1.

Merger, Consolidation and Appraisal Right

a. Merger vs. Consolidation

- In the context of corporations, merger and consolidation are two methods of combining two or
more companies. A merger is a process where two or more companies combine to form a new
company, with the original companies ceasing to exist. The new company is usually a
combination of the original companies, with the owners of both corporations continuing as
owners of the new company. On the other hand, consolidation is a process where two or more
companies combine to form a new company, with the original companies ceasing to exist. The
new company is a completely new entity that owns all the assets and liabilities of the previous
corporations. The original companies’ owners do not continue as owners of the new company.

- The main difference between a merger and a consolidation is that in a merger, the resulting
company is a combination of the original companies, while in a consolidation, the resulting
company is a completely new entity. Mergers are often used to strengthen an operational or
financial position or to increase markets or productivity, while consolidations are often used to
streamline operations and reduce costs

b. Plans of Merger or Consolidation

Name

Term

Mode

Changes in aoi

Other provisions
 c. Articles of Merger or Consolidation- signed by pres/vp and certified by secretary/asst. sec

Majority- BOD

2/3- Stockholders/members

Plan of merger

No of shares/members

No. of votes for/against such plan

CA & FV of assets &liab

Method of merger/consol

Provisional/pro forma values

Info prescribed by the SEC

d. Effects of Merger vs. Consolidation

 e. Instances of appraisal right

Amendment of aoi

Sale of assets/properties

Merger/consolidation

Investments other than for the

Primary purpose

Mortgage- prenda sa immovable property

Pledge- prenda sa movable property

Written demand for the fair value of

His shares 30 days after the vote was

taken

If 60 days after the corporate action,

The stockholder and the corp can’t

Agree on the FV of the shares, shall be determined

By 3 disinterested persons

1 chosen by stockholder

1 by the corporation

1 both by stockholder and corp

PAID 30 DAYS AFTER AWARD IS

MADE

2. Dissolution

a. Dissolution

Dissolution in the context of corporations refers to the process of ending a corporation. It is

the change in the relationship of the corporation caused by the termination of its
existence as a legal entity.
In the Philippines, the Revised Corporation Code provides guidelines on the voluntary and
involuntary dissolution of corporations. Voluntary dissolution occurs when no creditor is
affected, while involuntary dissolution occurs when the corporation has committed acts that
are grounds for dissolution, such as fraudulent acts, failure to file by-laws, and continuous in
operation for at least five years.
The Securities and Exchange Commission (SEC) has released standard procedures for the
voluntary and involuntary dissolution of corporations in the Philippines. The dissolution of
corporations shall pass through the SEC Company Registration and Monitoring Department
or the SEC Extension Offices

b. Dissolution vs. Liquidation

Dissolution refers to the process of ending a corporation’s existence as a legal entity. It is

the change in the relationship of the corporation caused by the termination of its
existence as a legal entity. In the Philippines, the Revised Corporation Code provides
 guidelines on the voluntary and involuntary dissolution of corporations. Voluntary
dissolution occurs when no creditor is affected, while involuntary dissolution occurs when
the corporation has committed acts that are grounds for dissolution, such as fraudulent acts,
failure to file by-laws, and continuous inoperation for at least five years.

Liquidation, on the other hand, refers to the process of winding up the affairs of a
corporation, settling its obligations and debts, and distributing its remaining assets to its
shareholders or owners. In the Philippines, liquidation is the process of winding up the
affairs, settlement of corporate obligations/debts, and distribution of remaining corporate
assets through liquidating dividends.

The main difference between dissolution and liquidation is that dissolution is the process of
ending a corporation’s existence as a legal entity, while liquidation is the process of winding
up the affairs of a corporation, settling its obligations and debts, and distributing its
remaining assets to its shareholders or owners Modes and Procedures of Dissolution

