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  • Case # 118 - Lim v. Lim Yu

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    The document summarizes a court case between LIM and LIM YU regarding preemptive rights in a corporation. LIM was promised shares in LIMPAN Corporation for legal services. When those shares were issued, LIM's sister, YU, filed a complaint alleging her minority rights were affected. A temporary restraining order was issued preventing distribution of shares and prohibiting YU from filing a derivative suit on behalf of other shareholders, though she could file on her own behalf. The court ultimately ruled that YU's suit was not a derivative suit, as she was only complaining about violation of her own preemptive rights as a shareholder, so she had legal capacity to file the suit.

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    CASE # 118- LIM V. LIM YU

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    The document summarizes a court case between LIM and LIM YU regarding preemptive rights in a corporation. LIM was promised shares in LIMPAN Corporation for legal services. When those shares were issued, LIM's sister, YU, filed a complaint alleging her minority rights were affected. A temporary restraining order was issued preventing distribution of shares and prohibiting YU from filing a derivative suit on behalf of other shareholders, though she could file on her own behalf. The court ultimately ruled that YU's suit was not a derivative suit, as she was only complaining about violation of her own preemptive rights as a shareholder, so she had legal capacity to file the suit.

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    © All Rights Reserved
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    73 views2 pages

    Case # 118 - Lim v. Lim Yu

    Uploaded by

    jon jon
    The document summarizes a court case between LIM and LIM YU regarding preemptive rights in a corporation. LIM was promised shares in LIMPAN Corporation for legal services. When those shares were issued, LIM's sister, YU, filed a complaint alleging her minority rights were affected. A temporary restraining order was issued preventing distribution of shares and prohibiting YU from filing a derivative suit on behalf of other shareholders, though she could file on her own behalf. The court ultimately ruled that YU's suit was not a derivative suit, as she was only complaining about violation of her own preemptive rights as a shareholder, so she had legal capacity to file the suit.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Case # 118

    LIM v. LIM YU
    G.R No. 138343 ǀ February 19, 2001
    Digested by: Israel D. Bandonill

    A suit to enforce preemptive rights in a corporation is not a derivative suit. Thus, a


    temporary restraining order enjoining a person from representing the corporation will not
    bar such action, because it is instituted on behalf and for the benefit of the shareholder, not
    the corporation.

    FACTS: LIMPAN Corporation engaged the legal services of LIM, in handling various cases
    of the said corporation, promising LIM, 15, 515 shares of stock of the corporation. So, in
    order for the shares of stock to fall under the possession of LIM, corporate secretary
    requested the Corporate legal affairs department of the SEC asking for the exemption of the
    abovementioned 15,515 shares of stock to be exempted from the registration requirements of
    the revised securities act. The request was granted. So, the 15,515 stock was now in the
    possession of LIM of which he now controls 62.5% of the shares of the corporation.
    Subsequently, YU the sister of LIM filed a complaint against LIM Corporation. She alleged
    that as a minority stock holder, a part of the stock she was controlling was affected by the
    subsequent turnover of the 15, 515 shares of stock to her brother. Consequently, a TRO was
    issued by the court enjoining the distribution of the shares of stock. A part of the TRO’s
    condition was that YU was not allowed to file a derivative suit on behalf of the other
    stockholders, but may do so for herself.

    ISSUE: Does YU have the legal capacity to file a derivative suit on behalf of the
    corporation?

    RULING:

    No. derivative suit, has been defined as "an action brought by minority shareholders in the
    name of the corporation to redress wrongs committed against it, for which the directors refuse
    to sue. It is a remedy designed by equity and has been the principal defense of the minority
    shareholders against abuses by the majority." In a derivative action, the real party in interest
    is the corporation itself, and not the shareholders who actually instituted it.

    "If the suit filed by respondent was indeed derivative in character, then respondent may not
    have the capacity to sue. The reason is that she would be acting in representation of the
    corporation, an act which the TRO enjoins her from doing.

    However, in this case, the suit that was filed by YU with the SEC is not a derivative suit
    because she was complaining only of the violation of her preemptive right as a shareholder.
    In a corporation a stockholder is not barred from filing a suit representing her own interest.
    Aside from that, neither did she violate the TRO issued by the high courts preventing a
    derivative suit from being filed by her.

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