A. de Facto B. de Jure C. Corporation by Estoppel D. It Does Not Exist As A Corporation at All

Corporation Law – Atty. Ruben C.
Ladia
Midterms
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
Disclaimer:
These are mere practice questions to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
Made by Gabriel Jhick Saliwan
1. 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
2. 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
3. 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
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
Disclaimer:
1. 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
2. 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 another 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
3. 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
4. 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.
Disclaimer: as general partners for all debts, liabilities and
damages
These are mere arising
practice questions therefrom
to gauge the students’ mastery about the subject. Basahin, Intindihin, Madaling Sagutin! God bless us all!!
5. 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
True or False:
1. Moral damages cannot be awarded to a corporation - True.
2. Nationality is not a requirement in for incorporators - True. Only residency requirement
3. Last Name of a person can be used as part of the Corporation Name - True. Provided consent is given and not a
stockholder
4. There can only be 5 incorporators - False. In case of an educational institution an incorporator can be from 5 to 15
5. A corporation can be an incorporator- True. A corporation in a rural bank
6. All corporations acquire Juridical Personality only upon the approval of SEC- False. In case of sole corporation,
corporation created by special charter, corporation by estoppel.
7. Labor performed or services rendered can be a consideration for stocks- True
8. According to Ronnie Duter, corporations exists only for a period of 25 years.
9. All shareholders of a Non-stock Corp are automatically considered as members- False
10. By Laws may provide for additional qualification of a director- True
11. There is no minimum requirement to be subscribed in a corporation- True
12. Non-voting does not have a voting right- False. Sec. 6
13. In Piercing the veil of corporate fiction, control means majority or complete stock control. - False. Includes complete
domination as to the finance, policy and management of the corporation
14. Members of the executive committee must be a member of a board- True. Exercise powers and authority that is
within the competence of the board.
15. Directors cannot receive compensation- False. Reasonable per diems, provided in the bylaws or upon majority vote
of the stockholders; and perform functions other than a director provided that the total yearly compensation of
such director will not exceed 10% of the net income before income tax of the corporation during the preceding year
16. Directors can dispose all or substantially all of the Corporation properties. -False. A director cannot dispose all or
substantially all of the corporation properties that would render the corporation incapable of continuing its
business or accomplishing the purpose for which it was incorporated.
17. Ultra Vires acts are subject to ratification of the stockholders. -False. When such ultra vires act is not illegal per se, it
can be ratified by the stockholders in order such act to be validated.
18. Shareholders are not conclusively presumed to know By– Laws- True
19. Common share cannot be denied their right to vote. -False. Common shares can be denied by founder’s shares
which are given exclusive right to vote or be voted to the board for a period not exceeding 5 years.
Define or Differentiate the Following:
Disclaimer:
1. What is a corporation?
A corporation is an artificial created by operation of law, having the right of succession and the powers, attributes, and
properties expressly authorizes by law or incidental to its existence.
2. What are Ultra Vires Acts

Ultra Vires acts are those which cannot be performed by a corporation because they are not within the express, implied
or inherent powers as defined by their charters or articles of incorporation. Accordingly, it can be subject to collateral
attacks questioning the authority of the corporation in engaging in such particular endeavors. An ultra vires act that is
not illegal per se may be validated by ratification of the stockholders, or on equitable ground, or by estoppel.
3. Differentiate De Facto from De Jure Corporation

A de facto corporation exist by virtue of a defect or irregularities in its organization or creation or from omission to
comply with a requirement that is required to form a de jure corporation . However, there is a colorable compliance
with the requirements of the law which they might be incorporated for the purpose and its existences can only be
attacked directly by a state through a quo warranto proceeding. A De Jure Corporation is form, created and organized
with strict compliance and adherence with the law and its right of existence cannot be successfully attack even by the
state through a quo warranto proceeding.
4. What are Unrestricted Retained Earnings?

They are the fruits of investment of a stockholders. The undistributed earning of the corporation which have not been
allocated for any managerial, contractual or legal purposes and which are free for distribution to the stockholders as
dividends.
5. What is Corporation by Estoppel

Corporation which are so defectively formed not to be either a de facto or de jure corporation but which are considered
as corporation only as to those who cannot deny its existence through their agreement, conduct or admission.
a. When there is fraud;
b. When a party is not estopped even if he is trying to evade liability.
6. What is the Incorporation test?

Applied in order to determine whether a corporation is a foreign or domestic corporation. If it is incorporated under the
laws of another state, then it is a foreign corporation. If it is made under the laws of the Philippines, then it is a filipino
or domestic corporation irrespective of the nationalities of its stockholders.
7. Define Doctrine of Secondary Meaning

This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an
article on the market, because it is geographical or otherwise descriptive, may nevertheless be used exclusively by one
producer with reference to his article so long as in that trade and to that branch of the purchasing public, the word or
phrase has come to mean that the article was his product.
Disclaimer:
8. Define and differentiate Authorized Capital, Subscribed Capital and Paid Up Capital
Authorized capital stock signifies as the maximum numbers of shares that a corporation can issue; Subscribed capital
stock refers to the portion of the authorized capital stock that has already been subscribed by the subscribers or
stockholders; and Paid up capital stock is the actual amount or value which have been actually paid to the corporation in
consideration of the subscriptions made thereon.
9. What is outstanding Capital Stock

The total shares of stocks issued under a binding subscription agreements to the subscribers or stockholders, whether or
not fully or partially paid. It does not include treasury shares.
10. What are Non-par value shares

Those issued price are not stated in the certificate of stocks but may be fixed in the AOI or by the board of directors
when so authorized by the AOI or the bylaws, or in the absence thereof, by the shareholders themselves.
Conditions and limitations in the issuance of Non-par value share:
A. when issued, non par value shares are deem fully paid and, thus, non assessable;
B. The consideration of such issuance must not be less than 5 pesos;
C. Entire consideration constitutes a capital, hence, cannot be declare as dividends;
D. Cannot be issued as preferred stocks; and
E. Cannot be issued by banks, trust companies, insurance companies, public utilities and loans association.
11. What are preferred stocks

Stocks that gives the holder preference as to the holder of common stocks with respect to the issuance of stock
dividends and or the distribution of capital in case of liquidation.
Limitations:
A. Only be issued with the stated par value; and
F. The preference must be stated in the articles of incorporation and the certificate of stocks otherwise such share shall
be treated as common shares.
12. What is cumulative voting?

Gives the stockholders the right to vote a candidate as many votes as the number of directors to be elected multiplied
by the number of his shares. The purpose of this is to give the minority stockholders a representation in the board of
directors.
13. Differentiate Cumulative Preferred Shares vs. Earned Cumulative/Dividend Credit Type
Cumulative preferred shares entitles the owner the payment, not only of current dividends, but also back dividends not
previously paid whether there are profits or not. Earned cumulative in entitled only to arrears if there are profits in
those years.
14. What are Treasury Shares?

Shares which are already issued and fully paid but subsequently reacquired by the issuing corporation through purchase,
redemption, donation or some other lawful means. It can be issued for a price even below the its original par value. It
can also be declared as dividends since it is a property of the corporation. The owners of a treasure shares are not given
the right to vote or the right to a share of dividends.
15. What is the Doctrine of Limited Liability?

The liability of a shareholders shall only be up to the extent of his subscription or promised contribution. The
disadvantage is that it limits the credit available to the corporation.
Disclaimer:16. What is Pre-emptive Rights and when can it be exercised?

The
Made right given
by Gabriel Jhickto all existing stockholder to subscribe to all issues or disposition of shares of any class,
Saliwan in proportion to
their respective holdings, subject to the limitations imposed by law. Unless the articles of incorporation denied the
issuance of such right.
Enumerate the Following:
Disclaimer:
1. When may Directors and/or Officers be personally liable with the corporation?
A.Willfully and knowingly vote or assent to patently unlawful acts of the corporation, gross negligence or
bad faith in directing affairs of the corporation and when he acquire any personal or pecuniary interest in
conflict with their duty as Directors or Officers;
B.Consented to the issuance of watered stocks or who, having knowledge thereof, does not file with the
corporate secretary his written objection thereto;
C. Made personally liable by a specific provision of law; and
D. The director or officer contractually made himself personally or solidarily liable with corporation.
2. What is the test in determining whether a corporation has the implied power to do a certain act? The
lawful act, not otherwise prohibited, must essential or reasonably necessary in carrying out its purpose or
purposes expressly granted to it by the articles of incorporation and such act must reasonably contribute to the
promotion of those corporate purposes.
3. What is the limitation imposed by law on the right of a corporation to decrease its capital stock?
A.When such decrease in the capital stock will prejudice a creditor pursuant to the Trust Fund Doctrine.
4. What is the reason for the decrease of capital stock?

A.To reduce or wipe out existing deficit where no creditors would thereby be affected; and
B.When capital is more than what is necessary to procreate the business or reduction of capital surplus;
C.To write down the value of its fixed assets to reflect their present actual value in case where there is a
decline in the value of the fixed assets of the corporation.
5. What is the Business Judgment Rule?

Questions of policy and management are left solely to the honest decision of the board of directors and
the court has no authority to substitute its judgment as against the former.
2. Advantages of the Corporate form of business

A. Capacity to act as a single unit
B. Limited shareholder’s liability
C. Continuity of existence
D. Feasibility of Greater Undertaking
E. Transferability of shares
F. Centralized management
G. Standardized method of organization, management and finance
3. Requirements for the Amendments of AOI

A. Resolution by the Board of Directors;
B. Votes or written assent of the stockholders representing at least 2/3 the outstanding capital stock;
B. Submission and Filing of the amended articles of incorporation with the SEC; and
C. Approval by the SEC.
4. Disadvantage of the Corporate form of business

A. Board meeting is required in order for a corporation to have a valid and binding corporate act;
H. A corporation cannot act outside the jurisdiction of a state from where it was incorporated unless authorized to so;
I. The limited shareholders’ liability tends to limit a credit available to the corporation;
J. Transferability of shares may result to incompatible or conflicting interest;
K. The minority shareholders may practically have no say in the conduct of the corporation;
L. Doubt taxation may be imposed in corporate income;
M. Always subject to government regulation, supervision and control.
5. What is the test in determining whether a corporation is private or public corporation?

The test to determine the nature of a corporation is the relation of the body to the state. A public corporation is created, form
and organized for political or governmental purpose with political powers to be exercised for purposes connected with the
Disclaimer:
public good in the administration of the civil government. While a private corporation is created, form and organized for the
purpose of advancing
Made by Gabriel Jhick Saliwan the interest of a private individual.
6. Enumerate the Instrumentality Test

A. There is a complete domination of finance, policy and business practice of a corporation;
17. The limitation that the corporation must at all times have ―unrestricted retained earnings is a
condition for the exercise of this power, EXCEPT:
1. Redemption of redeemable shares
2. Exercise of a stockholders right to compel a close corporation to purchase his shares for any reason under the
corporation code and when the corporation has enough assets in its book to cover any debts or liabilities exclusive of
its capital stocks;
3. In case of deadlocks.
18. Provisions that cannot be amended

A. Names of the incorporators and the incorporating directors and trustees;
A. Name of the treasurer originally or first elected by the subscribers or members of such corporation;
B. Numbers of shares and the amount originally subscribed and paid out of the original authorized capital stock of the
corporation;
C. Date and place of the execution of articles of incorporation and the signatories and acknowledgment thereof.
19. A close corporation may not be denied its pre-emptive right.
Explain why the following statements are CORRECT.
Disclaimer:
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.
It is absolute because a close corporation is intended not to be open for public. In a close corporation, there is no public
investors and the shareholders are active in the conduct of the corporate affairs.
2. Labor performed or services rendered can be a

consideration for stocks
A consideration is necessary in exchange for actual labor or services to the corporation. Hence, the corporation code allowed
labor performed or services rendered to be a consideration for stocks.
3. Minors can be a corporator

A minor can be a corporator provided that such minor is accompanied by his parent, guardian or administrator.
1. Members of the executive committee must be a member

of a board
Because an executive committee is formed to act on a specific matters which would require the competence a member of a
board.
4. Service of summons against a corporation must not be

made upon Branch Manager
Branch manager is an agent of the corporation and under the new rules, the court cannot acquire jurisdiction over the
corporation if the service of summon is made to an agent unless it is made to the person enumerated under section 13 of the
revised rules of court.
5. Treasury shares may be issued lower than par value

Because treasury shares are shares which have been issued and fully paid but subsequently reacquired by the corporation
through any lawful purpose.
6. Corporate extension may be made earlier than 5 years

prior expiration
As a general rule, corporate expansion cannot be made earlier than 5 years prior expiration unless there are justifiable reasons
in allowing for an earlier extension determined by the SEC.
7. Demand may be waived in a Derivative Suit.

Demand may be waived in a derivative suit when such demand is became futile such as when a director, that is being sued, has
complete control over the corporation.
8. Corporations persists to exist despite death, incapacity,

civil interdiction or withdrawal of stockholders or members
Because a corporation, having its own juridical personality, is separate and distinct from the personality of its incorporators
and shareholders.
9. Cumulative voting is not allowed in a Non-Stock

Corporation
Each member of a non-stock corporation is entitled by the code to only have one vote. Hence, each members are equal with
respect to their right to vote unlike in a stock corporation.
10. A corporation may acquire its own shares.

A. To eliminate fractional shares arising out of stock dividends;
B. To collect or compromise indebtedness to the corporation, arising out of unpaid subscription, in a delinquency share, and to
purchase delinquent shares sold during the said sale;
C. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the provisions of the code.
11. Disloyal act of a director may be subject to ratification by a

Disclaimer:
votepractice
These are mere of stockholders owning
questions to gauge or representing
the students’ mastery about at
theleast 2/3
subject. of the
Basahin, outstanding
Intindihin, capitalGod
Madaling Sagutin! stock.
bless us all!!
When a business
Made by Gabriel opportunity was first offered to the director and such business opportunity should
Jhick Saliwan have been for the
corporation. Such act of the director can be ratified by the stockholder pursuant to the corporation code.
Essay:
DKD INC.. which is engaged in land transportation business has an authorized capital stock of Php100M divided into
100M shares with a par value of Php1.00 per share. 50M has been subscribed and 25M was duly paid up. The Board of
Directors consist of 10 members as fixed in the Articles of Incorporation. The by-laws are silent as to whether or not the
company may create an Executive Committee. One of its stockholders, “A”, recently graduated Magna Cum Laude in
Business Administration from Yale University and the Board firmly believes that he (A) will be able to help bring the
company to its highest level of competence.
Ans: No. only a member of the board of directors can be made a member of an executive committee.
Under the corporation code, the bylaws may create an executive committee, composed of not less than three members
of the board of directors, to be appointed by the board. The executive committee may act, by majority vote of all its
member, on such specific matter within the competence of the board except as otherwise provided.
In this case, A, not being a member of the board, is not qualified to be a member of the executive committee since the
acts of the latter requires the competence of a board of director delegated to it by the bylaws or on majority vote of the
board.
Disclaimer:
1. The Board of Directors may create an executive committee.
If yes, why and if not, why not, and what should be done in order that one may be created?
Yes, the board may create an executive committee provided it is not been prohibited by the bylaws. An executive committee is
composed by not less than 3 members of the board, to be appointed by the board.
2. If such an executive committee may be created, may it be

composed of 5 members consisting of 4 directors and “A” who is not a director? Why or why not?
No. An act of executive committee requires the competence of a member of board of director which has been delegated to it by
the bylaw or by majority vote of the members of the board. In allowing a non member of the board to be appointed as a
member of an executive committee would result to undue delegation of corporate powers.
3. May the company validly engage in water transportation

without amending the articles of incorporation to include such an activity in the purpose clause? Explain.
No. Secondary purpose must be consistent with the primary purpose of the corporation. Moreover, a certificate for public
convenience must first be acquired in order for the corporation to validly engage in water transportation.
4. May the company put up a 12 story building, occupy 3

stories for its offices and rent out the rest to the public? Why or Why not?
Yes. The corporation code expressly declares that a corporation may purchase, hold or lease real properties necessary to enable
to carry out the purpose from which they are created. In so far that the lot was lawfully acquired, it is entitled to full beneficial
use thereof.
No. The corporation code expressly declares that a corporation may purchase, hold, or lease real properties that is reasonably
necessary to enable then to carry out the purpose from which they are created. In this case, a 12 story building is far from being
reasonably necessary in carrying out the purpose of the corporation.
5. If the company made Php30M surplus profits (unrestricted

retained earnings) may the Board be compelled to declare dividends even if there are no preferred shareholders? If Yes, to
what extent or how much may they be compelled to declared? If no, why not?
6. If DKD INC.. earlier entered into a contract with Z CO., which

represented itself as a corporation for the lease/rental of 5 of the buses of the former who was aware that Z CO., INC. is not
in fact registered as a corporation, and DKD INC.., fully complied with its obligation, on a suit brought to by it (DKD INC..)
directly against the person/s who assumed to act as such corporation, may the latter interpose that DKD INC.. has no cause
of action against them because he dealt with Z CO., INC. as a corporation and thus admitted its legal existence as a
corporate body?
7. Assuming that Z CO., INC., (as stated in no. 6) is a de facto

corporation, may the stockholder who made representation of the existence of the corporation be sued in their
personal/individual capacities?
8. If a stockholder is denied to exercise his pre-emptive right

by the board of directors and the former intends to sue the latter, what type of suit may he institute/bring?
A stockholder may file a personal action towards the BOD. The exercise of a pre-emptive right is personal to the stockholder.
9. In relation to item 8, may service of summons be validly

served upon a director who is neither the president, managing director, in house counsel, corporate secretary or treasurer.
Explain.
Yes. Since the act of the board of directors, in denying the pre emptive right of a stockholder, is patently unlawful they can be
made personally liable against the stockholder.
10. If the president DKD INC., issues a corporate check to pay

corporate liabilities and the check bounced for insufficiency of funds, may he successfully advance the Corporate Entity
Theory to evade liability in an action filed against his person? Why or why not?
Disclaimer:
No. Because a special provision of a law makes the president personally liable.
11. Illustrate cumulative voting
Cumulative voting give a stockholder, entitled to vote, the right to give a candidate as many votes as the number of directors
elected multiples by the number of his shares shall equal or he may distribute them among the candidates as he may see fit. The
CHAPTER 8: BY-LAWS
1. When is the effectivity of a by-laws?

After the approval of the SEC
Prior to Incorporation - must be sign by all the incorporators without the need of the affirmative vote of
the majority of the outstanding capital stock or the members provided it is submitted together with the
AOI
After Incorporation - Must be submitted one month after the issuance of the certificate of incorporation
and must be approved by a majority of the outstanding capital stock or members and sign by them
also.
CHAPTER 9: MEETINGS
1. A stockholder whose shares are declared delinquent will have?

a. No voting and dividend rights
b. No voting rights at any meeting
c. Voting and dividend rights
d. Voting rights but no dividend rights
2. Which of the following meetings is not valid?

a. Members’ meeting held in Tagaytay City where the principal office is located in Makati but the by-laws
provide that meetings of the members may be held anywhere in the Philippines
b. Stockholders’ meeting held in Tagaytay City where the principal office is located in Makati but the by-
laws provide that stockholders’ meetings may be held anywhere in the Philippines
c. Trustees’ meeting held in Baguio City where the principal office is located in Makati
d. Directors’ meeting held in Macau where the principal office is located in Makati.
3. The by-laws of a stock corporation may provide that stockholders meeting may be held anywhere in the
Philippines?
False. Sec. 51 states that SH or members’ meetings, whether regular or special shall be held in the city or
municipality where the principal office of the corporation is located.
Note: Stockholders meeting must at all times be held in the city or municipality where the principal office is
located, or if practicable at the principal office of the corporation. Metro Manila is considered as one city or
municipality.
4. Absent any by-law provision authorizing t holding of a meetings of members in a non-stock corporation,
members’ meetings may nonetheless be validly held anywhere in the Philippines
False, in the absence of any by-law provision, members’ meeting of a non-stock corporation should be held
in the city or municipality where the principal office of the corporation is located.
Note: Non-stock corporation may provide in its by-laws any place of members; meeting provided there is
proper notice.
5. Any meeting of a SH/members irregularly held or called is necessarily without force and effect?
False. Sec. 51: the meetings shall be valid even of irregularly held or called provided:
A. All proceedings had and any business transacted is within the powers or authority of the
corporation,
Disclaimer:
B. All SH/members of the corporation are present or duly represented at the meeting
6. The general requirements for a valid Stockholders’ meeting.
Must be held on the date fixed in the by‐laws or in accordance with law.
A. Prior notice must be given.
B. It must be held in the proper place.
C. It must be called by the proper party.
D. Voting and quorum requirements must be met.
STOCKHOLDER MEETING DIRECTORS MEETING

MUST AT ALL TIME BE HELD WITHIN MAY BE HELD ANYWHERE, WITHIN
THE BOUNDARIES OF THE OR OUTSIDE THE PHILIPINES,
CORPORATION’S PRINCIPAL EXCEPT WHEN THE BY-LAWS
OFFICE.EXCEPT, NON-STOCK PROVIDES OTHERWISE.
CORPORATION PROVIDED THAT IT IS
STIPULATED IN ITS BY-LAWS PROXY VOTING IS NOT ALLOWED.
PROXY VOTING IS ALLOWED.
XPN: NON STOCK CORPORATION NOTICE:
WITH THE BY-LAWS PROHIBITING GR: SPECIAL MEETING CONDUCTED
PROXIES. WITHOUT THE PRESENCE OF ALL OF
THE DIRECTORS OR WITHOUT
NOTICE IS ILLEGAL.
XPN: IF ALL OF THE DIRECTORS ARE

PRESENT
QUORUM: UNLESS THE AOI OR

BYLAWS PROVIDE FOR A GREATER
MAJORITY, A MAJORITY OF THE
MEMBERS OF THE BOD AS FIXED IN
THE AOI WILL CONSTITUTE A
QUORUM.
XPN: ELECTION OF CORPORATE

OFFICERS WHICH REQUIRED THE
VOTE OF A MAJORITY OF ALL THE
MEMBERS OF THE BOARD.
PROXY VOTING
REQUIREMENTS:
1. Must be in writing;
2. Signed by the SH or M or his duly authorized representative; and
3. Filed on or before the schedule meeting with the corporate secretary.
DURATION:
May be fixed by the proxy’s own term but it cannot exceed 5 years and for not more than 5 years of each
renewal. Otherwise, it expires after the meeting for which it was given.
VOTING TRUST PROXY

Disclaimer:
BENEFECIAL OWNER OF THE LEGAL TITLE TO THE SHARES
SHARES CEASED TO BE REMAIN WITH THE OWNER
STOCKHOLDER OF RECORD SINCE
OWNER OF THE SHARES MAY BE
THE SHARES ARE TRANSFERRED TO
ELECTED SINCE THE LEGAL TITLE
THE TRUSTEE
REMAINS THEREOF
BENEFICIAL OWNER IS
PROXY HOLDER MUST VOTE IN
DISQUALIFIED TO BE A DIRECTOR
PERSON
TRUSTEE MAY VOTE IN PERSON OR
DURATION MUST NOT EXCEED 5
BY PROXY
YEARS
DURATION MAY EXCEED FIVE YEARS
UNLESS REQUIRED BY THE BY-
VTA TO BE VALID MUST BE LAWS, PROXIED NEED NOT BE
NOTARIZED AND FILED WITH THE NOTARIZED NOR IS IT REQUIRED TO
SEC BE FILED WITH THE SEC
CHAPTER 10: STOCKS AND STOCKHOLDERS
SUBSCRITION PURCHASE
THE SUBSCRIBER BECOMES THE BUYER BECOMES
STOCKHOLDER EVEN IF THERE IS STOCKHOLDER ONLY UPON FULL
ONLY PARTIAL PAYMENT PAYMENT OF THE PRICE.
UNISSUED SHARE IS THE SUBJECT UNISSUED SHARE CANNOT BE A
OF SUBSCRIPTION TO BECOME A SUBJECT TO A PURCHASE.
STOCKHOLDER
D. X Co., Inc., engaged in the manufacturing concern. It leased a parcel of land where it erected its plant
warehouse and offices. It has an authorized capital stock of Php100M divided into 100M shares with a par
value of Php1.00 per share. Php50M has been subscribed. One of the stockholders thereof is “A” who
subscribed to Php5M and has paid Php2.5M out of his subscription.
a.) May “A” be issued a stock certificate covering 2.5M shares? Why or why not? (3pts)
No section 64 of the corporation code provides that no certificate of stock shall be issued to a
subscriber until the full amount of his subscription together with interest and expenses ( in case of
delinquent shares) if any has been paid.
Assume that the corporation has been incurring loses to the tune of php5M and to raise much needed funds to
pay its liabilities, the BOD decided to make a call for the unpaid portion of the subscriptions of its stockholders
including “A” who did not pay the same on the date specified in the call. The Corporation this decided to sell his
shares at public auction but no bidders appeared.
Disclaimer:
a.) May the corporation bid? Why or why not? (3pts)
No. The corporation may bid subject to the provisions of the corporation code. Section 41 provides that
the corporation shall have the power to acquire its own shares provided that it has unrestricted retained
earnings. In this case, the corporation has no unrestricted retained earnings because it is incurring
loses.
Assume that the corporation and “Y” entered into a contract of sale in January 2016 for the latter to acquire
10M of the remaining unissued stocks of the corporation with a stipulation that “Y” shall pay a down payment of
Php5M, the balance to be paid on or before the end of June 2016, and that until and unless he shall have paid
the balance of his acquisition cost he shall have paid the balance of his acquisition cost he shall not be
considered as a stockholder. A meeting of the acquisition of the stockholders is called to be held in June 7,
2016 to elect a new set of directors, at a point in time when he has not yet paid his full acquisition cost.
b.) Is “Y” qualified to vote and be voted for as a director? Why or why not? (3pts)
Yes. The moment his subscription becomes effective, he becomes a stockholder for all intents and
purposes and the only requirement to be qualified as a director is that he must have at least one share
in his own name.
c.) Assume that on June 10, 2016, the entire compound of the corporation was ravaged by fire, turning
everything into ashes. May “Y” be compelled to pay the balance of his acquisition cost? Why or
why not? (5pts)
Yes. The corporation code provides that any contract for the acquisition of unissued stock in an existing
corporation or a corporation still to be formed shall be deemed a subscription, nowithstanding the fact
that the parties refer to is as a purchase or some other contract. Thus, a person whether deemed a
purchaser or subscriber of the unissued stocks of an existing corporation or a corporation still to be
formed becomes entitled to all the rights and of stockholder and subjected to all liabilities that attach
thereunder upon execution and effectivity of the contract, and the corporation can compel the payment
of the balance of the unpaid portion of the subscription.
NOTE: So long as the shares to be acquired from the corporation are "unissued stocks" of the latter, the
contract will be deemed a subscription contract. Thus, Z becomes entitled not only to the rights of a
stockholder but also to all liabilities attached thereunder.
PRE INCORPORATION SUBSCRIPTION
What may be used as a consideration? (sec. 62)

a. Actual cash paid to the corporation
b. 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 issued value of the stock issued
c. Labor performed for or services actually rendered to the corporation
d. Amounts transferred from unrestricted retained earnings to stated capital
e. Outstanding shares exchanged for stocks in the event of reclassification or conversion
How much should be the consideration?

