RFBT 5- CORPORATION

Pre-test
1. Purely ultra vires acts of the officers of a corporation to invest corporate funds in another business or corporation may be ratified by
a. Majority vote of the board of directors’ present
b. The stockholders holding two-thirds of the voting power
c. The stockholders holding one-half of the voting power
d. Majority vote of all members of the Board
2. Subscriber X has a total 1,000 delinquent share at P10 par value, to be sold at public auction sale. Total amount recoverable includes:
Total amount of the delinquent shares, P10,000 and total expenses of the sale, P5,000. Who will be declared the highest bidder
among the following bidders in the public sale?
a. M who is willing to pay the P15,000 for 950 shares
b. P who is willing to pay the P15,000 for 900 shares
c. N who is willing to pay the P15,000 for 970 shares
d. O who is willing to pay the P15,000 for 920 shares
3. A doctrine in corporation wherein the corporation will be estopped from denying the agent’s authority if it knowingly permits one of
its officers or any other agent to act within the scope of an apparently authority and it holds him out to the public as possessing the
power to do those acts.
a. Doctrine of apparent authority
b. Trust fund doctrine
c. Doctrine of equity
d. Doctrine of estoppel
4. The following except one are the requisites for valid declaration and/or issuance of stock dividend:
a. Existence of unrestricted retained earnings
b. Existence or original and unissued shares
c. It is issued to increase the authorized capital
d. Dividend declarations is made by the Board of Directors and approved by 2/3 of the outstanding capital stock
5. Which of the following statement is correct concerning the similarities between a limited partnership and a corporation?
a. Both are allowed to have juridical existence by the consent of all the members
b. All corporate stockholders and all partners in a limited partnership have a limited liability
c. Botha are allowed statutorily to have a perpetual existence
d. Each is created under the statue and must file a copy of its certificate with the SEC
6. A corporate officer or directors cannot, take advantage for their personal benefit a business opportunity which the corporation is
financially able to undertake
a. Doctrine of corporate opportunity
b. Trust fund doctrine
c. Doctrine of limited capacity
d. Doctrine of corporate fiction
7. The authorized capital stock of a proposed corporation is P1,000,000 divided into 10,000 shares with a par value of P100 each. The
minimum amount of a subscription that must be paid is
a. 625 shares
b. 750 shares
c. 500 shares
d. 875 shares
8. At least two-thirds of all shares issued and outstanding is prescribed under the Corporation Law for this purpose
a. For the dissolution of a stock corporation
b. For adoption of by-laws
c. For declaration of cash dividends
d. To elect directors
9. If the remaining directors constitute a quorum, they can fill up the vacancy
a. In case of resignation of a director
b. If there is an increase in the number of directors
c. In case of removal of a director
d. In case of expiration of term of a director
10. The voting requirement needed in declaring cash or property dividend
a. 2/3 votes of the director plus a majority of the outstanding shares
b. Majority vote of the Board of Directors plus the vote of a majority of the outstanding shares
c. Majority vote of the Board of Directors
d. Majority vote of the Board of Directors plus the vote of 2/3 of the outstanding shares
11. The officer of employees of this corporation may be elected or appointed by the stockholders not by the board of directors?
a. Close corporation
b. Sole corporation
c. Open corporation
d. Eleemosynary
12. A corporation generally can issue both par value and no par value stock. These are all fixed in the Articles of Incorporation of the
corporation. Which of the following corporations may not be allowed to issue no par value shares?
