How to Close a Business in the Philippines – Company Dissolution Guide

A registered company in the Philippines has ongoing compliance obligations whether it is operating or not. Annual filings with the SEC, BIR tax returns, local business permit renewals, and mandatory employee fund contributions all continue to apply. A dormant entity that stays on the books will accumulate penalties and potential tax liabilities year after year.

If you have no plans to resume operations, the cleanest path forward is to formally dissolve the company. This guide covers the full dissolution process for sole proprietorships, corporations, and partnerships registered in the Philippines.

Key Takeaways

• Business closure requires clearances from your local government (Barangay and City Hall), the Bureau of Internal Revenue (BIR), and either the SEC or DTI depending on your entity type.
• For corporations and partnerships, dissolution is governed by the Revised Corporation Code (RA 11232) and SEC Memorandum Circular No. 5, Series of 2022.
• There are two main dissolution routes for corporations: voluntary dissolution (Section 134) and dissolution by shortening of corporate term (Section 136). The second route is more commonly used because it can avoid the upfront BIR tax clearance requirement.
• The full process takes three to six months, though BIR tax clearance alone can extend this depending on the complexity of the audit.
• Employees must receive 30 days’ written notice and are entitled to separation pay unless the closure is due to serious financial losses.

Closing a Sole Proprietorship Business in the Philippines

Sole proprietorships are registered with the Department of Trade and Industry (DTI). Closure requires cancellation of the registered business name at the DTI head office.

DTI requirements for business name cancellation:

• Letter of Request for Cancellation of Business Name
• Affidavit of Cancellation of the Registered Business Name
• Original copies of the Certificate of Registration
• Affidavit of Loss of Certificate of Registration (if the original has been lost or misplaced)

Upon approval, the DTI issues a Certificate of Cancellation.

Closing a Corporation or Partnership in the Philippines

Corporations (including OPCs), partnerships, joint ventures, cooperatives, and other entities registered with the Securities and Exchange Commission (SEC) must file for dissolution with the SEC.

There are two main routes for voluntary dissolution.

Route 1: Voluntary Dissolution Where No Creditors Are Affected (Section 134, RCC)

This applies when the dissolution does not prejudice the rights of any creditor. It requires majority vote of the board of directors or trustees and an affirmative vote of stockholders owning at least a majority of the outstanding capital stock (or a majority of members for non-stock corporations).

Notice must be given to each shareholder or member at least 20 days before the meeting, either personally or by registered mail. The notice must also be published once in a newspaper of general circulation prior to the meeting date.

SEC documentary requirements for Voluntary Dissolution (Section 134):

• Verified Request for Dissolution signed by the corporation’s authorized representative
• Verification and Certification Against Forum Shopping
• Notarized board resolution or directors’/trustees’ certificate authorizing the dissolution, signed by a majority of the board and countersigned by the corporate secretary, designating the authorized representative
• Publisher’s Affidavit of Publication of the Notice of Meeting
• Latest General Information Sheet (GIS)
• Audited Financial Statements (AFS) as of the last fiscal year (see exceptions below)
• Affidavit executed under oath by the President and Treasurer stating that the dissolution is not prejudicial to the interests of creditors and that there is no opposition from creditors from the time of publication up to the filing of the dissolution notice with the SEC
• Bureau of Internal Revenue (BIR) Tax Clearance Certificate
• Notarized Secretary’s Certificate of no pending case involving intra-corporate dispute
• Clearance or favorable recommendation from other SEC departments or appropriate regulatory agencies, where necessary (per Section 4 of SEC MC No. 5, Series of 2022)

AFS exceptions for specific situations:

If the corporation has ceased operations for at least one year, submit the AFS as of the last year of operations together with an Affidavit of Non-Operation certified under oath by the President and Treasurer.

If the corporation has had no operations since incorporation, submit a Balance Sheet certified under oath by the Treasurer and President, an Affidavit of Non-Operation certified under oath by the President and Treasurer, and a Certificate of Non-Registration issued by the BIR.

