Review Questions (Partnership and Corporation)

QUESTIONS
Partnership and Corporations
Documents embodying partnership agreements:

Articles of partnership Partnership books
By laws of the partnership Board Directors minutes of meetings
A partnership characteristic which enables the partners to enter into a contract on behalf of the other partners is:
Voluntary association
Unlimited liability
Limited life
Mutual agency
Which of the following is not a characteristic of partnership contract?

Consensual Onerous Principal Innominate
A partnership without a definite period of existence and which can be dissolved at any time by any of the partners is called:
Universal partnership of all present property Particular partnership
Universal partnership of profits Partnership at will
When cash or property worth P3,000 or more is contributed as capital, the Articles of Co-partnership shall be in a public
instrument and registered with the Securities and Exchange Commission. If the said requirement is not complied with:
It will render the partnership void.
It will not affect the liability of the partnership and the partners thereof to third parties.
It will not give a legal personality to the partnership.
It will give the partnership a de facto existence.
When investing partners continue to own the real properties invested, the partnership created is:
Universal partnership of all properties Limited partnership
Universal partnership of all profits Particular partnership
Mr. X, a partner in an oral partnership for the catching of fish, with P10,000 cash as the only contributions thereto refused to
account for proceeds of the firm on the ground that the agreement was not in writing. Is he correct?
Yes, because the partnership’s capital is more that P3,000, therefore it must be in a public instrument.
No, because the oral partnership is valid, real properties not having been contributed.
Yes, because partnership must be in writing for it to be valid.
No, because there must be mutual trust and confidence between the partners.
Three (3) of the following are similarities between a partnership and a corporation.
The individual composing both have little voice in the conduct of the business.
Both have juridical personality separate and distinct from that of the individuals composing them.
Like a partnership a corporation can act only through agents.
Both are organizations composed of an aggregate of individuals, except corporation sole and “OPC”.
The following cannot give their consent to a Contract of Partnership, except:

Minors
Deaf-mutes who know how to write
Insane or demented persons
Persons who are suffering from civil interdiction
Statement 1: Co-ownership or co-possession does not of itself establish a partnership, whether co-owners or co-possessors do
or do not share any profits made by the use of the property.
Statement 2: The sharing of gross returns of itself establishes a partnership, whether or not the persons sharing them have a
joint or common right or interest in any property from which the returns are derived.
Both statements are true
Both statements are false
1st statement is true and 2nd statement is false
1st statement is false and 2nd statement is true
1st Statement: In a universal partnership where its nature is not specified, the presumption is that a universal partnership of all
profits only is formed.
2nd statement: When the contribution to the partnership consists of personal property amounting to P1,000,000 and real
property amounting to P20,000 and the contract is entered verbally, the partnership contract is void.
Both statements are true 1st statement is true and 2nd statement is false
Both statements are false 1st statement is false and 2nd statement is true
Which of the following would not be considered an advantage of forming a pship?

Skills and resources can be combined A p’ship is relatively free from government regulations and
A pship is easily formed restrictions.
A p’hip has unlimited liability
The following persons are disqualified to form a universal partnership. Who are the exceptions? (Phil CPA, 88-2)
Brother and sister Those guilty of the same criminal offense and the
Husband and wife partnership is entered into consideration of the same.
Those guilty of adultery and concubinage
If there is no stipulation, when a partnership is formed, assets contributed by the partners should be recorded on the
partnership books at their -
book values on the partners' books prior to their being original costs to the partner contributing them
contributed to the partnership assessed values for property purposes
fair market value at the time of the contribution
The following partnership contracts were presented to you for evaluation:

I. A partnership engaged in the sale of office supplies with a capital of P100,000.00, broken down into: cash, P30,000.00;
office supplies for sale, P50,000; and office equipment, P10.000.00; Land, P10,000. The agreement is in a private
instrument.
II. A partnership engaged in the lease of office spaces with a capital of P700,000.00 broken down into: land, P100,000.00;
building, P500,000.00; cash, P80,000.00; and office equipment, P20,000.00. The agreement is in a public instrument
attached to which is the inventory of the land and the building signed by the partners. The agreement is not recorded
with the Securities and Exchange Commission.
III. A partnership is engaged in the trading of computers whose name is "Lament Enterprises, Ltd." It has a total capital of
P500,000.00 broken down into P100,000.00 cash and computers worth P400,000.00, contributed by both general and
limited partners. The agreement was subscribed and sworn to by all the partners before a notary public but not recorded
Based on the foregoing:
Each partnership has a separate juridical personality. None of the partnerships has a separate juridical
I and II have separate juridical personality. personality.
II and III have separate juridical personalities.
A, B and C all are capitalist partners, form a partnership and agree to have a total contributed capital of P30,000. However, the
partners failed to agree as to the extent of their respective share in the capital contribution. In this case, which of the
following statement is not correct:
A, B and C must contribute P10,000 each to the partnership.
If A, B and C failed to stipulate on how to distribute profit and loss, the profit and loss will be distributed equally between
them.
If A, B and C mutually agreed that partner A will be excluded from the share in the losses, such agreement is void.
The partnership contract is void because there is no agreement as to the capital contribution of each partner.
PATOK Enterprises, a partnership engaged in the business of renting out video films, is owned by Patricia, Alice, Tina, Olga,
and Kaye, with Olga and Kaye as the managers. Diana owes PATOK Enterprises P6,000.00 and Olga, P4,000.00. Both debts are
unsecured and are already due. Diana pays Olga P4,000.00 for which Olga issues her own receipt.
The payment should be applied to Olga's credit only.
The payment should be applied to PATOK's credit only.
The payment should be divided proportionately between PATOK and Olga, at P2,400.00 and P1,600.00,
respectively.
The payment should be divided equally between PATOK and Olga at P2.000.00 each.
Which of the following stipulations is valid?

A stipulation excluding a capitalist partner from profits.
A stipulation exempting a capitalist partner from losses.
A stipulation exempting an industrial partner from losses.
A stipulation excluding an industrial partner from profits.
A, B, C and D are partners where A, B, and C contributed P1,000,000 each and D his services. The partnership is engaged in the
manufacture and export of garments. Due to a very strong typhoon, the entire roofing of the factory was blown by the strong
winds and if not repaired immediately would aggravate the damage. A, B, C and D agreed on an additional contribution of
P200,000 each in order to save the business from imminent loss. Which of these is the correct statement?
D is duty bound to contribute 20% more of his time to the business of the partnership.
If A no longer has money, he can be complied to sell his interest in the partnership to the other partners.
If C still has money, but refuses to make the contribution, he can be compelled to sell his interest in the partnership to
the other partners.
B can question the decision because he did not vote for the additional contribution.
Three (3) of the following are rights of a partner. Which one (1) is not?
Right to associate another person to his share. Right to admit another partner.
Right to inspect and copy partnership book. Right to ask dissolution of the firm at the proper time.
Bears the loss of property contributed to the partnership.

Capitalist partner Partners contributing usufructuary rights.
Limited partner None of the above.
A, B, and C are general partners in ABC Partnership. D is a debtor to the partnership in the amount of P15,000. A received
from debtor D the sum of P5,000 and issued a receipt identifying the amount as his share. Then D become insolvent, B and C
cannot collect the P10,000.
A cannot be compelled to share the P5,000 with B and C.
B and C can charge the capital of A with their share of the P5,000.
A can be compelled to share B and C with the P5,000.
B and C should automatically sue D to collect the P10,000.
The following statements pertain either to a partner appointed manager in the articles of partnership or through a document
after the formation of the partnership.
I. He may be removed as manager only for a just or lawful cause by the vote of the partners owning the controlling interest.
II. He may be removed as manager with or without just or lawful cause by the vote of the partner owing the controlling
interest.
III. He may perform all acts of administrator despite the opposition of his partners provided he is in good faith.
IV. He may perform all acts of administration in good faith but opposing partners may resort to his removal if he persists.
I and III pertain to a partner appointed as manager in the articles of partnership.
I and III pertain to a partner appointed as manager through a document after the formation of the partnership
II and III pertain to a partner appointed through a document after the formation of the partnership.
I and IV pertain to a partner appointed as manager in the articles of partnership
Statement 1. If two or more partners have been entrusted with the management of the partnership without specification of
their respective duties, or without a stipulation that one of them shall not act without the consent of all the others, each
one may separately execute all acts of administration, but if any of them should oppose the acts of the others, the
decision of the partners owning the controlling interest shall prevail. In case of a tie, the matter shall be decided by the
majority.
Statement 2. In case it should have been stipulated that none of the managing partners shall act without the consent of the
others, the concurrence of all shall be necessary for the validity of the acts, and the absence or disability of any one of
them cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership.
Only the 1st statement is true Both statements are not true
nd
Only the 2 statement is true Both statements are true
Statement 1. For a partner to have an associate in his share, consent of the other partners is not required.
Statement 2. For the associate to become a partner, all must consent, whether the partner having the associate is a manager
or not.
Only the 1st statement is true Both statements are not true
Only the 2nd statement is true Both statements are true
A is the capitalist partner and B the industrial partner. A engaged personally in the same kind of business the partnership is
engaged in. Which of the following statements is correct?
If there are profits, A will give the profits to the partnership
A will be excluded from the partnership and pay damages
If there are losses, the partnership will bear the losses
If there are profits, the profits will be shared by A and the partnership
Which of the following is not correct about partner’s right over specific partnership property?
A partner is co-owner with his partners of specific partnership property.
A partner's right in specific partnership property is assignable.
A partner's right in specific partnership property is not subject to legal support.
A partner's right in specific partnership property is not subject to attachment or execution except on claim against the
partnership.
A, B and C were partners. While acting within the scope of the firm’s business, A committed torts against X, a third person. Is
the firm liable?
No, because only A was only at fault.
Yes. Moreover A, B and C as well as the firm itself, are liable in solidum.
Yes. Moreover A, B and C as well as the firm itself, are liable pro rata.
No. X remedy is to go after only the property of A who committed the torts.
GREAT Company, a partnership engaged in the distribution of generators, is composed of George, Roland, Edmond, Albert and
Troy. George is the managing partner. During the month of April, the following transactions were entered into by the
following partners in behalf of the partnership without any authority:
I. The sale of a generator by Roland to Juan Torres who was not aware that Roland had no authority. Juan Torres has paid
for the generator which is due for delivery.
II. The purchase of a car by Edmond from Lexus Motors whose owner was not aware of Edmond's lack of authority. The car
and the price are due for delivery and payment, respectively.
Based on the foregoing, the partnership is bound by:
Transaction I only. Both Transactions I and II.
Transaction II only. Neither of Transaction nor II.
A, B. C and D are partners where D is an industrial partner and A, B and C respectively contributed P400,000, P200,000 and
P200,000. ABCD & Co. became indebted to X in the amount of P1,800,000.
X can only hold liable A, B, and C as the capitalist partners;
X must first exhaust the partnership asset of P800,000 and then hold A, B and C jointly for the balance of P1,000,000
X must first exhaust the partnership assets amounting to P800,000 and then hold A, B, C and D solidarily liable for the
balance of P1,000,000;
X must first exhaust the partnership assets amounting to P800,000 and then hold liable jointly A, B, C and D from the
balance of P1,000,000 – but after D the industrial partner pays X P250,000 he can ask reimbursement from A, B, and C so
that in the end D as an industrial partner will not be liable for losses among themselves.
Which of the following act requires the consent of all partners?

A. Dispose the goodwill of the business
B. Confess a judgment
C. Renounce a claim of the partnership
D. Submit a partnership claim to arbitration
E. Enter into a compromise agreement concerning a partnership claim
a. Only A, B, C and D b. Only A, B, C and E c. Only A, B and C d. All of them
Joseph owed a distillery partnership the sum of P50,000, but when sued for the debt, he put up the defense of payment. As
proof thereof, he introduced as evidence a declaration made by the former managing partner to the effect that Joseph
owed the partnership nothing. The declaration was made however after the declarant had ceased to be a partner. Is the
declaration evidence against the partnership?
No, it cannot be used against the firm because it was made by a person no longer a partner at the time of declaration.
Joseph’s debt therefore still exists.
Yes, because it was made by the managing partner.
Yes, because an admission by a partner is an admission against the partnership.
No, it cannot be used against the firm because it was made by a person no longer a partner at the time of declaration.
However, Joseph’s debt no longer exists.
C, a partner in "C" partnership, assigns his interest in "Y" partnership to X, who is not made a partner. After assignment X
asserts the right to
1. Participate in the management of "Y" partnership.
2. C's share in the surplus profit
3. May compel the other partners that he (x) becomes a partner.
X is correct as to which of these rights?
a. 1 and 3 b. 2 only c. 3 only d. 2 and 3
A, B, C and D are in a partnership where the managing partner is not specified and A decides to build a warehouse on a piece
of land owned by the partnership without obtaining the consent of B, C, and D, because he believes that it would be more
beneficial to the firm on the long term. His partners come over, once the warehouse is finished to look at it and did not
object to its existence. Was this valid?
No, because none of the partners may, without the consent of the others, make any important alteration in the
immovable property of the partnership, even if it may be useful to the partnership.
Yes, since the partners did not object, then there is implied consent.
No, because the partners must give their express consent.
Yes, because, this is an act of administration.
The following are property rights of a partner, except:

rights in specific partnership property. right to participate in the management.
interest in the partnership right to inspect and copy partnership books
A and B were real estate partners. A heard of a possible purchaser of a certain parcel of land owned by the firm. But A did not
inform B. Instead, A persuaded B to sell to him (A) B’s share at a nominal amount, after which A sold the whole parcel at a big
profit. B sued A for damages for alleged deceit A’s defense was that he after all had not been asked by B about a possible
purchaser.
A is liable, for he should not have concealed.
A is not liable because B should have demanded the information from A.
A is not liable because he already sold his share to A.
A is liable because it is his duty to account for any partnership affairs.
X, Y, and Z entered into a partnership contributing P1M each. They also agreed on equal distribution of profit. After 5 years of
operation, Z assigns his whole interest in the partnership to A, without knowledge and consent of X and Y. Is the partnership
dissolved?
The partnership is not dissolved because the assignment made by Z of his whole interest was without the knowledge and
consent of X and Y.
The partnership was dissolved because the assignee, A, automatically becomes a new partner.
It is dissolved since Z has ceased to be a partner because of the assignment of his whole interest to A.
The partnership is not dissolved because the conveyance of a partner’s interest in the partnership does not of itself
dissolve the partnership.
X, Y, and Z entered into a partnership contributing P1M each. They also agreed on equal distribution of profit. After 5 years of
operation, Z assigns his whole interest in the partnership to A, without knowledge and consent of X and Y. Which of the
following statements is correct?
A can participate in the management of the partnership.
A cannot inspect the partnership books.
A can inspect the and copy the books because he is a partner and therefore there is a fiduciary relationship.
A can take part in the control of the business.
Those who take active part and known to the public as a partner in a partnership.
Secret partner Liquidating partner Ostensible partner Dormant partner
Those who do not take an active part in the business and is not known to the public as a partner.
Ostensible partner Secret partner Silent partner Dormant partner
The following are obligations pf partners, except:

To give their promised contribution.
To engage in any business which is of the kind in which the partnership is engaged.
To account and hold as trustee for any profits derived without the consent of the other partners.
Not to convert partnership money to their own use.
If there is no stipulation, when a partnership is formed, assets contributed by the partners should be recorded on the
partnership books at their -
book values on the partners' books prior to their being contributed to the partnership
fair market value at the time of the contribution
original costs to the partner contributing them
assessed values for property purposes
The following partnership contracts were presented to you for evaluation:

I. A partnership engaged in the sale of office supplies with a capital of P100,000.00 broken down into: cash, P30,000.00;
office supplies for sale, P50,000; and office equipment, P10.000.00; Land, P10,000. The agreement is in a private
instrument.
II. A partnership engaged in the lease of office spaces with a capital of P700,000.00 broken down into: land,
P100,000.00; building, P500,000.00; cash, P80,000.00; and office equipment, P20,000.00. The agreement is in a public
instrument attached to which is the inventory of the land and the building signed by the partners. The agreement is not
recorded with the Securities and Exchange Commission.
III. A partnership is engaged in the trading of computers whose name is "Lament Enterprises, Ltd." It has a total capital of
P500,000.00 broken down into P100,000.00 cash and computers worth P400,000.00, contributed by both general and
limited partners. The agreement was subscribed and sworn to by all the partners before a notary public but not recorded
Each partnership has a separate juridical personality.
I and II have separate juridical personality.
II and III have separate juridical personalities.
None of the partnerships has a separate juridical personality.
D, to carry on a business, borrowed money from C. It was agreed that D would return the money in installments and that said
installments would come from D’s profits in the business. Is a partnership created between D and C?
Yes, because the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in
the business.
Yes, because such inference shall be drawn if such profits were received in payment of a debt by installments or
otherwise;
No, because no inference shall be drawn if such profits were received in payment of a debt by installments or
otherwise.
No, because the payment was in installments.
A, B, C and D are partners where A, B, and C contributed P1,000,000 each and D his services. The partnership is engaged in the
manufacture and export of garments. Due to a very strong typhoon, the entire roofing of the factory was blown by the strong
winds and if not repaired immediately would aggravate the damage. A, B, C and D agreed on an additional contribution of
P200,000 each in order to save the business from imminent loss. Which of these is the correct statement?
D is duty bound to contribute 20% more of his time to the business of the partnership.
If A no longer has money, he can be complied to sell his interest in the partnership to the other partners.
B can question the decision because he did not vote for the additional contribution.
If C still has money, but refuses to make the contribution, he can be compelled to sell his interest in the partnership to
the other partners.
Three (3) of the following are rights of a partner. Which one (1) is not?
Right to associate another person to his share. Right to inspect and copy partnership book.
Right to admit another partner. Right to ask dissolution of the firm at the proper time.
Bears the loss of property contributed to the partnership.

Capitalist partner Partners contributing usufructuary rights.
Limited partner None of the above.
A, B, and C are general partners in ABC Partnership. D is a debtor to the partnership in the amount of P15,000. A received
from debtor D the sum of P5,000 and issued a receipt identifying the amount as his share. Then D become insolvent, B and C
cannot collect the P10,000.
A cannot be compelled to share the P5,000 with B and C.
B and C can charge the capital of A with their share of the P5,000.
A can be compelled to share B and C with the P5,000.
B and C should automatically sue D to collect the P10,000.
X, Y, and Z formed XYZ Partnership where X contributed cash of P100,000, Y contributed a certain machinery, Z , his industry.
Their agreement is orally made. XYZ partnership is a:
De facto partnership Void partnership
De jure partnership Partnership by estoppel
A and B orally agreed to form a partnership each contributing cash of P50,000 to the common fund. However, they did not
register the partnership with the SEC.
The partnership is void. The partnership is valid.
The partnership is voidable. The partnership is valid and unenforceable.
D, E and F formed a partnership contributing P1M each. They also agreed to distribute profits equally. After several years of
operation, D assigned his whole interest in the partnership to X, without the knowledge and consent of E and F. is the
partnership dissolved?
No, because the assignment made by D was without the knowledge and consent of E and F.
Yes, because the assignee automatically becomes a partner.
Yes, because D has ceased to be a partner upon assignment of his whole interest to X.
No, because the conveyance of a partner’s interest does not of itself dissolve the partnership.
A, B. C and D are partners where D is an industrial partner and A, B and C respectively contributed P400,000, P200,000 and
P200,000. ABCD & Co. became indebted to X in the amount of P1,800,000.
X can only hold liable A, B, and C as the capitalist partners;
X must first exhaust the partnership asset of P800,000 and then hold A, B and C jointly for the balance of P1,000,000
X must first exhaust the partnership assets amounting to P800,000 and then hold A, B, C and D solidarily liable for the
balance of P1,000,000;
X must first exhaust the partnership assets amounting to P800,000 and then hold liable jointly A, B, C and D from the
balance of P1,000,000 – but after D the industrial partner pays X P250,000 he can ask reimbursement from A, B, and C
so that in the end D as an industrial partner will not be liable for losses among themselves.
A, B and C are partners engaged in a retail business. Their contribution is P20,000 each. D is admitted as a new partner with a
contribution of P8,000. At the time of his admission, the partnership has an outstanding obligation to E in the amount of P80,
000.00. In this case:
D is not liable to E for this obligation and his P8,000 contribution shall remain with the partnership
D is liable to E for this obligation so that after the assets of the partnership amounting to P68, 000.00 will be exhausted
leaving a balance of P12, 000.00, only A, B and C shall be liable jointly or pro rata, out of their separate property.
D is liable to E for this obligation so that after the assets of the partnership will be exhausted, leaving a balance of
P12,000.00, all the partners shall be liable jointly or pro rata, including D, out of their separate property.
D will be liable only if he knew of the liability of P80,000 at the time he joined the partnership.
A, B, C and D were partners in the real estate firm of “ABCD Partnership.” A certain parcel of land was registered, not in the
name of the firm, but in the name of A, B, C and D. If A, B, C, and D will sell the land to X, what will X get?
X will get the title. X will not get anything.
X will have only the equitable interest. YES, but the firm may get back the land.
The liability of the partners, including industrial partners for partnership contracts entered into in its name and for its account,
when all partnership assets have been exhausted is
Pro-rata Primary Solidary Voluntary
On October 1, 2021 A and B formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. A
contributed a parcel of land that cost him P200,000. B contributed P300,000 cash. The land has a quoted price of P360,000 on
October 1, 2021. What amount should be recorded in A’s capital account on the formation of the partnership?
360,000 300,000 348,000 200,000
In a general partnership, the creditor of a partner may charge the interest of the indebted partner, the interest so charged
may be redeemed with:
Partnership property
Separate property of any general partner
Both partnership property and separate property of the general partner cumulatively
Both partnership property and separate property of the general partner alternatively
A and B are partners. A misappropriates a sum of money belonging to a customer X but which was already in the custody
of the partnership. Whom can X hold liable?
X can hold liable either the firm or A or B, and the X can hold liable A and B jointly.
liability is for the whole amount because it is X can only hold the partnership liable.
solidary. X can only hold A liable.
X is not a partner of A, B, and C. Without the consent or knowledge of C but with the implied consent of A and B, X made
T believe that he is a partner of A, B, and C. Who shall be liable for the payment of a debt of P500, 000 in favor of T who
extended credit on the basis of the misrepresentation?
X, A and B pro rata. X, A, B and C pro rata.
X, A and B solidarily. X, A, B and C solidarily.
A and B are partners engaged in the operation of a cinema business. The theater was mortgaged to C who foreclosed the
mortgaged debt. A, in his own behalf, redeemed the property with his own private funds. Subsequently, A files for a
petition for the cancellation of the old title of the partnership and the issuance of a new title in his name alone. Did A
become the absolute owner of the property?
Yes, because he redeemed the property with his own funds.
No, he will only hold the property as the trustee and will be entitled to reimbursement plus interest from the time he
redeemed the property.
No, unless he is reimbursed by the partnership plus interest from the time he redeemed the property.
Yes, because the title of the property is now in his name.
As a general rule, a partner cannot ask for a formal accounting of the affairs of the partnership during its existence and
before it is dissolved, except:
I. When he is rightfully excluded from the partnership business
II. When the right exists under the terms of any agreement
III. When he derived any profits without the consent of the other partners from any transaction connected with the
formation, conduct, or liquidation of the partnership or from any use by him of its property.
IV. Whenever other circumstances render it just and reasonable
I, II, III and IV
I, II, and III only
II, III, and IV only
III and IV only
General partners shall have no right to perform the following acts without the written consent or ratification by all the
limited partners, except:
Admit a person as a general partner.
Admit a person as a limited partner, unless the right to do so is given in the certificate.
Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a
general partner, unless the right to do so is given in the certificate.
To have the partnership books kept at the principal place of business of the partnership, and at a reasonable hour to
inspect and copy any of them.
A decree by the court is necessary to dissolve a general partnership based on three of the following grounds. Which one
will not require such decree but will cause the automatic dissolution of the partnership?
The business of the partnership can only be carried on at a loss.
A partner is shown to be of unsound mind.
A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business.
A partner is civilly interdicted.
A, B, C and D were partners. A assigned his interest in the partnership to his son S. S now wanted to join in the
management of the enterprise. B, C and D refused. Is the partnership necessarily dissolved?
The partnership is dissolved because of the conveyance by A.
The mere assignment did not dissolve the firm. This is so even if B, C and D did not allow S to participate in the firm’s
business conduct.
The partnership is not dissolve provided B, C and D will allow S to join the management of the enterprise.
The conveyance of interest by A automatically dissolved the partnership.
A, B, and C are partners. A dies. B knows this, but still he later transacts new business with X, a business not connected
with winding up. This notice of dissolution was in the paper but X did not read the notice, and when X transacted with B, X
thought all the time that the firm had not yet been dissolved.
Statement 1. If X had been a previous creditor, the partnership is liable.
Statement 2. If X had never extended credit before, the partnership is not liable.
Statement 3. The partnership is liable whether X was a previous creditor or not.
Only the 1st statement is true
Only the 2nd statement is true
Only the 3rd statement is true
Statements 1 and 2 are true
All statements are not true
Sisa, Ungas, Pamelo, Eula, and Randy are partners of SUPER DUPER Enterprises whose business is car painting and repairs.
All partners are capitalist partners with Sisa as manager. After six (6) years of operations, Randy resigned from the
partnership. Although Sibal was aware of the resignation of Randy, he still bought ten (10) gallons of car paint from
MISTERPAINT owned by Marlon who had been dealing with SUPER DUPER for the past 5 years, and car spare parts from
SMARTPARTS, owned by Sandra who had been dealing with SUPER DUPER for the past 2 years. The dissolution of SUPER
DUPER was published in the Philippine Star but neither Marlon nor Sandra read it. Neither one knew at the time they
transacted with Sisa that the partnership had been dissolved.
SUPER DUPER is liable to both MISTERPAINT and SMARTPARTS.
SUPER DUPER is liable to MISTERPAINTS only.
SUPER DUPER is liable to SMARTPARTS only
SUPER DUPER is not liable to both MISTERPAINTS and SMARTPARTS.
In winding-up or liquidation of the partnership after dissolution, which is the correct order of payment?
Pay the creditors who are partners, then creditors who are third persons; then return of capital contribution and then
distribution of profits.
Pay to creditors who are not partners; then the creditors who are partners; then distribution of profits and return of
capital contribution.
Pay to creditors who are not partners; then the creditors who are partners; then return of capital contribution and then
Return of capital contribution; then payment of creditors who are not partners; then creditors who are partners and
A partnership is automatically dissolved, except:

By the death of any partner
By the insolvency of any partner or of the partnership
By the civil interdiction of any partner
By the insanity of any partner
As regards a limited partner, which statement is correct?

He cannot be allowed to transact business directly with the partnership of which he is a member as this would result into
conflict of interest.
He is automatically the agent of the partnership with general authority to bind the partnership to contracts with third
persons.
He can only contribute money and property but not services.
He has no liability to partnership creditors even if he takes part in the management of the partnership.
Without the written consent or ratification of the specific act by all the limited partners, a general partner or all of the
general partners have no authority to:
Do any act in contravention of the certificate.
Do any act that would make it impossible to carry on the ordinary business of the partnership.
Confess a judgment against the partnership.
All of the above.
A partner whose liability for partnership debts is limited to his capital contribution is called:
General partner
Limited partner
General-limited partner
Secret partner
On application by or for partner the court shall decree a dissolution whenever:

I. A partner becomes in any other way incapable of performing his part of the partnership contract.
II. A partner has been guilty of such conduct as it tends to affect prejudicially the carrying on of the business.
III. A partner willfully or persistently commits a breach of the partnership agreement that it is not reasonably practicable
to carry on the business in partnership with him.
I, II, and III
I, and III only
II, and IV only
III and IV only
A substituted limited partner is:

a person admitted as a partner by the other partners.
a buyer of right of the deceased partner.
An assignee admitted to all the rights of a limited partner.
All of the above.
In a limited partnership where there are 4 partners:

All the partners must be limited partners.
The number of limited partners must be equal to the number of general partner, that is, 2:2.
The number of limited partners must be greater than the number of general partners, that is, 3:1.
It is enough that there is one limited partner; the rest may all be general partners.
Which of the following is a false statement?

If a limited partnership will be created, registration is a condition precedent for the creation of the limited partnership
If one of the partners in a general partnership contributed a building to the partnership, there must be a public
instrument and an inventory as a requirement, otherwise the partnership is void
If a limited partnership will be created, registration is a condition subsequent for the creation of the limited
partnership.
If a limited partnership is not registered, a general partnership is created.
A partnership is dissolved on the death of a:

I. General partner
II. Industrial partner
III. General-Limited partner
IV. Limited partner
I, II, III or IV
I, II, or III only
II, III, or IV only
III or IV only
A decree by the court is necessary to dissolve a general partnership based on three of the following grounds. Which one
will not require such decree but will cause the automatic dissolution of the partnership?
The business of the partnership can only be carried on at a loss.
A partner is shown to be of unsound mind.
A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business.
A partner is civilly interdicted.
Which of the following may be a cause for involuntary dissolution?

Express will of any partner
Insolvency of any partner
Termination of the term
Expulsion of any partner
Allan, Beth and Chris are partners with capital contribution of P15,000, P10.000 and P5,000, respectively. Supposed on
dissolution, the assets of their partnership amount to only P46.000 and it owed Delia the amount of P50.000. Chris owes
Polly on his personal account P6,000. The partners have no separate personal property except Chris whose separate
property amounts to P7.000. Which is correct?
Delia and Polly shall divide Chris separate property equally.
Delia and Polly shall divide Chris property pro-rata.
Delia shall be preferred as regards Chris separate property
Polly shall be preferred as regards Chris separate property
In a limited partnership, the creditor of a limited partner may charge the interest of the indebted limited partner, the
interest so charged may be redeemed with:
Partnership property
Separate property of any general partner
Both partnership property and separate property of the general partner cumulatively
Both partnership property and separate property of the general partner alternatively
Without the written consent or ratification of the specific act by all the limited partners, a general partner or all of the
general partners have no authority to:
Do any act in contravention of the certificate.
Do any act that would make it impossible to carry on the ordinary business of the partnership.
Confess a judgment against the partnership.
All of the above.
A limited partner shall be liable as general partner in three of the following cases. Which one is the exception?
When he is a general-limited partner as stated in the certificate.
When he takes part in the control of the business.
When he participates in the management of the business.
When his surname which appears in the partnership name is also the surname of a general partner.
The following are all grounds for a judicial decree of dissolution except:
where a partner is guilty of such conduct as tends to prejudicially affect the partnership
when the business can only be carried at a loss
by any event which makes it unlawful for the partnership to carry on the business
where a partner is rendered incapable of performing his part of the agreement
where a partner is judicially shown to be insane
Which of these partners is not entitled to direct access to books and records of the partnership or to ask for formal
accounting or for dissolution, etc.
General partner
Assigned limited partner
Substituted limited partner
All of the above
In winding-up or liquidation of the partnership after dissolution, which is the correct order of payment?
Pay the creditors who are partners, then creditors who are third persons; then return of capital contribution and then
Pay to creditors who are not partners; then the creditors who are partners; then distribution of profits and return of
capital contribution.
Pay to creditors who are not partners; then the creditors who are partners; then return of capital contribution and then
Return of capital contribution; then payment of creditors who are not partners; then creditors who are partners and
A, B and C formed a universal partnership of all present property on February 14, 2019. A contributed P500,000, B a car
worth P500,000 and C contributed Equipment worth P500,000. The partners executed an article of co-partnership in
private instrument After operation for 5 months, A and B got married. Did the marriage dissolve the partnership?
Yes, the partnership is dissolved by the marriage, because there is a change in equity among the partners.
No, the marriage did not dissolve the partnership
No, because spouses can enter into a universal partnership
Yes, because it becomes unlawful for the business of the partnership to be carried on or for the members to carry it on
in partnership.
Which of the following losses will not cause the dissolution of a partnership?
Loss before delivery of a specific thing which a partner has promised to contribute to the partnership.
Loss after delivery of a specific thing where the partner contributed only its use and enjoyment, he reserved the
ownership thereof.
Loss before delivery of a specific thing where the partner promised to contribute only its use and enjoyment, reserving
the ownership thereof.
Loss of a specific thing after its delivery to and acquisition of its ownership by the partnership from partner who
contributed the same.
Republic Act 11232, The Revised Corporation Code of The Philippines took effect in :
February 23, 2019
February 27, 2019
February 28, 2019
March 2, 2019
Statement 1. The Congress shall not, except by general law, provide for the formation, organization, or regulation of
private corporations.
Statement 2. Government-owned or controlled corporations may be created or established by special charters in the
interest of the common good and subject to the test of economic viability.
Statement I is true but statement II is false
Statement I is false but statement II is true
One of the distinctions between a partnership and a corporation is that a partnership:

is managed by a board of directors.
is characterized by the principle of delectus personae.
has the right of succession.
may be dissolved only with the consent of the State.
A corporate term for a specific period may be extended or shortened by amending the articles of incorporation. Provided,
That no extension may be made earlier than ____________ years prior to the original or subsequent expiry date(s) unless
there are justifiable reasons for an earlier extension as may be determined by the Commission.
Five (5)
Four (4)
Two (2)
Three (3)
Statement 1. A corporation whose term has expired may, at any time, apply for a revival of its corporate existence,
together with all the rights and privileges under its certificate of incorporation and subject to all of its duties, debts and
liabilities existing prior to revival.
Statement 2. Upon approval by the Commission, the corporation shall be deemed revived and a certificate of revival of
corporate existence shall be issued, giving it perpetual existence, unless its application for revival provides otherwise.
A, the proprietor of a fleet of 10 taxicabs, decides to adopt, as his business name, “A Transport Co., Inc.” May this be
allowed?
No, it would be deceptive since he is a proprietor, not a corporation.
No, since “A” is a generic name, not suitable for registration.
Yes, since his line of business is public transportation.
Yes, since such name would give his business a corporate identity.
No application for revival of certificate of incorporation shall be approved by the Commission unless accompanied by a
favorable recommendation of the appropriate government agency in the following, except:
banks, banking and quasi-banking institutions
food and beverage companies
preneed, insurance and trust companies
non-stock savings and loan associations (NSSLAs)
Corporation is not entitled to this kind of damages?

