Corp Book 1-2

Question 1

Describe the concept of corporate layering in relation to foreign ownership restrictions.

Answer 1

Corporate layering is allowed as long as it is not used to bypass rules on foreign ownership restrictions.

Question 2

Define the grandfather rule in the context of multi-tiered corporations.

Answer 2

The grandfather rule allows for the attribution of shares based on ownership percentages to determine foreign or local ownership.

Question 3

How is the control test applied in the scenario involving ABC and XYZ corporations?

Answer 3

The control test is applied to determine ownership and control, especially when there is doubt about beneficial ownership due to share subscriptions not being paid.

Question 4

What is the significance of the grandfather rule when there is doubt about beneficial ownership and control?

Answer 4

The grandfather rule is cumulatively applied with the control test to determine the registration of shares as either foreign-owned or local-owned.

Question 5

Describe the registration process of shares under the grandfather rule in the given scenario.

Answer 5

Only the shares corresponding to the percentage owned by locals are registered as local-owned, while the rest are registered as foreign-owned.

Question 6

How do indirect and direct shareholdings contribute to determining foreign ownership limits in the case of ABC corporation?

Answer 6

Indirect and direct shareholdings are combined to calculate the total foreign shareholdings, which in this case exceed the allowable limit of 40%.

Question 7

Describe the doctrine of piercing the veil of corporate fiction.

Answer 7

It is the doctrine that allows the State to disregard the separate legal personality of a corporation from its owners under certain justifiable reasons.

Question 8

Define the doctrine of separate juridical personality.

Answer 8

It is the concept that recognizes a corporation as a legal entity distinct from its shareholders or owners.

Question 9

How does the doctrine of piercing the corporate veil apply in fraud cases?

Answer 9

It applies when the corporate entity is used to justify a wrong, protect fraud, or defend a crime.

Question 10

Do alter ego cases fall under the application of the doctrine of piercing the corporate veil?

Answer 10

Yes, alter ego cases are one of the areas where the doctrine applies, where a corporation is merely a farce serving as a business conduit for a person.

Question 11

Describe the grounds for the application of the doctrine of piercing the corporate veil.

Answer 11

The doctrine applies in cases of defeating public convenience, fraud, and alter ego situations where the corporation is controlled to the extent of being a mere instrument of a person.

Question 12

How does the doctrine of separate legal entity promote public convenience?

Answer 12

It does so by allowing for the efficient functioning of businesses and legal entities, providing clarity in ownership and liability separation.

Question 13

Describe the doctrine of piercing the corporate veil.

Answer 13

It is a legal concept where the courts disregard the separate legal personality of a corporation and hold the shareholders or directors personally liable for the corporation’s actions.

Question 14

Define forum shopping in a legal context.

Answer 14

Forum shopping refers to the practice of litigants choosing a court or jurisdiction that is likely to provide a favorable judgment in their case.

Question 15

How can the doctrine of piercing the corporate veil be applied in cases of fraud?

Answer 15

It can be applied when the corporate structure is used to perpetuate fraud, allowing courts to hold individuals personally liable for the fraudulent actions of the corporation.

Question 16

Do you know a case where the doctrine of piercing the corporate veil was applied due to the misuse of separate legal personality?

Answer 16

Yes, in the case where the majority stockholder filed a derivative suit on behalf of the corporation to challenge a sale that the corporation itself failed to contest.

Question 17

Describe the concept of derivative suit in corporate law.

Answer 17

A derivative suit is a legal action brought by a shareholder on behalf of the corporation to enforce a corporate right when the corporation has failed to do so.

Question 18

How does the doctrine of piercing the corporate veil protect the rights of third parties?

Answer 18

It allows courts to look beyond the corporate structure to hold individuals accountable for the actions of the corporation, ensuring that third parties are not unfairly disadvantaged by the separation of legal entities.

Question 19

Describe the concept of piercing the veil of corporate.

Answer 19

Piercing the veil of corporate fiction is a legal concept where the courts disregard the separation between a corporation and its shareholders, holding the shareholders personally liable for the corporation’s actions.

Question 20

Define the alter ego test in corporate law.

Answer 20

The alter ego test is a legal doctrine used to determine if a corporation is so controlled and manipulated by its shareholders that it should be considered the alter ego of the shareholders, leading to personal liability.

Question 21

How is the alter ego test applied in corporate law?

Answer 21

The alter ego test is applied by examining whether there is complete domination and control by shareholders over the corporation, with no separate identity, and if this control was used to commit fraud or wrongdoing.

Question 22

Describe the elements of the alter ego test in corporate law.

Answer 22

The elements of the alter ego test include complete domination and control over the corporation, lack of separate identity, and the use of such control to commit fraud or wrongful acts.

Question 23

What is the purpose of piercing the veil of corporate fiction?

Answer 23

The purpose of piercing the veil of corporate fiction is to hold shareholders personally liable for the actions of the corporation when the corporate structure is abused for fraudulent or wrongful purposes.

Question 24

How does the alter ego theory relate to the concept of piercing the corporate veil?

Answer 24

The alter ego theory is often used as a basis for piercing the corporate veil, as it focuses on the extent of control and domination by shareholders over the corporation, which may lead to personal liability.

Question 25

Describe the concept of piercing the corporate veil in terms.

Answer 25

Piercing the corporate veil is a legal doctrine where the courts hold shareholders or directors personally liable for the debts or actions of a corporation.

Question 26

Define alter-ego or instrumentality test in the context of piercing the corporate veil.

Answer 26

The alter-ego or instrumentality test is a legal principle used to determine if a corporation is so controlled and manipulated by its shareholders or directors that it should be considered the alter ego of those individuals.

Question 27

How does the concept of piercing the corporate veil protect the rights of workers and their unions?

Answer 27

Piercing the corporate veil can safeguard the rights of workers and their unions by holding the controlling parties personally liable, ensuring that labor laws and collective bargaining rights are not circumvented.

Question 28

Do you need to establish proximate causation in cases involving piercing the corporate veil?

Answer 28

Yes, in cases involving piercing the corporate veil, it is necessary to establish that the control and breach of duty by the parties directly caused the injury or unjust loss complained of.

Question 29

Describe a scenario where the separate existence of multiple companies was disregarded by the court in a piercing the corporate veil case.

Answer 29

In a scenario where three companies engaged in a work-pooling scheme, shared resources, and were controlled by the same party, the court disregarded their separate existence to protect workers’ rights.

Question 30

Cite an example of a Supreme Court case where the alter-ego or instrumentality test was applied in piercing the corporate veil.

Answer 30

In a case where a business owner terminated employees citing closure and asset sale, but later reopened under the same management revealing ownership by the same employer and family members, the alter-ego test was applied.

Question 31

How can the doctrine of piercing the corporate veil impact the liability of shareholders or directors?

Answer 31

The doctrine of piercing the corporate veil can result in shareholders or directors being held personally liable for the debts, obligations, or wrongful actions of the corporation.

Question 32

Define the term ‘collective bargaining’ in the context of labor relations.

Answer 32

Collective bargaining refers to negotiations between employers and labor unions representing a group of employees to determine wages, working conditions, and other terms of employment through a formal bargaining process.

Question 33

Describe the relationship between ABS-CBN and C.

Answer 33

CCI was a subsidiary of ABS-CBN, incorporated to handle props and set design requirements for ABS-CBN and its subsidiaries.

Question 34

Define corporate veil piercing in legal terms.

Answer 34

Corporate veil piercing is a legal concept where the courts disregard the separate corporate personalities of related entities and treat them as a single entity.

Question 35

How did ABS-CBN exercise control over CCI’s operations?

Answer 35

ABS-CBN influenced the closure of CCI by no longer using its services for set and prop design, leading to the termination of certain CCI employees.

Question 36

Do you know when the corporate veil may be pierced according to jurisprudence?

Answer 36

The corporate veil may be pierced if directors or officers are alleged to have acted in bad faith or gross negligence in managing the corporation.

Question 37

Describe a scenario where the corporate veil was pierced due to fraudulent actions by a family-owned corporation’s president.

Answer 37

The president committed fraud by selling a vehicle to a customer, collecting payment, despite knowing the vehicle was already sold to another, leading to the piercing of the corporate veil.

