Professional Documents
Culture Documents
Corporation Final
Corporation Final
EXAMS
Here are more than 100 questions and answers that your professor in
corporation law may ask in your final or midterm exams. NOTE: This
content is under construction. PJ asks for your patience regarding
misspellings and other possible errors.
IMPORTANT NOTE: THIS IS A 2018 POST. PLEASE CHECK
THE REVISED CORPORATION CODE.
[a] STOCK. The parent corporation owns all or most of the capital stock
of the subsidiary;
[b] DIRECTORS. The parent and subsidiary have common directors and
officers;
[c] FINANCE. The parent finances the subsidiary;
[d] SUBSCRIPTION OR INCORPORATION. The parent subscribes to all
the capital stock of the subsidiary or otherwise causes its incorporation;
[e] GROSSLY INADEQUATE CAPITAL. The subsidiary has grossly
inadequate capital;
[f] EXPENSES AND LOSSES. The parent pays the salaries and other
expenses or losses of the subsidiary;
[g] NO OTHER BUSINESS. The subsidiary has substantially no business
except with the parent corporation or no assets except those conveyed to
or by the parent corporation;
[h] DEPARTMENT OR DIVISION. In the papers of the parent
corporation or in the statements of its officers, the subsidiary is
described as a department or division of the parent corporation or its
business or financial responsibility is referred as the parent’s own;
[i] PROPERTY. The parent corporation uses the property of the
subsidiary as its own;
[j] DEPENDENCE. The directors or the executives of the subsidiary do
not act independently in the interest of the subsidiary but take their
orders from the parent corporation in the latter’s interest; and
[k] LEGAL REQUIREMENTS. The formal legal requirements of the
subsidiary are not observed.
[a] Injustice;
[b] Public inconvenience;
[c] Wrong;
[d] Fraud;
[e] Crime;
[f] Confusion regarding legitimate issues; and (among others)
[g] Deception through alter ego, adjunct or business conduit.
[a] STOCK. The parent corporation owns all or most of the capital stock
of the subsidiary;
[b] DIRECTORS. The parent and subsidiary have common directors and
officers;
[c] FINANCE. The parent finances the subsidiary;
[d] SUBSCRIPTION OR INCORPORATION. The parent subscribes to all
the capital stock of the subsidiary or otherwise causes its incorporation;
[e] GROSSLY INADEQUATE CAPITAL. The subsidiary has grossly
inadequate capital;
[f] EXPENSES AND LOSSES. The parent pays the salaries and other
expenses or losses of the subsidiary;
[g] NO OTHER BUSINESS. The subsidiary has substantially no business
except with the parent corporation or no assets except those conveyed to
or by the parent corporation;
[h] DEPARTMENT OR DIVISION. In the papers of the parent
corporation or in the statements of its officers, the subsidiary is
described as a department or division of the parent corporation or its
business or financial responsibility is referred as the parent’s own;
[i] PROPERTY. The parent corporation uses the property of the
subsidiary as its own;
[j] DEPENDENCE. The directors or the executives of the subsidiary do
not act independently in the interest of the subsidiary but take their
orders from the parent corporation in the latter’s interest; and
[k] LEGAL REQUIREMENTS. The formal legal requirements of the
subsidiary are not observed.
[a] That there is an apparently valid statute under which the corporation
with its purposes may be formed;
[b] That there has been colorable compliance with the legal requirements
in good faith; and
[c] That there has been use of corporate powers, i.e., the transaction of
business in some way as if it were a corporation.
A stock corporation is one whose capital stock is divided into shares and
whose articles of incorporation allows it to distribute dividends. A non-
stock corporation is one which lacks either of the two requirements of a
stock corporation.
A. INCORPORATORS
B. CORPORATORS
Directors and trustees are persons who compose the governing board of
a corporation. Directors are members of the governing board of a stock
corporation while trustees, non-stock corporation.
E. CORPORATE OFFICERS
F. PROMOTER
Based on the Constitution and statutes such as the Anti-Dummy Law, the
following are nationalized corporations:
This is part of the authorized capital or the whole of it over which there
have been contracts of subscription. In other words, there has been a
promise to pay and purchase said stocks and, as a result of such contract,
a stockholder holds the stocks. According to the Corporation Code, at
least 25% of the capital stock must be subscribed.
C. PAID-UP CAPITAL
This is part of the authorized capital stock or the whole of it which has
not only been subscribed but also paid. According to the Corporation
Code, the paid-up capital must be at least 25% of the subscribed capital.
D. OUTSTANDING CAPITAL
Outstanding capital is that part of the authorized capital which has been
issued as shares to stockholders.
