Corporation Law – Atty. Ruben C. Ladia d.

changing the principal office of the corporation

Midterms Practice Questions
Coverage: Until By-Laws 7. DKD INC.. declared cash dividends of P1.00 per share on January 18, 2011
Multiple Choice: to be paid to the stockholders of record on January 31, 2011. Said
1. A, B, C, D and E organized/formed DKD Inc. was issued a certificate of declaration was duly announced to the stockholders. On January 20,
registration by the appropriate government agency. It turned out, 2011, “A”, one of the stockholders holding 100,000 shares valued at
however, that C,D, and E are not residents of the Philippines. What P100,000 sold his shares for the same amount to “B”, who is not a
type/kind of corporation is DKD Inc.? stockholder of the same corporation, and on January 25, 2011 the
transfer in favor of “B” was duly recorded in the books of the
a. De Facto corporation. Absent any agreement to the contrary, as between “A” and
b. De Jure “B” who has better right to the dividends?
c. Corporation by Estoppel a. “A” because the transfer of his share was in violation of a by-law
d. It does not exist as a Corporation at all. provision granting existing stockholders the preferential right to
buy the shares of a selling stockholders
2. A director who was compensated and paid 15% of the net income before b. “A” because he was the owner of the shares at the time of the
tax of the corporation for the preceding year for the services rendered declaration of the dividend
by him as corporate secretary by a mere Board resolution is Because A subsequent transfer of stock would as a rule, not carry
with it the right to the divdendss which have been declared but not
a. Valid since he is acting in a capacity other than as such director yet paid.
b. Invalid since only 10% of the net income before tax is allowed by
law c. “B” because he was the recorded owner of the share even before
c. Invalid because it requires stockholders’ approval or a by-law payment of the dividend
provision authorizing it d. “B” because he was the owner of the share at the time/date of
d. Valid because all corporate powers, all businesses are conducted payment
and all properties are controlled by the Board of Directors
8. A stock corporation shall have the power to reacquire its own shares
3. The declaration of stock dividends will generally have irrespective of the existence of unrestricted retained earnings

a. the effect of decreasing the total assets of the corporation a. to eliminate fractional shares arising out of stock dividends.
b. the effect of an increase in the proportionate interest of the b. to pay dissenting stockholders in the exercise of their appraisal
stockholders rights
c. no effect in the proportionate interest of the stockholders c. to pay a stockholder in a close corporation who compels the latter
d. the effect of increasing the authorized capital stock that he be paid the value of his shares
notwithstanding the fact that the corporation has a free portion of d. to collect/compromise an indebtedness to the corporation arising
its capital stock to cover the declaration/distribution out of unpaid subscription in a delinquency sale

4. A contract between a corporation and its president is 9. Only the stockholders/members can fill up a vacancy created in the office
of a director if the said vacancy occurs
a. valid id not tainted with fraud and the contract is fair and
reasonable a. by virtue of the resignation of a hold-over director
b. by virtue of the death of a director
b. valid if previously approved by the Board of Directors c. if the director ceases to be a stockholder
c. voidable is the president holds a substantial interest in the d. if the director is subsequently disqualified by a by-law provision
corporation
d. voidable at the option of the corporation 10. The Articles of Incorporation of DKD INC.. provides for a nine (9) man
- with the following conditions: member Board of Directors. Two of them died. On January 15, 2011, the
 the presence of such director or trustee in the board meeting is not corporate secretary of the company resigned such that at a Director’s
necessary to constitute a quorum meeting was held and conducted to elect an0ther corporate secretary.
 the vote of such is not necessary for the approval of the contract Five (5) if the directors attended the meeting and four (4) of them
 contract is fair and reasonable elected “A” to replace the resigned corporate secretary. Is the election
 contract has been previously authorized by the BOD valid?

