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    Law Doctrine of Piercing The Veil

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    Josh Ursua
    The Supreme Court ruled that two employees were illegally dismissed from their jobs for three reasons: the closure of the company was done in bad faith to circumvent labor laws, the closure was not genuine as operations continued under a new company, and the employees were terminated unfairly. ABS-CBN was held jointly liable with the original company because they exercised control over the management and closure, and the companies were essentially alter egos of each other. The Doctrine of Piercing the Corporate Veil is effective at preventing abuse of the corporate form to commit fraud, as it holds shareholders and creditors personally liable for fraudulent acts of the corporation.

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    Law Doctrine of Piercing The Veil

    Uploaded by

    Josh Ursua
    47 views2 pages
    The Supreme Court ruled that two employees were illegally dismissed from their jobs for three reasons: the closure of the company was done in bad faith to circumvent labor laws, the closure was not genuine as operations continued under a new company, and the employees were terminated unfairly. ABS-CBN was held jointly liable with the original company because they exercised control over the management and closure, and the companies were essentially alter egos of each other. The Doctrine of Piercing the Corporate Veil is effective at preventing abuse of the corporate form to commit fraud, as it holds shareholders and creditors personally liable for fraudulent acts of the corporation.

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    law doctrine of piercing the veil

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    The Supreme Court ruled that two employees were illegally dismissed from their jobs for three reasons: the closure of the company was done in bad faith to circumvent labor laws, the closure was not genuine as operations continued under a new company, and the employees were terminated unfairly. ABS-CBN was held jointly liable with the original company because they exercised control over the management and closure, and the companies were essentially alter egos of each other. The Doctrine of Piercing the Corporate Veil is effective at preventing abuse of the corporate form to commit fraud, as it holds shareholders and creditors personally liable for fraudulent acts of the corporation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    47 views2 pages

    Law Doctrine of Piercing The Veil

    Uploaded by

    Josh Ursua
    The Supreme Court ruled that two employees were illegally dismissed from their jobs for three reasons: the closure of the company was done in bad faith to circumvent labor laws, the closure was not genuine as operations continued under a new company, and the employees were terminated unfairly. ABS-CBN was held jointly liable with the original company because they exercised control over the management and closure, and the companies were essentially alter egos of each other. The Doctrine of Piercing the Corporate Veil is effective at preventing abuse of the corporate form to commit fraud, as it holds shareholders and creditors personally liable for fraudulent acts of the corporation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    URSUA, Joshua Y.

    February 6, 2021
    BSAc 2 1335 BLR 221

    1. What are the reasons given by the Supreme Court in ruling that the two employees
    were illegally dismissed? (15)

    The reasons why the employees, Honorato C. Hilario and Dindo B. Banting, were
    illegally dismissed is because the closure of Creative Creatures, Inc (CCI) was done in
    bad faith for the purpose of circumventing the provisions of the Labor Code; it was a ploy
    to get rid of some of their employees. CCI failed to satisfactorily show that the closure of
    business was bono fide in character since there is no genuine cessation of operations but
    mere stipulations to make it appear that CCI intended to close the business. Furthermore,
    the Supreme Court also considered the actions after the closure which was the
    establishment of a new corporation. This new corporation performed the same business
    operations of the dissolved corporation, they also merely transferred and rehired most of
    the employees of CCI which shows that there was no genuine intention of closure. It was
    done to the prejudice of respondents who were terminated. With the facts presented,
    Supreme Court ruled that the respondent’s termination of employment was illegal and
    was done in bad faith.

    2. Why was ABS-CBN held jointly and severally liable with CCI to pay the two
    employees? (15)

    ABS-CBN (petitioner) and CCI was held jointly and severally liable, despite the
    fact that each has separate corporate personality, is because of the Doctrine of Piercing
    the Corporate Veil. This case falls under the instance where a corporation is merely a
    farce since it is a mere alter ego or business conduit of a corporation. CCI was principally
    formed to perform the functions and activities formerly undertaken by the petitioner’s
    ABS-CBN Scenic department. Thus, CCI was incorporated for the sole benefit of ABS-
    CBN. Additionally, CCI was also affiliated with and/or a subsidiary of the petitioner and
    majority of its stockholders are also the major stockholders of petitioner. Petitioner
    clearly exercised control and influence in the management and closure of CCI’s
    operations. With the facts presented, it justified the ruling of the appellate court and labor
    tribunals of disregarding their separate corporate personalities and treating them as a
    single entity. Also, Edmund Ty was a regular employee of petitioner and CCI was
    considered a division of petitioner. This fact further strengthened the conclusion that the
    petitioner is held jointly and severally liable with CCI for the illegal dismissal of
    respondents.

    3. In your own opinion is the Doctrine of Piercing the Veil of Corporate Fiction
    effective in preventing the use of a corporation as an instrument of fraud committed
    by the people who comprise it? (15)

    Yes, the Doctrine of Piercing the Veil of Corporate Fiction is effective in


    preventing a corporation from making their business as an instrument of abusing their
    characteristic of being a separate corporate personality. A corporation is a legal entity,
    meaning it is separate and distinct from its owners. This also means that is has limited
    liability, whatever the liability of a corporation is not the liability of its owners. This
    characteristic can be used by corporations for fraudulent cases, protect fraud, defend
    crime or alter ego cases to escape itself from liability. The doctrine exists to prevent this
    type of abuse from happening. It sets aside limited liability and hold a corporation’s
    shareholders or creditors liable for the corporation’s actions or debts. Corporations will
    now be prevented from doing fraudulent acts since owners can be held liable too in which
    when proven doing such acts, owners will suffer serious consequences.

    4. Cite other instances when the Doctrine of Piercing the Veil of Corporate Fiction
    may be applied. (15)

    In PNB v. Hydro Resources Contractors Corp, the Court said that the doctrine of
    piercing the corporate veil applies only in three basic areas: first is when it defeats public
    convenience as when the corporate fiction is used as a vehicle for the evasion of an
    existing obligation; second is in fraud cases, protect fraud, defend crime or when the
    corporate entity is used to justify a wrong; and the third one is alter ego cases, where a
    corporation is merely a farce since it is a mere alter ego or business conduit of a person or
    a corporation. Although some countries and states have different and altered laws about
    this doctrine, the most common case is when a corporation has done fraudulent or
    anything related therefrom with the reason of escaping personal liability from its
    shareholders and creditors.

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