Published — July 27, 2022
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
After reading “Who actually owns the properties of a corporation?”, read also “Who are the Beneficial Owners of the Corporation?”
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A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
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The property of a corporation, however, is not the property of the stockholders or members.
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Properties registered in the name of the corporation are owned by it as an entity separate and distinct from those who compose it.
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Similarly, properties of the shareholders, members or officers of the corporation are not the properties of the corporation.
Because a corporation has a separate juridical personality, the properties of the corporation are not the properties of its stockholders, board members and corporate officers. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from those who compose it. (Stockholders of Guanzon & Sons v. Register of Deeds of Manila, G.R. No. L-18216, October 30, 1962)
Similarly, properties of the shareholders, members or officers of the corporation are not the properties of the corporation.
The law says:
Section 2. Corporation defined. – A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. (Section 2, RCCP.)
Jurisprudence says:
“The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold without express authority from the board of directors. Physical acts, like the offering of the properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of such properties and the execution of the deed of sale covering such property, can be performed by the corporation only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board of directors.” (Litonjua v. Eternit Corporation, G.R. No. 144805, June 08, 2006)
In the case of PNB v. Aznar (G.R. No. 171805 and 172021, May 30, 2011), the Supreme Court ruled that a shareholder has no right to file in his name an action to quiet title of the properties of the corporation because of the separate nature of the personality of the shareholder and the corporation, to wit:
“While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person.”
The foregoing rule is applicable even if the stockholder lent the corporation money that was used to purchase the property.
What is the interest of a stockholder over the properties of the corporation?
The interest of stockholders over the properties of a corporation is merely inchoate and therefore does not entitle them to intervene in litigation involving corporate property. As such:
“Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations.” (PNB v. Aznar, G.R. No. 171805 and 172021, May 30, 2011)
Properties of the corporation cannot be included in the inventory of properties of the estate of the deceased shareholder of a corporation.
“Inasmuch as the real properties included in the inventory of the estate of the Late Pastor Y. Lim are in the possession of and are registered in the name of private respondent corporations, which under the law possess a personality separate and distinct from their stockholders, and in the absence of any cogency to shred the veil of corporate fiction, the presumption of conclusiveness of said titles in favor of private respondents should stand undisturbed.” (Lim v. Court of Appeals, G.R. No. 124715, January 24, 2000)
In the same manner, the properties of a corporation cannot be attached to satisfy a debt of a stockholder. As stated earlier, a stockholder only has an indirect and inchoate interests in the assets and business of the corporation.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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