Piercing the veil of corporate fiction. Piercing the Corporate Veil 2022-12-12
Piercing the veil of corporate fiction Rating:
9,2/10
1698
reviews
Piercing the veil of corporate fiction refers to the legal concept of disregarding the separate legal personality of a corporation and holding its shareholders or directors personally liable for the actions or debts of the company. This concept is often used when the company has been used to commit fraud or wrongdoing, or when the company is considered an "alter ego" of its shareholders or directors, meaning that it is being used as a mere shell or facade to carry out their personal business rather than functioning as a legitimate separate entity.
The concept of piercing the corporate veil has its roots in English common law and has been adopted by many jurisdictions around the world. It is based on the idea that a corporation is a legal fiction, created by the state for the purposes of conducting business and limiting liability. However, this limited liability protection can be abused, and courts may decide to pierce the veil and hold individuals personally liable in order to provide justice and deter wrongdoing.
One of the main reasons for piercing the corporate veil is to hold shareholders or directors personally responsible for the actions of the company. This may be necessary when the company has been used to commit fraud or other illegal activities, and the individuals behind the company cannot be held accountable through traditional legal means. For example, if a company is used to defraud investors or consumers, the individuals behind the company may be held personally responsible for their actions, even if they were acting on behalf of the company.
Another reason for piercing the corporate veil is when the company is being used as an alter ego for the personal business of its shareholders or directors. This may occur when the company is not being operated as a separate and distinct entity, but rather is being used as a vehicle for the personal business interests of its owners. In these cases, the court may decide to disregard the separate legal personality of the company and hold the individuals behind it personally responsible for its actions.
In order to pierce the corporate veil, a court must typically find that the company was used to commit fraud or wrongdoing, or that it was being used as an alter ego for the personal business of its shareholders or directors. This can be a difficult burden to meet, as courts are generally hesitant to disregard the limited liability protection afforded to corporations. However, in cases where the evidence is strong and the wrongdoing is serious, a court may decide to pierce the veil in order to provide justice and deter future wrongdoing.
In conclusion, piercing the veil of corporate fiction is a legal concept that allows courts to hold individuals personally responsible for the actions or debts of a corporation. This concept is used when the company has been used to commit fraud or wrongdoing, or when it is being used as an alter ego for the personal business of its shareholders or directors. While it can be a difficult burden to meet, piercing the corporate veil is an important tool for ensuring accountability and deterring wrongdoing in the business world.
PIERCING THE VEIL OF CORPORATE blog.sigma-systems.com
The doctrine of piercing the corporate veil is shrouded in misperception and confusion. Retrieved 9 September 2017. Patently unlawful acts are those declared unlawful by law which imposes penalties for commission of such unlawful acts. Cases involving creditors may be handled in bankruptcy court. In that case, the trial court had acquitted the President of the Bancap Corporation of a criminal estafa charge filed against her by the Bank of Commerce, but it held her personally and solidarily liable for Bancap Corp. The respondents do not likewise deny that Royale and Sceptre share the same officers and employees.
Corporate officers and Piercing the Veil of Corporate Fiction
There is no evidence in this case that Locsin acted in bad faith or with malice in carrying out the retrenchment and eventual closure of the company Garcia vs. NLRC, supra note 39, at 608-609. There must be a law declaring the act unlawful and penalizing the act. It is no longer open for review. Specific requirements must be present for company officers to be accountable for company liabilities. However, the issue of fraud had been resolved with finality when the trial court acquitted Nite of estafa on the ground that the element of deceit is non-existent in the case.
However, any piercing of the corporate veil has to be done with caution, albeit the Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. Bilog, III with Commissioners Erlinda T. NLRC, the Court did not hold a director, an officer, and other corporations personally liable for corporate obligations of the employer because the second requisite was lacking. To hold a director personally liable for debts of the corporation, and thus pierce the veil of corporate fiction, the bad faith or wrongdoing of the director must be established clearly and convincingly. Retrieved 9 September 2017. This is known as "totality of circumstances". International Exchange Bank, G.
The doctrine of piercing the veil of corporate fiction has only a res judicate effect to prevent wrong or fraud and is not available for other purposes. The court will then be entitled to look for the legal substance, not the just the form. Simply put, if a court becomes convinced that a shareholder or other equity investor has, by words or actions, led a counter-party to a contract to believe that an obligation is a personal liability rather than or in addition to a corporate debt, then courts sometimes will use a piercing theory to impose liability on the individual shareholder rather than a fraud theory. Founded Las Pinas City Bar Assn 2001. Closure of Establishment and Reduction of Personnel.
Piercing the veil of corporate fiction in labor law
Chicago Kent Law Review. See also Spouses Kho's position paper dated April 26, 2011; id. Penned by Associate Justice Jhosep Y. On appeal to the Supreme Court, the President of Bancap was absolved of liability for the corporate obligation. It is not in every instance of inability to collect from a corporation that the veil of corporate fiction is pierced, and the responsible officials are made liable. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto; 3. NLRC, we said: To reiterate, a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it.
The Three Justifications for Piercing the Corporate Veil
Pizarro and Samuel H. Joson,supra note 32, at 263-264; Santos v. See also Harpoon Marine Services, Inc. In this case, the "veil" that the law utilizes to separate the company and its responsibilities and. Honors: 3rd placer, 1984 Bar Exams 90. Ray Flemming Fruit Co.
NYU Center for Law, Economics and Organization. As correctly pointed out by the petitioner, it was Aida who exercised control and supervision over the affairs of both Sceptre and Royale. The Court's Ruling The petition is meritorious. Mere failure to comply with the notice requirement of labor laws on company closure or dismissal of employees does not amount to a patently unlawful act. Piercing the Veil of Corporate Fiction A doctrine that disregards the separate personality of a corporation if this separate personality is used as an alter ego of another entity and was used to justify wrong, protect fraud, perpetrate deception, or defeat public convenience. While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality.
Atty. Manuel J. Laserna Jr.: Piercing the veil of corporate fiction applied in execution of judgment in a labor case
Liability attached, especially to the responsible officers, even after final judgment and during execution, when there was a failure to collect from the employer corporation the judgment debt awarded to its workers. Arrow Bar, 452 N. In this Article we argue that there is a rational structure to the doctrine of corporate veil piercing not only in theory, but in practice as well. Accordingly, the Decision dated May 7, 2015 and the Resolution dated June 16, 2015 of the National Labor Relations Commission in NLRC LAC No. It is undisputed that the petitioner tendered his resignation and that he applied at Royale at the instance of Karen and Cesar and on the impression they created that these were necessary for his continued employment. DELA CRUZ, CENON JARDIN, AND ROVILLA L. Personal liability attaches only when, as enumerated by the said Section 31 of the Corporation Code, there is a fwillfull and knowing assent to patently unlawful acts of the corporation, there is gross negligence or bad faith in directing the affairs of the corporation, or there, is a conflict of interest resulting in damages to the corporation.