The consideration should not be less than the par or issued price of the stock (sec. 62)
What is the effect of issuance of shares of stocks without a consideration?

Disclaimer:
The shares will be considered as watered stocks (sec. 65) hence, subscribers may be compelled to pay the
full par or issued value thereof
CERTIFICATE OF STOCKS AND THEIR TRANSFER
1. X Co., Inc., engaged in the manufacturing concern. It leased a parcel of land where it erected its plant
warehouse and offices. It has an authorized capital stock of Php100M divided into 100M shares with a par
value of Php1.00 per share. Php50M has been subscribed. One of the stockholders thereof is “A” who
subscribed to Php5M and has paid Php2.5M out of his subscription.
b.) May “A” be issued a stock certificate covering 2.5M shares? Why or why not? (3pts)
No section 64 of the corporation code provides that no certificate of stock shall be issued to a
subscriber until the full amount of his subscription together with interest and expenses ( in case of
delinquent shares) if any has been paid.
2. A transferee of a certificate of stock in a non-stock corporation, if they are transferable by virtue of a by-law
provision, has the same right, power and authority to compel the corporation to register the said transfer in the
corporate books in his name, in order that he may be considered as a shareholder, in the same manner that
the transferee of a certificate of stock in a stock corporation may do so.
True (Sec. 87, last par.), the provision governing stock corporation, when pertinent, shall be applicable to
non-stock corporations, except as may be covered by specific provisions of this Title.
3. Pending issuance of the replacement certificate, the owner of a lost certificate of stock may validly transfer
his shares by a mere notarized deed
False. Two modes of transferring shares of stock:
1. When the corporation has already issued stock certificates – transfer is done only through endorsement
and delivery of the certificate or certificates of stock indorsed by the owner or his attorney-in-fact or other
person legally authorized to make the transfer.
2. When the corporation has not yet issued certificates of stock – by a duly notarized deed. If a certificate of
stock has been issued a mere notarized deed will not suffice. It must be coupled with endorsement and
delivery of the stock certificate.
4. “Subscription for shares of stock of a corporation is indivisible”.

Sec. 64. No certificate of stocks shall be issued to a subscriber until the full amount of his subscription
together with interest and expenses (in case of delinquent shares), if any is due, has been paid.
5. “Certificate of stock is merely quasi‐negotiable and is non‐negotiable”.

While it may be transferred by endorsement coupled with delivery thereof, and therefore merely quasi-
negotiable, it is nonetheless non‐negotiable in that the transferee takes it w/o prejudice to all the rights and
defenses w/c the true and lawful owner may have except in so far as the principles governing estoppel may
apply. (Delos Santos vs. McGrath).
6. Z corp. was registered in 1978 or before the effectivity of the Corporation Code. The by –laws of the
corporation allow it to issue certificate of stock covering the corresponding number of shares w/c the subscriber
may have already paid.
Disclaimer:
A subscribed to 1M shares w/a PV of 1.00/share and have paid 500K on his subscription. He now compels the
Corporation to issue a stock certificate covering 500K shares.
A. The corporation seeks your advice as counsel. What advice will you give? Explain.
Sec. 64. Issuance of stock certificates – No certificate of stock shall be issued to a subscriber until the full
amount of his subscription together with interest and expenses (in case of delinquent shares), if any is due,
has been paid. Thus, A should comply with the Corporation Code.
A stockholder whose subscription is not fully paid may not be issued a stock certificate for that portion already
paid. (Fua Chan vs. Summers and China Banking Corporation)
General Rule: Holders of subscribed shares not fully paid are entitled to all the rights of a stockholder.
Exception: That the shares have been declared delinquent; or the stockholder exercises his appraisal right.
B. Assume that A is now the owner of the stock certificate No. 008. B, his brother stole the certificate,
forged the signature of A and sold the same to C, who is a purchaser in good faith and for value. Who has
a better right over the shares covered by stock certificate No. 008? A or B? Explain.
A still has a better right over the shares under the doctrine of non‐negotiability of certificate of stock.
General Rule: In forged or unauthorized transfer of stock the purchaser acquires no title as against the lawful
owner and will have no right or remedy against the corporation (non‐negotiability of stock certificates).
C. Assume that C transfers the said stock certificate to D. Who is also a bona fide purchaser, will D acquire
title? Explain.
No, same basis to the previous answer.
D. Assume that before C transferred the shares, he surrendered the said stock certificate to the corporate
secretary for the registration/cancellation and for issuance of a new stock cert in his (C’s favor). The
corporation cancelled the said stock certificate and issued stock certificate No. 010 in the name of C, who
thereafter transferred the latter certificate by endorsing and delivering it to D. Will D acquire title? Explain.
Yes, D will acquire title to the stock certificate No. 010 as this would be the exception to the general rule.
Exception: The Corporation will be estopped to deny the validity thereof. The subsequent purchaser in good
faith took the shares by virtue of the genuineness of the certificates issued by the corporation or of the
representation made by the corporation that the same is valid and subsisting and that the person named
therein is a stockholder of the corporation.
E. Will A be deprived of his title? Explain.
No, A cannot be deprived of his right by virtue of an unauthorized transfer. He can go to the corporation and
ask for the cancellation of the stock certificate due to fraud or forgery. D may compel the corporation to
recognize him as a stockholder or claim reimbursement and damages against the latter.
F. Assume that the corporation has unissued and unsubscribed shares worth 20M and the corporation
want to issue them at the PV of P1.00/share instead of its FMV of P2.00/share. They seek your advice as
counsel if they can do so issued at P1.00. What advice will you give? Explain.
Yes, they can issue it at the PV of P1.00/share, because it is not below the par value. There is no watered
stock because the basis of watered stock is the par value and not the fair market value.
Ways in which watered stock may be issued:
Disclaimer:
1. For monetary consideration less than its par or issued value;
2. For a consideration in property, tangible or intangible, valued in excess of its fair market value;
3. Gratuitously or under agreement that nothing shall be paid at all; or
4. In the guise of stock dividends when there are no surplus profits of the corporation.
G. Further, assume that the corporation enters into a contract of sale/purchase of some of its remaining
unsubscribed shares w/ X who pays a down payment of 50% w/ a condition that he (X) will not be
considered as a stockholder until the full payment of the acquisition cost and that then and only then shall
be issued a stock certificate. Pending payment of the balance, the properties, inventories and all assets of
the corporation was razed in fire. The corporation now wants to collect the unpaid portion of the acquisition
cost of the shares.
X seeks exception in that the contract is one of sale, and the obligation of the parties is reciprocal and
dependent on one another. Rule and Explain.
YES, no matter how the party refer to it, it is considered subscription
Once you subscribe, you become a stockholder which is entitled to all the liabilities of a stockholder. The
acquiring stockholder is much bound to pay the debt owing to the corporation. Unpaid subscriptions will be a
debt owing to the corporation.
7. A subscribed 100,000 shares valued at 1M. He paid 500,000, so he has a balance of 500,000. The
Corporation is in dire need of money for the operation of its business so the BOD decided to make a call for the
unpaid portion of the subscription of A. The Corporation has debts amounting to 10M, and in order to raise
funds to pay the indebtedness, they made a call for the unpaid portion of the subscription of SH including A. It
specified the date when it should be paid. A did not pay, A's 100,000 shares are now delinquent and the BOD
can now sell these shares at a Public Auction subject to publication. There is an additional cost of 5,000. So
you now have 505,000. There are no bidders, no bidder appeared.
A. May the Corporation bid?
No, the corporation may bid subject to the provisions of this Code. This is acquisition of its own shares and as
a rule, a corporation cannot generally reacquire its own shares if it has no Unrestricted Retained Earnings. The
corporation cannot bid. It must have unrestricted retained earnings as a General Rule.
B. IF THE CORPORATION CANNOT BID BECAUSE IT HAS NO UNRESTRICTED RETAINED EARNINGS,
IS THE CORPORATION NOW LEFT WITHOUT RECOURSE TO ENFORCE PAYMENT OF THE UNPAID
SUBSCRIPTION OF A?
No. It can go for a Direct Action in Court.
8. A's shares are delinquent, he is a director of the corporation. Pending the sale of his shares, is he still
qualified to be a director?
Ownership of shares of stocks standing in his name in the books of the corporation is the qualification in order
that one may be a director. Will he lose his right to be a director?
No, until and unless all his shares are bid out and sold to the winning bidder, he remains the owner of the
shares of stock. It is still registered in his name in the books of the corporation. Therefore, he remains as
a stockholder, and even if it may be sold at public auction, he can still continue acting as the director.
Disclaimer:
f. Pending the issuance of the replacement certificate, the owner of a lost certificate of stock may validly
transfer his shares by a mere notarized deed
False, if a certificate of stock has been issued a mere notarized deed will not suffice. It must be coupled with
endorsement and delivery of stock certificate.
g. A transferee of a certificate of stock in a non-stock corporation, if they are transferable by virtue of a by-
law provision, has the same right, power and authority to compel the corporation to register the said transfer in
the corporate books in his name, in order that he may be considered as a shareholder, in the same manner
that the transferee of a certificate of stock in a stock corporation may do so.
TRUE
1. Certificate of stock are merely quasi-negotiable but non-negotiable (3pts)

