Atty. Pedro Z. Claravall

October 4, 1989 Atty. Pedro Z. Claravall Room 3, 2nd Floor Teofelix Bldg. No. 27 Session Road, Baguio City Sir : This refers to your letter dated September 5, 1989, requesting opinion of this Commission on the queries posed therein. LibLex You alleged therein that Baguio Imperial Diners Club has failed to organize by virtue of its lack of duly approved by-laws. Furthermore, you alleged that said corporation has not been in operation since 1970. Your queries are: 1. Whether or not Section 22 of the Corporation Code which provides that if a corporation does not formally organize and commence business within two (2) years from the date of its incorporation shall be deemed dissolved. Or, is there further necessity to file proceedings for the declaration of its dissolution by the Commission. 2. Whether a private person, who is neither a stockholder or officer but affected by an action in the court filed by the corporation, can pursue the action in the Commission to declare the corporation as dissolved. The Commission had previously opined that the dissolution contemplated in Section 22 of the Corporation Code can only be effected by the Commission after due notice and hearing. This interpretation is supported by the second paragraph thereof which states as follows: "This provision shall not apply if the failure to organize, commence the transaction of its business or the construction of its works, or to continuously operate is due to causes beyond the control of the corporation as may be determined by the Securities and Exchange Commission." Likewise, P.D. 902-A, as amended, provides: "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx 1). To suspend, or revoke, after proper notice and hearing ,the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: xxx xxx xxx 4. continuous inoperation for a period of at least five (5) years; 5. failure to file by-laws within the required period. ...(emphasis supplied). From the foregoing, it can be deduced that automatic dissolution was not envisioned under Section 22 of the Code. Accordingly, a corporation continues to exist as such notwithstanding its non-operational status until the dissolution or revocation has been lawfully declared by the Commission. Anent your second query, Section 121 of the Corporation Code provides: "SECTION 121. Involuntary dissolution . A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on grounds provided by existing laws, rules and regulations." (emphasis supplied). The aforecited provision does not specify the person who, or the agency which, can file such a verified complaint or institute such appropriate proceedings except to require that the complaint be verified. However, the "Rules of Procedure in the Securities and Exchange Commission" requires that: "All actions filed with this Commission must be prosecuted and defended in the name of the real party in interest ." (Rule III, Section 1). Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner