How To File Bankruptcy of Your Business in the Philippines
Engaging in business takes a lot of risks from its beginning and until it will end. Yes, the possibility of terminating a company, ending a partnership or closing a sole proprietorship is a big likelihood. There are many things that will come along the way during the venture which will eventually let you decide to close it down. This is why the chances are odds that a business will definitely end.
If the time has come for a businessman to accept defeat and declare that you have lost in this kind of competition, it is still not the end of the world. There are other options available and surely at the end of the tunnel is a light. So, do not lose hope and try to begin another chapter of your business career. However, before taking these steps further, take note that there are legal steps to follow when you decide to terminate your company operations.
Moreover, the most common reason in business closure especially in sole-proprietorship is bankruptcy. Obviously, financial reasons are generally the reason why a business will close down. Below is a guide on how to file bankruptcy of your business in the Philippines. Please read the steps and things to consider so you will have a smooth transition in your bankruptcy application.
1. Termination of employees at DOLE
Apparently, this is the first thing that you have to do as employer. You should give a 30-days notice of termination and closure to all employees of the business. A copy is also sent to the Department of Labor and Employment (DOLE) 30 days before date of termination and closure. Lastly, a termination pay amounting to at least one-half (1/2) month pay for every year of service, or one (1) month pay whichever is higher, per Philippine Labor Code mandate should be given to all employees. Make sure to comply with all these requirements so you will be clear of any labor obligations.
2. Notice of closure to government agencies
A notice of closure must be filed to these agencies:
(1) Bureau of Internal Revenue (BIR)
(2) Social Security System (SSS)
(3) Philippine Health Insurance Corporation (Philhealth)
(4) Home Development Mutual Fund (Pag-ibig)
Of all these agencies, the BIR should be complied first so the bureau could immediately assess and make necessary audit to clear the business of any taxes it should and will pay. If this is done, BIR will issue a clearance. Below are the BIR documentary requirements:
* Fill up BIR Form 1905 (Application for Registration Information Update)
– Letter of request stating reason for termination of business
– Original Certificate of Registration
– Books of Accounts
– Inventory List of Unused Receipts and Invoices
– Unused Receipts and Invoices for cancellation
– Board Resolution / Notice of Dissolution (if Corporation / Partnership)
* For SSS, Philhealth and/or Pag-ibig, the employer must make sure that the mandated contributions to employees have been paid or remitted to these agencies counting the recent month of the working days of the employees.
3. Notice of closure to Local Government Units
Depending on the location of your business, the local city or municipal office must also be informed of your closure. The requirements and procedures for this notice are different from one LGU to another. Thus, visit your city and municipality and inquire of the documents and requirements to be submitted.
4. Cancellation of business name at the Department of Trade and Industry (DTI)
If the business will be closed voluntarily, you need to inform the DTI as you will apply the cancellation of your Business Name or BN. Specifically, the following are the necessary documents for the cancellation of your business:
– A letter of request signed by the owner explaining the closure of business
– Affidavit of cancellation of the registered Business Name (BN). In this affidavit, the reason/s for the cancellation of the BN should be stated. Also, it has to be stated that the registered owner has no current financial obligation at the time of closure of the establishment
– Original copy of the BN certificate and the duplicate copy of the application form (If this cannot be provided, comply an affidavit of loss)
With the procedures and requirements detailed above, retiring a business surely is a long and tedious process. If opening up a new business requires a lot and may be tiresome and difficult, closing it is much more complex and time-consuming as it requires more documents and procedures to follow. It will approximately take about 6-months to close a business.
Nevertheless, this is how things are in the Philippines. You have no choice but to follow and comply the bureaucratic reality. Anyway, non-compliance is the consequence that you will face if all these will not be done which is actually a lot of pain to deal with. So, better follow and comply to be sure and safe.