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Law on Corporation - GENPROV Flashcards

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1
Q

What are the attributes of an corporation?

A

Artificial Being
Created by operation of law
Right of succession, has powers, attributes and properties
Expressly authorized by law or incidental to its existence

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2
Q

Corporation is treated by law as a person SEPARATE AND DISTINCT from the investors or incorporators forming it.

True or False?

A

True, it is called Doctrine of Corporate Entity

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3
Q

The corporation is liable for acts or contracts that are entered into in the name of the corporation

True or False?

A

True

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4
Q

If a stockholder has a debt to X, can X sue the corporation?

A

NO, even if the stockholder is the president

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5
Q

Corporations can enter into contracts in its own name

True or False?

A

True

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6
Q

Corporations can sue and be sued

True or False?

A

True

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7
Q

Corporations can own properties

But because you’re a stockholder, that does not already make you a co-owner of a specific property in a corporation

True or False?

A

True

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8
Q

Corporation has the right of succession

Corporation will continue even with the change in the membership or change of stockholders.

True or False?

A

True

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9
Q

The debts of the corporation are not the debts of its stockholders, nor are the debts of the stockholders the debts of the corporation.

True or False?

A

True

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10
Q

The stockholders are not the owners of the assets of the corporation but have only an indirect interest therein.

True or False?

A

True

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11
Q

In connection with corporate property or affairs, stockholders cannot maintain actions in their own name and they have no right to recover possession of property belonging to the corporation or to recover damages for injury thereto:

True or False?

A

True

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12
Q

In taxation, the income of the corporation is not the income of the stockholders who may still be required to pay taxes on the dividends they may derive from such income.

True or False?

A

True

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13
Q

Under Doctrine of piercing the veil of corporate entity

When do we apply the doctrine of piercing the veil of a corporate entity?

A

When corporation is used as a ‘Shield for FRAUD’

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14
Q

What is the general rule in Corporation?

A

GR: Corporation is SEPARATE AND DISTINCT

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15
Q

What is the exemption to the general rule in Corporation?

A

A creditor can go after the GUILTY director or officer

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16
Q

When do we apply the doctrine of piercing the veil of a corporate entity?

A

When corporation is used as a ‘Shield for FRAUD’
*Court can now remove the barrier between the corporation and the directors of the corporation
* To make the guilty directors/ officers liable for the fraud committed

In short:
Separate Juridical Personality of the Corporation is DISREGARDED

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17
Q

ABC Corporation borrowed money from X. If X would want to demand payment from ABC Corp. Can he go to the BOD of the Corp?

A

No, only in ABC Corp

Because of doctrine of corporate entity

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18
Q

ABC Corporation borrowed money from X. If X would want to demand payment from ABC Corp. If the BOD decided that they don’t want to pay X even if they have sufficient assets. Therefore, the BOD decided to dissolved the Corp and created another one to avoid paying X. Can X go to the BOD of the Corp?

A

Yes, because there is FRAUD

Doctrine of piercing the veil of corporate entity can ba use

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19
Q

Supposing A has several creditors and he is insolvent. A does not want to pay any of them. A then go and create a corporation and transfer all of his assets making the creditors hard to collect the debt from him. Can creditors now go to A directly and not only to the Corporation?

A

Yes

However
Creditors will have the burden of proof
- Principle that ‘He who alleges must prove’

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20
Q

Unlike partnerships, corporations do not come into existence by the mere agreement of the parties. They require special authority from the sovereign power.

True or False?

A

True

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21
Q

A corporation, being a mere creation of the law, operates under the doctrine of limited capacity. Hence, it can only perform acts within the powers expressly granted to it by its charter, those implied from such powers expressly conferred, and those that are incidental to its existence. Any act performed beyond the range of such powers is considered ultra vires.

True or False?

A

True

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22
Q

What are the similarities of partnership and corporation?

A

a. Both have a separate juridical personality.

b. Both are artificial persons, i.e., they have no bodily existence, and can only act through agents.

c. Both are composed of a group of persons with the exception of a corporation sole and One Person Corporation (OPC).

d. A partnership, with the exception of a general professional partnership, is taxed as a corporation.

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23
Q

What are the distinctions of partnership and corporation?

A

a. Manner of creation
b. Number of organizers
c. Right of succession
d. Powers
e. Management
f. Liability of members for debts
g. Commencement of existence
h. Transferability of interest
i. Dissolution

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24
Q

Under the distinctions of partnership and corporation

a. What are their manner of creation?

A

A corporation is created by operation of law, while a partnership is created by the mere agreement of the partners.

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25
Q

Under the distinctions of partnership and corporation

a. What are their number of organizers?

A

A corporation may be formed singly or jointly with others, but the number should not exceed 15.

A partnership may be formed by two or more persons.

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26
Q

Under the distinctions of partnership and corporation

a. What are their right of succession?

A

A corporation has the right of succession, while a partnership has no such right.

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27
Q

Under the distinctions of partnership and corporation

d. What are their powers?

A

A corporation can exercise only the powers expressly authorized by law, those implied from the exercise. of such express powers, and those incidental to its existence.

A partnership may exercise any power provided it is authorized by the partners and it is not contrary to law, morals good customs, public order or public policy.

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28
Q

Under the distinctions of partnership and corporation

e. What are their management?

A

A corporation acts through its board of directors, while a partnership acts through all the general partners each one of whom is considered an agent of the partnership, unless otherwise agreed.

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29
Q

Under the distinctions of partnership and corporation

f. What are the liability of members for debts?

A

The stockholders or members are not liable for the obligations of the corporation

While the general partners of a partnership are liable with their separate property for partnership debts.

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30
Q

Under the distinctions of partnership and corporation

g. What are their commencement of existence?

A

A corporation commences to have juridical personality on the date of the issuance of its certificate of incorporation.

A partnership, on the other hand, commences to have juridical personality upon the execution of the, partnership contract unless a different date is set by the partners.

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31
Q

Under the distinctions of partnership and corporation

h. What are their transferability of interest?

A

In a corporation, a stockholder can transfer his shares to another person without the consent of the other stockholders.

In a partnership, a partner cannot transfer his interest to a third person for the purpose of making the latter a partner without the consent of the other partners (Art. 1813), by reason of the element of delectus personae which is inherent in a partnership contract.

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32
Q

Under the distinctions of partnership and corporation

i. In terms of dissolution?

A

A corporation cannot be dissolved without the consent of the State, while a partnership may be dissolved by the partners.

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33
Q

What are the two classes of corporations in general?

A

Stock and Non-Stock Corp

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34
Q

One that has capital stock divided into shares and is authorized to distribute dividends or allotments of surplus profits on the basis of the shares held.

A

Stock Corporation

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35
Q

One no part of the income of which is distributable as dividends to its members, trustees or officers.

A

Non- Stock Corporation

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36
Q

Classes of Corporation

As to the state or country under whose laws it was created

A

a. Domestic corporation
b. Foreign corporation

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37
Q

One incorporated under Philippine laws (or one operating within the country under whose laws it was incorporated).

A

Domestic corporation

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38
Q

One formed, organized and existing under any laws other than those of the Philippines and. whose laws allow Filipino citizens and corporations to do business in its own country or State.

A

Foreign corporation

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39
Q

What are the tests to determine nationality of a corporation?

A

1) Incorporation test
2) Control test
3) Business domiciliary test

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40
Q

This is the test where the nationality of a corporation follows that of the country under whose laws it was incorporated.

A

Incorporation test

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41
Q

This is a test where the nationality of a corporation follows that of the stockholders owning the controlling interest.

A

Control Test

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42
Q

This is a test where the nationality of a corporation is that of the country where its principal business is conducted.

A

Business domiciliary test

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43
Q

A method by which the percentage of Filipino equity in corporations engaged in nationalized and/or partly nationalized areas of activities, provided for under the Philippine Constitution and other nationalization laws; is accurately computed, and the diminution of such equity prevented.

A

Grandfather Rule

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44
Q

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality, “ pertains to the control test or liberal rule.

True or False?

A

True

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45
Q

If the percentage of the Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as Philippine nationality,” pertains to the stricter, more stringent grandfather rule.

True or False?

A

True

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46
Q

What are under the classes of corporations as to number of persons composing them?

A

a. Corporation aggregate
Corporation sole

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47
Q

One that is composed of more than one corporator

A

Corporation aggregate

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48
Q

One composed of only one person, like a bishop or a rabbi, or a “One Person Corporation”.

A

Corporation sole

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49
Q

What are the classes of corporations under purposes?

A

a. Public corporation
b. Private corporation

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50
Q

One that is organized for the government of a portion of the State, like provinces, cities, municipalities and barangays.

A

Public corporation

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51
Q

One that is formed for a private purpose or end, like San Miguel Corporation.

A

b. Private corporation

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52
Q

What includes private corporations?

A

1) Government-owned or controlled corporations
2) Quasi-public corporations

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53
Q

These refer to corporations created by special law (Sec. 4, RCC) other than those for the government of a portion of the State, such as the Land Bank, Government Service Insurance System, Philippine Postal Corporation, etc., and those formed under the Revised Corporation Code, where the government owns at least a majority of its outstanding voting capital stock. They may be performing governmental or proprietary function.

A

Government-owned or controlled corporations

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54
Q

Those organized for profit which are granted a franchise by the State to perform public service, such as Meralco.

A

Quasi-public corporations

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55
Q

What are the classes of corporation under the purpose of religious or not?

A

a. Ecclesiastical or religious corporation
b. Lay corporation

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56
Q

One formed for a religious purpose.

A

Ecclesiastical or religious corporation

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57
Q

One formed for a purpose other than ecclesiastical or religious.

A

Lay corporation

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58
Q

Under what classes of corporation where the purpose is charitable or not?

A

a. Eleemosynary corporation charity.
b. Civil corporation

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59
Q

One organized for public

A

a. Eleemosynary corporation charity

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60
Q

One organized for business or profit.

A

b. Civil corporation

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61
Q

What classes of corporation under their legal right to corporate existence?

A

a. De jure corporation
b. De facto corporation

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62
Q

One that has been created in strict compliance with all the legal requirements and whose.right to exist as a corporation cannot be successfully attacked in a direct proceeding for that purpose by the State.

A

De jure corporation

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63
Q

One that is defectively created but there is an actual exercise of corporate rights and franchise resulting from an attempt in good faith to incorporate on the part of the members. It has all the powers of a de jure corporation but its due existence can be attacked directly in a quo warránto proceeding.

A

De facto corporation

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64
Q

What classes of corporation under their relation to another corporation or other corporations?

A

a. Parent or holding corporation
b. Subsidiary corporation

65
Q

One which owns the shares of another corporation and having the power, directly or indirectly, over the latter including the election of the directors thereof.

A

Parent or holding corporation

66
Q

One whose shares of stock are owned by another corporation, called the parent corporation, which has the power to elect its directors/

A

Subsidiary corporation

67
Q

What classes of corporation where its shares may be held by the public or not?

A

a. Close corporation
b. Open corporation

68
Q

What are the classes of corporation under other classifications?

A

a. Corporation by prescription
b. Corporation by estoppel

69
Q

One which has exercised corporate powers for such a length of time without interference from the State and which, by fiction of law, is given the status of a corporation, such as the Roman Catholic Church.

A

Corporation by prescription

70
Q

One which is not in reality a corporation but is considered as one with respect to those who are precluded by their admission or conduct from denying its existence.

