Liability for Misappropriation of Company Funds in the Philippines (A doctrinal, statutory-and-case-based survey as of 12 May 2025)

1. Concept and Scope

Misappropriation (or conversion) of company funds is the act of taking, using, or disposing of corporate money for a purpose not authorized by the corporation and incompatible with the fiduciary duties owed to it. The phrase covers a spectrum of conduct—from outright theft by a rank-and-file cashier, to sophisticated “self-dealing” schemes orchestrated by directors, officers, or controlling shareholders.

2. Governing Legal Framework

Source	Key Provisions	Salient Points
Revised Corporation Code (RCC, R.A. 11232, 2019)	§§ 30-34, 155-160	Fiduciary duties; solidary liability for bad faith; authority of the Securities and Exchange Commission (SEC) to penalise and disgorge gains; trust-fund doctrine.
Revised Penal Code (RPC)	Estafa – Art. 315(1)(b); Qualified Theft – Arts. 308-310 (as amended by R.A. 10951, 2017)	Criminal liability attaches whether offender is employee or officer. Penalty graduates with the amount misappropriated.
Civil Code	Arts. 19-22, 1170-1171, 1455 (constructive trusts), 2187	Civil action for damages, restitution, or reconveyance; doctrines on unjust enrichment and fiduciary relationships.
Special Penal Laws	Sec. 3(e) & (g), R.A. 3019 (if offender is a public officer of a GOCC); P.D. 1689 (syndicated estafa ≥ ₱10 M); R.A. 9160/RA 11521 (AML compliance)	Increases penalties or adds disqualification/confiscation remedies.
Labor Code & DOLE issuances	Art. 297(c) (serious misconduct), Art. 299 (loss of trust)	Basis for dismissal and forfeiture of benefits.
Tax Code, BSP & AMLA Rules	Audit trail requirements; reportorial obligations for suspicious transactions	Non-compliance can trigger administrative fines and accessory liability.

3. Criminal Liability

Modality	Elements	Typical Actors
Estafa by misappropriation (Art. 315[1][b])	(1) Money/property received in trust, on commission or for administration; (2) Conversion or diversion to the offender’s personal use; (3) Prejudice to the company; (4) Demand is prima facie evidence but not an element.	Cashiers, treasurers, agents, corporate officers.
Qualified Theft (Art. 308)	(1) Taking of personal property; (2) Without consent; (3) With intent to gain; (4) Offender is a domestic servant, employee or household member; (5) Abuse of confidence.	Rank-and-file employees with access to funds.
Syndicated Estafa (P.D. 1689)	Estafa committed by ≥ 5 persons forming a syndicate and amount ≥ ₱10 M; penalty: reclusion perpetua.	Fraudulent group withdrawals, investment scams within a corporation.

Case snapshots People v. Balasa, G.R. 210302, 11 Jan 2023 – Treasurer found criminally liable for estafa despite partial reimbursement; demand letter only corroborative. People v. Reyes, G.R. 228257, 4 Mar 2020 – Director charged with qualified theft when he used corporate ATM card for casino expenses; court ruled abuse of confidence inherent in corporate office.

4. Civil and Corporate Liability

Solidary liability of directors/officers (RCC § 30). Where the board’s assent or officer’s act is attended by bad faith or gross negligence, they answer solidarily with the corporation for resulting losses.
Self-dealing (RCC § 31). Contracts where a director/officer has an interest are voidable unless the strict six-factor safe-harbor is met (full disclosure, fair price, ratification, etc.). Unauthorized withdrawals disguised as “loans” fall here.
Trust-fund doctrine. Corporate assets constitute a trust fund for creditors and shareholders; an officer who misapplies them may be deemed a trustee ex maleficio under Civ. Code Art. 1455, liable to reconvey with interest and fruits.
Derivative or representative suits. Shareholders may sue on the corporation’s behalf where the board refuses to act against a culpable insider (McLeod v. NAI, G.R. 175291, Apr 2014).