Certificate of stock is quasi negotiable because it maybe transferred by endorsement coupled with delivery
thereof. It is nonetheless non-negotiable in the sense that the transferee takes it without prejudice to
all the rights and defenses which the true and lawful owner may have except insofar as the principles
governing estoppel may apply.
9. Explain the following statements:

1. Subscriptions to shares of stock of a corporation are indivisible.
2. Certificates of stock are merely quasi-negotiable and are non-negotiable.
1. No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with
interest an expenses (in case of delinquent shares), if any is due, has been paid. (sec. 64)
2. While it may be transferred by endorsement coupled with delivery, and therefore merely quasi-negotiable, it
is non-negotiable in the sense that the transferee takes it without prejudice to all the rights and defenses
which the true and lawful owner may have except in so far as the principles governing estoppels may apply.
(Tan v. SEC)
3. Popeye subscribed to shares of stock and paid it. He did not however register it. On February 14, 2000, he
assigned said shares of stock to his girlfriend Olive through a duly notarized deed. Olive asked the corporate
secretary to register it but she refused to do so. So olive filed mandamus. The corporate secretary filed a
motion to dismiss contending that there is no cause of action because there is no proper party.
4. Decide the case.
5. What if it was transferred to Olive through a pledge where it was provided that in case of failure to pay,
Popeye was authorized to foreclose said mortgage, will mandamus lie?
6. Duty of the secretary to record transfer is ministerial hence, mandamus will lie if the secretary refuses to
record the transfer (Rural Bank of Salinas v. CA). But the secretary cannot be compelled when the
transferee’s title to the said shares has no prima facie validity or is uncertain. In order that a writ of
mandamus may issue, it is essential that the person petitioning for the same has a clear legal right to the
thing demanded. It neither confers powers nor imposes duties and is never issued in doubtful cases. It is
simply a command to exercise a power already possessed and to perform a duty already imposed. (Tay
v. CA)
The duly notarized deed must be endorsed and delivered by the owner thereof, their attorney-in-fact or any
other legally authorized person. In the absence of endorsement and delivery, it is still valid between the parties
but does not make the transfer effective (Rural Bank of Lipa City, Inc. v. CA).
As it appears, there is nothing in the facts of the case which proves that there was delivery or endorsement
hence, the transfer is not binding upon the corporation. Olive then has no clear right to the title of Popeye's
Disclaimer:
shares of stock as far as the corporation is concerned. In effect, the corporate secretary cannot be compelled
to register the transfer through mandamus.
7. No, Olive did not acquire ownership of the shares by virtue of the contract of pledge. There is no showing
that petitioner made any attempt to foreclose or sell the shares through public or private auction, as
stipulated in the contracts of pledge and as required by Article 2112 of the Civil Code. Therefore,
ownership of the shares could not have passed to her. The pledgor (Popeye) remains the owner during the
pendency of the pledge and prior to foreclosure and sale as expressly stated in Art. 2103 of the same
Code. (Tay v. CA)
ENFORCEMENT OF PAYMENT OF SUBSCRIPTION
8. The winning bidder in a delinquency sale is the highest bidder

False, the winning bidder is the lowest bidder from the wordings of statute. The bidder who tenders to pay the
full amount of delinquency plus cost and expenses for the least number of shares.
1. If declared delinquent, what would be the effect as to the owner of said shares?
The delinquent stock shall not be voted for or be entitled to vote or to representation. The holder shall not be
entitled to any rights of a stockholder except the right to dividends (Sec. 71). However if the shares are not
delinquent, subscribers to the capital of a corporation, though not fully paid, are entitled to all the rights of a
stockholder (Sec. 72).
2. A corporation paid 50% of subscription and was later on declared delinquent when he could not pay upon
call; A is also a director of the corporation. Will A, upon declaration of delinquency, still be able to exercise
his right as a director?
Yes, he loses all his right as a stockholder except his right to receive dividends (Sec. 71). He remains to be a
director, only qualification to be a director is he must own at least 1 share and since it still stands in his name
pending the sale, he remains to be and act as a director. Even if there is sale, he may still be director because
the winning bidder may not bid or pay for all the shares for there might be remaining shares which would be
credited in favor of the delinquent stockholder (Sec. 43).
3. When will the replacement certificate be issued?

After the expiration of one (1) year from the date of the last publication (Sec. 73)
Could it be issued earlier than 1 year?
Yes it can be. When the registered owner files a bond or other security, a new certificate may be issued even
before the expiration of the 1 year period. (Sec. 73)
May corporate officers be held liable for the unauthorized issuance?
Yes, in case of fraud, bad faith, or negligence (Sec. 73, last par.)
4. Certificate of stock was lost, the owner transfers his shares by way of a notarized deed. Will it be valid?
He cannot do so. If there is an issued certificate of stock by the corporation, a mere notarized deed will not
suffice. Deed of assignment was not sufficient since there was no endorsement (Rural Bank of Lipa, Inc. v.
CA).
Disclaimer:
1. A stockholder whose shares are delinquent will
a. Have no voting and dividend rights
b. Have no voting rights at any meeting
c. Have voting and dividend rights
d. Have voting rights but no dividend rights
2. The winning bidder in a delinquency sale is
a. The bidder who bids for the highest price for the shares of the delinquent stockholders
b. The bidder who pays or tenders to pay the amount of delinquency plus cost, expenses and interest, if
any, for the most number of shares
c. The bidder who pays or tenders to pay the amount of delinquency plus cost, expenses and
interest, if any, for the least number of shares
d. The bidder who pays or tenders to pay the full value of shares amount already paid for by the
delinquent stockholder
3. A director whose shares are declared delinquent does not automatically cease to be a director? True. To be a
director, he must own at least 1 share that stand in his name. Even after sale, he may still be credited to some of
the shares and he only needs 1 to qualify as a director.
4. Explain the effects of declaration of delinquency vis-à-vis the right of the stockholder:
a. To vote and be voted upon.
The stockholder of delinquent stock shall not have the right to vote or be voted upon (Sec. 71)
b. To receive cash and stock dividends.
The stockholder of delinquent stock shall have the right to receive cash dividends which shall first be applied to
the unpaid balance on his subscription plus cost and expenses. With regard to stock dividends, this shall be
withheld from the delinquent stockholder until the unpaid subscription is fully paid (Sec. 43)
5. Subscriptions to shares of stock of a corporation are indivisible.

No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with
interest an expenses (in case of delinquent shares), if any is due, has been paid. (Sec. 64)
6. A director/stockholder whose shares are declared delinquent is not automatically disqualified to be and act as
director.
In order for one to be and act as a director, Section 23 of the Corporation Code requires that the director must
own at least one (1) share which shall stand in his name in the books of the corporation. Delinquency does
not deprive the director of ownership of shares. The effects of delinquency are provided in Section 71 of the
Corporation Code.
CHAPTER 11: CORPORATE BOOKS AND RECORDS
1. Remedies of a stockholder who is denied inspection of corporate books:

A. Mandamus
B. Damages either against the corporate or the responsible officer, or
C. Criminal complaint based on Sec 144 of the Code.
2. Is there any defense available that could be raised? By the corporate officers to justify the refusal?
Yes, if he proves that:

a. the person demanding has improperly used any information secured through any prior examination of the
records or minutes of such corporation or of any other corporation;
b. He was not acting in good faith or for a legitimate purpose in making his demand; or
c. The right is limited or restricted by special law or the law of its creation
Disclaimer:
CHAPTER 12: MERGER AND CONSOLIDATION
1. The dissolved constituent corporation in a merger should necessarily liquidate its corporate affairs?
False. Associated Bank v. CA, although there is a liquidation of the absorbed corporations, there is no
winding up of their affairs or liquidation of their assets because the surviving corporation automatically
acquires all their rights, privileges and powers as well as liabilities.
2. In a case of merger, the employees of the absorbed corporation/dissolved corporation are automatically
absorbed by the absorbing/surviving corporation?
Employees of the absorbed or dissolved corporation are automatically absorbed by the surviving
corporation even in the absence of a resolution to that effect because it is more in keeping with social
justice and full protection to labor. Nevertheless, the surviving corporation has the right to terminate the
employment of the absorbed employees for a lawful or authorized cause. In the same way, the absorbed
employees have the right to resign, retire or otherwise sever their employment with the surviving
corporation even before or after the merger or consolidation, subject to existing contractual obligations.
(BPI v. BPI Employees Union)
3. Effects of merger and consolidation:

A. There will be a single corporation. In case of merger, the surviving corporation, or in case of
consolidation, the consolidated corporation.
B. Termination of the corporate existence of the constituent corporations, except that of the surviving or
consolidated corporation.
C. The surviving or the consolidated corporation will possess all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a corporation organized under this Code.
D. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and
franchise of the constituent corporation, and all property and all receivables due on whatever account,
including the interest of, or belonging to, or due to its constituents corporation shall be deemed transferred
to and vested in such surviving or consolidated corporation without further act or deed; and
E. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and
obligations of each of the constituent corporations. The rights of creditors or liens upon the property of any
such constituent corporations shall not be impaired by such merger or consolidation.
4. The three methods of liquidation and their effects on the 3-year period to liquidate the corporate affairs:
A. By the Corporation itself through the BOD- the Board will only have 3 years to finish its task of
liquidation, claims for or against the corporation not filed within 3 year period will become unenforceable as
there exist no corporate entity against which they can be enforced.
B. By Trustee appointed by the corporation- 3 year period will not apply provided the designation of a
trustee is made within the 3-year period.
C. By appointment of a receiver on petition or motu proprio upon the dissolution of the corporation- the 3-
year period will not apply because the dissolved corporation is substituted by the receiver who may sue or
be sued beyond the 3-year period.
5. Give your comment of the decision of the High Court in Clemente v. CA regarding a juridical entity, long
dissolved (40 years) that did not undertake liquidation and winding to the effect that:
“The termination of the life of a juridical entity does not by itself cause the extinction or diminution of rights and
liabilities of such entity (citing Gonzales v. Sugar Regulatory Administration) nor those of its owners and
directors. If the three year period extended life has expired without a trustee or receiver having been expressly
designated by the corporation within that period. The BOD or trustee itself, following the rationale of SC’s
Disclaimer:
decision in Gelano v. CA may be permitted to so continue as “trustee” by legal implication to complete the
liquidation. Still in the absence of a BOD or trustees, those having any pecuniary interest in the assets,
including not only the stockholders but likewise the creditors of the corporation, acting for and in its
behalf, might make proper representations with the (proper forum), which has primary and sufficiently
board jurisdiction in matters of this nature, for working out a final settlement of the corporate concern.” (5pts)
1. The dissolved constituent corporation in a merger should necessarily liquidate its corporate affairs.
False. Although there is a liquidation of the absorbed corporations, there is no winding up of their affairs or
liquidation of their assets because the surviving corporation automatically acquires all their rights, privileges
and powers as well as liabilities (Associated Bank v. CA)
2. All corporations dissolved necessarily undertake liquidation and winding up of their corporate affairs.
False. In mergers, although there is a liquidation of the absorbed corporations, there is no winding up of their
affairs or liquidation of their assets because the surviving corporation automatically acquires all their rights,
privileges and powers as well as liabilities (Associated Bank v. CA)
6. When do merger and consolidation become effective? What if the SEC fails to act on it without fault
attributable to the corporation involved?
It will never become valid until and unless the SEC gives its stamp of approval. It will be up to the
constituent corporation to follow it up. It will never take effect until the SEC gives its approval and issues
the articles of merger
9. Three methods of liquidation and their effects on the 3 year period to liquidate the corporate affairs.
A. By the corporation it through the Board of Directors or the governing boards.
Effects:
A. Claims for/against the corporation not filed within 3 yrs. will become unenforceable.
B. Actions pending for or against the corporation when the 3 yr. period expires are abated.
C. By a trustee or by an assignee appointed by the corporation
Effects:
A. The 3 yr. period will not apply provided that the designation of the trustee is made within that
period.
B. A dissolved corporation is still liable for all its debts, liabilities in an action filed against it, even if
the case is filed beyond the 3 yr. period. (It may be sued even beyond the 3 yr. period)
By appointment of a receiver.
Effects:
A. 3 yr. period will not apply because the dissolved corporation is substituted by the receiver who
may sue or be sued even after that period.
CHAPTER 13: APPRAISAL RIGHT
1. What is appraisal right?

Right to withdraw from the corporation and demand payment of the fair value of his shares after dissenting
from certain corporate acts involving fundamental changes in corporate structure (Sec. 81)
2. Enumerate three (3) specific instances when this right may be exercised?
Disclaimer:
A. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights
of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of
outstanding shares of any class, or of extending or shortening the term of corporate existence;
B. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all
of the corporate property and assets as provided in the Code; and
C. In case of merger or consolidation.
3. In the amendment in the by-laws, appraisal right is available

False. Appraisal right may be exercised on certain instances, Sec. 81 of the Corporation Code does not
include amendment of by-laws in its enumeration of the instances when appraisal right may be exercised
by a SH. Although said enumeration is not exclusive, a by-law amendment may not still fall under these
instances because it does not result in the changing or restricting the rights of the SH, but merely affects
internal governance of the corporation.
1. The fair market value of the shares of a stockholder exercising his appraisal right should be determined on
the date
a. Of the meeting where he interposed his objection
b. Of receipt of his written demand that he paid the value of his shares
c. Prior to the meeting where the matter was taken up
d. Of the payment of his shares
4. Amendment:
Principal office - from QC to Manila
Primary purpose - from general construction to realty
A objected but outvoted
Can he exercise his appraisal right?
For the principal office - No, it must be changing or restricting the rights of any stockholders
For the primary purpose - Yes, as provided for in Sec. 42 [Subject to the provision of this Code, a private
corporation may invest its fund in any other corporation or business or for any purpose other than the primary
purpose for which it was organized xxx Any dissenting stockholder shall have the option to exercise his
appraisal right]
If the legs of A were amputated, will the change of PO give him the right to an appraisal right?
If the reason is that he cannot attend meeting, such reason cannot be used because a meeting may be held
anywhere in Metro Manila. However, if the proper forum allows him, A may exercise such right. If the proper
forum does not allow him, A may not exercise it.
NOTE: In case of close corporation, A may exercise his appraisal right for any reason and compel the
purchase of his shares at fair value when there is sufficient assets (Sec. 105)
5. When will the FMV of the objecting stockholder be determined? Will it be on the date that he made the
objection in the meeting? Will it be on the date when he made a written demand that he be paid the fair value
of his share? Or will it be on the date when he is actually paid the fair value of his share?
The day prior to the date of the meeting where he interposed his objection (Sec. 82, first par.)
Disclaimer:
If the FMV is P5M
When should the objecting stockholder be paid the fair value of his share or the P5M?
Within 30 days
What would be the effect if the stockholder exercises his appraisal rights? What happens to his voting
and dividend rights if he exercises his appraisal rights?
It will be suspended with a limitation of 30 days (Sec. 83)
What happens if he is not paid the FMV of his shares within the period provided for in the law?
It will be restored (supra.)
May a stockholder who has not paid his subscription in full exercise his appraisal right?
Yes, he can exercise his appraisal right, by reconciling the provisions of Sections. 72, 82 and 86. The
corporation will however demand the surrender of the stock certificate and if it is not submitted within 10 days
from demand, he will cease to be paid the value of his shares at the option of the corporation.
So why should the corporation then demand the surrender of the stock certificate when no certificate
has not yet been given?
It is only at the option of the corporation
6. The primary purpose of the corporation was changed from general construction to realty. A objected but was
outvoted. On the 30th day from the date of the meeting, he made a written demand that he paid the fair value of
his share. It was agreed that the FMV of his share is P5M. But when he made the written demand, the
corporation has no more fund. A was not paid. His dividend and voting rights were restored. A year and a half
later, the corporation made 100M earnings.
May the corporation now pay A his 5M and later declare the entire 95M as cash dividend to his
exclusion?
Yes, as there was no consent of the corporation, the demand made is deemed withdrawn (Sec. 84). Thus, all
rights accruing to his shares, including voting and dividend rights, are suspended except his right to receive
payment of 5M (Sec. 83).
Once the right is exercised, it remains forever. When he withdraws his demand for payment and the
corporation consents thereto, the right of a dissenting stockholder to be paid the fair value of his shares
ceases. In this case, it was not mentioned that he made a withdrawal and even if he may have withdrawn, the
corporation must give its consent.
7. What are the instances when the right of a dissenting stockholder to be paid the fair value of his shares
ceases?
Disclaimer:
e. When he withdraws his demand for payment and the corporation consents thereto;
f. When the proposed action is abandoned or rescinded by the corporation;
g. When the proposed action is disapproved by the SEC where such approval is necessary;
h. When the SEC determines that he is not entitled to exercise his appraisal right;
i. When he fails to submit the stock certificate within ten (10) days from demand to the corporation for
notation that such shares are dissenting shares; and,
j. If the shares are transferred and the certificate subsequently canceled.
Who bears the cost?

It depends.
k. The corporation bears the cost if:
l. The price offered by the corporation is lower than the fair value of the shares of the dissenting
stockholder as determined by the appraisers; or
m. Where an action is filed by the dissenting stockholder to recover such fair value and the refusal of the
stockholder to receive payment is found by the court to be justified.
n. Dissenting stockholder will be liable for the cost and expenses of appraisal when:
o. When the price offered by the corporation is approximately the same as the fair value ascertained by the
appraisers; or
p. Where the action filed by the dissenting stockholder and his refusal to accept payment is found by the
court to be unjustified.
May the dissenting stockholder sell, transfer or assign his shares? Yes, as provided for in Sec. 86
2. No stockholder may be able to compel the corporation to pay the value of his shares if the corporation has no
unrestricted retained earnings
False, a stockholder of a close corporation may for any reason, provided only that the corporation has
sufficient assets to cover its debts and liabilities
3. In amendment of the by-laws, appraisal right is available.
False, it is available only if the amendment has the effect of changing or restricting the rights of any stockholder
or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any
class, or of extending or shortening the term of corporate existence (Sec. 81[1])
CHAPTER 14: NON STOCK CORPORATION
1. Cumulative voting is generally not allowed in a Non-stock corporation?

