CORPORATION CODE

I. Concept
1. One of these statements is not correct:
a. A corporation is an artifcial being created by operation of
law, having the right of succession and the powers,
attributes and properties epressly authori!ed by law or
incident to its eistence.
b. On the basis of the place of incorporation, a domestic
corporation is one incorporated under the laws of the
"hilippines, while a foreign corporation is one formed,
organi!ed or eisting under any laws other than those of
the "hilippines and whose laws allow #ilipino citi!ens and
corporations to do business in its own country.
c. On the basis of the control test, the nationality of a
corporation is determined by the nationality of the
ma$ority of its outstanding capital stoc%.
d. If the stoc%holders of a corporation consist of several tiers
of corporations, the nationality of their stoc%holders can
be traced indefnitely through the tiers of ownership.
&. One of these statements is not correct:
a. 'nder the grandfather rule, if a corporation is engaged in
a nationali!ed area of business, and its stoc%holders
consist of holding corporations, the percentages of the
#ilipino stoc%holders of the holding corporations shall be
computed to determine if the corporation meets the
re(uired minimum #ilipino ownership of its capital stoc%.
b. 'nder the #oreign Investments Act, if a corporation and
its foreign stoc%holders own shares of stoc% in a
"hilippine corporation, at least )* percent of the capital
stoc% entitled to vote in each of the two corporations
must be owned by #ilipino citi!ens and at least )* percent
of the members of the board of directors of both
corporations must be #ilipino citi!ens for the owned
corporation to be considered a "hilippine national.
c. +ince a corporation is an artifcial person, it cannot be
awarded moral damages for mental anguish and
wounded feelings.
d. A corporation cannot be awarded moral damages for
besmirched reputation.
,. One of these statements is not correct:
a. A stoc%holder cannot be held liable for contracts entered
into by the corporation and vice-versa.
b. .he properties of a corporation are not properties of its
stoc%holders and vice-versa
c. A suit against a corporation is not a suit against its
stoc%holders and vice-versa.
d. A stoc%holder who sued to annul the conveyance of a
parcel of land belonging to the corporation can have a
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notice of lis pendens annotated on the title to the parcel
of land.
/. One of these statements is not correct:
a. A corporation can be held liable for a (uasi-delict for
negligence in the selection and supervision of its
employees.
b. A corporation is liable for a (uasi-delict committed by its
o0cers if it is connected with its business.
c. A corporation is liable for a (uasi-delict committed by its
o0cers even if it had no relation to its business.
d. A corporation can be held criminally liable, if the penalty
will be a fne or dissolution.
1. One of these statements is not correct:
a. 2hen the separate $uridical personality of a corporation is
being used to defeat public convenience, $ustify wrong,
protect fraud, or defend crime, it should be disregarded.
b. .he separate $uridical personality of a corporation cannot
be disregarded as against a minority stoc%holder.
c. If a holding corporation eercises control over the
management and operations of a subsidiary corporation,
their separate $uridical personalities should be
disregarded.
d. .he mere fact that a stoc%holder has ma$ority control
over a corporation is not su0cient basis to disregard its
separate $uridical personality.
). One of these statements is not correct:
a. .he separate $uridical personality of a corporation may be
disregarded if it is being used to commit fraud or to
evade a law.
b. .he separate $uridical personality of a corporation may be
disregarded if it is merely an alter ego or business
conduit of a controlling stoc%holder.
c. .he separate $uridical personality of a corporation may be
disregarded if in their internal dealings the stoc%holders
were disregarding its separate $uridical personality.
d. A corporation can invo%e the doctrine of piercing the veil
of corporate fction in its favor.
II. Incorporation and Organi!ation
A. Classifcation of +hares
1. One of these statements is not correct:
a. Only preferred and redeemable shares may be deprived
of voting rights.
b. 3an%s, trust companies, insurance companies, public
utilities, and building and loan associations cannot have
no-par value shares.
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c. "referred shares cannot be given preference superior
over the claims of creditors.
d. 4edeemable shares may be issued as no-par value
shares.
3. "romoters
1. One f these statements is not correct:
a. 3efore incorporation, a promoter is not personally liable if
it is understood that the other party will hold only the
future corporation liable.
b. After incorporation, if a promoter bound himself
personally, he remains liable even if the corporation
became liable.
c. .he corporation will become liable on the contract of a
promoter if it adopted his contract.
d. If a promoter bound himself personally, he remains liable
even if the corporation and the stoc%holders agreed to
release him.
&. One of these statements is not correct:
a. A subscription for shares of stoc% of a corporation to be
formed is irrevocable for at least si months from the
date of subscription.
b. A subscription for shares of stoc% of a corporation to be
formed may be revo%ed by consent of all the subscribers.
c. A subscription for shares of stoc% of a corporation to be
formed is revo%ed if the corporation fails to materiali!e
within si months or a longer stipulated period.
d. A pre-incorporation subscription cannot be revo%ed if the
articles of incorporation were submitted to the +ecurities
and 5change Commission.
III. Consideration for +hares of +toc%
1. One of these cannot be a consideration for the issuance of
shares of stoc%:
a. Cash
b. "roperty
c. 6abor or services actually rendered
d. "romissory note
&. One of these cannot be a consideration for the issuance of
shares of stoc%:
a. "reviously incurred indebtedness.
b. Amount transferred from unrestrained earnings to stated
capital.
c. Outstanding shares echanged for stoc%s in case of
reclassifcation or conversion.
d. #uture services.
I7. Corporate 8ame
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1. One of these statements is not correct:
a. 8o corporate name may be allowed if it is identical or
deceptively or confusingly similar to that of an eisting
corporation or any other name already protected by law
or is patently deceptive, confusing or contrary to eisting
laws.
b. A proposed corporate name is confusingly similar to an
eisting corporate name if it contains a dominant word or
phrase in the eisting corporate name and they are
engaged in the same line of business.
c. .he name 'niversal 9ills Corporation should not be
allowed, because it is confusingly similar to the name
'niversal .etile 9ills, Inc.
d. If the word :lyceum; is part of the name of a school, it
can prevent other schools from using it.
7. <e #acto Corporations and Corporations by 5stoppel
A. <e #acto Corporation
1. One of these statements is not correct:
a. A de facto corporation is one so defectively formed as not
to be a de $ure corporation but nevertheless is the result
of a bona fde attempt to incorporate under eisting
statutory authority, coupled with eercise of corporate
powers.
b. .he re(uisites for the eistence of a de facto corporation
are: =1> a valid law under which it might be incorporated?
=&> an attempt in good faith to incorporate or eistence of
colorable compliance with the re(uirements of
incorporation? and =,> assumption of corporate powers.
c. A corporation formed to practice a profession can (ualify
as a de facto corporation.
d. 2ithout a certifcate of registration from the +ecurities
and 5change Commission, a corporation cannot be a de
facto corporation.
&. One of these defects preclude the eistence of a de facto
corporation:
a. #ailure of the articles of incorporation to state all matters
re(uired by the Corporation Code.
b. Close resemblance of its corporate name to that of a pre-
eisting corporation tending to deceive the public.
c. Ineligibility of the incorporators.
d. #ailure to eecute articles of incorporation.
,. One of these is not an eercise of corporate powers:

a. 5ntering into a subscription agreement.
b. Issuance of shares of stoc%.
c. Adoption of by-laws.
d. +igning articles of incorporation.
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/. One of these statements is not correct:
a. A de facto corporation has the same powers and liabilities
as a de $ure corporation.
b. .he stoc%holders and the o0cers of a de facto
corporation have the same powers and liabilities as those
of a de $ure corporation.
c. .he eistence of a de facto corporation cannot be
attac%ed collaterally.
d. A private party may directly attac% the eistence of a de
facto corporation.
3. Corporation by 5stoppel
1. One of these statements is not correct:
a. A corporation by estoppel is so defectively formed as not
to be a de $ure or de facto corporation and which is
considered a corporation only to those who cannot deny
its corporate eistence.
b. A person who %nows that the company he represents is
not incorporated can claim that the other party who sued
him is in estoppel.
c. .hose who act as a corporation %nowing that it is not
incorporated are liable $ointly and severally as general
partners for all liabilities and damages.
d. A person who represented an unincorporated
organi!ation in contracting with another person cannot
invo%e the defense of corporation by estoppel if the other
party sues him.

7I. 3y-6aws
1. One of these statements is not correct:
a. 2ithin one month after receipt of o0cial notice of the
issuance of its certifcate of incorporation by the
+ecurities and 5change Commission, a corporation must
adopt a code of by-laws.
b. .he by-laws must be adopted by the vote of at least a
ma$ority of the outstanding capital stoc% or members.
c. .he by-laws are e@ective upon adoption by the
stoc%holders or members of a corporation.
d. .he failure of a corporation to submit its by-laws to the
+ecurities and 5change Commission on time does not
automatically result in its dissolution but may be a
ground for suspension of its registration.
&. One of these statements is not correct:
a. If a corporation fails to fle its by-laws on time, it may be
considered a de facto corporation.
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b. .he by-laws may be amended by the vote of at least a
ma$ority of the outstanding capital stoc% or members of a
corporation.
c. .he owners of at least two-thirds of the outstanding
capital stoc% or two-thirds of the members of a
corporation may delegate to the board of directors or
trustees the power to amend or repeal the by-laws or to
adopt new by-laws.
d. .he owners of at least two-thirds of the outstanding
capital stoc% or members of a corporation may revo%e the
power delegated to the board of directors.
,. One of these statements is not correct:
a. It is void for the by-laws to authori!e the board of
directors to cancel the shares of a stoc%holder to compel
him to withdraw.
b. A provision in the by-laws of a non-proft corporation
consisting of residents of a subdivision authori!ing
someone who is not a member of the corporation to be a
member of the board of directors is not valid.
c. A provision in the by-laws which is contrary to the articles
of incorporation is not valid.
d. .he by-laws are binding upon third parties even if they
have no actual %nowledge of them.
7II. Corporate "owers
A. Aind of "owers
1. One of these statements is not correct:
a. .he epress powers of a corporation are those granted by
law or those contained in the articles of incorporation.
b. .he implied powers are those powers necessary to carry
out the purposes stated in its articles of incorporation.
c. Incidental powers are those inherent in a corporation.
d. An epress power cannot be an incidental power of a
corporation.
&. One of these is not an implied power of a corporation:
a. Acts in the usual course of business, such as, borrowing
money, eecuting promissory notes, and issuing chec%s.
b. Acts to protect debts of the corporation, such as,
purchasing property of debtors at an eecution sale.
c. Biring of entertainers by a hotel to attract patronage.
d. Ac(uisition of a shipping company by a taicab company.
,. One of these is not an implied power of a corporation.
a. Ac(uisition by a cement company of an electric power
plant for its factory.
b. 'nloading of a coal from the pier by an electric power
plant and hauling it to its plant.
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c. Ac(uisition by a sugar central of a company that
manufactures sugar bags.
d. 5ngagement by a mining corporation in real estate
development.
3. "ower to <eny "re-5mptive 4ights
1. One of these statements is not correct:
a. .here is no pre-emptive right unless it is epressly
granted in the articles of incorporation.
b. .here is no pre-emptive right if shares will be issued to
comply with legal re(uirements to ma%e a public o@ering.
c. .here is no pre-emptive right if shares will be issued in
good faith and with approval of two-thirds of the
outstanding capital stoc% in echange for property
needed for corporate purposes.
d. .here is no pre-emptive right issued in echange of
shares as payment of a previously contracted debt.
&. .here is no right of pre-emption in one of these cases:
a. .he authori!ed capital stoc% will be increased.
b. .he authori!ed but unissued shares will be o@ered for
subscription.
c. .reasury shares will be sold.
d. .he shares of a delin(uent stoc%holder will be sold at
public auction.
C. "ower to +ell or <ispose of Corporate Assets
1. One of these statements is not correct:
a. If a corporation will sell, lease, mortgage, echange,
pledge, or otherwise dispose of all its properties and its
assets, it must be authori!ed by ma$ority vote of the
directors and by at least two-thirds of the outstanding
capital stoc%.
b. .he disposition is deemed to cover substantially all the
corporate properties and assets if the corporation will be
rendered incapable of continuing its business or
accomplishing the purpose for which it was incorporated.
c. .he authori!ation of the stoc%holders is not re(uired if a
corporation will dispose of its properties and assets in the
usual or regular course of business or if the proceeds will
be appropriated for the conduct of its remaining business.
d. .he authori!ation of the members of a non-stoc%
corporation is not re(uired if it will sell all its properties
even if the members have the right to vote.
<. 4ight to Ac(uire Own +hare
1. One of these statements is not correct:
a. A corporation may ac(uire its own shares to eliminate
fractional shares arising out of stoc% dividends.
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b. A corporation may ac(uire its own shares to collect or
compromise an indebtedness to it arising out of unpaid
subscription, in a delin(uency sale or to purchase
delin(uent shares sold during the public auction.
c. A corporation may ac(uire its own shares to pay a
stoc%holder who eercised his appraisal rights.
d. A corporation cannot ac(uire its own redeemable shares.
5. "ower to Invest #unds
1. One of these statements is not correct:
a. If a corporation will invest its funds in any business or
purpose other than the primary purpose, the approval of
the ma$ority of the directors and of at least two-thirds of
its outstanding capital stoc% is re(uired.
b. A sugar central can ac(uire a corporation which
manufactures sugar bags, without need of approval of its
stoc%holders.
c. A corporation engaged in the brewery business can
ac(uire another brewery without need of approval of its
stoc%holders.
d. If a corporation will invest its funds in a business provided
for in one of its secondary purposes, the approval of its
stoc%holders is not re(uired.
#. "ower to <eclare <ividends
1. One of these statements is not correct:
a. A corporation cannot declare dividends unless it has
retained earnings.
b. <ividends may be in the form of cash, property, or stoc%.
c. "aid-in surplus from subscriptions cannot be declared as
dividends, whether as cash or stoc% dividends.
d. If treasury shares will be declared as dividends, they
should be declared as stoc% dividends.
&. One of these statements is not correct:
a. .he directors can declare cash dividends without need of
stoc%holder approval.
b. .he directors need stoc%holder approval to declare a
stoc% dividend.
c. .he directors need stoc%holder approval to declare a
property dividend.
d. +toc% dividends cannot be granted to a company who is
not a stoc%holder but has a management contract with
the corporation as part of its compensation.
,. One of these statements is not correct:
a. .he approval of a declaration of cash dividends can be
revo%ed before its announcement to the public but not
after the announcement.
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b. .he approval of a stoc% dividend can be revo%ed even
after its announcement to the public but before the
issuance of the stoc% certifcate.
c. A stoc%holder who has not fully paid for his subscription is
not entitled to receive any dividends.
d. .he dividends should be given to a stoc%holder who sold
his shares but remains as stoc%holder of record in the
boo%s of the corporation.
/. A corporation is not ecused from declaring dividends if its
retained surplus eceeds 1** percent of its paid-in capital in
one of these:
a. It has declared corporate epansion pro$ects or programs
approved by the board of directors.
b. It is prohibited under a loan agreement with any creditor
from declaring dividends without its consent and the
consent has not yet been secured.
c. It is clearly stated that the retention is necessary, or
when there is a need for special reserves for probable
contingencies.
d. .he retained surplus has been invested in government
bonds.
C. "ower to 5nter into 9anagement Contracts
1. One of these statements is not correct:
a. A management contract between two corporations must
be approved by a ma$ority of the directors of both
corporations and by at least a ma$ority of the outstanding
capital stoc% of both corporations.
b. If the two corporations have common stoc%holders and
the common stoc%holders own more than one-third of the
outstanding capital stoc% of the managing corporation or
if the ma$ority of the directors of both corporations are
the same, the contract must be approved by at least two-
thirds ma$ority of the stoc%holders of the managed
corporation.
c. .he maimum period of a management contract is fve
years.
d. A management contract cannot be renewed.
B. 'ltra 7ires Acts
1. One of these statements is not correct:
a. 'ltra vires acts are acts which a corporation cannot
perform, because they are outside those conferred by
law or by its articles of incorporation and are not
necessary or incidental to the powers so conferred.
b. A corporation organi!ed to transport passengers by sea
cannot operate a taicab service.
c. A mining corporation cannot engage in real estate
development
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d. A corporation organi!ed to engage in business as a
lending investor can engage in business as a pawnbro%er.
&. One of these statements is not correct:
a. .he stoc%holders may ratify an ultra vires contract of the
corporation.
b. .he stoc%holders cannot ratify an ultra vires contract if it
is contrary to law, morals, public order, or public policy.
c. If the ultra vires contract of a corporation is illegal, either
party can sue to enforce it.
d. If an ultra vires contract of a corporation is illegal and has
been fully or partially performed, neither party can sue to
recover what he gave.
,. One of these statements is not correct:
a. If an ultra vires contract of a corporation is not illegal and
has been fully performed, neither party can sue to set it
aside.
b. If an ultra vires contract of a corporation is not illegal and
has been performed by one party, it can be enforced
against the other party.
c. If an ultra vires contract is not illegal and neither party
has performed it, neither party can sue to enforce it.
d. A minority stoc%holder can fle a derivative suit to nullify
an ultra vires contract of a corporation which is not
illegal.
I. 5ercise of "owers
1. One of these statements is not correct:
a. .he board of directors is responsible for the corporate
policies and general management of the business o0ce.
b. .he o0cers eecute the policies of the board and have
latitude in determining the course of business operations.
c. .he stoc%holders have residual powers over fundamental
corporate changes.
d. .he board of directors cannot delegate any of its
functions.
7III. +toc%holders and 9embers
A. +ubscriptions
1. One of these statements is not correct:
a. A subscription is an indivisible contract.
b. A stoc%holder who has not paid in full for his subscription
can assign a part of his subscription.
c. 5ach share is e(ual in all respects to every other share
unless it is otherwise provided in the articles of
corporation and stated in the stoc% certifcate.
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d. According to the trust fund doctrine, the capital stoc%, the
properties and the assets of a corporation constitute a
trust fund to answer for payment of the claims of
creditors.
3. 4ights of +toc%holders
A. Appraisal 4ights
1. A stoc%holder cannot eercise his appraisal rights in one of
these:
a. An amendment to the articles of incorporation changes or
restricts the rights of any stoc%holder or class of shares.
b. Amendment of the articles of incorporation authori!es
preferences superior to those of outstanding shares of
any class.
c. Amendment of the by-laws.
d. +ale, lease, echange, transfer, mortgage, pledge, or
other disposition of all or substantially all of the corporate
properties and assets.
&. A stoc%holder cannot eercise his appraisal rights in one of
these:
a. 5tension or shortening of the term of corporate
eistence.
b. Investment of corporate funds in another corporation or
business outside its primary purpose.
c. 9erger or consolidation.
d. Approval by ma$ority stoc%holders of renewal of a
management contract.
,. One of these statements is not correct:
a. Only a stoc%holder who voted against the proposed
corporate action can invo%e his appraisal rights.
b. A written demand must be made within ,* days after the
date on which the vote in (uestion was ta%en.
c. A stoc%holder can invo%e his appraisal rights even if the
corporation has no retained earnings.
d. #rom the time of demand for payment of his shares, all
the rights of the stoc%holders are suspended ecept the
right to receive payment for his shares.
/. .he right of the stoc%holders does not cease in one of these:
a. Be withdrew his demand for payment with the consent of
the corporation.
b. .he proposed corporate action was abandoned by the
corporation.
c. .he +ecurities and 5change Commission disapproved
the corporate action.
d. .he stoc%holders and the corporation failed to agree on
the fair value of his shares within )* days from his
demand for payment.
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3. 4ight of Inspection
1. One of these statements is not correct:
a. .he right of inspection of a stoc%holder of a corporation
does not etend to its wholly owned subsidiary.
b. .he o0cer or agent who refused to allow the inspection
or the directors who ordered it if the refusal is pursuant to
their order are liable to the stoc%holders invo%ing his
inspection rights.
c. .he persons responsible for the refusal of inspection shall
be liable for damages and shall be criminally liable.
d. .he persons responsible for the refusal of inspection have
the burden of proof to show that the stoc%holder is not
entitled to inspection rights.
&. One of these is not a defense against the eercise of the right
of inspection:
a. .he stoc%holder improperly used information secured
through any prior eamination.
b. .he stoc%holder was not acting in good faith.
c. .he stoc%holder was not acting for a legitimate purpose.
d. .he stoc%holder is as%ing for a list of the stoc%holders for
the purpose of a proy right against the management.
,. One of these is not a defense against the eercise of the right
of inspection:
a. .he stoc%holder bought one share to be able to pry into
transactions entered into before he became a
stoc%holder.
b. .he stoc%holder was eercising his right in bad faith to
harass the corporation for refusing to give him increased
monthly allowance, to give him cash advances which he
had no intention to pay, and to transfer corporate
properties to him.
c. Although he ac(uired shares of stoc%, the stoc%holder is
not yet a stoc%holder of record.
d. .he inspection is being re(uested for a derivative suit.
C. <erivative +uits
1. One of these statements is not correct:
a. A derivative suit is an action brought by a minority
stoc%holder in the name of the corporation to redress
wrongs committed against the corporation, for which the
directors refused to sue.
b. .he frst re(uisite for fling a derivative suit is that there
eists a cause of action calling for this %ind of relief.
c. .he creation of several corporate positions and the
reasonable increase in the emoluments of corporate
o0ces may be the sub$ect of a derivative suit.
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d. .he appropriation by an o0cer of corporate funds for his
own beneft can be the sub$ect of a derivative suit.
&. One of these statements is not correct:
a. In a derivative suit, a stoc%holder is allowed to fle a suit
in behalf of a corporation for a cause of action belonging
to the corporation because of mismanagement by its
o0cers.
b. In an individual suit, a stoc%holder fles a case because of
a wrong done to him personally li%e denial of inspection
rights.
c. In a representative suit, a suit is fled by a group of
stoc%holders for a wrong to them as a group li%e the
violation of right to preference of preferred stoc%holders.
d. .he denial of the pre-emptive right of a stoc%holder can
be the sub$ect of a derivative suit.
,. One of these statements is not correct:
a. .he heirs of a stoc%holder whose shares were
fraudulently transferred cannot fle a derivative suit to
recover them.
b. A minority stoc%holder can $oin as plainti@ in a derivative
suit against the corporate o0cers for fraudulently
appropriating for themselves the corporate funds to
depress the value of the shares of stoc% and induce him
to sell his shares at a low price, because his personal
rights were also in$ured.
c. .he second re(uisite for fling a derivative suit is that the
stoc%holder was a stoc%holder at the time the acts
complained of occurred unless they continued after he
became a stoc%holder.
d. A stoc%holder whose number of shares is minimal cannot
fle a derivative suit.
/. One of these statements is not correct:
a. A person who is merely holding in trust the shares of
stoc% in his name can fle a derivative suit.
b. 2here the date of the issuance of a stoc% certifcate was
antedated, he cannot fle a derivative suit to (uestion the
transactions that occurred before the true date of the
issuance.
c. .he third re(uisite for the fling of a derivative suit is that
the stoc%holder ehausted all intra-corporate remedies,
unless to do so is ecused.
d. A demand upon the directors is ecused if it would be
useless, because they were the ones who committed the
fraud.
1. One of these statements is not correct:
a. .he fourth re(uisite for fling a derivative suit is that it
must be fled in the name of the corporation.
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b. If a minority stoc%holder has fled a derivative suit,
another minority stoc%holder cannot fle a second
derivative suit.
c. .he reliefs granted in a favorable decision in a derivative
suit should pertain to the stoc%holder who fled it.
d. .he ffth re(uisite for fling a derivative suit is that no
appraisal rights are available for the acts complained of.
<. 9eetings of +toc%holders and 9embers
1. One of these statements is not correct:
a. 4egular meetings should be held annually on the date
fed in the by-laws.
b. If there is no date fed in the by-laws, the regular
meeting shall be in April of every year on a date fed by
the board of directors.
c. +pecial meetings may be held at any time.
d. All meetings shall be held in the principal o0ce of the
corporation.
&. One of these statements is not correct:
a. 2ritten notice is re(uired for regular or special meetings.
b. 8otice of the meeting cannot be waived.
c. .he one who can call a meeting is the person authori!ed
in the by-laws.
d. If there is no person authori!ed to call a meeting, upon
petition of a stoc%holder or member for good cause
shown, the +ecurities and 5change Commission may
authori!e him to call a meeting.
,. One of these statements is not correct:
a. A ma$ority of the outstanding capital stoc% of the
members shall constitute a (uorum.
b. If the Corporation Code or the by-laws provide for a
di@erent number for a (uorum, such provision shall
control.
c. Once a (uorum is present when a meeting is called to
order, the meeting can continue transacting business
even if some stoc%holders or members leave so that the
number left does not constitute a (uorum.
d. 5ven if the meeting was improperly held or called, all
proceedings, if within the powers of the corporation, shall
be valid provided all stoc%holders or members are
present or duly represented.
ID. 3oard of <irectors and .rustees
A. <enomination, .erm, Eualifcations and <is(ualifcations
1. One of these is not a corporate o0cer:
a. .reasurer
b. +ecretary
14
c. Ceneral 9anager whose position was created by the
board of directors
d. 7ice-"resident whose position was created by the by-laws
&. One of these statements is not correct:
a. 5cept in the case of non-stoc%, educational, and
religious corporations, the term of o0ce of directors or
trustees is one year.
b. .he directors or trustees are entitled to hold over until
their successors are elected and (ualifed.
c. All directors or trustees must be residents of the
"hilippines.
d. A director must own at least one share recorded in his
name on the boo%s of the corporation.
,. One of these statements is not correct:
a. A person is (ualifed to be a director if it appears in the
boo%s of the corporation that he has legal title to the
share of stoc%, even if somebody else has benefcial
ownership over it.
b. .he by-laws may re(uire that a director should not own
only one share but should own a certain minimum
number of shares.
c. .o be eligible to be a director, a person must be a
stoc%holder at the time of his election.
d. A director convicted by fnal $udgment of an o@ense
punishable by imprisonment for less than si years for an
act committed within fve years prior to the date of his
election is dis(ualifed.
/. One of these statements is not correct:
a. A person convicted by fnal $udgment of violation of any
o@ense under the Corporation Code, irrespective of the
penalty, if the o@ense was committed within fve years
before his election is dis(ualifed.
b. .he by-laws may impose additional dis(ualifcations for
directors.
c. .he by-laws may dis(ualify a stoc%holder from being
elected director if he is a director of a competitor in
business.
d. .he by-laws may provide that all the directors of a
corporation engaged in a line of business which is
partially nationali!ed must be #ilipino citi!ens.
3. 5lection
1. One of these statements is not correct:
a. +ince the law grants the right to vote by proy, the by-
laws cannot prohibit proy voting.
b. +ince the law allows a stoc%holder to cumulate his shares
and give one candidate as many votes as the number of
15
directors to be elected multiplied by the number of his
shares, the by-laws cannot prohibit cumulative voting.
c. .he election must be by ballot if re(uested by any voting
stoc%holder or member.
d. 7oting by viva voce or by a show of hands is prohibited.
C. 4emoval and #illing of 7acancies
1. One of these statements is not correct:
a. A director or trustee may be removed by a vote of at
least two-thirds of the outstanding capital stoc% or two-
thirds of the members.
b. .he proposal to remove a director need not be stated in
the notice to be given to the stoc%holders.
c. As a rule, a director can be removed with or without
cause.
d. A director or trustee representing the minority
stoc%holders or members can be removed only for cause.
&. One of these statements is not correct:
a. .he vacancy created by the removal of a director shall be
flled by election by the stoc%holders or members.
b. Any vacancy in the board of directors or trustees
occurring other than by removal shall be flled by the vote
of the remaining directors or trustees if they still
constitute a (uorum.
c. If the remaining directors or trustees no longer constitute
a (uorum, vacancies in the board of directors shall flled
by the stoc%holders.
d. In case of resignation of a hold-over director, the vacancy
shall be flled by vote of the remaining directors.
<. Compensation
1. One of these statements is not correct:
a. .he compensation of directors consists of =1> reasonable
per diem? =&> additional compensation if provided for in
the by-laws? =,> and additional compensation granted by
the vote of stoc%holders representing the ma$ority of the
outstanding capital stoc%.
b. .he directors can grant themselves additional
emoluments.
c. .he total yearly compensation of directors shall not
eceed 1* percent of corporate net income before
income ta during the preceding year.
d. <irectors may receive compensation in ecess of 1*
percent of the corporate income ta if they are holding
other positions also.
5. 6iabilities of <irectors, .rustees and O0cers
1. One of these statements is not correct:
16
a. According to the business $udgment rule, courts will not
review and substitute their $udgment for that of the board
of directors in the management of the business a@airs of
a corporation unless they assented to a patently unlawful
act or are guilty of bad faith or gross negligence.
b. A director or o0cer is personally liable if he assented to a
patently unlawful act of the corporation.
c. A director or o0cer is personally liable if he acted in bad
faith. 3ad faith means a dishonest purpose or fraudulent
act.
d. A director or o0cer is personally liable if he acted
erroneously on a matter involving a di0cult (uestion of
law.
&. One of these statements is not correct:
a. <irectors who dismissed a general manager who was
implementing remedial measures to prevent irregularities
are guilty of bad faith and are personally liable to him.
b. Corporate o0cers who %new the corporation was
violating the provisions of labor standards and did not
correct the situation are liable solidarily to the
employees.
c. <irectors who tampered with the boo%s of account to
ma%e it appear falsely that the corporation was incurring
losses to $ustify the adoption of a retrenchment program
are guilty of bad faith, and are solidarily liable to the
dismissed employees.
d. .he directors are personally liable for the unlawful
dismissal of an employee of the corporation.
,. One of these statements is not correct:
a. .he o0cers of a consortium of ban%s became the
directors of the borrower when its debt was converted to
e(uity. .hey then sold two generators of the corporation
and used the proceeds of the sale to pay the ban% which
had a frst mortgage over the properties of the borrower.
2hen the mortgage was assigned to the consortium of
ban%s, they foreclosed the mortgage and emerged as the
winning bidder. .he consortium of ban%s should be held
liable to the creditors because the directors obtained an
undue advantage for their ban%s.
b. .he o0cers of a corporation who formed a new
corporation and transferred to it all the assets of the old
corporation mortgaged to secure the payment of a debt
of the old corporation are guilty of fraud.
c. <irectors who passed a resolution admitting the liability
of the corporation to pay a loan which had prescribed and
entered into a compromise with the assignee of the loan
for its payment are guilty of fraud.
d. <irectors are personally liable for separation pay to the
dismissed employees.
/. One of these statements is not correct:
17
a. A director or o0cer is personally liable if he is guilty of
gross negligence
b. Cross negligence means want of any or even slight care
and diligence.
c. A director or trustee who ac(uired interest adverse to the
corporation in respect of any matter reposed to him in
confdence is $ointly and severally for all damages
su@ered by the corporation, its stoc%holders and
members and other parties.
d. An o0cer, director or trustee is not liable for bribes or
rebates for service contracts given to him if there was no
in$ury to the corporation.
1. One of these statements is not correct:
a. A director who, by virtue of his o0ce, ac(uires for himself
a business opportunity which should belong to the
corporation must turn over all profts to the corporation.
b. .his rule does not apply if the director ris%ed his own
funds.
c. .he stoc%holders owning at least two-thirds of the
outstanding capital stoc% can ratify the contract.
d. <irectors and o0cers who consented to the issuance of
watered stoc% or who, having %nowledge of it, do not fle
their written ob$ections with the corporate secretary are
$ointly and severally liable for the di@erence between the
value received and the par value.
). One of these statements is not correct:
a. A director or o0cer will be personally liable under a
contract if he bound himself solidarily with the
corporation.
b. A director will be personally liable if a special law ma%es
him personally liable for the actions of the corporation.
c. A director will be criminally liable if a special law ma%es
him criminally liable for the actions or omissions of the
corporation.
d. A corporate o0cer will not be personally liable if he
eceeded the scope of his authority.
Contracts
One of these statements is not correct in order that a contract
between a director or an o0cer and a corporation will not be
voidable:
.he presence of the director in the meeting in which the
contract was approved was not necessary to constitute a
(uorum.
.he vote of the director was not necessary for the approval
of the contract.
.he contract is fair and reasonable.
If the contract is with an o0cer, it need not have been
previously authori!ed by the board.
18
One of these statements is not correct:
If the presence of the director was needed to constitute a
(uorum or his vote was necessary for the approval of the
contract, the contract may be ratifed by the
stoc%holders.
.he adverse interest of the director must be fully disclosed
to the stoc%holders.
.he contract must be fair and reasonable.
.he vote of the ma$ority of the outstanding capital stoc% is
su0cient to ratify the contract.
One of these statements is not correct:
.he contract between two corporations shall not be
invalidated merely because they have interloc%ing
directors.
A contract between two corporations may be invalidated if it
is not fair or reasonable.
If the interest of an interloc%ing director does not eceed
twenty percent of the outstanding capital stoc% in one
corporation but eceeds twenty percent of the
outstanding capital stoc% in the other corporation, his
presence in the board meeting of the frst corporation
should not be necessary to constitute a (uorum and his
vote should not be necessary to approve the contract.
A contract between two corporations with interloc%ing
directors cannot be ratifed by the stoc%holders.
One of these can have a contract between a corporation and a
director, an o0cer, or a corporation with interloc%ing directors
annulled:
.he director or o0cer who entered into a contract with the
corporation.
.he corporation where the interloc%ing director owns more
than &* percent of the outstanding capital stoc%s.
.he corporation with which the director or o0cer entered
into a contract or where the interloc%ing director does not
own more than &* percent of the outstanding capital
stoc%.
A creditor of one of the corporations of which the director or
o0cer is connected.
5ecutive Committee
One of these statements is not correct:
.he by-laws may create an eecutive committee.
.here should be at least fve members of the eecutive
committee.
.he members of the eecutive committee are appointed by
the board of directors.
.he members of the eecutive committee must be directors.
One of these statements is not correct:
19
.he matters on which the eecutive committee can act can
be delegated in the by-laws or by ma$ority vote of the
board of directors.
.he delegation of powers to the eecutive committee can
only cover specifc matters within the competence of the
board of directors.
.he approval of any action for which approval of the
stoc%holders is re(uired cannot be delegated to the
eecutive committee.
.he distribution of cash dividends can be delegated to the
eecutive committee.
One of these statements is not correct:
.he flling of vacancies in the board of directors cannot be
delegated to the eecutive committee.
.he amendment or repeal of by-laws and the adoption of
new by-laws cannot be delegated to the eecutive
committee.
.he amendment or repeal of any resolution of the board
which by its epress terms is not amendable or
repealable cannot be delegated to the eecutive
committee.
.he board of directors cannot reverse or amend the actions
of the eecutive committee.
9eetings
One of these statements is not correct:
4egular board meetings shall be held monthly, unless the
by-laws provide otherwise.
+pecial board meetings may be held at any time.
+pecial board meetings may be called by the president or as
otherwise provided in the by-laws.
Any matter can be ta%en up at a special board meeting.
One of these statements is not correct:
5cept in the case of ban%s, board meetings may be held
anywhere in or outside the "hilippines, unless the by-laws
provide otherwise.
2ritten notices of regular or special meetings must be sent
to every director.
A director may waive epressly or impliedly the absence of
notice to him.
3oard meetings cannot be held by tele-conference or video
conference.
One of these statements is not correct:
"roy voting is valid in board meetings.
An abstention during a voting is counted as a vote with the
ma$ority vote.
20
.he president is the one who presides at the board
meetings.
It is the chairman who presides at board meetings if the by-
laws so provide.
D. Capital +toc%
+toc% Certifcates
1. One of these statements is not correct:
a. A stoc% certifcate is a written instrument which serves as
evidence the person named in it is the owner of the
number of shares stated in it.
b. A stoc% certifcate is not essential for ownership of shares
in a corporation. As long as a stoc%holder has a
subscription contract recorded in the stoc% and transfer
boo%, he may eercise all the rights of a stoc%holder.
c. A stoc% certifcate is (uasi-negotiable, because the shares
covered by it can be transferred by indorsing and
delivering the stoc% certifcate. Bowever, unli%e in the
case of a negotiable instrument, a buyer in good faith and
for value cannot ac(uire title to the shares if the
indorsement is forged.
d. .he mere indorsement and delivery of a stoc% certifcate is
not valid to transfer title to the shares covered by it.
&. One of these statements is not correct:
.he proper indorsement and delivery of a stoc% certifcate is
su0cient to transfer the shares without need of an
accompanying deed of sale.
.he eecution of a deed of absolute sale embodied in a
public document transfers title to the shares even if the
stoc% certifcate was not indorsed.
A stoc% certifcate cannot be issued to a stoc%holder until the
full amount of his subscription has been paid.
.he partial payment by a stoc%holder for his subscription
may be applied as full payment for the number of shares
corresponding to it, and a stoc% certifcate may be issued
for such number of shares.
,. One of these statements is not correct:
a. +ince it is the corporate secretary who, as custodian of
corporate records, should ma%e the entries in the stoc%
and transfer boo%, the posting in the stoc% and transfer
by the controlling stoc%holder of the transfer of his shares
to other persons is not valid.
b. 8o shares of stoc% against which the corporation holds
any unpaid claim shall be transferable in the boo%s of the
corporation.
c. .he unpaid claim which will prevent the transfer of shares
in the boo%s of a corporation is not limited to the unpaid
subscription and includes other debts.
21
d. In case of conFict between the articles of incorporation
and the stoc% and transfer boo% as to the identities of the
stoc%holders and the number of outstanding shares, the
articles of incorporation should prevail.
