Mr. Francisco Abian, et al

January 4, 1996 Mr. Francisco Abian, et al Silangan Integrated Services Cooperative Balingoan, Misamis Oriental S i r : This refers to your letter dated October 31, 1995 which was received by the Commission only on December 18, 1995 inquiring whether you can go after the shares of stock and personal properties of the Board of Directors of Balingoan Port Service Company Inc. in order to satisfy money claim against said corporation for non-payment of the 13th month pay and incentives to its employees and requesting that said Company be dissolved for alleged acts in violation of its Articles of Incorporation. It is well-settled in corporate jurisprudence that a corporation has a personality separate and distinct from that of each shareholder . This is a basic attribute or privilege attached to a corporation which gives rise to a fundamental principle in corporation law that under normal conditions, the stockholders of a corporation are not personally liable for corporate obligations and cannot be held liable to third persons who have claims against the corporation beyond their agreed contribution to the corporate capital. However, under the " doctrine of piercing the veil of corporate entity ",the principle on separate identity of a corporation from its stockholders may be disregarded when it is used to defeat public convenience, justify wrong, protect or cover fraud or defend crime or work an injustice. If used in those situations, the corporation and the stockholders composing it should be treated as one and the same. Consequently, the stockholders can be held personally liable to corporate debts. However ,application of said doctrine is for the proper court to decide. The proper court will not hesitate to pierce the corporate veil or corporate fiction when it would defeat the ends envisaged by law, as the theory of corporate entity was not meant to promote unfair objectives. Relative to your request to dissolve the corporation, please be informed that the authority of the SEC to cancel or revoke the certificate of registration or dissolve corporations emanates from the following provisions of law: CORPORATION CODE : "SECTION 121. Involuntary dissolution . A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on grounds provided by existing laws, rules and regulations ." (Emphasis supplied) "SECTION 144. Violations of the Code . Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more than five (5) years, or both, in the discretion of the court. If the violation is committed by a corporation, the same may, after notice and hearing ,be dissolved in appropriate proceedings before the Securities and Exchange Commission; Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee or officer of the corporation responsible for said violation: Provided further, That nothing in this section shall be construed to repeal the other causes for dissolution of a corporation provided in this Code." (Emphasis supplied) P.D. 902-A AS AMENDED : "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx 1) To suspend, or revoke ,after proper notice and hearing ,the franchise or certificate of registration of corporations, partnerships or associates, upon any of the grounds provided by law including the following : 1. Fraud in procuring its certificate of registration; 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public; 3. Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to grave violation of its franchise; 4. Continuous inoperation for a period of at least five (5) years; 5. Failure to file by-laws within the required period; 6. Failure to file required reports in appropriate forms as determined by the Commission within the prescribed period. ...(Emphasis supplied) The aforecited provisions require that cancellation or revocation of corporate franchise or regulation can be effected by the SEC only upon filing of a verified complaint on grounds provided by law and only after proper notice and hearing .Likewise, the SEC Revised Rules of Procedure ,quoted hereunder, requires that actions filed with the Commission must be prosecuted and defended in the name of the real party in interest . "SECTION 2. Parties in Interest . All actions filed with the Commission must be prosecuted and defended in the name of the real party in interest .All persons having an interest in the subject of the action and in obtaining the relief demanded shall be joined as complainants or petitioners. All persons who claim an interest in the controversy or the subject thereof adverse to the complainant or petitioner or who are necessary to a complete determination or settlement of the questions involved therein shall be joined as respondents." (Emphasis supplied) Thus, if you believe you are a real party in interest, you may file a verified complaint/petition for dissolution of the above-mentioned corporation on grounds provided by law with the Securities and Investigation and Clearing Department of this Commission pursuant to PD 902-A, as amended, and the Revised Rules of Procedure of the SEC. Very truly yours, (SGD.) PERFECTO R. YASAY, JR. Acting Chairman