Law On Corporations Test Bank With Revised Corporate Code References - Compress

LAW ON CORPORATION
Regulatory Framework for Business Transactions
1. A corporation organized for religious purposes.

a. Corporation aggregate
b. Close corporation
c. Lay corporation
d. Ecclesiastical corporation
The correct answer is: Ecclesiastical corporation
CLASSIFICATIONS OF CORPORATION
1. Corporation aggregate – Consists of more than 1 member.
2. Corporation sole – Consists of only one member and his
successors.
3. Ecclesiastical corporation – Organized for religious purposes.
4. Lay corporation – Organized for other than religious purposes.
5. Eleemosynary corporation – Established for charitable purposes.
6. Civil corporation – Established for business/profit.
7. Domestic corporation – Incorporated under the laws of the
Philippines.
8. Foreign corporation – Formed, organized and exists under any
laws other than those of the Philippines.
9. De jure corporation – Corporation existing in fact and in law.
10. De facto corporation – Corporation existing in fact but not in
law.
11. Close corporation – One which is limited to selected persons.
12. Open corporation – One which is open to any person.
13. Parent or holding corporation – One which is so related to
another corporation that it has the power to elect the majority of
directors of other corporation.
14. Subsidiary corporation – One which is so related to another
corporation that the majority of its directors can be elected by other
corporation.
15. True corporation – Exists by statutory authority.
16. Quasi-corporation – One which exists without formal
legislative grant.
a. Corporation by prescription – One which have never
exercised corporate powers for an indefinite period without
interference on the part of the sovereign power and which, by
fiction of law, is given the status of corporation.
b. Corporation by estoppel – One which in reality is not a
corporation but is considered one for only those who are
precluded from asserting that it is not a corporation.
17. Public corporation – Formed or organized for the
government of a portion of the state.
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18. Private corporation – Formed for some private purpose,

benefit or end.
a. Government-owned / controlled corporations – Directly
created by special law or organized under the general
corporation law.
b. Quasi-public corporations – Accepted from state the grant
of a franchise or contract involving rendition/performance of
public duty/service but which are organized for profits.
2. A class of stock entitling the holder to vote on corporate matters, to receive

dividends after other claims and dividends have been paid (specially to
preferred shareholders), and to share in assets upon liquidation.
a. Common stock
b. Watered stock
c. Preferred stock
d. Treasury stock
The correct answer is: Common stock
3. A contract of the corporation with one or more of its directors or trustees

or officers.
a. Doctrine of corporate opportunity
b. Doctrine of double compensation
c. Doctrine of self-dealing board of directors.
d. Doctrine of trust fund
The correct answer is: Doctrine of self-dealing board of directors.

• Doctrine of corporate opportunity- if the director acquired a
business opportunity that should belong to the corporation, he must
account to the corporation for all the profits he obtained unless his act
was ratified by the stockholders representing at least two-thirds of the
outstanding capital stock
• Doctrine of double compensation
• Doctrine of self-dealing board of directors- A director of a
corporation holds a position of trust and as such, he owes a duty of
loyalty to his corporation. In case his interests conflict with those of
the corporation, he cannot sacrifice the latter to his own advantage
and benefit.
• Doctrine of trust fund- subscriptions to the capital stock of a
corporation constitute a fund to which the creditors have a right to
look for the satisfaction of their claims.
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4. A corporation created in strict or substantial conformity with the mandatory

statutory requirements for incorporation and the right of which to exist as
a corporation cannot be successfully attacked or questioned by any party
even in a direct proceeding for that purpose by the state.
a. De facto corporation
b. Government- owned or controlled corporation
c. Quasi- public corporation
d. De jure corporation
The correct answer is: De jure corporation

• De facto corporation- corporation where there exists a flaw in its
incorporation. Its existence cannot be inquired collaterally. Such
inquiry may be made by the Solicitor General in a quo warranto
proceeding.
• Government- owned or controlled corporation- These are
corporations created or established by a special charter or law in the
interest of the common good and subject to the test of economic
viability
• Quasi- public corporation- sometimes referred to as a public service
corporation, is a private corporation that is backed by a government
agency that has a public requirement to provide certain services.
• De jure corporation- organized in accordance with the requirements
of law
5. It constitutes charter or fundamental law of the corporation.

a. Articles of incorporation
b. By-laws
c. Rules, regulation and discipline
d. None of the above
The correct answer is: By-laws
Binding effect of by-laws

By-laws when valid, substantially the same force and effect as laws of
the corporation as have the provisions of its charter in so far as the
corporation, the persons within it is concerned. They are in effect written
into the charter and in this sense; they become part of the fundamental law
of the corporation. And the corporation, and its directors and officers are
bound by and must comply with them. Strangers, however, are not bound
to know by-laws which are merely provisions for the government of a
corporation and notice of them will not be presumed.
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6. It is an artificial being created by operation of law, having the right of

succession and the powers, attributes and properties expressly authorized
by law or incidental to its existence.
a. Sole Proprietorship
b. Corporation Sole
c. Corporation
d. Partnership
The correct answer is: Corporation

SEC. 2. Corporation Defined. – A corporation is an artificial being
created by operation of law, having the right of succession and the powers,
attributes, and properties expressly authorized by law or incidental to its
existence.
7. A corporation incorporated under the laws of the Philippines.

a. Corporation by prescription
b. Domestic Corporation
c. Foreign Corporation
d. Corporation by estoppel
The correct answer is: Domestic Corporation

• Corporation by prescription- a corporation that has existed for such
a time longer than the memory of man can remember, it is presumed
that, long time ago, it was given a charter and it should be deemed a
corporation in our legal system
• Domestic Corporation- a business entity that is organized,
registered, and existing under Philippine laws
• Foreign Corporation- corporation organized, authorized, or existing
under the laws of any foreign country. A foreign corporation is either
a resident - a corporation engaged in trade or business in the
Philippines, or a non-resident - a corporation not engaged in trade or
business in the Philippines
• Corporation by estoppel- All persons who assume to act as a
corporation knowing it to be without authority to do so shall be liable
as general partners for all debts, liabilities and damages incurred or
arising as a result thereof: Provided, however, That when any such
ostensible corporation is sued on any transaction entered by it as a
corporation or on any tort committed by it as such, it shall not be
allowed to use its lack of corporate personality as a defense. Anyone
who assumes an obligation to an ostensible corporation as such cannot
resist performance thereof on the ground that there was in fact no
corporation (SEC. 20. Corporation by Estoppel)
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8. A person shall be disqualified from being a director, trustee or officer of

any corporation if, within 5 years prior to the election or appointment as
such, the person was:
a. Found administratively liable for any offense involving fraudulent
acts.
b. Convicted by final judgment of an offense punishable by
imprisonment for a period exceeding 6 years.
c. Found by a foreign court or equivalent foreign regulatory authority
for acts, violations or misconduct.
d. All of the above.
The correct answer is: All of the above.

SEC. 26. Disqualification of Directors, Trustees or Officers. – A
person shall be disqualified from being a director, trustee or officer of any
corporation if, within five (5) years prior to the election or appointment as
such, the person was:
a. Convicted by final judgment:
1) Of an offense punishable by imprisonment for a period exceeding
six (6) years;
2) For violating this Code; and
3) For violating Republic Act No. 8799, otherwise known as <The
Securities Regulation Code=;
b. Found administratively liable for any offense involving fraudulent acts;
and
c. By a foreign court or equivalent foreign regulatory authority for acts,
violations or misconduct similar to those enumerated in paragraphs
(a) and (b) above.
The foregoing is without prejudice to qualifications or other

disqualifications, which the Commission, the primary regulatory agency, or
the Philippine Competition Commission may impose in its promotion of good
corporate governance or as a sanction in its administrative proceedings.
9. Subscriptions to the capital stock of a corporation constitute a fund to which

the creditors have a right to look for the satisfaction of their claims.
a. Doctrine of corporate opportunity
b. Trust funds doctrine
c. Doctrine of indivisibility
The correct answer is: Trust funds doctrine
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10. It is a body created by- laws and composed of not less than three
members of the board which, subject to the statutory limitations, has all
the authority of the board of directors to the extent provided in the by-
laws.
a. Officers committee
b. Trust committee
c. Board of committee
d. Executive committee
The correct answer is: Executive committee

