NATIONAL COLLEGE OF BUSINESS AND ARTS

Cubao-Fairview-Taytay
FIRST SEMESTER SY 2019-2020
MIDTERM DEPARTMENTAL EXAMINATIONS 2 HRS
BUSINESS LAW 2 LAWS ON BUSINESS ORGANIZATION

INSTRUCTIONS:Select the correct answer for each of the following questions. Mark only one answer for
each item by shading the corresponding letter of your choice on the answer sheet provided. STRICTLY NO
ERASURES ALLOWED. Use Pencil No. 2 only.
PART I
For Numbers 1 – 15, determine if:
A. TRUE B. FALSE

1. A universal partnership of all present property comprises only all that the partners may F
acquire by their work or industry during the existence of the partnership.
2. Common shareholders shall not be deprived of their right to vote F
3. The partner appointed manager can execute all acts of administration despite the opposition F
of his other partners unless he will act unreasonably.
4. The common property of a universal partnership shall be all the properties which shall belong F
to each of the partners at the time of the constitution of the partnership as well as the
properties which each may acquire thereafter.
5. All partners except industrial ones are liable pro rate for the contractual liabilities of the F
partnership
6. Persons who are prohibited by law to donate to each other cannot enter into partnership F
contracts.
7. When an unlawful partnership is dissolved, the profits acquired therefrom will be confiscated T
in favor of the state.
8. No person convicted of violating the Corporation Code shall qualify as a director F
9. All incorporators are corporators T
10. The owner of founder shares may be given the exclusive right to vote and be voted for in the F
election of director for a limited period not exceeding 3 years
11. Treasury shares sold for less than par or issued value are considered watered stocks and F
as such are prohibited by law
12. Preferred shares of stocks may be issued with or without a stated par value. F
13. Members are entitled to receive cash dividends F
14. Redeemable shares may be redeemed even without available unrestricted retained earnings T
15. All persons who assume to act as a corporation knowing it to be without authority to do so F
shall be liable as limited partners for all debts, liabilities and damages incurred or arising as
results thereof.

PART I – MULTIPLE CHOICE

16. How many numbers of votes of the Board of Directors are required to change the name of a corporation?
A. 2/3 vote of all members of the Board;
B. 2/3 vote of all present;
C. Majority of all present
D. Majority vote of the Board.

17. The authorized capital stock of a proposed corporation is P70,000 divided into 700 shares with a par
value of P100 each. Under the corporation code, the minimum amount of subscription that must be paid
is:
A. P 4,375 C. P 5,100
B. P 17,500 D. P 5,000

18. The nationality of the corporation is determined by the laws of its domicile or place of principal business.
This test is known as:
A. The control theory C. The incorporation theory
B. The full absorption theory D. The management theory

19. This group of persons may not form a corporation or be incorporators in a corporation in the Philippines
under the corporation code.
A. Fifteen Spanish citizens who are residents of Manila.
B. Ten resident aliens and four aliens in Singapore.
BUSINESS LAW 2 LAWS ON BUSINESS ORGANIZATION
C. Eleven Filipinos who are residents of San Francisco, California.
D. Seven Americans residing in the Philippines and two Filipinos residents of Hawaii.

20. For purposes of interlocking directors, the stockholdings shall be considered substantial if:
A. Exceeding 10% of the authorized capital stock
B. Exceeding 10% of the outstanding capital stock
C. Exceeding 20% of the authorized capital stock
D. Exceeding 20% of the outstanding capital stock

21. 1st statement -For a de facto corporation to exist, it is necessary that it is issued by the SEC a certificate
of incorporation just like a de jure corporation.
2nd statement - In a corporation by estoppel, those who represent themselves as forming by a
corporation are liable as stockholders to third persons.
A. First statement is true, second is false
B. First is false, second is true
C. Both are false
D. Both are true

22. 1st statement - Redeemable shares may be taken up or purchased by the corporation even in the
absence of surplus profits.
2nd statement - Treasury shares may be reissued for a reasonable price even below par value.
A. Both statements are false C. Only the first is true
B. Both are true D. Only the first is false

23. The person cannot be admitted into the partnership without the consent of
A. All the partners C. 2/3 of the partners
B. Majority of the partners D. Partners representing the controlling interest

24. After ten years, five out of the nine incorporators who organized the corporation and signed the articles
of incorporation died. The corporation is
A. Dissolved as there will only be four left which is below the minimum of five incorporators
B. Dissolved as the Corporation Code requires that the incorporators be alive during the operation of
the business
C. Not dissolved as it still has forty years left in its term
D. Not dissolved as it enjoys the right of succession

25. They are issued to those who helped in incorporating the company or for services rendered in launching
the welfare of the company:
A. preferred stocks C. founders stock
B. stock in escrow D. promotion Stocks