Actual damages
Moral damages
Exemplary damages
Liquidated damages
A private corporation organized under the corporation law commences to have corporate existence and juridical
personality and its deemed incorporated from:
From the date the SEC issues a certificate of incorporation under its official seal.
The date when the articles of incorporation is signed by the incorporators.
When the articles of incorporation and by-laws are presented and received by the Security and Exchange Commission and
the filing fee is paid.
When the articles of incorporation is notarized by a Notary Public.
Which of the following can be an incorporator of a corporation?

i. Any person
ii. Partnership
iii. Association
iv. Corporation
i only
i and iv only
i, iii, and iv
i, ii, iii, iv
Three (3) of the following are attributes of a corporation. Which is the exception? (Phil CPA, 89-1)
An artificial being
Has the right of succession
Has power, attributes and properties expressly authorized by law or incident to its existence.
Created by agreement of the corporation.
The articles of incorporation differ from the by-laws in that the articles of incorporation are:
the rules of action adopted by a corporation for its internal government.
adopted before or after incorporation.
approved by the stockholders if adopted after incorporation.
a condition precedent in the acquisition by a corporation of a juridical personality.
Which of the following will not qualify as incorporator of a corporation?

A minor
Association
A corporation
Partnership
In the amendment of the Articles of Incorporation of a stock corporation, the following is necessary:
Amendment by the majority vote of the Board of Directors plus a vote or written assent of the stockholders
representing at least 2/3 of the outstanding capital stock.
Amendment by a vote of 2/3 of the stockholders.
Amendment by a majority vote of the Board of Directors.
None of the three.
The following are some of the requisites of a de facto corporation. Choose the exception: (Phil CPA, 86-2; 87-2-M)
Valid law under which it is incorporated
Attempt to incorporate
Assumption of corporate power
None of the above
The corporation's separate juridical personality may be disregarded when the corporate identity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime.
Doctrine of Limited capacity
Doctrine of Limited Liability
Doctrine of Corporate Entity
Doctrine of Piercing the Veil of Corporate Entity
Corporations governed by special laws have to submit a recommendation from the appropriate government agency to the
effect that such articles are in accordance with law. These include the following, except:
banks, banking and quasi-banking institutions,
Preneed companies
insurance companies
telecommunication companies
pawnshops
The following constitutional guarantees are applicable to corporations, except:

i. right against unreasonable searches and seizure
ii. due process clause
iii. right against self–incrimination
iv. freedom to travel
iv only
iii, and iv
i and iv
i, ii, iii, iv
The amendment of the Articles of Incorporation shall take effect upon their approval by the Commission or from the date
of filing with the said Commission if not acted upon within ____________from the date of filing for a cause not
attributable to the corporation.
six (6) months
twelve (12) months
three (3) months
one (1) month
X Corp. operates a call center that received orders for pizzas on behalf of Y Corp. which operates a chain of pizza
restaurants. The two companies have the same set of corporate officers. After 2 years, X Corp. dismissed its call agents for
no apparent reason. The agents filed a collective suit for illegal dismissal against both X Corp. and Y Corp. based on the
doctrine of piercing the veil of corporate fiction. The latter set up the defense that the agents are in the employ of X Corp.
which is a separate juridical entity. Is this defense appropriate?
Yes, it is not shown that one company completely dominates the finances, policies, and business practices of the other.
No, since the doctrine would apply, the two companies having the same set of corporate officers.
No, the real employer is Y Corp., the pizza company, with X Corp. serving as an arm for receiving its outside orders for
pizzas.
Yes, since the two companies perform two distinct businesses.
A corporation, the sole purpose of which is to invest its capital in a specific property and afterwards consume that
property or extract its value at a profit is called:
Quasi corporation
Open corporation
Wasting asset corporation
Eleemosynary corporation
B is the owner of 75% of the shares in Bentong Corporation. On one occasion, Bentong Corporation, as represented by B
as the President and General Manager, entered into a contract to sell with K involving a townhouse. For failure of
Bentong Corporation to build the townhouse, K filed a case of rescission and damages against B and Bentong Corporation.
Which is correct?
The action filed against B will not prosper because Bentong Corporation has a separate and distinct personality from the
former and that when B entered into a contract with K, he was only acting in behalf of the company.
The action filed against Bentong Corporation will prosper because this pertain to the company and the company alone
should be held liable unless B acted maliciously or in bad faith.
The action filed against Bentong Corporation and B will prosper because the latter owns a majority of the shares in former
and as such B is personally liable for all the transactions entered into by the corporation.
a and b only
A, B, C, D and E distributed calling cards identifying themselves as directors of Summit Corporation, to several individuals
during a business conference. In reality, however, no such corporation is registered with the Securities and Exchange
Commission. X, who received a calling card granted credit amounting to P50.000.00 to "Summit Corporation" believing
that such a corporation really existed. When the supposed corporation was unable to pay, X brought a court action
against it. At that time, "Summit Corporation" had assets of P30,000.00.
“Summit Corporation" is liable only up to P30,000.00, its remaining assets, since it is different from A, B, C, D and E who
are not liable in their individual capacities.
A, B, C, D and E can move for the dismissal of the court action because "Summit Corporation" has no personality of its
own.
X can go after the separate assets of A, B, C, D, and E after exhausting the assets of "Summit Corporation.
X cannot allege the lack of juridical personality on the part of "Summit Corporation" because he is stopped from doing
so.
Mrs. Baby owns a substantial portion of the outstanding capital of X corporation. Is the mere ownership of substantial
portion alone of the outstanding capital in a corporation justify the application of doctrine of piercing the veil of corporate
entity?
No. It requires that the stockholders must own at least more than 50% of the outstanding capital stock to justify the
application of piercing the veil of corporate entity.
Yes. A substantial ownership of the outstanding capital stock alone is sufficient for the application of piercing the veil of
corporate entity.
Yes. Piercing the veil of corporate entity applies whenever there is parent subsidiary relationship which means that the
parent owns at least more than 50% of the outstanding capital stock of the subsidiary.
No. Mere ownership by a single stockholder or by any corporation of all or substantially all of the capital stock of the
corporation does not justify the application of the doctrine of piercing the veil of corporate entity. There must be other
circumstances that must be present.
Which of the following statements pertaining to no-par shares is incorrect?

Subscriptions to no-par shares are deemed fully paid and non-assessable.
Shares without par value may not be issued for a consideration less than P5.00 per share.
No-par shares may not be issued by banks, trust companies, insurance companies, public utilities and building and loan
associations.
Subscriptions to no-par shares in excess of the issued price shall be available for distribution as stock dividends.
The following statements pertaining to the power of a corporal to issue non-voting shares were presented to you for
evaluation:
I. Those classified as "redeemable" or "preferred" may be deprived of the voting right.
II. All shares of the corporation may be deprived of the voting right.
III. Non-voting shares may vote in certain corporate acts like in the amendment of the articles of incorporation.
I and II are true.
II and III are true.
I and III are true.
All statements are true.
Which of the following is the disadvantage of forming a corporation? (Phil CPA, 93-2; 94-2; 96-1)
The free and ready transferability of ownership
The subservience of minority stockholders to the wishes of the majority subject only to equitable restraint.
The shareholders are not liable for the debts of the business.
Because of the power of succession, the existence of the entity is not affected by the personal vicissitudes of the
individual shareholders.
This share can be acquired by the corporation which issued it even without unrestricted retained earnings:
founder's shares
par value shares
redeemable shares
no-par shares
The following are advantages of no-par value share of stock. Which is the exception? (Phil CPA, 90-1)
No par value shares allow flexibility in price.
The stockholders of n0-par value shares are relieved of personal liability for unpaid stock subscription.
No-par value shares afford a possible remedy of relief from the evil of over capitalization and stock watering.
It allows the issue of stocks in exchange of property.
An auditing firm composed of Certified Public Accountants may validly form:

I. a partnership
II. a corporation
The statement is true with respect to both business organizations.
The statement is false with respect to both business organizations.
The statement is false with respect to partnership; true with respect to corporation.
The statement is true with respect to partnership; false with respect to corporation.
A non-voting stock may vote in the following corporate acts, except in case of:
approval of the compensation of directors.
merger or consolidation.
increase or decrease in capital stock.
sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of corporate property.
A corporation created in strict or substantial conformity with the statutory requirements for incorporation and whose
right to exist as a corporation cannot be successfully attacked even in a direct proceeding for that purpose by the State is
known as: (Phil CPA, 91-2)
De jure corporation
De facto corporation
Corporation by estoppel
Answer not given
These corporation are prohibited from issuing no par shares, except:

Brokerage companies
Public utilities
Building and loan association
Insurance companies
Statement 1. A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
Statement 2. Corporations with certificates of incorporation issued prior to the effectivity of the Revised Corporation
Code, and which continue to exist shall have perpetual existence, unless the corporation, upon a vote of its stockholders
representing two-thirds of its outstanding capital stock, notifies the Commission that it elects to retain its specific
corporate term pursuant to its articles of incorporation.
The following are transactions pertaining to shares of stock of a certain corporation:
I. Subscriptions to 100 shares of stock at P100.00 par value per share by Mr.
II. Purchase of 30 shares of stock from the corporation's treasury shares by Mr. BB at a total price of P300.00.
III. Purchase of 100 shares of stock by Mr. CC at a total price of P1,200.00, from Mr. DD, another stockholder.
Which of the above transactions are enforceable although they are not in writing?
I and II
I and III
II and III
I only
The articles of incorporation of Miro Corporation, a construction company, classify its shares into voting common stock
and non-voting preferred stock, and provide for 11 directors. Its by-laws on the other hand, give the board of directors the
authority to approve transactions not exceeding P2,000,000.00. Any transactions in excess of the said amount have to be
ratified by the stockholders. In which of the following cases may the preferred stock vote?
Increase in the number of directors from 11 to 15.
Approval of a loan amounting to P3,000,000.00 from BDO Bank.
Declaration of stock dividends from the unissued common stock.
Purchase of cement worth P2,500,000.00 from United Cement Corporation.
The board of directors are allowed to fill up the following vacancies?