SEC. 34. Executive, Management, and Other Special Committees.
If the bylaws so provide, the board may create an executive committee
composed of at least three (3) directors. Said committee may act, by
majority vote of all its members, on such specific matters within the
competence of the board, as may be delegated to it in the bylaws or by
majority vote of the board, except with respect to the: (a) approval of any
action for which shareholders’ approval is also required; (b) filling of
vacancies in the board; (c) amendment or repeal of bylaws or the adoption
of new bylaws; (d) amendment or repeal of any resolution of the board
which by its express terms is not amendable or repealable; and (e)
distribution of cash dividends to the shareholders.
11. It is one where no part of its income is distributable as dividends to its

members, trustees, or officers.
a. Non-stock corporation
b. Stock corporation
c. Corporation by prescription
d. Corporation aggregate
The correct answer is: Non- stock corporation
TITLE XI
NONSTOCK CORPORATION
SEC. 86. Definition. – For purposes of this Code and subject to its
provisions on dissolution, a nonstock corporation is one where no part of its
income is distributable as dividends to its members, trustees, or officers:
Provided, That any profit which a nonstock corporation may obtain incidental
to its operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation was
organized, subject to the provisions of this Title.
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12. Are shares of stock which have been issued and fully paid for, but
subsequently reacquired by the issuing corporation by purchase,
redemption, donation or through some other lawful means.
a. Redeemable share
b. Treasury stock
c. Convertible share
d. Founder`s share
The correct answer is: Treasury stock

SEC. 7. Founders’ Shares. – Founders’ shares may be given certain
rights and privileges not enjoyed by the owners of other stocks. Where the
exclusive right to vote and be voted for in the election of directors is granted,
it must be for a limited period not to exceed five (5) years from the date of
incorporation: Provided, That such exclusive right shall not be allowed if its
exercise will violate Commonwealth Act No. 108, otherwise known as the <Anti-
Dummy Law=; Republic Act No. 7042, otherwise known as the “Foreign
Investments Act of 1991=; and other pertinent laws.
SEC. 8. Redeemable Shares. – Redeemable shares may be issued by
the corporation when expressly provided in the articles of incorporation. They
are shares which may be purchased by the corporation from the holders of such
shares upon the expiration of a fixed period, regardless of the existence of
unrestricted retained earnings in the books of the corporation, and upon such
other terms and conditions stated in the articles of incorporation and the
certificate of stock representing the shares, subject to rules and regulations
issued by the Commission.
SEC. 9. Treasury shares. – Treasury shares are shares of stock which
have been issued and fully paid for, but subsequently reacquired by the issuing
corporation through purchase, redemption, donation, or some other lawful
means. Such shares may again be disposed of for a reasonable price fixed by
the board of directors.
13. A written contract to purchase newly issued shares of stock.

a. Purchase contract
b. Sales contract
c. Redemption contract
d. Subscription contract
The correct answer is: Subscription contract

SEC. 59. Subscription Contract. – Any contract for the acquisition of
unissued stock in an existing corporation or a corporation still to be formed
shall be deemed a subscription within the meaning of this Title,
notwithstanding the fact that the parties refer to it as a purchase or some
other contract.
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14. Is the book which records the names and addresses of all stockholders
arranged alphabetically, the installment paid and unpaid on all stock for
which subscription has been made, and the date of payment thereof.
a. Ledgers
b. Journals
c. Check book
d. Stock and transfer book
The correct answer is: Stock and transfer book
SEC. 73. Books to be Kept; Stock Transfer Agent.

…Stock corporations must also keep a stock and transfer book, which
shall contain a record of all stocks in the names of the stockholders
alphabetically arranged; the installments paid and unpaid on all stocks for
which subscription has been made, and the date of payment of any
installment; a statement of every alienation, sale or transfer of stock made,
the date thereof, by and to whom made; and such other entries as the
bylaws may prescribe. The stock and transfer book shall be kept in the
principal office of the corporation or in the office of its stock transfer agent
and shall be open for inspection by any director or stockholder of the
corporation at reasonable hours on business days.
15. Refers to the continuation of a corporation`s legal status despite

changes in ownership or management.
a. Succession
b. Dissolution
c. Inheritance
d. Liquidation
The correct answer is: Succession

In corporation law, right of succession also means "continuity of
existence." This means that, despite the death, incapacity, replacement or
civil interdiction of the persons composing it, the corporation is not affected
and its business operations continue uninterrupted as long as its juridical
personality exists.
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16. It is a person who, apart from shareholdings and fees received from the
corporation, is independent of management and free from any business or
other relationship which could, or could reasonably be perceived to
materially interfere with the exercise of independent judgement in carrying
out the responsibilities as a director.
a. Dependent director
b. Independent director
c. Authorized director
d. Outstanding director
The correct answer is: Independent director

SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term.
…An independent director is a person who, apart from shareholdings
and fees received from the corporation, is independent of management
and free from any business or other relationship which could, or could
reasonably be perceived to materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a director.
Independent directors must be elected by the shareholders present or
entitled to vote in absentia during the election of directors. Independent
directors shall be subject to rules and regulations governing their
qualifications, disqualifications, voting requirements, duration of term and
term limit, maximum number of board memberships and other requirements
that the Commission will prescribe to strengthen their independence and
align with international best practices.
17. The following are the characteristics of a corporation, except?

a. It has the powers, attributes and properties expressly authorized
by Law or incident to its existence
b. It is an artificial being
c. It has the right of succession
d. Created by meeting of the minds
The correct answer is: Created by meeting of the minds

SEC. 2. Corporation Defined. – A corporation is an artificial being
created by operation of law, having the right of succession and the powers,
attributes, and properties expressly authorized by law or incidental to its
existence.
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18. It is the preferential right of all stockholders of a stock corporation to

subscribe to all issues or disposition of shares of any class, in proportion to
their respective shareholdings.
a. Right to vote
b. Voting right
c. Pre-emptive right
d. Appraisal right
The correct answer is: Pre-emptive right

SEC. 38. Power to Deny Preemptive Right. – All stockholders of a
stock corporation shall enjoy preemptive right to subscribe to all issues or
disposition of shares of any class, in proportion to their respective
shareholdings, unless such right is denied by the articles of incorporation or
an amendment thereto: Provided, That such preemptive right shall not
extend to shares issued in compliance with laws requiring stock offerings or
minimum stock ownership by the public; or to shares issued in good faith
with the approval of the stockholders representing two-thirds (2/3) of the
outstanding capital stock, in exchange for property needed for corporate
purposes or in payment of a previously contracted debt.
19. It means that a stockholder who dissented and voted against the
proposed corporate action, may choose to get out of the corporation by
demanding payment of the fair market value of his shares.
a. Stockholders right
b. Right to liquidation
d. Appraisal right
The correct answer is: Appraisal right

SEC. 81. How Right is Exercised. – The dissenting stockholder who
votes against a proposed corporate action may exercise the right of appraisal
by making a written demand on the corporation for the payment of the fair
value of shares held within thirty (30) days from the date on which the vote
was taken: Provided, That failure to make the demand within such period shall
be deemed a waiver of the appraisal right. If the proposed corporate action is
implemented, the corporation shall pay the stockholder, upon surrender of the
certificate or certificates of stock representing the stockholder’s shares, the fair
value thereof as of the day before the vote was taken, excluding any
appreciation or depreciation in anticipation of such corporate action.
If, within sixty (60) days from the approval of the corporate action by
the stockholders, the withdrawing stockholder and the corporation cannot agree
on the fair value of the shares, it shall be determined and appraised by three
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(3) disinterested persons, one of whom shall be named by the stockholder,

another by the corporation, and the third by the two (2) thus chosen. The
findings of the majority of the appraisers shall be final, and their award shall be
paid by the corporation within thirty (30) days after such award is made:
Provided, That no payment shall be made to any dissenting stockholder unless
the corporation has unrestricted retained earnings in its books to cover such
payment: Provided, further, That upon payment by the corporation of the
agreed or awarded price, the stockholder shall forthwith transfer the shares to
the corporation.
20. The requisites for a contract of the corporation with one or more of its
directors or trustees of officers to be validated the following except:
a. That in case of an officer, the contract has been previously
authorized by the stockholders.
b. That the vote of such director or trustee was not necessary for the
approval of the contract.
c. That the presence of such director or trustee in the board meeting
in which the contract was approved was not necessary to
constitute a quorum for such meeting.
d. That the contract is fair and reasonable under the circumstances.
The correct answer is: That in case of an officer, the contract has been
previously authorized by the stockholders.
SEC. 31. Dealings of Directors, Trustees or Officers with the
Corporation. – A contract of the corporation with (1) one or more of its
directors, trustees, officers or their spouses and relatives within the fourth
civil degree of consanguinity or affinity is voidable, at the option of such
corporation, unless all the following conditions are present:
a. The presence of such director or trustee in the board meeting in which
the contract was approved was not necessary to constitute a quorum
for such meeting;
b. The vote of such director or trustee was not necessary for the approval
of the contract;
c. The contract is fair and reasonable under the circumstances;
d. In case of corporations vested with public interest, material contracts
are approved by at least two-thirds (2/3) of the entire membership of
the board, with at least a majority of the independent directors voting
to approve the material contract; and
e. In case of an officer, the contract has been previously authorized by
the board of directors.
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21. The following are the qualifications of a board of directors/trustees,

except:
a. The director or trustee must be legal age.
b. The director or trustee must be capacitated.
c. for a stock corporation, ownership of at least 1 share of the capital
stock of the corporation in his own name. For a non-stock
corporation, only members of the corporation can be elected
d. Majority of the board of directors or trustees must be citizens of
the Philippines.
The correct answer is: Majority of the board of directors or trustees must be
citizens of the Philippines.
22. Stocks issued for a consideration less than the par or issued price
thereof or any other than cash valued in excess of its fair value.
a. Optional stock
b. Preferred stock
c. Watered stock
d. Founder`s stock
The correct answer is: Watered stock

SEC. 64. Liability of Directors for Watered Stocks. – A director or
officer of a corporation who: (a) consents to the issuance of stocks for a
consideration less than its par or issued value; (b) consents to the issuance
of stocks for a consideration other than cash, valued in excess of its fair
value; or (c) having knowledge of the insufficient consideration, does not
file a written objection with the corporate secretary, shall be liable to the
corporation or its creditors, solidarily with the stockholder concerned for the
difference between the value received at the time of issuance of the stock
and the par or issued value of the same.
23. The following are instances when a corporation may acquire its own
shares, except:
a. To acquire founder`s shares.
b. To pay dissenting or withdrawing stockholders entitled to payment
for their shares under the provision of the corporation code.
c. To collect or compromise an indebtedness to the corporation,
arising out of unpaid subscription, in a delinquency sale, and to
purchase delinquent shares sold during said sale.
d. To eliminate fractional shares arising out of stock dividends.
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The correct answer is: To acquire founder`s shares.

SEC. 40. Power to Acquire Own Shares. – Provided that the corporation
has unrestricted retained earnings in its books to cover the shares to be
purchased or acquired, a stock corporation shall have the power to purchase
or acquire its own shares for a legitimate corporate purpose or purposes,
including the following cases:
a. To eliminate fractional shares arising out of stock dividends;
b. To collect or compromise an indebtedness to the corporation, arising
out of unpaid subscription, in a delinquency sale, and to purchase
delinquent shares sold during said sale; and
c. To pay dissenting or withdrawing stockholders entitled to payment for
their shares under the provisions of this Code.
24. The factors for the application of the doctrine of piercing the corporate
veil are the following except:
a. Stock ownership by one or common ownership of both corporation
b. The manner of keeping corporate books and records
c. Identity of directors and officers
d. Identity of the stockholders
The correct answer is: Identity of the stockholders
25. The following are limitations on no par value shares, except;

a. The entire consideration for its issuance constitutes capital so that
no part of it should be distributed as dividends.
b. It is deemed fully paid and non-assessable
c. It can be issued for a consideration of at least P 3.00
d. It cannot be issued as preferred shares
The correct answer is: It can be issued for a consideration of at least P 3.00
SEC. 6. Classification of Shares
…Shares of capital stock issued without par value shall be deemed fully
paid and nonassessable and the holder of such shares shall not be liable to
the corporation or to its creditors in respect thereto: Provided, That no-par
value shares must be issued for a consideration of at least Five pesos (P5.00)
per share: Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall be treated as capital and shall
not be available for distribution as dividends…
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26. The following are the requirements before one can qualify as a de facto
corporation, except:
a. The existence of a valid law under which it may be incorporate
b. An attempt in good faith to incorporate
c. None of the above
d. Assumption of corporate powers
The correct answer is: None of the above
27. The following are the limitations of an executive committee, except:

a. Amendment or repeal of by-laws or the adoption of new by-laws.
b. Approval of any action for which shareholders’ approval is also
required.
c. Filling of vacancies in the board.
d. Amendment or repeal of any resolution of the board
The correct answer is: Amendment or repeal of any resolution of the board
SEC. 34. Executive, Management, and Other Special Committees. –
majority vote of the board, except with respect to the:
a. approval of any action for which shareholders’ approval is also
required;
b. filling of vacancies in the board;
c. amendment or repeal of bylaws or the adoption of new bylaws;
d. amendment or repeal of any resolution of the board which by its
express terms is not amendable or repealable; and
e. distribution of cash dividends to the shareholders.
The board of directors may create special committees of temporary or
permanent nature and determine the members’ term, composition,
compensation, powers, and responsibilities
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28. The following are limitations in the amendment of the articles of

incorporation, except:
a. The amendment must be for legitimate purposes and must not be
contrary to the corporation code and special laws.
b. The amendment requires the vote or written assent of
stockholders representing majority of the outstanding capital
stock or majority members if it be a non-stock corporation.
c. The original and amended articles together shall contain all
provision required by law to be set out in the articles of
incorporation.
d. The amendment must be approved by a majority of the board of
directors or board of trustees.
The correct answer is: The amendment requires the vote or written assent
of stockholders representing majority of the outstanding capital stock or
majority members if it be a non-stock corporation.
SEC. 15. Amendment of Articles of Incorporation. – Unless

otherwise prescribed by this Code or by special law, and for legitimate
purposes, any provision or matter stated in the articles of incorporation may
be amended by a majority vote of the board of directors or trustees and the
vote or written assent of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, without prejudice to the appraisal
right of dissenting stockholders in accordance with the provisions of this
Code. The articles of incorporation of a nonstock corporation may be
amended by the vote or written assent of majority of the trustees and at
least two-thirds (2/3) of the members.
The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Amendments
to the articles shall be indicated by underscoring the change or changes
made, and a copy thereof duly certified under oath by the corporate
secretary and a majority of the directors or trustees, with a statement that
the amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the Commission.
The amendments shall take effect upon their approval by the
Commission or from the date of filing with the said Commission if not acted
upon within six (6) months from the date of filing for a cause not attributable
to the corporation.
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29. The following are the requisites for the exercise of a corporate power to
invest corporate funds in another corporation, except:
a. Ratification by the stockholders representing at least 2/3 of the
outstanding capital stock, or by at least 2/3of the members in the
case of non-stock corporations, at a stockholder`s or member`s
meeting duly called for the purpose.
b. Written notice of the proposed investment and the time and place
of the meeting shall be addressed to each stockholders or member
by mail or served personally.
c. Approval of the majority of the board of directors or trustees.
d. Any dissenting stockholders shall have pre-emptive right.
The correct answer is: Any dissenting stockholders shall have pre -emptive right.
30. They may be purchased or taken up by the corporation upon the

expiration of a fixed period, regardless of the existence of unrestricted
retained earnings in the books of the corporation, and upon such other
terms and conditions must also be stated in the certificate of stock-
representing said shares.
a. Par Value stock
b. Redeemable stock
c. Class A stock
d. No par value stock
The correct answer is: Redeemable stock
31. The purposes of proxies are the following, except:

a. It assures the presence of all.
b. For convenience.
c. It secures voting control.
d. It enables those who do not wish to attend the meeting to protect
their interest.
The correct answer is: It assures the presence of all.
32. The retained earnings which have not been reserved or set aside by the
board of directors for some corporate purpose.
a. Unrestricted retained earnings
b. Restricted retained earnings
c. None of the Above.
d. All of the above
The correct answer is: Unrestricted retained earnings
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33. The following are the requisites of the corporate power to extend or
shorten corporate term:
I. Approval by a 2/3vote of the board of directors or trustees.
II. Ratification by the stockholders representing at least 2/3 of the
outstanding capital stock or by at least 2/3 of the members in case
of non-stock corporations.
a. Only I is true
b. Only II is true
c. Both are false
d. Both are true
The correct answer is: Only II is true

SEC. 36. Power to Extend or Shorten Corporate Term. – A private
corporation may extend or shorten its term as stated in the articles of
incorporation when approved by a majority vote of the board of directors or
trustees, and ratified at a meeting by the stockholders or members
representing at least two-thirds (2/3) of the outstanding capital stock or of
its members. Written notice of the proposed action and the time and place
of the meeting shall be sent to stockholders or members at their respective
place of residence as shown in the books of the corporation, and must either
be deposited to the addressee in the post office with postage prepaid, served
personally, or when allowed in the bylaws or done with the consent of the
stockholder, sent electronically in accordance with the rules and regulations
of the Commission on the use of electronic data messages. In case of
extension of corporate term, a dissenting stockholder may exercise the right
of appraisal under the conditions provided in this Code.
34. This is the maximum amount fixed in the articles of incorporation that
may be subscribed and paid by the stockholders of the corporation.
a. Outstanding capital stock
b. Paid-up capital stock
c. Authorized capital stock
The correct answer is: Authorized capital stock
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LAW ON CORPORATION
35. The requirements for board meeting are the following, except:
a. Presence of the required quorum
b. Meeting of the directors or trustees duly assembled as a board
c. Decision of the majority of all the members of the board
d. Meeting at the place, time, and manner provided in the by-laws.
The correct answer is: Decision of the majority of all the members of the
board
36. The requirements for a valid proxy are the following, except:
a. It shall be signed by the corporate secretary
b. It shall be in writing
c. Unless otherwise provided in the proxy, it shall be valid only for
the meeting which it is intended.
d. It shall be filed before the scheduled meeting with the corporate
secretary
The correct answer is: It shall be signed by the corporate secretary

SEC. 57. Manner of Voting; Proxies.
…Proxies shall be in writing, signed and filed, by the stockholder or
member, in any form authorized in the bylaws and received by the corporate
secretary within a reasonable time before the scheduled meeting. Unless
otherwise provided in the proxy form, it shall be valid only for the meeting
for which it is intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time.
37. The stockholders or members mentioned in the articles of incorporation

as originally forming and composing the corporation and who are
signatories thereof.
a. Incorporators
b. Corporators
c. Board of directors
d. Board of trustees
The correct answer is: Incorporators

SEC. 5. Corporators and Incorporators, Stockholders and Members. –
Corporators are those who compose a corporation, whether as stockholders or
shareholders in a stock corporation or as members in a nonstock corporation.
Incorporators are those stockholders or members mentioned in the articles of
incorporation as originally forming and composing the corporation and who are
signaories thereof.
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LAW ON CORPORATION
38. Where a stockholder or stockholders representing the same interest of

both managing and the manage corporations own or control more than 1/3
of the total outstanding capital stock entitled to vote of the managing
corporation.
a. Interlocking board of directors
b. Interlocking members
d. Interlocking Stockholders
The correct answer is: Interlocking Stockholders

SEC. 32. Contracts Between Corporations with Interlocking
Directors. – Except in cases of fraud, and provided the contract is fair and
reasonable under the circumstances, a contract between two (2) or more
corporations having interlocking directors shall not be invalidated on that
ground alone: Provided, That if the interest of the interlocking director in
one (1) corporation is substantial and the interest in the other corporation
or corporations is merely nominal, the contract shall be subject to the
provisions of the preceding section insofar as the latter corporation or
corporations are concerned.
Stockholdings exceeding twenty percent (20%) of the outstanding
capital stock shall be considered substantial for purposes of interlocking
directors.
39. For a valid transfer of stocks, there must be strict compliance with the
mode of transfer prescribed by law. The following are the requirements,
except;
a. To be valid against third parties, the transfer must be recorded in
the SEC.
b. The certificate must be endorsed by the owner or his attorney-in-
fact or other persons legally authorized to make the transfer.
c. There must be delivery of the stock certificate.
d. To be valid against third parties, the transfer must be recorded in
the books of the corporation.
The correct answer is: To be valid against third parties, the transfer must
be recorded in the SEC.
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LAW ON CORPORATION
40. When the vacancy prevents the remaining directors from constituting a
quorum and emergency action is required to prevent grave, substantial,
and irreparable loss or damage to the corporation, the vacancy may be
temporarily filled from among the officers of the corporation by unanimous
vote of the remaining directors or trustees.
a. Emergency board of director
b. Interim board of director
c. Provisional board of director
d. Temporary board of director
The correct answer is: Emergency board of director
41. The requirements for the sale of other disposition of assets are the
following except;
a. Any dissenting stockholders may exercise his appraisal right.
b. Ratification by the vote of the stockholders representing at least
2/3 of the outstanding capital stock, or in case of non-stock
corporation, by the of at least to 2/3 of the members.
c. Approval by the majority vote of its board of directors or trustees.
d. SEC approval is required.
The correct answer is: SEC approval is required.
a. Voting right
b. Appraisal right
d. Management right
The correct answer is: Voting right
43. Revocation of proxy may be through the following, except:

a. Formal notice;
b. None of the above
c. Verbal communication;
d. Conduct
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LAW ON CORPORATION
The correct answer is: To acquire founder`s shares.

SEC. 40. Power to Acquire Own Shares. – Provided that the corporation
has unrestricted retained earnings in its books to cover the shares to be
purchased or acquired, a stock corporation shall have the power to purchase
or acquire its own shares for a legitimate corporate purpose or purposes,
including the following cases:
a. To eliminate fractional shares arising out of stock dividends;
b. To collect or compromise an indebtedness to the corporation, arising
out of unpaid subscription, in a delinquency sale, and to purchase
delinquent shares sold during said sale; and
c. To pay dissenting or withdrawing stockholders entitled to payment for
their shares under the provisions of this Code.
24. The factors for the application of the doctrine of piercing the corporate
veil are the following except:
a. Stock ownership by one or common ownership of both corporation
b. The manner of keeping corporate books and records
c. Identity of directors and officers
d. Identity of the stockholders
0 1
The correct answer is: Identity of the stockholders
25. The following are limitations on no par value shares, except;

a. The entire consideration for its issuance constitutes capital so that
no part of it should be distributed as dividends.
b. It is deemed fully paid and non-assessable
c. It can be issued for a consideration of at least P 3.00
d. It cannot be issued as preferred shares
The correct answer is: It can be issued for a consideration of at least P 3.00
SEC. 6. Classification of Shares
…Shares of capital stock issued without par value shall be deemed fully
paid and nonassessable and the holder of such shares shall not be liable to
the corporation or to its creditors in respect thereto: Provided, That no-par
value shares must be issued for a consideration of at least Five pesos (P5.00)
per share: Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall be treated as capital and shall
not be available for distribution as dividends…
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LAW ON CORPORATION
26. The following are the requirements before one can qualify as a de facto
corporation, except:
a. The existence of a valid law under which it may be incorporate
b. An attempt in good faith to incorporate
d. Assumption of corporate powers
27. The following are the limitations of an executive committee, except:

a. Amendment or repeal of by-laws or the adoption of new by-laws.
b. Approval of any action for which shareholders’ approval is also
required.
c. Filling of vacancies in the board.
d. Amendment or repeal of any resolution of the board
The correct answer is: Amendment or repeal of any resolution of the board
SEC. 34. Executive, Management, and Other Special Committees. –
majority vote of the board, except with respect to the:
a. approval of any action for which shareholders’ approval is also
required;
b. filling of vacancies in the board;
c. amendment or repeal of bylaws or the adoption of new bylaws;
d. amendment or repeal of any resolution of the board which by its
express terms is not amendable or repealable; and
e. distribution of cash dividends to the shareholders.
The board of directors may create special committees of temporary or
permanent nature and determine the members’ term, composition,
compensation, powers, and responsibilities
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LAW ON CORPORATION
Regulatory 0Framework
1 for Business Transactions
28. The following are limitations in the amendment of the articles of

incorporation, except:
a. The amendment must be for legitimate purposes and must not be
contrary to the corporation code and special laws.
b. The amendment requires the vote or written assent of
stockholders representing majority of the outstanding capital
stock or majority members if it be a non-stock corporation.
c. The original and amended articles together shall contain all
provision required by law to be set out in the articles of
incorporation.
d. The amendment must be approved by a majority of the board of
directors or board of trustees.
The correct answer is: The amendment requires the vote or written assent
of stockholders representing majority of the outstanding capital stock or
majority members if it be a non-stock corporation.
SEC. 15. Amendment of Articles of Incorporation. – Unless

otherwise prescribed by this Code or by special law, and for legitimate
purposes, any provision or matter stated in the articles of incorporation may
be amended by a majority vote of the board of directors or trustees and the
vote or written assent of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock, without prejudice to the appraisal
right of dissenting stockholders in accordance with the provisions of this
Code. The articles of incorporation of a nonstock corporation may be
amended by the vote or written assent of majority of the trustees and at
least two-thirds (2/3) of the members.
The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Amendments
to the articles shall be indicated by underscoring the change or changes
made, and a copy thereof duly certified under oath by the corporate
secretary and a majority of the directors or trustees, with a statement that
the amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the Commission.
The amendments shall take effect upon their approval by the
Commission or from the date of filing with the said Commission if not acted
upon within six (6) months from the date of filing for a cause not attributable
to the corporation.
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LAW ON CORPORATION
29. The following are the requisites for the exercise of a corporate power to
invest corporate funds in another corporation, except:
a. Ratification by the stockholders representing at least 2/3 of the
outstanding capital stock, or by at least 2/3of the members in the
case of non-stock corporations, at a stockholder`s or member`s
meeting duly called for the purpose.
b. Written notice of the proposed investment and the time and place
of the meeting shall be addressed to each stockholders or member
by mail or served personally.
c. Approval of the majority of the board of directors or trustees.
d. Any dissenting stockholders shall have pre-emptive right.
The correct answer is: Any dissenting stockholders shall have pre -emptive right.
30. They may be purchased0 or taken 1 up by the corporation upon the

expiration of a fixed period, regardless of the existence of unrestricted
retained earnings in the books of the corporation, and upon such other
terms and conditions must also be stated in the certificate of stock-
representing said shares.
a. Par Value stock
b. Redeemable stock
c. Class A stock
d. No par value stock
The correct answer is: Redeemable stock
31. The purposes of proxies are the following, except:

a. It assures the presence of all.
b. For convenience.
c. It secures voting control.
d. It enables those who do not wish to attend the meeting to protect
their interest.
The correct answer is: It assures the presence of all.
32. The retained earnings which have not been reserved or set aside by the
board of directors for some corporate purpose.
a. Unrestricted retained earnings
b. Restricted retained earnings
c. None of the Above.
d. All of the above
The correct answer is: Unrestricted retained earnings
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LAW ON CORPORATION
33. The following are the requisites of the corporate power to extend or
shorten corporate term:
I. Approval by a 2/3vote of the board of directors or trustees.
II. Ratification by the stockholders representing at least 2/3 of the
outstanding capital stock or by at least 2/3 of the members in case
of non-stock corporations.
a. Only I is true
b. Only II is true
c. Both are false
d. Both are true

SEC. 36. Power to Extend or Shorten Corporate Term. – A private
corporation may extend or shorten its term as stated in the articles of
incorporation when approved by a majority vote of the board of directors or
trustees, and ratified at a meeting by the stockholders or members
representing at least two-thirds (2/3) of the outstanding capital stock or of
its members. Written notice of the proposed action and the time and place
of the meeting shall be sent to stockholders or members at their respective
place of residence as shown in the books of the corporation, and must either
be deposited to the addressee in the post office with postage prepaid, served
personally, or when allowed in the bylaws or done with the consent of the
stockholder, sent electronically in accordance with the rules and regulations
of the Commission on the use of electronic data messages. In case of
extension of corporate term, a dissenting stockholder may exercise the right
of appraisal under the conditions provided in this Code.
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34. This is the maximum amount fixed in the articles of incorporation that
may be subscribed and paid by the stockholders of the corporation.
a. Outstanding capital stock
b. Paid-up capital stock
c. Authorized capital stock
The correct answer is: Authorized capital stock
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LAW ON CORPORATION
35. The requirements for board meeting are the following, except:
a. Presence of the required quorum
b. Meeting of the directors or trustees duly assembled as a board
c. Decision of the majority of all the members of the board
d. Meeting at the place, time, and manner provided in the by-laws.
The correct answer is: Decision of the majority of all the members of the
board
36. The requirements for a valid proxy are the following, except:
a. It shall be signed by the corporate secretary
b. It shall be in writing
c. Unless otherwise provided in the proxy, it shall be valid only for
the meeting which it is intended.
d. It shall be filed before the scheduled meeting with the corporate
secretary
The correct answer is: It shall be signed by the corporate secretary

SEC. 57. Manner of Voting; Proxies.
…Proxies shall be in writing, signed and filed, by the stockholder or
member, in any form authorized in the bylaws and received by the corporate
secretary within a reasonable time before the scheduled meeting. Unless
otherwise provided in the proxy form, it shall be valid only for the meeting
for which it is intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time.
37. The stockholders or members mentioned in the articles of incorporation

as originally forming and composing the corporation and who are
signatories thereof.
a. Incorporators
b. Corporators
c. Board of directors
d. Board of trustees
The correct answer is: Incorporators

SEC. 5. Corporators and Incorporators, Stockholders and Members. –
Corporators are those who compose a corporation, whether as stockholders or
shareholders in a stock corporation or as members in a nonstock corporation.
Incorporators are those stockholders or members mentioned in the articles of
incorporation as originally forming and composing the corporation and who are
signaories thereof.
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LAW ON CORPORATION
38. Where a stockholder or stockholders representing the same interest of

both managing and the manage corporations own or control more than 1/3
of the total outstanding capital stock entitled to vote of the managing
corporation.
a. Interlocking board of directors
b. Interlocking members
d. Interlocking Stockholders
0 1
The correct answer is: Interlocking Stockholders

SEC. 32. Contracts Between Corporations with Interlocking
Directors. – Except in cases of fraud, and provided the contract is fair and
reasonable under the circumstances, a contract between two (2) or more
corporations having interlocking directors shall not be invalidated on that
ground alone: Provided, That if the interest of the interlocking director in
one (1) corporation is substantial and the interest in the other corporation
or corporations is merely nominal, the contract shall be subject to the
provisions of the preceding section insofar as the latter corporation or
corporations are concerned.
Stockholdings exceeding twenty percent (20%) of the outstanding
capital stock shall be considered substantial for purposes of interlocking
directors.
39. For a valid transfer of stocks, there must be strict compliance with the
mode of transfer prescribed by law. The following are the requirements,
except;
a. To be valid against third parties, the transfer must be recorded in
the SEC.
b. The certificate must be endorsed by the owner or his attorney-in-
fact or other persons legally authorized to make the transfer.
c. There must be delivery of the stock certificate.
d. To be valid against third parties, the transfer must be recorded in
the books of the corporation.
The correct answer is: To be valid against third parties, the transfer must
be recorded in the SEC.
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LAW ON CORPORATION
40. When the vacancy prevents the remaining directors from constituting a
quorum and emergency action is required to prevent grave, substantial,
and irreparable loss or damage to the corporation, the vacancy may be
temporarily filled from among the officers of the corporation by unanimous
vote of the remaining directors or trustees.
a. Emergency board of director
b. Interim board of director
c. Provisional board of director
d. Temporary board of director
The correct answer is: Emergency board of director
41. The requirements for the sale of other disposition of assets are the
following except;
a. Any dissenting stockholders may exercise his appraisal right.
b. Ratification by the vote of the stockholders representing at least
2/3 of the outstanding capital stock, or in case of non-stock
corporation, by the of at least to 2/3 of the members.
c. Approval by the majority vote of its board of directors or trustees.
d. SEC approval is required.
The correct answer is: SEC approval is required.
0 1
a. Voting right
b. Appraisal right
d. Management right
The correct answer is: Voting right
43. Revocation of proxy may be through the following, except:

a. Formal notice;
b. None of the above
c. Verbal communication;
d. Conduct
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LAW ON CORPORATION
44. The requisites for removal of directors are the following except:
a. The removal should take place at a regular or special meeting duly called
for the purpose.
b. The special meeting of the stockholders or members of a corporation for
the purpose of removal must be called by the secretary on order of the
president or on the written demand of the stockholders representing or
holding at least a majority of the outstanding capital stock or a majority
of the members entitled to vote.
c. The must be a previous notice to stockholders or members of the
corporation of the intention to propose such removal at the meeting.
d. The director or trustee can only be removed by a vote of the
stockholders representing at least majority of the outstanding capital
stock or majority of the members entitled to vote in case of non-stock
corporation.
The correct answer is: The director or trustee can only be removed by a vote
of the stockholders representing at least majority of the outstanding capital
stock or majority of the members entitled to vote in case of non-stock
corporation.
SEC. 27. Removal of Directors or Trustees. – Any director or trustee of a
corporation may be removed from office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the outstanding capital stock, or in a
nonstock corporation, by a vote of at least two-thirds (2/3) of the members entitled
to vote: Provided, That such removal shall take place either at a regular meeting
of the corporation or at a special meeting called for the purpose, and in either case,
after previous notice to stockholders or members of the corporation of the intention
to propose such removal at the meeting. A special meeting of the stockholders or
members for the purpose of removing any director or trustee must be called by the
secretary on order of the president, or upon written demand of the stockholders
representing or holding at least a majority of the outstanding capital stock, or a
majority of the members entitled to vote. If there is no secretary, or if the
secretary, despite demand, fails or refuses to call the special meeting or to give
notice thereof, the stockholder or member of the corporation signing the demand
may call for the meeting by directly addressing the stockholders or members.
Notice of the time and place of such meeting, as well as of the intention to propose
such removal, must be given by publication or by written notice prescribed in this
Code. Removal may be with or without cause: Provided, That removal without
cause may not be used to deprive minority stockholders or members of the right
of representation to which they may be entitled under Section 23 of this Code.
The Commission shall, motu proprio or upon verified complaint, and after due
notice and hearing, order the removal of a director or trustee elected despite the
disqualification, or whose disqualification
0 1 arose or is discovered subsequent to an
election. The removal of a disqualified director shall be without prejudice to other
sanctions that the Commission may impose on the board of directors or trustees
who, with knowledge of the disqualification, failed to remove such director or
truste.
LAW ON CORPORATION
45. A close corporation is one whose articles of incorporation provides the

following, except; 0 1
a. All the issued stock of all classes shall be subject to 1 or more
specified restrictions on transfer.
b. 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 20;
c. The corporation shall not list in any stock exchange or make any
public offering of its stocks of any class.

