Mrs. Nora Agraviador

March 30, 1982 Mrs. Nora Agraviador J-Brands Agro-Industrial Corporation Ilagan, Isabela Dear Mrs. Agraviador: This has reference to your letter-request dated March 8, 1982 relative to the filing of the Amended Articles of Incorporation of the "J-Brands Agro-Industrial Corporation" for the purpose of shortening its term of existence. cdtech It appears from your letter that you filed an Amended Articles of Incorporation to shorten the term of existence of said corporation on November 9, 1981; that to date, you have not been notified of any positive action thereon; that unless said papers have been acted upon by this Commission within six (6) months from date of filing, it may be presumed that the same has already been approved (Section 16 of the Corporation Code of the Philippines); that however, you prefer to be more discreet and to faithfully comply with the law to show your good faith and to preclude any legal problem or complexity. We thank you for reminding us of any apparent lapse of our personnel, and we are studying and devising ways and means to avoid that repetition of said incident. For your information, it appears from the records of this Commission that the Corporate and Legal department (CLD) held in abeyance the processing of your papers because the original records (OR) of your corporation could not be located and it is against the standard operating procedure (SOP) of this Office to act on papers based on duplicate records only. Unfortunately, it appears that the Records Section of the Administrative and Finance Department (AFD) has continuously failed to locate and/or forward to the CLD the OR of your corporation for more than four (4) months. We will therefore have to discover solutions to untangle this mess in the records section. In passing, however, please be informed that Section 16 of the Corporation Code of the Philippines dealing with the automatic approval of the amended articles of incorporation can not be applicable to dissolution of the corporation under Section 120 of the same law, for the following reasons: 1. The corporation is a creature of the State. It is forced by complying with the formalities and conditions prescribed in the law; and therefore, it shall also be dissolved by complying with the formalities of the law and its rules and regulations: "There must be some step, administrative or judicial, before the dissolution can be legal or effective. . . These requirements are again based on the theory that since it was the State which "creates" the corporation, it can only be dissolved with State approval." (Campos & Campos Lopez, Notes and Selected Cases on Corporation Law, p. 933). In this connection, the SEC is the agency empowered by law to determine whether or not all the provisions of the law and its rules and regulations have been complied with. 2. The purpose of requiring compliance with the formalities for dissolution is to prevent it from giving rise to or perpetuating a fraud: When it decided to disclose a corporation before the expiration of its existence, the result cannot be accomplished merely by the vote of the shareholders, even if unanimous, unless it can be said that such action will not "effect the rights of any creditor having a claim against such corporation." (Fisher on Phil. Law of Stock Corporations, pp. 379-381)...Dissolution is fraudulent (1) if it is for the mere purpose of injuriously oppressing the minority of the stockholders, or any of them, and causing a destruction or sacrifice of their pecuniary interest or (2) it affects the rights of any creditor having a claim against such corporation, although the votes are unanimous. (4 Martin, Phil. Commercial Laws, p. 1693, 1961 ed). For that matter, dissolution papers of corporations are carefully scrutinized to assure strict compliance with all the requirements of the law and the SEC rules and regulations. The legal aspects as well as financial condition of the corporation seeking dissolution are also inquired into by the SEC. 3. Finally, Section 16 is a general provision and it should give way to Section 120 of the Corporation Code of the Philippines, which is a special provision because, "The legislature cannot be presumed to have intended a conflict especially in two provisions of a contemporaneous enactment." (Martin, Statutory Construction, p. 152, 5ed.). To apply the automatic approval under Section 16 to Section 120 will result in the absurd situation wherein one provision of the law negates the other. Besides, Section 120 is very clear that it is only upon approval by the SEC that the corporation shall be deemed dissolved: "SECTION 120. Dissolution by shortening corporate term . A voluntary dissolution may be affected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of the Code. A copy of the amended articles of incorporation shall be submitted to the Securities and Exchange Commission in accordance with the Code; Upon approval of the amended articles of incorporation or the expiration of the shortened term, as the case may be, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation." We hope that we have given you the information you seek. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner