Mr. Redentor Melo

February 27, 1989 Mr. Redentor Melo Sea Foods Corporation Maritima Building 117 Dasmarias Street Manila Sir : This refers to your letter dated February 10, 1989, requesting for clarification on the queries posed therein. It appears that the term of existence of Sea Foods Corporation expired on February 10, 1986. Your queries are: 1. Can the corporation continue to operate and manage its subdivision project in Zamboanga City including the sale or disposition of remaining unsold lots therein? 2. What would be the legal effect of expiration of corporate life of the corporation on its power to transact business or enter into contracts with other persons particularly on disposal of its remaining assets? 3. Can its last set of corporate officers continue to legally hold office in hold over capacity? The pertinent provisions 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 aforecited provision that the corporation ceases to be a body corporate for the purpose of continuing the business for which it was established. It cannot, therefore, continue the business for which it was organized. But it shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its assets. In other words, it shall continue as a body corporate only for the purpose of winding up and liquidation. After the three-year period, as a general rule, it can no longer sue or be sued. However, any litigation filed by or against it within the period of three years, but which could not be terminated, must necessarily prolong that period. (Agbayani, Commercial Laws of the Philippines citing Pasay Credit and Finance Corporation (CA) 48 O.G. 5528).Moreover, if the liquidation is effected by the appointment or a receiver or of a trustee, the receivership or trusteeship, unless otherwise specifically limited in its duration, shall exist indefinitely until the affairs of the corporation shall have been completely settled and liquidated. (Ibid, citing In re Voluntary Dissolution of Union Guaranty Co.,(CA, 37 O.G.) 545, Mar. 2, 1939). Relative to your third query, the usual procedure is liquidation by the corporation itself through its board of directors. Thus, our Supreme Court has held that "the normal method or procedure is for the creditors and executive officers to have charge of the winding up operations, though there is the alternative method of assigning the property of the corporation to trustees for the benefit of its creditors and shareholders". (Ibid, citing China Banking Corp. v. Michelin & Cie, G.R. No. 36930, June 30, 1933). Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman