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CORPORATION The articles of incorporation differ from the by-laws in that articles of incorporation are: a. the rules of action adopted by a corporation for its internal government. b. adopted before or after incorporation. c. a condition precedent in the acquisition by a corporation of a juridical ...

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CORPORATION 1. The articles of incorporation differ from the by-laws in that articles of incorporation are: a. the rules of action adopted by a corporation for its internal government. b. adopted before or after incorporation. c. a condition precedent in the acquisition by a corporation of a juridical personality. d. approved by the stockholders if adopted after incorporation. 2. The following may be the consideration of the shares of stock of a corporation, except: a. actual cash paid to the corporation. b. previously incurred indebtedness of the corporation. c. amounts transferred from unrestricted retained earnings. d. service to be performed by a lawyer on the proposed increase in capital stock of the corporation. 3. A certificate of stock is distinguished from share of stock in that a share of stock: a. is the written evidence of a stockholder’s interest in the assets and management of a corporation. b. is tangible personal property. c. is one of the units into which the capital stock is divided. d. may not be issued if the subscription has not been fully paid. 4. The articles of incorporation of Acme Corporation provide for the issuance of 100,000 shares without par value and an issued price per share of P10.00. At the time of incorporation, the subscription and paid-up capital should not be less than: a. P250,000.00 and P62,500.00, respectively. b. P1,000,000.00 and P250,000.00, respectively. c. P250,000.00 and P250,000.00, respectively. d. P250,000.00 and P125,000.00, respectively. 5. Their names are mentioned in the articles of incorporation as originally forming the corporation and are signatories thereof. a. Corporators. b. Stockholders. c. Incorporators. d. Members. 6. A corporation acquires juridical personality: a. upon the filling of the articles of incorporation. b. upon the filling of the by-laws. c. upon the issuance of the certificate of incorporation. d. within 30 days from the receipt of the notice of the issuance of the certificate of incorporation. 7. A delinquent stockholder is not entitled to the following rights, except the right: a. to be voted. b. to vote or be represented in the meetings of stockeholders. c. to dividends. d. He is not entitled to all the rights of a stockholder. 8. A, B, C, D, E, F and G are the duly elected directors for 2014 of Excellent Corporation whose articles of incorporation provide for 7 directors. On August 1, 2014, Directors A, B, C, D and E met to fill two vacancies in the board brought about by the valid removal of F for disloyalty to the corporation and the death of G. In the said meeting, the remaining directors voted for X to replace F, and Y, a son of G, to replace his father. Both X and Y are owners of at least one share

of stock of the corporation. The election of X and Y by the remaining director is: a. valid for both X and Y. b. not valid for both X and Y. c. valid with respect to X; not valid with respect to Y.

d. not valid with respect to X; valid with respect to Y. 9. In the meeting of the board of directors of Grand Corporation, a construction company, held on August 31, 2014, directors A, B, C, D and E were present among the 9 directors. The meeting had for its agenda the following: I. The appointment of a new treasurer. II. The approval of the contract for the purchase of cement worth P50,000.00 from X Construction Supplies Co. When the voting took place, directors A, B, C and D voted for the election of Y as the new treasurer; and directors A, B and C voted for the approval of the contract with X Construction Supplies. a. Both corporate acts are valid. b. Both corporate acts are not valid. c. The election of Y as the new treasurer is valid; the approval of the contract with X Construction Supplies is not valid. d. The election of Y as the new treasurer is not valid; the approval of the contract with X Construction Supplies is valid. 10. Under this theory, the nationality of a corporation is that of the country under whose laws it was formed. a. Control test b. Incorporation test c. Domiciliary test d. Grandfather rule 11. A corporation created in strict compliance with all the legal requirements and whose right to exist as a corporation cannot be successfully attacked in a direct proceeding for that purpose by the State is a: a. de jure corporation b. de facto corporation c. corporation by estoppel d. corporation by prescription 12. Stock dividends differ from cash dividends in that stock dividend: a. do not increase the legal capital. b. involve disbursements of corporate funds. c. require the approval of both the board of directors and the stockholders. d. once received by the stockholders, are beyond the reach of corporate creditors. 13. The subscriber of unpaid shares which are not delinquent shall be entitled to the following rights, except the right to: a. vote b. inspect corporate books c. a stock certificate d. dividends 14. These statements pertaining to the right of a stockholder to inspect the books and records of a corporation are presented to you for evaluation: I. The right may be delegated to an agent. II. The right may be denied if in the past, the stockholder improperly used the information which he obtained from the books and records of another corporation of which he is also a stockholder. a. Both statements are true. b. Both statements are false. c. Statement I is true; Statement II is false.

d. Statement I is false; Statement II is true.

15. Under this doctrine, the separate personality of a corporation may be disregarded if it is used for fraudulent or illegal purpose or to escape the faithful compliance of an obligation: a. Trust fund doctrine b. Doctrine of piercing the veil of corporate entity c. Doctrine of corporate opportunity d. Doctrine of limited capacity 16. Consolidation differs from merger in that in consolidation: a. The surviving corporation shall enjoy all the rights, powers and attributes of a corporation under the Corporation Code. b. The existing liabilities of the constituent corporations shall be assumed by the surviving corporation. c. The corporate existence of all the constituent corporations shall be extinguished and a new corporation emerges. d. The surviving corporation shall possess all the rights, privileges, immunities and franchises of the constituent corporations. 17. The right of a stockholder to demand payment of the fair value of his shares when he dissents from certain corporate acts is known as: a. pre-emptive right b. appraisal right c. redemption right d. appreciation right 18. These statements pertaining to the meetings of directors are presented to you for evaluation: I. Directors or trustees may attend or vote by proxy at board meetings. II. The articles of incorporation or the by-laws of a corporation may provide for a greater majority for its quorum during the meetings of the board of directors. a. b. c. d.

Both statements are true. Both statements are false. Statement I is true; Statement II is false. Statement I is false; Statement II is true.

19. A stock that is issued without consideration or below par value or the issued price is known as: a. watered stock b. delinquent stock c. redeemable stock d. preferred stock 20. A non-voting stock may vote in the following corporate acts, except in case of: a. approval of the compensation of directors. b. merger or consolidation c. increase or decrease in capital stock d. sale, lease, exchange, mortgage, pledge or other disposition of all or sustainability all of corporate property. 21. Directors may be given compensation through any of the following ways, except by: a. the vote of the stockholders representing at least a majority of the outstanding capital stock. b. a provision in the by-laws. c. the vote of the board of directors if the compensation is a reasonable per diem. d. the vote of the board of directors if the compensation is other than per diems. 22. A is a director and owns 50% of the outstanding capital stock of Ace Corporation which is

engaged in the trading of computers. Ace Corporation purchased computer tables from Top Corporation of which A is also a director and owns 15% of its outstanding capital stock. The articles of incorporation of both corporations provide for 5 directors. In the approval of the

contract for the said purchase, A did not attend the meeting of the board of directors of Ace Corporation, while in the meeting of the board of directors of Top Corporation which was called for the same purpose, directors A, B, C and D were present with all of them voting for the approval of the contract. Assuming that there is no fraud and that the contract is fair and reasonable under the circumstances, the contract between Ace Corporation and Top Corporation is: a. valid b. voidable at the option of Top Corporation c. unenforceable against Top Corporation d. void because corporations with interlocking directorate should not enter into a contract with each other. 23. One of the following acts may be performed by the executive committee of a corporation. Which is it? a. Declaration of stock dividends b. Filling of vacancies in the board of directors c. Amendment or repeal of the by-laws or adoption of new by-laws d. Approval of contracts in the ordinary course of business 24. The following statements pertain to the express powers of a corporation. I. A corporation may establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees. II. A corporation may make donations for the benefit of a political party or candidate or for purposes of partisan political activity provided the donations are reasonable. a. b. c. d.

Both statements are true. Both statements are false. Statement I is true; Statement II is false. Statement I is false; Statement II is true.

