3.

1
A derivative action is a suit by a shareholder to enforce a corporate cause of action.[16] Under the Corporation Code, where a corporation is an
injured party, its power to sue is lodged with its board of directors or trustees. But an individual stockholder may be permitted to institute a
derivative suit on behalf of the corporation in order to protect or vindicate corporate rights whenever the officials of the corporation refuse to
sue, or are the ones to be sued, or hold control of the corporation. In such actions, the corporation is the real party-in-interest while the suing
stockholder, on behalf of the corporation, is only a nominal party.[17]

3.2
In the case of Filipinas Port Services, Inc. v. Go,[18] we enumerated the foregoing requisites before a stockholder can file a derivative
suit:
a) the party bringing suit should be a shareholder as of the time of the act or transaction complained of,
the number of his shares not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for
the appropriate relief but the latter has failed or refused to heed his plea; and
c) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being caused to the
corporation and not to the particular stockholder bringing the suit. [19]
4.1
In Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations Commission,[32] the Court revisited the subject
principle of piercing the veil of corporate fiction and wrote:

Under the doctrine of piercing the veil of corporate fiction, the court looks at the corporation as a mere
collection of individuals or an aggregation of persons undertaking business as a group, disregarding the separate
juridical personality of the corporation unifying the group. Another formulation of this doctrine is that when
two business enterprises are owned, conducted and controlled by the same parties, both law and equity
will, when necessary to protect the rights of third parties, disregard the legal fiction that two corporations
are distinct entities and treat them as identical or as one and the same.

Whether the separate personality of the corporation should be pierced hinges on obtaining facts
appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit
the Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of
justice. x x x (Emphasis supplied.)

The same principle was the subject and discussed in Rivera v. United Laboratories, Inc.:

While a corporation may exist for any lawful purpose, the law will regard it as an association of persons
or, in case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for
fraud or illegality. This is the doctrine of piercing the veil of corporate fiction. The doctrine applies only
when such 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.

To disregard the separate juridical personality of a corporation, the wrongdoing must be

established clearly and convincingly. It cannot be presumed.
5.1

Upon winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or
cannot be found shall be escheated to the city or municipality where such assets are located.
Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or
property except upon lawful dissolution and after payment of all its debts and liabilities.
Following the voluntary or involuntary dissolution of a corporation, liquidation is the process of settling the affairs of said
corporation, which consists of adjusting the debts and claims, that is, of collecting all that is due the corporation, the settlement
and adjustment of claims against it and the payment of its just debts. 44 More particularly, it entails the following:
Winding up the affairs of the corporation means the collection of all assets, the payment of all its creditors, and the distribution of
the remaining assets, if any among the stockholders thereof in accordance with their contracts, or if there be no special contract,
on the basis of their respective interests. The manner of liquidation or winding up may be provided for in the corporate by-laws
and this would prevail unless it is inconsistent with law.45

5.2
It may be undertaken by the corporation itself, through its Board of Directors; or by trustees to whom all corporate assets
are conveyed for liquidation; or by a receiver appointed by the SEC upon its decree dissolving the corporation.

6.2
amount of accumulated profits and gains realized out of the usual and continuous operations of the company after
deducting distributions to stockholders and transfers to capital stock or other accounts, and which is: (1) not appropriated
by its Board of Directors for corporate expansion programs or projects ; (2) not covered by a restriction for dividend
declaration under a loan contract; and (3) not required to be retained under special circumstances, such as when a special
reserve for likely contingencies is needed.

6.3
Trust fund doctrine is a principle of judicial invention which says that corporate assets are held as a trust fund for the
benefit of shareholders and creditors and that the corporate officers have a fiduciary duty to deal with them properly.
The subscribed capital stock of the corporation is a trust fund for the payment of debts of the corporation which the
creditors have the right to look up to satisfy their credits. The creditors can use it to reduce the debts, unless it has passed
into the hands of a bona fide purchaser without notice.

The trust fund doctrine usually applies in four cases:

(a) Where the corporation has distributed its capital among the stockholders without providing for the payment of
creditors;
(b) where it had released the subscribers to the capital stock from their subscriptions;
(c) where it has transferred the corporate property in fraud of its creditors;
(d) where the corporation is insolvent.

7.1
For sure, both common and preferred shares have always been considered part of the corporation’s capital stock. Its
shareholders are no different from ordinary investors who take on the same investment risks.
They participate in the same venture, willing to share in the profits and losses of the enterprise. Under the doctrine of
equality of shares – all stocks issued by the corporation are presumed equal with the same privileges and liabilities, provided
that the Articles of Incorporation is silent on such differences