True, members are only entitled to only one vote, unless allowed by the articles of incorporation or by-laws
(Sec. 89)
Disclaimer:
2. A transferee of a certificate of stock in a non-stock corporation, if they are transferable by virtue of a by-law
provision, has the same right, power and authority to compel the corporation to register the said transfer in the
corporate books in his name, in order that he may be considered as a shareholder, in the same manner that
the transferee of a certificate of stock in a stock corporation may do so.
True (Sec. 87, last par.), the provision governing stock corporation, when pertinent, shall be applicable to
non-stock corporations, except as may be covered by specific provisions of this Title.
3. Distinguish between voting rights of stockholders in a stock corporation and members in a non-stock
corporation.
Except as provided for in the Code, the voting right of stockholders is inherent and they may vote the way
they please. Thus, stockholders may vote personally, or by representative or proxy or by voting trust
agreement, executor, administrator, receiver or other legal representative appointed by the court (Secs. 55,
58 and 59).
On the other hand, in Non-stock Corporation, the voting rights of members may be limited, broadened, or
denied by the by-laws (Sec. 89, first par.)
4. Non-stock corporation with P4B funds. May it be distributed for and among its members?
General rule: No, it can only be transferred or conveyed to one or more corporations, societies or organizations
engaged in activities in the Philippines substantially similar to those of the dissolving corporation (Sec. 94[3])
Exception: If there is no distributive agreement, then the corporation may do so thru a plan of distribution in
accordance with the procedures laid down in Sec. 95
5. Place of meeting:
General rule: In the city or municipality where its PO is located (Sec. 93; Sec. 51)
Exception: The by-law may provide that meetings be held anywhere in the Philippines, provided proper
notice is sent to all members (Sec. 93)
6. All educational corporations must have a governing board of only either 5, 10 or 15 members.
False, only educational institutions organized as non-stock corporations must have such number of
governing board. Those organized as Stock Corporation may be within 5 to 15.
CHAPTER 15: CLOSE CORPORATION

1. Explain “The right of a stockholder to compel the corporation to pay the value of his shares is broader in a
close corporation”.
A. Close Corporation – may withdraw and compel the corporation to purchase his shares for any reason
with the limitation that the corporation has sufficient assets to cover its liabilities exclusive of capital stocks.
B. Ordinary Corporation – unless he sells his shares, a stockholder cannot get back his investment nor
compel the corporation to buy his shares except in the exercise of his appraisal right.
2. Explain “in cases of deadlocks in a close corporation, the courts can interfere in the management of the
corporate affairs”.
Disclaimer:
The court has a wide discretion in the management of the corporation in cases of deadlocks. The court can
interfere because the directors/stockholders are so divided respecting the management of the
corporations business and affairs. The votes required for any corporate action cannot be obtained.
As a consequence, the business and affairs of the corporation can no longer be conducted to the
advantage of the stockholders. The “business judgment rule” cannot be applied here.
3. If not denied by a provision in AOI, the pre-emptive right of a corporation is absolute.

The statement is correct, why? Because under Sec. 102, the pre-emptive right of a close corporation shall
extend to all stock to be issued, including reissuance of treasury shares, whether for money, property, or
personal services, or in payment of corporate debts, unless AOI provide otherwise.
4. A close corporation may validly provide in its AOI or by-laws that

a. Cumulative voting shall be denied to the stockholders
b. Proxy voting shall be denied to the stockholders
c. Quorum and voting requirements in stockholders’ meeting imposed by the code shall be more than that
required by law
d. Meetings of stockholders may be held anywhere in the Philippines
5. Assume that 3 of the 5-man member board reconstituted the AOI falsely adding new purposes not originally
included thereat such as lumber concession, cattle ranch, mining and agriculture, thereby misapplying and
misusing corporate funds and assets. May a stockholder file a dissolution proceedings against the corporation?
Why or why not? (3pts)
No. Dissolution of the corporation is warranted only when the acts of the directors constitute or threaten
a substantial injury to the public or such as to amount to a violation of the fundamental conditions of its
charter, or its conduct is characterized by obduracy or pertinacity in contempt of law.
c.) If a case is instituted and you were the Judge, will you grant the prayer for dissolution? Why or why not?
(3pts)
No.
d.) Will your answer be the same if the corporation is a close one? Why or why not? (3pts)
No my answer will not be the same if the corporation is a close one. Even mere dishonesty, any act that
maybe detrimental to any of the stockholder or corporation itself is a ground for dissolution in a close
corporation.
6. What are the requisites of a close corporation?
A. All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not
more than a specified number of persons, not exceeding twenty (20);
B. All the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted
by this Title; and
C. The corporation shall not list in any stock exchange or make any public offering of any of its stock of any
class.
7. What if 2/3 of the outstanding capital stock is owned by another corporation which is also a close
corporation, will it be a close corporation?
No, it will only be a close corporation if 2/3 of the voting stocks of a close corporation is also owned by a close
corporation. Stated otherwise, even if another corporation owns or controls 2/3 of the voting stocks of a close
Disclaimer:
corporation, the latter may still be considered as such close corporation if the corporation owning or controlling
the shares is also a close corporation. (Sec. 96, first par.)
8. Grounds for involuntary dissolution provided for in the Code.
A. Violation of any provision of the Code (Sec. 144);

B. In case of deadlock in a close corporation (Sec. 105);
C. In a close corporation, any acts of directors, officers or those in control of the corporation which is illegal or
fraudulent or dishonest or oppressive or unfairly prejudicial to the corporation or any stockholder or whenever
corporate assets are being misapplied or wasted (supra.)
CHAPTER 16: SPECIAL CORPORATION
1. All educational corporations must have a governing board of only either 5, 10 or 15 members.
False, only educational institutions organized as non-stock corporations must have such number of
governing board. Those organized as Stock Corporation may be within 5 to 15.
2. Who manages educational corporations?
General rule: its Board of Directors which must consist of Filipino citizens (Art. XIV, Sec. 4[4], 1987
Constitution)
Exception: (a) religious order; (b) mission boards; and (c) charitable organizations
3. Is a corporation sole required to file the articles of incorporation in the SEC?

Yes (Sec. 112, second par.)
Is it required to indicate its terms of execution?
No, because a corporation sole is supposed to exist in perpetuity. However, it does not mean that it shall
continue to exist forever, it merely means that it has the capacity of continuous existence during a particular
period until dissolved in accordance with law.
When will a corporation sole acquire juridical personality?
From and after filing with the SEC of its articles of incorporation along with other documents required by Sec.
112. Hence, approval of SEC is not required.
Does a corporation sole have the same power, rights and privileges to acquire and alienate properties just like
any other corporations?
Yes, except the power to sell or mortgage real property which must first secured with a court order to that
effect in the absence of manner or method of holding or alienating properties as provided for in the rules and
regulations of the religious corporation concerned (Sec. 113)
Since a corporation sole is consist of only one person, will the registration of the property in the name of the
corporation sole vest unto the head thereof the ownership of the property?
Disclaimer:
No, it will not vest unto the head, the head is acting merely as a guardian. Ownership devolves upon the
congregation or religious denomination (Roman Catholic Apostolic Adm. of Davao, Inc. v. Land Registration
Comm., et. al.)
A corporation sole may validly sell/transfer its old van for purposes of acquiring a new one without court
intervention
TRUE, In case of personal property, intervention of courts shall not be necessary.
4. All religious corporations commence to exist and are vested with juridical personality upon filing of the
Articles of Incorporation with SEC.
False. Corporation Sole commences to exist and are vested with juridical personality upon filing of the AOI
with the SEC. Religious societies however acquire juridical personality upon issuance of the Certificate of
Registration with the SEC.
CHAPTER 17: DISSOLUTION

1. What is dissolution?
It is the extinguishment of the corporate franchise and the termination of corporate existence.
General Rule: When a corporation is dissolved, it ceases to be a juridical entity and can no longer pursue
the business for which it is incorporated.
Exception: The Corporation will continue as a body corporate for another period of 3 years from the time it
is dissolved for the purpose of winding up its affairs and the liquidation of its assets.
2. Three modes of dissolution:

A. By the expiration of the corporate term;
B. By voluntary surrender of its primary franchise (voluntary dissolution); or
C. By the revocation of its corporate franchise (involuntary dissolution).
3. Assume that 3 of the 5-man member board reconstituted the AOI falsely adding new purposes not originally
included thereat such as lumber concession, cattle ranch, mining and agriculture, thereby misapplying and
misusing corporate funds and assets. May a stockholder file a dissolution proceedings against the corporation?
Why or why not? (3pts)
No. Dissolution of the corporation is warranted only when the acts of the directors constitute or threaten
a substantial injury to the public or such as to amount to a violation of the fundamental conditions of its
charter, or its conduct is characterized by obduracy or pertinacity in contempt of law.
4. Involuntary dissolution
NOTE:Since dissolution is tantamount to imposition of death penalty, relief of dissolution will only be awarded if
there is no other remedy available and it will not be allowed where the rights of the stockholders can be, or are,
protected in some other way (Republic v. Bisaya Land Trans. Co. Inc.)
5. May a court initiate dissolution of a corporation on its own?
Yes, involuntary dissolution is commenced through (a) verified complaint or (b) motu proprio
6. What are the grounds for involuntary dissolution?
Disclaimer:
a. Those provided for in Sec. 6, PD 902-A
b. Those provided for in other special laws
c. Corporation Code:
a) Violation of any provision (Sec. 144)

b) In case of deadlock in a close corporation (Sec. 105)
c) In a close corporation, any acts of directors, officers or those in control of the corporation which is
illegal or fraudulent or dishonest or oppressive or unfairly prejudicial to the corporation or any
stockholder or whenever corporate assets are being misapplied or wasted (supra.)
7. Who has jurisdiction to hear dissolution cases?