If the corporation (stock or non-stock) has total assets or liabilities of less than PHP 600,000, it may submit a Balance Sheet as of the last preceding fiscal year, certified under oath by the President and Treasurer, in place of audited financial statements.

Once the SEC receives the Verified Request for Dissolution, any incorporator, director, trustee, shareholder, or member may file a withdrawal request within 15 days. If no withdrawal is filed during this period, the SEC approves the request and issues the Certificate of Dissolution. The dissolution takes effect only upon issuance of this certificate.

Route 2: Dissolution by Shortening of Corporate Term (Section 136, RCC)

A corporation can also dissolve by amending its Articles of Incorporation to shorten its corporate term.

This is the most commonly used dissolution route in the Philippines, and the requirements differ depending on the proposed expiration date.

If the proposed expiration is one year or more from the SEC’s approval:

• Cover Sheet
• Notarized Directors’ Certificate signed by a majority of the directors or trustees and the corporate secretary, attesting that the dissolution by shortening of corporate term was approved by a majority of the board and ratified by at least two-thirds of the stockholders representing the outstanding capital stock (including non-voting shares)
• Amended Articles of Incorporation
• Notarized Secretary’s Certificate of no pending intra-corporate dispute
• Clearance or favorable recommendation from other departments of the SEC or from appropriate regulatory agencies, where necessary

BIR Tax Clearance is not required under this option, which is why it is often the faster route.

If the proposed expiration is less than one year from the SEC’s approval:

The same requirements above apply, plus:

• Audited Financial Statements as of the last fiscal year (with the same exceptions for non-operating and small corporations)
• Affidavit executed under oath by the President and Treasurer (same as Section 134 requirements)
• BIR Tax Clearance Certificate
• Publisher’s Affidavit of Publication of the Notice of Meeting
• Compliance Monitoring Division (CMD) Monitoring Clearance

Upon expiration of the shortened corporate term, the corporation is deemed dissolved without any further proceedings and without the SEC needing to issue a Certificate of Dissolution.

Note: The proposed expiration of the corporate term must contemplate a future date for all applications filed under Section 136. No application for amendment shall be accepted if the corporate term has already lapsed at the time of filing.

Regulatory clearances for licensed entities

If your corporation holds secondary licenses from agencies like PEZA, BOI, BSP, or the Insurance Commission, you must obtain clearance from these regulators as well before the SEC will approve the dissolution.

Emerhub’s local experts can secure necessary approvals on your behalf and submit the application for business closure to relevant authorities.

Step-by-step Process to Close A Business in the Philippines

To close your business in the Philippines, you must secure clearances and approvals from all relevant authorities including local government, BIR, and SEC or DTI depending on the legal entity. 

Here’s the step-by-step process to close a business in the Philippines:

1. Notify Employees and DOLE

Under Article 298 of the Labor Code, you must provide written notice to both affected employees and the regional Department of Labor and Employment (DOLE) office at least 30 days before the intended closure date. Both notices must be sent simultaneously.

The notice should state the reason for closure and the effective date.

Employees terminated due to business closure are entitled to separation pay. If the closure is not due to serious financial losses, separation pay is one month’s salary or half a month’s salary for every year of service, whichever is higher. If the closure is due to serious business losses or financial reverses, the employer may be exempt from paying separation pay, though this must be supported by audited financial statements or other evidence of losses.

Also notify your suppliers, creditors, and customers ahead of the closure date.

2. Secure Clearance from Government Agencies

Update the following agencies to reflect the closure and ensure all contributions are settled:

• Department of Labor and Employment (DOLE)
• Social Security System (SSS)
• Philippine Health Insurance Corporation (PhilHealth)
• Home Development Mutual Fund (Pag-IBIG)

These clearances confirm that there are no outstanding employer obligations and that employee contributions have been fully remitted.

