyance by the corporation of its
property in trust, 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
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 interest." EcSCHD

In such cases, the three year limitation period will not apply provided
the designation of the trustee is made within said period. Unless the
trusteeship is limited in its duration by the deed of trust, there is no time
limit by which the trustee must finish the liquidation, and he may sue or be
sued even beyond the three year period. (Villanueva, Philippine Corporate
Law, p. 690.)
The above discussion clearly shows that on one hand, a dissolved
corporation may, during the three-year term after dissolution, appoint a
trustee or a receiver who may act beyond that period;
On the other hand, if the three-year extended life has expired without
a trustee or receiver being expressly designated by the corporation within
that period, the board of directors or trustees themselves, following the
rationale laid down in Gelano vs. Court of Appeals may be permitted to
continue as "trustees" by legal implication to complete the corporate
liquidation
Reburiano vs. Court of Appeals (301 SCRA 342), reiterated the ruling of
the Supreme Court that seeks to allow the full liquidation of the corporate
affairs even beyond the three-year period provided for in the Code, and
invoked in addition the transitory provision of Section 145 of the Corporation
Code. In the said case, the High Court declared:
"For indeed as early as 1939, in the case of Sumera vs. Valencia, this
Court held: It is to be noted that the time during which the corporation
through its own officers may conduct the liquidation of its assets and
sue and be sued as a corporation is limited to three years from the
time the period of dissolution commences; but there is no time limit
within which the trustees must complete a liquidation placed in their
hands. It is provided only (Corp. Law, Sec. 78 [now Sec. 122]) that the
conveyance to the trustees must be made within the three-year period.
It may be found impossible to complete the work of liquidation within
the three-year period or to reduce disputed claims to judgment."
Similarly, the SEC En Banc, in the matter of Northern Luzon
Transportation, Inc. SEC AC No. 347 October 7, 1991 ruled that:
"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 Transportation, Inc.
which term has long expired, was unable to dispose of its remaining
assets even during the three-year period granted it by Section 122.
Accordingly, it should be allowed to continue liquidating its remaining
assets in order to complete the process of dissolving the corporation.
Likewise, it should be allowed to distribute the proceeds from said
disposition to its stockholders or creditors, if any. A contrary
interpretation would have unjust and absurd results."

We trust that we have sufficiently addressed your concerns. HSDCTA

Very truly yours,

CD Technologies Asia, Inc. © 2023 cdasiaonline.com
 (SGD.) VERNETTE G. UMALI-PACO
General Counsel

CD Technologies Asia, Inc. © 2023 cdasiaonline.com