Bouncing Check

A big international software company sent me a demand letter from a local attorney's office demanding I pay them a huge amount of money due to non payment of the softwares that the company of which i was a minor board of director ordered from them which they delivered. More so, there were checks issued which bounced.

Backgrounder: In 2005, I sold an office unit to Ms. Corazon de luna (Not her real name). As she was then contemplating to get a loan from the bank she asked me to signed a corporation paper as a minority without paying anything or receiving anything. I have no participation with her company in whatsoever capacity sort of dummy. I did signed because I really wanted to help her to get the loan. But I did not checked thoroughly but it was only later this year 2009 that I found out that she did not include her name in the corporation. That we're dummies in her company of which she was the one in control.

Going back to the demand letter, I understood that she ordered softwares online from that international software company but issued checks that bounced (She alone signed those checks). Last 2008 or 2009 she was ambushed and killed.

Then last July 2009 I received the demand letter. What will be my liability? I have no knowledge of those softwares and the bouncing checks.

Regarding the checks that were dishonored, you cannot be held criminally liable for violation of B.P. 22 or the Bouncing Checks Law because you are not the signatory.

Can you be held civilly liable for the obligation of the corporation? A corporation is an entity with a juridical personality separate and distinct from its stockholders and officers. Because a corporation has a separate personality, the debts of the corporation will not be considered the debts of its stockholders or officers. The liability of a stockholder is limited to the amount of his or her capital contribution. This is the general rule. Going now to your case, since you are a minority stockholder of the corporation, your liability is only limited to the amount of your capital contribution. In other words, your own assets cannot be attached to satisfy the liability of the corporation.

For example: A corporation has 1000 shares and one share = Php10.00. You subscribed for 10 shares worth Php100.00. Out of the 10 shares you subscribed, you paid only 25% equivalent to Php25.00. If the corporation incurs indebtedness, you can only be held liable for your unpaid subscription, i.e., Php75.00, the amount representing your unpaid subscription.

However, there is an exception to the above rule which is called the doctrine of piercing the corporate veil. When the said doctrine is applied, the responsible officers, incorporators or stockholders may be held solidarily liable with the corporation for the latter’s obligations. The liability of the corporation will attach directly to the officers and stockholders. The said doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

Regarding your legal problem, if the creditor wants to pursue you or the other stockholders, it will be difficult because he or she must establish that there is a ground to pierce the corporate fiction of the corporation.

No need to worry for now.