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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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.
