CORPORATION LAW Flashcards
1
Q
A corporation is a natural person created by law.
A
False – A corporation is an artificial being, not a natural person.
2
Q
A corporation does not have the right of succession.
A
False – It has the right of succession, meaning it continues despite changes in ownership.
3
Q
A corporation can exercise powers beyond what is authorized by law.
A
False – It can only exercise powers expressly granted or incidental to its existence.
4
Q
A corporation is created by operation of law.
A
True
5
Q
A corporation ceases to exist upon the death of its founder.
A
False – Unlike sole proprietorships, corporations continue to exist even if the founders die.
6
Q
What is an artificial being created by operation of law that has the right of succession?
A
Corporation
7
Q
What allows a corporation to continue existing even after changes in ownership?
A
Right of succession
8
Q
What grants corporations their powers, attributes, and properties?
A
Law
9
Q
What term refers to the ability of a corporation to exist beyond the lives of its incorporators?
A
Perpetual existence or right of succession
10
Q
What is required for a corporation to legally exist?
A
Registration with the Securities and Exchange Commission (SEC)
11
Q
Why is a corporation considered an artificial being?
a) It is made up of machines
b) It exists only in contracts
c) It is created by law and not by natural birth
d) It does not have any right
A
It is created by law and not by natural birth.
12
Q
What is the ability of a corporation to continue existing even if shareholders change called?
a) Corporate identity
b) Right of succession
c) Corporate dissolution
d) Shareholder immunity
A
Right of succession.
13
Q
Which of the following is NOT a characteristic of a corporation?
a) Created by operation of law
b) Perpetual existence
c) Directly managed by its shareholders
d) Has rights and attributes granted by law
A
Directly managed by its shareholders.
Management is through the board of directors.
14
Q
Which entity is responsible for granting a corporation its legal existence?
a) Department of Trade and Industry (DTI)
b) Securities and Exchange Commission (SEC)
c) Bureau of Internal Revenue (BIR)
d) Local Government Unit (LGU)
A
Securities and Exchange Commission (SEC).
15
Q
What happens to a corporation if one of its incorporators dies?
a) The corporation is dissolved immediately
b) The corporation continues to exist
c) The corporation’s assets are automatically liquidated
d) The corporation is sold to the government
A
The corporation continues to exist.
16
Q
4 Key Characteristics of a Corporation (CARP)
A
Created by operation of law
Artificial being
Right of succession
Powers, attributes, and properties granted by law
17
Q
What type of being is a corporation?
A
A corporation is an artificial being created by operation of law.
18
Q
What right allows a corporation to exist after the death of its incorporators?
A
A corporation has the right of succession.
19
Q
What type of powers does a corporation have?
A
A corporation only has the powers, attributes, and properties that are expressly authorized by law.
20
Q
How must a corporation be created and registered?
A
A corporation must be created by operation of law and registered with the SEC.
21
Q
What grants a corporation its powers and limitations?
A
The law grants a corporation its powers and limitations.
22
Q
Stock corporations do not have capital stock divided into shares.
A
False – Stock corporations have capital stock divided into shares.
23
Q
Stock corporations can distribute dividends or surplus profits to stockholders.
A
True
24
Q
Nonstock corporations are authorized to distribute dividends to their members
A
False – Nonstock corporations cannot distribute profits; they must use them for their purpose.
25
All corporations formed under the Revised Corporation Code are stock corporations
False – There are both stock and nonstock corporations.
26
A nonstock corporation does not issue shares of stock.
True
27
What type of corporation has capital stock divided into shares?
Stock corporation
28
What type of corporation is allowed to distribute profits in the form of dividends?
Stock corporation
29
What type of corporation does not issue shares and uses its profits for its purpose?
Nonstock corporation
30
What is the basis for the distribution of dividends in stock corporations?
Shares held by stockholders
31
What law governs stock and nonstock corporations in the Philippines?
Revised Corporation Code of the Philippines
32
Corporations created by special laws or charters are primarily governed by the Revised Corporation Code.
False – They are primarily governed by the special law or charter that created them, with the Corporation Code applying only when relevant.
33
A corporation created by a special law does not need to comply with the provisions of the Corporation Code at all.
False – While the special law takes precedence, the Corporation Code still applies where relevant.
34
Corporations created by legislative acts or special charters exist independently of general corporate laws.
True
35
Government-owned and controlled corporations (GOCCs) created by special laws are still governed by their respective charters first.
True
36
Private corporations are generally created by special laws or charters.
False – Private corporations are usually created under the Revised Corporation Code, not special laws.
37
All incorporators are corporators, but not all corporators are incorporators.
True
38
Incorporators are those who originally formed and composed the corporation and signed the articles of incorporation.
True
39
Corporators only exist in stock corporations.
False – Corporators exist in both stock and nonstock corporations.
40
A person who becomes a stockholder after incorporation is still considered an incorporator.
False – Only those who originally formed and signed the articles of incorporation are incorporators.
41
Members of a nonstock corporation are not considered corporators.
False – Members of a nonstock corporation are considered corporators
42
Who are the persons that compose a corporation, either as stockholders or members?
Corporators
43
Who are the original stockholders or members that formed the corporation and signed the articles of incorporation?
Incorporators
44
What document must incorporators sign to formally establish a corporation?
Articles of Incorporation
45
What do you call stockholders of a stock corporation?
Corporators or Shareholders
46
In a nonstock corporation, what are the individuals who compose the corporation called?
Members or Corporators
47
Who among the following is always a corporator?
a) A person who buys shares of a corporation after incorporation
b) A stockholder at the time of incorporation
c) A person who lends money to a corporation
d) An employee of the corporation
b) A stockholder at the time of incorporation
48
Which of the following best describes an incorporator?
a) Any person who invests in the corporation
b) A founding stockholder or member who signed the articles of incorporation
c) Any corporate officer
d) Any employee who holds shares
b) A founding stockholder or member who signed the articles of incorporation
49
Which statement is true about corporators and incorporators?
a) Incorporators and corporators are always the same people
b) Incorporators remain incorporators even if they leave the company
c) All incorporators are initially corporators, but corporators can change over time
d) A corporation cannot exist without corporators
c) All incorporators are initially corporators, but corporators can change over time
50
In a nonstock corporation, what are the corporators called?
a) Stockholders
b) Board of Directors
c) Members
d) Trustees
c) Members
51
What document proves the identity of the incorporators of a corporation?
a) By-laws
b) Articles of Incorporation
c) Business permit
d) SEC Registration Certificate
b) Articles of Incorporation
52
_________ are those who compose a corporation, whether as stockholders or members.
Corporators
53
_______ are the original stockholders or members who signed the articles of incorporation.
Incorporators
54
In a nonstock corporation, corporators are called _________.
Members
55
Stockholders in a stock corporation are considered _________.
Corporators
56
The incorporators must be listed in the _________.
Articles of Incorporation
57
The classification of shares and their corresponding rights must be indicated in the by-laws of the corporation.
False – The classification of shares must be indicated in the Articles of Incorporation, not in the by-laws.
58
Each share shall be equal in all respects to every other share unless otherwise provided in the Articles of Incorporation and the certificate of stock.
True
59
Corporations are not required to specify the rights, privileges, or restrictions of shares in their incorporation documents.
False – The Articles of Incorporation must indicate the classification, rights, and privileges of shares.
60
The stated par value of shares is always required for all stock corporations.
False – Some shares may be issued without par value, except for specific corporations like banks and insurance companies.
61
Preferred shares may have different rights and privileges compared to common shares.
True
62
Where must the classification of shares and their corresponding rights, privileges, and restrictions be stated?
Articles of Incorporation
63
What document, aside from the Articles of Incorporation, may provide specific provisions regarding share classification?
Certificate of Stock
64
What type of shares can be issued with different rights, privileges, and restrictions?
Preferred Shares
65
What are shares with no specific value assigned at issuance called?
No-par value shares
66
What governing body requires corporations to state share classifications in their incorporation documents?
Securities and Exchange Commission (SEC)
67
Which document must indicate the classification of shares in a corporation?
a) By-laws
b) Articles of Incorporation
c) Stockholders’ Agreement
d) Business Permit
b) Articles of Incorporation
68
Which of the following statements is TRUE regarding corporate shares?
a) All shares must have the same rights and privileges.
b) The classification of shares does not need to be specified in the Articles of Incorporation.
c) Some shares may have different privileges if stated in the Articles of Incorporation.
d) Preferred shares cannot have voting rights.
c) Some shares may have different privileges if stated in the Articles of Incorporation
69
What type of shares typically provide voting rights and a share in corporate profits?
a) Preferred Shares
b) Redeemable Shares
c) Common Shares
d) Treasury Shares
c) Common Shares
70
What happens if a corporation does not specify the classification of its shares in its Articles of Incorporation?
a) All shares are considered common shares with equal rights.
b) The corporation must apply for an amendment.
c) The SEC will assign a classification.
d) The shares become non-transferable.
a) All shares are considered common shares with equal rights.
71
Which of the following is NOT required for shares of stock?
a) Classification
b) Par value (for all types of corporations)
c) Rights and privileges
d) Indication in the Articles of Incorporation
b) Par value (for all types of corporations)
72
A corporation may divide its shares into classes or series, or both.
True
73
All shares in a stock corporation must have voting rights.
False – Preferred and redeemable shares may be issued without voting rights, except on specific matters.
74
Nonvoting shares are never allowed to vote under any circumstances.
False – Nonvoting shares may vote on key corporate decisions such as amendments to the Articles of Incorporation, mergers, or dissolution.
75
Corporations engaged in banking, insurance, and public utilities may issue no-par value shares.
False – These corporations cannot issue no-par value shares.
76
No-par value shares must be issued for at least P5.00 per share.
True
77
What type of shares may be issued without voting rights, except as provided by law?
Preferred or Redeemable Shares
78
What governing body must receive a certificate of terms and conditions for preferred shares before they take effect?
Securities and Exchange Commission (SEC)
79
What type of shares may have priority in dividend distribution and liquidation?
Preferred Shares
80
What is the minimum amount a no-par value share must be issued for?
Five Pesos (P5.00)
81
What corporate document must authorize the classification of shares and their voting rights?
Articles of Incorporation
82
Which of the following statements about voting rights is TRUE?
a) All shares are required to have voting rights.
b) Preferred shares always have voting rights.
c) There must always be a class of shares with complete voting rights.
d) Nonvoting shares cannot vote on any matter.
c) There must always be a class of shares with complete voting rights.
83
Which of the following corporate actions allows holders of nonvoting shares to vote?
a) Appointment of corporate officers
b) Adoption and amendment of bylaws
c) Day-to-day management decisions
d) Employee hiring policies
b) Adoption and amendment of bylaws
84
Which type of shares can be issued only with a stated par value?
a) No-par value shares
b) Common shares
c) Preferred shares
d) Treasury shares
c) Preferred shares
85
Which of the following companies is NOT allowed to issue no-par value shares?
a) A small retail corporation
b) A trust company
c) A technology startup
d) A private consulting firm
b) A trust company
86
What must be done before the terms and conditions of preferred shares take effect?
a) Board approval only
b) Approval by the shareholders
c) Filing of a certificate with the SEC
d) Submission to the Bureau of Internal Revenue
c) Filing of a certificate with the SEC
87
Instances when nonvoting shares are still allowed to vote. (3Is AM SAD)
Incurring, creating, or increasing bonded indebtedness
Increase or decrease of authorized capital stock
Investment of corporate funds in another business
Amendment of the articles of incorporation
Merger or consolidation with another corporation
Sale, lease, exchange, mortgage, pledge, or disposition of corporate property
Adoption and amendment of bylaws
Dissolution of the corporation
88
Founders' shares may be given rights and privileges that are not available to other stockholders.
True
89
The exclusive right to vote and be voted for in the election of directors granted to founders’ shares may last indefinitely.
False – It must be for a limited period not exceeding five (5) years from incorporation.
90
The exclusive right to vote in the election of directors through founders' shares is always allowed, regardless of other laws.
False – It is not allowed if it violates the Anti-Dummy Law, Foreign Investments Act, or other pertinent laws.
91
A corporation may extend the exclusive voting rights of founders' shares beyond five years by amending the articles of incorporation.
False – The law strictly limits it to five (5) years from incorporation.
92
What is the maximum period that founders' shares may have the exclusive right to vote and be voted for in director elections?
5 years from incorporation
93
A corporation may have an unlimited number of incorporators.
False – A corporation may have a maximum of fifteen (15) incorporators.
94
Natural persons who are licensed professionals can always form a corporation to practice their profession.
False – Professionals and professional associations cannot form a corporation unless allowed under special laws.
95
Each incorporator in a stock corporation must own at least one share of the capital stock.
True
96
A corporation with only one stockholder is called a Sole Proprietorship
False – It is called a One Person Corporation (OPC).
97
Incorporators must be at least 21 years old to be eligible.
False – Incorporators must only be of legal age (18 years or older).
98
What is the maximum number of incorporators allowed in a corporation?
Fifteen (15)
99
What is the minimum number of shares a stock corporation incorporator must own or subscribe to?
One (1) Share
100
What type of corporation has only one stockholder?
One Person Corporation (OPC)
101
What is the minimum age requirement for incorporators?
Legal age (18 years old and above)
102
What type of entity is prohibited from forming a corporation unless provided by special laws?
Licensed Professionals and Professional Associations
103
How many incorporators can a corporation have?
a) 1-5
b) 2-10
c) 1-15
d) 5-20
c) 1-15
104
Which of the following may NOT organize as a corporation?
a) A group of investors starting a real estate company
b) A law firm consisting of licensed lawyers
c) A technology startup
d) A family-owned restaurant business
b) A law firm consisting of licensed lawyers
105
A corporation automatically has a perpetual existence unless stated otherwise in the articles of incorporation.
True
106
Corporations incorporated before the effectivity of this Code must dissolve after 50 years.
False – They automatically have perpetual existence unless they opt for a specific term.
107
A corporation’s term may be extended or shortened through an amendment to the articles of incorporation.
True
108
A corporation can apply for a revival of its existence after its term expires.
True
109
A bank can apply for revival of its corporate term without any additional approvals.
False – Banks and financial institutions must have a favorable recommendation from the appropriate government agency.
110
What is the default corporate term under the law?
a) 10 years
b) 50 years
c) Perpetual, unless stated otherwise
d) 100 years
c) Perpetual, unless stated otherwise
111
When can a corporation apply for an extension of its term?
a) At any time
b) At least five years before expiration
c) No earlier than three years before the original expiry date
d) Only after dissolution
c) No earlier than three years before the original expiry date