A

Corporation by estoppel

71
Q

Under Corporations created by SPECIAL CHARTERS

The primary law governing corporations created by special law or charters will be the law creating them.

True or False?

A

True

RCC will apply suppletorily

Ex: GOCCs

72
Q

What are the components of a Corporation?

A
  1. Corporators
  2. Stockholders
  3. Members
  4. Incorporators
73
Q

Those who compose a corporation, whether a stockholders or members.

A

Corporators

very broad term
all those who compose the corporation

74
Q

Corporators of a stock corporation.

  • can be natural or juridical persons
A

Stockholders

75
Q

Corporators of a non-stock corporation.

A

Members

76
Q

Those stockholders or members mentioned in articles of incorporation as originally forming and composing corporation and are signatories of such document.

A

Incorporators

77
Q

One’s name may be mentioned in the articles of incorporation, but if he is not identified as an incorporator and is not a signatory thereto, what is he?

A

He is mere subscriber or member. Or an individual may be a signatory to the articles of incorporation but is not an incorporator if he is merely signing the articles to represent an incorporator which is not a natural person.

78
Q

Is a person, natural or juridical, who usually discovers a prospective business and brings persons interested to invest in it through the formation of a corporation.

A

Promoter

79
Q

Although the law does not require the services of a promoter as a precondition to incorporation; a promoter facilitates the creation of the corporation by negotiating contracts for its initial operations including subscriptions to its capital stock, incorporating the business, and helping management start operations.

True or False?

A

True

80
Q

Those who promise to purchase shares

A

Subscribers
* They are not considered stockholders
* To be considered as stockholder, you should fully pay for the shares subscribed.

81
Q

An investment banker who has agreed to purchase an entire issue of shares or a substantial portion of issued shares.

Perhaps promised to market the shares

A

Underwriter

82
Q

The amount specified in the articles of incorporation paid in, or procured to be paid in for the carrying on of the business of the corporation.

A

Capital stock

83
Q

What are the different kinds of capital stock?

A

a. Authorized capital stock
b. Subscribed capital stock
c. Outstanding, capital stock
d. Paid-up capital stock
e. Unissued capital stock

84
Q

The total amount of shares which a corporation is allowed to issue if the shares have par value. If the shares do not have par value, the corporation does not have an authorized capital stock which is an amount. What it has is the authorized number of no- par shares that it may issue. Once issued, the corporation shall have a capital stock with the corresponding amount, but not an authorized capital stock.

A

Authorized capital stock

85
Q

This is the part of the capital stock which is subscribed, whether paid or unpaid.

A

Subscribed capital stock

For legal purposes, all shares subscribed whether or not fully or partially paid are already considered issued. This is evident from the definition of outstanding capital stock in Sec. 173.

86
Q

This refers to the total shares of stock issued to subscribers or stockholders, whether fully or partially paid (as long as there is a binding subscription contract), except treasury shares.

A

Outstanding, capital stock

87
Q

The part of the, subscribed capital stock paid to the corporation.

A

Paid-up capital stock

88
Q

That part of the capital stock which is not issued or subscribed.

A

Unissued capital stock

89
Q

Refers to the total par value of all issued par value shares, or the total cash or consideration received for all issued no- par value shares.

A

Legal capital

90
Q

The capital with which the corporation issuing shares without par value begins business, increased by any additions thereto, or diminished by any deductions therefrom.

A

Stated capital

91
Q

Refers to the actual property of the corporation in money and other property.

A

Capital

92
Q

Is one of the units into which the capital stock is divided. It represents the intangible interest or right which an owner has in the management, profits, and assets of the corporation. It is property subject to conversion.

A

Share of stock

93
Q

This is the basis:

  • Of participation
  • In the share of dividends
  • In the share of corporation assets after liquidation
A

Share of stock

94
Q

Can a corporation issue several classes of shares?

