Corporation Law – Atty. Ruben C.

Ladia
Midterms Practice Questions
Coverage: Until By-Laws
Multiple Choice:
1. A, B, C, D and E organized/formed DKD Inc. was issued a certificate of registration by the appropriate government agency. It turned out,
however, that C,D, and E are not residents of the Philippines. What type/kind of corporation is DKD Inc.?

a. De Facto
b. De Jure
c. Corporation by Estoppel
d. It does not exist as a Corporation at all.

2. A director who was compensated and paid 15% of the net income before tax of the corporation for the preceding year for the services
rendered by him as corporate secretary by a mere Board resolution is

a. Valid since he is acting in a capacity other than as such director

b. Invalid since only 10% of the net income before tax is allowed by law
c. Invalid because it requires stockholders’ approval or a by-law provision authorizing it
d. Valid because all corporate powers, all businesses are conducted and all properties are controlled by the Board of Directors

3. The declaration of stock dividends will generally have

a. the effect of decreasing the total assets of the corporation

b. the effect of an increase in the proportionate interest of the stockholders
c. no effect in the proportionate interest of the stockholders
d. the effect of increasing the authorized capital stock notwithstanding the fact that the corporation has a free portion of its capital
stock to cover the declaration/distribution

4. A contract between a corporation and its president is

a. valid id not tainted with fraud and the contract is fair and reasonable
b. valid if previously approved by the Board of Directors
c. voidable is the president holds a substantial interest in the corporation
d. voidable at the option of the corporation
- with the following conditions:
 the presence of such director or trustee in the board meeting is not necessary to constitute a quorum
 the vote of such is not necessary for the approval of the contract
 contract is fair and reasonable
 contract has been previously authorized by the BOD

5. It is common practice in DKD Inc. for the general manager to enter into contracts for an in behalf of the corporation without prior approval
of the Board of Directors. Said contracts are

a. invalid since the power and authority is lodged to that of the Board of Directors
b. valid because approval of the Board is not required for its validity
c. invalid because the general manager is not authorized by law to enter into contracts for and in behalf of the corporation
d. valid because similar acts were approved and allowed by the Board as a matter of practice, custom and policy and thus binding on
the corporation even without formal Board resolution

6. Non-voting shares are not included in determining the voting requirements imposed by the code in cases of

a. removal of a member of the Board of Directors

b. providing for additional disqualifications of directors in the by-laws
c. shortening of the corporate terms
d. changing the principal office of the corporation

7. DKD INC.. declared cash dividends of P1.00 per share on January 18, 2011 to be paid to the stockholders of record on January 31, 2011.
Said declaration was duly announced to the stockholders. On January 20, 2011, “A”, one of the stockholders holding 100,000 shares valued
at P100,000 sold his shares for the same amount to “B”, who is not a stockholder of the same corporation, and on January 25, 2011 the
transfer in favor of “B” was duly recorded in the books of the corporation. Absent any agreement to the contrary, as between “A” and “B”
who has better right to the dividends?
a. “A” because the transfer of his share was in violation of a by-law provision granting existing stockholders the preferential right to buy
the shares of a selling stockholders
b. “A” because he was the owner of the shares at the time of the declaration of the dividend
Because A subsequent transfer of stock would as a rule, not carry with it the right to the dividends which have been declared but not
yet paid.

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 c. “B” because he was the recorded owner of the share even before payment of the dividend
d. “B” because he was the owner of the share at the time/date of payment

8. A stock corporation shall have the power to reacquire its own shares irrespective of the existence of unrestricted retained earnings

a. to eliminate fractional shares arising out of stock dividends.

b. to pay dissenting stockholders in the exercise of their appraisal rights
c. to pay a stockholder in a close corporation who compels the latter that he be paid the value of his shares
d. to collect/compromise an indebtedness to the corporation arising out of unpaid subscription in a delinquency sale

9. Only the stockholders/members can fill up a vacancy created in the office of a director if the said vacancy occurs

a. by virtue of the resignation of a hold-over director

b. by virtue of the death of a director
c. if the director ceases to be a stockholder
d. if the director is subsequently disqualified by a by-law provision

10. The Articles of Incorporation of DKD INC.. provides for a nine (9) man member Board of Directors. Two of them died. On January 15, 2011,
the corporate secretary of the company resigned such that at a Director’s meeting was held and conducted to elect an0ther corporate
secretary. Five (5) if the directors attended the meeting and four (4) of them elected “A” to replace the resigned corporate secretary. Is the
election valid?

a. Yes, because there are only seven (7) living members of the Board and the vote of four (4) constitutes a majority
b. No, because the vote required is majority of the Board as fixed in the Articles of Incorporation
c. No, because the quorum requirement was not complied with
d. Yes, because the vote required is only a majority of those present at which there is a quorum

11. DKD INC.. paid A CO., INC. 10% of the property dividend declared by the Board of Directors of the former pursuant and in consideration of
messenger services actually rendered by the later. Is the payment valid?

a. Yes because it is a valid contractual arrangement between the parties

b. No because stockholders’ approval is required for its validity
c. No because it would result to a dilution of dividend rights of the stockholder
d. Yes because labor or services actually rendered may be paid by way of property

12. All persons who assume to act as a corporation knowing it without authority to do so shall be liable

a. only to the extent of their subscription to the capital stock of the corporation
b. only to the extent of the corporate assets
c. as limited partners for all debts, liabilities and damages arising therefrom
d. as general partners for all debts, liabilities and damages arising therefrom

13. A, B, C, D and E are the 5-man member of the Board of Directors of DKD INC.. On January 15, 2011, the remaining members of the Board
of Directors consisting of A, B and C conducted a meeting to fill up two (2) vacancies in the Board cause by the removal of D by the
stockholders and by the death of E. D was unanimously replaced by F, and E by G. The election of F and G is

a. valid for both

b. not valid for both
c. not valid for G but valid for F
d. valid for G but not valid for F

14. DKD INC.. filed/submitted an amendment of its Articles of Incorporation with the SEC. If the latter does not act on it within 6 months
without fault attributable to the corporation, the amendment takes effect on the date of its filing except

a. when the amendment consists of a decrease in the capital stock

b. when the amendment consists of a decrease in the number of directors
c. when the amendment consists of including reasonable restrictions on transfer of shares
d. when the amendment consists of a change in the principal office of the corporation

15. The Board of Directors cannot, without stockholders’ approval, pass a valid corporate act

a. to sell/dispose of its only property in the usual course of its business

b. to invest its corporate funds necessary to carry out the secondary purpose indicated in the articles of incorporation
c. to declare property dividends
d. to reacquire its own shares

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
16. A contract between corporations with interlocking directors will be subject to the provisions of section 32 of the Code (voidable) when

a. the interlocking director owns 20% of the outstanding capital stock in one corporation while 18% in the other
b. the interlocking director owns 22% in one corporation while 25% in the other
c. the interlocking director owns 20% in one corporation while 22% in the other
d. the interlocking director owns 22% in both corporation

17. A director who ceases to be a stockholder shall

a. automatically cease to be a director

b. continue to serve in a hold-over capacity until his successor has been duly elected and qualified
c. continue to serve as such until the expiration of his term.
d. continue to serve as such until the expiration of his term if authorized by the Board of Directors

18. DKD INC.. is engaged in the realty business with no other purpose indicated in the article of incorporation. It entered into a catering
service with Y CO., INC. for the retirement of the latter’s president for a consideration of Php150,000. X CO. fully complied with its
obligation but Y CO., later refused to pay the agreed amount claiming that X CO., is not empowered/authorized to engage in the food
catering business. In an action brought before the Court, may Y CO., INC. be compelled to pay?

a. No, because the actuation of DKD INC.. is beyond its corporate powers and authority. (Doctrine of Limited Capacity)
b. Yes, because the party who has received the benefits of the contract is estopped to set up that contract is beyond the corporate
powers of X CO., to defeat an action on the same.
c. Yes, because the contract is valid per se
d. No, because the court cannot interfere with the business judgment of the Board of Directors

