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    Notes: Nell Doctrine (In Relation To Corporation's Power To Sell or Dispose Its Assets)

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    Jovelle Zabala Cayaban
    The Nell Doctrine generally holds that when one corporation sells all its assets to another corporation, the buying corporation is not liable for the debts of the selling corporation. There are four exceptions: (1) if the buying corporation expressly or implicitly agrees to assume the debts; (2) if the transaction amounts to a consolidation or merger; (3) if the buying corporation is merely a continuation of the selling corporation; or (4) if the transaction was fraudulent to escape liability for debts. The document then discusses a 1965 Supreme Court case that established these exceptions to analyze whether one company was the alter ego of another it purchased assets from.

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    Notes: Nell Doctrine (In Relation To Corporation's Power To Sell or Dispose Its Assets)

    Uploaded by

    Jovelle Zabala Cayaban
    257 views2 pages
    The Nell Doctrine generally holds that when one corporation sells all its assets to another corporation, the buying corporation is not liable for the debts of the selling corporation. There are four exceptions: (1) if the buying corporation expressly or implicitly agrees to assume the debts; (2) if the transaction amounts to a consolidation or merger; (3) if the buying corporation is merely a continuation of the selling corporation; or (4) if the transaction was fraudulent to escape liability for debts. The document then discusses a 1965 Supreme Court case that established these exceptions to analyze whether one company was the alter ego of another it purchased assets from.

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    corporation code of the philippines-neil doctrine

    Original Title

    Neil Doctrine-corporation Code

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    The Nell Doctrine generally holds that when one corporation sells all its assets to another corporation, the buying corporation is not liable for the debts of the selling corporation. There are four exceptions: (1) if the buying corporation expressly or implicitly agrees to assume the debts; (2) if the transaction amounts to a consolidation or merger; (3) if the buying corporation is merely a continuation of the selling corporation; or (4) if the transaction was fraudulent to escape liability for debts. The document then discusses a 1965 Supreme Court case that established these exceptions to analyze whether one company was the alter ego of another it purchased assets from.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    257 views2 pages

    Notes: Nell Doctrine (In Relation To Corporation's Power To Sell or Dispose Its Assets)

    Uploaded by

    Jovelle Zabala Cayaban
    The Nell Doctrine generally holds that when one corporation sells all its assets to another corporation, the buying corporation is not liable for the debts of the selling corporation. There are four exceptions: (1) if the buying corporation expressly or implicitly agrees to assume the debts; (2) if the transaction amounts to a consolidation or merger; (3) if the buying corporation is merely a continuation of the selling corporation; or (4) if the transaction was fraudulent to escape liability for debts. The document then discusses a 1965 Supreme Court case that established these exceptions to analyze whether one company was the alter ego of another it purchased assets from.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    continuation of the selling corporation;

    Notes: Nell Doctrine (in and (4) where the transaction is entered
    relation to into fraudulently in order to escape
    liability for such debts.
    Corporation’s Power to Background of the case:

    Sell or Dispose Nell Co. filed a civil case against Insular


    Farms, Inc. for a sum of money plus interest,
    its Assets) attorney’s fees, and costs. A writ of
    execution was issued by the court, but was
    DECEMBER 20, 2017 JEFF REY
    returned unsatisfied, stating that Insular
    Farms had no leviable property. Thereafter,
    Nell Co. filed another action against Pacific
    Farms, Inc. for the collection of the same
    amount, upon the theory that the latter is the
    alter ego of Insular Farms. Nell Co.
    supported its claim by alleging that Pacific
    Farms had purchased all or substantially all
    of the shares, as well as the real and personal
    properties, of Insular Farms.

    The record shows that, on March 21,


    The 2017 Commercial Law Bar 1958, Pacific Farms purchased 1,000
    Examination made mention of this: shares of stock of Insular Farms for
    Under the Nell Doctrine, so called P285,126.99; that, thereupon, Pacific
    because it was first pronounced by the Farms sold said shares of stock to
    Supreme Court in the 1965 ruling in certain individuals, who forthwith
    Nell v. Pacific Farms, Inc. (15 SCRA reorganized said corporation; and that
    415), the general rule is that where one the board of directors thereof, as
    corporation sells or otherwise transfers reorganized, then caused its assets,
    all of its assets to another corporation, including its leasehold rights over a
    the latter is not liable for the debts and public land in Bolinao, Pangasinan, to
    liabilities of the transferor. be sold to Pacific Farms for P10,000.00.
    The Supreme Court held that such facts do
    State the exceptions to the Nell not prove that Pacific Farms is the alter ego
    Doctrine. (4%) of Insular Farms. There was neither proof
    nor allegation that Pacific Farms had
    The answer, as provided by the Supreme
    expressly or impliedly agreed to assume the
    Court in such case, is:
    debt of Insular Farms, or that the Pacific
    Generally where one corporation sells or Farms was a continuation of Insular Farms,
    otherwise transfers all of its assets to or that the sale of either the shares of stock
    another corporation, the latter is not or the assets of Insular Farms to the Pacific
    liable for the debts and liabilities of the Farms had been entered into fraudulently, in
    transferor, except: (1) where the order to escape liability for the debt of the
    purchaser expressly or impliedly agrees to Insular Farms.
    assume such debts; (2) where the In fact, such sales took place months before
    transaction amounts to a consolidation or the rendition of the judgment in the previous
    merger of the corporations; (3) where the case, and a month before the filing of the
    purchasing corporation is merely a present case.  Moreover, Pacific Farms
    Page 1 of 2
    purchased the shares as the highest bidder at
    an auction sale held at the instance of the
    bank, to which the shares were originally
    pledged as a security for an obligation of
    Insular Farms.

    Neither was it claimed that these


    transactions have resulted in the
    consolidation or merger of the Insular Farms
    and Pacific Farms.  On the contrary, Nell
    Co’s theory to the effect that Pacific Farms
    was an alter ego of the Insular Farms
    negated such consolidation or merger, for a
    corporation cannot be its own alter ego.
    The case is generally related to the power of
    a corporation to sell or dispose its assets, as
    provided in Sec. 40 of the Corporation
    Code.  In essence, it can be also related
    with the Doctrine of Piercing of Corporate
    Veil.

    Page 2 of 2

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