Published — July 29, 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 “Are there instances when corporate officers may be held liable for obligations incurred by the corporation?”, read also “Who are corporate officers of a corporation?”
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The following shall be jointly and severally liable for damages suffered by the corporation, its stockholders or members and other persons:
a. directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation
b. directors or trustees who are guilty of gross negligence or bad faith in directing the affairs of the corporation
c. directors or trustees who acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees -
A director, trustee, or officer shall not attempt to acquire, or acquire any interest adverse to the corporation in respect of any matter which has been reposed in them in confidence, and upon which, equity imposes a disability upon themselves to deal in their own behalf.
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Otherwise, the said director, trustee, or officer shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
The law says:
Section 30 of the Revised Corporation Code provides that:
SEC. 30. Liability of Directors, Trustees or Officers. – Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
A director, trustee, or officer shall not attempt to acquire, or acquire any interest adverse to the corporation in respect of any matter which has been reposed in them in confidence, and upon which, equity imposes a disability upon themselves to deal in their own behalf; otherwise, the said director, trustee, or officer shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
Jurisprudence says:
In the case of Heirs of Late Reynaldo Magaling v. Peter Ong (G.R. No. 173333, August 13, 2008), the Supreme Court enumerated the instances when the separate personality of a corporation may be set aside, and the corporate officers may be held solidarily liable. To wit:
“It is basic that a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf, and in general, from the people comprising it. The general rule is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities, and vice versa.
There are times, however, when solidary liabilities may be incurred and the veil of corporate fiction may be pierced. Exceptional circumstances warranting such disregard of a separate personality are summarized as follows:
- When directors and trustees or, in appropriate case, the officers of a corporation:
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons;
- When a director or officer has consented to the issuance of watered-down stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto;
- When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; or
- When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.”
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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