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141994, Jan 17, 2005.2.When the corporation has a reputationthatisdebased,resultinginitshumiliationinthebusinessrealm(Manila Electric Company v. T.E.A.M.Electronics Corporation, et. al., G.R. No.131723, Dec. 13, 2007.Q: What is the doctrine of piercing the veil ofcorporate fiction?A:It is the doctrine that allows the State todisregard the notion of separate personality of acorporation for justifiable reason/s.Note:ThisisanexceptiontotheDoctrineofSeparate Corporate Entity.Q: What are the effects of piercing the veil?A:Courts will look at the corporation as anaggregation of persons undertaking the businessas a group.Note:When the veil of corporate fiction is pierced inpropercases,thecorporatecharacterisnotnecessarily abrogated. It continues for legitimateobjectives.Thedecisionappliesonlyforthat
USTGOLDEN NOTES 2011 MERCANTILELAWTEAM:ADVISER:ATTY. AMADOE. TAYAG;SUBJECTHEAD:EARLM. LOUIEMASACAYAN;ASST. SUBJECTHEADS:KIMVERLYA. ONG& JOANNAMAYD.G. PEÑADA;MEMBERS:MA. ELISAJONALYNA. BARQUEZ, ANGELIR. CARPIO,ANTONETTET. COMIA, ALBANROBERTLORENZOF. DEALBAN, JOEBENT. DEJESUS, CHRISJARKACEM. MAÑO, ANNAMARIEP. OBIETA,RUBYANNEB. PASCUA, FLORANGELAT. SABAUPAN, GIANFRANCESNICOLEC. VILCHESparticular case.(Reynoso IV v. CA, G.R. Nos. 11612425, Nov 22, 2000)Q: What circumstances the mere existence ofwhich does not necessarily entitle piercing theveil?A:1.Controllingownershipofthecorporation s share2.2 corporations have common directors3.Substantial identity of the incorporatorsor 2 corporations and identity of itsbusinessQ: What are the tests in piercing the corporateveil?A:1.Fraud test (When corporate fiction usedto justify a wrong, protect fraud ofdefend crime)2.Control test3.Alteregoorinstrumentalitytest(orconduit cases)4.Public convenience or objective test5.Equity cases/testQ: Plaintiffs filed a collection action against XCorporation.Uponexecutionofthecourt'sdecision, X Corporation was found to be withoutassets.Thereafter,plaintiffsfiledanactionagainstitspresentandpaststockholderYCorporation which owned substantially all of thestocks of X corporation. The two corporationshavethesameboardofdirectorsandYCorporationfinancedtheoperationsofXcorporation. May Y Corporation be held liablefor the debts of X Corporation? Why?A:Yes, Y Corporation may be held liable for thedebts of X Corporation. The doctrine of piercingthe veil of corporation fiction applies to this case.The two corporations have the same board ofdirectors and Y Corporation owned substantiallyall of the stocks of X Corporation, which factsjustify the conclusion that the latter is merely anextension of the personality of the former, andthat the former controls the policies of the latter.