A

Yes

95
Q

Under Distinguished from stock certificate

Share of stock represents the rights and interest of a stockholder in a corporation. Stock certificate is the written evidence of such rights and interest.

True or False?

A

True

96
Q

Under Distinguished from stock certificate

Share of stock is intangible personal property, while stock certificate is tangible personal property.

True or False?

A

True

97
Q

Under Distinguished from stock certificate

Share of stock may be issued even if not fully paid, except shares without par value which are deemed fully paid and non-assessable upon issuance. Stock certificate is issued only if the subscription is fully paid.

True or False?

A

True

98
Q

A corporation has the power to classify shares

True or False?

A

True

99
Q

All shares are presumed EQUAL unless otherwise stated

True or False?

A

True

100
Q

As a general rule, when a corporation issues series of shares, all of the shares must have complete voting rights

True or False?

A

True

101
Q

As a general rule, when a corporation issues series of shares, all of the shares must have complete voting rights.

What is the exception?

A

When they are preferred shares or redeemable shares

102
Q

What are the classes of stocks?

A
  1. Common stock
  2. Preferred stock
  3. Par value stock
  4. No-par value stock
  5. Redeemable shares
  6. Founders’ shares
  7. Treasury shares
  8. Watered stock
  9. Voting stock corporation
  10. Nonvoting stock
103
Q

The ordinary stock of a corporation that entitles the holder to a pro rata division of the dividends, without any preference or advantage over other stockholders.

A

Common stock

104
Q

One that entitles the holder to certain preferences over other stockholders.

A

Preferred stock

They can only be issued with PAR VALUE

105
Q

Such preferences may be as what?

A

a. Preferred stock as to asset
b. Preferred stock as to dividends

106
Q

One that entitles the holder to preference in the distribution of assets over common stock upon liquidation of the corporation.

A

Preferred stock as to asset

107
Q

One that entitles the holder to preference in the distribution of dividends over common stock.

A

Preferred stock as to dividends

108
Q

What are the kinds of preferred stock as to dividends?

A

1) Cumulative preferred stock
2) Non-cumulative preferred stock
3) Participating preferred stock
4) Non-participating preferred stock

109
Q

Those which entitle the holder to payment not only of current dividends but also those in arrears, when dividends are declared, to the extent stipulated, before holders of common shares are paid.

A

Cumulative preferred stock

110
Q

Those that entitle the holder to payment of current dividends but not those in arrears, before holders of common shares are paid.

A

Non-cumulative preferred stock

111
Q

Those that entitle the holder to participate with the holders of common shares in the surplus profits after the amount stipulated has been paid to the holders of preferred shares.

A

Participating preferred stock

112
Q

Those that entitle the holders only to the stipulated preferred dividend.

A

Non-participating preferred stock

113
Q

One the nominal value of which appears on the stock certificate.

A

Par value stock

114
Q

One without any nominal or par value appearing on the stock certificate.

A

No-par value stock

115
Q

Banks, trust, insurance, and preneed companies, public utilities, building and loan associations, and other corporations authorized should NOT issue NO-PAR VALUE stock

True or False?

A

True

116
Q

No par value shares should not be less then P5

True or False?

A

True

117
Q

Those that grant the issuing corporation the power to redeem or purchase them after a certain period.

A

Redeemable shares

118
Q

What are the characteristics of redeemable shares?

A

a. They may be issued by the corporation only when expressly provided in the articles of incorporation.

b. They may be deprived of the voting right.

c. They may be purchased by the corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained earrings in the books of the corporation.

d. The, terms and conditions for their purchase must be stated in the articles of incorporation and in the stock certificate representing the said shares.

e They shall be considered as treasury shares unless retired or again disposed of by the corporation.

119
Q

Are shares issued by a corporation, classified as such in the articles of incorporation and which grant the holders thereof certain rights and privileges not enjoyed by other shares such as the exclusive right to vote and be voted for in the election of directors or preference in the distribution of dividends. They are issued to those who established the corporation.

