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Corporation Law Jurisprudence · Podcast Episode 1 · 11:48
Piercing the Corporate Veil: Nagsara Para ’Di Magbayad?
When can a creditor go after the owner, or the new company?
A company shut down after promising it wouldn’t. Then a new one opened on the same floor, with the same president. Atty. Jeric and Sweet walk through three Supreme Court decisions on piercing the corporate veil, and why they came out differently.
Three cases, three answers
Same question. Different facts. Different results.
G.R. No. 182729 · September 29, 2010 · at 4:45
Kukan International Corporation vs. Reyes
NOT PIERCEDG.R. No. 166282 · February 13, 2013 · at 7:05
Heirs of Fe Tan Uy vs. International Exchange Bank
SPLITThe rule
A corporation is separate from its owners, but that is not a shield for fraud.
The veil is pierced only when three things are proven: control, fraud or wrong, and harm. If one is missing, there is no piercing.
Try the interactive explainer →Recap
- A corporation is separate from its owners, but that is not a shield for fraud.
- The three-prong test: control, fraud, harm. Miss one, and there is no piercing.
- The same owners, a similar name or a title is not enough. There must be clear evidence.
Bar tip
When asked whether the veil can be pierced, don’t stop at “same stockholders.” Look at the purpose: was the corporation used to escape an obligation or to defraud?
Chapters
- 0:00Cold open
- 0:41The rule: separate personality and the three-prong test
- 2:36Case 1: Livesey vs. Binswanger Philippines, Inc. (pierced)
- 4:45Case 2: Kukan International Corporation vs. Reyes (not pierced)
- 7:05Case 3: Heirs of Fe Tan Uy vs. International Exchange Bank (split)
- 9:07Why did the answers differ?
- 10:41Recap and bar tip
Cases cited
Full text on LawPhil.
Next episode
Reverse piercing: can a corporation be made to pay its owner’s personal debt?
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