5. It is common practice in DKD Inc. for the general manager to enter into a. Yes, because there are only seven (7) living members of the Board
contracts for an in behalf of the corporation without prior approval of and the vote of four (4) constitutes a majority
the Board of Directors. Said contracts are b. No, because the vote required is majority of the Board as fixed in
the Articles of Incorporation
a. invalid since the power and authority is lodged to that of the Board c. No, because the quorum requirement was not complied with
of Directors d. Yes, because the vote required is only a majority of those present
b. valid because approval of the Board is not required for its validity at which there is a quorum
c. invalid because the general manager is not authorized by law to
enter into contracts for and in behalf of the corporation 11. DKD INC.. paid A CO., INC. 10% of the property dividend declared by the
d. valid because similar acts were approved and allowed by the Board Board of Directors of the former pursuant and in consideration of
as a matter of practice, custom and policy and thus binding on the messenger services actually rendered by the later. Is the payment valid?
corporation even without formal Board resolution
a. Yes because it is a valid contractual arrangement between the
6. Non-voting shares are not included in determining the voting parties
requirements imposed by the code in cases of b. No because stockholders’ approval is required for its validity
c. No because it would result to a dilution of dividend rights of the
a. removal of a member of the Board of Directors stockholder
b. providing for additional disqualifications of directors in the by-laws d. Yes because labor or services actually rendered may be paid by way
c. shortening of the corporate terms of property

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 Y CO., later refused to pay the agreed amount claiming that X CO., is not
12. All persons who assume to act as a corporation knowing it without empowered/authorized to engage in the food catering business. In an
authority to do so shall be liable action brought before the Court, may Y CO., INC. be compelled to pay?

a. only to the extent of their subscription to the capital stock of the a. No, because the actuation of DKD INC.. is beyond its corporate
corporation powers and authority. (Doctrine of Limited Capacity)
b. only to the extent of the corporate assets b. Yes, because the party who has received the benefits of the
c. as limited partners for all debts, liabilities and damages arising contract is estopped to set up that contract is beyond the corporate
therefrom powers of X CO., to defeat an action on the same.
d. as general partners for all debts, liabilities and damages arising c. Yes, because the contract is valid per se
therefrom d. No, because the court cannot interfere with the business judgment
of the Board of Directors
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 19. A provision in the by-laws of a regulatory/ordinary stock corporation may
Directors consisting of A, B and C conducted a meeting to fill up two (2) validly provide
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 a. for a greater quorum and voting requirement in stockholders’
election of F and G is meeting
b. for a denial of cumulative voting of the stockholders
a. valid for both c. for a greater quorum and voting requirements in directors’ meeting
b. not valid for both d. for the holding of stockholders’meeting anywhere in the
c. not valid for G but valid for F Philippines
d. valid for G but not valid for F
20. “A”, the President of DKD INC.. which is engaged in the realty business,
14. DKD INC.. filed/submitted an amendment of its Articles of Incorporation bought (in his personal and individual capacity) from his friend a parcel
with the SEC. If the latter does not act on it within 6 months without fault of land for Php5M and later sold it at Php5.5M thereby making a profit
attributable to the corporation, the amendment takes effect on the date of Php.5M. May his act be validly ratified by the stockholders at the
of its filing except objection of any one single stockholder?

a. when the amendment consists of a decrease in the capital stock a. Yes, because he acted as a natural person separate and distinct of
b. when the amendment consists of a decrease in the number of the corporation which he is the President
directors b. No, because he acquired a personal interest in conflict with his duty
c. when the amendment consists of including reasonable restrictions as a director
on transfer of shares c. No, because he serves in a fiduciary position and should not
d. when the amendment consists of a change in the principal office of advance his selfish motives to the damage and prejudice of the
the corporation corporation
d. Yes, because he merely acquired a business opportunity rightfully
15. The Board of Directors cannot, without stockholders’ approval, pass a belonging to the corporation
valid corporate act
True or False:
a. to sell/dispose of its only property in the usual course of its 1. Moral damages cannot be awarded to a corporation TRUE
business 2. Nationality is not a requirement in for incorporators FALSE
b. to invest its corporate funds necessary to carry out the secondary 3. Last Name of a person can be used as part of the
purpose indicated in the articles of incorporation Corporation Name TRUE
c. to declare property dividends
4. There can only be 5 incorporators FALSE
d. to reacquire its own shares
5. A corporation can be an incorporator TRUE
16. A contract between corporations with interlocking directors will be 6. All corporations acquire Juridical Personality only upon the
subject to the provisions of section 32 of the Code (voidable) when approval of SEC TRUE
7. Labor performed or services rendered can be a
a. the interlocking director owns 20% of the outstanding capital stock consideration for stocks FALSE
in one corporation while 18% in the other 8. According to Ronnie Duter, corporations exists only for a
b. the interlocking director owns 22% in one corporation while 25% in period of 25 years. FALSE
the other 9. All shareholders of a Non-stock Corp are automatically
c. the interlocking director owns 20% in one corporation while 22% in considered as members TRUE
the other 10. By Laws may provide for additional qualification of a director
d. the interlocking director owns 22% in both corporation TRUE
11. There is no minimum requirement to be subscribed in a
17. A director who ceases to be a stockholder shall
corporation FALSE
12. Non-voting does not have a voting right TRUE
a. automatically cease to be a director
b. continue to serve in a hold-over capacity until his successor has 13. In Piercing the veil of corporate fiction, control means
been duly elected and qualified majority or complete stock control. FALSE
c. continue to serve as such until the expiration of his term. 14. By Laws are not mandatory TRUE
d. continue to serve as such until the expiration of his term if 15. Non-filing of By Law results to immediate dissolution. FALSE
authorized by the Board of Directors 16. Members of the executive committee must be a member of
a board TRUE
18. DKD INC.. is engaged in the realty business with no other purpose 17. Directors cannot receive compensation FALSE
indicated in the article of incorporation. It entered into a catering service 18. Directors can dispose all or substantially all of the
with Y CO., INC. for the retirement of the latter’s president for a Corporation properties. TRUE (SEC.40)
consideration of Php150,000. X CO. fully complied with its obligation but

Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 19. Ultra Vires acts are subject to ratification of the stockholders
TRUE
20. Shareholders are not conclusively presumed to know By –
Laws
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 bionding 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 dividens
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
- Doctrine of Secondary meaning is a word of 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
Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
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 pain 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 of 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
 - Contracts are not voidable
- May be upheld the contracts if there is no bad faith of unfairness
14. What are Treasury Shares? or collusion
Shares which have been issued and fully paid for, but subsequently re-
acquired by the issuing corporation by purchase, redemption, donation or Enumerate the Following:
through some other lawful means. Such shares may again be disposed of for 1. When may Directors and/or Officers be personally
a reasonable price fixed by the BOD. liable with the corporation?
- No voting right as long as they remain in the treasury. He assents to:
a. Patently unlawful act of the corporation
15. What is the Doctrine of Limited Liability? b. Bad faith or gross negligence in directing its affairs
c. For conflict of interest, resulting to damages in the
16. What is Pre-emptive Rights and when can it be exercised?
corporation
- A right granted by law to all existing stockholders of a stock
2. He consents to the issuance of watered stocks or
corporation to subscribe to all issues or disposition of shares of who having knowledge thereof, does not
any class, in proportion to their respective stockholdings unless forthwith file with the corporate secretary his written
denied by the AOI objection.
- It may be lost by waiver of the SH, expressly or impliedly by his 3. He agrees to hold himself personally and solidarilly
inability or failure to exercise it after having been notified. liable with the corporation
Pre-emptive right shall not extend to:
2. What is the test in determining whether a corporation
(a) shares to be issued in compliance with laws requiring stock has the implied power to do a certain act?
offerings or minimum stock ownership by the public 3. What is the limitation imposed by law on the right of a
corporation to decrease its capital stock?
4. Elements of By Laws
(b) shares
1. It must not be contrary to law,public policy, or
to be issued in good faith with the approval of 2/3 of the stockholders
morals
representing outstanding capital stock, in exchange for property needed for
2. It must not be inconsistent with the AOI
corporate purposes or in payment of a previously contracted debt 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
17. What is the Corporate Entity Theory? Comes into existence vested rights
upon the issuance of the certificate of incorporation 5. It must be reasonable

