Diagnostic Exercises2

DIAGNOSTIC EXERCISES
ON CORPORATIONS
MULTIPLE CHOICE. Select the best answer by writing the letter of your choice.
1. Which of the following is not an attribute of a corporation?

a. It is an artificial being.
b. It is created by the agreement of the incorporators.
c. It has the right of succession.
d. It has the powers, attributes and properties expressly authorized by law or incident
to its existence.
2. It refers to the doctrine to the effect that the separate personality of a corporation will be
disregarded if it is used to defeat public convenience, justify a wrong, protect fraud, or
defend crime.
a. Doctrine of limited capacity.
b. Doctrine of corporate opportunity.
c. Trust fund doctrine.
d. Doctrine of piercing the veil of corporate entity
3. These statements are presented to you:

I. Frequent transactions between a parent company and its subsidiary are themselves
a sufficient reason for disregarding the fiction of separate corporate personality.
II. For as long as the separate personality of a corporation is not used for illegal or
fraudulent purpose, the other party to the transaction has no right to pierce the
corporate veil.
In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

I. Mere ownership by a single stockholder of all or nearly all of the capital stock of
a corporation is by itself sufficient reason for disregarding the fiction of separate
personality.
II. The fact that the name of a corporation includes the name of one of the
stockholders is a valid ground to pierce the corporate evil.

5. Mr. S and his family are the owners of the outstanding capital stock of ABC factory
Corporation (ABC) which owed its workers certain benefits under the law. Then ABC
ceased operations. The following day, ABC was succeeded by, and its assets were turned
over to, XYZ Factory Corporation (XYZ) whose subscribed shares are also owned by
Mr. S and his family. XYZ also hired its own workers. The ABC workers now sue XYZ
and Mr. S and his family for the unpaid benefits.
a. Both XYZ and Mr. S and his family are liable for the unpaid benefits.
b. Neither XYZ and Mr. S and his family are liable for the unpaid benefits because
they have a personality separate and distinct from ABC, the actual employer of the
suing workers.
c. The unpaid benefits of the ABC workers are deemed forfeited in view of the
cessation of operations of ABC.
d. Only Mr. and S and his family are personally liable since they are the stockholders
of both ABC and XYZ.
6. A corporation commences to exist:

a. upon the execution of the articles of incorporation by the incorporators
b. upon the filing of the articles of incorporation with the Securities and Exchange
Commission
c. upon the issuance of the certificate of incorporation
d. on the date when the incorporators acknowledged the due execution of the articles
of incorporation before a notary public
7. These are presented to you:

I. A corporation continues to exist for the period for which it has been formed
regardless of the changes in the ownership of its shares or in its membership.
II. The existence of a corporation is not affected by the death, insolvency, or
incapacity of the individual stockholders or members.
Which of the foregoing statements refer to the right of succession of a corporation?

a. Both I and II.
b. Neither I nor II.
c. Statement I only.
d. Statement II only.
8. The following independent situations concerning Coronet Corporation, a stock

corporation, are presented to you:
I. All the stockholders of the corporation died.
II. All the stockholders of the corporation became insolvent.
In your evaluation of the foregoing, which of the above situations will dissolve the
corporation?
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
9. The following cases are presented to you for evaluation:

I. Sale by 6 of the 7 directors of XYZ Corporation of their shareholdings to Mr. A, the
remaining director.
II. Death of Mr. B, a director of XYZ Corporation, who owns 95% of its outstanding
capital stock.
III. Expiration of the shortened term of XYZ Corporation. The corporation was formed
for a term of 50 years but its articles of incorporation were amended to reduce its term
to 30 years and such a period has expired.
Which of the foregoing cases will not affect the corporate existence of XYZ Corporation?
a. I and II.
b. II and III.
c. I and III.
d. I, II and III.
10. A partnership and a corporation are similar except with respect to:
a. having a separate personality
b. being composed of a group of persons
c. being artificial persons
d. having the right of succession
11. The following characteristics are applicable to a corporation, except one which pertains
to a partnership. Which one pertains to the latter?
a. The admission of a member to the firm requires the consent of the all the existing
members.
b. It may not be formed for an indefinite period.
c. Its members are not liable for the firm’s debts.
d. It cannot be dissolved without the consent of the State.
12. A, B, C, D and E want to establish a car repair business. A, B and C each have the
amount of P200, 000.00 to contribute to the business capital. D is to contribute to the firm
his lot and building, while E will contribute his services as a mechanic. All of them are
legal age and residents of the Philippines. They are deciding on what type of business
organization to put up.
a. The five can only put up a partnership.
b. The five can only put up a corporation.
c. The five can only put up either a partnership or a corporation.
d. The five cannot put up either a partnership or a corporation.

I. A general partnership may be formed by the mere agreement of the partners.
II. The death of a general partner dissolves the partnership.
III. A stock corporation may be formed by the mere agreement of the partners.
IV. The death of an incorporator or a stockholder dissolves the corporation.

a. Only I and II are true.
b. Only III and IV are true.
c. Only I and III are true.
d. Only II and IV are true.
14. One of the following is not a characteristic of a stock corporation. Which is it?
a. It is formed by not less than 5 but not more than 15 persons.
b. The stockholders are liable only to the extent of their investment.
c. The stockholders directly own the properties of the corporation.
d. It acts through a board of directors.
15. A stock corporation differs from a non-stock corporation in that in a non-stock

corporation:
a. There is a capital stock divided into shares.
b. There is an authority to distribute dividends or allotments from surplus profits.
c. Its income shall be used only for the furtherance of the purpose for which it was
incorporated.
d. It is formed for profit.
16. It refers to a corporation which operates within the country under laws it was
incorporated.
a. Foreign corporation
b. Offshore corporation
c. Domestic corporation
d. Public corporation
17. Under this test of determining the nationality of a corporation, the nationality of a
corporation follows that of the country under whose laws it was formed.
a. Incorporation Test
b. Control Test
c. Business Domiciliary Test
d. Grandfather Rule
18. This is the test applied in determining the nationality of a corporation during wartime
where the assets of a corporation may be confiscated by the State under whose laws it
was incorporated for purposes of national security.
a. Control Test
b. Incorporation Test
c. Business Domiciliary Test
d. Grandfather Rule
19. A corporation that is organized for the government of a portion of the State, like a
province, city, municipality or barangay.
a. Public Corporation
b. Quasi-public corporation
c. Government-owned corporation
d. Government-controlled corporation
20. A corporation that has been created in strict compliance with all the legal requirements
and whose right to exist as a corporation cannot be successfully attacked in a direct
proceeding for that purpose by the State.
a. De facto corporation
b. De jure corporation
c. Corporation by prescription
d. Corporation by estoppel
21. A corporation that is defectively created but there is an actual exercise of corporate rights
and franchise resulting from an attempt in good faith to incorporate on the part of its
members,
a. De jure corporation
b. Corporation by prescription
c. Corporation by estoppel
d. De facto corporation
22. In due existence can be attacked directly in a quo warranto proceeding by the State.
c. Both de facto and de jure corporation
d. Neither de facto nor de jure corporation
23. In due existence can be inquired into collaterally either by the State or private persons.
c. Both de facto and de jure corporation
d. Neither de facto nor de jure corporation
24. Assuming that a certificate of incorporation was issued by the Securities and Exchange
Commission, which of the following is not a de facto corporation?
a. A corporation that failed to comply with the subscription and/or paid-in capital
requirements.
b. A corporation where an incorporator is incapable of giving consent.
c. A corporation where the acknowledgment of the incorporation is defective
d. A corporation which failed to file its articles of incorporation.
25. When the certificate of the incorporation of a corporation was issued despite the fact that
majority of the incorporators are not residents of the Philippines, the corporation that is created is
a:
a. de jure corporation.
b. de facto corporation.
c. corporation by estoppel.
d. corporation by prescription.
26. D purchased group on the credit amounting to P100,000.00 from Clover Leaf Corporation
whose certificate of incorporation was issued to months earlier by the Securities and Exchange
Commission. D defaulted on his payment on due date. Accordingly, Clover Leaf Corporation
filed a complaint for collection against him. D moved for the dismissal of the complaint on the
ground that Clover Leaf Corporation was non-existent. To prove his case, d attached to his
motion to dismiss a certified true copy of the articles of the incorporation and the treasurer’s
affidavit showing that Clover Leaf Corporation’s paid up capital amounted to only 20% of the
subscribed capital stock which was in violation of the minimum requirement of 25% paid-up. Is
D correct in questioning the due existence of Clover Leaf Corporation in the case filed against
him?
a. yes, because Clover Leaf really had no right to sue.
b. no, because he cannot make a collateral attack on the due existence of Clover Leaf
Corporation in the same action that was brought against him.
c. yes, because he can make a direct attack on due existence of Clover Leaf Corporation in the
same action brought against him.
d. yes, because Clover Leaf Corporation is a de facto corporation
27. One which is not in reality a corporation but is considered as one with respect to those who
are precluded by their admission or conduct from denying from its existence.
a. Corporation by estoppel
c. De jure corporation
28. those composing it are liable as general partners.

c. De jure corporation
29. A, B, C, D, and E represented themselves to X as directors and stockholders of “Titanic

Corporation”. In reality, no such corporation is registered with the Securities and Exchange
Commission. Later, X granted credit sales to Titanic Corporation. When Titanic Corporation
defaulted on its payment, X sued Titanic Corporation. Titanic Corporation move for the
dismissal of the complaint on the ground that it had no corporate personality. Is the defense of
Titanic Corporation tenable?
a. Yes, because it was not registered with the Securities and Exchange Commission.
b. No. because it is estopped from raising as a defense its lack of corporate personality against X.
c. Yes, because Titanic Corporation does not really exist.
d. Yes, because only the office of the Solicitor General can sue Titanic Corporation.
30. Assume the same facts in the preceding number except that it was Titanic Corporation which
granted credit sales to X defaulted in his payment, Titanic Corporation filed a collection case
against him. X moved for the dismissal of complaint on the ground that Titanic Corporation was
a non-existent corporation. Is the defense of X tenable?
a. Yes, because Titanic corporation was not registered with the Securities and Exchange
Commission.
b. No, because X is precluded from raising the defense that Titanic Corporation does not exist.
c. Yes, because Titanic Corporation does not really exist.
d. Yes, because Titanic corporation lacks separate juridical personality.
31. refer to No. 29 the corporation formed under the circumstances is a:

a. corporation by prescription.
b. corporation by estoppel.
c. de facto corporation.
d. de jure corporation.
32. A corporation that has exercised corporate powers for such a length of time without
interference from the state and which, by fiction of law, is given the status of a corporation.
b. De facto corporation
c. Corporation by prescription
d. De jure corporation
33. in case a corporation is formed for the exercise of a profession, it shall be considered as a:
a. de facto corporation
b. de jure corporation
c. either a or b depending on whether or not a certificate of incorporation was issued.
d. non-existent corporation even if a certificate of incorporation was issued.
34. Those mention in the articles of incorporation as originally forming and composing the
corporation and are signatories of such document are known as:
a. corporators
b. stockholders
c. incorporators
d. members

I. An incorporator of a corporation must be subscriber to its capital stock in case of a stock
corporation, or a member thereof in case of non-stock corporation, at the time of incorporation.
II. An incorporators remain such even if he is no longer a stockholder or a member of the
corporation.

a. both statements are true
b. both statements are false
c. only statement I is true
d. only statement II is true
36. He facilitates the creation of a corporation by negotiating contracts for its initial operations
including subscription to its capital stock, incorporating the business, and helping management
start operations.
a. subscriber
b. incorporator
c. corporator
d. promoter
37. The total amount of shares which a corporation is authorize to issue if the shares have par
value.
a. subscribed capital stock
b. unissued capital stock
c. authorized capital stock
d. issued capital stock
I. Issued capital stock refers only to the capital stock that has been fully paid and for which stock
certificates have been issued.
II. Subscribed capital stock refers only to the capital stock that has been subscribed but has not
been fully paid.

c. Only statement I is true.
d. Only statement II is true.
39. it refers to the total par value of all issued par values shares, or the total cash, or
consideration received for all issued no par value shares.
a. Stated capital
b. Legal capital
c. Paid-up capital
d. Capital
40. It refers to the total shares of stock issued to subscribers or stockholders, whether or not fully
or partially paid (as long as there is a binding subscription agreement), except treasury shares.
a. Outstanding capital stock
b. Issued capital stock
c. subscribed capital stock
d. Authorize capital stock
41. The articles of incorporation of Pathfinder Corporation provide, among other information, for
an authorized capital stock of P1, 000, 000.00 divided into 10,000 shares with a par value of
P100.00 per share, and 7 directors. As of December 31, 2008, 5,000 shares of the corporation has
been subscribe at par value of which 4,000 shares had been paid in full, while 1,000 shares were
up to 80%.
The issued capital stock of Pathfinder Corporation is:
a. P5,000.00
b. P400,000.00
c. P480,000.00
d. P1,000,000.00
42. Refer to the facts in preceding number. Assume that for 2009, A, B, C, D, E, F, G, and H ran
for the position of director in the annual election of directors. If you are a stockholder with 400
shares, how many votes may you possibly cast in the election?
a. 400 votes
b. 2,800 votes
c. 3,200 votes
d. 8 votes
43. A shares of stock differs from a stock certificate in that a share of stock:
a. is tangible personal property
b. may not be issued unless the subscription has been fully paid
c. is the written evidence of a stockholder’s rights and interest in a corporation
d. is one of the units into which the capital stock is divided
44. The ordinary stock of a corporation that entitles the holder to a pro rata division of the
dividends, without preference or advantage over other stockholders.
a. Common stock
b. Preferred stock
c. Par value stock
d. No-par value stock
45. A stock whose nominal value is stated in the stock certificate.
a. Par value stock
b. Issued stock
c. No-par value stock
d. Redeemable stock
46. Non-voting shares may vote in the following cases, except:

a. in the amendment of the articles of incorporation
b. in case of merger or consolidation of the corporation with another corporation or other
corporations
c. in the elections of directors of the corporations
d. non-voting shares are not allowed to vote at all, that is why they are classified as non-voting

I. A corporation may classify all its shares as non-voting.
II. A corporation cannot issue both par value and no-par value stock at the same time

a. Both statements are true
b. Both statements are false
c. Only statement I is true
d. Only statement II is true
48. Which of the following statements concerning no-par shares is incorrect?

a. Subscription to no-par shares shall be deemed fully paid and non-assessable.
b. The entire consideration received for no-par shares shall all be treated as capital and no part
thereof shall be available for distribution as dividends
c. They may be issued for a consideration of less than P5.00 per share.
d. They may not be issued by banks, trust companies, insurance companies, public utilities, and
building and loan associations.
49. You are provided with the following list of certain stocks:
I. Founders stock
II. Redeemable stock
III. Preferred stock
IV. Common stock
Which of the stock above stocks, as a rule, may be deprived of the voting right?
a. I and II
b. II and III
c. III and IV
d. I and IV

I. Shares with par value may be issued for a consideration less than P5.00 per share.
II. Preferred shares may be issued with or without a stated par value.

b. Both statements are falls.
51. Which shares may be reacquired by a corporation even if it has no unrestricted retain
earnings in its books?
a. Founders’ shares
b. Redeemable shares
c. Convertible shares
d. Par value shares
52. Shares that are issued without consideration or with no adequate consideration are known as:
a. watered stock
b. redeemable stock
c. founders’ stock
d. no-par stock
53. Which of the following statements concerning treasury shares is incorrect?

a. They have no voting rights as long as they remain in the treasury.
b. They are not outstanding shares.
c. They are not entitled to dividends.
d. They may not be disposed of at price lower than par value or issued price in the case of no-par
shares.
54. Which of the following documents is not required to be submitted at time time of
incorporation?
a. Articles of incorporation
b. Treasurer’s affidavit
c. Certificate of the bank deposit on the paid-up capital
d. by-laws
55. Corporations that are required to submit a favorable recommendation from the appropriate
government agency before their articles of incorporation and/or by-laws are accepted for filing
by the Security and Exchange Commission include the following, except:
a. a trading corporation
b. a banking corporation
c. an insurance corporation
d. an educational institution
56. It refers to the right to exist as a corporation and it is vested in the individual who compose
the corporation and not in the corporation itself?
a. primary franchise
b. secondary franchise
c. both a and b
d. neither a nor b
57. The charter of a corporation organized under the law includes the following, except the:
a. Corporation code
b. articles of incorporation of the corporation
c. laws applicable thereto
d. by-laws
58. Incorporators of a stock corporation must, in additional to being natural persons, possesses
the following qualifications, except one. Which is such exception?
a. They must be of legal age
b. Majority of them must be citizens of the Philippines
c. They must not be less than 5 nor more than 15 in number
d. They must be the owner at least 1 share of stock
59. Who/which of the following maybe a subscriber to the shares of stock of a corporation?
a. Another corporation
b. A partnership
c. An individual
d. All of the foregoing
60. What is the effect if a corporation has been issued a certificate of incorporation by the
Security and Exchange Commission despite the fact that its name is identical to that of an
existing corporation or one that is protected by law?
a. The corporation shall be deemed dissolve
b. The corporation will be allowed to change its name by amending its articles of incorporation
c. The franchise of the corporation will be suspended
d. The corporation will be considered unincorporated
61. The term from which a corporation is to exist which must be stated in the articles of
incorporation at the time of incorporation:
a. Should be exactly 50 years
b. Any number of years which maybe more than 50 years
c. Any number of years provided it does not exceed 50 years
d. Need not be stated since a corporation may exist indefinitely
62. Stock corporations formed under corporation code are required to have a minimum
subscription at the time of incorporation (in case the shares have par value) in an amount:
a. not less than 25% of the authorized capital stock
b. equivalent to the 100% of the authorized capital stock
c. not less than 50% of the authorized capital stock
d. equivalent to 50% of the authorized capital stock
63. Stock corporations are required to have a paid-up capital at the time of incorporation (in case
the shares have par value) in an amount which is at least:
a. 25% of the authorized capital stock or P5,000.00 whichever is higher
b. 25% of subscribed capital stock or P5,000.00 whichever is higher
c. 25% of the fair market value of the subscribed capital stock or P5,000.00, whichever is higher
d. P50,000.00
64. The articles of incorporation of Crown Office Supplies Corporation provide for an authorized
capital stock of P50, 000.00 divided into 5,000 shares each having a par value of P10.00 at the
time of incorporation, how much are the minimum subscription and paid-in capital requirements
of the corporation?
a. P12,500.00 and P3,125.00, respectively
b. P12,500.00 and P12,500.00, respectively
c. P12,500.00 and P5,000.00, respectively
d. P50,000.00 and P12,500.00, respectively
65. The articles of incorporation of Expert Corporation provide, among other information, the
following: authorized shares; issued price of P10.00 per share. How much are the subscription
and paid-in capital requirements of the corporation at the time of incorporation?
a. P25, 000.00 and P6,250.00, respectively.
b. P25,000.00 and P25,000.00, respectively.
c. P100,000.00 and P25,000.00, respectively.
d. P100,000.00 and P100,000.00, respectively.
Items 66 to 72 based on the following information:

The articles of incorporation of Super garments Corporation provide, among other matters, for an
authorized capital stock of P100,000.00, divided into 10,000 shares at the par value of P100.00
per share and seven (7) directors.
66. The minimum subscription and paid-in capital requirements of Super Garments Corporation
at the time of incorporation is:
a. P100,000.00 and P250,000.00, respectively
b. P250,000.00 and P62,500.00, respectively
c. P250,000.00 and P250,000.00, respectively
d. P750,000.00 and P187,000.00, respectively
67. Assuming that at the time of incorporation, 5,000 shares were subscribed at par value of
which 4, 000 shares had been paid in full, and 1,000 shares had been paid at 60% of the
subscription price, the number of issued shares of the corporation is:
a. 5,000 shares
b. 4,000 shares
c. 10,000 shares
d. 4, 600 shares
68. The total number of shares subscribed is:

a. 5,000 shares
b. 4,000 shares
c. 10,000 shares
d. 4, 600 shares
69. Assume that Super Garments Corporation reacquired 100 shares of the 4,000 shares paid in
full. How many shares are outstanding?
a. 3,900 shares
b. 4,900 shares
c. 9,900 shares
d. 900 shares
70. If you were a stockholder owning 200 shares and 8 stockholders ran for the position of
director during the annual election, you will be entitled to cast a maximum of:
a. 1,600 votes
b. 1,400 votes
c. 200 votes
d. 8 votes
71. Assuming that you were the subscriber of the 1,000 shares for which you paid a 60% of the
subscription price or a total payment of P60,000.00, you shall entitle at the time of your
subscription to the following rights of a stockholder, except the right to:
a. dividends
b. vote in the election of directors
c. attend stockholders’ meetings
d. a stock certificate covering 600 shares
72. in the election of directors, those elected were A, B, C, D, E, F, and G. in the first meeting of
the board of directors, the minutes of meetings show the following information:
I. approval of a contract for the purchase of garments from director G, who is an importer of
apparel from China. Present during the meeting were A, B, C, D, and G, with A, B, and G voting
for the approval of the contract. The contract is considered fair and reasonable under the
circumstances.
II. Appointment of T as the new treasurer, with A, B, and C voting for his appointment.
In your evaluation of the above corporate acts:

a. Both acts are valid
b. Both acts are not valid
c. Only I is valid
d. Only II is valid
73. The basic governing document of a private corporation which in effects serves as the
application of the incorporators with the government through the Securities and Exchange
Commission to become a corporation is the:
a. articles of incorporation
b. by-laws
c. certificate of incorporations
d. verification certificate
74. The purpose or purposes, aside from being lawful, must comply with which of the following
requirements?
a. The purpose or purposes must be definitely stated.
b. The primary purpose must be stated separately from the secondary purpose or purposes
c. The purposes, if there are several, must be susceptible of being lawfully combined.
d. All of the foregoing.
75. Which of the following provisions of the articles of incorporation cannot be amended?
a. Name of the corporation
b. Corporate term
c. purpose of the corporation
d. Number and names of the incorporators

I. An incorporator must be also a member of the board of directors or trustees at the time of
incorporation.
II. One’s may be stated in the article of incorporation as a subscriber or member at the time of
incorporation, but he may not be an incorporator.

c. Only statement 1 is true.
77. The document issued by the Securities and Exchange Commission under its official seal
giving the incorporators, stockholders/members and their successors the authority toconstitute
themselves as a body politic and corporate under the name stated in the articles of the
incorporation for the period specified therein.
b. By-laws
c. Certificate of incorporation
d. Certificate of registration
78. It is the top governing body of a corporation which exercise corporate powers, conduct
corporate business and controls and holds corporate property.
a. Executive committee
b. Board of directors
c. Council of elders
d. Steering committee

I. A director of a corporation may act individually in behalf of the corporation provided he owns
the controlling interest in the corporations.
II. Directors have to act as a body only if none of them owns the controlling interest in the
corporation.
80. D, a director and majority stock holder of Trident Corporation, was attending a business
conference in Singapore when he was offered a contract which he believed was good for Trident.
He accepted the offer by signing the contract in his capacity as director and in behalf of Trident.
a. The contract is binding on Trident since D is a director thereof and can bind the corporation in
such capacity.
b. The contract is binding on Trident since D is a majority stockholder.
c. The contract is binding on the Trident because D acted in a manner that is advantageous to
Trident.
d. The contract is not binding on Trident since D had no authority from the board of directors to
act on the particular matter.
81. Director of a stock corporation must possess the following qualifications, except:
a. They must be the owner of at least one share of stock.
b. The shares of stock they own must stand in their name in the books of corporation while they
are directors.
c. Majority of the directors must be citizens of the Philippines.
d. They must not be less than 5 nor more than 15 in number.
82. The articles of incorporation of Emerald Marketing Corporation provide for 9 directors. As
of April 30, 2008, the cut-off date for purpose of the annual election of directors, the corporation
had 10,000 shares outstanding. If you own 200 shares and you belong to the minority and you
wish to elect 2 directors, what is the minimum number of shares that you must be able to solicit
to be assured of the election of your 2 candidates for directors?
a. 2001 shares
b. 2,223 shares
c. 1,800 shares
d. 200 shares
83. Fernando and his children, namely, Anna, Benito, Cristina, and Donato, are stockholders of
Fontella Corporation whose articles of incorporation provide for 5 directors. The certificate of
stock shows the following number of shares in their names: Fernando, 2,700 shares; Anna, 2,000
shares; Benito, 2,000 shares; Cristina, 800 shares; and Donato, 800 shares; for a total of 8,300
shares representing 83% of the 10,000 shares outstanding. The remaining 1700 shares (17%) are
in the name of Xavier at 1,000 shares and several minority stockholders owning the balance 700
shares. All the five seats in the board are due to be filled up and Fernando and his 4 children
have decided to run for director. Should the family of Fernando join forces on one hand , and
Xavier and the other minority stockholders, on the other hand, how many seats in the board may
the family of Fernando possibly win?
a. Five
b. Four
c. Three
d. Two
84. As a rule, the quorum in the meeting of the board of directors or trustees is at least:
a. a majority of the total number of directors or trustees fixed in the articles of incorporation.
b. two-thirds (2/3) of the total number fixed in the articles of incorporation.
c. three-fourths (3/4) of the total number fixed in the article of incorporation
d. any number as long as it is fixed in the by-laws.
85. The by-laws may provide that the quorum in the meetings of directors or trustees may be:
I. less than the majority of the total number of directors fixed in the articles of incorporation.
II. more than the majority of the total number of directors fixed in the articles of incorporation.
The statement is true with respect to:
a. both I and II
b. I only
c. II only
d. neither I nor II
86. As a rule, the vote required in the meetings of the board of directors for the validity of the
corporate act taken should be at least:
a. a majority of the total number of the board of directors fixed in the articles of incorporation
b. a majority of the number of directors present provided there is a quorum
c. a majority of the number of directors present even if there is no quorum
d. two-thirds (2/3) of the total number of directors fixed in the articles of incorporation
87. Who may attend and vote in person or proxy in meetings?