I. The vacancy in the board was the result of the removal by the stockholders or members
II. The vacancy in the board was due to expiration of term
III. The vacancy in the board was due to an increase in the number of directors
IV. Vacancy of corporate secretary
I and II III and IV
II and III IV only
After the election of the directors, trustees and officers of the corporation, within what period the secretary, or any other
officer of the corporation shall submit the report of election of directors, trustees and officers to the Securities and
Exchange Commission (SEC)?
Thirty (30) days Forty-five (45) days
Fifteen (15) days Sixty days (60) days
Which of the following is not correct about removal of director?

The remaining director may fill up the vacancy in the board if the ground of the vacancy is due to death provided the
remaining director still constitute quorum.
A director can be removed by at least 2/3 vote of the outstanding capital stock.
A director may be removed by majority vote of the directors if the by-laws expressly provided otherwise.
If the ground of vacancy of director is due to removal from office, only the stockholders can fill up the vacancy in the
board.
Which of the following qualifications is necessary in order that one may be elected president of the corporation?
He must be a citizen and a resident of the Philippines.
He must not be a stockholder or director of a competitor corporation.
He must not be a president of any other corporation.
He must be a director of the corporation.
Which of the following qualifications is necessary in order that one may be elected secretary of the corporation?
He must be a stockholder of the corporation.
He must not be a secretary of any other corporation.
1st Statement: A majority of the directors or trustees of all corporations organized in the Phil. must be citizens of the
Phil.
2nd Statement: Any two (2) or more positions may be held concurrently by the same person, except that no one shall act
as president and secretary or as secretary and treasurer at the same time.
Both statements are not true
Only 1st statement is true
Only 2nd statement is true
An officer of a corporation may hold two or more positions in the corporation but not as:
Chairman of the Board and President.
President and Treasurer
Secretary and Treasurer
Vice President and Secretary
A Chinese national is not allowed to become:

Treasurer Director
Secretary President
In which of the following corporations will those composing the corporation be liable as general partners?
Corporation by prescription.
De facto corporation.
Corporation by estoppel.
De jure corporation.
In the meeting of the board of directors of Grand Corporation, a construction company, held on March 31, 2019, directors
A, B, C, D and E were present among the 9 directors. The meeting had for its agenda the following:
I. The appointment of a new treasurer.
II. The approval of the contract for the purchase of cement worth P50,000.00 from X Construction Supplies Co
When the voting took place, directors A, B, C and D voted for the election of Y as the new treasurer; and directors A, B
and C voted for the approval of the contract with X Construction Supplies.
Both corporate acts are valid.
Both corporate acts are not valid
The election of Y as the new treasurer is valid; the approval of the contract with X Construction Supplies is not valid.
The election of Y as the new treasurer is not valid; the approval of the contract with X Construction Supplies is valid.
In 2019, Corporation "A" passed a board resolution removing "X" from his position as manager of said corporation. The
by-laws of "A" corporation provides that the officers are the president, general-manager, treasurer and secretary. Upon
complaint filed with the SEC, it held that the general manager could be removed by mere resolution of the board of
director.
On motion for reconsideration, "X" alleged that he could only be removed by the affirmative vote of the stockholders
representing 2/3 of the outstanding capital stock. Is "X's" contention legally tenable.
No, the vote required is majority of the board and 2/3 OCS consenting
Yes, the voting requirement is only 2/3 of the outstanding capital stock.
No, the required vote is MBD consented by MOCS.
No, the voting requirement is only majority of the Board of Directors.
The rule is that no stock dividend shall be issued without the approval of stockholders representing at least 2/3 of the
outstanding capital stock at a regular or special meeting called for the purpose. As to other forms of dividends:
a mere majority of the entire Board of Directors applies.
a mere majority of the quorum of the Board of Directors applies.
a mere majority of the votes of stockholders representing the outstanding capital stock applies.
the same rule of 2/3 votes applies.
The Board of Directors of XYZ Corp. unanimously passed a Resolution approving the taking of steps that in reality
amounted to willful tax evasion. On discovering this, the government filed tax evasion charges against all the company’s
members of the board of directors. The directors invoked the defense that they have no personal liability, being mere
directors of a fictional being. Are they correct?
No, since as a rule only natural persons like the members of the board of directors can commit corporate crimes.
Yes, since it is the corporation that did not pay the tax and it has a personality distinct from its directors.
Yes, since the directors officially and collectively performed acts that are imputable only to the corporation.
No, since the law makes directors of the corporation solidarily liable for gross negligence and bad faith in the discharge
of their duties.
The Corporation Code sanctions a contract between two or more corporations which have interlocking directors, provided
there is no fraud that attends it and it is fair and reasonable under the circumstances. The interest of an interlocking
director in one corporation may be either substantial or nominal. It is nominal if his interest:(2011 Bar)
does not exceed 25% of the outstanding capital stock.
exceeds 25% of the outstanding capital stock.
X Corp., whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corp., an investment firm,
through a resolution of its Board of Directors. The investment grew tremendously on account of Y Corp.'s excellent
business judgment. But a minority stockholder in X Corp. assails the investment as ultra vires. Is he right and, if so, what is
the status of the investment?
Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders’ ratification.
Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders’ ratification.
Yes, it is an ultra vires act of its Board of Directors and thus void.
Yes, it is an ultra vires act of the corporation itself and, consequently, void.
Which of the following instances are non-voting shares not allowed to vote?
Increasing capital stock
Payment of Bonded indebtedness.
Mortgaging substantially all of the corporate property.
Investment of corporate fund in another corporation not for primary purpose of the corporation.
The term of office of Mr. Carlito as member of the board is about to expire on May 10, 2018. On May 12, 2018 a special
meeting was called to fill up the vacancy in the board. Mr. Vladimir got the highest number of votes; however, Mr.
Vladimir is not a shareholder.
Mr. Carlito is no longer a director because Mr. Vladimir is qualified to be a director
Mr. Vladimir is entitled to office because he got the highest number of votes and the term of Mr. Carlito is already
expired.
Mr. Carlito is entitled to hold office despite that his term is already expired because Mr. Vladimir is not qualified to be a
director not being a shareholder. Hence, the incumbent director Mr. Carlito shall serve until his successor is elected and
qualified.
Mr. Vladimir is the new director because he got the highest number of votes.
“The majority vote of its board of directors and by the vote or written assent of the stockholders representing at least
two-thirds of the subscribed capital stock of the corporation” is prescribed under the Corporation Law for this purpose
For declaration of stock dividends.
For adoption of any by-law or by-laws.
To invest its corporate funds in any corporation or business, or for any purpose other than the main purpose for which it
was organized.
To amend the articles of incorporation.
Any provision or matter stated in the articles of incorporation of stock corporation may be amended by a
Majority vote of the board of directors and the vote or written assent of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock.
Majority vote of the board of directors and the vote or written assent of the stockholders representing Majority of the
outstanding capital stock.
Majority vote of the board of directors and the vote of the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock in a regular or special meeting called for that purpose.
Majority vote of the board of directors and the vote of the stockholders representing majority of the outstanding capital
stock in a regular or special meeting called for that purpose.
In case of a delinquent stockholder, the following rights are not given to him except:
Right to vote
Right to be voted for
Right of representation of any stockholders’ meeting
Right to receive dividends in accordance with the provisions of the law
One of the following does not require stockholders’ approval:

Merger or consolidation
Change of corporate name
Investment of corporate fund for a purpose outside of the main purpose of the corporation
Declaration of cash dividend
Which of the following is not correct about director?

A director must be an owner of at least one share of stock.
A person is disqualified to become a director if he is convicted by final judgment of an offense punishable by
imprisonment for a period exceeding six (6) years.
A juridical person like partnership is allowed to be a director
The number of directors of Stock Corporation is not less than five but not more than fifteen.
Which of the following is not correct about removal of director?

The remaining director may fill up the vacancy in the board if the ground of the vacancy is due to death provided the
remaining director still constitute quorum.
A director can be removed by at least 2/3 vote of the outstanding capital stock.
A director may be removed by majority vote of the directors if the by-laws expressly provided otherwise.
If the ground of vacancy of director is due to removal from office, only the stockholders can fill up the vacancy in the
board.
Which of the following is not correct about management contract?

The maximum period of management contract as a rule is five (5) years for any one term.
Management contract shall have been approved by the board of directors and by stockholders owning at least the
majority of the outstanding capital stock, or by at least a majority of the members in the case of a non-stock corporation,
of both the managing and the managed corporation.
Where a majority of the members of the board of directors of the managing corporation also constitute a majority of
the members of the board of directors of the managed corporation, then the management contract must be approved
by the stockholders of the managing corporation owning at least two-thirds (2/3) of the total outstanding capital stock
entitled to vote.
where a stockholder or stockholders representing the same interest of both the managing and the managed corporations
own or control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the managing
corporation, the management contract must be approved by the stockholders of the managed corporation owning at
least two-thirds (2/3) of the total outstanding capital stock entitled to vote.
Which of the following qualifications is necessary in order that one may be elected president of the corporation?
He must not be a stockholder or director of a competitor corporation.
He must not be a president of any other corporation.
The following are the requisites, except one, for valid declaration and/or issuance of stock dividend. Which is the
exception?
Existence of original and unissued shares
Dividend declaration is made by the Board of Directors and approved by 2/3 of the outstanding capital stock
It is issued to increase the authorized capital
Existence of unrestricted retained earnings
In the following cases, the preemptive right of the stockholders can be denied - choose the exception.
If it is denied in the articles of incorporation.
By a vote of a majority of the outstanding shares where the increase in authorized capital stock is to be used for the
payment of corporate debts still to be contracted
If the increase in authorized capital stock is to enable the corporation to comply with a law requiring subscription by the
public.
by a vote of 2/3 of the outstanding shares where the increase in authorized capital stock is to be exchanged with a
property needed for a corporate purpose.
One of the following is not required and does not form part of the three-fold duty of directors of a corporation. Which
one?
Duty of Diligence Duty of Obedience
Duty of Loyalty Duty of Efficiency
Right which the existing stockholders or corporation cannot be deprived without the consent of their right to subscribe or
to purchase new stock issued by the corporation or unissued original stock, in proportion to their holdings before it can be
offered to others:
Right of redemption Right to purchase
Pre-emptive right None of them
A non-voting stock may vote in the following corporate acts, except in case of:
approval of the compensation of directors.
merger or consolidation.
increase or decrease in capital stock.
sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of corporate property.
Which of the following statements is false concerning treasury shares?