a. Banks
b. Insurance companies
c. Trust companies
d. All the answers are correct
13. The members of the Board of Directors may be given compensation by any of the following acts, except
a. If approved by the Board of Directors if the salary given is not more than 10% of the net income before income tax during the
preceding year
b. If approved by the vote of the stockholders representing majority of the outstanding capital stock
c. If provided in the by-laws
d. If approved by the Board of Directors giving them a reasonable per diem
14. The right of a corporation to exist as juridical person during its term as stated in its Articles of Incorporation despite the death of any
of its stockholders is:
a. Right of redemption
b. Pre-emptive right
c. Right of existence
d. Right of succession
15. The following are the legal effects of merger or consolidation. Except one
a. All actions pending by or against the constituent’s corporations shall now be litigated by the consolidated corporations
b. The liabilities and obligations or claims against the constituent’s corporations may not be assumed by the consolidated
corporations because of the theory of separate legal entity
c. The consolidated corporation shall enjoy the same rights, powers, privileges and immunities and shall be subject to the same
duties and obligations of corporations established under the Corporation Law
d. All properties, interest, claims and the like pertaining to the constituent’s corporations shall now pertain to the surviving
corporation
16. The majority vote of its board of director and by the vote or written assent of the stockholders representing at least two-thirds of the
subscribed capital stock of the corporation is prescribed under the Corporation Law for this purpose.
a. To amend the articles of incorporation
b. To invest its corporate funds in any corporation or business, or for any purpose other than the main purpose for which it was
organized
c. For adoption of any by-law or by-laws
d. For declaration of stock dividends
17. To call a meeting for the purpose of removing a director of a corporation, the required votes of the stockholders is:
a. Majority of the outstanding capital stock
b. ¾ of the outstanding capital stock
c. Majority of the stockholders’ present
d. 2/3 of the outstanding capital stock
18. The following are ways of enforcing payment of unpaid subscription. Which is the exception?
a. Sale at public auction of delinquent stock
b. Denying delinquent stock cash dividend
c. Denying delinquent stock the right to vote and be voted upon
d. Filing a court action to recover unpaid subscription
19. At the annual meeting of ABC Corporation for the election of five directors, A, B, C, D, E, F and G were nominated. A, B, C, D and
E received the highest number of votes and proclaimed elected. F received ten votes less than E. Subsequently, E sold his shares to F,
who between E and F has the right to attend as director in the board meeting? The transfer of shares having been registered with the
corporation.
a. E is the director because his term is one year until his successor is elected and qualified
b. F is the director for he has acquired all the shares of E
c. Either of them shall be the director
d. Neither of them shall be the director
20. Under this doctrine, the corporation may exercise only powers expressly authorized by law or incident to its existence:
a. Doctrine of limited capacity
b. Trust fund doctrine
c. Doctrine of piercing the veil of corporate entity
d. Doctrine of separate juridical personality
21. If ABC Corporation will increase its authorized capital stock, the Corporation Code requires
a. The approval of the majority of the Board of Directors only
b. The approval of 2/3 of the shareholders of the outstanding capital stock as well as the approval of the SEC
c. The approval of the majority of the stockholders and the Board of Directors
d. The approval of the majority of the Board of Directors and approval of the shareholders holding 2/3 share of the outstanding
capital stock
22. Which of the following is not correct about compensation of director or trustee?
a. The law presumes that the service of the directors, as such director is free
b. The compensation other than per diems may be granted to directors by the vote of the majority of stockholders at a regular or
special stockholder’s meeting
c. If compensation is granted to director, the total yearly compensation of directors, as such directors shall not exceed 10% of the
net income before income tax of the corporation during the preceding year
d. The directors shall not receive any compensation, as such directors, except for reasonable per diems
23. The following except one are valid considerations in a subscription agreement relative to the stocks of a corporation
a. Previous corporate obligations
b. Outstanding shares in exchange for stocks in the event of reclassification or conversion
c. Intangible property
d. Promissory notes
24. In the matter of management of the corporation, this is supreme
a. Board of Directors
b. Chairman of the board of Directors
c. President
d. Stockholders
25. The corporation has a 13-member board. Three of the members of the Board have sold their shares while three others are abroad. To
have a quorum, this number is required
a. Five
b. Seven
c. Eight
d. Four
26. The following are the qualifications of corporate directors, except:
a. Must not be convicted by final judgment with imprisonment exceeding 6 years or violation of the Code committed within 5
 years prior to election
b. Ownership of shares must be recorded in the books of the corporation
c. Majority are citizens of the Philippines
d. Must own at least one share of stock
27. X sold all his shares in ABO Hotel Corporation to Y. X owns 99% of ABO Hotel Corporation. As the new owner, Y wanted a
reorganization of the hotel which is to include primarily the separation of all existing employees and hiring of new employees.