26. Any director of a corporation may be removed from office by a vote of the stockholders holding or
representing:
A. majority of the stockholders present during the meeting
B. ¾ of the outstanding capital stock entitled to vote
C. 2/3 of the outstanding capital stock entitled to vote
D. majority of the outstanding capital stock entitled to vote

27. One of the following is not required and does not form part of the three-fold duty of directors of a
corporation. Which one?
A. Duty of Diligence C. Duty of Loyalty
B. Duty of Obedience D. Duty of Dependability

28. Private corporations which have accepted from the State the grant of a franchise or contract involving
the performance of public duties is called:
A. Quasi-public corporation C. Quasi-corporation
B. Ecclesiastical corporation D. Eleemosynary corporation

29. Three of the following corporations are not authorized to issue no-par-value shares of stock. Which one
is the exception?
A. Educational institutions C. Insurance companies
B. Trust Companies D. Public utilities

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30. The corporation has a twelve-member board. Two of the members of the Board have sold their shares
while three others are abroad. To have a quorum, this number is required:
A. Seven B. Five C. Six D. Four

31. The stockholders or members mentioned in the Articles of Incorporation originally forming and
composing the corporation and who are signatories thereof are called:
A. incorporators C. subscribers
B. stockholders D. corporators

32. Under the corporation code, the following are the qualifications of incorporators. Choose the exceptions
A. Majority of whom must be Filipinos.
B. Majority of whom are residents of the Philippines
C. All are of legal age.
D. Natural persons, not less than five but not more than 15.

33. This is a written acknowledgement by the corporation of an interest of a stockholder in the corporate
property and franchise:
A. Proxy C. Share of stock
B. Certificate of stock D. Capital stock

34. Under the corporation code, the corporation shall be deemed dissolved and its corporate powers
cease, if from the date of its incorporation, it does not formally organize and commence the
transaction of its business within:
A. 4 years B. 3 years C. 2 years D. 5 years

35. Which of the following will qualify as an incorporator of a corporation under the corporation code?
A. A minor C. Partnership
B. A corporation D. Foreigner

36. Under the corporation code, majority of the following must residents of the Philippines, except:
A. Members of the board of directors C. Incorporators
B. Members of the board of trustees D. Officers

37. In case a managing partner collects a demandable debt from his debtor who also owes the partnership
a demandable debt, which of the following is not correct if payment is not enough to cover the two
debts?
A. The sum collected shall be applied to the partnership credit
B. It shall be applied to the two credits in proportion to their amounts
C. The debtor has the right to have the payment applied to his debt to the partner if it should be
onerous to him
D. The partner cannot apply the payment to his own credit

38. Statement 1- A director is removed from office by a vote of the stockholder or representing at least 2/3
of outstanding capital stock. The vacancy occasioned by such removal can be filled by the vote of at
least a majority of the remaining directors if still constituting a quorum
Statement 2-Treasury shares sold for less than par or issued value are considered “watered stock” and
as such are prohibited by law.
A. True, true B. True, false C. False, true D. False, false

39. Delectus personae is an element of a partnership which means

A. Right to choose his partners C. Obligation to remain loyal to his partners
B. Confidence and trust in his partners D. Distribution of profits among the partners

40. When a real property is contributed to the partnership

A. A real contract is perfected
B. A written instrument is required
C. A public instrument complete with inventory is required
D. A partner can make important alteration if beneficial to the partnership

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41. Can be made by the managing partner without consent of the other partners:
A. Waiver or compromise
B. Make material alteration upon an immovable property belonging to the partnership
C. Sell partnership goodwill
D. Sell property in the usual course of business

42. One or more but less than all the partners have no authority to perform the following acts, except:
A. Do any act which would make it impossible to carry on the ordinary business of the partnership.
B. Submit a partnership claim or liability to arbitration.
C. Renounce a claim of the partnership.
D. Convey partnership property in the ordinary course of partnership business.

43. Capitalist partner engaged for his own account in an operation which is of the kind of business in which
the partnership is engaged. Said partner can be
A. compelled to sell his interest in the partnership to the other capitalist partners
B. compelled to dissolve or discontinue the operation of his business
C. compelled to bring to the common funds of the partnership any profits accruing to him from his
transactions
D. share his profits the other partners

44. X, Y and Z are partners of X Partnership, each contributed P200,000 and A contributed his industry.
The net contractual liability of the partnership amounted to P230,000. The remaining assets of the
partnership amounted to only P20,000. Supposed the creditor B, got the P20,000, how can he recover
deficiency of P120,000?
A. B can recover P70,000 each from the capitalist partners.
B. B can recover P210,000 from any of the partners.
C. B can recover P210,000 from X, Y and Z based on their capital contributions
D. B can recover P52,500 each from the four partners

45. A, B and C orally agreed to form a partnership 1 year from today. If at the arrival of the period, one
refuses to go ahead with the agreement, can the others enforce the agreement?
1st statement - No, because the agreement was merely oral
2nd statement - Yes, because their contract is not governed by the Statute of frauds
A. Only the 1st statement is true C. Both are false
B. Only the 2nd statement is true D. Both are true

46. Which of the following is false?

A. Partnership with a capital of three thousand pesos or more, in money or movable property, shall
appear in a public instrument, and recorded at SEC.
B. An industrial partner is always a general partner.
C. Persons who are not partners as to each other are not partners as to third persons.
D. In the absence of stipulation, the share of each partner in the profits and losses shall be equal to
each other.