E. CAPITAL.
Capital is the maximum fund that the corporation intends to use in its
operations. If reflected on the articles of incorporation and approved by
the SEC, it is called "authorized capital stock."
There must be [a] a resolution by the governing board via a majority vote
of its members; [b] 2/3 vote or written assent of the stockholders
representing the outstanding capital stock; [c] submission to and filing
with the SEC; [d] a copy of the amendments duly certified under oath by
the corporate secretary and a majority of the directors or trustees stating
that the vote requirements have been complied with; and [e] favorable
recommendation by the appropriate supervising government agency.
[a] REPORT. Failure to file its annual report or pay any fees as required
by this Code;
[b] RESIDENT AGENT. Failure to appoint and maintain a resident agent
in the Philippines as required by this Title;
[c] CHANGES. Failure, after change of its resident agent or of his
address, to submit to the Securities and Exchange Commission a
statement of such change as required by this Title;
[d] AUTHENTICATION. Failure to submit to the Securities and
Exchange Commission an authenticated copy of any amendment to its
articles of incorporation or by-laws or of any articles of merger or
consolidation within the time prescribed by this Title;
[e] MISREPRESENTATION. A misrepresentation of any material matter
in any application, report, affidavit or other document submitted by such
corporation pursuant to this Title;
[f] FAILURE TO PAY TAXES. Failure to pay any and all taxes, imposts,
assessments or penalties, if any, lawfully due to the Philippine
Government or any of its agencies or political subdivisions;
[g] OUTSIDE PURPOSE. Transacting business in the Philippines outside
of the purpose or purposes for which such corporation is authorized
under its license;
[h] UNLICENSED FOREIGN CORPORATION. Transacting business in
the Philippines as agent of or acting for and in behalf of any foreign
corporation or entity not duly licensed to do business in the Philippines;
or
[i] OTHER GROUNDS. Any other ground as would render it unfit to
transact business in the Philippines. (n)
It must be noted, however, that by-laws are mere internal rules and are
subordinate to the articles of incorporation.
[26] WHAT ARE THE KINDS OF POWERS OF A
CORPORATION?
An ultra vires act is one done by the corporation outside of its purpose.
In other words, it is an act not supported by the purpose clause in the
articles of corporation.
A stock corporation shall have the power to purchase or acquire its own
shares for a legitimate corporate purpose or purposes, including but not
limited to the following cases: Provided, That the corporation has
unrestricted retained earnings in its books to cover the shares to be
purchased or acquired:
Yes.
Yes.
No, because this sale is in the regular course of business. Moreover, this
is in line with the purpose of the corporation.
[40] AA CORPORATION IS ENGAGED IN THE BUSINESS OF
PRINTING BOOKS. AROUND 70% OF ITS ASSETS CONSISTS
OF CASH IN THE BANK, 25% PRINTING MACHINE AND THE
REMAINING OFFICE EQUIPMENT AND SUPPLIES. AA
CORPORATION PLANS TO SELL THE MACHINE. CAN IT BE
CONSIDERED SALE OF SUBSTANTIALLY ALL OF THE
ASSETS OF THE CORPORATION?
[a] Increasing the par value of existing shares without increasing the
number of shares;
[b] Increasing the number of existing shares without increasing the par
value thereof; and
[c] Increasing the number of existing shares and, at the same time,
increasing the par value thereof.
[a] He must have at least one (1) share which stands in his name on the
books of the corporation; and
[b] He must be a natural person.
Also:
[c] He must not have been convicted by final judgment for a crime
punishable by at least 6 years of imprisonment;
[d] He must not have violated the Corporation Code within 5 years prior
to the date of his election; and
[e] He must be of legal age.
Courts will not interfere with the decisions made by the governing board
as regards the internal affairs of the corporation unless such acts are so
unconscionable and oppressive as to amount to a wanton destruction of
the rights of the minority shareholders, let alone illegal.
Self-dealing corporate agents are those [a] who have pecuniary interest
in the a transaction or contract that the corporation is entering into and
[b] whose affirmative vote is material to the realization or approval of
such transaction, contract or project.
In the absence of the [a] and [b] above, there may be ratification by
stockholders representing at least 2/3 of the outstanding capital stock or
at least 2/3 of the members in a meeting called for the purpose voted to
ratify the contract after full disclosure of such adverse interest in said
meeting.
They are those officers identified by the Corporation Code, by the articles
of incorporation or by the by-laws of the corporation. Currently, the
Revised Corporation Code provides that they are the CEO, CFO, the
corporate secretary and other officers as may be provided in the by-laws.