A

Founders’ shares

120
Q

What are the are the limitations on the issuance of founders’ shares?

A

a. They must be classified as such in the articles of incorporation.

b. If the exclusive right to vote and be voted for in the election of directors is granted, it must be for a limited period not to exceed (5) years from the date of incorporation. However, such exclusive right shall not be allowed if its exercise will violate the “Anti-Dummy Law”, the “Foreign Investments Act of 1991”, and other pertinent laws.

c. The grant of such exclusive right to vote and be voted for in the election of directors to the holders of founders’ shares will thus deprive the other shares the right to vote in the election of directors during the term provided for its exercise, although such other shares may not be classified as “preferred” or “redeemable”

121
Q

Those that have been issued and fully paid for, but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful means.

A

Treasury shares

122
Q

What are the following characteristics of a treasury shares?

A

a. They shall have no voting rights as long as they remain in the treasury.

b. Although they are part of the subscribed capital stock, they are not considered as outstanding shares.

c. Since they are hot outstanding for being owned by the corporation, they are not entitled to dividends.

d. They may again be disposed of for a reasonable price fixed by the board of directors.

The price may be less than the par value or the issued price in case of no-par shares provided it is reasonable. By reason of this provision, the shares are not considered as watered stock.

123
Q

Those issued without consideration or for an inadequate consideration.

A

Watered stock

124
Q

Those entitled to vote in meetings of the corporation.

A

Voting stock corporation

125
Q

Those without voting rights, except in certain cases.

A

Nonvoting stock

126
Q

Under power of a corporation to classify its own shares

A corporation may divide its shares into classes or series of shares, or both.

True or False?

A

True

127
Q

Under power of a corporation to classify its own shares

A corporation may divide its shares into classes or series of shares, or both.

Such classification may include what following?

A

a. Voting and nonvoting shares.
b. Common and preferred shares.
c. Par value and no-par value shares.
d. Classification to insure compliance with constitutional or legal requirements.

128
Q

A corporation may classify its shares into Series “A”, which can be subscribed only by Filipinos, and Series “B”, which can be subscribed by both Filipinos and foreigners.

This classification may be resorted to in order that foreign stock ownership would not exceed the maximum, say 40%, as provided by law, for certain corporations.

True or False?

A

True

129
Q

Under power of a corporation to classify its own shares

The classification of shares, their corresponding rights, privileges, or restriction, and their stated par value, if any, must be included in the articles of incorporation.

True or False?

A

True

130
Q

Under power of a corporation to classify its own shares

The classification of shares, their corresponding rights, privileges, or restriction, and their stated par value, if any, must be included in the articles of incorporation.

True or False?

A

True

131
Q

Under the power of a corporation to classify its own shares

Except as otherwise provided in the articles of incorporation and stated in the stock certificate, each share shall be equal in all respects to every other share.

True or False?

A

True

This is referred to as the “doctrine of equality of shares”.

132
Q

What are the limitations on the issuance of non voting shares?

A

a. Only those classified as “preferred” or “redeemable” shares may be deprived of the voting right, unless otherwise provided in the Revised Corporation Code.

b. There shall always be a series or class of shares that have complete voting rights.

c. Non Voting shares may nevertheless vote in following cases

133
Q

An instance when shares may be deprived of the voting right although they are not classified as “preferred or “redeemable” is when founders’ shares are issued where the holders thereof are given the exclusive right to vote and be voted for in the election of directors for a period of five (5) years.

True or False?

A

True

134
Q

Not all the shares may be deprived of the voting right.

True or False?

A

True

135
Q

Non Voting shares may nevertheless vote in what following cases?

A

1) Amendment of the articles of incorporation.

2) Adoption and amendment of bylaws.

3) Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property.

4) Incurring, creating or increasing bonded indebtedness.

5) Increase or decrease of authorized capital stock.

6) Merger or consolidation of the corporation with another corporation or other corporations.

