Company Liquidation in the Philippines

Company liquidation in the Philippines can happen if investors decide to close their business due to various reasons, such as financial difficulties.

There are two main ways in which a Filipino company can be liquidated: the voluntary and the involuntary one. There is also the company liquidation procedure by shortening the corporate term. Our Philippines company formation consultants can explain the main differences between the types of company liquidation procedures.

Voluntary and involuntary company liquidation in the Philippines

Starting a company in the Philippines is easy. However the company liquidation procedure is not that simple and could take a while before the company is dissolved. The main laws governing company liquidation in the Philippines are the Commercial Law and the Financial Rehabilitation and Insolvency Act, shortly known as FRIA.

Quick facts
Types of company liquidation in the Philippines	Voluntary and compulsory
Initiating voluntary company liquidation	The board of directors must pass a resolution to liquidate the business, and shareholders must approve this decision.
Voluntary company liquidation process	– inform creditors, – file documents with the Securities and Exchange Commission (SEC), – appoint liquidator, – file final report with SEC
Documents needed for voluntary liquidation	– petition for voluntary dissolution, – audited company financial statements, – board resolution certified copy, – minutes of the shareholder meeting, etc.
Notice for creditors	Must be published in a local or national newspaper once per week for 3 consecutive weeks.
Role of liquidator	– manage the liquidation process, – sell and distribute assets, – settle debts with creditors, – prepare final report, etc.
Appointing the liquidator	Our company formation specialists can be appointed as liquidators.
Situations that may require the removal of the liquidator	– misconduct, – failure to perform his/her duties properly, – conflicts of interest, – resignation, etc.
Distribution of assets to shareholders	Based on the proportion of owned shares or the terms in the Articles of Association.
Compulsory liquidation – characteristics	Initiated by creditors, shareholders, or government authorities by filing a petition with the appropriate court.
Documents for creditors proving their claims	– unpaid invoices, – contracts or agreements, – official correspondence, – court judgments, etc.
Regulatory framework for company liquidation	Commercial Law and the Financial Rehabilitation and Insolvency Act
Duration of company liquidation	6 months – 2 years
Alternative to company liquidation	Modifying the company’s Memorandum and Articles of Association can be an option. Our company registration specialists can detail.
Assistance	We can help you open a company in the Philippines or close it, depending on your business needs.

We mentioned above that there are two types of liquidation procedures companies in the Philippines can undergo. These are:

• the voluntary liquidation without any effect on the creditors,
• the voluntary liquidation with effects on the creditors,
• the involuntary liquidation which is asked by the creditors.

Our company formation agents in the Philippines can assist with the company liquidation procedures.

The voluntary company liquidation procedure in the Philippines

Even if many investors decide to open a company in the Philippines, some may decide to close their business. Our team can help in this situation. It should be noted that company dissolution must be completed with one or more authorities in the Philippines. These authorities are:

• the Trade Register,
• the Department of State and Industry,
• the Securities and Exchange Commission (SEC),
• the Bureau of Internal Revenue,
• the Department of Labor and Employment.

For the voluntary winding up of a company in the Philippines, the directors’ board must pass a resolution to liquidate the business. Shareholders must also approve the liquidation. The notice of company liquidation must be published in a local/national newspaper once a week for three consecutive weeks. This step is required so that potential creditors can submit their claims. 

After shareholders approve closing the company in the Philippines, the company must file specific documents with the SEC to formalize the liquidation. Our company registration agents in the Philippines can help companies submit these documents, which include:

• A petition for voluntary dissolution, which must be signed by a majority of the board of directors and authorized by shareholders;
• Certified copies of the board resolution and minutes of the shareholder meeting;
• Audited financial statements of the company.

The company must appoint a liquidator to manage winding up the company in the Philippines. The liquidator must manage and sell the company’s assets, settle its debts, and distribute any remaining assets to the shareholders. He/she must also request creditors to submit their claims.

One of the most important responsibilities of the liquidator is submitting the detailed final liquidation report to the SEC. The report must outline the liquidation process and the distribution of assets.

Our specialists in company formation in the Philippines can act as liquidators.

Involuntary company liquidation in the Philippines

Involuntary company liquidation in the Philippines occurs when creditors, shareholders, or government authorities file a petition with the appropriate court to request liquidation of the company. This can happen due to insolvency, fraudulent activities, violations of laws or regulations, or not meeting the company’s financial obligations.

If the court approves the petition, it will issue an order for liquidation. The court will appoint a liquidator to manage the closing of the company in the Philippines. The liquidator’s duties remain the same as in the case of voluntary liquidation.

Our accountants in the Philippines can assist businesses with financial difficulties in order to avoid involuntary liquidation.

Company dissolution by reducing the corporate term in the
Philippines

This is a special procedure preferred by many Filipino companies facing financial distress. It implies modifying the Memorandum and Articles of Association of a company. The amendments will provide for the cessation of the activities of the company within a period of time agreed by the shareholders.

Our team can offer details about this special procedure which is an alternative to winding up a company in the Philippines.

Other information about company liquidation in the Philippines

If you wish to know more about company liquidation in the Philippines, here are some additional information:

• After the Philippines passed the Financial Rehabilitation and Insolvency Act (FRIA) in 2010, the country was ranked 65th globally in the “Resolving Insolvency” category in the 2020 World Bank report;
• The process of company dissolution and liquidation in the Philippines can take from 6 months to 2 years;
• The docket fee for filing a petition for company liquidation with the Securities and Exchange Commission is PHP 3,030.

Our services also include those related to immigrating to the Philippines.

For full information on the company liquidation procedure, please contact our Philippines company registration advisors.