/. One of these statements is not correct:
.he situs of shares of stoc% for purposes of attachment,
garnishment and eecution is the principal o0ce of the
corporation.
.he situs of shares of stoc% for the purpose of registration of
a chattel mortgage on them is the principal o0ce of the
corporation.
.he situs of shares of stoc% for the purpose of liability for
estate ta is the principal o0ce of the corporation.
.he situs of shares of stoc% for purposes of liability for estate
ta includes the residence of the stoc%holder.
1. One of these statements is not correct:
a. If a stoc% certifcate was lost, to obtain a replacement, a
stoc%holder must fle with the corporation an a0davit
setting forth the circumstances of the loss.
b. .he corporation must publish a notice of the loss once a
wee% for three consecutive wee%s.
c. After one year from the date of the last publication of the
notice, the corporation shall issue a new stoc% certifcate
to the stoc%holder if no contest has been presented to
the corporation.
d. A stoc%holder cannot get a new stoc% certifcate before
the epiration of the one-year period even if he posts a
bond.
"ayment of 3alance of +ubscription
1. One of these statements is not correct:
a. .he payment of the balance of an unpaid subscription
becomes due when the board of directors ma%es a call
and declares the payment due.
b. .he payment of the balance of unpaid subscriptions
becomes due if the subscription contract provides when it
will be paid.
c. .he payment of the balance of unpaid subscriptions
becomes due, if the corporation becomes insolvent.
d. A call for payment of unpaid subscriptions need not be
uniform.
&. One of these statements is not correct:
a. #ailure of a stoc%holder to pay an unpaid subscription on
the date specifed in the subscription contract or stated in
the call made by the board of directors will render the
entire balance due and payable.
b. #ailure of a stoc%holder to pay on the date specifed in the
subscription contract or stated in the call made by the
22
board of directors shall ma%e the stoc%holder liable for
interest according to the specifed rate in the by-laws or
the legal rate if there is no provision in the by-laws.
c. If within ,* days from the date the payment was due no
payment was made, all shares of stoc% covered by the
subscription shall become delin(uent and sub$ect to sale.
d. 5cept for the right to receive dividends, which is
suspended, all the other rights of delin(uent stoc%holders
remain subsisting.
,. One of these statements is not correct:
.he directors may order the sale of the delin(uent shares
not earlier than ,* days nor later than )* days from the
date of delin(uency.
8otice of the sale, with the board resolution, shall be sent to
the delin(uent stoc%holder personally or by registered
mail.
8otice of the sale shall also be published once in a
newspaper of general circulation.
If the delin(uent stoc%holder does not pay on or before the
date of the sale, the shares shall be sold at public
auction.
/. One of these statements is not correct:
.he shares shall be sold to the bidder o@ering to pay the full
amount due for the least number of shares.
.he remaining shares shall be forfeited in favor of the
corporation.
If there is no bidder, the corporation may bid for the shares.
If the corporation bids, the total amount due shall be
deemed paid in full.
1. One of these statements is not correct:
a. A stoc%holder may sue to recover the shares because of
irregularity or defect in the notice of sale or in the sale.
b. .he stoc%holder must frst pay to the buyer the sum for
which the shares were sold, with legal interest from the
date of the sale.
c. .he action must be fled within si months from the date
of sale.
d. .he corporation cannot fle a collection case for the
unpaid subscription in lieu of a delin(uency sale.
Alienation of +hares
1. One of these is not an allowable restriction on the sale of shares
of stoc%:
a. If a stoc%holder will sell his shares, he must frst o@er
them to the other stoc%holders and then to the
corporation before o@ering them to third parties.
b. .he corporation has the right of frst option to buy the
shares at a fed price.
23
c. A share is given to an o0cer or employee, but he must
sell it bac% to the corporation upon his termination.
d. A stoc%holder cannot sell his shares without the consent
of the other stoc%holders or the consent of the
corporation.
&. One of these statements is not correct:
a. A stoc%holder cannot sell all the shares involved in a
subscription contract if the subscription is only partly paid
unless he gets the consent of the corporation, because it
involves novation by substitution of debtors.
b. A stoc%holder cannot sell a part of the shares in a
subscription agreement if the subscription is only partially
paid, because the contract is indivisible.
c. 5ven if the shares are fully paid and covered by a stoc%
certifcate, their sale will not bind the corporation and
third parties until the sale is recorded in the boo%s of the
corporation.
d. A buyer of shares which are fully paid and covered by a
stoc% certifcate in the name of the seller can compel the
corporation to issue a stoc% certifcate in his name even if
he has not yet been registered in the stoc% and transfer
boo% as a stoc%holder.
,. #or the sale of shares to bind third parties, one of these is not
re(uired:
.he stoc% certifcate in the name of the owner must be
delivered.
.he stoc% certifcate must be endorsed by the owner or
other person legally authori!ed to ma%e the transfer.
.here must be a deed of sale.
.he transfer must be recorded in the boo%s of the
corporation.
/. One of these statements is not correct:
Chattel mortgage on shares of stoc% need not be registered
in the stoc% and transfer boo%.
A chattel mortgage on shares of stoc% will bind third parties
if it is registered with the registers of deeds of the
provinces or cities where the mortgagor resides and
where the principal o0ce of the corporation is located.
An attachment on shares of stoc% registered in the stoc% and
transfer boo% in the name of the defendant prevails over
their sale which has not been recorded in the stoc% and
transfer boo%.
A subse(uent sale over shares of stoc% previously attached
prevails over the attachment.
DI. <issolution
7oluntary <issolution
One of these is not a method of voluntary dissolution of a
corporation:
24
<issolution where no creditors are a@ected.
<issolution where creditors are a@ected.
+hortening of corporate term.
+ale of all properties of the corporation.
One of these statements is not correct:
In all the voluntary methods of dissolution, the dissolution
must be approved by ma$ority vote of the directors
and approved by the vote of at least two-thirds of the
outstanding capital stoc% or members.
.he voluntary dissolution of a corporation is not e@ective
until its approval by the +ecurities and 5change
Commission.
In dissolution by shortening of the corporate term, the
procedure for amending the articles of incorporation
should be followed.
It is ministerial for the +ecurities and 5change
Commission to approve the voluntary dissolution of a
corportation.
Involuntary <issolution
One of these is not a ground for the involuntary dissolution of
the corporation:
5piration of the corporate term.
#ailure to organi!e and commence business transactions
within two years from the date of incorporation.
Continuous non-operation for at least fve years
+uspension of operations because of depressed economic
conditions.
One of these is not a ground for the involuntary dissolution of a
corporation:
7iolations of the provisions of the Corporation Code.
7iolations of +ection )=e> of "residential <ecree 8o. G*&-A
<eadloc%s in a close corporation.
6ate fling of by-laws
One of these is a ground for the involuntary dissolution of a
corporation:
a. "etition of a minority stoc%holder for illegal or
fraudulent acts and gross mismanagement by the
directors and o0cers.
b. #ailure to hold annual meetings of the stoc%holders for
lac% of (uorum.
c. 5ntering into an ultra-vires contract
d. Ac(uiring real properties in ecess of its needs.
6i(uidation
One of these statements is not correct:
25
A dissolved corporation will continue to eist for three =,>
years after dissolution.
In the case of voluntary dissolution, the three-year period
is counted from the date of its approval by the
+ecurities and 5change Commission.
.he corporation will continue to eist merely for the
purpose of winding up.
.he corporation can continue renewing contracts during
the three-year period.
One of these is not a manner for li(uidating a corporation:
.hrough the board of directors.
.hrough a trustee.
.hrough a receiver.
.hrough the +ecurities and 5change Commission.
