LAW503 Corp.

Study online at quizlet.com/_5qom2a

1. C As regards the corporate by laws, which of the following is false?

A. To adopt majority of the outstanding capital stock is needed

B. To delegate to the BOD the power to amend, repeal, or adopt new by laws, 2/3 of the outstanding capital stock
C. To revoke the power delegated to the board to amend, repeal, or adopt new by laws, 2/3 of the outstanding capital stock
D. To amend, repeal or adopt new by-laws, majority of the outstanding capitalstock
2. B The power to deny pre-emptive rights to stockholders is

A. Incidental power
B. Express power
C. Implied power
D. Discretionary power
3. D As regards treasury shares, which is not correct?

A. They have no voting rights while in the treasury

B. They may be distributed as property dividend if there is a surplus profit
C. They are not entitled to dividends
D. They are considered as part of the earned or surplus profits thus distributable as dividends
4. D This is the equitable right of the stockholders to subscribe to all issues of shares in proportion to their shareholdings to maintain
their equity participation in the corporation

A. Appraisal right of dissenting stockholder

B. Right to first refusal in close corporation
C. Right to dividends date entity
D. Pre-emptive right
5. B In the matter of management of the corporation, this is supreme:

A. Majority of the shareholders

B. Board of directors
C. 2/3 of the stockholders
D. Officers of the corporation
6. D This is the written acknowledgment of the interest of the stockholder in the corporation

A. Proxy
B. Share of stock
C. Voting trust agreement
D. Certificate of stock
7. A These are the persons who sign the articles of incorporation and therefore must be subscribers of shares

A. Incorporators
B. Directors
C. Stockholders
D. Corporate officers
8. B They provide and regulate the internal matters of the corporation

A. Articles of incorporation
B. By-laws of the corporation
C. Certificate of incorporation
D. Certificate of filing of by-laws
9. B This is a public instrument giving authority to vote for stockholder

A. Proxy
B. Voting trust agreement
C. Stock certificate
D. Voting trust certificate
10. C A gratuitous reissue of treasury shares will result in

A. Capital surplus
B. Stock dividend
C. Watered stock
D. Property dividend
11. B A certificate of stock is not a negotiable instrument because it lacks the requirement of

A. The instrument must be in writing and signed by the maker or drawer

B. It must contain an unconditional order or promise to pay a sum certain in money
C. It must be payable to order or to bearer
D. It must be payable on demand or at a fixed or determinable future time
12. B The number of trustees in a non-stock corporation may be

A. Not less than 5 but not more than 15

B. Not less than 5 but may be more than 15
C. Not less than 5 but not more than 11
D. May be less than 5 and more than 15
13. C Which of the following is a limitation on proxy?

A. The proxy acquires legal titles to the shares of the stockholder

B. The proxy may attend the meeting even in the presence of the stockholder
C. The proxy as a rule is only for the meeting from which it is issued
D. The proxy is not revocable at will of the stockholder
14. B S1: In a corporation by estoppel, those who represent themselves as forming a corporation are liable as stockholders to 3rd
persons
S2: 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

A. True, false
B. False, true
C. True, true
D. False, false
15. B The following are requirements for incorporators. Which is not?

A. Majority of them must be residents of the Philippines

B. Majority of them must be of legal age
C. They must be natural persons
D. They must be not less than five nor more than fifteen in number
16. D S1: To elect officers of the corporation, majority of the directors in a meeting constituting a quorum is sufficient.
S2: Members of a non-stock corporation may all be without voting rights if provided for in the articles of incorporation or by laws

A. Both are false

B. Both are true
C. Only S1 is true
D. Only S1 is false
17. B In three of the following corporate acts, dissenting stockholders have appraisal rights except;

A. Merger or consolidation of corporations

B. Increase or decrease of capital stock, incurring, creating or increasing bonded indebtedness
C. Investment of corporate funds in another business or corportion or for any purpose other than primary purpose
D. Disposition of all or substantially all of the corporate assets
18. C Stockholders with or without voting rights may vote on the following matters except:

A. Amendment of the articles of incorporation

B. Dissolution of the corporation
C. Election of directors
D. Adoption and amendment of by-laws
19. D The nationality of the corporation determined by the nationality of the stockholder in control of the same is called:

A. Domicile test
B. Incorporation test
C. Management test
D. Control test
20. D S1: Directors as a rule are entitled to compensation as directors but not exceeding ten percent of the net income before tax of the
preceding year
S2: All private corporations in the Philippines shall be incorporated under the Corporation Code, which is a general law

A. Both are true

B. Both are false
C. Only S1 is true
D. Only S1 is false
21. B S1: Redeemable shares may be taken up or purchased by the corporation even in the absence of surplus profits
S2: Treaury shares may be reissued for a reasonable price even below par value.

A. Both are false

B. Both are true
C. Only S1 is true
D. Only S1 is false
22. A S1: In case of shares owned in common by two or more stockholders, the consent of either is enough to vote the same
S2: The pledgee or mortgagee shall have the right to vote the shares unless stipulated otherwise

A. Both are false

B. Both are true
C. Only the first is true
D. Only the first is false
23. C S1: Contracts between corporations with interlocking directors shall only be voidable, not void, because of the nominal interest of
the director
S2: Management contracts shall be approved by 2/3 vote of the directors and stockholders of both managed and managing
corporation

A. Only S1 is false
B. Both are true
C. Both are false
D. Only the first is true
24. A Vacancy in the board of directors can be filled up by the remaining directors in the following cases, except.

A. Increase in the number of directors

B. Resignation of a director
C. Death of a director
D. None of the above
25. D The following are requisites for de facto corporation, except one

A. Valid law under which it is incorporated

B. Actual use of corporate powers
C. Attempt in good faith to organize
D. Non-issuance by the SEC of certificate of incorporation
26. A S1: In an open corporation, only in certain case do stockholders have appraisal right of dissenting stockholders while in a close
corporation, stockholders can at anytime for whatever reason demand payment of surrendered shares
S2: In the former, there is no restriction in the transfer of shares while in the latter, there is in the form of the right of first refusal of
the corporation or stockholders

A. Both are true

B. Both are false
C. Only S1 is true
D. Only S2 is false
27. B S1: The by-laws of a corporation may provide that the stockholders or trustees meeting may be outside of the Philippines
S2: The code of by-laws may be filed with the SEC either before or after incorporation

A. Only S1 is true
B. Only S1 is false
C. Both are true
D. Both are false
28. D A subscribed to 1,000 shares of stock of X corporation. She paid 25% of the said subscription. During the stockholders meeting,
can A vote all her subscribed shares?

A. No,because the subscription has not yet been fully paid

B. No, because A's shares have become delinquent which cannot be voted
C. No as to the unpaid percentage of subscription
D. Yes, because unpaid shares not delinquent can be voted
29. A S1: After dissolution but within the three year period for liquidation,a corporation's term may still be extended by amendment of its
articles of incorporation
S2: The dissolution of a corporation shall take place because it has been in continuous non-operation for 5 years.

A. Both statement are false

B. Both are true
C. True, false
D. False, true
30. B S1: The by-laws may provide that the holders of a majority of the outstanding capital stock may elect all members of the board of
directors
S2: That it may also provide that no officer of the corporation shall be required to be a stockholder

A. Both are true

B. Both are false
C. True, false
D. False, true
31. D Majority of the following must be residents of the Philippines, except

A. Members of the BOD

B. Members of the Board of trustees
C. Incorporators
D. Officers
32. C Private corporations has the following attributes, except

A. It is created by operation of law as a juridical person

B. It has the right of succession
C. It may be formed, organized, and existing under a special law or charter
D. It has the powers, attributes and properties expressly authorized by law or incident to its existence
33. C In three of the following instances, shares with or without voting rights can be voted , except

A. Increase or decrease of capital stock

B. Dissolution of the corporation
C. Election of directors or trustees
D. Merger or consolidation with other corporation
34. C One of the following does not have voting rights

A. Preferred shares
B. Redeemable shares
C. Treasury shares
D. Common shares
35. C The executive committee cannot act on this matter except

A. Filing of vacancy in the board of directors

B. Cash dividend declaration
C. Board resolution on depositary bank of the corporation
D. Stock dividend declaration
36. A Three of the following are not authorized to issue no par value shares . Which one is the exception?

A. Industrial companies
B. Insurance companies
C. Trust companies
D. Public utilities
37. B The corporation has a nine-member board. Two of the members have sold their shares while two others are abroad. To have a
quorum, the number required is

A. Seven
B. Five
C. Three
D. Four
38. C S1: A majority of the directors or trustees of all corporations organized in the Philippines must be citizens of the Philippines
S2: Any two or more positions may be held concurrrently by the same person, except that no one shall act as president and
secretary or as secretary and treasurer at the same time

A. Only S1 is true
B. Only S2 is true
C. Both are false
D. Both are true
39. D S1: When par value shares are issued above par, the premium or excess is to be considered as part of the legal capital
S2: Shares issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be
liable to the corporation or its creditors in respect thereto.

A. Both are false

B. Both are true
C. True,false
D. False, true
40. B Which of the following corporate acts requires the approval of the majority of the outstanding capital stock or of the members?

A. To invest corporaye funds in another corporation or business

B. To adopt, amend or repeal by-laws
C. To dissolve the corporation
D. To amend the articles of incorporation
41. D A distribution by a corporation of shares held by it in another corporation is

A. Stock dividend
B. Sale of capital assets
C. Sale of treasury stock
D. Property dividend
42. D They are issued to those who helped in incorporating the corporation or for services rendered in launching the welfare of the
same

A. Preferred shares
B. Stock in escrow
C. Founder's shares
D. Promotion stock
43. C A director of a corporation may be removed from the office by a vote of the stockholders representing

A. Majority of the outstanding capital stock

B. 2/3 of the stockholder
C. 2/3 of the outstanding capital stock
D. Majority of the stockholders
44. A Three of the following are attributes of a corporation. Which is the exception?

A. Created by agreement of the incorporators

B. An artificial being
C. Has a right of succesion
D. Has powers, attributes and properties expressly authorized by law or incident to its existence
45. A One of the following is the disadvantage of forming a corporation

A. The subservience of minority stockholders to the wishes of the majority subject only to equitable restraints
B. The free and ready transferability of ownership
C. The shareholders are not liable for the debts of the business
D. The owner of succession the existence of the entirety is not affected by the personal vicissitudes of the individual stockholders
46. C One of the following does not require stockholder's approval

A. Change of corporate name

B. Merger or consolidation
C. Declaration of cash dividend
D. Investment of corporate funds outside main purpose of the corporation
47. B In a corporation, two or more positions may be held concurrently by the same person, except that no person shall act as

A. President and chairman of the board

B. President and secretary
C. Secretary and treasurer
D. Treasurer and director
48. C The following are qualifications of corporate directors, except

A. Must own at least one share of stock

B. Must not be convicted by final judgment with imprisonment atleast 6 years and committed within 5 years prior to election
C. Majority are citizens of the Philippines
D. Ownership of shares must be recorded in the books of the corporation
49. A The interest or right of the stockholder in the corporation's profits or in the net assets of corporation on dissolution is

A. Shares of stock
B. Dividend
C. Capital
D. Certificate of stock
50. B The right of a corporation to exist as juridical person during its term as stated in the articles of incorporation despite the death of
any of its stockholders is

A. Right of existence
B. Right of succesion
C. Pre-emptive right
D. Right of redemption,
51. B A corporate doctrine which the stockholders are not personally liable for corporate debts

A. Piercing the veil of corporate fiction

B. Separate legal entity
C. Trust fund doctrine
D. Corporate opportunity
52. A A stockholder who does not approve the action taken by the Board of Directors in proposing to amend the articles of
incorporation is not allowed to withdraw from the corporation in one of the following instances

A. Creating, incurring, increasing or decreasing any ond indebtedness

B. Shortening or prolonging corporate existence
C. Investing of corporate funds in another corporation
D. Merger or consolidation
53. C The following are ways of enforcing payment of unpaid subscription, which is the exception

A. Filing a court action to recover unpaid subscription

B. Sale at public auction of delinquent stocks
C. Denying delinquent stock cash dividends
D. Denying delinquent stock the right to vote and voted upon
54. D Which of the following will qualify as incorporator in a corporation?

A. A minor
B. A corporation
C. Partnership
D. Foreigner
55. A A corporation code requires that

A. At least a majority of the directors are residents of the Philippines

B. All of the directors or trustees are residents of the Philippines
C. All of the directors or trustees are citizens of the Philippines
D. Majority of the directors are citizens of the Philippines
56. A The authorized capital stock of a proposed corporation is P1,000,000 divided into 10,000 shares with a par value of P100 each.
The minimum amount of subscription that must be paid up is

A. P62,500 or 625 shares

B. P50,000 or 500 shares
C. P75,000 or 750 shares
D. P87,500 or 875 shares
57. A 1. Corporators are incorporators.
2. Incorporators are corporators

A. False, true
B. True, false
C. True, true
D. False, false
58. B An individual or a domestic corporation designated in a written power of attorney by a foreign corporation authorized to transact
business in the Philippines, on whom any summons and other legal processes may be served in all actions or other legal
proceedings against such corporation is called

A. Resident director
B. Resident agent
C. Receiver
D. Trustee
59. D The holder of non-voting shares shall nevertheless be entitled to vote on the following matter

A. Increase or decrease of capital stock

B. Adoption or amendment of by-laws
C. Dissolution of the corporation
D. Dividend declaration
60. D Requirement to effect the amendment of the by-laws of a corporation

A. Majority vote of the board of directors

B. Majority vote of the outstanding capital
C. Vote of 2/3 of the outstanding capital stock
D. Majority vote of the board of directors and majority vote of the outstanding capital stock
61. D The following are the requisites except one, for valid declaration and/or issuance of stock dividend.

A. Existence of of original and unissued shares.

B. Existing unrstricted retained earnings
C. Devidends declaration of the BOD and approved by 2/3 vote of the OCS
D. It is issued to increase the authorized capital stock
62. C Purely ulta vires acts of the officers of a corporation to invest corporate funds in another business or corporation, ie, acts not
contrary to law, morals, and public policy may be ratified by:

A. Majority vote of all members of the board

B. Stockholders with 1/2 of voting power
C. Stockholders holding 2/3 of the voting power
D. Majority vote of the board present
63. B Which of the following is a ground for the suspension or revocation of the certificate of incorporation by the SEC?

A. If the corporation has commenced its business and subsequently become continuously inoperative for two years
B. If the corporation has ceased operations continuously for a period of at least 5 years
C. If the corporation did not commenced its business transactions for 2 years
D. If the corporation did not formally organize after incorporation
64. B The following defect will preclude the creation of even a de facto corporation

A. The incorporators of a certain number of them are not residents of the Philippines
B. Lack of certificate of incorporation from the SEC
C. Name of the corporation closely resembles that of a preexisting corporation and may deceive the public
D. There is actual use of corporate powers
65. D 1. The meetings of the BOD of a stock corporation may be held anywhere in the world
2. The meeting of the members of a non-stock corporation may be held anywhere within the Philippines

A. True, False
B. False, True
C. Both are false
D. Both are true
66. C (1) Appraisal right means that whenever the capital stock of a corporation is increased and new shares of stock are issued, the new
issue must first be offered to the stockholders in proportion to their existing shareholdings before subscriptions are received from
the general public
(2) Ultra vires acts are illegal and therefore void
(3) Certificate of incorporation is the document prepared by the persons establishing the corporation and filed with the SEC
containing the matter required by the Corporation Code

A. Only (1) is true

B. Only (2) is false
C. All are false
D. All are true
67. D (1) A foreign corporation doing business in the Philippines without a license may be sued but it cannot sue
(2) A written demand for payment of the fair value of the shares made in the exercise of the appraisal right will suspend the
stockholder's rights

A. False, True
B. True, False
C. False, false
D. True, true
68. D Which of the following statement is correct

a. eleemosynary corporation is one established for business or profit

B. Corporation aggregate is one established for religious purposes
C. Civil corporation is one established under the laws of the Philippines
D. Lay corporation is one established for the purposes other than religious
69. A A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

Can the aforementioned persons validly form a domestic corporation?

