Treatment of liquidating

There was no discussion to guide taxpayers on how to treat liquidating dividends.In so doing, the BIR put in limbo anew the tax treatment of liquidating dividends and added yet another legal thorn to an already complicated, time-consuming and costly dissolution process.In addition, no DST shall be due on the surrender by the stockholders of their shares in the liquidating corporation and the subsequent cancellation thereof.The surrender of the said shares does not constitute a sale, assignment or transfer because the liquidating corporation is not taking title to the surrendered shares, and the shares are retired and not retained as treasury shares.The company will not be dissolved unless and until the proper applications are filed.This gives the company flexibility on its decision whether to dissolve or maintain its legal existence should business pick up later on.The BIR denied the request for confirmation for lack of legal basis under the 1997 Tax Code.

There is no change in the corporate term and all reportorial and administrative requirements shall subsist.

• When there are creditors affected by the dissolution, a formal petition for dissolution shall be filed with the SEC, and notice and hearing will be duly conducted.

• Shortening of corporate term by the amendment of the articles of incorporation.

Dissolution may either be voluntary or involuntary.

There are three modes of voluntary dissolution, namely: • When there are no creditors affected by the dissolution, an administrative application for dissolution is filed with the Securities and Exchange Commission (SEC).

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