Trade and Industry Secretary Ramon M. Lopez has called for a review of processes in closing down a business, saying the difficulty of closing down a business has long been an issue among businesses in the country.
“We need to change the process of business closure because am aware of that problem that are relayed to us even when I was still with the private sector,” said Lopez In an interview at ONE NEWS TV by program host Chito Beltran.
Lopez agreed that the processes are difficult and the other expenses that need to be settled. “That is the reason there should be a review, we have to revisit the procedure of closure,” he emphasized.
Because of the long and hard lockdowns, some companies have decided or planning to close shop but are faced with the difficulty in filing for closure. Aside from the fact that they are already bankrupt, have to spend for the separation pay of workers, and no income during the long lockdowns, there are still other fees these firms need to settle with the Bureau of Internal Revenue (BIR) and other requirements from the local government units and other government agencies.
While he strongly called for a review of the processes in closing down a business, Lopez also noted that the main concern among establishments now is the reopening of the their businesses.
According to the trade chief, of the more than 30,000 establishments surveyed by the DTI in the National Capital Region, the percentage of closure has gone down to 10 percent in June from 16 percent the previous month. The percentage of closure is also expected to further go down with the reopening of more economic sectors.
Based on the DTI website, a sole proprietorship business that would like to close his operation must apply for cancelllation of the registered business name (BN).
The proprietor must also submit other BN-Related Application Form prescribed signed by the registered BN owner.
He must submit a valid ID, declaration under oath that the cancellation is not intended to defraud creditors and that he/she has no outstanding and pending financial obligation in connection with his/her business or that he/she has notified all the creditors of such cancellation, as the case may be.
The proprietor must also submit an authorization letter upon filing of the application if filed by a representative and presentation of the authorized representative’s valid ID.
If dissolved at the Securities and Exchange Commission, the company must submit letter request signed by the authorized signatory (Board Resolution for the authorized signatory), certified photocopy of the SEC certificates of dissolution of the corporation/partnership; original copy of the business name certificate of registration and the duplicate copy of the application form. (Affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost).
From the local government unit, the requirements vary. But usual requirements include affidavit of gross (reason for and date of closure), Mayor’s permit, financial statement/ITR, sketch, and latest payment.
For the BIR, the proprietor must submit 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), and additional requirements in case of death of taxpayer.
There are 10 procedures listed in the processing for these documents for the BIR alone.
There are also requirements from the Department of Labor and Employment. These include service of a written notice to the employees and the DOLE at least onemonth before the intended date of closure/cessation; closure or cessation of business operations is bona fide in character; payment to the employees of termination pay amounting to at least one-half month pay for every year of service, or one month pay whichever is higher, per Philippine Labor Code mandate, and additional requirements in case of death of individual taxpayer.
The Bangko Sentral ng Pilipinas also imposes a different set of requirements for pawnshop closures.