i. Voluntary- CREDITORS AND STOCKHOLDERS CAN OBJEXT TO THE DISSOLUTION

1. no creditors affected

According to the Revised Corporation Code of the Philippines, voluntary dissolution occurs when no
creditor is affected. In such cases, corporations may apply for voluntary dissolution with the SEC
Company Registration and Monitoring Department (CRMD) or the SEC Extension Offices (EOs) whose
territorial jurisdiction includes the principal office address of the corporation. The corporation seeking
voluntary dissolution shall submit a verified request signed by its duly authorized representatives
containing the corporate name, SEC registration number, principal office, a statement requesting for
the dissolution, and reason for the dissolution. The verified request must also contain the notice given
to the corporation’s shareholders/members 20 days prior to the meeting where the vote on its
dissolution occurred; the names of stockholders and directors, or members and trustees, who
approved the dissolution; and a statement that the corporation has no pending case involving intra-
corporate dispute, among others. The corporation must submit the verified request together with a
notarized copy of the board resolution or directors’ or trustees’ certificate authorizing the dissolution
and designating an authorized representative to file the verified request. Supporting documents for the
verified request also include the latest due General Information Sheet (GIS); audited financial statement
(AFS) as of last fiscal year, where applicable; a tax clearance certificate from the Bureau of Internal
Revenue (BIR); notarized secretary’s certificate of no pending case involving intra-corporate dispute; and
clearance or favorable recommendation from other SEC departments or from the appropriate
regulatory agency, when necessary. The president and treasurer of the corporation must also submit an
affidavit stating that the dissolution is not prejudicial to the interest of its creditors, and there is no
opposition from any creditors from the time of publication of the dissolution notice up to its filing with
the Commission

2. creditors are affected

According to the Revised Corporation Code of the Philippines, if the dissolution of a corporation may
prejudice the rights of any creditor, a verified petition for dissolution shall be filed with the Securities
and Exchange Commission (SEC) 12. The petition for dissolution shall contain the following information:
-The reason for the dissolution

-The form, manner, and time when the notices were given

-The names of the stockholders and directors or members and time of the meeting in which the vote
was made

-Details of publication

-The petition shall be signed by a majority of the board of directors or trustees and countersigned by the
secretary of the corporation. The petition shall also be accompanied by the following documents:

A copy of the resolution authorizing the dissolution, certified by a majority of the board of directors or
trustees and countersigned by the secretary of the corporation

Proof of publication

Favorable recommendation from the appropriate regulatory agency, when necessary

Within fifteen (15) days from receipt of the verified petition for dissolution, and in the absence of any
withdrawal within said period, the SEC shall approve the petition and issue the certificate of dissolution.
The dissolution shall take effect only upon the issuance by the SEC of a certificate of dissolution

3. shortening corporate term

According to the Revised Corporation Code of the Philippines, a voluntary dissolution may be effected 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 (SEC) in accordance with the code and submit the required documents, such as the board
resolution authorizing the amendment, the tax clearance certificate from the BIR, and the favorable
recommendation from the appropriate regulatory agency, when necessary. The SEC shall issue a
certificate of filing of the amended articles of incorporation upon approval of the amendment. The
corporation shall then proceed to wind up its affairs, settle its obligations, and distribute its remaining
assets to its shareholders or members

ii. Involuntary

1. violation of the Revised Corporation Code

(MOTU PROPRIO)- Or upon filing of a verified complaint

According to the Revised Corporation Code of the Philippines, a corporation may be dissolved by the
Securities and Exchange Commission (SEC) upon filing of a verified complaint and after proper notice
and hearing on the grounds provided by existing laws, rules, and regulations. Involuntary dissolution
may occur when a corporation has committed acts that are grounds for dissolution, such as fraudulent
acts, failure to file by-laws, and continuous inoperation for at least five years.

For instance, Section 138 of the Revised Corporation Code provides that the SEC may dissolve a
corporation for the following grounds:

Non-use of their corporate charter

Continuous inoperation of the corporation

Upon receipt of a lawful court order dissolving the corporation

Upon finding by final judgment that it procured its incorporation through fraud

2. failure to commence business within 5 years from incorporation

SHELL CORPORATION

SHELF CORPORATION

c. Liquidation or Winding-up

According to the Revised Corporation Code of the Philippines, liquidation or winding up is the process of
winding up the affairs, settlement of corporate obligations/debts, and distribution of remaining
corporate assets through liquidating dividends.