25. Which of the following by-laws is valid? a. A by-law which provides that one need not be the owner of a share of stock to become a director of the corporation. b. A by-law which provides that that one must be the owner of more than one share of stock of the corporation to become a director. c. A by-law which provides that one can continue to be a director throughout his term although he has disposed all his shares in the corporation. d. A by-law which provides a greater number of directors that that stated in the articles of incorporation. 26. Winner Corporation, a dealer-manufacturer of garments and with principal office in Caloocan City, held the meeting of its stockholders in Nasugbu, Batangas, in conjunction with its annual company outing. Stockholders owning 75% of the capital stock were present, while 25% were duly represented by proxies. In the said meeting, the corporation by a vote of the stockholders representing 80% of the capital stock, approved the purchase of sewing machines worth P5,000,000.00. The by-laws of the Corporation provide that contracts in excess of P3,000,000.00 must be ratified by the stockholders. The contract for the purchase of the sewing machines was unanimously approved by the board of directors before it was presented to the stockholders for ratification. S, a stockholder who did not vote for the approval of the resolution, now questions its validity on the ground that the meeting was held outside the place where the principal office of the corporation is located. What is the status of the contract for the purchase of the sewing machines? a. b. c. d.

Void Valid Unenforceable Voidable

27. Which of the following statements pertaining to non-stock corporations is incorrect? a. Members may vote by mail.

b. The number of trustees may be more than 15. c. Any incidental income that it may earn may be distributed as dividends to its members. d. The meetings of members may be held outside the city or municipality where the principal office of the corporation is located. 28. A corporation may acquire its own shares for a legitimate purpose provided it has unrestricted retained earnings. In which of the following acquisitions is the requirement of unrestricted retained earnings not imposed? a. When the acquisition is made to eliminate fractional shares. b. When delinquent shares are acquired in a delinquency sale. c. When redeemable shares are repurchased in accordance with the terms provided in the articles of incorporation. d. When shares are acquired from stockholders who exercise their appraisal right. Items 29, 30 and 31 are based on the following information: Danilo, a resident of Malolos, Bulacan obtained a loan from the Rural Bank of Sta. Rosa, Nueva Ecija amounting to P90,000.00. The loan is secured by a pledge of shares of stock of Saint Michael Corporation covered by 3 stock certificates of 1,000 shares each, which certificates are registered in the name of Servando, a friend of Danilo. The current market value of the shares based on the records of the Philippine Stock Exchange is P30.00 per share. Other than pledge of the shares, no other document or information is recorded in the books of San Michael Corporation at its office in Pasig City. 29. Who is entitled to vote the shares of stock in the stockholders’ meeting? a. Danilo b. Servando c. Rural Bank of Sta. Rosa d. None, the right to vote the shares is suspended while the pledge constituted on the shares is existing. 30. The pledge in order that it may bind third persons requires the following: a. The deed of pledge must be accompanied by an affidavit of good faith and recorded in the Register of Deeds of Pasig b. It must be in a public instrument showing a description of the thing pledged and the date of the pledged and registered in the Register of Deeds of Pasig. c. The pledge must be in a public instrument showing a description of the thing pledged and the date of the pledge. Registration in the Register of Deeds is not required. d. The deed of pledge must be accompanied by an affidavit of good faith and recorded in the Register of Deeds of Pasig and the province of Bulacan. 31. Danilo pays the Rural Bank of Sta Rosa the sum of P30,000.00. May Danilo demand the cancellation of the pledge of 1,000 shares of stock by reason of such payment? a. No, Danilo has to pay his obligation of P90,000.00 in full before he can demand any cancellation of the pledge of the shares of stock. b. Yes, Danilo can demand cancellation of the pledge of 1,000 shares because the market value of the same is equivalent to the payment of P30,000.00 that was made. c. No, Danilo can demand cancellation of the pledge only if he has paid more than 50% of his debt. d. Yes, Danilo can demand cancellation because the pledge of each of the 3 stock certificates is independent of one another. 32. S is the registered owner of 500 shares of stock of XYZ Corporation whose articles of incorporation provide for 11 directors. In the annual election of directors for 2014, 12 position, namely, A, B, C, D, E, F, G, H, I, J, K and L. K and L are minority stockholders whom S wishes to elect to represent him and the other minority stockholders in the board. In the said election of

directors, S may cast a maximum of: a. 500 votes b. 6,000 votes

c. 5,500 votes d. 1,000 votes 33. One of the distinctions between a partnership and a corporation is that a partnership: a. is managed by a board of directors. b. is characterized by the principle of delectus personae. c. has the right of succession. d. may be dissolved only with the consent of the State. 34. One of the distinctions between a proxy and a voting trust agreement is that in a voting trust agreement: a. the representative acquires legal title to the shares to be voted. b. the exercise of the right to vote is limited to a particular meeting. c. the representative cannot vote if the stockholder is present during the meeting. d. the agreement need not be recorded with the Securities and Exchange Commission. 35. Which of the following statements is false concerning treasury shares? a. They are entitled to dividends. b. They have no voting right. c. They may be disposed of for a price lower than the par value provided such price is reasonable. d. They are not outstanding shares. 36. Which of the following will cause the automatic dissolution of a corporation? a. Continuous inoperation for a period of at least 5 years b. Failure to formally organize and commence the transaction of its business or the construction of its works within 2 years from its incorporation c. Failure to adopt by-laws and submit the same to the Securities and Exchange Commission within 30 days from the receipt of the official notice of the issuance of its certificate of incorporation d. Commission by the corporation of an ultra-vires act 37. Which of the following statements pertaining to no-par shares is incorrect? a. Subscriptions to no-par shares are deemed fully paid and non-assessable b. Shares without par value may not be issued for a consideration of less than P5.00 per share c. No-par shares may not be issued by banks, trust companies, insurance companies, public utilities and building and loan associations d. Subscriptions to no-par shares in excess of the issued price shall be available for distribution as stock dividends. 38. A, B, C, D, E, F, G, H and I are directors of Strong Cement Corporation whose articles of incorporation provide for 9 directors. In the meeting of September 2014, directors A, B, C, D, and E were present to approve a contract for the purchase of cement bags from E who deals in the said product. The contract was deliberated upon exhaustively by the said directors in the meeting including E. When the voting took place, however, only A, B, C and D who found the contract fair and reasonable under the circumstances, voted for its approval. The contract between the corporation and E is: a. Valid and enforceable b. Voidable at the option of the corporation c. Unenforceable against the corporation d. Void because a corporation must not enter into a contract with any of its directors since a director occupies a position of trust 39. A, B, C, D and E distributed calling cards identifying themselves as directors of Summit Corporation, to several individuals during business conference. In reality, however, no such corporation is registered with the Securities and Exchange Commission. X, who received a

calling card granted credit amounting to 50,000.00 to "Summit Corporation" believing that such a corporation really existed. When the supposed corporation was unable to pay, X brought a court action against it. At that time, "Summit Corporation" had assets of P30,000.00.

a. " Summit Corporation" is liable only up to P30,000.00, its remaining assets, since it is different from A , B, C, D and E who are not liable in their individual capacíties. b. X can go after the separate assets of A, B , C, D and E after exhausting the assets of " Summit Corporation ." c. A , B, C, D and E can move for the dismissal of the court action because "Summit Corporation " has no personality of its own. d. X cannot allege the lack of juridical personality on the part of "Summit Corporation" because he is estopped from doing so. 40.Which of the following subscriptions does not comply with the subscription and paid- up capital requirements at the time of incorporation ? Authorized, Subscribed, Paid-up a. P1,000,000.00 250,000.00 62,500.00 b. 300,000.00 75,000.00 500,000.00 c. 100,000.00 100,000.00 100,000.00 d. 50,000.00 12,500.00 3,125.00 41. An auditing firm composed of Certified Public Accountants may validly form: I. a partnership II. a corporation a. The statement is true with respect to both business organizations. b. The statement is false with respect to both business organizations. c. The statement is true with respect to partnership; false with respect to corporation. d. The statement is false with respect to partnership; true with respect to corporation. 42 A, B, C, D, E, F and G are directors of Commonwealth Appliances Corporation, a trader of appliances, whose articles of incorporation provide for 7 directors . On September 1, 2014, the board of directors met to approve a contract for the purchase of appliances from A who is an importer of appliances. Present during the meeting were A, B, C, D and E with A, B, C and D voting for the approval of the contract . Assuming that the contract is ...