Salgado, Lovely Jaze A.

Final Examination
Business Laws and Regulations
1st Semester
SY 2021-2022

I. Explain and answer briefly the following questions

1. Tryout Trading obtained a judgment against Sold out Corp. Upon execution of the
court’s decision, Sold out Corporation was found to have no assets nor inventory.
After investigation, it was determined that 10 months before the judgment, Buy out
Corporation, a corporation engaged in the exact same business as Sold out Corp.,
purchased the entire inventory and assets of Sold-out Corp. Then, it was found that
3 out of 10 directors of Sold-out Corp were also directors of Buy out Corp. another 3
former directors of Sold Out Corp were majority shareholders in Buyout Corp. Tryout
Trading Corp also found evidence that Sold out and Buyout made similar
transactions at nearly the same three years prior. Thus, Tryout Trading filed a
motion to execute the judgment against Buyout Corp, on the ground that Buyout
Corp was merely an alter ego of Sold-out Corp. Are there sufficient indicacia that the
corporate fiction maybe pierced?

There is no adequate evidence that the corporate fiction may be pierced based on
the doctrine of piercing the veil of corporate entity or corporate fiction'
interpretations (G.R.No.168306 and 185280). In that situation, there is no proof of
fraud. Furthermore, control and ownership of all assets of another organization is not
an indicator of fraudulent intent, according to the law. Tryout Trading must provide
strong and persuasive proof that the owning business committed fraud or gross
negligence resulting in ill faith in order to avoid the obligation.

2. S, a stockholder of C Corporation brought a suit in the name of the Corporation

against the members of the board of directors and some officers for alleged acts of
mismanagement of the affairs of the corporation which were detrimental to the
corporation. In his complaint, S claimed among other matters, that C Corporation
suffered damages when the board created three positions, each with a salary of Php
13,050, for accommodation purposes. The directors and officers contended that the
case was not a derivative suit. Are the directors correct?

According to the readings about the basic right of the stockholders, the directors
made a mistake. The power to launch a derivative suit belongs to S as a stockholder,
but the cause of action belongs to C Corporation. Furthermore, it proves that the
directors are not correct to the fact that the act complained is not covered by S’s
appraisal right.