Mr. Juvencio L. Ocampo

April 12, 1993 Mr. Juvencio L. Ocampo 347 Bacood Street, Sta. Mesa Manila S i r : This refers to your letter of March 23, 1993 requesting opinion on the following queries: a) whether a corporation, whose corporate existence has automatically been terminated due to expiration of term, can still hold election of officers, b) and in the dissolution and liquidation process of said corporation, who has the first priority as far as money claim is concerned. The pertinent provision of the Corporation Code provides: "SECTION 122. Corporate liquidation . 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 . At any time during said three (3) years, said 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 any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, 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 interest. (Emphasis supplied) It is clear from the foregoing provision that upon the expiration of the corporate term, the corporation ceases to exist and is dissolved ipso facto. Hence, it can no longer continue the business or purposes for which it was organized. However, it may be continued as a corporate body for three (3) years only for the purposes of winding up and liquidation. Thus, while the corporation is automatically dissolved after the expiration of its term, nevertheless it may be continued after the time when it would have been dissolved for the purpose of enabling it to settle and close its affairs. Accordingly, it may hold an election but only for winding up and liquidation purposes, e.g. for the purpose of prosecuting and defending suits by or against the corporation to enable it to settle and close its affairs. Regarding your second query, it is well-settled that under the "trust fund doctrine",debts and liabilities of the corporation to its creditors must be paid or adequately provided for in the dissolution/liquidation proceedings before the corporate assets are distributed to the stockholders. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman