“We should all be obliged to appear before a board every 5 years and justify our existence… on the pain of liquidation.”
– George Bernard Shaw, Irish Playwright and Political Activist
(Part 2 of 4)
By Realttorney®
In Part 1 of this series, we discussed how corporations in the Philippines may be dissolved and how their legal personality is extended for a limited period to allow for liquidation. We now turn to the practical steps for selling real estate still registered in the name of a corporation that has lost its corporate franchise, commonly referred to as a “dead” corporation.
Depending on whether the sale occurs within or beyond the three-year winding-up period provided by law, the procedure varies. Licensed real estate brokers, lawyers, and buyers alike need to know which rules apply.
Scenario A: Sale Within the 3-Year Liquidation Period
If the corporation is dissolved but the three-year liquidation period under Section 139 of the Revised Corporation Code has not yet expired, the corporation retains limited legal capacity to dispose of its property.
Here are the procedural steps:
1. Confirm the Dissolution Status. Obtain a Certificate of Dissolution from the Securities and Exchange Commission (SEC). Then, verify the effective date of dissolution and compute the expiration of the 3-year window.
2. Review the Articles of Dissolution. Check if liquidators or trustees have been designated. If not, the board of directors may continue to act for liquidation purposes as long as it is within the 3-year period.
3. Secure Corporate Authority to Sell. A board resolution must be issued by the board of liquidators or remaining directors, authorizing the sale of the specific property.
4. Conduct Legal Due Diligence. Verify that the Torrens title is clean and under the corporation’s name. Thereafter, check the tax declaration, ensure that real estate taxes are current, and identify any liens or encumbrances, if any.
5. Execute the Deed of Sale. The corporation, represented by its liquidator, signs the Deed of Absolute Sale. It is important to emphasize that the buyer must be informed that the seller is a dissolved corporation acting only within its winding-up capacity.
6. Comply with BIR Requirements. Pay Capital Gains Tax (CGT), Documentary Stamp Tax (DST), and Value-Added Tax (VAT) if applicable. After a few weeks, kindly secure the Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue (BIR). This is one requirement for the payment of transfer tax at the Local Treasurer’s Office.
7. Register the Sale. Submit the Deed (or transferring document), the CAR, and other required documents to the Registry of Deeds. Pay the registration fees and process the cancellation and issuance of the new title.
Scenario B: Sale After the 3-Year Liquidation Period
Once the three-year period lapses, the corporation loses its capacity to act, including the authority to sell property. However, the law provides remedies through trusteeship or court-supervised liquidation.
1. Check for Trust Assignment. Determine whether the corporation executed a trust assignment of its assets to named trustees before the 3-year period ended. If so, the trustees now have the authority to sell the property.
2. If No Trustees Were Appointed. Under some jurisprudence, the assets of the corporation are held in trust for the benefit of stockholders. This means that the stockholders now own the property pro indiviso (undivided) and must act collectively.
3. Initiate SEC or Court Action if Necessary. If disputes arise, the parties may petition the SEC or a Regional Trial Court to appoint a liquidator or approve a partition. This is common when there are missing or uncooperative shareholders.
4. Execute the Sale Through Trustees or Stockholders. On the first hand, the trustees may execute the sale through a Trust Deed. On the other hand, if stockholders are selling the property themselves, they must first agree on and execute a partition, either judicially or extrajudicially.
5. Process BIR and Title Transfer. The sale is subject to standard tax compliance (payment of CGT, DST, VAT, etc.). Kindly note that title transfer may require proof of succession or trust assignment, along with updated corporate or stockholder documentation.
Risk Management and Ethical Considerations
Practitioners should be mindful of the following risks:
1. The absence of designated liquidators may delay transactions.
2. Simulated sales or transactions without proper authority may be void.
3. Buyers must be fully informed of the dissolved status of the selling entity.
4. Brokers may face administrative or civil liability if they facilitate a legally defective transaction.
In conclusion, even a “dead” corporation can sell its real estate under Philippine law, but only under certain conditions and within certain timeframes. Whether within or beyond the 3-year liquidation period, strict compliance with legal procedures, BIR rules, and SEC documentation is essential.
In the third part of this series, we will examine key Supreme Court decisions that provide insight into the legal treatment of corporate liquidation and property disposition.
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Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.
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