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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.
AT A GLANCE:
In the case of Nell vs. Pacific Farms, G.R. No. L-20850, November 29, 1965, the Supreme Court first pronounced the rule regarding the transfer of all the assets of one corporation to another.
Section 39 of the Revised Corporation Code provides:
“Sec.39. Sale or other Disposition of Assets. — Subject to the provisions of Republic Act No. 10667, otherwise known as “Philippine Competition Act”, and other related laws, a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of its property and assets, upon such terms and conditions and for such consideration, which may be money, stocks, bonds, or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient.”
Further, Section 79 of the Revised Corporation Code provides:
“Sec.79. Effects of Merger or Consolidation. — The merger or consolidation shall have the following effects:
xxx
(e) The surviving or consolidated corporation shall be responsible for all the liabilities and obligations of each constituent corporation as though such surviving or consolidated corporation had itself incurred such liabilities or obligations xxx”
In Nell vs. Pacific Farms, G.R. No. L-20850, November 29, 1965, the Supreme Court held that generally, where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for debts and liabilities of the transferor, except:
- Where the purchaser expressly or impliedly agrees to assume debts;
- Where the transaction amounts to a consolidation or merger of the corporations;
- Where the purchasing corporation is merely a continuation of the selling corporation; and
- Where the transaction is entered fraudulently in order to escape liability for such debts.
With regard to the employees, the Supreme Court ruled in the case of Philippine Geothermal Inc. vs. Unocal Philippines Inc., G.R. No. 190187, September 28, 2016 that the absorbing corporation automatically assumes the employment contracts of the absorbed corporation, such that the absorbed corporation’s employees become part of the manpower complement of the surviving corporation.
Related Articles:
Disposal of assets of the corporation after dissolution
WHAT IS THE POWER OF THE CORPORATION TO SELL/DISPOSE CORPORATE ASSETS?
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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