19. A provision in the by-laws of a regulatory/ordinary stock corporation may validly provide

a. for a greater quorum and voting requirement in stockholders’ meeting

b. for a denial of cumulative voting of the stockholders
c. for a greater quorum and voting requirements in directors’ meeting
d. for the holding of stockholders’meeting anywhere in the Philippines

20. “A”, the President of DKD INC.. which is engaged in the realty business, bought (in his personal and individual capacity) from his friend a
parcel of land for Php5M and later sold it at Php5.5M thereby making a profit of Php.5M. May his act be validly ratified by the stockholders
at the objection of any one single stockholder?

a. Yes, because he acted as a natural person separate and distinct of the corporation which he is the President
b. No, because he acquired a personal interest in conflict with his duty as a director
c. No, because he serves in a fiduciary position and should not advance his selfish motives to the damage and prejudice of the
corporation
d. Yes, because he merely acquired a business opportunity rightfully belonging to the corporation

True or False:
1. Moral damages cannot be awarded to a corporation TRUE
2. Nationality is not a requirement in for incorporators FALSE
3. Last Name of a person can be used as part of the Corporation Name TRUE
4. There can only be 5 incorporators FALSE
5. A corporation can be an incorporator TRUE
6. All corporations acquire Juridical Personality only upon the approval of SEC TRUE
7. Labor performed or services rendered can be a consideration for stocks FALSE
8. According to Ronnie Duter, corporations exists only for a period of 25 years. FALSE
9. All shareholders of a Non-stock Corp are automatically considered as members TRUE
10. By Laws may provide for additional qualification of a director TRUE
11. There is no minimum requirement to be subscribed in a corporation FALSE
12. Non-voting does not have a voting right TRUE
13. In Piercing the veil of corporate fiction, control means majority or complete stock control. FALSE
14. By Laws are not mandatory TRUE
15. Non-filing of By Law results to immediate dissolution. FALSE
16. Members of the executive committee must be a member of a board TRUE
17. Directors cannot receive compensation FALSE
18. Directors can dispose all or substantially all of the Corporation properties. TRUE (SEC.40)
19. Ultra Vires acts are subject to ratification of the stockholders TRUE
20. Shareholders are not conclusively presumed to know By – Laws

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
Define or Differentiate the Following:
1. What is a corporation? A corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or is incident to its existence
2. What are Ultra Vires Acts – are those can not be executed or performed by a corporation because they are not within its
express and implied or inherent powers as defined by its character or AOI
- Not necessarily be illegal but merely beyond the power of the corporation to perform.
- Not illegal per se
- May be binding and enforceable either by RATIFIICATION, ESTOPPEL OR ON EQUITTABLE GROUNDS.
3. Differentiate De Facto from De Jure Corporation
DE FACTO -A corporation where there exist a flaw in its incorporation
Requisites
(1) Organized under a valid law
(2) Bona fide compliance with formalities of law
(3) User of corporate powers
(4) SEC issuance of certificate of incorporation

DE JURE- A corporation organized in accordance with the requirements of the law.

4. What are Unrestricted Retained Earnings? Undistributed earnings of the corporation which have not been allocated for any
managerial, contractual or legal purposes and which is free for distribution to the stockholders as dividends

5. What is Corporation by Estoppel

Where a group of persons misrepresent themselves as a corporation, they are subsequently estopped from claiming lack of corporate life in
order to avoid liability

All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts,
liabilities and damages incurred or arising as a result thereof.

