CORPORATION LAWDOCTRINES/ PRINCIPLES
CORPORATION LAWDOCTRINES/ PRINCIPLES
DOCTRINE OF CORPORATE ENTITY
A corporation is invested by law with a personality distinct and separate from its SHsor
members. In the same vein, a corporation by legal fiction and convenience is an
entityshielded by a protective mantle and imbued by law with a character alien to the
personcomprising it.
(Lim v. CA)
DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY
An exception to the doctrine of corporate entity. Under this doctrine, where the fictionof
the corporate entity is being used as a cloak for fraud or illegality, or “to defeat
publicconvenience, justify wrong, protect fraud or defend crime”, or for ends subversive
of the policyand purpose behind its creation, this fiction will be disregarded and the
individuals comprisingit will be treated as identical. Liability will attach personally or
directly to the SHs or officers or where there are two corporations, they will be merged
as one, the one being merely regardedas the instrumentality, agency, conduit or adjunct
of the
other. A corporation will be looked upon as a legal entity as a rule, and until sufficientrea
son to the contrary appears; but when the notion of legal entity is used to defeat
publicconvenience, justify wrong, protect fraud, or defend crime, the law will regard the
corporationas an association of persons.
(Villanueva Commercial Law Reviewer citing U.S. v.Milwaukee, p.575)
DOCTRINE OF BUSINESS-ENTERPRISE TRANSFERS
A corporation which purchases or takes over the entire business enterprise of
another corporation or entity, becomes liable for debts pertaining to such
business enterprise.
Likewise,
the mere change of the medium of holding the same business (e.g. from apartnership or
corporation) enterprise would authorize piercing to enforce the obligationsincurred.
(Villanueva, p. 592)
DOCTRINE OF ESTOPPEL/ CORPORATION BY ESTOPPEL
A party is estopped to challenge the personality of a foreign corporation and itsstanding
to sue in the Philippines even when it has no license to do business, after
havingacknowledged the same by entering into a contract with it. The doctrine of
estoppel to denycorporate existence applies to foreign as well as to domestic
corporations; one who has dealtwith a foreign
corporation as a corporate entity is estopped from denying its corporateexistence and
capacity. The principle will be applied to prevent a person contracting with aforeign
corporation from taking advantage of its non-compliance with the statutes, chiefly
incases where such person has received the benefits of the contract.
(Merill Lynch v. CA, 211SCRA 825)
A 3rd party who, knowing an association to be incorporated, nonetheless treated it
asa corporation and received benefits from it, may be barred from denying its corporate
existence in a suit brought against the alleged corporation.Under the law on estoppel,
those acting on behalf of the corporation and thosebenefited by it, knowing it to be
without valid existence, are held liable as
general partners
.
(Read sec. 21)
INSTRUMENTALITY RULE OR ALTER EGO DOCTRINE
Where one corporation is so organized and controlled and its affairs are conducted
sothat, it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the
corporateentity of the “instrumentality” may be disregarded