We’ve Already Assigned Our Shares to Another Person

2020 January 08

On 6 December 2005, the Social Security System filed a petition for the issuance of a warrant of levy and garnishment of the personal properties and bank accounts of the directors of a dissolved corporation to satisfy its unremitted contributions and penalties.

In their defense, A and B (both directors) averred that they had already assigned their respective shares to certain persons on 5 May 1998. According to A and B, they already ceased to be directors and were no longer connected in any capacity with the corporation at the time of the alleged non-remittance of the contributions. A and B stress that since their Deed of Assignment was notarized, the assignment was binding upon third parties, including the Social Security System.

Can a director of a dissolved corporation be held solidarily liable for its unremitted Social Security System contributions?

The Supreme Court ruled in the affirmative. It found that the Social Security System was not bound to recognize the transfer, there being no showing that the transfer of their shares was recorded in the books of the corporation. Furthermore, under prevailing jurisprudence,1Philex Gold Phil. Inc. v. Philex Bulawan Supervisors Union, G.R. No. 149758, August 25, 2005, 505 PHIL 224-240. a corporate director may be held jointly and severally liable with the corporation when a director, trustee or officer is made, by a specific provision of law, personally liable for his corporate action. In this regard, the Supreme Court pointed to Section 28 (f) of the Social Security Act of 1997,2NOTE: This provision also appears in the Social Security Act of 2018 (Republic Act No. 11199) as follows: “SECTION 28. Penal Clause. — x x x (f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing head, directors or partners shall be liable for the penalties provided in this Act for the offense.” which reads:

“Sec. 28. Penal Clause. — x x x

“(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.”

Further reading:

  • Dox & Parcel Courier Express International, Inc. v. Social Security System, G.R. No. 225648, January 8, 2020.