Pre-Fi and Finals Reviewer

Question 1

What is a stockholder?

Answer 1

is a person who has interest in a corporation by reason of his investment therein. A stockholder is an investor in a stock corporation.

Question 2

2 ways of acquisition of shares.

Answer 2

1. purchase
2. subscription

Question 3

What are the three rights of stockholders?

Answer 3

1. Proprietary Rights
2. Management Rights
3. Remedial Rights

Question 4

These are surplus profits that are not allocated for any purpose. It will be the source of dividends.

Answer 4

Unrestricted retained earnings

Question 5

This is the right to receive dividends; and the right to participate in the assets of the corporation upon dissolution and liquidation.

Answer 5

Proprietary Rights

Question 6

Right of shareholder to vote on all corporate acts; and the right to elect the directors of the corporation.

Answer 6

Management Rights

Question 7

This right of shareholders refers to the appraisal right, pre-emptive right, right to inspect, right to copy of financial statement, and right to file a individual suit, representative suit and derivative suit.

Answer 7

Remedial Rights

Question 8

The only shares that would deprive the common shareholders of voting rights.

Answer 8

Founder’s Share (cannot be exercised if it will violate the Anti-Dummy Law and Foreign Investment Act)

Question 9

Elements of Derivative Suit.

Answer 9

1. SH at the time the acts/transactions subject of action occurred & at the time action was filed.
2. exhaustion of all intra-corporate remedies
3. appraisal right is not available
4. action is not a nuisance or harassment suit

Question 10

Refers to any contract for the acquisition of unissued stock in an existing corporation or the shares of a corporation is still to be formed.

Answer 10

Subscription contract

Question 11

Can a subscription be divided?

Answer 11

No, pursuant to the doctrine of individuality or indivisibility of subscription.

Question 12

What is the status if a corporation commenced its business but subsequently becomes inoperative for a period of at least five (5) consecutive years, the Commission, may, after due notice and hearing, place the corporation under ____.

Answer 12

Delinquent status of a corporation.

Question 13

When a stockholder went out of the country and give his share to other stockholders, the true owner is still the owner of the stock if the same is not registered under Stock and Transfer Book.

Answer 13

Yes. Ownership by transfer must be registered in the Stock and Transfer Book are only person considered as stockholders/subscribers.

Question 14

SUBSCRIPTION for shares of stock still to be formed - shall be irrevocable for a period of at least 6 months from the date of the incorporation. Why irrevocable?

Answer 14

The irrevocability of pre-incorporation subscription contracts prevents a subscriber from speculating on the stocks of a proposed corporation. The rule protects the corporation from financially irresponsible subscribers.

Question 15

In forming a corporation, the State needs to give its consent. If it is given, and one stockholders reneged its responsibilities, it is detrimental to other stockholders.

Answer 15

Theory of Concession

Question 16

Requisites for Valid Use of Non-cash property as consideration for stocks (FANVA)

Answer 16

1. Property must be subject to fair evaluation equal to the par or issued value of the stock issued
2. Property is actually received by the corporation
3. Property is necessary for its use and lawful purposes
4. Valuation shall be determined by the SHs or BOD
5. Valuation is approved by the SEC

Question 17

Is a stock issued for a consideration less than the par or issued price thereof or for a consideration in any form other than cash, valued in excess of its fair value.

Answer 17

Watered Stock

Question 18

Directors or officers of a corporation are liable for watered stocks if they: (3)

Answer 18

1. Consent to the issuance of stocks for a consideration less than its par or issued value;
2. Consent to the issuance of stocks for a consideration in any form other than cash, valued in excess of its fair value;
3. Having knowledge of the insufficient consideration

Question 19

It is a written acknowledgement by the corporation of the stockholder’s interest in the corporation. It is a quasi-negotiable since title can be transferred by indorsement coupled with delivery. But it is non-negotiable since it is payable to a specified person and holder takes it subject to the defenses of the registered owner. It binds the corporation when the transfer is recorded in corporate books.

Answer 19

Certificate of stock and Transfer of shares

Question 20

Can non-par value shares be delinquent when it is issued?

Answer 20

No, it is deemed fully-subscribed. Only par value share can be delinquent. No par value shares requires full payment, and no demand therein.

Question 21

How transfer of shares is made? (3 steps)

Answer 21

1. There must be delivery of the certificate
2. the share certificate must be indorsed by the owner or his agent
3. to be valid between the corporation and third parties the transfer must be recorded in the stock and transfer book

Question 22

Remedies for non-issuance of stock certificate

Answer 22

1. Action for specific performance
2. Action for damages
   3.. Petition for mandamus for issuance of certificate
3. recission of the subscription agreement with the consequent mutual resolution

Question 23

A stock certificate endorsed in blank; one transferable by delivery and the holder is entitled to demand its transfer into his name

Answer 23

Street Certificate