Which statement is most accurate?
a. Despite the change in shareholder, there is actually no change in the juridical entity and therefore existing employees cannot
automatically be considered separated
b. Y, as the new shareholder, has the right to retain only those employees who in his judgment are qualified
c. For as long as the existing employees are given their separation pay, they can be terminated
d. With the change in ownership, in effect there is a new juridical entity and therefore all employees are considered separated
28. As regards the corporate by-laws, which of the following is true?
a. To revoke the power delegated to the board to amend, repeal or adopt new by-laws. 2/3 of the outstanding capital stock
b. To delegate to the board of directors the power to amend, repeal or adopt new by-laws, majority of the outstanding capital stock
c. To adopt, amend or repeal 2/3 of the outstanding capital stock is needed
d. To amend, repeal or adopt new by-laws, majority of the outstanding capital stock
29. The following act requires meeting of stockholder whether regular or special meeting, except?
a. Amendment of articles of incorporation
b. Extension of corporate term
c. Decrease of capital stock
d. Increase of bonded indebtedness Answer: A
30. If par value are now treasury shares, the following rules are applicable except one. The exception is
a. They are entitled to dividends
b. They still have no voting rights as long as they remain in the treasury
c. They are not part of subscribed stock and not considered as outstanding share
d. They may again be disposed of for a reasonable price even below par Answer: C
31. The ratification of director’s or trustee’s contract with the corporation requires the vote of
a. 2/3 of outstanding capital stock of voting and non-voting shares or 2/3 of all the members
b. 2/3 of outstanding capital stock of voting shares or 2/3 of the members entitled to vote
c. Majority of outstanding capital stock of voting shares or majority of the members entitled to vote
d. Majority of outstanding capital stock of voting and non-voting shares or majority of all the members
32. Which of the following requires the approval of the majority of the outstanding capital stock?
a. Dissolution of the corporation
b. Investment of corporate funds in another business or corporation
c. Amendment of the articles of incorporation
d. Amendment, repeal or adoption of by-laws
33. The corporation has a twelve-member board. Two of the members of the Board have sold their shares while two others are abroad.
To have a quorum, this number is required:
a. 7 b. 4 c. 5 d. 3
34. Choose the situation which illustrates best the minimum requirement of the law to corporate formation:
a. Authorized capital (50,000); Subscribed capital (12,500); Paid-in capital (3,125)
b. Authorized capital (150,000); Subscribed capital (37,500); Paid-in capital (15,000)
c. Authorized capital (60,000); Subscribed capital (30,000); Paid-in capital (5,000)
d. Authorized capital (600,000); Subscribed capital (150,000); Paid-in capital (37,500)
35. A corporation cannot be an incorporator in the Philippines because only natural persons must become incorporators, except
a. Eleemosynary corporations
b. Ecclesiastical organizations incorporated under Philippine laws
c. International organizations operating in the Philippines
d. Cooperative as incorporator of a rural bank
36. The quorum required to elect directors:
a. Majority vote of the outstanding capital, voting and non-voting
b. 2/3 of outstanding capital voting
c. Majority vote of the outstanding capital voting
d. 2/3 of outstanding capital, voting and non-voting
37. Which of the following is not correct about management contract?
a. The maximum period of management contract as a rule is 5 years for any one term
b. Where stockholder or stockholders representing the same interest of both the managing and the managed corporations own or
control more than 1/3 of the total outstanding capital stock entitled to vote of the managing corporation, the management
contract must be approved by stockholders of the managed corporation owning at least 2/3 of the total outstanding capital stock
entitled to vote
c. Where a majority of the members of the board of directors of the managing corporation also constitute a majority of the
members of the board of directors of the managed corporation, then the management contract must be approved by the
stockholders of the managing corporation owning at least 2/3 of the total outstanding capital stock entitled to vote
d. Management contract shall have been approved by the board of directors and by stockholders owning at least the majority of
the outstanding capital stock, or by at least a majority of the members in the case of a non-stock corporation, of both the