18. What is Business Judgment Rule? - is a presumption that in 5. Advantages of the Corporate form of business
making a business decision, the directors of a corporation 1. Capacity to act as a single unit
acted on an informed basis, in good faith and in the honest 2. Limited Shareholder’s liability
belief that the action taken was in the best interests of the 3. Continuity of existence
company 4. Feasibility of greater undertaking
5. Transferability of shares
19. Differentiate ordinary vs special amendment 6. Centralized Management
7. Standardized method of organization, management
ORDINARY:
and finance
- Amendment of the AOI of incorporation such as change of name
- purpose/s and or 6. Requirements for the Amendments of AOI
- principal office (a) majority vote of the BOD/BOT
- restrictions on transfer of shares (b) vote or written assent of the stockholders representing at least
- BOD physical presence is not necessary two-thirds 2/3 of the outstanding capital stock, without prejudice
to the appraisal right of dissenting stockholders.
SPECIAL (c) Includes all stockholders/members with or without voting rights
- Increase or decrease in CS or
- incur, create or increase bonded indebtedness - Amendment of AOI of close corporations (Sec 103)
- Shortening or extending the corporate term - AOI which seeks to delete or remove any provision required to be
- BODs presence is necessary 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
20. Differentiate Self-Dealing vs. Interlocking Directors
capital stock,
SELF DEALING
- with or without voting rights, or of such greater proportion of
- Involves the duty of loyalty of a director shares as may be specifically provided in the AOI
- One who deals or transacts business with his own corporation - at a meeting duly called
- Voidable, at the point of such corporation
- May be ratified by the vote of a SH representing at least 2/3 of the 7. Requirements for the Amendments of By Laws
OCS OR 2/3 of the members - Majority vote of the BOD/TRUSTEE
Provided that: full disclosure of the adverse interest and it must - Owners of at least majority of the OCS
be fair and reasonable. - At least majority of the members of a non-stock corporation
- At a regular/special meeting
INTERLOCKING DIRECTOR - Amendment shall be attached to the original BL
- A director in one corporation who deals or transact business with - Copy duly certified under oath of the corpse and majority of the
directors and trustees
another corporation of which he is a director.
- Filed with SEC
- A violation of the duty of loyalty because he occupies the position
- Attaching the original BL
of a director in two corporations dealing with each other.

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These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
 - Effective upon issuance by the SEC of a cert that the same is not 1. Increasing the par value of the existing number of shares without
inconsistent with the code. increasing the number of shares
2. Increasing the number of existing shares without increasing the value
8. Disadvantage of the Corporate form of business thereof; and
1. Formal proceedings are required. 3. Increasing the number of shares and at the same time increasing the par
2. Business transaction is limited to the state of its incorporation unless value of shares
obtained a license from the foreign state
3. SH’s liability tend to limit the credit available to the corporation as a 16. Reason for Decreasing Capital Stock?
separate legal entity 1. To reduce or wipe out existing deficit where no creditors would be thereby
4. Since the nature of shares of stock are a personal properties, transfer of affected
share may result to uniting incompatible and conflicting interest 2. When capital is more than what is necessary to procreate the business or
5. Double taxation may be imposed reduction of capital surplus; or
6. Corporations are subject to governmental regulation, supervision and 3. To write down the value of its fixed assets to reflect the present actual
control value in case where there is a decline in the value of the fixed assets of the
corporation *not exclusive
9. What is the test in determining whether a corporation
is private or public corporation? 17. What are the types of Dividends
1. Incorporation Test- state of incorporation, regardless of the nationality of - CASH dividends- payable in lawful money or currency
its stockholders. - Property- paid in the form of property instead of cash
2. Domicile Test - state where it is domiciled (place fixed by the law creating - Stock- corporations shares of stock itself or of the certificate
or recognizing it) evidencing it (bonds, titles, evidences of indebtedness and other
3. Control Test/WARTIME TEST. - nationality of the controlling stockholders securities)
or members. 18. Enumerate the test in determining whether a
corporation has the implied powers to do certain acts
10. Enumerate the Instrumentality Test 19. Requisites for a corporation to be classified as a STOCK
(1) CONTROL, not mere majority stock control, but complete domination CORPORATION
over finances and business practices in respect to the transaction of the - That they have a capital stock divided into shares; and,
corporation attacked so that the government entity as to this transaction had - authorized to distribute dividends or allotments as surplus profits
at that time had no separate mind, will or existence of its own; to its stockholders on the basis of shares held by them
(2) Such Control must have been used by the to commit fraud, or wrong
doing to perpetuate the violation of plaintiff’s legal rights 20. Requisites for the use of corporate name
(3) The control and breach of duty must proximately cause the injury or (1) That the complainant corporation acquired a prior right over the
unjust loss complained of. use of such corporate name; and
(2) The proposed name is either: a. Identical; or b. Deceptively or
11. What can be a consideration for stock? confusingly similar to that of any existing corporation or to any
1. Actual cash paid to the corporation other name already protected by law c. Patently deceptive,
2. Property, tangible or intangible, actually received by the corporation and confusing or contrary to law
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 21. REASONS why the PURPOSE CLAUSE is important
3. Labor performed or services actually rendered 1. FOR STOCKHOLDERS – to know within what lines of business their money
4. Previously incurred indebtedness is to be put at risk
5. Amounts transferred from unrestricted retain earnings to stated capital 2. FOR BOD – to know within what lines of business they are authorized to
6. Outstanding shares in exchange for stocks in the event of reclassification act
or conversion 3. FOR THIRD PERSONS – to know whether or not the contract or transaction
entering is one within the general authority of the management
12. Enumerate the defenses available to the directors for
their failure or refusal to declare dividends 22. CORPORATIONS which cannot have secondary purpose
1. Educational, religious, and other non stock corporation, which would
13. When can Non-Voting Shares participate in voting? change or contradict its purpose or to engage in any enterprise to make
1. Amendment of the AOI profits for its members
2. Adoption & Amendment of BL 2. Insurance companies cannot engage in commercial banking
3. Sale, Lease, exchange of corporate property 3. Stock brokers
4. Incurring, creating or increasing bonded indebtedness
5. Increase or decrease of capital stock 23. WHY statement of principal office is necessary?
6. Merger or consolidation of the corporation 1. It establishes the residence of the corporation
7. Investment of the corporate funds in another corporation or 2. It is important in determining the venue in an action against the
business corporation
8. Dissolution of the corporation 3. It determines where chattel mortgage should be registered
4. Venue of meetings

