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Incorporation-Family Business gone bad

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1 Incorporation-Family Business gone bad on Mon Mar 19, 2012 10:52 pm

margaret40506070


Arresto Menor
Hi,
We need proper legal advice : Hope you can help us asap !

Our parents have a company business. They included us 3 kids in the incorporation of their company many many years ago-so there are 5 of us in total. However we are really not involved in the running of the company.

As it is a family run business... my parents do not really tell us how the company is doing. For a long time it was fine but then due to the financial crisis, bad decisions it is not doing very well. We had to slowly sell off properties and now the last property finally has a buyer but it is still not enough to pay all the outstanding debt.

Us kids are really totally not involved in the running of the company. Last year my younger sibling was able to leave the company but I the eldest and my middle sibling cannot as we were told minimum of 4 incorporators for 2 years. However we were able to reduce our shares to 1 each instead of 250,000 like before.

Since the company has been doing very bad for a few years already... I have already inputed a lot of money to help... more than I can actually plus we still have to maintain our parents monthly expenses. My other sister who was able to get out is also still helping us, in fact she gives more to them financially every month than I am able to.

Recently (last month) we found out that some BIR arrears were not paid. They have agreed to a payment schedule, however we are all now hanging on strings and really don't know what to do anymore. As our parents do not really want to listen to us plus I am actually abroad and my middle sibling who is still like me part of the company is not actually doing well financially, so he can not really help.

My question is,
1.will I and my sibling be liable for any legal case the company gets into even if we only own 1 share each now ? I am not aware if my parents have anymore debts aside from what I know.

2.How can we get out of the company legally ? Or protect ourselves from what is happening ?
When we signed the papers of incorporation before we didn't really realize the responsibilities involved... it was like just so they can meet the number of minimum incorporators to set up the company. Our parents are very headstrong and we can not tell them what to do.

3.Is there a cheaper way to file for bankruptcy ? who can we contact ?

4. As I am working abroad it is very hard for me to know what is happening.
I do not get any financial reports.... nothing. I have a family with a child so I am now concerned that this problem will affect my own family which is still vey young.

5. My parents have personally guaranteed loans to the bank even the place were they live in. Everything has been sold now except the place they live in which is still with the bank... plus they still have debt as the sale of the properties was not enough to cover all debts.

6. But they will be able to continue some work-smaller scale so maybe they can pay off some debt if agreed to be rescheduled.

7. We do not mind losing all as we can start over... It is the stress and peace of mind that we really want. It is so hard as we can not communicate well with our parents. We can not talk to them as they get angry every time we just want to know what is happening-so we can help fix the problem.

PLEASE HELP... WE ARE SO STRESSED NOW AND DONT KNOW WHAT TO DO OR WHO TO TURN TO. IN OTHER COUNTRIES THE GOVERNMENT CAN HELP FILE BANKRUPTCY AT NO COST OR MINIMAL COST. IS THAT POSSIBLE IN THE PHILIPPINES ?

THANKS AND HOPE TO HEAR FROM YOU SOON !

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2 Re: Incorporation-Family Business gone bad on Sat Mar 24, 2012 1:14 pm

attyLLL


moderator
that's the nice thing about corporations, you are liable only for your shares unless you are not fully paid up. as for the criminal liability for the tax, it has to be shown you are the one responsible.

so sit tight. any suit against you will have it hard to prosper


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3 Re: Incorporation-Family Business gone bad on Sun May 20, 2012 9:13 am

margaret40506070


Arresto Menor
Hi Atty,
Thank you so much for your advice!
We paid, not by my parents but by us the kids the debts to SSS as we were afraid of the criminal case. We used our life savings.
The company still owes BIR debts-quite a lot but they have agreed get it paid per month but interest is 3% per month.if we are able to put up the funds privately should we pay this off?
These debts were incurred when I & siblings were still Directors without my knowledge. I was able to get out as Director & sell all my shares to my father a few months ago only. He refuses to discuss how we can solve the problem so us kids are just trying to save ourselves now as we cannot even discuss the problem w my father. All 3 kids are no longer Directors, just my mom & dad now.
Incase the debt to the BIR cannot be met monthly what can the penalties be ? My parents no longer have assets so will the BIR run after the assets of the kids/us even if they are no longer Directors but the debt was incurred while they were?

There are issued checks, unissued checks and salary debts to employees. There is money coming in to pay this from the sale of the last asset,but our father refuses to pay them all in one shot-which is against our advice. As he thinks he can still turn it around but we dont think so.there is not enough funds to pay The unissued checks though & 1supplier is threatening to sue now.

What can we the kids do as we feel trapped. We think we have a better solution but it is like talking to a brick wall.

Does the supplier with unissued checks have a case?

Who is liable for the issued checks? The signee only or also the directors? They were made without our knowledge.

Cases like this must happen often in the philippines because of the dynamics of the family. We kids have no voice even if we are full grown adults.

We are afraid of litigation so we want to know how far can the law reach us? What punishment/penalties can we take ?
I also have been living abroad for almost 2decades already so i do not know how it will work out incase a case is filed as to go home for trial will be costly & interfere w my work.
At this point we hv given up on our parents as we cannot force them so we are just concentrating on us kids & our young families.
Pls help us w your advice.

Thanks again !

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4 Re: Incorporation-Family Business gone bad on Sun May 20, 2012 3:03 pm

ibonidarna


Reclusion Perpetua
Would you narrow down or specify your concerns (if possible number them) so that they can be answered accordingly.

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5 Re: Incorporation-Family Business gone bad on Mon Dec 03, 2012 1:00 am

lottdrive


Arresto Menor
they can only run after the corporations property ( PROPERTIES NAMED AFTER THE CORPORATION) not your personal property. but still as a previous director you are still liable and will be charged.

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