SEC. 95. Definition and Applicability of Title. – A close corporation,
within the meaning of this Code, is one whose articles of incorporation provides
that: (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 its stocks of any class. Notwithstanding the foregoing, a corporation shall not
be deemed a close corporation when at least two-thirds (2/3) of its voting stock
or voting rights is owned or controlled by another corporation which is not a
close corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except mining
or oil companies, stock exchanges, banks, insurance companies, public utilities,
educational institutions and corporations declared to be vested with public
interest in accordance with the provisions of this Code.
The provisions of this Title shall primarily govern close corporations:
Provided, that other Titles in this Code shall apply suppletorily, except as
otherwise provided under this Title.
46. A corporation formed for the same purpose as corporation sole. It

consists of two or more persons.
a. Corporation aggregate
b. Corporation de facto
c. Close corporation
d. Corporation sole
The correct answer is: Corporation aggregate
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LAW ON CORPORATION
47. A trust created by an agreement between a group of the stockholders

of a corporation and the trustee or by a group of identical agreements
between individual stockholders and a common trustee, whereby it is
provided that for a term of years, or for a period contingent upon a certain
event, or until the agreement is terminated, control over the stock owned
by such stockholders, either for certain purposes or for all purposes, is to
be lodged in the trustee, either with or without a reservation to the owners,
or persons designated by the, of the power to direct how such control shall
be used.
a. Management contract
b. Voting trust agreement
c. Proxy
d. Executive committee
The correct answer is: Voting trust agreement

SEC. 58. Voting Trusts. – One or more stockholders of a stock
corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to 0vote and
1 other rights pertaining to the shares
for a period not exceeding five (5) years at any time: Provided, That in the
case of a voting trust specifically required as a condition in a loan agreement,
said voting trust may be for a period exceeding five (5) years but shall
automatically expire upon full payment of the loan. A voting trust agreement
must be in writing and notarized, and shall specify the terms and conditions
thereof. A certified copy of such agreement shall be filed with the corporation
and with the Commission; otherwise, the agreement is ineffective and
unenforceable. The certificate or certificates of stock covered by the voting
trust agreement shall be cancelled and new ones shall be issued in the name
of the trustee or trustees, stating that they are issued pursuant to said
agreement. The books of the corporation shall state that the transfer in the
name of the trustee or trustees is made pursuant to the voting trust
agreement.
48. Bidder who shall offer to pay the full amount of the balance on the
subscription together with accrued interest, costs of advertisement and
expenses of sale, for the smallest number of shares or fraction of a share.
a. Winning bidder
b. Highest Bidder
c. Losing bidder
d. Lowest bidder
The correct answer is: Highest Bidder
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LAW ON CORPORATION
49. An action by the directors of a close corporation without a meeting shall

not be deemed valid if:
a. The directors are accustomed to take informal action with the
express or implied acquiescence of all the stockholders.
b. Before or after such action is taken, written consent thereto is
signed by a majority the directors.
c. All the directors have express or implied knowledge of the action
in question and none of them makes prompt objection thereto in
writing.
d. All the stockholders have actual or implied knowledge of the action
and make no prompt objection thereto in writing.
The correct answer is: Before or after such action is taken, written consent
thereto is signed by a majority the directors.
SEC. 100. When a Board Meeting is Unnecessary or Improperly Held.
– Unless the bylaws provide otherwise, any action taken by the directors
of a close corporation without a meeting called properly and with due notice
shall nevertheless be deemed valid if:
a. Before or after such action is taken, a written consent thereto is signed
by all the directors; or
b. All the stockholders have actual or implied knowledge of the action
and make no prompt objection in writing; or
c. The directors are accustomed to take informal action with the express
or implied acquiescence of all the stockholders; or
d. All the directors have express or implied knowledge of the action in
question and none of them makes a prompt objection in writing.
An action within the corporate powers taken at a meeting held without
proper call or notice, is deemed ratified by a director who failed to attend,
unless after having knowledge thereof, the director promptly files his written
objection with the secretary of the corporation.
50. Evidence of the holder`s 0ownership

1 of the stock and of his right as a
shareholder.
a. Treasury stock
b. Certificate stock
c. Par value stock
d. Shares of stock
The correct answer is: Certificate stock
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LAW ON CORPORATION
51. An impartial person who is neither a stockholder nor a creditor of the

corporation or of any subsidiary or affiliate of the corporation, and whose
further qualifications, if any, may be determined by the SEC.
a. Provisional director
b. Provisional member
c. Provisional stockholder
d. Provisional trustee
The correct answer is: Provisional director

SEC. 103. Deadlocks.
… A provisional director shall be an impartial person who is neither a
stockholder nor a creditor of the corporation or any of its subsidiaries or
affiliates, and whose further qualifications, if any, may be determined by the
Commission. A provisional director is not a receiver of the corporation and
does not have the title and powers of a custodian or receiver. A provisional
director shall have all the rights and powers of a duly elected director,
including the right to be notified of and to vote at meetings of directors until
removed by order of the Commission or by all the stockholders. The
compensation of the provisional director shall be determined by agreement
between such director and the corporation, subject to approval of the
Commission, which may fix the compensation absent an agreement or in
the event of disagreement between the provisional director and the
corporation.
52. As a rule, a corporation that purchases the assets of another will not be
liable for the debts of the selling corporation, except when any of the
following circumstances is present. Which is the exception?
a. Where the purchasing corporation is merely continuation of the
selling corporation.
b. Where the purchaser expressly or impliedly agrees to assume the
debts.
c. Where the transaction is validly entered into.
d. Where the transaction amounts to a consolidation or merger of
the corporations.
The correct answer is: Where the transaction is validly entered into.
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LAW ON CORPORATION
53. Any stockholder of a corporation shall have the right to dissent and
demand payment of the fair value of hiss hares in the following instances,
except;
a. In case of sale, lease, exchange, transfer, mortgage, pledge or
other disposition of all substantially all of the corporate property
and assets.
b. In case of increase or decrease of capital stock.
c. In case of merger or consolidation.
d. 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
0 1
superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence.
The correct answer is: In case of increase or decrease of capital stock.
SEC. 80. When the Right of Appraisal May Be Exercised. – Any
stockholder of a corporation shall have the right to dissent and demand
payment of the fair value of the shares in the following instances:
a. In case an 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 this Code;
c. In case of merger or consolidation; and
d. In case of investment of corporate funds for any purpose other than
the primary purpose of the corporation.
54. Consideration for the issuance of stock may be:

a. 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.
b. Previously incurred indebtedness of the corporation.
c. Labor performed for or services to be rendered to the corporation.
d. Actual cash paid to the corporation
The correct answer is: Labor performed for or services to be rendered to

the corporation
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LAW ON CORPORATION
SEC. 61. Consideration for Stocks. – Stocks shall not be issued for a
consideration less than the par or issued price thereof. Consideration for the
issuance of stock may be:
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. Previously incurred indebtedness of the corporation;
e. Amounts transferred from unrestricted retained earnings to stated
capital;
f. Outstanding shares exchanged for stocks in the event of
reclassification or conversion;
g. Shares of stock in another corporation; and/or
h. Other generally accepted form of consideration.
Where the consideration is other than actual cash, or consists of
intangible property such as patents or copyrights, the valuation thereof shall
initially be determined by the stockholders or the board of directors, subject
to the approval of the Commission.
55. It is one where no part of its income is distributable as dividends to its

members, trustees, or officers.
a. Close corporation
b. Stock corporation
c. Corporation sole
d. Non-stock corporation
0 1
The correct answer is: Non-stock corporation