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

15. Modes of Increasing Capital Stock?

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• Common Stocks • Preferred Stocks • Participating and Non Participating •
Cumulative and non cumulative • Par Value • Non Par Value • Voting and 2. Failure of a corporation to adopt/file its by-laws within the time
Non Voting • Founders • Redeemable • Treasury frame provided for by law does not result to the automatic
dissolution of the corporation.
26. What are the limitations of no par value shares? -only suspension, BL is not a mandatory for a corporation
1. Such shares once issued, are deemed fully paid and thus non assessable
3. Labor performed or services rendered can be a consideration for
2. The consideration of its issuance should not be less than 5 pesos
stocks
3. The entire consideration for its issuance constitutes as a capital, hence, not
4. Minors can be a corporator.
available for dividend declaration -So long as they are assited by their guardian, parents or person
4. They cannot be issued as preferred stock assigned by the court or authorized
5. They cannot be issued by banks, trust companies, insurance companies, 5. Members of the executive committee must be a member of a
public utilities and building and loan associations board
6. Adoption of By Laws prior incorporation is more convenient than
27. ADVANTAGES of issuance of no par value shares after incorporation.
1. It gives the advantage of flexibility of price 7. Service of summons against a corporation must not be made upon
2. . Practically results to the evasion of the danger of the liability Branch Manager
upon watered stock in case of overvaluation of the consideration -Branch Manager has already been amended to a General Manager
paid for it 8. Treasury shares may be issued lower than par value
3. 3. Since they are fully paid and on assessable , it results to the 9. Corporate extension may be made earlier than 5 years prior
disappearance of personal liability on the part of the thereof for expiration
10. Demand may be waived in a Derivative Suit.
unpaid subscription
11. Corporations persists to exist despite death, incapacity, civil
interdiction or withdrawal of stockholders or members
28. GROUNDS FOR DISAPPROVAL OF AOI
–Because it has a juridicao personality distinct and separate from
1. Not substantially in accordance with the form prescribed therein its stockholders or board
2. Purpose or purposes of the corporation are patently unconstitutional, 12. Third-person can be bound by the By Laws of a Corporation.
illegal or immoral. 13. Directors or Officers can be liable with the corporation.
3. Treasurer’s affidavit concerning in the amount of capital stock subscribed 14. Cumulative voting is not allowed in a Non-Stock Corporation
and/or paid is false 15. A corporation may acquire its own shares.
4. Ownership of capital stock by citizens of the PH. 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
29. WHEN A CORPORATION MAY BE DISREGARDED OR capital stock.
PIERCED? 17. Acts of self-dealing director is merely voidable
1. used to defeat public convenience, to justify wrong and protect fraud, 18. Acts of Interlocking directors are valid
19. Incorporators are not subject of any amendments
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.
Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!