6. What is the Incorporation test?

- The corporation is a national of the country under whose laws it is organized or incorporated
- Determined by the state of incorporation, regardless of the nationality of the stockholders
- Applied in determining whether a corporation is domestic or foreign. If it is incorporated in another state, it is a foreign corporation,
while if it is registered under Philippine laws, it is deemed a Filipino or domestic corporation irrespective of the nationality of its
stockholders
- Exception: In times of war, the “control test” would apply in determining the corporate nationality, i.e., the citizenship of the
controlling stockholders determines the nationality of the corporation

7. Define Doctrine of Secondary Meaning

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 - Doctrine of Secondary meaning is a word or phrase originally incapable of exclusive appropriation, might nevertheless have been
used so long and so exclusively by one producer with reference to his article that, in trade and to that branch of the purchasing
public, the word or phrase has come to mean that the article was his product

8. Define and differentiate Authorized Capital, Subscribed Capital and Paid Up Capital
AUTHORIZED CAPITAL – the maximum amount fixed in the AOI to be subscribed and paid in or secured to be paid by the subscribers
- Maximum number of shares that a corporation may issue

SUBSCRIBED CAPITAL – makes reference to the total number of shares and its total value for which there are contracts for their acquisition o
subscription
- At least 25% of the ACS must be subscribed

PAID UP CAPITAL – Paid in capital, the actual amount or value which has been actually contributed or paid to the corporation in consideration of
the subscriptions thereon.
- At least 25% of the total subscription must be paid
- May either be in cash, property or in the form of services actually rendered to the corporation

9. What is outstanding Capital Stock - total shares of stock issued under binding subscription agreements to subscribers or
stockholders, whether or not fully or partially paid, except treasury shares

10. What are Non-par value shares – those whose issued price are not stated in the certificate of stock but which may be fixed in
the AOI or by the board of directors when so authorized by the AOI of BL, in the absence by the SH.

11. What are preferred stocks – stock that gives the holder a preference over the holder of common stocks with respect to the
payment of dividends and/or with respect to distribution of capital upon liquidation.
LIMITATIONS IMPOSED:
1. Can be issued only with a stated par value
2. Preferences mut be stated in the AOI and in the Cert of Stock otherwise, equal to every other share

12. What is cumulative voting?

Cumulative voting for one candidate A stockholder is allowed to concentrate his votes and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal.

Cumulative voting by distribution A stockholder may cumulate his shares by multiplying the number of his shares by the number of directors to
be elected and distribute the same among as many candidates as he shall see fit.
13. Differentiate Cumulative Preferred Shares vs. Earned Cumulative/Dividend Credit Type
Cumulative Preferred Shares
- Those that entitle the owner to payment not only to current dividends but also back dividends not previously paid
- Stockholder of such shares do not lose their right to claim dividend for the years that they were not declared

Earned Cumulative/Dividend Type

- Preferred stocks give the holder of such shares the right to have dividends paid in a particular year depending on the judgment of
discretion of the BOD
- Unless the director failing to declare dividend have abused their discretion as to result in oppression, fraud or unfair discrimination,
right in that particular year cannot be made in subsequent year

14. What are Treasury Shares?

Shares which have been issued and fully paid for, but subsequently re-acquired by the issuing corporation by purchase, redemption, donation or
through some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the BOD.
- No voting right as long as they remain in the treasury.

15. What is the Doctrine of Limited Liability?

16. What is Pre-emptive Rights and when can it be exercised?
- A right granted by law to all existing stockholders of a stock corporation to subscribe to all issues or disposition of shares of any class,
in proportion to their respective stockholdings unless denied by the AOI
- It may be lost by waiver of the SH, expressly or impliedly by his inability or failure to exercise it after having been notified.
Pre-emptive right shall not extend to:

(a) shares to be issued in compliance with laws requiring stock offerings or minimum stock ownership by the public

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
(b) shares to be issued in good faith with the approval of 2/3 of the stockholders representing outstanding capital stock, in exchange for
property needed for corporate purposes or in payment of a previously contracted debt

17. What is the Corporate Entity Theory? Comes into existence upon the issuance of the certificate of incorporation

18. What is Business Judgment Rule? - is a presumption that in making a business decision, the directors of a corporation acted on
an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company

19. Differentiate ordinary vs special amendment

ORDINARY:
- Amendment of the AOI of incorporation such as change of name
- purpose/s and or
- principal office
- restrictions on transfer of shares
- BOD physical presence is not necessary

SPECIAL
- Increase or decrease in CS or
- incur, create or increase bonded indebtedness
- Shortening or extending the corporate term
- BODs presence is necessary

20. Differentiate Self-Dealing vs. Interlocking Directors

SELF DEALING
- Involves the duty of loyalty of a director
- One who deals or transacts business with his own corporation
- Voidable, at the option of such corporation
- May be ratified by the vote of a SH representing at least 2/3 of the OCS OR 2/3 of the members
Provided that: full disclosure of the adverse interest and it must be fair and reasonable.