3. Get a Barangay Certificate of Closure

The Barangay Certificate of Closure can be obtained by presenting the required documents at the Barangay Hall and creating a  Letter of Request for Retirement / Closure of Business with the following details:

• Date of application
• Contact details
• Name of applicant
• Registered business name
• Date of registration with the Barangay
• Business permit number
• Reasons for closure of business
• Proposed date of closure
• A declaration that the business has no outstanding obligation or liability with the Barangay. 

The requirements for the closure of business in Barangay Hall are:

• Valid ID of the business owner, partners, or company president
• Barangay Clearance Certificate
• Letter of Request for Retirement / Closure of Business

4. City Hall Certificate of Closure 

The City Hall Certificate of Closure is required before you can proceed with BIR closure. Sole proprietorships must submit an Affidavit of Closure or Dissolution indicating the exact closure date. Corporations must submit a Board Resolution, and partnerships must submit a Notice of Dissolution.

City Hall requirements:

• Valid ID of the business owner, partners, or company president
• Barangay Clearance Certificate
• Barangay Certificate of Closure indicating the exact date of closure
• Latest Business Permit
• Notarized Affidavit of Closure, Board Resolution, or Notice of Dissolution indicating the exact date of closure
• Original Partnership Dissolution Agreement (for partnerships)
• Original Board Resolution or Corporate Secretary Certificate (for corporations)
• BIR Form 2303 (Certificate of Registration)
• Latest Income Tax Return and Financial Statements
• Latest VAT and OPT Returns
• Books of Accounts
• Proof of Business Tax Payment from the LGUs governing any branches

5. Apply for BIR Tax Clearance and Closure

File BIR Form 1905 (Application for Registration Information Update) with the Revenue District Office (RDO) where the business is registered. This must be filed within 10 days of the cessation of business operations.

During BIR closure, you must surrender all unused sales invoices, official receipts, accounting forms, business notices, and the Certificate of Registration (BIR Form 2303). The RDO will verify whether there are any open or delinquent cases, and a tax audit will be conducted covering all unaudited taxable years prior to the closure. Once all liabilities are settled, the BIR issues the Tax Clearance Certificate.

Be prepared for the BIR audit to take time. The audit is mandatory and covers all outstanding taxable periods, which can extend the overall dissolution timeline significantly.

BIR requirements for closure and final tax clearance certificate:

• BIR Form 1905
• Notice of Dissolution or Board Resolution
• Inventory of unused sales invoices and official receipts
• Ending inventory of the business
• Business notices, permits, and Certificate of Registration (BIR Form 2303)
• Latest Income Tax Return
• Latest VAT and OPT Returns
• Books of Accounts

6. Dissolution at SEC or DTI

Filing for a dissolution at the SEC is only applicable to corporations and partnerships. Furthermore, obtaining clearance from other regulatory agencies is required if your business has secondary licenses like PEZA and BOI. With a successful application, you will get a Certificate of Dissolution from the SEC.

For the dissolution of Sole Proprietorship, cancel your business name at the Department of Trade and Industry (DTI) head office and obtain a Certificate of Cancellation. In cases where the Certificate of Registration of Business Name is lost or misplaced, an Affidavit of Loss is required.

Company Dissolution Timelines and Costs in the Philippines

The overall company dissolution process normally takes three to six months for straightforward cases. However, if the BIR audit is complex or there are outstanding assessments, the process can extend to one to two years.

Filing and professional fees for dissolution range from PHP 20,000 to PHP 100,000, depending on the complexity of the case, the number of regulatory clearances required, and professional service fees for legal and accounting support.

Need Help Closing a Philippine Entity?

Emerhub is a corporate services provider with a local team in the Philippines. We advise foreign companies on entity structuring, compliance, and corporate changes, including dissolution. Our team can prepare the required filings, coordinate with the BIR, SEC, and local government agencies, and manage the closure process from start to finish.

Fill out the form below to get in touch with one of our experts.