TITLE XI
NONSTOCK CORPORATION
SEC. 86. Definition. – For purposes of this Code and subject to its
provisions on dissolution, a nonstock corporation is one where no part of its
income is distributable as dividends to its members, trustees, or officers:
Provided, That any profit which a nonstock corporation may obtain incidental
to its operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation was
organized, subject to the provisions of this Title.
The provisions governing stock corporations, when pertinent, shall be
applicable to nonstock corporations, except as may be covered by specific
provisions of this Title.
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LAW ON CORPORATION
56. In addition to the functions designated by the One Person Corporation,

the corporate secretary shall:
a. Be responsible for maintaining the Minutes book and/or records of
the corporation.
b. Notify the SEC of the death of the single stockholder within 5 days
from such occurrence and stating in such notice the names,
residence addresses, and contact details of all known legal heirs.
c. Notify the nominee or alternate nominee of the death or incapacity
of the single stockholder, which notice shall be given no later than
5 days from such occurrence.
d. All of the above
The correct answer is: All of the above

SEC. 123. Special Functions of the Corporate Secretary. – In
addition to the functions designated by the One Person Corporation, the
corporate secretary shall:
a. Be responsible for maintaining the minutes book and/or records of the
corporation;
b. Notify the nominee or alternate nominee of the death or incapacity of
the single stockholder, which notice shall be given no later than five
(5) days from such occurrence;
c. Notify the Commission of the death of the single stockholder within
five (5) days from such occurrence and stating in such notice the
names, residence addresses, and contact details of all known legal
heirs; and
d. Call the nominee or alternate nominee and the known legal heirs to a
meeting and advise the legal heirs with regard to, among others, the
election of a new director, amendment of the articles of incorporation,
and other ancillary and/or consequential matters.
57. Is an action brought by minority shareholders in the name of the

corporation to redress wrongs committed against it, for which the
directors refuse to sue.
a. Class suit
b. Representative suit
c. Derivative suit
d. Individual suit
The correct answer is: Derivative suit

0 1
LAW ON CORPORATION
58. Is one formed, organized or existing under any laws other than those
of the Philippines and whose laws allow Filipino citizens and corporations
to do business in its own country or state.
a. Foreign corporation
b. Government owned-and0 1controlled corporation
d. Domestic corporation
The correct answer is: Foreign corporation
SEC. 140. Definition and Rights of Foreign Corporations. – For
purposes of this Code, a foreign corporation is one formed, organized or
existing under laws other than those of the Philippines’ and whose laws allow
Filipino citizens and corporations to do business in its own country or State.
It shall have the right to transact business in the Philippines after obtaining
a license for that purpose in accordance with this Code and a certificate of
authority from the appropriate government agency.
59. It is a union whereby one or more existing corporations are absorbed

by another corporation that survives and continues the combined
business.
a. Business combination
b. Consolidation
c. Merger
The correct answer is: Merger

SEC. 75. Plan of Merger or Consolidation. – Two (2) or more
corporations may merge into a single corporation which shall be one of the
constituent corporations or may consolidate into a new single corporation
which shall be the consolidated corporation.
The board of directors or trustees of each corporation, party to the
merger or consolidation, shall approve a plan of merger or consolidation
setting forth the following:
a. The names of the corporations proposing to merge or consolidate,
hereinafter referred to as the constituent corporations;
b. The terms of the merger or consolidation and the mode of carrying the
same into effect;
c. A statement of the changes, if any, in the articles of incorporation of
the surviving corporation in case of merger; and, in case of
consolidation, all the statements required to be set forth in the articles
of incorporation for corporations organized under this Code; and
d. Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or desirable.
0 1
LAW ON CORPORATION
60. It is the union of two or more existing entities to form a new entity
called the consolidated corporation.
a. Merger
b. Business combination
c. Acquisition
d. Consolidation
The correct answer is: Consolidation

SEC. 75. Plan of Merger or Consolidation. – Two (2) or more
corporations may merge into a single corporation which shall be one of the
constituent corporations or may consolidate into a new single corporation
which shall be the consolidated corporation.
61. Stock corporations must also keep a stock and transfer book, which shall
contain;
a. A statement of every alienation, sale or transfer of stock made,
the date thereof, by and to whom made.
b. The installment paid and unpaid on all stocks for which
subscription has been made, and the date of payments of any
installment. 0 1
c. A record of all stocks in the names of the stockholders
alphabetically arranged.
62. As a general rule, it is not empowered to engage in business.

Moreover, it is prohibited to make income or profits as an incident to its
operation.
a. There is non-transferability of membership.
b. It does not have capital stock divided into shares.
c. No part of its income during its existence is distributable as
dividends to its members, trustees, or officers.
The correct answer is: As a general rule, it is not empowered to engage in

business. Moreover, it is prohibited to make income or profits as an incident
to its operation.
0 1
LAW ON CORPORATION
63. The articles of incorporation of a close corporation may provide, except

for.
a. The business of the corporation shall be managed by the
stockholders of the corporation rather than by aboard of directors.
b. A lesser quorum or voting requirements in meetings of
stockholders or directors.
c. A classification of shares or rights and the qualifications for owning
or holding the same and restrictions on their transfer as may be
stated therein, subject to the provisions of the following section.
d. A classification of directors into one or more classes, each of whom
may be voted for and elected solely by a particular class of stock.
The correct answer is: A lesser quorum or voting requirements in meetings

of stockholders or directors.
SEC. 95. Definition and Applicability of Title.

The articles of incorporation of a close corporation may provide that the
business of the corporation shall be managed by the stockholders of the
corporation rather than by a board of directors. So long as this provision
continues in effect, no meeting of stockholders need be called to elect
directors: Provided, That the stockholders of the corporation shall be
deemed to be directors for the purpose of applying the provisions of this
Code, unless the context clearly requires otherwise: Provided, further, That
the stockholders of the corporation shall be subject to all liabilities of
directors.
The articles of incorporation may likewise provide that all officers or
employees or that specified officers or employees shall be elected or
appointed by the stockholders, instead of by the board of directors.
64. The following are instances where a dissenting stockholder who

demands payment of his shares is no longer allowed to withdraw from his
decision, except:
a. The SEC determines that such stockholder is not entitled to
appraisal right.
b. The proposed corporate action is abandoned or rescinded by the
0 1
corporation.
c. The proposed corporate action is approved by the SEC where its
approval is necessary
d. The corporation consents to the withdrawal.
The correct answer is: The proposed corporate action is approved by the
SEC where its approval is necessary
0 1 LAW ON CORPORATION
65. The books and records required to be kept by the corporation are the
following except;
a. Minutes of meetings of stockholder or members
b. Daily time record
c. Minutes of all meetings of directors or trustees.
d. Stock and transfer book, in case of stock corporations.
The correct answer is: Daily time record
66. The following are corporations that cannot incorporate as a close

corporation, except;
a. Mining or oil companies
b. Industrial companies
c. Banks
d. Stock exchanges
The correct answer is: Industrial companies

SEC. 95. Definition and Applicability of Title.
Any corporation may be incorporated as a close corporation, except mining
or oil companies, stock exchanges, banks, insurance companies, public
utilities, educational institutions and corporations declared to be vested with
public interest in accordance with the provisions of this Code.
67. The following are the characteristic of a non-stock corporation, except:

a. The right to vote of members may be limited, broadened, or even
denied in the articles of incorporation or the by-laws.
b. Non-stock corporation may, through their articles of incorporation
or their by-laws designate their governing boards by any name
other than as board of trustees.
c. A non-stock corporation is not allowed to distribute any of its
assets or any incidental income or profit made by the corporation
during its existence.
d. By-laws may provide that the members may hold their meetings
at any place even outside the place where the principal office of
the corporation is located, even if that such place is outside the
Philippines.
The correct answer is: By-laws may provide that the members may hold
their meetings at any place even outside the place where the principal office
of the corporation is located, even if that such place is outside the
Philippines.
0 1
LAW ON CORPORATION
68. The following are the characteristic of a non-stock corporation, except:

a. The right to vote of members may be limited, broadened, or
even denied in the articles of incorporation or the by-laws.
b. Non-stock corporation may, through their articles of
incorporation or their by-laws designate their governing boards
by any name other than as board of trustees.
c. A non-stock corporation is not allowed to distribute any of its
assets or any incidental income or profit made by the
corporation during its existence.
d. By-laws may provide that the members may hold their meetings
at any place even outside the place where the principal office of
the corporation is located, even if that such place is outside the
Philippines. 0 1
The correct answer is: By laws may provide that the members may
hold their meetings at any place even outside the place where the
principal office of the corporation is located, even if that such place
is outside the Philippines.
69. The following, except one, are the exceptional circumstances warranting
the disregard of the doctrine of separate personality;
a. When a director or officer has consented to the issuance of
watered-down stocks or who, having knowledge thereof, did not
forthwith file with the corporate secretary his written objection
thereto.
b. When directors and trustee or, in appropriate case, the officers of
a corporation vote for or assent to patiently unlawful acts of the
corporation.
c. When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarity liable with the
corporation.
d. When a director, trustee or officer is made, by specific provision
of by-laws. Personally, liable for his corporate action.
The correct answer is: When a director, trustee or officer is made, by specific
provision of by-laws. Personally, liable for his corporate action.
0 1
LAW ON CORPORATION
70. The following are the limitations on the right of inspection by a

stockholder, except:
a. The right can be exercised only by the common stockholders.
b. The demand is made in good faith or for a legitimate purpose.
c. The right must be exercised during reasonable hours on business
days.
d. The person demanding the right has not improperly used any
information obtained through any previous examination of the
books and records of the corporation.
The correct answer is: The right can be exercised only by the common
stockholders
71. The following are the requisites of a derivative suit:

a. He has tried to exhaust intra-corporate remedies, i.e., has made
a demand on the board of directors for the appropriate relief but
the latter has failed or refused to heed his plea; and
b. The cause of action actually devolves on the corporation, the
wrong doing or harm having been, or being caused to the
corporation and not to the particular stockholder bringing the suit.
c. The party bringing suit should be a shareholder as of the time of
the act or transaction complained of, the number of his shares not
being material;
72. The following are voluntary0 modes

1 of dissolution of a corporation,
except:
a. By legislative enactment.
b. By expiration of corporate term provided for the articles of
incorporation.
c. By the judgement of the SEC after hearing of petition for voluntary
dissolution where creditors are affected.
d. By failure to formally organize and commence its business within
5 years form the date of incorporation.
The correct answer is: By the judgement of the SEC after hearing of petition
for voluntary dissolution where creditors are affected.
0 1
LAW ON CORPORATION
73. The following are voluntary modes of dissolution of a corporation,

except:
a. By amending the articles of incorporation to shorten the corporate
term.
b. In case of a corporation sole, by submitting to the SEC a verified
declaration of the dissolution for approval.
c. By legislative enactment.
d. By the vote of the board of directors or trustees and the resolution
adopted by the stockholders or members where no creditors are
affected.
The correct answer is: By legislative enactment.
74. The following may be grounds for involuntary dissolution of the

corporation:
a. Upon receipt of a lawful court order dissolving the corporation.
b. Non-use of corporate charter.
c. Continuous in operation of a corporation.
75. The merger or consolidation shall have the following effects:

a. The surviving or the consolidated corporation shall possess all the
rights, privileges, immunities, and powers and shall be subject to
all the duties and liabilities of a corporation.
b. The constituent corporations shall become a single corporation.
c. The separate existence of the constituent corporations shall cease.
The correct answer is: All of the above
76. The three tests of voting trust agreement are the following:
a. That the principal purpose of the grant of voting rights is to acquire
voting control of the corporation.
b. That the voting rights granted are intended to be irrevocable for
a definite period of time.
c. That the voting rights of the stock are separated from the other
attributes of ownership.
0 1
LAW ON CORPORATION
77. Where a stockholder or member is denied the right of inspection, his

suit would be individual because the wrong is done to him personally and
not to the other stockholders or the corporation.
a. Individual suit
b. Class suit
c. Representative suit
d. Derivative suit
0 1
The correct answer is: Individual suit

78. Where the wrong is done to a group of stockholders, as where preferred
stockholders` right are violated, a class suit will be proper for the
protection of all stockholders belonging to the same group.
a. Corporate suit
b. Individual suit
c. Class suit
d. Representative suit
The correct answer is: Representative suit
79. STATEMENT I. A delinquent corporation shall have a period of 2 years

to resume operations and comply with all requirements that the SEC shall
prescribe.
STATEMENT II. Upon compliance by the corporation, the SEC shall issue
an order lifting the delinquent status. Failure to comply with the requirements
and resume operations within the period given by the SEC shall cause the
revocation of the corporation`s certificate of incorporation.
a. Only I is true
b. Both are false
c. Both are true
d. Only II is true

SEC. 21. Effects of Non-Use of Corporate Charter and
Continuous Inoperation. – If a corporation does not formally organize
and commence its business within five (5) years from the date of its
incorporation, its certificate of incorporation shall be deemed revoked as of
the day following the end of the five (5)-year period.
However, if a corporation has commenced its business but subsequently
becomes inoperative for a period of at least five (5) consecutive years, the
0 1
LAW ON CORPORATION
Commission may, after due notice and hearing, place the corporation under
delinquent status.
A delinquent corporation shall have a period of two (2) years to resume
operations and comply with all requirements that the Commission shall
prescribe. Upon compliance by the corporation, the Commission shall issue
an order lifting the delinquent status. Failure to comply with the
requirements and resume operations within the period given by the
Commission shall cause the revocation of the corporation’s certificate of
incorporation.
The Commission shall give reasonable notice to, and coordinate with the
appropriate regulatory agency prior to the suspension or revocation of the
certificate of incorporation of companies under their special regulatory
jurisdiction.
80. STATEMENT I: The act of corporate officers within the scope of their
authority are binding on the corporation.
STATEMENT II: Any two or more positions may be held concurrently by
the same persons, except that no one shall act as president and secretary or
as president and vice president at the same time.
a. Both are false
b. Both are true
c. Only I is true
d. Only II is true
0 1
The correct answer is: Only I is true

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LAW ON CORPORATION

Regulatory Framework for Business Transactions

1. A corporation organized for religious purposes.

The correct answer is: Ecclesiastical corporation

18. Private corporation – Formed for some private purpose,

2. A class of stock entitling the holder to vote on corporate matters, to receive

The correct answer is: Common stock

3. A contract of the corporation with one or more of its directors or trustees

The correct answer is: Doctrine of self-dealing board of directors.

4. A corporation created in strict or substantial conformity with the mandatory

The correct answer is: De jure corporation

5. It constitutes charter or fundamental law of the corporation.

The correct answer is: By-laws

Binding effect of by-laws

6. It is an artificial being created by operation of law, having the right of

The correct answer is: Corporation

7. A corporation incorporated under the laws of the Philippines.

The correct answer is: Domestic Corporation

8. A person shall be disqualified from being a director, trustee or officer of

The correct answer is: All of the above.

The foregoing is without prejudice to qualifications or other

9. Subscriptions to the capital stock of a corporation constitute a fund to which

The correct answer is: Trust funds doctrine

The correct answer is: Executive committee

11. It is one where no part of its income is distributable as dividends to its

The correct answer is: Non- stock corporation

The correct answer is: Treasury stock

13. A written contract to purchase newly issued shares of stock.

The correct answer is: Subscription contract

The correct answer is: Stock and transfer book

SEC. 73. Books to be Kept; Stock Transfer Agent.

15. Refers to the continuation of a corporation`s legal status despite

The correct answer is: Succession

The correct answer is: Independent director

17. The following are the characteristics of a corporation, except?

The correct answer is: Created by meeting of the minds

18. It is the preferential right of all stockholders of a stock corporation to

The correct answer is: Pre-emptive right

The correct answer is: Appraisal right

(3) disinterested persons, one of whom shall be named by the stockholder,

21. The following are the qualifications of a board of directors/trustees,

The correct answer is: Watered stock

The correct answer is: To acquire founder`s shares.

The correct answer is: Identity of the stockholders

25. The following are limitations on no par value shares, except;

The correct answer is: None of the above

27. The following are the limitations of an executive committee, except:

28. The following are limitations in the amendment of the articles of

SEC. 15. Amendment of Articles of Incorporation. – Unless

30. They may be purchased or taken up by the corporation upon the

The correct answer is: Redeemable stock

31. The purposes of proxies are the following, except:

The correct answer is: It assures the presence of all.

The correct answer is: Unrestricted retained earnings

The correct answer is: Only II is true

The correct answer is: Authorized capital stock

The correct answer is: It shall be signed by the corporate secretary

37. The stockholders or members mentioned in the articles of incorporation

The correct answer is: Incorporators

38. Where a stockholder or stockholders representing the same interest of

The correct answer is: Interlocking Stockholders

The correct answer is: Emergency board of director