Corporations

Question 1

A corporation commences to have juridical personality on:

A. The date of the submission of articles of incorporation to SEC
B. The meeting of the minds of the incorporators
C. Upon issuance of the certificate of incorporation
D. Upon submission of bylaws to SEC

Answer 1

C. Upon issuance of the certificate of incorporation

Question 2

The legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded and the corporation will be considered as a mere association of persons, such that liability will attach directly to the officers and the stockholders.

A. Doctrine of Separate Personality
B. Theory of Concession
C. Doctrine of Piercing the Veil of Corporate Fiction
D. Doctrine of Limited Liability

Answer 2

C. Doctrine of Piercing the Veil of Corporate Fiction

Question 3

One of the distinctions between a partnership and a corporation is that a partnership

A. Is managed by board of directors
B. Is characterized by the principle of delectus personae
C. Has the right of succession
D. May be dissolved only with the consent of the state

Answer 3

B. Is characterized by the principle of delectus personae

Question 4

Which of the following acts may be done by an executive committee

A. Filing of vacancies in the board
B. Declaration of cash dividends
C. Amendment of bylaws
D. Approval of a lease contract for 5 years

Answer 4

D. Approval of a lease contract for 5 years

Question 5

It is an act committed outside the purpose for which a corporation is created as defined by the law and its organization, therefore beyond the powers conferred upon it.

A. Ultra vires act
B. Unenforceable act
C. Both A and B
D. None of the above

Answer 5

A. Ultra vires act

Question 6

Purely ultra vires acts of the officers of a corporation to invest corporate funds in another business or corporation, i.e., acts not contrary to law, morals, public policy may be ratified by:

A. Majority vote to all members of the board
B. Stockholders with 1/2 of voting power
C. Stockholders holding 2/3 of the voting power
D. Majority vote of the board present

Answer 6

C. Stockholders holding 2/3 of the voting power

Question 7

X Corp., whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corp., an investment firm, through a resolution of its Board of Directors. The investment grew tremendously on account of Y Corp.’s excellent business judgement. But a minority stockholder in X Corp. assails the investment as ultra vires. Is he right and, if so, what is the status of the investment?

A. Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders’ ratification
B. Yes, it is an ultra vires act of its Board of Directors and thus void
C. Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders’ ratification
D. Yes, it is an ultra vires act of the corporation itself and, consequently, void

Answer 7

A. Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders’ ratification

Question 8

A corporation shall exist for a period not exceeding ___ years from the date of incorporation unless sooner dissolved or unless said period is extended.

A. 50
B. 75
C. 100
D. Private corporation has perpetual existence

Answer 8

D. Private corporation has perpetual existence

Question 9

Which is the effect of the failure of a private corporation to renew its corporate term within the deadline set by the Revised Corporation Code?

A. It will make such private corporation a de facto corporation
B. Such private corporation will be liable for fine before it may be able to renew its corporate term
C. Such private corporation is ip so facto dissolved by operation of law
D. Such failure will be a ground for court-ordered court dissolution

Answer 9

C. Such private corporation is ip so facto dissolved by operation of law

Question 10

May rightfully question an ultra-vires act of a corporation, except

A. Stockholders
B. State
C. Competitors
D. Creditors, if fraud is charged

Answer 10

C. Competitors

Question 11

Under the Revised Corporation Code, which of the following statements is false?

A. Two corporations may form another corporation
B. An individual can form a corporation
C. Individuals can form a corporation to practice their profession if provided under special law
D. Incorporators must be residents of the Philippines and shall not exceed 15

Answer 11

D. Incorporators must be residents of the Philippines and shall not exceed 15

Question 12

Preferred shares are entitled to vote in the following matters, except:

A. Amendment of bylaws
B. Increase of capital stock
C. Entering into a management contract
D. Dissolution of corporation

Answer 12

C. Entering into a management contract

Question 13

ABC Co. is a proposed corporation with authorized capital stock of P60,000 and actual subscribed capital stock of P32,000. What is the minimum paid up capital of this corporation?

A. P5,000
B. P8,000
C. P3,750
D. The Revised Corporation Code does not require minimum paid-up capital

Answer 13

D. The Revised Corporation Code does not require minimum paid-up capital

Question 14

The minimum amount of paid-up capital in case of increase in authorized capital stock under the Revised Corporation Code is:

A. 25% of the subscription but not less than 5,000
B. 25% of the subscription
C. There is no longer a minimum paid-up capital requirement
D. Not less than 5,000

Answer 14

B. 25% of the subscription

Question 15

A stock that is issued without consideration or below par value or the issued price is known as:

A. Watered stock
B. Delinquent stock
C. Redeemable stock
D. Preferred stock

Answer 15

A. Watered stock

Question 16

Non-voting shares may vote in case of (a) sale or disposition of all or substantially all of corporate property, (b) merger or consolidation of corporation, (c) investment of funds in another corporation or another business purpose, and (d) corporate dissolution.

A. All except d
B. All except c
C. All except b
D. All of them

Answer 16

D. All of them

Question 17

Which type of corporation is allowed to issue no-par value common shares?

A. Public utility
B. Insurance company
C. Educational institution
D. Banks

Answer 17

C. Educational institution

Question 18

Which shares of stocks may be issued a price lower than P5.00 per share?

A. Par value shares
B. No-par value shares
C. Both A and B
D. Neither A nor B

Answer 18

A. Par value shares

Question 19

A corporation may acquire its own shares for a legitimate purpose provided it has unrestricted retained earnings. In which of the following acquisition is the requirement of unrestricted retained earnings not imposed?

A. When the acquisition is made to eliminate fractional shares
B. When delinquent shares are acquired in a delinquency sale
C. When redeemable shares are repurchased in accordance with the terms provided in the articles of incorporation
D. When shares are acquired from stockholders who exercise their appraisal right

Answer 19

C. When redeemable shares are repurchased in accordance with the terms provided in the articles of incorporation

Question 20

Which of the following corporations do not require a favorable recommendation from the appropriate government agency?

A. Pawnshops
B. Educational institutions
C. Banks
D. Pre-needed companies

Answer 20

B. Educational institutions

Question 21

First statement: The articles of incorporation has been described as one that defines the charter of the corporation and the contractual relationship between the State and the corporation, the stockholders and the State, and between the corporation and its stockholders.

Second statement: No corporate name may be allowed by SEC if it is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws.

A. Only the first statement is true
B. Only the second statement is true
C. Both statements are true
D. Both statements are false

Answer 21

C. Both statements are true

Question 22

A is a Certified Public Accountant; B is a lawyer; while C is a mechanical engineer. They want to put up a business for the purpose of exporting dried fish. What kind of business organization may the three of them establish for such purpose?

A. Partnership only
B. Corporation only
C. Either partnership or corporation
D. Neither partnership or corporation

Answer 22

C. Either partnership or corporation

Question 23

What is the vote required in an amendment of the articles of incorporation?

A. Majority vote of the BOD
B. Majority vote of the outstanding capital stock
C. Majority vote of the BOD + majority vote of the outstanding capital stock
D. Majority vote of the BOD + 2/3 vote of the outstanding capital stock

Answer 23

C. Majority vote of the BOD + majority vote of the outstanding capital stock

Question 24

What vote is needed to change the name of LOVE Corporation to HEARTBROKEN Corporation?

A. Majority of the Board of Directors
B. Majority of the Board of Directors and outstanding capital stock
C. Majority of the Board of Directors and 2/3 of the outstanding capital stock
D. Majority of the Board of Directors and 2/3 of the outstanding common stock

Answer 24

C. Majority of the Board of Directors and 2/3 of the outstanding capital stock

Question 25

For the adoption of by-laws by the corporation, the affirmative vote of the stockholders representing at least a ___ of the outstanding capital stock, or of at least a majority of the members in case on nonstock corporations, shall be necessary.

A. 1/2
B. 2/3
C. 3/4
D. Majority

Answer 25

D. Majority

Question 26

The stockholders may delegate to the directors the power to amend the by-laws by the vote of:

A. 2/3 of the outstanding common stock
B. Majority of the outstanding stock
C. Majority of the outstanding common stock
D. The stockholders cannot delegate the power to amend the by-laws to the stockholders

Question 27

What is the required vote for the revocation of the power given to the board of directors to amend the by-laws of the corporation?

A. At least majority vote of the outstanding capital stock
B. At least 2/3 vote of the outstanding capital stock
C. At least majority vote of the board of directors and ratification by at least majority vote of the outstanding capital stock
D. At least majority vote of the board of directors and ratification by at least 2/3 vote of the outstanding capital stock

Answer 27

A. At least majority vote of the outstanding capital stock

Question 28

Will require stockholders 2/3 approval

A. Election of corporate officers
B. Election of members of the board
C. Granting of authority to the board to amend the by-laws
D. Amendment of by-laws

Answer 28

C. Granting of authority to the board to amend the by-laws

Question 29

The certificate of incorporation of a corporation shall be deemed revoked if it does not formally organize within how many years from the date of its incorporation?

A. 2 years
B. 3 years
C. 5 years
D. 10 years

Answer 29

C. 5 years

Question 30

When a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for at least ___ consecutive years, the SEC may, after due notice and hearing, place the corporation under delinquent status.

A. 5
B. 4
C. 3
D. 2

Answer 30

A. 5

Question 31

Consolidation differs from merger in that in consolidation:

A. The surviving corporation shall enjoy all the rights, powers and attributes of a corporation under the Corporation Code
B. The existing liabilities of the constituent corporations shall be assumed by the surviving corporation
C. The corporate existence of all the constituent corporations shall be extinguished and a new corporation emerges
D. The surviving corporation shall possess all the rights, privileges , immunities and franchises of the constituent corporations

Question 32

ABC Corp. increased its capital stocks from Php 10 million to Php 15 million and, in the process, issued 1,000 new shares divided into Common Shares “B” and Common Shares “C”. T, a stockholder owning 500 shares, insists on buying the newly issued shares through a right of pre-emption. The company claims, however, that its By-laws deny T any right of pre-emption. Is the corporation correct?

A. No, since the By-laws cannot deny a shareholder his right of pre-emption
B. Yes, but the denial of his pre-emptive right extends only to 500 shares
C. Yes, since the denial of the right under the By-laws is binding on T
D. No, since pre-emptive rights are governed by the articles of incorporation

Answer 32

D. No, since pre-emptive rights are governed by the articles of incorporation

Question 33

The rule is that no stock dividend shall be issued without the approval of stockholders representing at least 2/3 of the outstanding capital stock at a regular or special meeting called for the purpose. As to other forms of dividends:

A. A mere majority of the entire Board of Directors applies
B. A mere majority of the quorum of the Board of Directors applies
C. A mere majority of the votes of stockholders representing the outstanding capital stock applies
D. The same rule of 2/3 vote applies

Question 34

The following are requisites except one, for valid declaration and/or issuance of stock dividend.

A. Existence of the original and unissued shares
B. Existing unrestricted retained earnings
C. Dividends declaration by the Board of Directors and approved by 2/3 vote of the outstanding capital stock
D. It is issued to increase the authorized capital

Question 35

It is the right of existing stockholders to purchase or subscribe to all issuances or disposition of shares of any classes, in proportion to their respective stockholders, before such shares are offered to the public.

A. Appraisal right
B. Pre-emptive right
C. Subscription right
D. Dissenting right

Question 36

ABC Corporation has an authorized capital stock of P 1M dividend into 50,000 common shares and 50,000 preferred shares. At its inception, the corporation offered for subscription all the common shares, however, only 40,000 shares were subscribed. Recently, the directors thought of raising additional capital and decided to offer to the public all the authorized shares at their market value. Would X, the stockholder of 4,000 shares, have pre-emptive right to the remaining 10,000 common shares?

A. Yes, because all stockholders have pre-emptive rights to all issues of shares of any class in proportion to their shareholdings
B. No, because pre-emptive right does not apply to unissued shares to be issued
C. Yes, because pre-emptive right applies only to the issuance of unissued shares
D. No, because pre-emptive right does not apply to shares that are being reoffered by the corporation

Question 37

ABC Corporation has an authorized capital stock of P 1M dividend into 50,000 common shares and 50,000 preferred shares. At its inception, the corporation offered for subscription all the common shares, however, only 40,000 shares were subscribed. Recently, the directors thought of raising additional capital and decided to offer to the public all the authorized shares at their market value. Would X, the stockholder of 4,000 shares, have pre-emptive right to the 50,000 preferred shares?

A. Yes, because all stockholders have pre-emptive rights to all issues of shares of any class in proportion to their shareholdings
B. No, because pre-emptive right does not apply to unissued shares to be issued
C. Yes, because pre-emptive right applies only to the issuance of unissued shares
D. No, because X has waived his pre-emptive rights to the issuance of preferred shares when he subscribed to the common shares

Question 38

X Corporation is engaged in selling pencils on whole sale basis. It is merely renting a bodega and 90% of its assets consist of its stock of pencils. Mr. A, a school supply dealer, wanted to purchase all of the stocks of X Corporation. What is the vote required before this transaction could push through?

A. 2/3 vote of the outstanding capital stock
B. 2/3 vote of the outstanding capital stock and majority vote of the BOD
C. Majority vote of BOD
D. No voting required for this specific transaction

Question 39

Statement 1: No management contract shall be entered into for a period longer than five years for any one term.
Statement 2: The power to amend the articles of incorporation lies with the stockholders or members directly or indirectly by delegating said power to the board of directors of trustees.

A. Both are true
B. Both are false
C. Only the first is true
D. Only the second is true

Question 40

First statement: As a general rule, stock corporations are prohibited from restraining surplus profits in excess of one hundred percent (100%) of their paid-in capital.
Second statement: In a corporation, two or more positions may be held concurrently by the same person except that no one person shall act as president and chairman of the board.

A. Both statements are true
B. Both statements are false
C. Only the first statement is true
D. Only the second statement is true

Question 41

When 3 CPAs put up a business and the purpose of incorporation is to exercise their profession, what kind of business organization may the three of them establish for such purpose?

A. Partnership only
B. Corporation only
C. Either partnership or corporation provided there’s a special law
D. Neither partnership nor corporation

Answer 41

C. Either partnership or corporation provided there’s a special law