47. Which of the following is true?

A. The designation of the profits and losses may be entrusted to the managing partner.
B. If property has been promised by a partner as contribution to the partnership, the fruits arising
from the time the property should have been delivered should also be given provided prior demand
was made.
C. Whenever immovable property is contributed, an inventory of said property is needed, signed by
the parties and attached to the public instrument, otherwise the contract of partnership is void
D. A limited partner can contribute money, property or industry into the common fund.

48. The following persons are disqualified to form a universal partnership. Who are the exceptions?
A. Half Brothers and half sisters
B. Husband and Wife
C. Those guilty of adultery and concubinage
D. Those guilty of the same criminal offense, if the partnership is entered into in consideration of
the same

49. A, B and C are capitalist partners while D is an industrial partner. A, the managing partner engaged
personally in a business that is the same as the business of the partnership without the consent of the
other partners. As a result,
A. If there are losses, the partnership will bear the losses

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B. If there are profits, the profits will be shared by A and the partnership
C. If there are profits, A will give the profits to the partnership
D. A will be excluded from the partnership and will pay damages

50. X is indebted to XYZ Partnership in the amount of P50,000 and to Y, the managing partner in the amount
of P50,000. Y collects from X P50,000.
1st statement - If Y gives his own receipt, the payment shall be applied to the two credits
proportionately.
2nd statement - If Y gives a receipt of the partnership, the payment shall be applied to the credit of
the partnership
A. Only the 1st statement is true C. Both are false
B. Only the 2nd statement is true D. Both are true

51. X, Y, Z, and A are partners in AX Partnership. E is a debtor of the partnership in the amount of
P100,000.00. X received from debtor E the sum of P25,000.00 and issued a receipt identifying the
amount of his share. Then E became insolvent. The other partners cannot collect their shares. Which of
the following is correct?
A. X cannot be compelled to share the P25,000.00 with the other partners
B. Y, Z, and A can charge the profit of X with their share of the P25,000.00.
C. X can be compelled to share with Y, Z, and A the P25,000.00.
D. Y, Z, and A should automatically sue E to collect the P75,000.00

52. A partnership whereby the partners contribute to a common fund all the property actually belonging to
them at the time of the constitution of the partnership, with the intention of dividing the same among
themselves as well as the profits which they may acquire therewith is called:
A. Universal partnership of all present property
B. Universal partnership of profits
C. Particular partnership
D. Partnership at will

53. A and B agreed to contribute their respective farms to form a partnership. A immediately delivered his
land. B waited until after 2 months so he could harvest some rice in his farm. What may the parties
do?
A. B should deliver the land and the rice he harvested.
B. B is allowed to keep his land until a formal demand is made.
C. A should also be allowed to harvest any fruits in his land.
D. A should ask for a rescission of the contract of partnership.

54. Alex and Jennifer agreed to form a partnership. Each contributed cash and personal properties worth P
100,000 to a common fund. But they did not register the partnership with the Securities & Exchange
Commission.
A. The partnership is still valid. C. The partnership is voidable
B. The partnership is void. D. The partnership is unenforceable

55. Which of the following is an essential element of partnership?

A. There must be a contribution of money, property or industry to a common fund.
B. There must be a valid and voluntary agreement.
C. It must be an association for profit with the intention to divide the profits among themselves
D. All of them.

56. A person who directly represents himself or consents or allows himself to be represented with one or
more persons who are not actually partners
A. Nominal Partner C. Substituted limited Partner
B. Dormant Partner D. Ostensible Partner

57. The change in the relation of the partners caused by any partner ceasing to be associated in the carrying
on of the business
A. Liquidation C. Winding up
B. Termination D. dissolution

58. A partner who’s liability for contractual obligations of the partnership does not extend to his properties
not contributed to the partnership.
A. Limited Partner C. Nominal partner
B. All Partners D. Silent Partner

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59. A partner who has all the rights, power and subject to all the restrictions of a general but whose liability
is, among themselves, limited to his capital contribution
A. General Limited partner C. Ostensible Partner
B. Limited Partner. D. A newly admitted Partner

60. Which of the following contracts of partnership need not appear in a public instrument?
A. Limited partnership
B. Partnership where immovable are contributed
C. Partnership having a capital of P3,000 or more
D. None of the above

**** THE END ****

GOD BLESS!

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