managing and the managed corporation
38. Which of the following statement is correct?
a. Corporation aggregate is one established for religious purposes
b. Lay corporation is one established for purposes other than religious
c. Civil corporation is one established under the laws of the Philippines
d. Eleemosynary corporation is one established for business or profit Answer: B
39. The Corporation Code requires that:
a. Majority of the directors are citizens of the Philippines
b. All of the directors or trustees are residents of the Philippines
 c. All of the directors or trustees are citizens of the Philippines
d. At least a majority of the directors are residents of the Philippines
40. An officer of a corporation may hold two or more positions in the corporation but not as
a. Secretary and treasurer
b. President and secretary
c. President and muse
d. Vice president and secretary
41. When treasury shares are declared as dividends they are classified as
a. Property dividend
b. Liquidating dividend
c. Stock dividend
d. Cash dividend
42. Dividends which do not decrease the capital of the corporation
a. Liquidating dividend
b. Cash dividend
c. Stock dividend
d. Property dividend
43. A stock which has been issued by a corporation as fully paid up when in fact it is not, because it has been issued as a bonus or
otherwise, without any consideration, at all, or for less than part or for property, labor or service at an overvaluation.
a. Bonus stock
b. Watered stock
c. Promotion stock
d. Treasury stock
44. ABC Corporation has an authorized capital stock of P1 million divided into 50,000 common shares and 50,000 preferred shares. At
its inception, the corporation offered for subscription all the common shares. However only 40,000 shares were subscribed. Recently,
the directors thought of raising additional capital and decided to offer to the public all the authorized shares at their market value.
Would X, the stockholder of 4,000 shares have pre-emptive right to the remaining shares?
a. No, because pre-emptive right does not apply to unissued shares to be issued
b. Yes, because pre-emptive right applies only to the issuance of unissued shares
c. Yes, because all stockholders have the pre-emptive rights to all issues of shares of any class in proportion to their shareholdings
d. No, because he was waived this right when he subscribed to a part only of the issuance of shares
45. Which of the following issuance of stocks is not allowed under the Corporation Code of the Philippines?
a. “Metro Bank Corp.”, a banking institution issued a no par value common shares for P5 per share
b. “Yummy Corp”, engaged in restaurant business issued a no par value share for P10 per share
c. “Xerex Corp”, engaged in manufacturing business issued preferred stock for P1 par value
d. Malayan Insurance Corp.”, an insurance company issued a preferred stock for P4 par value
46. One of the following does not require stockholders’ approval
a. Change of corporate name
b. Declaration of cash dividend
c. Merger or consolidation
d. Investment of corporate funds outside main purpose of the corporation
47. The right given to the corporation itself to operate its business, with all the powers and attributes conferred upon it
a. Primary franchise
b. Pre-emptive right
c. Artificial being
d. Secondary franchise
48. Which of the following corporate acts wherein non-voting redeemable shares classified as such in the article of incorporation are not
entitled to vote?
a. Decrease of capital stock
b. Payment of bonded indebtedness
c. Creation of bonded indebtedness
d. Increase of capital stock
49. Which of the following statements pertaining to treasury shares is correct?
a. Treasury shares are entitled to vote
b. Treasury shares may not be disposed of at a price lower than the par or issued price even if it is reasonable and approved by the
Board of Directors
c. Treasury shares once disposed of, entitle the purchaser or transferee the right to dividends
d. Treasury shares are not part of issued capital stock
50. Singapore Airlines is a foreign airline company. Singapore Airlines tickets are sold in the Philippines though Philippine Airlines as
their agent. Singapore Airlines is not registered to do business as such with the Philippine SEC. Which statement is most accurate?
a. Singapore Airlines cannot sue and cannot be sued also
b. Singapore Airline can sue but cannot be sued
c. Singapore Airlines can be sued in Philippine Courts but cannot sue
d. Although unlicensed to do business in the Philippines, Singapore Airlines can sue before the Philippine Courts and can also be
sued