They are entitled to dividends.
They have no voting right.
They may be disposed of for a price lower than the par value provided such price is reasonable.
They are not outstanding shares.
The by-laws of a corporation may create an executive committee, composed of not less than 3 members of the board of
directors to be appointed by the board. The executive 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 on majority vote of the
board, EXCEPT:
Approval of any action for which shareholders' approval is also required.
Amendment or repeal of by laws or adoption of new by laws.
Filling of vacancies in the Board,
All of the above
Statement 1. Under the Business Judgment Rule, the authority of the board to control the affairs, assets of the
corporation is absolute for as long as the BOD has acted in accordance with its best judgment.
Statement 2. And in the absence of bad faith, gross negligence, breach of trust, the court is not supposed to substitute its
judgment to that of the bod.
Statement 1. Directors shall be elected for a term of one (1) year from among the holders of stocks registered in the
corporation’s books, while trustees shall be elected for a term not exceeding three (3) years from among the members of
the corporation.
Statement 2. The board of corporations vested with public interest shall have independent directors constituting at least
twenty percent (20%) of such board.
Statement 1: Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as
president and secretary or as secretary and treasurer at the same time.
Statement 2: Immediately after their election, the directors of a corporation must formally organize by the election of a
president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and
citizen of the Philippines, and such other officers as may be provided for in the by-laws.
Both statements are true.
Both statements are false.
Statement I is true, but statement II is false.
Statement I is false, but statement II is true.
The report of election of directors, trustee and officer must be submitted to the Securities and Exchange Commission
within:
Thirty (30) days after the election of the directors, trustee and officers of the corporation.
Sixty (60) days after the election of the directors, trustee and officers of the corporation.
Ninety (90) days after the election of the directors, trustee and officers of the corporation.
One hundred twenty (120) days after the election of the directors, trustee and officers of the corporation.
The following, except one are qualifications of corporate directors:

Must continuously own at least one share during their term as directors.
Must own at least one share of stock.
Ownership of shares must be recorded in the books of corporation.
Majority are citizens of the Philippines.
1st Statement: In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive
any compensation, as such directors, except for reasonable per diems.
2nd Statement: In no case shall the total yearly compensation of each director, as such directors, exceed ten (10%)
percent of the net income before income tax of the corporation during the preceding year
A, B, C, D, E, F, G, H and I are directors of Strong Cement Corporation whose articles of incorporation provide for 9
directors. In the meeting of March 2019, directors A, B, C, D and E were present to approve a contract for the purchase of
cement bags from E who deals in the said product. The contract was deliberated upon exhaustively by the said directors
in the meeting including E. When the voting took place however, only A, B, C and D who found the contract fair and
reasonable under the circumstances, voted for its approval. The contract between the corporation and E is:
Valid and enforceable.
Voidable at the option of the corporation.
Unenforceable against the corporation.
Void because a corporation must not enter into a contract with any of its directors since a director occupies a position of
trust.
The contract between corporations with interlocking directorates is generally considered as:
valid
rescissible
Voidable
Unenforceable
Void
A is a director and owns 50% of the outstanding capital stock of Ace Corporation which is engaged in the trading of
computers. Ace Corporation purchased computer tables from Top Corporation of which A is also a director and owns 15%
of its outstanding capital stock. The articles of incorporation of both corporations provide for 5 directors. In the approval
of the contract for the said purchase, A did not attend the meeting of the board of directors of Ace Corporation, while in
the meeting of the board of directors of Top Corporation which was called for the same purpose, directors A, B, C and D
were present with all of them voting for the approval of the contract. Assuming that there is no fraud and that the
contract is fair and reasonable under the circumstances, the contract between Ace Corporation and Top Corporation is:
valid.
voidable at the option of Top Corporation.
unenforceable against Top Corporation.
void because corporations with interlocking directorate should not enter into a contract with each other.
1st Statement: Where a director, by virtue of his office, acquires for himself a business opportunity which should belong
to the corporation, thereby obtaining profits to the prejudice of such corporation, such director shall refund to the
corporation double the profits he realizes on such business opportunity.
2nd Statement: If such act is ratified by a vote of the stockholders representing at least majority of the outstanding
capital stock, the director is excused from remitting the profit realized.
The voting requirement to increase or decrease capital stock: (Phil CPA, 89-1)
Majority vote of the Board of Directors and consented to by the stockholders representing two-thirds (2/3) of the
outstanding capital stock.
Two-thirds (2/3) vote of the Board of Directors with the consent of majority of outstanding capital stock.
Majority vote of the Board of Directors with the consent of majority of the outstanding capital stock.
Majority vote of the Board of Directors and three-fourth (3/4) vote of the outstanding capital stock,
1st Statement: A sale of all or substantially all of the corporation’s properties and assets, including its goodwill must be
authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or at
least two-thirds (2/3) of the members, in a stockholders’ or members’ meeting duly called for the purpose.
2nd Statement: After such authorization or approval by the stockholders or members, the board of directors or trustees
may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge, or other disposition of
property and assets, subject to the rights of third parties under any contract relating thereto, without further action or
approval by the stockholders or members.
A corporation may invest its funds in any other corporation or business or for any purpose other than primary for which it
was organized.
There is a majority vote the Board of Directors and ratified by the stockholders representing 2/3 of the outstanding
capital stock.
It is reasonably necessary to accomplish its secondary purpose, the approval of the stockholders not necessary.
There is majority vote of the Board of Directors.
There is majority vote of the outstanding capital stock
One of the following acts may be performed by the executive committee of a corporation. Which is it?
Declaration of stock dividends.
Filling of vacancies in the board of directors.
Amendment or repeal of the by-laws or adoption of new by-laws.
Approval of contracts in the ordinary course of business.
1st Statement: A private corporation may invest its funds in any other corporation or business or for any purpose other
than the primary purpose for which it was organized when approved by a majority of the board of directors or trustees
and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or by at least two
thirds (2/3) of the members in the case of non-stock corporations, at a stockholder's or member's meeting duly called for
the purpose.
2nd Statement: Investment of a corporation in a business which is in line with its primary purpose requires only the
approval of the board.
A, B, C, D, E, F and G are the members of the Board of directors (BoD) of a corporation. A, B and C resigned for personal
reasons. How shall the vacancies be filled up?
The vacancies shall be filled up by the majority vote of the BoD.
The vacancies shall be filled up by the majority vote of the stockholders in a regular or special meeting.
The vacancies shall be filled up by the vote of at least 2/3 of the stockholders in a regular or special meeting.
The vacancies shall be filled unanimously by the BoD.
A, B, C, D, E, F and G are the members of the Board of directors (BoD) of a corporation. A, B and C were removed from
office due to fraudulent practices. How shall the vacancies be filled up?
The vacancies shall be filled up by the majority vote of the BoD.
The vacancies shall be filled up by the majority vote of the stockholders in a regular or special meeting.
The vacancies shall be filled up by the vote of at least 2/3 of the stockholders in a regular or special meeting.
The vacancies shall be filled unanimously by the BoD.
Which of the following distinctions between cash dividend and a stock dividend is false?
The declaration of cash dividend requires only a majority of the quorum of the BoD; whereas the declaration of stock
dividend requires the approval of at least 2/3 of the members of the BoD.
Cash dividend, once declared, belongs to the stockholder and cannot be transferred to any surplus account of the
corporation; whereas the declaration of stock dividend may be rescinded before its actual issuance.
Cash dividend has the effect of distributing the accumulated profits to the stockholders; whereas stock dividend has the
effect of capitalizing such accumulated profits thereby increasing the corporation’s capital.
A delinquent stockholder is still entitled to receive cash dividend but it must first be applied to his unpaid subscription
balance; whereas stock dividend shall be withheld until the delinquent stockholder pays his subscription in full.
Which of the following is a valid corporate act?

Declaration of stock dividend by the majority vote of the board of directors
Declaration of cash dividend by the majority members of the executive committee
Filling of vacancies in the board by two third (2/3) of the members of the executive committee.
Filling of vacancies in the Board of directors by the stockholders in a regular or special meeting called for that purpose.
Is a by-law provision of "X" Corporation "rendering ineligible if elected, subject to removal, a director if he is also a
director in a corporation whose business is in competition with or antagonistic to said corporation" valid and legal?
Yes, under the principle of "corporate opportunity’”.
No, under the principle of "separate entity”.
Yes, provided it is approved by 2/3 of the outstanding capital stock.
Yes, under the principle of "vested interest"
A, B, C, D, E, F and G are the duly elected directors for 2021 of ABC Inc. whose articles of incorporation provide for 7
directors. On August 1, 2021, directors, A, B, C, D, and E met to fill the two vacancies in the board brought about by the
removal of F for disloyalty to the corporation and the death of G. In the said meeting, the remaining directors voted for X
to replace F; and for Y, a son of G to replace his father. Both X and Y are owners of at least one share of stock of the
corporation. The election of X and Y by the remaining directors is-
Not valid with respect to X; valid with respect to Y.
Valid for both X and Y.
Invalid for both X and Y.
Valid with respect to X; invalid with respect to Y.
Generally, a corporation’s article of incorporation must include all of the following except the
Name of the corporation
Number of authorized shares
Name of each incorporators
Quorum requirements
In 2021, Corporation "A" passed a board resolution removing "X" from his position as manager of said corporation. The
by-laws of "A" corporation provides that the officers are the president, general-manager, treasurer and secretary. Upon
complaint filed with the SEC, it held that the general manager could be removed by mere resolution of the board of
director.
On motion for reconsideration, "X" alleged that he could only be removed by the affirmative vote of the stockholders
representing 2/3 of the outstanding capital stock. Is "X's" contention legally tenable.
No, the vote required is majority of the board and 2/3 OCS consenting
Yes, the voting requirement is only 2/3 of the outstanding capital stock.
No, the required vote is MBD consented by MOCS.
No, the voting requirement is only majority of the Board of Directors.
of their duties.
The Corporation Code sanctions a contract between two or more corporations which have interlocking directors, provided
there is no fraud that attends it and it is fair and reasonable under the circumstances. The interest of an interlocking
director in one corporation may be either substantial or nominal. It is nominal if his interest:(2011 Bar)
ABC Corp. increased its capital stocks from Php10 Million to Php15 Million and, in the process, issued 1,000 new shares
divided into Common Shares “B” and Common Shares “C.” T, a stockholder owning 500 shares, insists on buying the newly
issued shares through a right of pre-emption. The company claims, however, that its By-laws deny T any right of pre-
emption. Is the corporation correct?
No, since the By-Laws cannot deny a shareholder his right of pre-emption.
Yes, but the denial of his pre-emptive right extends only to 500 shares.
Yes, since the denial of the right under the By-laws is binding on T.
No, since pre-emptive rights are governed by the articles of incorporation.
The boards of directors are allowed to fill up the following vacancies?

I. The vacancy in the board was the result of the removal by the stockholders or members
II. The vacancy in the board was due to expiration of term
III. The vacancy in the board was due to an increase in the number of directors
IV. Vacancy of corporate secretary
I and II III and IV
II and III IV only
Which of the following is not correct about director?