INTERLOCKING DIRECTOR
- A director in one corporation who deals or transact business with another corporation of which he is a director.
- A violation of the duty of loyalty because he occupies the position of a director in two corporations dealing with each other.
- Contracts are not voidable
- May be upheld the contracts if there is no bad faith of unfairness or collusion

Enumerate the Following:

1. When may Directors and/or Officers be personally liable with the corporation?
He assents to:
a. Patently unlawful act of the corporation
b. Bad faith or gross negligence in directing its affairs
c. For conflict of interest, resulting to damages in the corporation
2. He consents to the issuance of watered stocks or who having knowledge thereof, does not
forthwith file with the corporate secretary his written objection.
3. He agrees to hold himself personally and solidarilly liable with the corporation

2. What is the test in determining whether a corporation has the implied power to do a certain act?
3. What is the limitation imposed by law on the right of a corporation to decrease its capital stock?
4. Elements of By Laws
1. It must not be contrary to law,public policy, or morals
2. It must not be inconsistent with the AOI
3. It must be general and uniform in its effect or applicable to all alike or those similarly situated
4. It must not impair obligations and contracts or vested rights
5. It must be reasonable

5. Advantages of the Corporate form of business

1. Capacity to act as a single unit
2. Limited Shareholder’s liability
3. Continuity of existence
4. Feasibility of greater undertaking
5. Transferability of shares
6. Centralized Management
7. Standardized method of organization, management and finance

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 6. Requirements for the Amendments of AOI
(a) majority vote of the BOD/BOT
(b) vote or written assent of the stockholders representing at least two-thirds 2/3 of the outstanding capital stock, without prejudice to
the appraisal right of dissenting stockholders.
(c) Includes all stockholders/members with or without voting rights

- Amendment of AOI of close corporations (Sec 103)

- AOI which seeks to delete or remove any provision required to be contained in the AOI of Close Corporations o
- to reduce a quorum or voting requirement stated in said AOI requires the affirmative vote of at least 2/3 of the outstanding capital
stock,
- with or without voting rights, or of such greater proportion of shares as may be specifically provided in the AOI
- at a meeting duly called

7. Requirements for the Amendments of By Laws

- Majority vote of the BOD/TRUSTEE
- Owners of at least majority of the OCS
- At least majority of the members of a non-stock corporation
- At a regular/special meeting
- Amendment shall be attached to the original BL
- Copy duly certified under oath of the corp sec and majority of the directors and trustees
- Filed with SEC
- Attaching the original BL
- Effective upon issuance by the SEC of a cert that the same is not inconsistent with the code.

8. Disadvantage of the Corporate form of business

1. Formal proceedings are required.
2. Business transaction is limited to the state of its incorporation unless obtained a license from the foreign state
3. SH’s liability tend to limit the credit available to the corporation as a separate legal entity
4. Since the nature of shares of stock are a personal properties, transfer of share may result to uniting incompatible and conflicting interest
5. Double taxation may be imposed
6. Corporations are subject to governmental regulation, supervision and control

9. What is the test in determining whether a corporation is private or public corporation?

1. Incorporation Test- state of incorporation, regardless of the nationality of itsstockholders.
2. Domicile Test -state where it is domiciled (place fixed bythe law creating or recognizing it)
3. Control Test/WARTIMETEST. - nationality of the controlling stockholders or members.

10. Enumerate the Instrumentality Test

(1) CONTROL, not mere majority stock control, but complete domination over finances and business practices in respect to the transaction of
the corporation attacked so that the government entity as to this transaction had at that time had no separate mind, will or existence of its own;
(2) Such Control must have been used to commit fraud, or wrong doing to perpetuate the violation of plaintiff’s legal rights
(3) The control and breach of duty must proximately cause the injury or unjust loss complained of.

11. What can be a consideration for stock? APLIAO

1. Actual cash paid to the corporation
2. Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair
valuation equal to the par or the issued value of the stock issued
3. Labor performed or services actually rendered
4. Previously incurred indebtedness
5. Amounts transferred from unrestricted retain earnings to stated capital
6. Outstanding shares in exchange for stocks in the event of reclassification or conversion

12. Enumerate the defenses available to the directors for their failure or refusal to declare dividends

13. When can Non-Voting Shares participate in voting?

1. Amendment of the AOI
2. Adoption & Amendment of BL
3. Sale, Lease, exchange of corporate property
4. Incurring, creating or increasing bonded indebtedness
5. Increase or decrease of capital stock
6. Merger or consolidation of the corporation
7. Investment of the corporate funds in another corporation or business
8. Dissolution of the corporation

14. What are justifiable reasons for non-declaration of corporate dividends?

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 - Justified by definite corporate expansion projects approved by the Board of Directors
- corporation is prohibited under loan agreement from declaring dividends without the financial institution or creditor’s consent and
such consent is not yet secured
- retention is necessary under special circumstances, such when there is need for special reserve for probable contingencies

15. Modes of Increasing Capital Stock?

1. Increasing the par value of the existing number of shares without increasing the number of shares
2. Increasing the number of existing shares without increasing the value thereof; and
3. Increasing the number of shares and at the same time increasing the par value of shares

16. Reason for Decreasing Capital Stock?

1. To reduce or wipe out existing deficit where no creditors would be thereby affected
2. When capital is more than what is necessary to procreate the business or reduction of capital surplus; or
3. To write down the value of its fixed assets to reflect the present actual value in case where there is a decline in the value of the fixed assets of
the corporation *not exclusive

17. What are the types of Dividends

- CASH dividends- payable in lawful money or currency
- Property- paid in the form of property instead of cash
- Stock- corporations shares of stock itself or of the certificate evidencing it (bonds, titles, evidences of indebtedness and other
securities)
18. Enumerate the test in determining whether a corporation has the implied powers to do certain acts
19. Requisites for a corporation to be classified as a STOCK CORPORATION
- That they have a capital stock divided into shares; and,
- authorized to distribute dividends or allotments as surplus profits to its stockholders on the basis of shares held by them

20. Requisites for the use of corporate name

(1) That the complainant corporation acquired a prior right over the use of such corporate name; and
(2) The proposed name is either: a. Identical; or b. Deceptively or confusingly similar to that of any existing corporation or to any other
name already protected by law c. Patently deceptive, confusing or contrary to law

21. REASONS why the PURPOSE CLAUSE is important

1. FOR STOCKHOLDERS – to know within what lines of business their money is to be put at risk
2. FOR BOD – to know within what lines of business they are authorized to act
3. FOR THIRD PERSONS – to know whether or not the contract or transaction entering is one within the general authority of the management

22. CORPORATIONS which cannot have secondary purpose

1. Educational, religious, and other non stock corporation, which would change or contradict its purpose or to engage in any enterprise to make
profits for its members
2. Insurance companies cannot engage in commercial banking
3. Stock brokers

23. WHY statement of principal office is necessary?

1. It establishes the residence of the corporation
2. It is important in determining the venue in an action against the corporation
3. It determines where chattel mortgage should be registered
4. Venue of meetings

24. Why should the corporation classify its shares?

1. To specify and define the rights and privileges of the Stockholders
2. For the regulation and control of the issuance of sale/transfer of shares of stock/corporate securities for the protection of purchasers and
stockholders.
3. As a management controlling device
4. To comply with the statutory requirements
5. To guarantee return of investment 6. For flexibility in price

25. Classification of shares

• Common Stocks • Preferred Stocks • Participating and Non Participating • Cumulative and non cumulative • Par Value • Non Par Value •
Voting and Non Voting • Founders • Redeemable • Treasury

26. What are the limitations of no par value shares?

1. Such shares once issued, are deemed fully paid and thus non assessable
2. The consideration of its issuance should not be less than 5 pesos
3. The entire consideration for its issuance constitutes as a capital, hence, not available for dividend declaration
4. They cannot be issued as preferred stock

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
5. They cannot be issued by banks, trust companies, insurance companies, public utilities and building and loan associations

27. ADVANTAGES of issuance of no par value shares

1. It gives the advantage of flexibility of price
2. . Practically results to the evasion of the danger of the liability upon watered stock in case of overvaluation of the consideration paid
for it
3. 3. Since they are fully paid and on assessable , it results to the disappearance of personal liability on the part of the thereof for
unpaid subscription

28. GROUNDS FOR DISAPPROVAL OF AOI

1. Not substantially in accordance with the form prescribed therein
2. Purpose or purposes of the corporation are patently unconstitutional, illegal or immoral.
3. Treasurer’s affidavit concerning in the amount of capital stock subscribed and/or paid is false
4. Ownership of capital stock by citizens of the PH.

29. WHEN A CORPORATION MAY BE DISREGARDED OR PIERCED?

1. used to defeat public convenience, to justify wrong and protect fraud, defend crime, confuse legitimate issues
2. To circumvent the law or perpetuate deception
3. used as an alter ego, adjunct or a business conduit for the sole benefit of a stockholder or group of stockholders or another corporation

30. Ecclesiastical corporation religious purposes

31. lay corporation purpose other than for religion.
32. eleemosynary corporation charitable purposes
33. Promoter takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration
34. What are the condition for the exercise of power to sell or dispose assets?
1. Resolution by the majority vote of the BOD/T
2. Authorization from SH representing at least 2/3 of the OCS or 2/3 of the members of non stock corporations
3. Ratification must be made at the meeting called for that purpose
4. Prior notice of the action must be made stating the time and place of the meeting addressed to each stockholder or member at his place of
residence either by mail or personal service
5. The sale of assets shall be subject to the provision of existing laws on illegal combinations and monopolies
6. Any dissenting holder shall have the option to exercise his appraisal right

Explain why the following statements are CORRECT: (YUNG IBANG SAGOT DITO NASA ENUMERATION NA, PAKI0CHECK NA LANG)

1. If not denied by a provision in the articles of incorporation, the pre-emptive right of a stockholder in a close corporation is absolute.
- corporation because of the express provision in the code which provides that the pre-emptive right of a stockholder in a close
corporation shall extend to all stocks to be issued, including the re issuance of treasury shares, whether for money, property or
personal services or in any payment of corporate debt, unless the articles provide otherwise.

2. Failure of a corporation to adopt/file its by-laws within the time frame provided for by law does not result to the automatic
dissolution of the corporation.
-only suspension, BL is not a mandatory for a corporation

3. Labor performed or services rendered can be a consideration for stocks

4. Minors can be a corporator.
-So long as they are assited by their guardian, parents or person assigned by the court or authorized
5. Members of the executive committee must be a member of a board
6. Adoption of By Laws prior incorporation is more convenient than after incorporation.
7. Service of summons against a corporation must not be made upon Branch Manager
-Branch Manager has already been amended to a General Manager
8. Treasury shares may be issued lower than par value
9. Corporate extension may be made earlier than 5 years prior expiration
10. Demand may be waived in a Derivative Suit.
11. Corporations persists to exist despite death, incapacity, civil interdiction or withdrawal of stockholders or members
–Because it has a juridicao personality distinct and separate from its stockholders or board
12. Third-person can be bound by the By Laws of a Corporation.
13. Directors or Officers can be liable with the corporation.
14. Cumulative voting is not allowed in a Non-Stock Corporation
15. A corporation may acquire its own shares.
16. Disloyal act of a director may be subject to ratification by a vote of stockholders owning or representing at least 2/3 of the
outstanding capital stock.
17. Acts of self-dealing director is merely voidable
18. Acts of Interlocking directors are valid

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 19. Incorporators are not subject of any amendments

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!