The courts and SEC have concurrent jurisdiction through the Special Commercial Courts (Sec. 5[m], RA 8799)
8. May a corporation ask for dissolution of the corporation when there is no prejudice to the general public?
Yes, in a close corporation, a petition for the dissolution of the corporation may be instituted by any one
individual shareholder on the ground even by mere dishonesty
NOTE: With the inclusion of the word "dishonest" in Sec. 105, it follows that mere dishonesty is a ground in a
close corporation.
9. Can minority stockholders dissolve a corporation?

General rule: No, they cannot use and demand its dissolution
Exception: Yes, if they were unable to obtain redress and protection of their rights within the corporation
(Financing Corp. of the Philippines v. Teodoro)
10. Methods of liquidation:
d) By the corporation itself through the Board of

Directors
e) By a trustee appointed by the corporation
f) By appointment of a receiver
By the corporation itself through the Board of Directors

If this method is resorted to, the board will only have a period of 3 years to finish its task of liquidation. Claims
for or against the corporate entity not filed within the period will become unenforceable as there exist no
corporate entity against which they can be enforced. Actions pending for or against the corporation when the 3
year period expires, are abated since after the period, the corporation ceases for all intents and purposes and
is no longer capable of suing or being sued.
By a trustee appointed by the corporation
Disclaimer:
If this method is used, the three year period limitation imposed by section 122 will not apply provided the
designation of the trustee is made within that period.
Should the corporation, therefore, finds it difficult to finish its liquidation, it may, at any time during the three
year period, convey all its assets and receivables to a trustee to prosecute and defend suits by or against the
corporation begun before the expiration of said period (National Abaca other Fibers Co. v. Pore)
The counsel who prosecuted and defended the interest of the corporation may be considered as a “trustee” at
least with respect to the matter in litigation only (Gelano v. CA)
By appointment of a receiver
A receiver may be appointed by the proper forum on petition or motu proprio upon the dissolution of the
corporation. If a receiver is appointed, the 3-year period fixed by law within which to complete the task of
liquidation will not likewise apply because the dissolved corporation is substituted by the receiver who may sue
or be sued even after that period.
When a corporation is dissolved and the liquidation of the assets is placed in the hands of receiver or
assignee, the period of 3 years prescribed by law is not applicable and the assignee may institute all actions
leading to the liquidation of the corporation even after the expiration of 3 years (Sumera v. Valencia)
If there is a trustee, assignee or liquidator, it can continue prosecuting suit even beyond the 3 year period fixed
by law because he becomes the legal owner of the rights, assets and properties conveyed to him (Board of
Liquidators v. Kalaw)
11. May a corporation that is already dissolved, transfer and assign its assets and properties to a new
corporation which will continue the business of the dissolved one?
Yes, provided all the stockholders gave their consent (Chung Ka Bio v. IAC)
During the three year period granted to a corporation to liquidate or wind up its affairs, the BOD is not normally
permitted to undertake any activity outside the usual liquidation of the corporation. There is, however, nothing
to prevent the stockholders from conveying their respective shareholdings toward the creation of a new
corporation to continue the business of the old. This is because winding up is the sole activity of the dissolved
corporation that does not intend to incorporate a new. If it does, however, it is not unlawful for the old board of
directors to negotiate and transfer the assets of the dissolved corporation to the new corporation intended to be
created as long as the stockholders have given their consent (Republic v. Marsman Development Company).
Winding up is the sole activity of a dissolved corporation that does not intend to incorporate anew. If it does,
however, it is not unlawful for the old board of directors to negotiate and transfer the assets of the dissolved
corporation to the new corporation intended to be created as long as the stockholders have given their consent
(Chung Ka Bio v. IAC)
CHAPTER 18: FOREIGN CORPORATION

1. Grounds for revocation of license (Foreign Corporation)
A. Failure to file its annual report or pay any fees as required by the Code;
B. Failure to appoint and maintain a resident agent in the Phils;
Disclaimer:
C. Failure, after change its resident agent or if his address, to submit to the SEC a statement of such
change;
D. Failure to submit to the SEC an authenticated copy of any amendment to its articles of incorporation or
by‐laws or if any articles of merger or consolidation within the time prescribe by the code.
E. Misrepresentation of any material matter in any application, report, affidavit or other document
submitted;
F. Failure to pay any and all taxes, impost, assessment or penalties, if any, lawful due to the Phil
Government or any of its agencies or political subdivisions;
G. Transacting business in the Phils. outside of the purpose for which such corporation is authorized under
its license;
H. Transacting business in the Phils. as agent of or acting for and in behalf of any foreign corporation or
entity not duly licensed to do business in the Phils;
I. Any other grounds as would render it unfit to transact business in the Phils.
2. Requirements and procedure for the withdrawal of Foreign Corporations:

A. Filing of a petition for withdrawal of license;
B. All claims which accrued in the Phils. have been paid, compromise or settled;
C. All taxes, imposts, assessment and penalties, if any, lawfully due to the Philippine Government or any of
its agencies or political subdivisions have been paid;
D. Publication of the petition for withdrawal once a week for 3 consecutive weeks in a newspaper of
general circulation in the Philippines; and
E. Issuance of certificate of withdrawal by the SEC.
3. Instances when a Foreign Corporation w/ no license to do business in the Philippines can sue:
A. The act or transaction involved is an “isolated transaction;” (Bulakhidas vs. Navarro);
B. The foreign corporation is not seeking to enforce any legal or contractual rights arising from, or growing
out of any business which it has transacted in the Philippines;
C. The purpose of the suit is to protect its trademark, trade name, reputation or goodwill. (Western
Equipment and Supply Co. vs. Reyes);
D. The suit is based on violation of the RPC; (Lechemise Lacoste vs. Fernandez);
E. The foreign corporation is merely defending a suit filed against it. (Time, Inc. vs. Reyes);
F. The party is estopped to challenge the personality of the corporation by entering into a contract with it.
(Communication Materials and Design, Inc vs.CA)
1. The appointment of a distributor/representative in the Philippines made by a foreign corporation necessarily

results to doing/transacting business in the country
False, the foreign corporation is not doing business in the Philippines if the representative is an independent
entity acting in his own name for in its account not for account of foreign corporation.
Disclaimer:

A. de Facto B. de Jure C. Corporation by Estoppel D. It Does Not Exist As A Corporation at All

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Corporation Law – Atty. Ruben C.

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

3. The declaration of stock dividends will generally have

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

4. A contract between a corporation and its president is

a. valid id not tainted with fraud and the contract

a. invalid since the power and authority is lodged to

2. Non-voting shares are not included in

a. removal of a member of the Board of

3. DKD INC.. declared cash dividends of P1.00 per

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

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

2. The Articles of Incorporation of DKD INC.. provides for a nine

3. DKD INC.. paid A CO., INC. 10% of the property dividend

a. Yes because it is a valid contractual arrangement between

4. All persons who assume to act as a corporation knowing it

a. only to the extent of their subscription to the capital stock of

5. A, B, C, D and E are the 5-man member of the Board of

Define or Differentiate the Following:

2. What are Ultra Vires Acts

3. Differentiate De Facto from De Jure Corporation

4. What are Unrestricted Retained Earnings?

5. What is Corporation by Estoppel

6. What is the Incorporation test?

7. Define Doctrine of Secondary Meaning

9. What is outstanding Capital Stock

10. What are Non-par value shares

11. What are preferred stocks

12. What is cumulative voting?

14. What are Treasury Shares?

15. What is the Doctrine of Limited Liability?

Disclaimer:16. What is Pre-emptive Rights and when can it be exercised?

4. What is the reason for the decrease of capital stock?

5. What is the Business Judgment Rule?

2. Advantages of the Corporate form of business

3. Requirements for the Amendments of AOI

4. Disadvantage of the Corporate form of business

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

6. Enumerate the Instrumentality Test

18. Provisions that cannot be amended

19. A close corporation may not be denied its pre-emptive right.

Explain why the following statements are CORRECT.

2. Labor performed or services rendered can be a

3. Minors can be a corporator

1. Members of the executive committee must be a member

4. Service of summons against a corporation must not be

5. Treasury shares may be issued lower than par value

6. Corporate extension may be made earlier than 5 years

7. Demand may be waived in a Derivative Suit.

8. Corporations persists to exist despite death, incapacity,

9. Cumulative voting is not allowed in a Non-Stock

10. A corporation may acquire its own shares.

11. Disloyal act of a director may be subject to ratification by a

2. If such an executive committee may be created, may it be

3. May the company validly engage in water transportation

4. May the company put up a 12 story building, occupy 3

5. If the company made Php30M surplus profits (unrestricted

6. If DKD INC.. earlier entered into a contract with Z CO., which

7. Assuming that Z CO., INC., (as stated in no. 6) is a de facto

8. If a stockholder is denied to exercise his pre-emptive right

9. In relation to item 8, may service of summons be validly

10. If the president DKD INC., issues a corporate check to pay

1. When is the effectivity of a by-laws?