No, because the Rules of Court requires that such service shall be made
exclusively to the President, the Managing Director, the Corporate
Secretary, the in-house counsel, the Treasurer or the General Manager.
[a] Amendments increasing and decreasing the capital stock must not
only be approved by the board and the stockholders, it must also be
registered with and approved by the SEC;
[b] The election of corporate officers is within the power of the governing
board and cannot be taken away by mere contract;
[c] The election of directors is within the power of the stockholders
exclusively and cannot be taken away by mere contract; and
[d] The management of the affairs of the corporation is a business
judgment which cannot be taken away from the board of directors.
[1] Cannot have an issue price of less than P5.00 per share;
[2] Once issued, they shall be deemed fully paid and non-assessable and
the holders of such shares shall not be liable to the corporation or to its
creditors in respect thereto;
[3] Entire consideration received by the corporation shall be treated as
capital and shall not be available for distribution as dividends;
[4] Articles of Incorporation must state the fact that the corporation
issues no-par shares and the number of shares;
[5] Cannot be issued as preferred stocks;
[6] Cannot be issued by banks, insurance companies, trust companies,
building and loan associations, and public utilities; and
[7] Issued price may be fixed in the Articles of Incorporation, or by the
BOD pursuant to authority conferred upon it by the Articles of
Incorporation, or, in the absence thereof, by majority vote of the
outstanding shares in a meeting called for the purpose.
Of the five above, the short answer is [d]. The subscription must be fully-
paid before the issuance of a certificate of stock.
It depends.
No, the transfer does not bind the corporation because it was not
registered in the corporate books. The corporate secretary, as far as she
is concerned, has the duty to issue certificates of stock only under the
name of the owner thereof as registered in the books of the corporation.
The law does not prescribe a period within which the registration of the
transfer of shares should be effected. Hence, the action to enforce the
right does not accrue until there has been a demand and a refusal
concerning the transfer.
[a] The party bring the suit should be a shareholder at the time the act or
transaction complained of took place;
[b] He has exhausted all intra-corporate remedies; and
[c] The cause of action actually belong to the corporation, not to the
stockholder.
There are three available remedies: (a) call (to action) by resolution of
the governing board and sale of delinquent shares; and (b) judicial action
via a collection suit.
[a] If there is due date, no need for a call by the board. If there is none,
there must be a board resolution declaring the unpaid subscription due
on a specified date;
[b] Personal notice or notice by registered mail must be sent and
addressed to the concerned stockholder;
[c] If he fails to pay within 30 days from call or due date, the unpaid
shares shall be subjected to delinquency sale;
[d] Board resolution ordering the sale must be issued stating the
amount, date, time and place of sale;
[e] The sale shall shall be made not earlier than 30 days but not later
than 60 days from date of delinquency;
[f] Note of sale with a copy of the board resolution shall be send to every
delinquent shareholder in person or by mail;
[g] Publication of notice of sale for 2 consecutive weeks;
[h] Sale to the bidder who offered the full amount of the balance of
subscription including all costs for the smallest number of shares;
[i] Registration in the name of the winning bidder and issuance of
certificate under his name;
[j] Remaining (paid) shares shall be credited to the delinquent
shareholder; and
[k] If there is no bidder, the corporation may purchase and pay for the
shares.
Any cash dividends due on delinquent stock shall first be applied to the
unpaid balance on the subscription plus costs and expenses, while stock
dividends shall be withheld from the delinquent stockholder until his
unpaid subscription is fully paid.
Holders of subscribed shares not fully paid which are not delinquent
shall have all the rights of a stockholder.
The entries are considered prima facie evidence of the matters stated
therein and may be subject to proof to the contrary. (G.R. No. 123553)
79. DISTINGUISH
In the new law, the period is 5 years and the effect is "deemed revoked."
Under the old law, in case of continuous inoperation for at least 5 years,
this is a ground for the suspension or revocation of corporate franchise
or certificate of incorporation.
In the new law, the same period is prescribed but the effect is
"declaration of delinquency status" which may be removed by
compliance within 2 years.
However, Ladia (2015) opines that it is enough that the corporation has
functioned and engaged in the business for which it was formed and its
charter cannot be forfeited simply because it has failed to a president or a
secretary.
Liquidation is the process by which all the assets of the corporation are
converted into liquid assets (cash) in order to facilitate the payment of
obligations to creditors, and the remaining balance if any is to be
distributed to the stockholders. It is a proceeding in rem.
[a] All issued stock, exclusive of treasury shares, shall be held by persons
not exceeding 20;
[b] All issued stock shall be subject to one or more specified restrictions
on transfer; and
[c] The corporation shall not list in any stock exchange or make any
public offering of any of its stock of any class.