The process of liquidation or winding up may vary depending on the type of dissolution of the
corporation. The Revised Corporation Code provides guidelines on the voluntary and involuntary
dissolution of corporations, as well as the dissolution by shortening of corporate term
 d. Liquidation vs. Rehabilitation

IF NAAY FINANCIAL DISTRESS, DILI NECESSARY MO DISSOLVE DIRETSO, PWEDE PA E REHABILITATE

The main difference between liquidation and rehabilitation is that liquidation is the process of winding
up the affairs of a corporation, settling its obligations and debts, and distributing its remaining assets to
its shareholders or owners, while rehabilitation is the process of restoring the financial health of a
corporation that is under financial distress. The Revised Corporation Code provides guidelines on the
rehabilitation of corporations, which includes the appointment of a rehabilitation receiver, the
submission of a rehabilitation plan, and the approval of the rehabilitation plan by the creditors and the
court

i. "Equality is Equity"

-FOR LIQUIDATION, ALL CREDITORS WILL BE TREATED WITH RESPECT TO THE HIERARCHY KUNG UNSA
SILA. WALAY EQUAL NA CREDITOR. FOR REHABILITATION, ALL CREDITORS ARE TREATED EQUALLY,
KUNG NAAY FRIA WALA SAY BAYARAN NA CREDITOR, WALA SAY IBALIGYA NA ASSET.SI OUTSIDER NA
ANG MO MANAGE SA CORPORATION PAG NAAY FRIA.

“Equality is equity” is a phrase that emphasizes the importance of treating people fairly and providing
them with equal opportunities. In the context of corporations, this means that all employees should be
treated equally and given the same opportunities to succeed, regardless of their race, gender, ethnicity,
or other personal characteristics. This can include providing equal pay for equal work, offering the same
benefits to all employees, and creating a work environment that is free from discrimination and bias. By
promoting equality in the workplace, corporations can create a more diverse and inclusive environment
that benefits everyone.

e. Method of Liquidation

NAAY CORPORATIONS VESTED WITH PUBLIC INTEREST:

CORPORATION BANKS

INSURANCE CORPORATIONS

FRIA WILL NOT BE APPLICABLE TO CORPORATE BANKS, NAAY OWN FRIA ANG CENTRAL BANK ACT.
THE NEW CENTRAL BANK ACT OR THE GENERAL BANKING ACT.

FOR INSURANCE NAA ANG INSURANCE CODE OF THE PHILIPPINES

i. Under the Revised Corporation Code

ii. Under the Financial Rehabilitation and Insolvency Act

The Financial Rehabilitation and Insolvency Act (FRIA) of 2010 provides guidelines on the rehabilitation
or liquidation of financially distressed enterprises and individuals in the Philippines. The FRIA guarantees
a timely, fair, transparent, effective, and efficient rehabilitation or liquidation of debtors.
Under the FRIA, liquidation refers to the process of winding up the affairs, settlement of corporate
obligations/debts, and distribution of remaining corporate assets through liquidating dividends.

For voluntary liquidation, an insolvent debtor may apply for liquidation by filing a petition for liquidation
with the court. The petition must indicate the names of at least three nominees to the position of
liquidator and must include, as minimum attachments, the following: (1) verified financial statements;
(2) list of creditors and their claims; (3) list of assets and liabilities; (4) inventory of assets; (5) list of
contracts and other obligations; (6) list of employees and their claims; and (7) other documents that
may be required by the court.

For involuntary liquidation, the court may issue a liquidation order upon finding that the debtor is
insolvent. The order shall declare the debtor insolvent, order the liquidation of the debtor, order the
sheriff to take possession and control of all the properties of the debtor, except those that may be
exempt from execution, order the publication of the petition in a newspaper of general circulation,
direct payments of any claim and conveyance of any property due the debtor to the liquidator, prohibit
payments by the debtor and the transfer of any property by him, direct all creditors to file their claims
with the liquidator, authorize the payment of administrative expenses as they become due, direct the
submission of names of nominees to the position of liquidator, and set the case for hearing for the
election and appointment of the liquidator

iii. Under the New Central Bank Act

iv. Under the Insurance Code

Relative Provisions under Republic Act No. 11232 or The REVISED Corporation Code:

1. Sec. 75-85

2. Sec. 21

3. Sec. 133-139