5. Administrative & Regulatory Exposure

Regulator	Powers when misappropriation is alleged
SEC	Issue cease-and-desist or asset-freeze orders; impose fines up to ₱5 M plus ₱1,000/day of continuing violation (RCC § 158); file criminal complaints.
Bangko Sentral ng Pilipinas (for covered institutions)	Enforce fiduciary standards; remove officers; elevate cases to DOJ/Ombudsman.
Philippine Stock Exchange (listed companies)	Suspend trading, require disclosure, delist for “fraudulent or manipulative acts”.

6. Labor-Law Consequences

Misappropriation is classic serious misconduct and willful breach of trust (Lab. Code Art. 297[c]). Valid dismissal requires:

clear and convincingly established act;
observance of twin-notice rule (Fortune Tobacco v. NLRC, G.R. 199719, Jan 2021); and
proportionality—yet dismissal is almost automatic for fund diversion regardless of amount (Ramonfal Inc. v. Umayan, G.R. 240040, Dec 2022).

7. Remedies Available to the Corporation

Remedy	Statutory/Equitable Basis	Notes
Restitution & actual damages	Civ. Code Arts. 19-22, 2176	Must be specifically pleaded and proved.
Disgorgement of profits	RCC § 30 (bad-faith acts)	Can include interest at legal rate (6% p.a. currently).
Constructive trust & reconveyance	Civ. Code Art. 1455	Four-year prescriptive period from discovery, but not beyond ten years.
Attachment / receivership	Rule 57 & 59, Rules of Court	Injunctive recourse during suit to protect assets.
Freezing & forfeiture (criminal)	AMLA; R.A. 10927 (casino transactions)	Requires probable cause found by AMLC or court.

8. Defences and Mitigating Factors

Good faith & authority. If the use of funds was pre-approved by the board or covered by a valid corporate resolution, criminal intent is negated.
Ratification. Subsequent shareholder ratification may cure ultra vires acts (but not criminal liability).
Accounting errors / absence of demand. In estafa, demand is not an element but can create reasonable doubt where records are ambiguous.
Prescription.
- Estafa: 15 years when penalty exceeds prisión mayor (Art. 90, RPC).
- Civil actions: 4 years from discovery (constructive trusts) or 10 years from last transaction (written contract).

9. Compliance & Prevention Checklist

Segregation of duties in finance functions; dual signatories for disbursements.
Real-time accounting & bank reconciliation with board-level audit committee oversight.
Whistle-blower hotlines and non-retaliation policies.
Annual fidelity bonds for officers handling cash.
Directors’ orientation on RCC fiduciary standards; periodic self-dealing disclosures (RCC § 31).
AML/CTR reporting for thresholds ≥ ₱500,000 single transaction or suspicious patterns.

10. Practical Litigation Tips

Trace the money. Subpoena bank records, mobile-wallet ledgers, and Cloud-based accounting logs; employ forensic accountants.
Calibrate causes of action. File parallel criminal and civil suits—the former pressures settlement, the latter secures restitution.
Consider derivative suit if the board is conflicted; comply with demand-excused exceptions (Hechanova v. Atty. Arrieta, G.R. 202991, Feb 2022).
Forum selection.
- Criminal: Office of the City/Provincial Prosecutor → RTC (if > ₱1.2 M).
- Civil: RTC sitting as special commercial court (for intra-corporate controversies) or ordinary RTC.
- Administrative: SEC, or PSE for listed entities.

11. Synthesis

The Philippines employs a multi-layered regime—criminal, civil, corporate, labor, and administrative—to deter and punish misappropriation of company funds. The Revised Corporation Code heightens personal exposure of directors and officers, while amendments to the Penal Code ensure penalties keep pace with inflation. Effective governance and robust internal controls remain the best prophylaxis, but when breaches occur, Philippine law equips corporations and stakeholders with a comprehensive toolkit—restitution, disgorgement, dismissal, imprisonment, fines, and regulatory sanctions—to vindicate the fiduciary principle that corporate money must never be treated as a personal purse.

This article is for informational purposes only and does not constitute legal advice. For specific situations, consult Philippine counsel.