After registering countless companies in the Philippines, Triple i Consulting has seen many scenarios play out in regards to the normal course of business.
One important thing to remember when starting a business in the Philippines is that some day at some point this business will close. Hopefully it is through a successful exit but sometimes its because the business could no longer be sustained. Whatever the case may be closure is something that should be thought of at the very beginning as it has large consequences in the future.
I have witnessed businessmen who 10 or 15 years ago simply abandoned their business without properly closing it thinking they would not have a reason to do business in the Philippines in the future. Of course now that the economy is enjoying its boom many are returning only to find a mountain of legal problems and debt.
When a business is not properly closed it continues to build liability to all the investors and shareholders involved in the corporation. Even foreign owned branch and representative offices must be closed properly or the parent company may face issues with the BIR and SEC if and when it returns to the country.
People who believe that there are a lot of hurdles to overcome in the incorporation process should be prepared for a long and difficult time during the closing.
The steps are relatively straight forward but as with everything the reality is often more complicated.
Usually the first step in closing a company is to begin immediately to file cessation of business with the BIR, LGU, and SEC letting them know that you plan to stop your business. These as with the case with the BIR must be done regularly or the district office will just count as if you did not file and penalties will begin to mount.
If there are employees in the corporation then you must also seek a release from the Department of Labor making sure that all obligations to the employees have been settled. If the reason for closing is financial and the company cannot pay the severance and last month of the employees than this further complicates the matter so I will cover this in a separate post.
Then companies must “settle up” with their respective LGU and a tax assessment will be made to see if the company owes anything. This is a similar process with the BIR and will usually entail an audit.
The company after receiving a release from the BIR and LGU can begin filing for a closure with SEC and shorten the life of their company (most Philippines corporations begin with a 50 year life) they must also post in an accredited paper a notice to the public that they are closing so that any debtors may be notified and file claims in courts or with the SEC.
After these steps are all completed the company can file its final closure with the SEC. It is important to note that this entire process while covered in just 4 or 5 paragraphs can take up to 2 years to complete properly. Again I stress that this process must be fully completed or there is a great chance that the shareholders or parent company will face liability in the future.
While the task is great in scale, Triple i Consulting has a wealth of experience in helping companies seek their closure from the SEC and invite any company looking to close to contact us for more information.