Question 38

Define the term ‘internal Scenic Department’ mentioned in the content.

Answer 38

The internal Scenic Department initially handled props and set designs for ABS-CBN before being abolished and replaced by CCI.

Question 39

How was CCI’s incorporation related to ABS-CBN’s former contractor, Ty?

Answer 39

CCI was incorporated through the collaboration of Ty, ABS-CBN’s former contractor, and other major stockholders and officers of ABS-CBN.

Question 40

Describe the outcome of ABS-CBN’s engagement with Ty’s company after he organized his own business.

Answer 40

ABS-CBN hired Ty as a consultant and engaged his company’s services, leading to CCI deciding to close its operations as it was no longer needed for set and prop design services.

Question 41

What led to the termination of certain employees of CCI according to the content?

Answer 41

The decision by ABS-CBN to no longer use CCI’s services for set and prop design in its programs and shows resulted in the termination of certain CCI employees.

Question 42

Describe the concept of piercing the corporate.

Answer 42

Piercing the corporate refers to a legal to disregard the separate legal personality of a corporation, holding its shareholders or directors personally liable for the corporation’s actions.

Question 43

Define jurisdiction a legal context.

Answer 43

Jurisdiction refers to the authority of a court to hear and decide a case.

Question 44

How can a court acquire jurisdiction over a corporation?

Answer 44

A court can acquire jurisdiction over a corporation through summons, voluntary appearance, or other recognized modes of acquiring jurisdiction.

Question 45

Do directors who are not parties to an arbitration agreement have to participate in arbitration proceedings?

Answer 45

Directors who are not parties to an arbitration agreement can be compelled to participate in arbitration proceedings if there are allegations of bad faith or malice in their acts representing the corporation.

Question 46

Describe the Supreme Court’s stance on compelling corporate representatives to submit to arbitration proceedings.

Answer 46

The Supreme Court held that corporate representatives may be compelled to submit to arbitration proceedings if there are allegations of bad faith or malice in their acts representing the corporation, even if the arbitration only covers the corporation.

Question 47

How did the Supreme Court interpret the relationship between directors and corporations in cases of alleged malice and bad faith?

Answer 47

The Supreme Court stated that when directors are alleged to have acted with malice and bad faith in directing the affairs of the corporation, it implies that the directors and the corporation are not acting as separate entities.

Question 48

Do nonstock non-profit corporations fall under the doctrine of piercing the corporate veil?

Answer 48

Yes, nonstock non-profit corporations can still be subject to piercing the corporate veil if evidence shows that individuals controlling the corporation exercised control.

Question 49

Define reverse piercing of the corporate veil.

Answer 49

Reverse piercing is when a claimant seeks to hold the corporation liable for the debts of its shareholders or members, going against the traditional direction of veil-piercing actions.

Question 50

How does reverse piercing differ from traditional piercing of the corporate veil?

Answer 50

In reverse piercing, the plaintiff aims to reach the corporation’s assets to satisfy claims against corporate insiders, while traditional piercing targets the assets of the insiders.

Question 51

Describe the purpose of applying the doctrine of piercing the corporate veil.

Answer 51

It is necessary to prevent multiple lawsuits and save on expenses by holding individuals accountable for the actions of the corporation.

Question 52

How does the equitable nature of the doctrine of piercing the corporate veil impact its application?

Answer 52

The equitable nature allows the court to look beyond the statutory framework of the corporation and assess the substance of the organization to determine liability.

Question 53

Describe the scenario involving the lawyer-lessee and the lessor in the content.

Answer 53

The lawyer-lessee failed to pay rent, leading to a complaint for unlawful detainer by the lessor. The judgment in favor of the lessor was eventually executed through the levy of real property.

Question 54

Define ‘alter ego’ as mentioned in the content.

Answer 54

Alter ego refers to a situation where a corporation is considered the alter ego of an individual, or vice versa, implying a close connection or identity between the two entities.

Question 55

How did the Supreme Court rule regarding the levy against the lessee by the corporation I/AME?

Answer 55

The Supreme Court agreed with the Court of Appeals, sustaining the levy by ruling that the corporation was the alter ego of the lessee.

Question 56

What is the purpose of using a corporate entity as an alter ego, as described in the content?

Answer 56

The purpose is to shield assets from creditors by using the corporation as a separate legal entity.

Question 57

Do you dissolve a corporation when piercing the corporate veil?

Answer 57

No, piercing the corporate veil does not result in the dissolution of the corporation.

Question 58

Describe the difference in the number and qualifications of incorporators between the OCC and the RCC.

Answer 58

The OCC required at least five natural persons as incorporators, while the RCC allows partnerships, associations, or corporations to be incorporators.

Question 59

Describe the requirements for incorporators who are natural persons in a stock corporation.

Answer 59

Incorporators must be of legal age and own or subscribe to at least one share of the capital stock.

Question 60

Define One Person Corporation in the context of business organizations.

Answer 60

A corporation with a single stockholder is considered a One Person Corporation.

Question 61

How many individuals can organize a corporation jointly, according to the content?

Answer 61

Up to 15 individuals can organize a corporation jointly.

Question 62

Describe the residency requirement for incorporators as per the content.

Answer 62

The RCC eliminated the residency requirement for incorporators.

Question 63

Do natural persons licensed to practice a profession have any restrictions on organizing a corporation?

Answer 63

They may organize a corporation only if allowed under a special law.

Question 64

Define the ownership requirement for incorporators in a nonstock corporation.

Answer 64

In a nonstock corporation, incorporators must own at least one share of the corporation’s membership.

Question 65

Describe the requirement for stock corporations to have a minimum capital stock according to the RCC.

Answer 65

Stock corporations are not required to have minimum capital stock, except as specified by special law.

Question 66

What are the revisions under the RCC regarding subscription and paid-up capital requirements upon incorporation?

Answer 66

The RCC removed the minimum subscription and paid-up capital requirement, except as provided by special law. However, upon increase of capital stock, at least 25% must be subscribed and 25% of the subscribed amount should be paid in cash or equivalent property.

Question 67

Define authorized capital stock, subscribed capital stock, and paid-up capital stock.

Answer 67

Authorized capital stock is the amount in the articles of incorporation for subscription and payment by stockholders. Subscribed capital stock is the portion covered by subscription agreements, whether fully paid or not. Paid-up capital stock is the amount actually paid by shareholders.

Question 68

Explain the concept of outstanding capital stock in a corporation.

Answer 68

Outstanding capital stock refers to the total shares issued under binding subscription contracts to subscribers or stockholders, whether fully or partially paid, excluding treasury shares.

Question 69

How can subscribed capital stock and issued or outstanding capital stock be interchanged in a corporation?

Answer 69

Subscribed capital stock and issued or outstanding capital stock can be interchanged. While every subscribed share is outstanding, an issued share may not have the status of outstanding shares like treasury shares.

Question 70

Describe the significance of the maximum number of shares allowed to be issued without amending the articles of incorporation in a corporation.

Answer 70

The authorized capital stock represents the maximum number of shares a corporation can legally issue without amending its articles of incorporation.

Question 71

Describe paid-up capital stock in a corporation.

Answer 71

Paid-up capital stock is the portion of authorized capital stock that has been subscribed and paid by the stockholders of the corporation.

Question 72

Define the term ‘capital’ in the context of corporations.

Answer 72

In this context, ‘capital’ refers to shares with voting rights.

Question 73

How much of the authorized capital stock should be subscribed and paid-up upon incorporation according to the RCC?

Answer 73

The RCC does not have a minimum subscription and paid-up capital requirement upon incorporation, except as provided by special law.

Question 74

What percentage of the capital of corporations engaged in public utility, large-scale mining, and exploration of natural resources should be owned by Filipinos according to the Philippine Constitution?

Answer 74

At least 60% of the capital.

Question 75

Do all funds or assets received by a corporation count as paid-up capital?

Answer 75

No, paid-up capital has a technical signification in Corporation Law and refers to the portion of authorized capital stock that is subscribed and actually paid up.

Question 76

How does the RCC differ from the OCC regarding the subscription and paid-up capital requirements upon incorporation?

Answer 76

The RCC does not have a minimum subscription and paid-up capital requirement upon incorporation, unlike the OCC which mandates at least 25% of authorized capital stock to be subscribed and paid upon incorporation.

Question 77

Describe the share ownership structure in the provided content.

Answer 77

The share ownership structure includes common shares, voting preferred shares, and non-voting preferred shares, with a mix of Filipino-owned and foreign-owned shares.

Question 78

Define beneficial ownership as mentioned in the content.

Answer 78

Beneficial ownership refers to the actual enjoyment of benefits from ownership, even if the title of the shares is in another entity’s name.

Question 79

How does the Constitution define compliance in terms of share ownership?

Answer 79

The Constitution requires full and legal beneficial ownership of at least 60% of the outstanding capital stock, coupled with 60% of the voting rights held by Filipino nationals.

Question 80

Describe the significance of effective control in a corporation.

Answer 80

Effective control in a corporation is achieved through having directors and full beneficial ownership of stocks, allowing for decision-making power.

Question 81

Do the share ownership percentages in the provided example comply with the Constitution’s requirements?

Answer 81

Yes, the example shows compliance with Filipino ownership of at least 60% of the voting shares and outstanding capital stock.

Question 82

Define par value of shares as mentioned in the content.

Answer 82

Par value of shares is the nominal value assigned to a share by the issuing company, often used for accounting and legal purposes.

Question 83

Describe the term of a corporation under the RCC.

Answer 83

A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.

Question 84

What are the revisions under the RCC on corporate term?

Answer 84

Corporations with certificates of incorporation issued prior to the effectivity of the RCC shall have perpetual existence unless the corporation decides otherwise.

Question 85

Define corporate term extension under the RCC.

Answer 85

The period to extend the corporate term has been reduced from five to three years prior to the original or subsequent expiry dates.

Question 86

How can a corporation whose term has expired regain its corporate existence under the RCC?

Answer 86

It may apply for a revival, and upon approval by the SEC, it shall be deemed revived with perpetual existence.

Question 87

Do corporations with certificates of incorporation issued before the RCC have perpetual existence by default?

Answer 87

Yes, unless the corporation, by a majority vote of stockholders, elects to retain a specific corporate term.

Question 88

Describe the effect of extending the corporate term under the RCC.

Answer 88

Extension of the corporate term shall take effect only on the day following the original or subsequent expiry dates.

Question 89

Describe the impact of the RCC on the corporate term of a corporation.

Answer 89

The RCC automatically deems the corporate term of a corporation perpetual without the need for amending its Articles of Incorporation.

Question 90

Define perpetual existence in the context of a corporation under the RCC.

Answer 90

Perpetual existence means that a corporation continues indefinitely without a specified end date, as provided for in the RCC.

Question 91

How does the RCC handle the corporate term of existing corporations?

Answer 91

Existing corporations under the RCC are automatically deemed to have perpetual existence unless they choose otherwise through a majority vote of stockholders.

Question 92

Do stockholders need to vote to extend the corporate term to perpetual existence under the RCC?

Answer 92

No, stockholders do not need to vote to extend the corporate term to perpetual existence as it is automatically deemed perpetual.

Question 93

Describe the role of the SEC in relation to the corporate term of corporations under the RCC.

Answer 93

The SEC is notified by corporations if they choose to retain a specific corporate term instead of automatic perpetual existence.

Question 94

What action is required from corporations organized prior to the RCC to maintain a specific corporate term?

Answer 94

Corporations organized prior to the RCC must notify the SEC and have a majority vote of stockholders to retain a specific corporate term instead of automatic perpetual existence.

Question 95

Describe the process for a corporation to retain its specific corporate term according to its articles of incorporation.

Answer 95

A corporation can notify the SEC of its decision to retain its specific corporate term as stated in its articles of incorporation.

Question 96

Define the term ‘revival of corporate existence’ for a corporation.

Answer 96

Revival of corporate existence refers to the process where a corporation whose term has expired applies for a revival, granting it perpetual existence.

Question 97

How can a corporation reincorporate after its term has expired?

Answer 97

A corporation may decide to reincorporate, especially if it does not intend to liquidate, by organizing a new corporation or adopting the name of the dissolved corporation with approval from the majority of stockholders.

Question 98

Describe the requirement for the approval of revival of certificate of incorporation for certain financial institutions by the SEC.

Answer 98

For banks, insurance companies, and other financial intermediaries, the SEC requires a favorable recommendation from the appropriate government agency for the approval of revival of certificate of incorporation.

Question 99

Define the term ‘retention of specific corporate term’ for a corporation.

Answer 99

Retention of specific corporate term refers to a corporation’s decision to maintain its existing term as specified in its articles of incorporation.

Question 100

How does a corporation obtain perpetual existence after its term has expired?

Answer 100

By applying for revival of corporate existence and receiving approval from the SEC, a corporation can be deemed revived and granted perpetual existence, subject to its previous duties, debts, and liabilities.

Question 101

Describe the process of extending or shortening the corporate term as per the content.

Answer 101

The corporate term can be extended or shortened by amending the articles of incorporation, requiring approval from the majority of the board of directors and at least 2/3 of the stockholders.

Question 102

Define the significance of SEC approval in the extension or shortening of the corporate term.

Answer 102

The extension or shortening of the corporate term is effective only upon approval from the Securities and Exchange Commission (SEC).

Question 103

How is the extension of the corporate term affected during the liquidation period of a corporation?

Answer 103

The extension of the corporate term can only be done while the corporation is active and not during the three-year liquidation period, as it contradicts the purpose of liquidation.

Question 104

Describe the limitations on corporate activities during the liquidation period.

Answer 104

During the liquidation period, corporate activities should be limited to winding up corporate affairs, and extending the term is considered incompatible with the nature of liquidation.

Question 105

Do stockholders play a role in approving the extension of the corporate term?

Answer 105

Yes, stockholders representing at least 2/3 of the outstanding capital stock must approve the extension of the corporate term.

Question 106

Define the impact of extending the corporate term on the business continuity.

Answer 106

Extending the corporate term is equivalent to continuing the business, indicating a commitment to the ongoing operations and sustainability of the corporation.

Question 107

Describe common shares of stock.

Answer 107

Common shares are the basic class of stock typically issued without special privileges, except for the right to vote.

Question 108

Define preferred shares of stock.

Answer 108

Preferred shares are stock that come with specific preferences outlined in the articles of incorporation but may not include voting rights.

Question 109

How are shares of stock classified?

Answer 109

Shares of stock in corporations can be divided into classes or series, each with distinct characteristics.

Question 110

Do shares of stock represent ownership in a corporation?

Answer 110

Yes, shares of stock are securities that signify equity ownership in a company, providing rights to vote, receive dividends, and share in assets.

Question 111

Describe the classification of shares in a corporation.

Answer 111

Shares can be classified into common shares, preferred shares, voting shares, non-voting shares, founder’s shares, treasury shares, redeemable shares, watered shares, and other categories as specified in the articles of incorporation.

Question 112

Describe the preferences that may be given to preferred shares of stock.

Answer 112

Preferred shares of stock may have preferences classified into two forms: preferred shares as to assets and preferred shares as to dividends.

Question 113

Define preferred shares as to assets and preferred shares as to dividends.

Answer 113

Preferred shares as to assets give the holder preference in asset distribution during liquidation, while preferred shares as to dividends entitle the holder to receive dividends before common stock holders.

Question 114

How can the terms and conditions of preferred shares of stock be fixed?

Answer 114

The board of directors, if authorized in the articles of incorporation, can fix the terms and conditions of preferred shares, effective upon filing a certificate with the SEC.

Question 115

Do holders of preferred shares become creditors of the corporation?

Answer 115

No, holders of preferred shares are not considered creditors of the corporation, as their rights are subordinate to creditors and they can only look to what remains after corporate debts are paid.

Question 116

Describe the risk associated with being a shareholder, whether common or preferred.

Answer 116

Shareholders are considered risk-takers who invest capital in the business and can only receive what is left after corporate debts and liabilities are fully paid, with no guarantee of receiving dividends.

Question 117

How is the right to receive dividends for preferred shares conditioned?

Answer 117

The right to receive dividends for preferred shares is conditioned on the availability of unrestricted retained earnings or surplus profit, and holders cannot compel payment if there is no surplus profit.