A director must be an owner of at least one share of stock.
A person is disqualified to become a director if he is convicted by final judgment of an offense punishable by
imprisonment for a period exceeding six (6) years.
A juridical person like partnership is allowed to be a director
The number of directors of Stock Corporation is not less than five but not more than fifteen.
The following are the requisites, except one, for valid declaration and/or issuance of stock dividend. Which is the
exception?
Existence of original and unissued shares
Dividend declaration is made by the Board of Directors and approved by 2/3 of the outstanding capital stock
It is issued to increase the authorized capital
Existence of unrestricted retained earnings
X owns 99% of the capital stock of ABC Corporation. X also own 99% of XYZ Corporation. ABC Corporation obtained a loan
from DEF Banks. On due date, ABC Corporate defaulted. XYZ Corporation is financially healthy. Which statement is most
accurate?
X being a controlling owner of ABC Corporation can automatically be held personally liable for the loan of ABC
Corporation;
XYZ Corporation, owned by 99% by X, can automatically be held liable;
ABC Corporation and XYZ Corporation, although both are owned by X, are 2 distinct corporations with separate juridical
personalities hence, the XYZ Corporation cannot automatically be held liable for the loan of ABC Corporation;
The principle of piercing the veil of corporation fiction can be applied in this case
Which oh the following corporation commences to have corporate existence and juridical personality and is deemed
incorporated from the date the Securities and Exchange Commission issues a certificate of incorporation under its official
seal?
i. Public corporation
ii. Private corporation
iii. Foreign corporation
iv. Corporation sole
I and II II only
II and III II and IV
1st Statement: The general rule is that every member of a nonstock corporation, and every legal owner of shares in a
stock corporation, has a right to be present and to vote in all corporate meetings.
2nd Statement: Voting may be express personally, or through proxies who vote in their representative capacities.
1st Statement: A majority of the directors or trustees as stated in the articles of incorporation shall constitute a quorum
to transact corporate business.
2nd Statement: Every decision reached by at least a majority of the directors or trustees constituting a quorum, except
for the election of officers which shall require the vote of a majority of all the members of the board, shall be valid as a
corporate act.
1st Statement: Regular meetings of the board of directors or trustees of every corporation shall be held annually, unless
the bylaws provide otherwise.
2nd Statement: Meetings of directors or trustees of corporations may be held anywhere in or outside of the Philippines,
unless the bylaws provide otherwise.
1st Statement: Directors must act as a body in a meeting called pursuant to the law or the corporation’s by-laws,
otherwise, any action taken therein may be questioned by any objecting director or shareholder.
2nd Statement: the general rile is that a corporation, through its board of directors should act in the manner and within
the formalities, if any, prescribed by its charter or by the general law.
Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or
trustee at least __________ prior to the scheduled meeting, unless a longer time is provided in the bylaws.
Twenty-one days
One week
Two days
Ten days
Unless the by-laws provide otherwise, written notice of regular meetings shall be sent to all stockholders of record
At least twenty-one (21) day prior to the meeting
At least two (2) days prior to the meeting
At least one (4) week prior to the meeting
At least two (2) weeks prior to the meeting
The requirements for a valid meeting are the following, except:

It must be held at the principal place of business only.
It must be held at the stated date and the appointed time.
It must be called by the proper person.
The person or persons designated in the by-laws have authority to call stockholders or members meeting.
1st Statement: Stockholders or members may attend and vote in their meetings by proxy; directors cannot do so.
2nd Statement: The chairman or, in his absence, the president shall preside at all meetings of the directors or trustees as
well as of the stockholders or members, unless the bylaws provide otherwise.
1st Statement: As a rule, in case of pledged or mortgaged shares in stock corporations, the pledgor or mortgagor shall
have the right to attend and vote at meetings of stockholders.
2nd Statement: Generally, in case of shares of stock owned jointly by two or more persons, in order to vote the same, the
consent of all the co‐owners shall be necessary.
1st Statement: Directors or trustees cannot attend or vote by proxy at board meetings.
2nd Statement: in stock corporations, the presence of a quorum is ascertained and counted on the basis of the
authorized capital stock.
This is an authority to vote in a corporation stockholders meeting:

Proxy Certificate of stock
By-laws Shares of stock
One of the following is a limitation on proxies. Which is it?

Proxy acquires legal title to the shares of the stockholders.
A proxy votes even in the presence of the stockholders.
A proxy is irrevocable at any time.
The proxy is voted only for the meeting for which it was intended.
When may the right to vote by proxy be exercised?

Election of the BOD/BOT
Voting in case of joint ownership of stock
Voting by trustee under VTA
All of the above
The requirements for a valid proxy are the following, except:

It shall be in writing.
It shall be signed by the stockholder or member.
It shall be filed before the scheduled meeting with the corporate treasurer.
Unless otherwise provide in the proxy, it shall be valid only for the meeting which it was intended.
The purposes of proxies are the following, except:

For convenience.
It assures the presence of all.
It enables those who do not wish to attend the meeting to protect their interest.
It secures voting control.
It assures the presence of a quorum.
These statements pertaining to the meetings of directors we presented to you for evaluation:
I. Directors or trustees may attend or vote by proxy at board meetings.
II. The articles of incorporation or the by-laws of a corporation may provide for a greater majority for its quorum during
the meetings of the board of directors.
Both statements are true.
Both statements are false.
Statement I is true; Statement II is false.
Statement I is false; Statement II is true.
1st Statement: VTA can be entered into for a period not exceeding 5 years at any one time except when it is a condition
in a loan agreement but shall automatically expire upon full payment of the loan.
2nd Statement: A voting trust agreement must be in writing and notarized, and shall specify the terms and conditions
there.
One of the distinctions between a proxy and a voting trust agreement is that in a voting trust agreement:
The agreement need not be recorded with the Securities and Exchange Commission.
The exercise of the right to vote is limited to a particular meeting.
The representative cannot vote if the stockholder is present during the meeting.
The representative acquires legal title to the shares to be voted.
The following statements concerning representative voting were presented to you for evaluation:
I. The representative acquires legal title to the shares.
II. It is good only for the meeting for which it was intended.
III. It is generally revocable, and the stockholder may vote even in the presence of the representative.
IV. The agreement giving the representative the power to vote must be duly notarized and a copy thereof must be
submitted to the Securities and Exchange Commission to be effective and enforceable.
I and IV apply to voting trust agreement
I and III apply to voting trust agreement
I and IV apply to proxy
I and III apply to proxy.

I. Subscriptions to 100 shares of stock at P100.00 par value per share by Mr. AA.
I and II I and III
II and III I only
The following may be the considerations for the issuance of stock, except:
Actual cash paid to the corporation
Previously incurred indebtedness of the corporation
Amounts transferred from unrestricted retained earnings to stated capital
Promissory notes and future services
A gratuitous issue of Treasury shares will result in:

Capital surplus Additional profit
Watered stock Stock dividend
A written instrument signed by the proper officers of the corporation, stating or acknowledging that the person named
therein is the holder of a designated number of shares of its stock:
Certificate of stock
Certificate of incorporation
Share of stock
Dividend
Mercy subscribed 10,000 shares of Rosario Corporation and paid 25% of the total subscription. During the stockholders’
meeting how many votes on subscribed shares does Mercy have?
2,500 shares 10,000 shares
7,500 shares Not entitled to vote
1st Statement: in stock corporations, shareholders may generally transfer their shares.
2nd Statement: membership in and all rights arising from a non-stock corporation are personal and non-transferable.
Delinquent stocks are:

Entitled to vote in stockholders' meeting
Entitled to inspect the books of the corporation
Entitled to dividends
None of the above
This 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.
Individual suit
Representative suit
Class suit
Derivative suit
Where a stockholder or member is denied the right of inspection, he can file this suit because the wrong is done to him
personally and not to the other stockholders or the corporation.
Individual suit
Representative suit
Class suit
Derivative suit
Where the wrong done is done to a group of stockholders as where preferred stockholders’ rights are violated, this suit
will be proper for the protection of all stockholders belonging to the same group.
Individual suit
Representative suit
Corporate suit
Derivative suit
Unit of interest in a corporation.

Treasury stock
Shares of stock
Par value stock
Which of the following statements is not correct?

In the delinquency sale at public auction the highest bidder is one who offers to pay the full amount of the balance of
the subscription plus interest and expenses of the sale for the highest number of shares
The sale of delinquent stock at public auction can be stopped if the board of directors stops the sale for valid reasons
payment of unpaid subscription may not be enforced by applying cash dividends to delinquent stockholders
The board of directors shall order, by resolution, the sale of delinquent stock specifying the amount due plus accrued
interest, the place, time and date of the sale.
Which of the following statements is not correct?

In the delinquency sale at public auction the highest bidder is one who offers to pay the full amount of the balance of
the subscription plus interest and expenses of the sale for the highest number of shares
The sale of delinquent stock at public auction can be stopped if the board of directors stops the sale for valid reasons
The cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus cost and
expenses, while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully
paid.
The board of directors shall order, by resolution, the sale of delinquent stock specifying the amount due plus accrued
interest, the place, time and date of the sale.
One who has agreed to take stock from the corporation on the original issue of such stock is called
Incorporators Promoters
Members Subscribers
Share of stock
Dividend
Which of the following statements is false concerning treasury shares?

They have no voting right.
They may be disposed of for a price lower than the par value provided such price is reasonable.
They are not outstanding shares.
They are entitled to dividends.
of their duties.
The articles of incorporation of Alpha Corporation, a construction company, provide for 7 directors. In the monthly
meeting of the board of directors held on April 12, 2004, directors A, B, C, D and E were present and the following
resolutions were approved:
I. A resolution for the purchase of 500 pieces of hollow blocks from Excellent Concrete Enterprises, a proprietorship
owned by E. B, C, D and E voted TO resolution.
II. A resolution appointing T as the new treasurer corporation. A, B, C and D voted for the resolution.
Both resolutions are valid.
Both resolutions are not valid.
Resolution I is valid; Resolution II is not valid.
Resolution I is not valid; Resolution II is valid.
Which of the following is a valid corporate act?