A. Yes, provided majority of them are resident of the Philippines

B. Yes, because majority of them areFilipino citizens
C. Yes, provided they will subscribe for atleast 25% of the authorized capital stock
D. No, because foreigners cannot be incorporators of a domestic corporation
70. D A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

How much atleast shall be subscribed by the incorporators at the time of the incorporation?

A. P300,000
B. P350,000
C. P200,000
D. P250,000
71. C A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

How many shares at least shall be paid up by the incorporators?

A. 625,000
B. 62500
C. 6250
D. 625
72. A A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

Can B demand for a certificate of stock of 1,200 shares?

A. No, because certificate of stock shall be issued onlyafter payment of the full amount of the subscription
b. No, because the 800 shares subscribed by him are already delinquent
C. Yes, because he can surrender the 800 shares to the corporation and limit his subscription to 1,200 shares only
D. Yes, because he has paid P12,000 representing the full value of 1,200 shares
73. D A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

Is the payment of X for his subscription valid?

A. Yes, provided the promissory note is converted to cash on its maturity

B. Yes, as long as the other incorporators shall accept his promissory note
C. No, because only actual cash paid to the corporation can be valid payment
D. No, because shares of stock shall not be issued in exchange of promissory note
74. D A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

Can F be an incorporator of the corporation?

A. Yes, provided the other incorporators do not object

B. No, because an incorporator must have substantial share in the corporation
C. Yes, because as a Filipino, he has the right to join the formation of a domestic corporation
D. No, because he does not own atleast one share of the capital stock of the corporation
75. B A,B,C,D,E and F, Filipino citizens , X,Y,Z, Amrican citizens, and R&S Japanese citizens agreed to form a domestic corporation with
an authorized capital stock of P1,000,000 divided into one hundred thousand shares with a par value of P10 per share. B
subscribed for 2,000 shares and he paid P12,000. X subscribed for 5,000 shares and he issued a promissory note in the amount
of P30,000. F joined the group but he did not subscribe for any number of shares.

Assuming that the corporation has been organized, how many shares can B validly vote in the election of the members of the
board of directors?

A. 1,200 shares because these have been paid

B. 2,000 shares because that is his total subscriptions
C. 800 shares because that is the balance of his unpaid subscription
D. Any of the above
76. D (1) It is illegal to issue watered stocks. However, stocks issued without any consideration at all is justified if such issues are bonus
shares
(2) A director is removed from office by a vote of the stockholders holding at least 2/3 of the outstanding capital stock.The
vacancy occasioned by such removal can be filled by the vote of the majority of the remaining directors if still constituting a
quorum

A. Only (1) is correct

B. Both are correct
C. Only (2) is correct
D. Both are wrong
77. C The voting proportion required to enable a corporation to invest its fund in any other corporation or business or for any purpose
other than its primary purpose

A. 2/3 vote of the board of directors and ratified by majority of the outstanding capital stock
B. Majority vote of the board of directors and ratified by majority of the outstanding capital stock
C. Majority vote of the board of directors and ratified by 2/3 of the outstanding capital stock
D. Majority vote of the board of directors and ratified by 2/3 of the stockholders
78. C (1) The doctrine of corporate opportunity rests on the unfairness of an officer or director of a corporation taking advantage of an
opportunity for his own personal benefit adverse to the corporation
(2) The by-laws must be filed with the SEC for the corporation to acquire juridical bpersonality

A. Both statements are true

B. Both are false
C. First is true, second is false
D. First is false, second is true
79. C (1) Stockholder's meeting must be in the city or municipality where the principal office is located while members' meeting of non-
stock corporation may be outside thereof
(2) The secretary of the corporation mus generally be a citizen and resident of the Philippines

A. Both are true

B. Both are false
C. True, False
D. False, True
80. B Which of the following is not a requisite for a close corporation?

A. The number of stockholders shall not exceed twenty

B. That no close corporation is a stockholder thereof owning 2/3 of the voting stocks
C. There is a restriction in the transfer of shares
D. There is no public offering of shares