TITLE II INCORPORATION AND ORG SEC.10-21

Question 1

TRUE OR FALSE. Corporations may only last for 50 years but it is renewable. (Sec11)

Answer 1

FALSE. The lifetime of the corporations are not definite or it is perpetual

Question 2

TRUE OR FALSE. The balance to be payable on a date or fixed date in the contract of subscription without need of all, or in absence of a fixed date, upon call for payment by the board of directors.

Answer 2

TRUE. Provided that the in no case the paid-up capital be less than 5,000 pesos.

Question 3

TRUE OR FALSE. Stock corporations shall have a required minimum authorized capital stock.

Answer 3

FALSE. Stock corporations are not required to have a minimum authorized capital stock unless ordered by special laws.

Question 4

TRUE OR FALSE. SEC shall not accept the articles of incorporation of any stock corporation unless accompanied by a sworn statement of the treasurer elected by the subscriber showing that at least 25% of the authorized capital stock has been subscribed and the total subscribed shares have been fully paid by him in a total of 25% of the said subscription, which shall not be less than 5,000.

Answer 4

TRUE

Question 5

What is the amount of capital stock to be subscribed and paid for the purpose of incorporation?

Answer 5

The required subscription of the capital stock is 25% and 25% of the total subscription must be paid

Question 6

TRUE OR FALSE. General rule - all forms of tangible properties are acceptable for payment to subscription provided that it complies with the 3 test of paid-up capital determination which is ownership, existence, and valuable.

Answer 6

TRUE

Question 7

Forms of Articles of Incorporation

Answer 7

Articles of the domestic corporations must substantially supply the following information to SEC.

1. Name of the corporation
2. Specific purpose or purposes
3. The principal office of the Corporation which must be in the Philippines
4. Terms of the existence of the corporation (lifetime)
5. Name, nationalities, and residences of incorporators which must be the majority of Filipino citizen
6. Number of directors and trustees (not less than5 but not more than 15)
7. Names, nationalities, and residences of the board of directors which the majority shall be a Filipino citizen.
8. Amount of authorized capital stock*
9. Nonstock corporation
10. Inclusion of other matters *may include other matters which are not inconsistent with the law but necessary and convenient for the incorporators.

Question 8

TRUE OR FALSE. The due incorporation of any corporation claiming in good faith to be a corporation and its right to exercise corporate powers shall be inquired into collaterally in any private suit to which such corporation may be a party.

Answer 8

FALSE. IT SHALL BE NOT BE INQUIRED INTO COLLATERALLY.

Question 9

TRUE OR FALSE. When any such ostensible corporation is used on any transaction entered by it as a corporation shall not be allowed to use as a defense its lack of corporate personality.

Answer 9

TRUE

Question 10

Commencement of Corporate Existence (Sec19)

Answer 10

A private corporation formed commences from the date SEC issues a certificate of Incorporation under its official seal

Question 11

It is generally referred to as organizations exercising corporate power under the color of a more or less legally constituted corporation.

Answer 11

De facto corporation

Question 12

TRUE OR FALSE. All persons who assume to act as a corporation knowing it to be without authority to do so shall not be liable as general partners for all debts, liabilities, and damages incurred or arising, as a result, therefore.

Answer 12

FALSE. THE CORPORATION WHO ACTED LIKE ONE WITHOUT AUTHORITY TO DO SO SHALL BE LIABLE AS GENERAL PARTNERS.

Question 13

TRUE OR FALSE. The amendment shall take effect upon the change in the decision of the board of directors or shareholders.

Answer 13

FALSE. IT SHALL TAKE EFFECT UPON THE APPROVAL OF SEC OR FROM THE DATE OF FILING WITH SEC.

Question 14

TRUE OR FALSE. A dissenting stockholder may not exercise his appraisal right if he is against the amendment to be made and demand payment of the fair value of his shares.

