Finals, Private Corporation Law – reviewer 1. Give the two most common kinds of dividends a. Cash Dividend b.

Stock dividend 2. Please state if true or false a. When cash dividends are declared, the assets of the corporation diminish by exactly the amount paid off and the property of the stockholder increases. TRUE b. A stock dividend converts surplus or profits of a corporation into the permanent account and is capitalized, placing it beyond the power of the board of directors to withdraw from corporate use and to distribute it to the stockholders. TRUE c. A stock dividend is taxable as income. FALSE


A management contract can delegate entire supervision and control over the officers and business of a corporation to another. FALSE

5. Please give the legal effects of the following acts and how the defects may be cure if any; a. Ultra vires act – VOIDABLE – BY RATIFICATION b. Illegal acts – VOID – NO MORE REMEDY c. Acts done without complying with certain conditions and formalities – VOIDABLE – BY RATIFICATION

d. Acts involving inexistent contracts – VOID – NO MORE REMEDY 6. Give the rule in the following cases of ultra vires acts: a. Those which are executory on both sides – cannot be enforced by either party, thereto b. Those fully performed on both sides – neither party can maintain to set aside transaction or to recover what has been parted with. c. Those performed on one side and the other received benefits by reason of such performance. – recovery is permitted in most courts on behalf of the former

d. Both cash dividend and stock dividend may be declared only by the Board of directors without involving the stockholders. FALSE 3. State the difference between a stock split and stock dividend. The essential distinction between a stock dividend and a stock split is that in the former, there is capitalization of earnings or profits, together with a distribution of the added shares which evidence the assets transferred to capital, while in the latter, there is a mere increase in the number of shares which evidence ownership without altering the amount of the capital, surplus, or segregated earnings.

7. State the general rule for liability for acts committed by corporate officers, directors/ trustees: a. Torts – damages, corporation is liable for the acts of officers, directors/trustees done within the scope of their authority b. Crimes – imprisonment ================================= 1. Define by-laws. - As the rules of action adopted by a corporation for its internal government and for the government of its stockholders or members and those having the direction, management and control of its affairs in their relation to the corporation and as among themselves, including rules for routine matters such as calling meetings and the like. 2. Please state if true or false:

4. Please state if true or false a. In a management contract, where a stockholder of both the managed and managing corporation own more than 1/3 of the total outstanding capital stock entitled to vote of the managing corporation, the management contract does not need the approval of the stockholders. FALSE b. No management contract shall be entered into for a period longer than five years. TRUE

Metro Manila and the stockholders may hold their meeting in any city or municipality located in Metro Manila. By-laws may be filed either prior to incorporation with the articles of incorporation or after receipt of official notice of the issuance of its certificate of incorporation by the SEC. FALSE j. Amendment or repeal of by-laws may be done by referendum. In the case of a voting trust specifically required as condition in a loan agreement. f. Give the two (2) kinds of meetings. its directors or trustees and officers are bound by and must comply with their by-laws. The president shall preside over all meetings of the stockholders/members as well as of the board of directors/members unless the by-laws provide otherwise. nos. FALSE d. TRUE b. The by-laws can dispense with the minimum legal requirement that the director must be the registered owner of at least one (1) share of stock. In case of pledged or mortgaged shares in stock corporation. c. TRUE g. d. 6 (par. such as Manila. Treasury shares c. c. 1-8). unless the pledgee or mortgagee is expressly given such right in writing which is recorded in the proper books of the corporation. Stockholders or members may vote in person or by proxy in all meetings. it is the corporation that is constituted as the proxy. TRUE i. TRUE h. =================================== 1. b. TRUE f. Give the two (2) kinds of proxies. The corporation. TRUE e. The place of meeting of the stockholders or members may be held “anywhere in or outside of the Philippines. Third persons who have no knowledge of the bylaws of a corporation are not bound by such bylaws. unless accompanied by a certificate of the appropriate government agency.a. be changed except for valid reasons. Directors or trustees can only exercise their powers as a board. e. Delinquent shares b. a. The date of the stockholders’/members’ meeting as fixed in the by-laws cannot as a general rule. FALSE c. it is the pledgor or mortgagor who has the right to attend and vote at meetings of stockholders. Even holders of non-voting shares or non-voting members are entitled to vote on the adoption of by-laws. The stockholders may delegate the power to amend or repeal the by-laws to the board of directors/trustees by a mere majority vote of the outstanding capital stock or a majority of the members of a non-stock corporation. a board resolution authorizing the signatory to the proxy should be submitted. In case of a proxy where the name is blank. Please state if true or false: a. The articles of incorporation of a corporation states that the principal office of the corporation is located at Makati. Meeting of directors/trustees 4. Please state if true or false a. oral proxies are allowed. 3. The power to revoke the power delegated to the board of directors/trustee may be effected only by 2/3 of the outstanding capital stock or 2/3 of the members in a non-stock corporation. 6. A voting trust agreement shall have a period not exceeding five years at any one time. g. l. 5. TRUE b. Preferred and redeemable shares may be deprived of their voting rights. Please state if true or false: a. While proxies must be In writing. 7. Meeting of Stockholders/Members b. not individually or separately. The meeting of the directors must always be held at the city or municipality where the principal office of the corporation is located. k. . A board resolution shall prevail over the by-laws in case of conflict. d. Shares not fully paid which are not delinquent 6. Holders of stock without voting rights may vote In cases provided in Sec. For corporate members. The SEC shall not accept the by-laws or amendments thereto of a special corporations governed by special laws. No proxy shall be valid and effective for a period longer than 10 years. e. Voting by proxy is allowed in board meetings. Non-filing of the by-laws on time will result to automatic dissolution of the corporation and shall render the corporation liable to the revocation of its registration. Please indicate by “no” or “yes” if the holders of the following shares have voting rights: a. m. b. f.

As to subject matter. Absolute subscription 5. TRUE To secure employment and salaries for the contracting parties is a valid and sustainable purpose of a voting trust agreement.C. TRUE e. FALSE 6. a. A stock option is a privilege granted to a party to subscribe to a certain portion of the unissued capital stock of a corporation within a certain period and under the terms and conditions of the grand exercisable by the grantee at any time within the period granted. The liability of a stockholder for unpaid subscription can be compensated or set-off with the value of his shares and stock dividends. Pre-incorporation subscription b. FALSE h. g.A a. S P T a. FALSE . Give the three ways by which a person may become a shareholder. k. FALSE d. By subscription contract with an existing corporation for the acquisition of unissued shares b. By transfer from a previous stockholder of the outstanding shares or existing subscription to shares. A voting trust is a corporate device to secure management control with little or no investment. Post incorporation subscription c. To assure continuity of policy and management is a valid and sustainable purpose of a voting trust agreement. A certified copy of the voting trust agreement shall be filed with the corporation and SEC to be effective and enforceable. A corporation does not need the approval of the SEC before it can grant or issue any stock option. TRUE i. Conditional subscription d. Stock subscriptions are in the nature of trust fund in the sense that they are to be maintained unimpaired for the protection of corporate creditors. A stock corporation may release an original subscriber from paying his shares without valuable consideration. d. TRUE f. FALSE b. FALSE e. original issue of stock b. increase of capital stock 4. Define stock option. FALSE The right of a trustee to act is limited to any particular meeting. TRUE c. TRUE j. The trustee issues to the stockholders in exchange for the shares conveyed under the voting trust agreement voting trust certificates. 2. Give the four kinds of subscription P. A voting trust agreement transfers only the voting or other rights pertaining to the share and also the properties or assets of the corporation. A subscription for share of stock of a corporation still to be formed shall be irrevocable for 12 months from date of subscription.said voting trust may be for a period exceeding five years which shall automatically expire upon full payment of the loan. give the 2 kinds of share that may be subject of a subscription contract. A voting trust agreement need not be in writing or notarized FALSE 3. The trustee holds the equitable or beneficial ownership while the stockholder holds title to the shares conveyed to the trustee under the voting trust agreement. True or false a.P. TRUE c. By purchase from the corporation of treasury shares c. FALSE f. Exercise of the stock option must be done within 3 years from approval thereof by the commission.

Any security issued or guaranteed by the Government of the Philippines or any political subdivision thereof. The assignee in an assignment of shares can enjoy the status of a stockholder and the assignor can be deprived of his rights as a stockholder. Delivery. An isolated transaction by which any security is sold. Please state the rule. TRUE f. As a general rule. TRUE g. TRUE b. or by any person controlled or supervised by. The consideration of no par shares should not be less than the value of P5/share. Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic relations. so indorsed to the transferee. Transfer of shares represented by the certificate is effected by its indorsement by the owner or his agent and delivery thereof. Please give the two (2) instances when such registration is not required. NO b. The stock certificate is a negotiable instrument. FALSE g. actual or constructive is essential to the issuance of a certificate of stock. FALSE b. The consideration for treasury shares may be less than par value thereof as long as the price is reasonable. Give three (3) sources of corporate capital. NO d. NO 6. FALSE c. b. 4. as one engaged in real estate development. Please state if true or false: a. Any security issued or guaranteed by the government of the Philippines. Shares of stock may be issued in exchange for promissory notes or future services. offered for sale. but is merely evidence of the holder’s interest and ownership of the share represented thereby. Stocks issued for a consideration less than their par or issued price are watered stocks. NO c. property or service c. TRUE 2. Any security issued or guaranteed by the Government of any country with which the Philippines maintains diplomatic relations or by any state on the basis of reciprocity. The corporation needs the consent of the SEC for the issuance of stock certificates. Please state if true or false: a. TRUE e. by subscription before and after incorporation b. TRUE i. by subscription to new issues of stock d. TRUE f. by making a stock dividend . otherwise an agreement to issue stock before the same is rendered is void. 5. Funds furnished by share holders b. and acting as an instrumentality of said government. all securities which are offered for sale shall be registered with the SEC. a. A subscriber becomes a stockholder immediately upon acceptance of his subscription even before full payment and may not legally be released by the corporation from the obligation to pay for his shares. The stock certificate is not stock in the corporation. not future services. Borrowings c. FALSE e. In order to be valid against third persons and the corporation. subdivision. subscription by the owner thereof or his representative. Please identify if the following securities/transactions should be registered with the SEC by “yes or no”: a. FALSE c. Give the four (4) modes by which shares may be issued. guardian or receiver or trustee in insolvency or bankruptcy proceedings. a. Stocks may be issued for a consideration less than the par or issued price thereof. FALSE d. At any judicial sale or sale by an executor. Property received as consideration for stocks need not be necessary or convenient for the use of the corporation. Real property may be accepted as payment on subscription to the capital stock only when the same can be used in the business of the corporation. at what point in time will a subscriber become a stockholder even though he has not paid for his shares. by sale of treasury stock after incorporation for money. Valuation of the consideration other than actual cash or consisting of intangible property after valuation there does not need the approval of the SEC. Profits and stock dividends 3. or by any political subdivision or agency thereof. agro-industrial business. the transfer of shares must be =================================== 1.7. under the Securities Regulation Code. FALSE d. administrator. The consideration of stocks by way of services should be for services actually performed. TRUE h. a.

Give the legal effect of an unregistered transfer of shares: a. TRUE d. FALSE e. The SEC has jurisdiction to decide cases involving intra-corporate disputes. a. TRUE j. Give the two (2) actions that may be brought by the state against a corporation. FALSE k. Judicial or extra-judicial settlement of the estate 8. Give the three (3) actions by stockholder or members.valid d. A stock delinquent for unpaid subscription may be voted upon or be entitled to vote at any stockholders’ meeting as well as have the rights to dividends. As to the corporation invalid and ineffective c. TRUE g. Notice to the stockholder is a condition precedent to recovery by the corporation for unpaid subscriptions. A bona fide transfer of shares of a corporation not registered in the corporate books is invalid as against a subsequent lawful attachment or execution of said shares regardless of whether or not the attaching creditor had actual notice of said transfer. As between the transferor and the transferee – valid and binding b. a. Shares of stock against which the corporation holds any unpaid claim arising from any unpaid subscription shall not be transferable in the books of the corporation. Minority stockholders objecting to certain corporate action may demand appraisal and payment of their stock and thus terminate their relation with the corporation b. The prohibition to issue “watered stocks” refers only to the original issue of stocks. Give two (2) rights of the dissenting minority. provided the price is reasonable. TRUE h. TRUE i. but not to a subsequent transfer of stocks by the corporation. Title to all the share purchased by the corporation of delinquent stocks shall be considered as treasury shares and may be disposed of by the board of directors for a reasonable price. Individual actions c. Injunction . a. Indorsement and delivery of stock certificate b. a. Give the three (3) modes of stock transfer. Please state if true or false: a. FALSE 7. May bring actions at law in their names to preserve and protect their interests or in the name of the corporation to redress wrongs committed solely against the corporation. The liability of a director or officer of a corporation consenting to the issuance of a watered stock is joint. FALSE b. FALSE h. Give the distinctions between the above actions by stockholders as to a) who will bring the action b) in whose name and in whose behalf c) nature of cause of action Who will bring the action In be Derivative Stockholders/members In Individual Share holder In Representative Stockholder In ot sit 12. but a sale thereof.invalid 9. The stock certificate may be issued to a subscriber even if the subscription has not yet been fully paid. The highest bidder is the person offering at the sale to pay the full amount of balance of the subscription together with accrued interest. Quo warranto b.entered and noted upon the books of the corporation. The stockholder by reason of his stock is a creditor of the corporation. TRUE 13. As against corporate creditors . Derivative actions b. TRUE c. for then it would no longer be an “issue”. 10. cost of advertisement and expenses of the sale for the highest number of shares or fraction of a share. Representative actions 11. Treasury shares may be sold for less than their par value or issued value for they have already been issued and paid for. if any. Right of the transferor to vote . Right of the transferor to dividends – valid e. Transfer made in separate instrument c. FALSE f.

Inc. Acquired corporation b. FALSE e. Minutes of all meetings of directors or trustees b. Inc. a. Identify the parties of the following a. Inc. continues its corporate existence. Delinquent stock is included in determining the presence of quorum. transfers all of its assets to B. FALSE 2. Collection form cash dividends and withholding of stock dividends 15. Give the three (3) remedies of a corporation to enforce payment of stock subscription. Inc. Inc. e. Inc. What is the corporate combination called?  MERGER b. b. which is dissolved. Insolvency supervenes upon a corporation. Judicial auction c. Give the two (2) cases when call for payment of unpaid subscriptions is not necessary. Any director. 4. What are the four rights which the holders of delinquent stock will be deprived of?  Deprived the stockholder the right to be voted d. B. Inc. TRUE g. trustee. Consolidation i. a. Extra judicial sale at public auction b. What are the 4 kinds of books corporations are required to keep? a. Stock and transfer book d. Inc. the payment of stock subscription may be enforced. What is A. because the corporation lost it itself. Publication of the loss maybe dispensed with when no certificate has been issued. absorbs and acquires all the property. Give the 4 parties who can inspect the corporate books? a. A. The stockholders of A. Full payment of subscription is not required to make one a stockholder. FALSE c.14. b. Please state if true or false a. Voting trust certificate holder c. Merger i. rights and liabilities of A. 3. a. Inc called?  ABSORBED CORPORATION c. Delinquent members of a non-stock corporation may be allowed to vote if allowed by the by-laws. and B. Record of all business transactions c. TRUE h. Inc. Beneficial owner of shares 5. TRUE d. become the stockholders of what corporation? . Inc. are existing corporations. TRUE f. What right can he not be deprived of?  He cannot be deprived of his rights to dividends. Constituent ii. or stockholder or member b. Identify the surviving corporation  B. Absorbed corporation ii. B. a. Minutes of all meetings of stockholders or members. In case of a lost stock certificate. A. TRUE b. Holders of subscribed shares not fully paid for which are not delinquent shall similarly be deprived of the right to vote. Consolidated 6. What is B. a new one may be issued before expiration of the one year period after publication of the loss upon filing of a bond for by the registered owner thereof. called?  ABSORBING CORPORATION   1. A sale of delinquent stocks may be questioned on the ground of irregularity or defect in the notice of sale or the sale itself upon payment or tender by the party to the holder of the stock such sum as required under section 69. Trade secrets may also be subject to inspection. Stockholder of a sequestered company d. Subscriber becomes insolvent Be voted Be represented at any stockholder’s meeting  Stockholder loses rights pertaining to a stock holder the moment the unpaid subscription becomes delinquent.

