Doctrine of piercing the corporate veil BLITZ NOTES IN COMMERCIAL &B REMEDIAL LAW FOR THE 2014 OCTOBER BAR EXAMS: An equitable doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.[1] A corporation has a juridical personality distinct and separate from the persons owning or composing it. Thus, the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa. There are, however, certain instances in which personal liability may arise. It has been held in a number of cases that personal liability of a corporate director, trustee, or officer along, albeit not necessarily, with the corporation may validly attach when:[2] 1. He assents to the (a) patently unlawful act of the corporation, (b) bad faith or gross negligence in directing its affairs, or (c) conflict of interest, resulting in damages to the corporation, its stockholders, or other persons; 2. He consents to the issuance of watered down stocks or, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto; 3. He agrees to hold himself personally and solidarily liable with the corporation; or 4. He is made, by specific provision of law, to personally answer for his corporate action. References 1PNB vs. Ritratto Group, Inc., G.R. No. 142616, 31 July 2001 2 Commissioner of Internal Revenue vs. Estate of Benigno Toda, Jr., G.R. No. 147188, 14 September 2004(TACORDA BIDO BERNABE DE LA VEGA NAPAY - LITUSQUEN ISIDORO & ABAD USB-MICRO FILM FILES/OFFICE)
Posted on: Mon, 30 Jun 2014 07:47:29 +0000
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