SEC-OGC Opinion: Lone Living Stockholder and Director may Act as Trustee-in-Liquidation

On 27 March 2023, the Securities and Exchange Commission (“SEC”) issued SEC-OGC Opinion No. 23-06 (“Opinion”) which confirmed that the lone living stockholder and director of a corporation may act as its trustee-in-liquidation to undertake the company’s liquidation process, even if the same is beyond the 3-year period to wind-up affairs and liquidate its assets.

The Opinion was brought about by a request of the counsel of Yuchu Investment Corporation (“Yuchu”) on the following matters:

1. May the lone living stockholder and director of Yuchu lawfully act as its trustee-in-liquidation to undertake the company’s liquidation process?
2. If the said director can lawfully act as Yuchu’s trustee-in-liquidation, can he execute a Special Power of Attorney delegating his authority to chosen representatives of the heirs of the deceased directors and stockholders of Yuchu?

Regarding the first question, the SEC opined that the lone living stockholder and director of Yuchu may lawfully act as its trustee-in-liquidation to undertake the company’s liquidation process. This is based on the previous opinions rendered by the SEC which explained that if the 3-year extended life has expired without a trustee or receiver having been expressly designated by the corporation within that period, the board of directors itself may be permitted to so continue as “trustees” by legal implication to complete the corporate liquidation. 

Moreover, in case of the death of one or more directors during or after the 3-year liquidation period, the surviving directors continue as trustees in liquidation and may exercise the powers and duties of the deceased director-trustee. However, this is subject to the right of creditors, stockholders, and other persons interested in the corporate assets to petition the courts for the appointment of a trustee in liquidation. 

As regards the second question, the SEC refrained from rendering an opinion on the matter since it required rendering an advisory opinion on the next steps to take after being designated as a trustee-in-liquidation, which is a function of a legal counsel of private firms and is outside the authority of the SEC to provide. 

In line with the above, the SEC also emphasized that, under the existing law, the approval of the SEC is not required in the distribution or liquidation of assets of a dissolved corporation. Instead, it is a matter of internal concern of the corporation and falls within the power of the directors and stockholders or duly appointed liquidation trustee. Should there be substantial issues, the same may be brought to court since jurisdiction over the liquidation of corporations now pertains to the appropriate Regional Trial Courts.