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What are the implications of a corporation’s separate juridical personality?

Photo from Unsplash | Andrey Konstantinov

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 a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is 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.


AT A GLANCE:

Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization. (Article 46, Civil Code of the Philippines)


Corporations are juridical persons to which the law grants a juridical personality, separate and distinct from that of each shareholder. (Article 44, Civil Code of the Philippines)

A corporation has a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related (Zambrano v. Philippine Carpet Manufacturing Co., G.R. No. 224099, June 21, 2017). As such, it may acquire and possess property of all kinds, and incur obligations in conformity with law.

The law says:

“Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization.(Article 46, Civil Code of the Philippines)

Jurisprudence says:

“It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members.(Sulo ng Bayan, Inc. v. Araneta, Inc. G.R. No. L-31061, August 17, 1976)

 

Property of the Corporation

Jurisprudence says:

“The property of the corporation is its property and not that of the stockholders, as owners, although they have equities in it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. Conversely, a corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the corporation, even in the case of a one-man corporation.” (Sulo ng Bayan, Inc. v. Araneta, Inc. G.R. No. L-31061, August 17, 1976)

 

Corporate Liability

Jurisprudence says:

“The general rule is that a corporation is invested by law with a personality separate and distinct from that of the persons composing it, or from any other legal entity that it may be related to. The obligations of a corporation, acting through its directors, officers, and employees, are its own sole liabilities. Therefore, the corporation’s directors, officers, or employees are generally not personally liable for the obligations of the corporation.” (Bank of Commerce v. Marilyn Nite, G.R. No. 211535, July 22, 2015)

 

Criminal Liability

Jurisprudence says:

“When a criminal statute designates an act of a corporation or a crime and prescribes punishment therefor, it creates a criminal offense which, otherwise, would not exist and such can be committed only by the corporation. But when a penal statute does not expressly apply to corporations, it does not create an offense for which a corporation may be punished. On the other hand, if the State, by statute, defines a crime that may be committed by a corporation but prescribes the penalty therefor to be suffered by the officers, directors, or employees of such corporation or other persons responsible for the offense, only such individuals will suffer such penalty. Corporate officers or employees, through whose act, default or omission the corporation commits a crime, are themselves individually guilty of the crime.” (Alfredo Ching v. Secretary of Justice, et.al., G.R. No. 164317, February 06, 2006)

Related article: WHAT ARE THE REMEDIES OF CORPORATIONS TO ENFORCE PAYMENT OF STOCKS?

 


Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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