Mr. Edwin V. Patricio

October 8, 1993 Mr. Edwin V. Patricio PNB Republic Bank Legaspi Towers 300 Roxas Blvd., Manila S i r : This refers to your letter of September 23, 1993 requesting opinion on the query posed therein. LibLex As stated, there are borrowers negotiating for a loan with PNB-Republic Bank intended as paid-up capital of a proposed corporation they intend to incorporate. The proceeds of the loan will be deposited with the Bank in the name of the trustee to be appointed by the borrowers in behalf and for the benefit of the proposed corporation. Your query is, whether the Bank can refuse to allow the withdrawal and disbursement by the new corporation of said paid-up capital (actual proceeds of the loan) which have been deposited in its behalf assuming that it has finally incorporated. It is well-settled in corporate jurisprudence that as a general rule, a corporation has a personality separate and distinct from that of each stockholder. It means that the stockholders of a corporation are different from the corporation itself. Consequently, a corporate property is owned by the corporation as a distinct legal person and the stockholders have only an indirect interest in its assets and business. For that matter, the property belonging to a corporation cannot be attached or held answerable for the debts of the stockholders thereof. The stockholders are liable personally for their own obligations. (Wise & Co., Inc vs. Man Sun Lung, G.R. No. 46997, Enero 11, 1940, 69 Phil. 309) Otherwise stated, the debt of a stockholder is not the debt of the corporation of which he is a stockholder, and conversely, the debt of the corporation is not the debt of its stockholders. Applying the above corporate principle on the present case, the subscribers of the proposed corporation may, in their own personal capacity and acting in good faith, borrow money for payment of their subscriptions. The loan agreement between the borrowers and the creditor Bank is a private contract between them of which the proposed corporation is not a party. What the SEC requires for purposes of registration is that the statutory paid up capital requirement must be actually paid. As to where the amount used for payment comes from, the SEC normally does not inquire into it. The moment the borrowed money is contributed as payment to subscriptions and upon incorporation, the ownership thereof is transferred to the new corporation. Accordingly, upon the issuance by the SEC of the certificate of registration, the corporation, being now the owner of the funds, can already withdraw and disburse the same for the operation of its business; and the borrower stockholders cannot, as a matter of right, demand for the return of the funds invested to answer their liability to the creditor Bank nor can they demand the corporation to pay their debts. The capital of the corporation can never be held liable for the personal indebtedness or obligations of its stockholders. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman