Corporation Law and Allied laws

Question 1

1. Which of the following statements relative to a corporation is false?
   a. A corporation has a legal personality distinct and separate from its stockholders.
   b. A corporation may be entitled to an award of moral damages where its good reputation is
   besmirched resulting into social humiliation.
   c. The interest of shareholders is corporate property is purely inchoate.
   d. A corporation is not within the protection of constitution regarding the right to
   secure against unreasonable searches and seizures.

Answer 1

d. A corporation is not within the protection of constitution regarding the right to
secure against unreasonable searches and seizures.

Question 2

2. Which is an element of the doctrine of “piercing the veil of corporate entity?”
   a. Complete control over the business.
   b. Control is used to commit fraud or wrong
   c. Control and breach of duty are the proximate cause of the injury or loss.
   d. All of the foregoing

Answer 2

d. All of the foregoing

Question 3

3. The doctrine or ”piercing the veil of corporate entity” shall not be applied where:
   a. The corporate operates for the benefit of single individual who exercises complete over its
   funds.
   b. The corporate controls the majority of stock of another corporation.
   c. The corporation is a mere alter ego of another corporation.
   d. The corporation is organized as a device to evade an outstanding legal obligation.

Answer 3

b. The corporate controls the majority of stock of another corporation.

Question 4

4. Which of the following statement is true?
   a. A corporation enjoying a legislative franchise to supply electricity may engage in buying
   and selling agricultural lands.
   b. A corporation engaged in car dealership may engage in land transportation business.
   c. A corporation engaged in deep sea fishing may operate in ice plant as a public service
   operator.
   d. A corporation engaged in the manufacture of rubber shoes may engage in the
   manufacture of rubber cement.

Answer 4

d. A corporation engaged in the manufacture of rubber shoes may engage in the
manufacture of rubber cement.

Question 5

5. One of the following attributes is not common to both a corporation and a partnership?
   a. Succession
   b. Income tax rate
   c. Juridical personality
   d. Can act through agents only

Answer 5

a. Succession

Question 6

6. One of t following entities cannot be organized as a stock corporation:
   a. Bank
   b. Close corporation
   c. Religious corporation
   d. Educational corporation

Answer 6

c. Religious corporation

Question 7

7. Which of the following entities are private corporations, as distinguished from public corporations?
   a. GSIS
   b. National Power Corporation
   c. Public Utilities
   d. All of the foregoing

Answer 7

d. All of the foregoing

Question 8

8. A corporation may be a partner to another corporation where:
   a. All partners are managing partners and the articles of incorporation expressly allow it.
   b. The foreign n corporation is a general partner in a domestic limited partnership.
   c. A joint venture is entered into that is not in line with its business.
   d. None of the foregoing

Answer 8

a. All partners are managing partners and the articles of incorporation expressly allow it.

Question 9

9. Which of the following statements relative to a corporation, stock or non stock, is trust?
   a. All incorporators are stockholders.
   b. All corporators are incorporators.
   c. All incorporators are subscribers.
   d. None of the foregoing

Answer 9

d. None of the foregoing

Question 10

10. Which of the following statements in relation to capital stock is false?
    a. There is no authorized capital stock in no par value shares.
    b. Subscribed capital stock is still unissued.
    c. Treasury stock is not part of outstanding capital stock.
    d. None of the foregoing.

Answer 10

d. None of the foregoing.

Question 11

11. One of the following is not a feature of “authorized capital stock”.
    a. It applies only to par value stock.
    b. It represents the maximum stock that may be issued by the corporation.
    c. It may include subscribed capital stock.
    d. It may include retained earnings.

Answer 11

d. It may include retained earnings.

Question 12

12. One of the following is a feature of a share of stock:
    a. It makes the stockholder a creditor of the corporation.
    b. It is an incorporeal right.
    c. It represents property of the corporation
    d. It requires a certificate of stock to vest ownership.

Answer 12

b. It is an incorporeal right.

Question 13

13. Which of the following is not a feature of preferred stock?
    a. It cannot vote, unless expressly granted in the article of incorporation.
    b. It is only preferred as to dividends in the absence of stipulation,
    c. It is always a par value stock.
    d. It may be redeemed stock.

Answer 13

a. It cannot vote, unless expressly granted in the article of incorporation.

Question 14

14. Preferred shares that are entitled to receive not only the stipulated dividends at a certain rate but also pro-rata with the common shares in the remaining profits are known as:
    a. Cumulative
    b. Non-cumulative
    c. Participating
    d. Non-participating

Answer 14

c. Participating

Question 15

15. Which of the following components of stockholders’ equity does not form part of legal capital?
    a. Paid-in capital stock
    b. Retained earnings
    c. Premium on capital stock
    d. Donated capital

Answer 15

b. Retained earnings

Question 16

16. Which of the following statements does not characterized a no-par value share?
    a. It always has an issued value
    b. It may be issued together with par value shares.
    c. It may be issued even if the subscription is not yet fully paid.
    d. It has no stated value appearing on the certificate of stock.

Answer 16

c. It may be issued even if the subscription is not yet fully paid.

Question 17

17. The value of a share of stock, which is increased by net profits or reduced by net losses of the corporation, is known as:
    a. Book value
    b. Par value
    c. Market value
    d. Liquidating value

Answer 17

a. Book value

Question 18

18. Which of the following corporations may issue no-par value stock?
    a. Banks
    b. Insurance companies
    c. Public utilities
    d. None of the foregoing

Answer 18

d. None of the foregoing

Question 19

19. One of the following transactions does not require the adequacy of unrestricted retained earnings:
    a. Redemption of redeemable shares
    b. Dividend on common stock
    c. Reacquisition on treasury shares
    d. Dividend on preferred stock

Answer 19

a. Redemption of redeemable shares

Question 20

20. A non-voting preferred stock cannot vote in:
    a. Filling of vacancy in the board.
    b. Amendment of articles of incorporation
    c. Increase or decrease in capital stock
    d. Dissolution of the corporation

Answer 20

a. Filling of vacancy in the board.

Question 21

21. Which of the following statement does not characterize a treasury share?
    a. It is an issued share but it is not classified as an outstanding share.
    b. It has no voting right.
    c. It may be sold at less than the par value.
    d. It may be distributed as a stock dividend

Answer 21

d. It may be distributed as a stock dividend

Question 22

22. There are five (5) incorporators (A, B,C,D and E) of a stock corporation to be organized. Which of the following cases shall be approved by the Securities and Exchange Commission?
    a. A,B,and C are Filipino residing in Canada; D and E are American citizen residing in the
    Philippines.
    b. A,B,C and D are over 21 years old; E is 16 years old.
    c. A,B,C and D are natural persons; E is a registered partnership.
    d. A,B,C and D are subscribers of 1 share each ; all the remaining subscriptions belong to E.

Answer 22

d. A,B,C and D are subscribers of 1 share each ; all the remaining subscriptions belong to E.

Question 23

23. Which of the following statements relative to an incorporator is true?
    a. Duly established cooperatives and corporations primarily organized to hold equities in rural banks may be incorporators of rural banks.
    b. Natural persons may be incorporators of stock and non-stock corporations.
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 23

c. Both (a) and (b).

Question 24

24. Which of the following statements relative to the filing of the articles of incorporation with the SEC is false?
    a. The “express lane” may be availed of upon payment of a minimal fee by corporations to
    be organized with a capital stock not exceeding P1,000,000.
    b. The articles of incorporation shall be submitted together with other related documents, such as the corporate treasurer’s affidavit, bank certification on deposit, and
    recommendations from the appropriate government agency in cases of corporations
    governed by special laws.
    c. The articles of incorporation may state the principal purpose of the corporation
    couched in broad and general terms.
    d. None of the foregoing

Answer 24

c. The articles of incorporation may state the principal purpose of the corporation
couched in broad and general terms.

Question 25

25. When may the corporate by-laws be filed with the SEC?
    a. Upon the filing of the articles of incorporation.
    b. Within one (1) month from the filing of the articles of incorporation.
    c. Either (a) or (b).
    d. Neither (a) nor (b)

Answer 25

a. Upon the filing of the articles of incorporation.

Question 26

26. What is the term of corporate existence?
    a. The term as specified in the articles of incorporation which must not be less than fifty (50) years.
    b. The term as specified in the articles of incorporation which must not be more
    than fifty (50) years.
    c. Fifty (50) years.
    d. Indefinite number of years.

Answer 26

b. The term as specified in the articles of incorporation which must not be more
than fifty (50) years.

Question 27

27. Determine which of the following “purpose clauses” contained in the articles of incorporation shall be accepted by the SEC?
    a. To practice law in the Philippines.
    b. To carry out any lawful business or purpose.
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 27

d. Neither (a) nor (b).

Question 28

28. A corporation to be formed has authorized par value capital of stock P8,000,000 divided into 80,000
    shares a P100 par value, and an authorized no-par value capital stock of 200,000 shares. Which of the following cases meets the pre- incorporation subscription requirement?
    a. On the par-value stock, 20,000 shares are subscribed and 5,000 shares thereof are paid;
    on the no-par value stock, 50,000 shares are subscribed and 12,500 shares thereof are
    paid.
    b. On the par-value stock, 40,000 shares are subscribed and 20,000 shares thereof are paid;
    on the no-par value stock, 100,000 shares are subscribed and 50,000 shares thereof are
    paid.
    c. On the par value stock, 20,000 shares are subscribed and 5,000 shares thereof
    are paid; on the no-par value stock, 50,000 shares are subscribed and fully paid.
    d. None of the foregoing.

Answer 28

c. On the par value stock, 20,000 shares are subscribed and 5,000 shares thereof
are paid; on the no-par value stock, 50,000 shares are subscribed and fully paid.

Question 29

29. Which of the following cases requires full payment upon subscription of stock?
    a. Subscription of corporation par value shares by a
    b. Subscription of no-par value shares
    c. Both (a) and (b)
    d. Neither (a) nor (b)

Answer 29

c. Both (a) and (b)

Question 30

30. An amendment in the articles incorporation that of would shorten the corporate term requires the approval of the:
    a. Majority vote of the board directors/trustees and majority vote of or written assent of the
    outstanding capital stock/members
    b. Majority vote of the board of directors/trustees and 2/3 vote or written assent of the outstanding capital stock/members
    c. Majority vote of the board of directors/trustees and 2/3 vote of the
    outstanding capital stock/members.
    d. 2/3 vote of the board of directors/trustees and 2/3 vote of the outstanding capital
    stock/members

Answer 30

c. Majority vote of the board of directors/trustees and 2/3 vote of the
outstanding capital stock/members.

Question 31

31. Which of the following amendments shall require for its approval only the majority vote of the board of directors and the vote or written assent of 2/3 of the outstanding capital stock?
    a. Amendment to decrease or increase capital stock
    b. Amendment to increase the number of the board of directors
    c. Amendment to incur bonded indebtedness
    d. Amendment to reduce voting requirement in a close corporation

Answer 31

b. Amendment to increase the number of the board of directors

Question 32

32. Any amendment to the articles incorporation shall take effect upon the:
    a. Date of approval by the SEC
    b. Date of filing if not acted upon within six (6) months therefrom for cause not attributable
    to the corporation
    c. Either (a) or (b)
    d. Neither (a) nor (b)

Answer 32

c. Either (a) or (b)

Question 33

33. Which of the following corporate trade names are not confusingly similar with each other?
    a. “House of Investments” VS. “House of insurance , Inc.”
    b. “Philips Export B.V.” vs. “Philips Industrial Development, Inc.”
    c. “Universal Textile Mills, Inc.” vS. “Universal Mills Corporation”
    d. All the foregoing are confusingly similar with each other.

Answer 33

a. “House of Investments” VS. “House of insurance , Inc.”

Question 34

34. Which of the following statements relative to de jure and de facto corporations is false?
    a. A de jure corporation is one that was able to comply substantially with all the requirements
    of the law for its incorporation.
    b. A de facto corporation is one that was able to make colorable compliance of the legal
    requirements for its incorporation.
    c. A de jure corporation’s existence can be attacked in a quo warranto proceeding.
    d. None of the foregoing.

Answer 34

c. A de jure corporation’s existence can be attacked in a quo warranto proceeding.

Question 35

35. Which of the following is a characteristic of a de facto corporation?
    a. There is a bona fide attempt to comply with the requirements of the law in organizing the
    corporation.
    b. There is an actual exercise of corporate powers in good faith.
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 35

c. Both (a) and (b).

Question 36

36. Which of the following defects would make the corporation a de facto corporation?
    a. The corporate name which resembles the name of a pre-existing corporation is
    likely to deceive the public.
    b. Failure to file the articles of incorporation with the SEC.
    c. Absence of certificate of incorporation from the SEC.
    d. Continuing business operations despite the discovery of the defect or defects after
    incorporation without any action to correct them.

Answer 36

a. The corporate name which resembles the name of a pre-existing corporation is
likely to deceive the public.

Question 37

37. Which of the following statements relative to a corporation by estoppel is false?
    a. It is an ostensible corporation.
    b. It is treated as a de jure or de facto corporation between the persons misrepresenting themselves as a corporation and the persons who relied on the their misrepresentation.
    c. Those who assume to act as a corporation shall be liable as general partners for all debts,
    liabilities and damages resulting therefrom
    d. None of the foregoing.

Answer 37

d. None of the foregoing.

Question 38

38. Determine which of the following omissions shall result into the automatic cessation of corporate powers and dissolution of the corporation?
    a. Failure of a corporation to formally organize and commence business transactions or
    construction of its works within two (2) years from the date of its incorporation.
    b. Subsequent continuous in operation for at least five (5) years
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 38

d. Neither (a) nor (b).

Question 39

39. Which of the following statements relative to the board of directors Of a stock corporation is false?
    a. The number of directors must not be less than five (5) nor more than fifteen (15).
    b. The majority of the directors must be citizens of the Philippines.
    c. Each director must own at least one share (not delinquent share) of the capital stock
    registered in his name in the corporate books (qualifies even if he is not actually the
    beneficial owner, such as a voting trustee).
    d. The term of office of directors is one (1) year, unless a valid holdover takes place (e.g.
    failure of quorum to hold the election).

Answer 39

b. The majority of the directors must be citizens of the Philippines.

Question 40

40. Which of the following statements relative to the board of directors of a stock corporation is false?
    a. Only natural persons can become members of the board of directors; provided, that a
    corporation that owns shares of stock in another corporation may designate its officer or
    representative to sit in the latter corporation’s board of directors.
    b. b. A majority of the quorum of the board is sufficient to adopt a proposal calling
    for an election of officers.
    c. The President of the corporation must be a director, but he cannot occupy the positions of
    President-Treasurer or President- Secretary at the same time.
    d. Directors cannot attend or vote by proxy in board meetings.

Answer 40

b. b. A majority of the quorum of the board is sufficient to adopt a proposal calling
for an election of officers.

Question 41

41. Which of the following statements relative to the board of directors of a stock corporation is false?
    a. A director must not have been convicted by final judgment of an offense punishable by
    more than six (6) years imprisonment, or committed a violation of the Corporation Code
    within five (5) years prior to the date of election or appointment.
    b. A director may be removed from office by a vote of the majority of the outstanding capital stock with or without cause; provided, that removal without cause may not be used to deprive minority stockholders, who used cumulative voting to elect such director, of the right of representation.
    c. No director shall receive any compensation (other than per diems) as such, unless the
    same is granted in the by-laws or by a vote of at least 2/3 of the outstanding capital stock;
    provided; that the total yearly compensation (excluding per diems and compensation as
    officers) shall not exceed ten (10%) percent of the net income before income tax of the
    corporation during the preceding year.
    d. Additional qualifications may be provided in the by-laws (e.g. a director is disqualified for
    nomination or election if he owns at least 10% of the stocks of another competing
    corporation). A corporation has five (5) seats in the board of directors. X owns ten (10)
    shares.

Answer 41

b. A director may be removed from office by a vote of the majority of the outstanding capital stock with or without cause; provided, that removal without cause may not be used to deprive minority stockholders, who used cumulative voting to elect such director, of the right of representation.

Question 42

42. Which of the following ways of voting in the election of directors exemplifies the use of straight-voting method?
    a. Fifty (50) votes for a single candidate
    b. Thirty (30) votes for a candidate and 20 votes for another candidate
    c. Either (a) or (b)
    d. Neither (a) nor (b)

Answer 42

a. Fifty (50) votes for a single candidate

Question 43

43. Which of the following statements relative to the election of the board of directors of stock
    corporations is false?
    a. Non-voting shares of stock are counted in determining the quorum during elections
    although they cannot vote.
    b. Voting shall be by ballot, unless voting by viva voce is requested by majority of the stockholders.
    c. Stockholders may vote by proxy.
    d. Method of voting (straight-voting or cumulative voting) cannot be denied in the articles of incorporation or by-laws of stock corporations because it is a statutory right.

Answer 43

b. Voting shall be by ballot, unless voting by viva voce is requested by majority of the stockholders.

Question 44

44. Which of the following statements relative to corporate officers is true?
    a. The term of office of the corporate President is coterminous with his term as a board director.
    b. The corporate President may simultaneously serve as the corporate Treasurer or Secretary.
    c. The corporate Treasurer must be a citizen of the Philippines.
    d. The corporate Secretary must also be a director or trustee of the corporation.

Answer 44

a. The term of office of the corporate President is coterminous with his term as a board director.

Question 45

45. A, B, C, D, E, F and G are the members of the board of directors of a corporation. Unfortunately, E, F and G resigned for personal reasons. How shall the vacancies be filled up?
    a. The vacancies shall be filled up by the majority vote of the board of directors.
    b. The vacancies shall be filled up by the majority vote of the stockholders in a regular or
    special meeting.
    c. The vacancies shall be filled up by the vote of at least 2/3 of the stockholders in a regular
    or special meeting.
    d. None of the foregoing.

Answer 45

a. The vacancies shall be filled up by the majority vote of the board of directors.

Question 46

46. Assume the same facts in Q. 45, except that E, F and G were removed from office due to fraudulent practices, How shall the vacancies be filled up?
    a. The vacancies shall be filled up by the majority vote of the board of directors.
    b. The vacancies shall be filled up by the majority vote of the stockholders in a regular or special meeting.
    c. The vacancies shall be filled up by the vote of at least 2/3 of the stockholders in a regular
    and/or special meeting.
    d. None of the foregoing.

Answer 46

b. The vacancies shall be filled up by the majority vote of the stockholders in a regular or special meeting.

Question 47

47. The contract entered into by a self-dealing director, trustee or officer is valid where:
    a. The presence of the director, trustee or officer in the board meeting in which the contract
    was approved was necessary to constitute a quorum for such meeting.
    b. The vote of such director, trustee or officer was necessary for the approval of the
    contract.
    c. Both (a) and (b).
    d. Neither (a) nor (b)

Answer 47

d. Neither (a) nor (b)

Question 48

48. X is a director owning 20% of the outstanding capital stock of ABC Corporation and 40% of RST
    Corporation. The two corporations entered into a contract whereby ABC Corporation sold
    commercial its lot to RST Corporation. The contract was approved as follows: ABC Corporation 4 out
    of 5 directors voted in the affirmative, including X; RST Corporation 5 out of 7 directors voted in the
    affirmative, including X. The contract entered into by the two corporations is:
    a. Valid
    b. Voidable
    c. Unenforceable
    d. Void

Answer 48

a. Valid

Question 49

49. A executive committee can validity act on the:
    a. Amendment of the articles of incorporations of the corporation.
    b. Preparation of the plan for merger of the corporation with another corporation.
    c. Filling of vacancy in the board of directors.
    d. None of the foregoing.

Answer 49

d. None of the foregoing.

Question 50

50. One of the following is not among the powers of a corporation:
    a. To sue and be sued
    b. Succession
    c. Making donations, except those in aid of any political party
    d. Establishment of retirement and the other benefits plans for its directors, trustees, officers
    and employees.

Answer 50

c. Making donations, except those in aid of any political party

Question 51

51. A stockholder’s right of pre-emption may be denied where:
    a. Shares are to be issued in order to comply with the minimum 60% Filipino ownership
    required by law.
    b. Shares are to be issued in good faith and with the approval of at least 2/3 of the outstanding capital stock in payment of a previously contracted debt.
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 51

c. Both (a) and (b).

Question 52

52. A corporation has an authorized capital stock of P4,000,000 composed of 40,000 shares @ P100
    par value, of which only 10,000 shares have been offered for subscription. These 10,000 shares are
    now fully subscribed and paid for. The board of directors, by majority vote that is ratified by 2/3
    vote of the outstanding capital stock, increased its capital stock by an additional 20,000 shares @
    P100 par value. Which of the following shall meet the minimum subscription requirement?
    a. At least 15,000 shares must be subscribed and 3,750 shares thereof must be paid before
    the increase in capital stock will be approved by the SEC.
    b. At least 12,500 shares must be subscribed and 3,125 shares thereof must be paid before
    the increase in capital stock will be approved by the SEC.
    c. Atleast 5,000 shares must be subscribed and 1,250 shares thereof must be paid before the increase in capital stock will be approved by the SEC.
    d. None of the foregoing.

Answer 52

c. Atleast 5,000 shares must be subscribed and 1,250 shares thereof must be paid before the increase in capital stock will be approved by the SEC.

Question 53

53. Assume the same facts in Q. 302. All the remaining unissued shares are offered for subscription. To
    what extent is the pre-emptive right of x who OwnS 10% (1,000 shares) of the corporation?
    a. 2,000 new shares
    b. 2,000 new shares and 3,000 original shares
    c. 2,000 new shares and 4,000 original shares
    d. None of the foregoing

Answer 53

b. 2,000 new shares and 3,000 original shares

Question 54

54. High-yield but high-risk bonds issued by heavily indebted or financially weak corporations that are
    desperately in need of additional capital are known as:
    a. Junk bonds
    b. Callable bonds
    c. Convertible bonds
    d. Guaranteed bonds

Answer 54

a. Junk bonds

Question 55

55. X Corporation owns shares of stock of Y Corporation. X corporation declares these shares as
    dividend to its stockholders. This dividend is known as:
    a. Stock dividend
    b. Liquidating dividend
    c. Scrip dividend
    d. Property dividend

Answer 55

d. Property dividend

Question 56

56. Shareholders who shall receive the dividends are those who are registered as such in the stock and
    transfer book as of the:
    a. Date of declaration
    b. Date of record
    c. Date of payment
    d. None of the foregoing

Answer 56

b. Date of record

Question 57

57. Which of the following distinctions between a cash dividend and a stock dividend is false?
    a. The declaration of cash dividend requires only a majority of the quorum of the board of directors; whereas the declaration of stock dividend requires the approval of at least 2/3 of the members of the board of directors.
    b. Cash dividend, once declared, belongs to the stockholder and cannot be transferred to any
    surplus account of the corporation; whereas the declaration of stock dividend may be
    rescinded before its actual issuance.
    c. Cash dividend has the effect of distributing the accumulated profits to the stockholders;
    whereas stock dividend has the effect of capitalizing such accumulated profits thereby
    increasing the corporation’s capital .
    d. A delinquent stockholder is still entitled to receive cash dividend but it must first be applied
    to his unpaid subscription balance; whereas stock dividend shall be withheld until the
    delinquent stockholder pays his subscription in full.

Answer 57

a. The declaration of cash dividend requires only a majority of the quorum of the board of directors; whereas the declaration of stock dividend requires the approval of at least 2/3 of the members of the board of directors.

Question 58

58. Which of the following statements relative to fractional shares is false?
    a. A fractional share is a share that is less than one share of stock which may arise when
    the corporation declares stock dividend to its stockholders.
    b. A fractional share has no voting right.
    c. A fractional negotiated certificate to share. scrip certificate may be with another fractional
    scrip convert them into one full
    d. None of the foregoing.

Answer 58

d. None of the foregoing.

Question 59

59. The restructuring of corporate capital where the outstanding shares are called in and replaced by a
    larger number, accompanied by a corresponding reduction in the par or stated value of each share,
    is called:
    a. Stock adjustment
    b. Stock split-up
    c. Stock split-down
    d. Stock trading

Answer 59

b. Stock split-up

Question 60

60. A Which of the following cases shall justify a valid restriction of retained earnings?
    a. Justifiable expansion projects approved by the board of directors;
    b. Loan agreement requiring the debtor to first secure the consent of the creditor before any
    dividend may be declared, and such consent is not yet secured.
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 60

c. Both (a) and (b).

Question 61

61. Which of the following statements relative to a “management contract” is false?
    a. The entire supervision and control over the officers and business of the managed corporation is turned over to the managing corporation.
    b. The contract must not be longer than five (5) years at any one term.
    c. The contract must be approved by the board of directors or trustees, and by the majority
    of the outstanding capital stock or members, as the case may be, of both the managing
    and managed corporations.
    d. The 2/3 vote of the outstanding capital stock entitled to vote or members, as the case may
    be, of the managed corporation shall be necessary whenever the stockholder/s having the
    same interest in both corporations own or control more than 1/3 of the total outstanding
    capital stock entitled to vote of the managing corporation

Answer 61

a. The entire supervision and control over the officers and business of the managed corporation is turned over to the managing corporation.

Question 62

62. A corporation is organized for the purpose of manufacturing and processing fruit stuffs. Which of
    the following transactions shall be deemed an ultra vires act?
    a. Manufacture of canned tomato products.
    b. Manufacture of shabu
    c. Both (a) and (b)
    d. Neither (a) nor (b)

Answer 62

d. Neither (a) nor (b)

Question 63

63. Which of the following statements relative to the by-laws of a corporation is false?
    a. It is to be submitted for approval to the SEC not later than one (1) month from receipt of
    official notice of the issuance of the certificate of incorporation.
    b. Any amendment or repeal thereto requires a majority vote of the board of directors or trustees and the 2/3 vote of the outstanding capital stock or members, as the case may be.
    c. It is not binding on third persons, unless they have actual or constructive knowledge thereof.
    d. None of the foregoing

Answer 63

b. Any amendment or repeal thereto requires a majority vote of the board of directors or trustees and the 2/3 vote of the outstanding capital stock or members, as the case may be.

Question 64

64. Which of the following statements relative to corporate board meetings is true?
    a. It is held on a monthly basis.
    b. It must be held within the Philippines.
    c. It cannot be done through teleconferencing or videoconferencing.
    d. It may be attended by means of proxy.

Answer 64

a. It is held on a monthly basis.

Question 65

65. Which of the following statements relative to corporate stockholders’ or members’ meetings is true?
    a. It is always held on any day of April each year.
    b. It can be conducted anywhere in the Philippines.
    c. It may be attended by means of proxy.
    d. It cannot be called on a special basis.

Answer 65

c. It may be attended by means of proxy.

Question 66

66. The majority of the outstanding capital stock or members entitled to vote shall be necessary for the
    approval of:
    a. Call of special meeting to remove directors or trustees
    b. Removal of directors or trustees
    c. Fixing of issued price of no-par value shares
    d. Delegation to the board of directors of the power to amend or repeal the by-laws or adopt
    new by –laws.

Answer 66

a. Call of special meeting to remove directors or trustees

Question 67

67. The majority vote of the quorum of the board of directors and at least 2/3 vote of the outstanding
    capital stock or members, as the case may be, shall be necessary for the approval of:
    a. Amendment of articles of incorporation
    b. Amendment of by-laws
    c. Issuance of stock dividends
    d. None of the foregoing

Answer 67

c. Issuance of stock dividends

Question 68

68. The majority vote of the board of directors or trustees, and at least 2/3 vote of the outstanding
    capital stock or members, as the case may be, shall be necessary for the approval of.
    a. Adoption of by-laws
    b. Plan of merger or consolidation
    c. Management contract
    d. Fixing of issued price of no-par stock

Answer 68

b. Plan of merger or consolidation

Question 69

69. Which of the following is not a characteristic of a “proxy?”
    a. An oral proxy is not valid
    b. It can be denied in the articles of incorporation and by-laws of a non-stock corporation.
    c. A continuing proxy with a period of over five (5) years is not valid.
    d. It is not allowed in meetings of the board of trustees.

Answer 69

c. A continuing proxy with a period of over five (5) years is not valid.

Question 70

70. X entered into a voting trust agreement with Y whereby the former transferred the legal title of all
    his shares of stock to the latter. Which of the following statements in relation to voting trust is
    correct?
    a. X is qualified to run for a seat in the board of directors.
    b. X has the right to collect the dividends.
    c. X and Y have the right to inspect corporate books.
    d. X and Y have the right to vote in the election of the board of directors.

Answer 70

c. X and Y have the right to inspect corporate books.

Question 71

71. Which of the following statements relative to subscriptions of stocks is true?
    a. A subscription contract is for the acquisition or purchase of original shares but not of
    additional new shares resulting from a capital increase.
    b. The Statute of Frauds is not applicable to subscription contracts.
    c. A pre-incorporation subscription contract is irrevocable for a period of one (1) year from the
    date of the subscription.
    d. A subscription contract cannot provide that the subscriber shall pay the shares subscribed out of the dividends that may be declared thereon until the subscription shall have been fully paid.

Answer 71

d. A subscription contract cannot provide that the subscriber shall pay the shares subscribed out of the dividends that may be declared thereon until the subscription shall have been fully paid.

Question 72

72. A stock option must be:
    a. Granted at par value for a period of three (3) years from commencement of business.
    b. Exercised within one (1) year from approval of the SEC
    c. Both (a) and (b).
    d. Neither (a) nor (b).

Answer 72

a. Granted at par value for a period of three (3) years from commencement of business.

Question 73

73. Which of the following statements relative to the transfer or issuance of stock is false?
    a. Shares Of stock cannot be issued in exchange for promissory notes or future services.
    b. Treasury shares may be sold for a reasonable price even if less than par or issued value.
    c. Over-issued stocks (in excess of authorized capital stock) are null and void.
    d. Shares of stock cannot be issued unless the subscription is fully paid.

Answer 73

d. Shares of stock cannot be issued unless the subscription is fully paid.

Question 74

74. One of the following statements relative to a certificate of stock is false:
    a. It is a document that serves as evidence of ownership of the shares of stock.
    b. It is a negotiable instrument as contemplated by the Negotiable Instruments Law.
    c. In case a subsequent transfer of stock is not recorded in the stock and transfer book of the corporation and the certificate of stock is not surrendered to the corporation so that a new one will be issued in favor of the transferee, the said transfer will not bind the
    corporation and the creditors.
    d. None of the foregoing.

Answer 74

b. It is a negotiable instrument as contemplated by the Negotiable Instruments Law.

Question 75

75. X subscribed 1,000 shares, P100 par value, of STV Corporation. To date, he has paid P50,000 or half
    of his subscription. Which of the following statements is true?
    a. X can unilaterally sell the unpaid 500 shares to a third party.
    b. X can unilaterally sell the entire 1,000 shares to a third party.
    c. X is entitled to a certificate of stock on the 500 shares already paid.
    d. X is entitled to receive dividends and cast his vote equivalent to 1,000 shares.

Answer 75

d. X is entitled to receive dividends and cast his vote equivalent to 1,000 shares.

Question 76

76. Which of the following statements relative to “watered stock” is false?
    a. It is issued for a consideration that is less than par or issued value.
    b. It is void per se.
    c. The director or officer having knowledge thereof and without raising any objection thereto
    is solidarily liable with the stockholder to the corporation and its creditors for the difference
    between the par or issued value and the consideration.
    d. None of the foregoing.

Answer 76

b. It is void per se.

Question 77

77. One of the following statements does not characterize a delinquent stock:
    a. A stock becomes delinquent when the subscription is not paid in full within the 30- day
    grace period or on the date of the “call” after due notice to the stockholders.
    b. A “call” is not necessary where the subscription contract has provided for a definite date of
    payment.
    c. A delinquent stock loses its right to receive dividends up to the time of delinquency sale.
    d. Any cash dividend shall first be applied to the unpaid subscription before the balance
    thereof will be given to the stockholder

Answer 77

c. A delinquent stock loses its right to receive dividends up to the time of delinquency sale.

Question 78

78. A delinquent stockholder is deprived of the:
    a. Right to vote
    b. Right to dividend
    c. Both (a) and (b)
    d. Neither (a) nor (b)

Answer 78

a. Right to vote

Question 79

79. X subscribed for 1,000 shares of P500 par value common stock for P500,000. He was able to pay
    only P200,000 and so the 600 unpaid shares were declared delinquent. Accrued interest to date
    amounted to P21,000 and expenses for the public sale amounted to P4,000. The following bids were
    offered:
    A - P325,000 for 800 shares
    B - P325,000 for 600 shares
    C - P250,000 for 600 shares
    D - P200,000 for 400 shares
    What is the consequence of the sale to the highest bidder?
    a. D shall own 400 shares and X shall retain 600 shares.
    b. A shall own 800 shares and X shall retain 200 shares.
    c. B shall own 600 shares and the corporation shall own 400 shares.
    d. B shall own 600 shares and X shall retain 400 shares.

Answer 79

d. B shall own 600 shares and X shall retain 400 shares.

Question 80

80. X is a stockholder of TVW Corporation. He and other stockholders were recently denied of their pre-
    emptive right when the corporation increased its authorized capital stock and they were also
    prohibited to exercise the right to vote in the election of the board of directors. Which of the following actions may be filed by X against TVW Corporation?
    a. Derivative suit for preemptive right and right to vote
    b. Representative suit for pre-emptive right and right to vote
    c. Representative suit for pre-emptive right, and individual suit for right to vote
    d. Individual suit for preemptive right, and representative suit for right to vote.

Answer 80

d. Individual suit for preemptive right, and representative suit for right to vote.

Question 81

81. One of the following books or record is not used by non-stock corporations:
    a. Minutes book
    b. Stock certificate book
    c. Journal
    d. Ledger

Answer 81

b. Stock certificate book

Question 82

82. One of the following is not an attribute of merger or consolidation:
    a. It needs the approval of the majority of the board of directors.
    b. It requires the consent of the creditors of the subject corporations.
    c. It becomes effective e the issuance of the certificate of merger or consolidation.
    d. It requires the approval of at least 2/3 of voting and non-voting outstanding capital stock.

Answer 82

b. It requires the consent of the creditors of the subject corporations.

Question 83

83. Appraisal right may not be exercised in one of the following cases:
    a. Any amendment to the articles of incorporation that changes or restricts the right of any stockholder or class of shares.
    b. Merger or consolidation
    c. Investment of funds in another corporation or business for a purpose other than its primary
    purpose.
    d. Expiration of corporate term.

Answer 83

d. Expiration of corporate term.

Question 84

84. One of the following is not an attribute of appraisal right:
    a. A written demand for payment of the shares of the dissenting stockholder must be made
    within 30 days from the date he cast his negative vote.
    b. The certificates of stock should be surrendered to the corporation within 10 days from the
    date of demand for payment.
    c. The right may be exercised in cases of amendment in the articles of incorporation, transfer
    of all or substantially all of the corporate assets, merger or consolidation, and investment
    of funds in another corporation for a purpose other than it primary purpose.
    d. The stockholder can no longer sell or transfer the shares after the certificates of stock have been annotated by the corporation as “dissenting shares.”

Answer 84

d. The stockholder can no longer sell or transfer the shares after the certificates of stock have been annotated by the corporation as “dissenting shares.”

Question 85

85. Which of the following statements relative to appraisal right is false?
    a. The fair value of the shares of stock as of the day prior to the date on which the vote was taken, inclusive of any appreciation or depreciation in anticipation of such action surrender thereof to the corporation.
    b. The parties are given sixty(60) days from the date the proposed corporate action was voted upon to arrive at the fair value of the dissenting shares.
    c. In the event they cannot agree on the said fair value, it shall determined by three (3) disinterested persons (one to be named by the stockholder, another by the corporation, and the third by the two thus chosen).
    d. None of the foregoing.

Answer 85

a. The fair value of the shares of stock as of the day prior to the date on which the vote was taken, inclusive of any appreciation or depreciation in anticipation of such action surrender thereof to the corporation.

Question 86

86. The stockholder shall be liable for the costs and expenses of appraisal where:
    a. The fair value ascertained by the appraisers is approximately the same as the price offered
    by the corporation to the stockholder who refused the same.
    b. The refusal of the stockholder to accept payment is found to be unjustified in an action filed by the stockholder to recover such fair value.
    c. Either (a) or (b)
    d. Neither (a) nor (b).

Answer 86

c. Either (a) or (b)

Question 87

87. One of the following is not an attribute of a close corporation:
    a. Management of the corporation may be entrusted to the stockholders rather than to a board of directors.
    b. The number of stockholders may exceed 20 where holders of treasury stock are also to be counted.
    c. The stocks are not listed in any stock exchanged or offered to the public.
    d. Restriction can be made prohibiting the transfer of stock to outsiders unless and until the corporation buys these stocks from the transferring stockholder

Answer 87

d. Restriction can be made prohibiting the transfer of stock to outsiders unless and until the corporation buys these stocks from the transferring stockholder

Question 88

88. One of the following is not an attribute of a close corporation:
    a. The officers or employees may be elected or appointed by the stockholders themselves
    rather that by the board of directors as may be provided in the articles of incorporation.
    b. The pre-emptive right of stockholders does not extend to treasury shares.
    c. The holders of each class of stock may elect the allocated number of directors coming from
    their own class as provided in the articles of incorporation.
    d. Any amendment to the articles of incorporation must be approved by at least 2/3 of the
    outstanding capital stock, with or without voting rights (mere assent is not sufficient)

Answer 88

b. The pre-emptive right of stockholders does not extend to treasury shares.

Question 89

89. One of the following is not an attribute of a close corporation:
    a. A stockholder may not, for any reason, withdraw from the corporation and demand that the corporation buy his shares at their fair value which shall not be less than the par or issued value thereof; provided, that the corporation has sufficient assets to cover its liabilities.
    b. Any stockholder may petition the SEC for the dissolution of the corporation by reason of
    illegal, fraudulent, dishonest, oppressive or unfair acts of directors Or officers, or misapplication of corporate assets.
    c. Notwithstanding the presence Of the foregoing characteristics of a close corporation, a corporation is deemed not a close corporation when at least 2/3 of its voting stock is owned or controlled by another corporation which is not a close corporation.
    d. A corporation vested with public interest cannot be organized as a close corporation.

Answer 89

a. A stockholder may not, for any reason, withdraw from the corporation and demand that the corporation buy his shares at their fair value which shall not be less than the par or issued value thereof; provided, that the corporation has sufficient assets to cover its liabilities.

Question 90

90. The following entities may be organized as close corporations under the Corporation Code:
    a. Mining or oil companies
    b. Banks
    c. Both (a) and (b)
    d. Neither (a) nor (b)

Answer 90

d. Neither (a) nor (b)

Question 91

91. Which of the following statements characterizes the pre-emptive right of a stockholder in a close
    corporation?
    a. It is absolute, , unless expressly curtailed in the articles of incorporation.
    b. The right can be exercised on voting and non-voting stocks, including treasury shares.
    c. Both (a) and (b).
    d. Neither (a) nor (b)

Answer 91

c. Both (a) and (b).

Question 92

92. Which of the following acts may be done validly by an ordinary non-stock corporation?
    a. Distribute any part of its income as dividends.
    b. Use its incidental profit for any purpose other than the purpose to which it is organized.
    c. Both (a) and (b).
    d. Neither (a) nor (b)

Answer 92

d. Neither (a) nor (b)

Question 93

93. One of the following statements is not a characteristic of an ordinary non-stock corporation:
    a. It does not distribute dividends to its members, although its membership may in some cases be expressed in terms of “shares of stock.
    b. It is prohibited to engage in business with the object of making profits, although it may earn income as an incident to its operation which must be used in the furtherance of its purpose.
    c. Each member is entitled to one vote which cannot be broadened or denied in the articles of incorporation or by-laws.
    d. Straight-voting shall be used in the election of the board of trustees, unless cumulative voting is expressly provided in the articles of incorporation or by-laws; One of the following statements is not a characteristic of an ordinary non-stock corporation: a. A member may
    vote by proxy which cannot be denied in the articles of incorporation or by-laws.

Answer 93

c. Each member is entitled to one vote which cannot be broadened or denied in the articles of incorporation or by-laws.

Question 94

94. One of the following statements is not a characteristic of an ordinary non-stock corporation:
    a. A member may vote by proxy which cannot be denied in the articles of incorporation or by laws.
    b. Voting by mail or any other means shall only be allowed if authorized in the by-laws and approved by the SEC.
    c. Additional qualifications for voting members may be provided in the articles of incorporation or by-laws.
    d. Its membership is personal and non- transferable, unless otherwise provided in the articles of incorporation or by-laws.

Answer 94

a. A member may vote by proxy which cannot be denied in the articles of incorporation or by laws.

Question 95

95. One of the following statements is not a characteristic of an ordinary non-stock corporation:
    a. Membership may be terminated in the manner and for the causes provided in the articles of incorporation and by-laws;
    b. The board of trustees must be composed of its members; provided, that the representatives of corporate members may be nominated and elected in the board of trustees as may be provided in the articles of incorporation or by-laws;
    c. The number of incorporating trustees must not be less than five (5) nor more than fifteen (15), but the board of trustees may later on be composed of more than the maximum number as may be provided in the articles of incorporation or by-laws;
    d. The term of office of the trustees shall be five (5) years, with one-fifth (1/5) of their number to expire each year

Answer 95

d. The term of office of the trustees shall be five (5) years, with one-fifth (1/5) of their number to expire each year

Question 96

96. Which of the following statements relatiy, to an educational corporation is false?
    a. It may be a stock or non-stock corporation,
    b. It is similar corporation purposes. to an ordinary organized for non-stock educational
    c. A family administered pre-school institution need not be incorporated.
    d. The approval of the SEC is necessary to its incorporation.

Answer 96

b. It is similar corporation purposes. to an ordinary organized for non-stock educational

Question 97

97. Which of the following statements relative to a religious corporation is false?
    a. It is different from an ordinary non-stock corporation organized for educational purposes.
    b. The Roman Catholic Church has the juridical personality of a corporation even if not registered.
    c. A religious group, sect or denomination is not required by law to incorporate as a religious corporation.
    d. The approval of the SEC is necessary for its incorporation.

Answer 97

d. The approval of the SEC is necessary for its incorporation.

Question 98

98. Which of the following is not a means for a corporation to voluntarily dissolve itself?
    a. Majority vote of the board of directors/ trustees and at least 2/3 vote of outstanding capital stock/member
    b. Bankruptcy
    c. Filing of a petition for dissolution before the SEC
    d. Amendment of articles of incorporation to shorten corporate term

Answer 98

b. Bankruptcy

Question 99

99. Which of the following is not a means for a corporation to involuntarily dissolve itself?
    a. Legislative revocation of franchise
    b. Judicial decree
    c. Order of SEC
    d. Expiration of corporate term

Answer 99

d. Expiration of corporate term

Question 100

100. Which of the following statements relative to the dissolution of corporations is false?
     a. Liquidation involves the sale or conversion of all corporate assets into cash and payment of all liabilities.
     b. Winding up involves the final distribution of whatever remains, if any, to the stockholders as a return of their investment.
     c. A corporation has only a period of five (5) years from the time it was dissolved within which to liquidate its affairs.
     d. Corporate creditors who do not belong to the corporation shall be preferred in payment
     than corporate creditors who are also stockholders, members, directors, trustees or officers
     of the corporation.

Answer 100

c. A corporation has only a period of five (5) years from the time it was dissolved within which to liquidate its affairs.

Question 101

101. VWX-USA is a foreign corporation that entered into a contract with XYZ-Phil., a domestic corporation. After several transactions were made, XYZ-Phil. ceased to honor its contract with VWX- USA. However, VWX-USA failed to secure any license to do business in the Phil.
     Which of the following statements is a correct?
     a. VWX-USA can sue XYZ-Phil. before the Philippine courts.
     b. XYZ-Phil. cannot sue VWX-USA before the Philippine courts.
     c. The contract between VWX-USA and XYZ- Phil. is null and void.
     d. VWX-USA can secure the requisite license even after the breach and then sue XYZ- Phil.

Answer 101

d. VWX-USA can secure the requisite license even after the breach and then sue XYZ- Phil.

Question 102

102. Which of the following activities of foreign corporations were held by the Court as “doing
     business in the Philippines?”
     a. A foreign corporation that is engaged in the manufacture of uniforms purchased soccer jerseys from the Philippines.
     b. A foreign corporation sold construction equipment in an isolated transaction.
     c. A foreign insurance company issued a policy to the consignee of exported steel pipes.
     d. A foreign subsidiary assumed the payment of the loan by a foreign corporation doing
     business in the Philippines, and the subsequent acquisition by the former of the latter.

Answer 102

a. A foreign corporation that is engaged in the manufacture of uniforms purchased soccer jerseys from the Philippines.

Question 103

103. Which of the following activities of foreign corporations were held by the Court as “not doing business in the Philippines?”
     a. A foreign shipping company loaded cargoes in the Philippines once a year for two consecutive years.
     b. A foreign corporation that manufactures cars appointed a Philippine distributor who merely transmits to it orders from buyers, the former fixing the price and the down payment,
     receiving payment directly from buyers, and shipping the cars directly to the buyers.
     c. A foreign corporation licensed a domestic corporation to manufacture its products.
     d. A foreign corporation appointed an exclusive distributor of its products in the Philippines,
     registered its trade name, and sent an officer to conduct a training program four times.

Answer 103

a. A foreign shipping company loaded cargoes in the Philippines once a year for two consecutive years.

Question 104

104. Which of the following is uncharacteristic of rehabilitation proceedings on corporations,
     partnerships and associations under the Rules of Procedure on Corporate Rehabilitation?
     a. Proceedings are in rem.
     b. Jurisdiction is acquired upon commencement of the proceedings.
     c. Proceedings are non-adversarial.
     d. Proceedings are summary in nature.

Answer 104

b. Jurisdiction is acquired upon commencement of the proceedings.

Question 105

105. Which of the following pleadings or motions is permitted in corporate rehabilitation proceedings?
     a. Motion to dismiss
     b. Intervention
     c. Third-party complaint
     d. None of the foregoing

Answer 105

d. None of the foregoing

Question 106

106. One of the following is an improper venue for filing the petition for rehabilitation:
     a. RTC which has jurisdiction over the principal office of the debtor as specified in the articles
     of incorporation or partnership.
     b. RTC of the city or municipality where the head office is located if the principal office is
     registered with the SEC as Metro Manila.
     c. RTC which has jurisdiction over the principal office of any of the member companies in case of a joint petition filed by a group of companies.
     d. None of the foregoing.

Answer 106

c. RTC which has jurisdiction over the principal office of any of the member companies in case of a joint petition filed by a group of companies.

Question 107

107. Which of the following is a characteristic of a “stay order?”
     a. The enforcement of claims against the debtor’s guarantors and persons jointly
     liable with the debtor is also stayed.
     b. The debtor cannot dispose his properties in the ordinary course of business.
     c. The suppliers may discontinue supplying goods or services to the debtor even if they are
     being paid after the issuance of the stay order.
     d. None of the foregoing.

Answer 107

a. The enforcement of claims against the debtor’s guarantors and persons jointly
liable with the debtor is also stayed.

Question 108

108. Which of the following claims is covered by the “stay order?”
     a. Claims against letters of credit
     b. Claims against trust receipts
     c. Foreclosure by the creditor of property belonging to the debtor under corporate
     rehabilitation
     d. None of the foregoing

Answer 108

c. Foreclosure by the creditor of property belonging to the debtor under corporate
rehabilitation

Question 109

109. Which of the following liabilities is prohibited from being paid by the debtor during its rehabilitation?
     a. Payment to suppliers for goods or services supplied after issuance of the stay order.
     b. Payment in full of the fees of the Rehabilitation Receiver and all of the persons employed by him.
     c. Payment of new loans obtained for the rehabilitation of the debtor with prior court
     approval.
     d. Payment of secured loan where security is about to be foreclosed.

Answer 109

d. Payment of secured loan where security is about to be foreclosed.

Question 110

110. The stay order may not be terminated or modified, or the creditor’s claim relieved from its coverage where:
     a. Any allegation in the petition, its attachments or verification has ceased to be true.
     b. A creditor does not have adequate protection over the property securing its claim.
     c. The debtor’s secured obligation is less than the fair market value of the property
     subject of the stay order.
     d. The property covered by the stay order is not essential or necessary to the rehabilitation
     and the creditor’s failure to enforce its claim will cause more damage to the creditor than
     to the debtor.

Answer 110

c. The debtor’s secured obligation is less than the fair market value of the property
subject of the stay order.

Question 111

111. Which of the following circumstances will qualify a person to be appointed as a Rehabilitation Receiver?
     a. He is a creditor of the debtor.
     b. He is engaged in a business that competes with the debtor.
     c. He was employed as the debtor’s accountant until his resignation three (3) years prior to the filing of the petition for rehabilitation.
     d. None of the foregoing.

Answer 111

c. He was employed as the debtor’s accountant until his resignation three (3) years prior to the filing of the petition for rehabilitation.

Question 112

112. One of the following is not a legal consequence of the approval rehabilitation plan by the court:
     a. The plan and its provisions shall be binding upon the debtor and all persons who may be affected thereby, excluding the creditors who have not participated in the proceedings, or opposed the plan, or their claims have not been scheduled.
     b. The debtor shall comply with the provisions of the plan and shall take all actions necessary
     to carry out the plan.
     c. Contracts and other arrangements between the debtor and its creditors shall be
     interpreted as continuing to apply to the extent that they do not conflict with the provisions of the plan.
     d. Any compromises on amounts or rescheduling of timing of payments by the debtor shall be
     binding on creditors regardless of whether or not the plan is successfully implemented.

Answer 112

a. The plan and its provisions shall be binding upon the debtor and all persons who may be affected thereby, excluding the creditors who have not participated in the proceedings, or opposed the plan, or their claims have not been scheduled.

Question 113

113. Which of the following is a characteristic of a pre-negotiated rehabilitation?
     a. It must be filed jointly by the debtor and any of its creditors.
     b. It requires the approval of the creditors holding at least 3/4 of the total liabilities of the
     debtor.
     c. It requires the approval of the secured creditors and unsecured creditors holding at least 50% of the total secured claims and total unsecured claims, respectively.
     d. None of the foregoing.

Answer 113

d. None of the foregoing.

Question 114

114. The term “securities” does not include:
     a. Shares of stock
     b. Voting trust certificates
     c. Lease contracts
     d. Bonds

Answer 114

c. Lease contracts

Question 115

115. Which of the following statements is false?
     a. A “broker” is a person who is engaged in the buying and selling of securities for the
     account of others.
     b. A “dealer” is a person who is casually engaged in the buying and selling of
     securities for his own account.
     c. An “associated person of a broker or dealer” does not include the employees of the broker
     or dealer whose functions are solely clerical or ministerial.
     d. An “associated person of a broker or dealer” does not include his salesmen performing
     non-discretionary functions.

Answer 115

b. A “dealer” is a person who is casually engaged in the buying and selling of
securities for his own account.

Question 116

116. Which of the following statements relative to the Commissioners of the Securities and Exchange Commission (SEC) is false?
     a. They are appointed by the President of the Philippines to serve a 7-year term each.
     b. They must all be natural-born citizens of the Philippines.
     c. At least three (3) of the Commissioners must be members of the Philippine Bar.
     d. None of the foregoing.

Answer 116

d. None of the foregoing.

Question 117

117. Which of the following cases falls under the jurisdiction of the SEC?
     a. Petition for insolvency where the corporation, partnership or association has no sufficient assets to cover its liabilities.
     b. Petition for suspension of payments where the corporation, partnership or association
     having sufficient assets to cover its liabilities foresees the impossibility of meeting them as
     they fall due.
     c. Intra-corporate or partnership controversies.
     d. None of the foregoing.

Answer 117

d. None of the foregoing.

Question 118

118. One of the following securities must be registered with the SEC:
     a. Securities issued or guaranteed by the Philippine government
     b. Certificates issued by a trustee in bankruptcy duly approved by the proper adjudicatory body
     c. Bank’s own shares of stock
     d. None of the foregoing

Answer 118

119. The sale of securities requires SEC registration where the qualified buyer is a;
     a. Bank
     b. Investment company
     c. Insurance company
     d. None of the foregoing

Question 119

119. The sale of securities requires SEC registration where the qualified buyer is a;
     a. Bank
     b. Investment company
     c. Insurance company
     d. None of the foregoing

Answer 119

d. None of the foregoing

Question 120

120. Which of the following statements is false?
     a. A”pre-need plan” includes life, pension, education, and interment plans.
     b. All “commodity future contracts” are gambling and against public policy.
     c. A “tender offer” is an offer to acquire at least 15% of any class of any equity security of a
     listed corporation by filing a declaration to that effect with the SEC.
     d. None of the foregoing

Answer 120

b. All “commodity future contracts” are gambling and against public policy.

Question 121

121. An “insider trading” is unlawful where:
     a. The insider communicates material nonpublic information about the issuer or
     the security to any person, knowing or believing that such person will buy or
     sell the security of the issuer by reason of the information.
     b. The insider proves that the information was not gained from his relationship with the issuer of the securities.
     c. The insider has reason to believe that the other party who is identified is also in possession of the information.
     d. The insider shows that the information is not material non-public information

Answer 121

a. The insider communicates material nonpublic information about the issuer or
the security to any person, knowing or believing that such person will buy or
sell the security of the issuer by reason of the information.

Question 122

122. Which of the following persons is exempted from registration with the SEC before he engages in the business of buying and selling of securities in the Philippines?
     a. Brokers and dealers
     b. Associated persons of broker or dealer
     c. Salesmen of broker or dealer
     d. None of the foregoing

Answer 122

d. None of the foregoing

Question 123

123. X borrowed the certificates of stock of Y to be used as security for a loan. Thereafter, the market price of the shares zoomed up and X sold the said shares in the trading market. X returned the amount equivalent to the par value of the shares to Y and pocketed the profit he made from the sale. This transaction is what is known as:
     a. Wash sale
     b. Short sale
     c. Insider trading
     d. None of the foregoing

Answer 123

d. None of the foregoing

Question 124

124. X connived with several brokers to engage among themselves in the buying and selling of his securities in order to create a false appearance of active trading with respect to his securities at the stock exchange. This transaction is what is known as:
     a. Wash sale
     b. Short sale
     c. Insider trading
     d. None of the foregoing

Answer 124

a. Wash sale

Question 125

125. An “Exchange” is an organized marketplace or facility that brings together buyers and sellers and executes trades of securities and/or commodities. Which of the following is uncharacteristic of an “Exchange?”
     a. It may be incorporated as a stock or non- stock entity.
     b. It must be engaged solely in the business of operating an exchange, unless exempted
     under the rules and regulations adopted by the SEC.
     c. The brokers in the board of the Exchange shall comprise of not more than 49% of such
     board.
     d. None of the foregoing.

Answer 125

a. It may be incorporated as a stock or non- stock entity.