Answer 14

FALSE

Question 15

Amendment of Articles of Incorporation may refer to:

Answer 15

1. change in the corporate name
2. extension of the term
3. change in classes or series of shares
4. change in rights, privileges, or restrictions in share ownership
5. increase or decrease of the number of directors
6. change in purpose

Question 16

Grounds when articles of incorporation or amendment may be rejected or disapproved. (Sec17)

Answer 16

SEC may reject or disapprove the articles of incorporation or its amendment when it does not comply with the requirements but SEC shall give reasonable time for the corporation to correct the objections.

1. Articles of incorporation or any amendment are not substantially in accordance.
2. The purpose is illegal, immoral, unconstitutional or contrary to government rules and regulation
3. The amount of capital stock subscribed is false
4. The required percentage of ownership of capital stock to be owned by the citizens has not complied.

Question 17

TRUE OR FALSE. The change of the name of the corporation does result in dissolution.

Answer 17

FALSE

Question 18

TRUE OR FALSE. SEC discourages the inclusion of intangible assets as goodwill, lease-hold rights, etc for payment of subscription, but for the increase of capital stock or in exchange for additional issuance of shares are allowed if there has been proof of valid transfer, taxes has been paid, and the properties have been reasonably valued.

Answer 18

TRUE

Question 19

TRUE OR FALSE. Bureau of Industry and Trade may conduct compliance with paid-up capital requirements.

Answer 19

FALSE. SECURITIES AND EXCHANGE COMMISSION MAY TRADE COMPLIANCE WITH PAID-UP CAPITAL REQUIREMENTS.

Question 20

Contents of articles of the incorporations (Sec14)

Answer 20

1. The name of the corporation
2. The specific purpose or purposes of the corporation, if there are many purposes, it shall have a primary purpose except the nonstock corporation which is not required to have a purpose.
3. The principal place of the corporation
4. The term of the existence of the corporation
5. The name, residence, and nationalities of the incorporators.
6. The number of board of directors or trustees shall be at least 5 but not more than 15.
7. The name, residence, and nationalities of the board of directors or trustees until the first regular board of directors or trustees are duly elected.
8. In a stock corporation, the number of authorized capital stock, the number of shares which it is divided, in case if the shares have a par value, then the par value of each share, the name, nationalities, and residence of the subscribers, amount subscribed and paid subscription, if the shares have no par value, it shall be stated.
9. In a nonstock corporation, the amount of the capital, names, nationalities, and residences of the contributors and the amount contributed.

Question 21

What are the number and qualifications of incorporators? (Sec10)

Answer 21

not less than 5 natural persons but not exceeding 15.

All in legal age

The majority are residents of the Philippines

Shall have at least 1 share of capital stock in a stock corporation.

Question 22

What are the capital stock requirements under special law?

Answer 22

1. In the case of mining and agricultural corporations, and the operation of public utilities, is required to have 60% of the capital stock is owned by citizens of the Philippines.
2. Based on the insurance code, a domestic insurance corporation shall have paid-up capital stock worth 2 million pesos before engaging in any business in the Philippines and must have paid-up capital stock of 5 million pesos before engaging in another insurance corporation, these amounts are deposited with the insurance commissioner.
3. The Finance Company Act requires the financing companies to have 60% of their capital must be owned by Filipino citizens and their paid-up capital must be at least 500,000 pesos.
4. A commercial bank is required to have a paid-up capital of 100 million pesos and if the commercial bank is authorized to operate an expanded foreign currency deposit system, they shall have 150 million pesos paid-up capital. If they are authorized to engage in universal banking, they shall have 500 million pesos paid-up capital.
5. The ownership and management of mass media must be limited to the citizen of the Philippines.
6. In Retail Trade Nationalization, a person who is not a citizen of the Philippines, and no association, partnership, or corporation whose capital is not wholly-owned by the citizen of the Philippines shall not engage directly or indirectly in the retail trade business.
7. Only vessels owned by domestic ownership are authorized to engage in coastwise shipping in the Philippines.

Question 23

TRUE OR FALSE. Unless otherwise prescribed by this code or special law, any matter stated in the articles of incorporation may be amended by a majority of vote of the board of directors or trustees and the vote or written assent of stockholders representing 2/3 of outstanding capital stock. (Sec16)

Answer 23

TRUE