G.R. No. 138343, 19 February 2001


At a special meeting, the Board of Directors of Limpan Investment Corporation approved a resolution authorizing the partial payment for the legal services rendered by petitioner Lim to be in form of shares of stock there being no available funds to pay the same. As a result, the unsubscribed shares of LIMPAN were issued and all of its authorized capital stock became fully subscribed with petitioner Lim ending up controlling 62.5% of the shares.

Respondent Yu filed a complaint against the members who approved the resolution. Petitioners moved to dismiss alleging Yu had no legal capacity to sue on the basis of a TRO issued by the SC on her guardianship case and thus incapacitated from filing a derivative suit. The SEC Hearing Officer held in abeyance the motion but the SEC En Banc ordered the case to proceed. CA affirmed the SEC En Banc.


Whether Yu’s suit to enforce her preemptive rights in a corporation is in the nature of a derivative suit.


No. A 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, not the shareholder(s) who actually instituted it. If the suit filed by Yu was indeed derivative in character, then Yu 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.

Hence, Yu’s suit cannot be characterized as derivative, because she was complaining only of the violation of her preemptive right under Section 39 of the Corporation Code. She was merely praying that she be allowed to subscribe to the additional issuances of stocks in proportion to her shareholdings to enable her to preserve her percentage of ownership in the corporation. She was therefore not acting for the benefit of the corporation. Quite the contrary, she was suing on her own behalf, out of a desire to protect and preserve her preemptive rights. Unquestionably, the TRO did not prevent her from pursuing that action.

*Case Digest by Krishianne Louise C. Labiano, JD – 4, Andres Bonifacio College, SY 2019 – 2020