CESSATION OF BANKING BUSINESS under the General Banking Law
• A corporation formed or organized under the Corporation Code may be dissolved voluntarily
or involuntarily.
• The term dissolution means the extinguishment of its FRANCHISE to be a Corporation and
the termination of its corporate existence.
• The methods of e ecting dissolution as prescribed by statute are EXCLUSIVE and a
Corporation cannot be dissolved except in the manner prescribed by law.
There are two (2) steps in the dissolution process:
• Termination of the Corporation Existence (at least as far as the right to go on doing ordinary
business)
• Liquidation Process which involves the winding up of a airs, payment of debts, and the
distribution of assets among the shareholders.
VOLUNTARY LIQUIDATION RECEIVERSHIP INVOLUNTARY LIQUIDATION
It can be undertaken as a A bank can be placed under The bank is rst placed under
consequence of VOLUNTARY receivership should it be found receivership by the Monetary
DISSOLUTION:
that any of the grounds exist:
Board and subsequently, under
liquidation.
1. By a vote of the Board of 1. Inability to pay liabilities as
Directors (BOD) and they become due in the (This happens when the
shareholders where NO ordinary course of business, Receiver cannot “save” the
creditors are a ected.
unless inability to pay is bank)
2. A judgment by the SEC after caused by extraordinary
hearing the petition for demands induced by
voluntary dissolution.
nancial panic.
3. By amending the Articles of 2. Insu ciency of realizable
Incorporation to shorten the assets
Corporate Term. 3. Inability to continue in
business without involving
probable losses to its
depositors or creditors
4. Persistence in conducting
business in an unsafe or
unsound manner.
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VOLUNTARY LIQUIDATION RECEIVERSHIP INVOLUNTARY LIQUIDATION
NO VOLUNTARY DISSOLUTION Before a bank is placed under
(VD) shall be undertaken by a receivership, the procedures
bank without prior approval of must be complied with:
the Monetary Board. Requests
for approval of a VD shall be 1. Report of the head of the
accompanied by a liquidation supervising department
plan which lays down the involving the bank.
procedure to be adopted by the 2. Finding of the Monetary
bank in the event of liquidation.
Board (MB) of the existence
of any of the grounds of
receivership.
IMPORTANT: The action for 3. Decision of the MB to forbid
voluntary liquidation does not the institution from doing
preclude the Bangko Sentral business.
from placing the bank under 4. Notice in writing to the BOD
receivership under Sec. 30 of RA informing the institution of
7563 and designating the PDIC the order of the MB directing
as receiver.
receivership.
EFFECTS:
In receivership, the receiver is Distribution of the assets of the
the designated person or entity closed bank in accordance with
1. A bank ceases to do bound to gather and take charge the preference established by
business.
of all the assets and liabilities of law. After the payment of all
2. It is prohibited to issue new the institution.
liabilities and claims against the
stocks.
closed bank, the receiver shall
3. Its assets constitutes a trust (Sa receivership, I-try ni receiver pay surplus dividends, if any.
fund in the hands of the the gawan na paraan ang
liquidating agent for the problems ni Bank by gathering
primary bene t of creditors its assets and liabilites for the
and depositors.
bene t of the depositors and
4. Contractual obligations of creditors of the bank and to
the bank remain binding on continue into liquidation
the bank.
whenever authorized.)
5. The liquidating bank may sue
and be sued for the purpose This is INVOLUNTARY.
of winding up its business.
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