Declaration of stock dividend by the majority vote of the board of directors
Declaration of cash dividend by the majority members of the executive committee
Filling of vacancies in the board by two third (2/3) of the members of the executive committee.
Filling of vacancies in the Board of directors by the stockholders in a regular or special meeting called for that purpose.
1st Statement: Corporate records, regardless of the form in which they are stored, shall be open to inspection by any
director, trustee, stockholder or member of the corporation in person or by a representative at reasonable hours on
business days.
2nd Statement: A requesting party who is not a stockholder or member of record, or is a competitor, director, officer,
controlling stockholder or otherwise represents the interests of a competitor shall have no right to inspect or demand
reproduction of corporate records.
1st Statement: A subscription of shares in a corporation still to be formed shall be irrevocable for a period of at least six
(6) months from the date of subscription, unless all of the other subscribers consent to the revocation, or the corporation
fails to incorporate within the same period or within a longer period stipulated in the contract of subscription.
2nd Statement: No pre-incorporation subscription may be revoked after the articles of incorporation is submitted to the
Commission.
A corporation shall furnish a stockholder or member, within ________ from receipt of their written request, its most
recent financial statement, in the form and substance of the financial reporting required by the SEC.
Five (5) days
ten (10) days
one week
two weeks
Share of stock
Dividend
1st Statement: The proper custodian of the books, minutes and official records of a corporation is usually the corporate
treasurer.
2nd Statement: The signature of the corporate president gives the minutes of the meeting probative value and credibility.
1st Statement. The stockholders’ right of inspection of the corporate books and records is based upon their ownership of
the assets and property of the corporation.
2nd Statement: the right of inspection granted to stockholders is absolute.
1st Statement: only the corporate secretary is duly authorized to make entries on the stock and transfer book.
2nd Statement: the minutes of board meetings should be signed by the corporate secretary.
The following are the limitations on the right of inspection by a stockholder, except:
The right must be exercised during reasonable hours on business days.
the person demanding to examine and copy excerpts from the corporation’s records and minutes has not improperly used
any information secured through any prior examination of the records or minutes of such corporation or of any other
corporation.
The demand is in good faith or for a legitimate purpose.
The right can be exercised regardless of purpose.
1st Statement: Two or more corporations may merge into a single corporation which shall be one of the constituent
corporations.
2nd Statement: Two or more corporations may consolidate into a new single corporation which shall be the consolidated
corporation.
1st Statement: The plan of merger or consolidation shall be approved by unanimous vote of each of the board of the
concerned corporations at separate meetings.
2nd Statement: The plan of merger/consolidation shall be approved by the vote of the 2/3 of the shareholders of the
outstanding capital stock or members in case of a non-stock corporation.
The following are the legal effects of merger or consolidation, except one:
All properties, interest, claims and the like pertaining to the constituent corporations shall now pertain to the surviving
corporation.
The consolidated corporation shall enjoy the same rights, power, privileges and immunities and shall be subject to the
same duties and obligations of corporations established under Corporate Law.
The liabilities and obligations or claims against the constituent corporations may not be assumed by the consolidated
corporations because of the theory of separate legal entity.
All actions pending, by or against the constituent corporations shall now be litigated by the consolidated corporation.
Statement 1. The prohibition to issue "watered stock" refers only to the original issue of stocks but not to a subsequent
transfer of such stocks by the corporation.
Statement 2. Treasury shares may be sold for less than their par or issued value for they have already been issued and
paid for, provided the price is reasonable.
Statement 1. A director or officer who consents to the issuance of a watered stock or having knowledge thereof does not
forthwith express his written objection with the corporate secretary is liable jointly and severally with the stockholder
concerned for the water in the stock in favor of the corporation and its creditors.
Statement 2. Where the par value of par value shares or the issued value of no par value shares is P100.00 and only
P80.00 is paid to the corporation but the share is issued as fully paid, the share is considered "watered" or "fictitiously
paid up" to the extent ofP20.00, which is the difference between the consideration paid and the par value or issued value
of the share taken. In such case, the subscriber is liable for the difference of P20.00.
The right given to the stockholders to dissent and demand payment of the fair value of their shares is called:
Right of proxy Pre-emptive right"
Appraisal right Stock right
On May 1, 2019, S subscribed to 1,000 shares of stock of Sigma Corporation at the par value of P10.00 per share.
Pursuant to the policy of the corporation which requires a down payment of 60% of the subscription price, S paid
P6,000.00 upon the execution of the subscription contract. The balance of the subscription must be paid after 30 days,
which in the case of S, is May 31, 2019.
Upon the execution of the subscription contract, S may demand the issuance to him of a stock certificate covering 600
shares.
S is already qualified to vote although he has not paid his subscription in full.
If S fails to pay the balance of his subscription on May 31, 2019, his shares will become delinquent on June 1, 2019,
In case of delinquency, only 400 shares will be considered delinquent.
In the exercise of the stockholder of his appraisal right, the right of such stockholder to be paid the fair value of the shares
shall cease in the following instances, except,
such demand for payment is withdrawn with the consent of the corporation.
proposed corporate action is abandoned or rescinded by the corporation.
disapproved by the Commission where such approval is necessary.
if the Commission determines that such stockholder is entitled to the appraisal right.
In a stockholders meeting, S dissented from the corporate act converting preferred voting shares to non-voting shares.
Thereafter, S submitted his certificates of stock for notation that his shares are dissenting. The next day, S transferred his
shares to T to whom new certificates were issued. Now, T demands from the corporation the payment of the value of his
shares. Can T exercise the right of appraisal?
No, when S transferred his shares to T and T was issued new stock certificates, the appraisal right of S ceased, and T
acquired all the rights of a regular stockholder.
Yes, when S transferred his shares to T and T was issued new stock certificates, the appraisal right of S was transferred to
T.
No, the transfer of shares from S to T constitutes an abandonment of the appraisal right of S.
a and b are correct
Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in
three of the following corporate acts. Which is the exception?
In case of any amendment to the articles of incorporation which has the effect of changing or restricting the debts of any
stockholders or class of shares.
In case of merger or consolidation
In case of sale, lease, exchange transfer, mortgage, pledge or other disposition of all or substantially all of the corporate
assets and property of the corporation.
In case of incurring, creating or increasing bonded indebtedness.
In an auction sale of delinquent stocks, a notice of sale and copy of the board resolution ordering the sale shall be sent to
every delinquent stockholder either personally or by registered mail or; published once a week for __________ in a
newspaper of general circulation in the province or city where the
principal office of the corporation, as specified in its articles of incorporation, is located.
once a week
once a week for 2 consecutive weeks
1st Statement: Investment of a corporation in a business which is in line with its primary purpose requires only the
approval of the board.
2nd Statement: Investment of funds of a corporation in another corporation or business like a subsidiary requires the
approval of majority of the board and ratified by 2/3 of the outstanding capital stock.
Dissenting stockholders are given appraisal right:
In case any amendments to the Articles of Incorporation has the effect of changing or restricting the right of any
stockholders or class of shares, or of authorizing preference in any respect superior to those of outstanding shares of any
class, or of extending or shortening the terms of corporate existence
In case of sale, lease, exchange, transfer mortgage or other disposition of all or substantially all of the corporate assets
In case of merger and consolidation
All of the above
The delinquent stock shall be sold at a public auction to the highest bidder who shall offer to pay the following, for the
smallest number of shares or fraction of a share, except
full amount of the balance on the subscription together
accrued interest
costs of advertisement and expenses of sale
penalties
Is a by-law provision of "X" Corporation "rendering ineligible if elected, subject to removal, a director if he is also a
director in a corporation whose business is in competition with antagonistic to said corporation" valid and legal?
Yes, under the principle of "corporate opportunity’”.
No, under the principle of "separate entity”.
Yes, provided it is approved by 2/3 of the outstanding capital stock.
Yes, under the principle of "vested interest"
A corporate stockholder sold his share to another, but the sale has not been recorded in the books of the corporation. The
sale is:
The sale is void because it was not registered in the corporate book.
The sale is perfectly valid as between the buyer and the seller.
The sale is void because the corporation has no consent in the sale of share of stock.
The sale is valid only if the same be registered in the corporate book.

I. Subscriptions to 100 shares of stock at P100.00 par value per share by Mr.
I and II I and III
II and III I only
The rule is that the valuation of the shares of a stockholder who exercises his appraisal rights is determined as of the day
prior to the date on which the vote was taken. This is true – (2011 Bar)
regardless of any depreciation or appreciation in the share's fair value.
regardless of any appreciation in the share's fair value.
regardless of any depreciation in the share's fair value.
only if there is no appreciation or depreciation in the share's fair value.
Stock which has been issued by a corporation, has fully paid up when in fact it is not, because it has been issued as bonus
or otherwise, without any consideration at all, or for less than par, or for property, labor or services at an overvaluation.
Watered stock Treasury stock
Over issued stock Redeemable stock
1st Statement: The plan of merger or consolidation shall be approved by majority vote of each board o f t h e concerned
corporations at separate meetings.
2nd Statement: The plan of merger/consolidation shall be approved by the vote of the 2/3 of the shareholders of the
outstanding capital stock or members in case of a non-stock corporation.
1st Statement: 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 five
(5) disinterested persons.
2nd Statement: No payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained
earnings in its books to cover such payment.
The following are the limitations on the exercise of appraisal right. Which is the exception?
Any of the instances provided by law for the exercise of the right by a dissenting stockholder must be present.
The dissenting stockholder must have voted against the proposed corporate action.
A written demand on the corporation for payment of his shares must be made by him within 30 days after the date the
vote was taken.
The price must be based on the par value of the shares as of the day prior to the date on which the vote was taken.
The following cases will have the effect of extinguishing the withdrawing stockholder’s right to payment of his shares,
except:
If such demand for payment is withdrawn even without the consent of the corporation.
If the proposed corporate action is abandoned or rescinded by the corporation.
If the proposed corporate action disapproved by the SEC where such approval is necessary.
If the SEC determines that such stockholder is not entitled to the appraisal right.

Review Questions (Partnership and Corporation)

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Review Questions (Partnership and Corporation)

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QUESTIONS

Partnership and Corporations

Documents embodying partnership agreements:

Which of the following is not a characteristic of partnership contract?

The following cannot give their consent to a Contract of Partnership, except:

Which of the following would not be considered an advantage of forming a pship?

The following partnership contracts were presented to you for evaluation:

Which of the following stipulations is valid?

Bears the loss of property contributed to the partnership.

Which of the following act requires the consent of all partners?

The following are property rights of a partner, except:

The following are obligations pf partners, except:

The following partnership contracts were presented to you for evaluation:

Bears the loss of property contributed to the partnership.

A partnership is automatically dissolved, except:

As regards a limited partner, which statement is correct?

On application by or for partner the court shall decree a dissolution whenever:

A substituted limited partner is:

In a limited partnership where there are 4 partners:

Which of the following is a false statement?

A partnership is dissolved on the death of a:

Which of the following may be a cause for involuntary dissolution?

One of the distinctions between a partnership and a corporation is that a partnership:

Corporation is not entitled to this kind of damages?

Which of the following can be an incorporator of a corporation?

Which of the following will not qualify as incorporator of a corporation?

The following constitutional guarantees are applicable to corporations, except:

Which of the following statements pertaining to no-par shares is incorrect?

An auditing firm composed of Certified Public Accountants may validly form:

These corporation are prohibited from issuing no par shares, except:

The board of directors are allowed to fill up the following vacancies?

Which of the following is not correct about removal of director?

A Chinese national is not allowed to become:

One of the following does not require stockholders’ approval:

Which of the following is not correct about director?

Which of the following is not correct about removal of director?

Which of the following is not correct about management contract?

Which of the following statements is false concerning treasury shares?

The following, except one are qualifications of corporate directors:

Which of the following is a valid corporate act?

The boards of directors are allowed to fill up the following vacancies?

Which of the following is not correct about director?

The requirements for a valid meeting are the following, except:

This is an authority to vote in a corporation stockholders meeting:

One of the following is a limitation on proxies. Which is it?

When may the right to vote by proxy be exercised?

The requirements for a valid proxy are the following, except:

The purposes of proxies are the following, except:

The following are transactions pertaining to shares of stock of a certain corporation:

A gratuitous issue of Treasury shares will result in:

Delinquent stocks are:

Unit of interest in a corporation.

Which of the following statements is not correct?

Which of the following statements is not correct?

Which of the following statements is false concerning treasury shares?

Which of the following is a valid corporate act?

The following are transactions pertaining to shares of stock of a certain corporation:

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