141994 2 When the corporation has a reputation that is debased

141994 2 when the corporation has a reputation that

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141994, Jan 17, 2005. 2. When the corporation has a reputation that is debased, resulting in its humiliation in the business realm (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 of corporate fiction? A: It is the doctrine that allows the State to disregard the notion of separate personality of a corporation for justifiable reason/s. Note: This is an exception to the Doctrine of Separate Corporate Entity. Q: What are the effects of piercing the veil? A: Courts will look at the corporation as an aggregation of persons undertaking the business as a group. Note: When the veil of corporate fiction is pierced in proper cases, the corporate character is not necessarily abrogated. It continues for legitimate objectives. The decision applies only for that
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UST G OLDEN N OTES 2011 M ERCANTILE L AW T EAM : A DVISER : A TTY . A MADO E. T AYAG ; S UBJECT H EAD : E ARL M. L OUIE M ASACAYAN ; A SST . S UBJECT H EADS : K IMVERLY A. O NG & J OANNA M AY D.G. P EÑADA ; M EMBERS : M A . E LISA J ONALYN A. B ARQUEZ , A NGELI R. C ARPIO , A NTONETTE T. C OMIA , A LBAN R OBERT L ORENZO F. D E A LBAN , J OEBEN T. D E J ESUS , C HRIS J ARK A CE M. M AÑO , A NNA M ARIE P. O BIETA , R UBY A NNE B. P ASCUA , F LOR A NGELA T. S ABAUPAN , G IAN F RANCES N ICOLE C. V ILCHES particular case. (Reynoso IV v. CA, G.R. Nos. 116124 25, Nov 22, 2000) Q: What circumstances the mere existence of which does not necessarily entitle piercing the veil? A: 1. Controlling ownership of the corporation s share 2. 2 corporations have common directors 3. Substantial identity of the incorporators or 2 corporations and identity of its business Q: What are the tests in piercing the corporate veil? A: 1. Fraud test (When corporate fiction used to justify a wrong, protect fraud of defend crime) 2. Control test 3. Alter ego or instrumentality test (or conduit cases) 4. Public convenience or objective test 5. Equity cases/test Q: Plaintiffs filed a collection action against X Corporation. Upon execution of the court's decision, X Corporation was found to be without assets. Thereafter, plaintiffs filed an action against its present and past stockholder Y Corporation which owned substantially all of the stocks of X corporation. The two corporations have the same board of directors and Y Corporation financed the operations of X corporation. May Y Corporation be held liable for the debts of X Corporation? Why? A: Yes, Y Corporation may be held liable for the debts of X Corporation. The doctrine of piercing the veil of corporation fiction applies to this case. The two corporations have the same board of directors and Y Corporation owned substantially all of the stocks of X Corporation, which facts justify the conclusion that the latter is merely an extension of the personality of the former, and that the former controls the policies of the latter.
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