Inc. a. A. 685 Manner of voting 1 share 1 vote Cannot vote Right to vote of holders of delinquent stock ======================================== 1. become stockholders of C. and B. They unite to form C. TRUE c. 10. Inc. What are A. or of extending or shortening the term of corporate existence. What is C. B. Inc. . State if true or false a. consolidation. Where an action is filed by the dissenting stockholder to recover fair value. it being authorized by law. or of authorizing preferences is any respect superior to those of outstanding shares of any clash. transfer. There is automatic assumption of liabilities of the absorbed or constituents corporations in merger and consolidation. Inc. Who shall bear the cost of appraisal of the shares: a. The consent of creditors of a corporation is not necessary in merger. Inc. A. are existing corporations. and B. In case any. Inc and B. and B. Inc. exchange. Inc.  Stockholders of A. FALSE b. and all their rights and liabilities are assumed by C. a. Who become stockholders of C. called?  Consolidated corporation c. Inc. a. lease. Give the 3 instances when the appraisal right may be exercised. Inc. Give the 3 features which the articles of incorporation of a close corporation shall provide for. b. The absorbed or constituent corporations are ipso facto dissolved. 7. and the refusal of the stockholder is found by the court to be justified. The title to their property passes to C. In case of sale. amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or clash of shares. Inc. TRUE 9. When the fair valuation ascertained by the appraiser is approximately the same as the price which the corporation may be offered. TRUE d. In case of merger or consolidation. Inc. – by the corporation c. Inc. All of the corporations issued stock of all classes exclusive of treasury shares shall be held of record by not more than a specified number of persons. – by the dissenting stockholder Number of member of the BOD/BOT Term of the BOD/BOT Qualifications of director/trustee Election of officers if done directly by shareholders/members Place of meeting of the BOD/BOT More than 15 3 years Member 1 year Director – 1 share BOD member At any place even outside the principal office of the corporation Only one vote Can vote p. – by the corporation 11. Inc. to which they will transfer all their assets. c. b. There is still winding up of affairs in merger and consolidation. When the fair valuation offered by the corporation is lower than the fair value of the appraiser. Inc. are dissolved by the consolidation. called?  Constituent corporation b. State the distinction between a non-stock and stock corporation on the following: Non-stock stock profit Distribution of dividends Non-profit No distribution Profit Distribution of dividends allowed 15 8. not exceeding twenty. mortgage pledge or other disposition of all or substantially all of the corporate property and assets are provided in this code.

it is the RTC that has jurisdiction to conduct the arbitration. TRUE b. Give the 2 kinds of special corporations a. The articles of incorporation of a close corporation may provide for the classification of shares or restrictions on the transfer of shares. b. 10. this is called a deadlock. Voluntary dissolution b. The pre-emptive right of stockholders in a close corporation extends only to new issues of shares out of an increase of the capital stock and not to all stocks to be issued. The articles of incorporation of a close corporation may not provide for the classification of directors into one or more classes. Voting or pooling agreement in particular 4. The approval of the SEC of the articles of incorporation is necessary before it can be considered a corporation sole. By judgment of the SEC after hearing of petition for voluntary dissolution where creditors are affected c. Stockholders agreement in general b. The objective of imposing restrictions on the transfer of shares in a close corporation is to prevent change of control of the corporation which might otherwise result from the transfer of voting shares. A greater quorum or voting requirement may not be provided for in meetings of stockholders or directors in close corporations. The corporation shall not be enlisted in any stock exchange of any class. FALSE c. FALSE d. 101 of the Corporation Code. Give the 2 kinds of religious corporations a. c. TRUE b. Give the 2 kinds of dissolution under the Corporation Code a. Give 3 kinds of involuntary dissolution a. The title to the properties of a corporation sole shall be in the name of the archbishop. a. The articles of incorporation of a close corporation may provide that the business of the corporation shall be managed by the stockholders rather than by a board of directors. “in trust for the use. True or false a. Name the 2 kinds of valid agreements by stockholders allowed for close corporations. By legislative enactment c. A corporation sole may mortgage and sell real property without need of obtaining a court order. etc.b. By amending the articles of incorporation to shorten the corporate terms. Give the 3 kinds of voluntary dissolution a. TRUE 3. TRUE d. In case of deadlock. A corporation sole may be dissolved upon submission of a declaration of dissolution to the SEC which needs no SE approval. b. A corporation sole consists of two or more incorporators. Religious societies 7. All of the issued stock of all classes shall be subject to one or more specified instruction or transfer c. By the expiration of the term provided for in the articles of incorporation b. Corporation sole b. True or false a. purpose and benefit” of the religious denomination. Religious corporation 6. TRUE e. 8. FALSE c. Where the directors or stockholders in a close corporation are so divided in the management of the corporation’s business and affairs. 2. In close corporations. by failure to formerly organize and commence the transaction of its business . By the vote of the board of directors and the stockholders where no creditors are affected. any action by the board of directors without a meeting shall be deemed valid under certain conditions under Sec. True or false a. e. each of which may be voted upon solely by a particular class of stock. FALSE 5. Educational corporation b. Involuntary dissolution 9. d. so that there is a paralyzation of corporate operations.

For the purpose of prosecuting and defending suits by or against it b. a. Upon dissolution. 22.within two years from date of incorporation. 11. Give the legal effect of non-use of the corporate charter and non-continuous inoperation of a corporation on a) whether it is deemed dissolved under sec. a. but not for the purpose of continuing the business for which it was established. The dissolution of a corporation results in the vesting of legal title to the corporate property in the stockholders who become co-owners thereof. Enabling it to settle and close its affairs c. Retroact 12. Liquidation by the corporation itself b. There is no automatic dissolution c. 14. the corporation ceases as a body corporate to continue the business for which it was established. The corporation shall be lawfully be dissolved upon issuance of the SEC certificate of dissolution after notice and hearing d. To dispose of and convey its properties and to distribute to assets. . FALSE 13. or c) when will it be lawfully considered d) what is the effectivity of such dissolution. True or false a. TRUE b. The dissolved corporation continues as a body corporate for 5 years for purposes of winding up or liquidation. Liquidation by a trustee to when the corporation had conveyed the corporate assets. Give the 3 methods by which a dissolved corporation may wind up its affairs. or b) is there automatic dissolution. Give the 3 purposes of winding up of the affairs of a dissolved corporation a. Liquidation by a duly appointed receiver c. Shall be deemed dissolved b. TRUE c.

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