One of these statements is not correct:
a. If the li(uidation of a corporation has not been
completed after three years and the directors did not
appoint a trustee, the directors may be permitted to
serve as trustees to complete it.
b. If the three-year has epired and there are still cases
involving the dissolved corporation which are pending,
the lawyer handling them may be considered a trustee
of the corporation to continue the cases.
c. 8o right of a corporation or any liability incurred by a
corporation shall be impaired by the dissolution of a
corporation.
d. A fnal $udgment in favor of a corporation cannot be
eecuted if it has been dissolved.
DII. Close Corporations
Characteristics
1. One of these is not a characteristic of a close corporation:
a. All issued stoc%s of all classes, ecept treasury shares,
shall be held of record by not more than a specifed
number of persons, not eceeding &*.
b. All issued stoc%s of all classes are sub$ect to one or
more specifed restrictions which are permitted.
c. .he corporation shall not list in any stoc% echange or
ma%e any public o@ering of any of its stoc%s of any
class.
d. One stoc%holder should own a ma$ority of the
outstanding capital stoc%.
7alidity of 4estrictions on .ransfer of +hares
One of these statements is not correct:
26
a. .he restrictions must appear in the articles of
incorporation, the by-laws, and the stoc% certifcates.
b. .he restrictions shall not be more onerous than
granting the eisting stoc%holders or the corporation
the option to purchase the shares of the transferring
stoc%holders with reasonable terms, conditions or
period stated in it.
c. If upon epiration of the period the option to purchase
is not eercised, the transferring stoc%holder may sell
his shares to a third person.
d. .he third person must be a relative by consanguinity
within the third degree of the transferring stoc%holder.
Issuance or .ransfer of +toc% in 3reach of Conditions
One of these statements is not correct:
If the certifcate of stoc% conspicuously shows the
(ualifcations to be a stoc%holder, the dis(ualifed
person is conclusively presumed to have notice of his
ineligibility.
If the articles of incorporation state the number of
persons entitled to be stoc%holders of record, the
stoc% certifcate conspicuously states such number,
and issuance of stoc% to any person will cause the
stoc% to be held by more than such number, the
person to whom the stoc% was issued is conclusively
presumed to have violated it.
If a stoc% certifcate conspicuously shows a restriction on
transfer of stoc%, the transferee is conclusively
presumed to have notice if his ac(uisition violates it.
.he corporation cannot register the transfer in case of
any violation even if all the stoc%holders agree to it.
3oard 9eetings
Any action of the directors without a meeting shall be valid
ecept in one of these:
3efore or after the action was ta%en, all the directors
signed a written consent.
.he directors are accustomed to ta%e informal action with
the epress or implied ac(uiescence of all the
stoc%holders.
All the directors have epress or implied %nowledge of the
action in (uestion and none of them promptly made a
written ob$ection.
8o stoc%holder promptly made a written ob$ection.
"reemptive 4ights
1. .he stoc%holders will have no right of pre-emption in one of
these instructions:
a. 4eissuance of treasury shares.
27
b. Issuance of shares for money, property, or personal
service
c. Issuance of shares in payment of corporate debts
d. <enial of pre-emptive right in the articles of
incorporation.
Amendment of Articles of Incorporation and <eadloc%
1. One of these statements is not correct:
a. Any amendment of the articles of incorporation must
be approved by at least two-thirds ma$ority of the
outstanding capital stoc%.
b. .he articles of incorporation may re(uire a greater
proportion of shares for approval of an amendment of
it.
c. If because of division respecting the management of
the business, the re(uired number of votes for any
corporate action cannot be obtained, upon written
petition of any stoc%holder the +ecurities and
5change Commission shall arbitrate the dispute.
d. .he articles of incorporation may prohibit arbitration of
any dispute by the +ecurities and 5change
Commission.
DIII. 8on-+toc% Corporation
1. One of these statements is not correct:
a. A non-stoc% corporation is one where no part of its
income is distributable as dividends to its members,
trustees, or o0cers, sub$ect to the provisions of the
Corporation Code, on dissolution.
b. A non-stoc% corporation may be formed for charitable,
religious, educational, professional, cultural, fraternal,
literary, scientifc, social, civic service, and similar
purposes, li%e trade, industry, agriculture and li%e
chambers, or any combination of them.
c. "rofts, whenever necessary or proper, shall be used
for the furtherance of the purposes for which the
corporation was organi!ed.
d. 9embership in a non-stoc% corporation can never be
transferable.
&. One of these is not a rule for distribution of assets in case of
dissolution:
All liabilities and obligations of the corporation shall be
paid.
Assets held upon a condition re(uiring return, transfer or
conveyance and which occurred because of the
dissolution, shall be returned, transferred or conveyed
accordingly.
Assets received by the corporation sub$ect to limitations
permitting their use only for charitable, religious,
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benevolent, educational or similar purposes but not
re(uiring their return, transfer, or conveyance in case
of dissolution of the corporation, shall be transferred
to a corporation engaged in the same activities.
Other assets shall be conveyed to the state.
,. One of these statements is not correct:
Assets other than those mentioned in the preceding rules
for distribution shall be distributed in accordance with
the provisions of the articles of incorporation or by-
laws to the etent that they determine the distributive
rights of members and provide for distribution.
In any other case, assets may be distributed to such
persons, societies, organi!ations, or corporations,
whether for proft or not, specifed in a plan of
distribution.
.he plan of distribution must be adopted by ma$ority vote
of the board of trustees.
.he plan of distribution must be also approved by a
ma$ority of the members with voting rights.
DI7. 4eligious Corporations
A. Corporation +ole
1. One of these statements is not correct:
A corporation sole consists of a chief archbishop, bishop,
priest, minister, rabbi or presiding elder of any
religious denomination, sect or church incorporating
himself to administer its temporalities.
A corporation sole has no nationality.
In determining whether a parcel of private land can be
registered in the name of a corporation sole and the
corporation sole is )* percent #ilipino, it is the
nationality of the constituents of the diocese that
should be considered.
A corporation sole owns the temporalities he is
administering.
3. 4eligious +ocieties
1. One of these statements is not correct:
a. A religious society may incorporate itself for the
administration of its a@airs, properties and estate.
b. .he incorporation must have been approved by a
ma$ority of the members of the religious society.
c. .he incorporation must not be forbidden by competent
authority or the rules of the religious sect to which it
belongs.
d. .he principal o0ce of the religious society must be
located in the "hilippines.
D7. #oreign Corporations
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A. <efnition of <oing 3usiness in the "hilippines
1. A foreign corporation is doing business in the "hilippines in
one of these cases:
a. It entered into an isolated transaction.
b. It entered into a contract which is not part of the
operation of its business.
c. .he contract it entered into was consummated
abroad.
d. It made in(uiries about mining operations and leased
space for a temporary o0ce.
&. A foreign corporation is doing business in the "hilippine in
one of these cases:
a. It is foreign shipping company which pic%ed up
cargoes in the "hilippines once in 1G), and once in
1G)/.
b. It is a shipping company engaged in transportation of
goods and passengers and hired a coo% from the
"hilippines for one of its vessels.
c. It sold laces to a "hilippine corporation which were
delivered to it in Bong Aong.
d. It submitted bids for construction pro$ects in the
"hilippines.
,. One of these acts constitutes doing business in the
"hilippines:
a. 9ere investment as a stoc%holder in a "hilippine
corporation.
b. Baving a director in the "hilippine corporation where it
has an investment to represent its interest.
c. Appointing a distributor who transacts business in the
name and account of the distributor.
d. +oliciting orders.
/. One of these acts constitutes doing business in the
"hilippines:
a. "ublication of a general advertisement through any
print or broadcast media.
b. 9aintaining a stoc% of goods for processing by an
entity in the "hilippines.
c. Consignment of e(uipment with a "hilippine company
to be used for in the processing of products for eport.
d. Opening o0ces.