7) Investment of corporate funds in another corporation or business.

8) Dissolution of the corporation.

136
Q

What are the limitations on the issuance of no-par shares?

A

a. Subscriptions to no-par shares shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto.

b. Shares without par value must be issued for a consideration of at least P5.00 per share.

c. The entire consideration received for no-par shares shall be treated as capital and shall not be available for distribution as dividends.

d. Banks, trust, insurance, and preneed companies, public utilities, building and loan associations, and other corporations authorized to obtain or access funds from the public, whether publicly listed or not, shall not be permitted to issue no-par value shares of stock.

137
Q

There should be no “subscription receivable” in the corporate books for no-par shares subscribed.

True or False?

A

True

138
Q

For par value shares, they may be issued for a consideration lower than P5.00 per share, as in the case of some mining shares which have a par value of as low as one centavo (P0.01) per share.

True or False?

A

True

139
Q

When no-par shares are subscribed at a price above the “issued price” (the minimum price at which no- par shares may be issued as provided in Sec. 61 of the RCC), the amount in excess thereof shall likewise be treated as capital.

It is different in the case of par value shares because any consideration received in excess of the par value may be distributed as stock dividends.

True or False?

A

True

140
Q

What are the limitations on the issuance of preferred shares?

A

a. Preferences in the distribution of dividends and in the distribution of corporate assets in case of liquidation, or such other preferences must be indicated in the articles of incorporation.

b. Preferred shares may be issued only with a stated par value.

c. The board of directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares or any series thereof.

d. Such terms and conditions shall be effective upon the filing of a certificate thereof with the SEC.

141
Q

There can be no no-par preferred stock.

True or False?

A

True

142
Q

This shares are:

  • Offered to organizers and promoters
  • Rights not given to others
  • Special privilege
A

Founders Shares

143
Q

What is an example of Founders Shares?

A

Right to be voted on as a director of a corp
Executive right to vote the election of directors

144
Q

What is the limitations in Founders Shares?

A

Only for 5 years
Starting from the date of incorporation

145
Q

Shares already sold by the corporation but have the option to buy back such shares

A

Redeemable/Callable Shares

146
Q

Terms of redemption must be stated in the Articles of Incorporation and in the Certificate of Stock

True or False?

A

True

147
Q

Is the Corporation under obligation to buy back the redeemable shares?

A

No
Only OPTIONAL
May/may not redeem

148
Q

The corporation can redeem even without the existence of unrestricted retained earnings.

True or False?

A

True

149
Q

What is unrestricted retained earnings?

A

Accumulated earnings
Earnings that have not been set aside for a particular corporate purpose. They are FREE earnings

150
Q

What is the general rule regarding redeemable/callable shares?

A

When a Corporation reacquires shares, there must be the existence of unrestricted retained earnings (SEC 40)

151
Q

What is the exemption to the general rule regarding redeemable/callable shares?

A

The corporation can redeem even without the existence of unrestricted retained earnings (SEC 8)

152
Q

What happens when the Corporation buys back the redeemable shares?

A

Shares are retired
The corporation can no longer sell them again, UNLESS otherwise stated in the Articles of Incorporation

153
Q

Shares that have been sold by the corporation and fully paid for, and corporation reacquires them

A

Treasury Shares

154
Q

Treasury shares can also be sell again

True or False?

A

True

155
Q

In treasury shares, there must be unrestricted retained earnings to reacquire the shares

True or False?

A

True (SEC 40)
This will serve as source of money to buy back the shares

156
Q

What is the effect of Reacquisition?

A

Shares become the property of the corp

157
Q

The corporation can sell the treasury shares at a price fixed by the BOD

True or False?

A

True

158
Q

Treasury shares, if unsold, cannot be considered outstanding shares

True or False?

A

True
they do not have the right
It is not being held by the shareholders, it now becomes the property of the Corporation

Business Law and Regulations (9 decks)

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