Post-dissolution litigation

Post-dissolution litigation | Daily Tribune

Under Philippine corporate law, a corporation that has been dissolved — whether voluntarily or involuntarily — generally loses its juridical personality and may no longer conduct business, save for acts directed toward liquidation.

Liquidation refers to the orderly winding up of corporate affairs, which include: (1) the collection of all amounts due to the corporation; (2) the settlement and adjustment of claims against it; and (3) the payment of its outstanding debts.

To this end, Section 139 of the Revised Corporation Code expressly allows a corporation whose corporate existence has been legally terminated to continue as a body corporate for a period of three years from dissolution.

This limited extension exists solely for purposes of prosecuting and defending suits by or against the corporation, settling and closing its affairs, disposing of and conveying its property, and distributing its remaining assets. Jurisprudence has consistently held that a dissolved corporation is not barred from continuing suits that were commenced prior to the expiration of this three-year period.

It is likewise settled that a corporation may exercise its powers and transact its business only through its board of directors or trustees. As a rule, no corporate power may be exercised by any officer or agent without proper authority from the board. Thus, representation of a corporation in legal proceedings generally requires a board resolution or a secretary’s certificate authorizing such representation.

In a recent decision, however, the Supreme Court confronted a fundamental issue that exposed a gap in the Revised Corporation Code: in light of the law’s silence, may a stockholder continue prosecuting or defending an action on behalf of a dissolved corporation beyond the three-year period, even without a board resolution authorizing such representation?

In William Golangco Construction Corporation v. Philippine Commercial and International Bank (G.R. No. 269981, 2 April 2025), the Court answered in the affirmative. Applying the doctrine of necessary implication, it ruled that a stockholder may represent a dissolved corporation in litigation even in the absence of a board resolution.

William Golangco Construction Corporation (WGCC) was incorporated in May 1963 with a corporate term of 50 years, set to expire in May 2013. In 1989, WGCC entered into a contract with Philippine Commercial and International Bank (PCIB) for the construction of PCIB Tower II. The building was turned over in 1992.

A year later, however, defects were discovered in certain portions of the structure, prompting PCIB to engage another contractor to undertake repairs and complete the remaining finishing works. This led PCIB to file a request for arbitration before the Construction Industry Arbitration Commission (CIAC), which ultimately rendered a decision in its favor.

WGCC elevated the case to the Supreme Court. The decision became final and executory on 27 December 2019. During execution proceedings, further issues arose, prompting WGCC to file another petition before the Court questioning certain CIAC orders relating to execution.

Among the issues raised was whether the Secretary’s Certificate issued in December 1995 — authorizing counsel to represent WGCC — remained valid, given that the corporation had already been dissolved in 2013.

Resolving the issue, the Supreme Court reiterated that a dissolved corporation is not precluded from prosecuting or defending suits commenced prior to the expiration of the three-year winding-up period.

Here, the counsel who signed the Verification and Certification against Forum Shopping was duly authorized through a Secretary’s Certificate issued in 1995, at a time when WGCC was still an existing corporation. Moreover, the petition filed involved the execution of the arbitral award in the main case for which the authority had originally been granted. The proceedings were therefore intrinsically related and necessary for the full and effective resolution of the controversy.

While the Court acknowledged that Section 139 of the Revised Corporation Code does not expressly grant stockholders the right to enforce corporate rights within or beyond the three-year period, it held that this statutory silence does not leave stockholders or successors-in-interest without recourse.

Harmonizing the provision with the doctrine of necessary implication, the Court explained that every statute is deemed to include, by implication, all provisions necessary to give effect to its purpose — including collateral and subsidiary consequences that may fairly and logically flow from its terms.

Ultimately, the Court concluded that it would be unreasonable to require a stockholder of a dissolved corporation to present a board resolution or secretary’s certificate in order to defend the corporation’s interests, when no functioning board or corporate entity remains capable of issuing such authority. To rule otherwise would effectively deny dissolved corporations — and those who stand to be affected by their unresolved obligations — any meaningful access to justice.