1. One of these does not constitute doing business in the
"hilippine:
a. Collecting information in the "hilippines.
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b. Appointing a distributor operating under full control of
the foreign corporation and domiciled in the
"hilippines or stays here for at least 1H* days.
c. "articipating in the management, supervision or
control of any domestic business.
d. Any act that implies continuity of commercial dealings
and contemplates performance of acts or eercise of
functions normally incidental to and in progressive
prosecution of commercial gain.
). One of these acts constitutes doing business in the
"hilippines:
a. "erforming services auiliary to an isolated contract
which are not on a continuing basis.
b. Importing molasses from the "hilippines.
c. Cranting distribution rights in the "hilippines for
motion pictures produced by the foreign corporation.
d. Appointing a distributor who merely transmitted to the
foreign corporation orders from buyers in the
"hilippines, determining the price, receiving the
payment directly from the buyers, and shipping the
goods directly to the buyers.
3. Involvement in 6itigation
1. One of these statements is not correct:
a. A foreign corporation which is not doing business in
the "hilippines cannot sue in the "hilippines.
b. A foreign corporation which is not doing business in
the "hilippines cannot be sued in the "hilippines.
c. If a foreign corporation which is not doing business in
the "hilippines but has properties here which were
attached, the suit can prosper as an action (uasi in
rem.
d. A foreign corporation which is doing business in the
"hilippines but has no license can be sued.
&. One of these statements is not correct:
a. A foreign corporation which is doing business in the
"hilippines but has no license cannot sue in the
"hilippines.
b. A foreign corporation which is doing business in the
"hilippines but has no license cannot intervene in a
suit in the "hilippines.
c. A foreign corporation which is doing business in the
"hilippines has no license can fle an action in an
administrative agency.
d. A foreign corporation which is doing business in the
"hilippines but has no license can sue in the
"hilippines for breach of contract the other party if the
other party %new that it was transacting business in
the "hilippines without a license.
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C. 4e(uisites for Issuance of 6icense to do business:
1. One of these is not re(uired to be submitted with an
application for a license to do business in the "hilippines:
a. Certifed true copy of articles of incorporation.
b. Certifed true copy of by-laws.
c. Certifcation from the authori!ed o0cial of the place of
incorporation that its laws allow #ilipino citi!ens and
corporations to do business there.
d. Certifcation of the good moral character of the
directors and o0cers of the foreign corporation.
&. One of these is not re(uired to be submitted with an
application for a license to do business in the "hilippines:
a. Certifcation by the authori!ed o0cial of the place of
incorporation that the applicant is an eisting
corporation in good standing.
b. A0davit of the president or authori!ed person that the
applicant is solvent and in sound fnancial condition
and setting forth its assets and liabilities as of the date
not eceeding one year before the fling of the
application.
c. "ower of attorney designating a resident agent.
d. Curricula vitae of directors and o0cers.
,. One of these statements is not correct:
a. A resident agent must be an individual residing in the
"hilippines and of good moral character and of sound
fnancial standing or a domestic corporation lawfully
transacting business in the "hilippines.
b. A partnership can be appointed as resident agent.
c. An applicant must submit an agreement that if it
ceases doing business in the "hilippines or has no
resident agent, summons intended for it may be
served upon the +ecurities and 5change Commission.
d. .he applicant must deposit securities with the
+ecurities and 5change Commission for the beneft of
its creditors.
<. 4evocation of 6icense
1. One of these is not a ground for revocation of the license of
a foreign corporation:
a. #ailure to fle its annual report or pay any fees re(uired
by the Corporation Code.
b. #ailure to appoint and maintain a resident agent.
c. #ailure to submit to the +ecurities and 5change
Commission a statement of change of its resident
agent or his address, in case of such change.
d. Conviction of an o0cer of the foreign corporation
punishable with a fne of "&,1**.
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&. One of these is not a ground for the revocation of the license
of a foreign corporation:
a. #ailure to submit to the +ecurities and 5change
Commission an authenticated copy of any amendment
of its articles of incorporation or by-laws or of any
articles of merger or consolidation within )* days
afterwards.
b. 9isrepresentation of any material matter in any
application, report, a0davit or other document
submitted pursuant to the Corporation Code.
c. #ailure to pay any and all taes, imposts, assessments
or penalties lawfully due to the "hilippine Covernment
or any of its agencies or political subdivision.
d. #ailure of any of its o0cers to pay any and all taes,
imposts, assessments or penalties due from him.
,. One of these is not a ground for revocation of the license of
a foreign corporation:
a. .ransacting business in the "hilippines outside the
purposes for which it was authori!ed under its license.
b. .ransacting business in the "hilippines as agent of a
foreign corporation or entity not licensed to do
business in the "hilippines.
c. Civing a notice of loc%out during a labor dispute.
d. Any other ground as would render it unft to transact
business in the "hilippines.
D7I. 9ergers and Consolidations
1. One of these statements is not correct:
a. 9erger is the union of two or more corporations
whereby one of the constituent corporation continues
its eistence and absorbs other constituent
corporations and ta%es over their rights, privileges,
franchises, properties, claims, liabilities and
obligations and thereby terminates their eistence.
b. Consolidation is the union of two or more corporations,
by forming a new corporation, the consolidated
corporation, which ac(uires the combined rights,
privileges, franchises, properties, claims, liabilities and
obligations of the constituent corporations and
thereby terminates their eistence.
c. .he plan of merger or consolidation must be approved
by the ma$ority of the board of directors or trustees of
each of the constituent corporations.
d. .he plan of merger or consolidation or any
amendment of it must also be approved by the vote of
ma$ority of the outstanding capital stoc% or members
of the constituent corporations.
&. One of these statements is not correct:
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After the approval of the plan of merger or consolidation,
the articles of merger or consolidation shall be signed
by the president or vice president and certifed by the
secretary or assistant secretary of each constituent
corporation.
.he articles of merger or consolidation must be submitted
to the +ecurities and 5change Commission.
.he articles of merger or consolidation are e@ective upon
submission to the +ecurities and 5change
Commission.
If the +ecurities and 5change Commission believes the
merger or consolidation is contrary to the Corporation
Code or eisting laws, it shall set a hearing for the
corporations concerned to be heard.
,. One of these statements is not correct:
a. .he constituent corporations shall become a single
corporation which, in the case of merger, is the
surviving corporation, and in the case of consolidation
is the consolidated corporation.
b. .he separate eistence of the constituent corporations
shall cease, ecept that of the surviving or the
consolidated corporation.
c. .he surviving or the consolidated corporation shall
possess all the rights, privileges, immunities and
powers, and shall be sub$ect to all the duties and
liabilities of the constituent corporations.
d. .he surviving ban% in case of merger is not entitled to
the payment of the promissory note payable to the
absorbed ban% if it was signed after the merger.
/. One of these statements is not correct:
a. .he surviving or the consolidated corporation shall
possess all the rights, privileges, immunities and
franchises of each constituent corporation, and all
properties, real or personal, and all receivables due on
whatever account, including subscriptions to shares
and other choses in action, and all and every other
interest of, or belonging to, or due to the constituent
corporations shall be deemed transferred to the
surviving or consolidated corporation.
b. .he surviving or consolidated corporation shall be
responsible for all liabilities and obligations of the
constituent corporations? and any claim, action or
proceeding pending by or against any constituent
corporation may be prosecuted by or against the
surviving or consolidated corporation.
c. In case of merger of two corporations the surviving
corporation can be sued for breach of contract entered
into by the absorbed corporation.
d. .he rights of creditors and any lien upon the property
of any constituent corporation shall be etinguished.
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