a. Stockholders or members of the regulars or special meetings of the stockholders or members
b. Directors or trustees in the regular or special meeting of the board of directors or trustees
c. Both a and b
d. neither a nor b
88. A, B, C, D, E, F, G, and H are candidates for the position of director of Compumatrix

Corporation whose articles for incorporation provide for 7 directors. S is a stockholder of
Compumatrix Corporation with 500 shares in his names. Which of the following is incorrect?
a. S may cast 500 votes each for A,B,C,D,E,F,G, and H
b. S may cast 1000 votes for A, 1000 votes for B, 1000 votes, for C, and 500 votes for D
c. S may cast 3500 votes for A alone
d. S may cast 500 votes each for A,B,C,D,E,F and G
89. A,B,C,D,E,F and G are directors of Bravado Construction Corporation, whose articles of
incorporation provide for seven directors. The minutes of the meeting of the board of directors
for the month of September and October show the following information:
I. September 10- approval of a contract for the purchase of steel from Titan Steel Mills. Present
during the meeting were A, B, C, and D with A, B and C voting for the approval of the contract.
II. October 10- election of a new corporate secretary of the corporation. Present were A,B,C,D
and E, with A,B and C voting for the election of S as the new corporate secretary.
Which of the above acts of the board is valid?

a. both I and II
b. neither I nor II
c. I only
d. II only
90. Who of the following corporate officers must also be a director ?

a. President
b. Treasurer
c. Corporate secretary
d. None of the foregoing officers is required to be a director for as long as each owns at least one
share of stock in his own name
91. The president of corporation should not at the same time be the:
a. Treasurer
b. Corporate secretary
c. Either a or b
d. Chairman of the board of directors
92. A,B,C,D,E,F and G are directors of Speedex corporation whose articles of the incorporations
provide for 7 directors. During the month of March 2009, the board of directors of the
corporation which is engaged in the sale of motor vehicles, held a meeting to approve a contract
for the purchase of 20 motorcycles from G, one of the directors, who is importer of motorcycles.
Present during the meeting were A,B,C,D and G, with A,B,C, and G voting for the approval of
the contract. Assuming that the contract is fair and reasonable under the circumstances, the
contract between the Speedex Corporation and G is:
a. valid
b. rescissible
c. voidable
d. unenforceable
93. Refer to the facts in preceding number. If an executive committee is allowed by the by-laws
of Speedex Corporation to be formed, which of the following cts may be performed by the
executive committee?
a. Election of Y to fill the vacancy in the board of directors
b. Declaration of the stock dividends
c. Amendment of the by-laws
d. Approval of a contract for the purchase of 10 units of Motorcycle.
94. The minimum number of members of the executive committee who must all be members of
the board of directors is:
a. 2
b. 3
c. majority of the number of the board of directors stated in the articles of incorporation
d. majority of the number of the board of directors present when the members of the executive
committee were appointed
95. What vote is required in order that the act of the executive committee will be valid?
a. majority of its members
b. all of its members
c. two-third of its members
d. majority of its member present during the executive committee meeting
96. Which of the following causes of vacancy in the board of directors may be filled by the
remaining directors if they still constitute a quorum?
a. Increase in the number of directors
b. Expiration of the term of directors
c. Death of a director
d. Removal of a director

I. As a rule, director of a stock corporation may be removed with or without cause.
II. Removal of a director with or without a reason can be used by the majority stockholders to
deprive minority stockholders of their representation in the board of directors.
98. A,B,C,D,E,F and G are directors of Crown Jewels Corporation whose articles of
incorporation provide for 7 directors. A,B,C and D resigned as a directors. The vacancy in the
board cause by the resignation of A,B,C and D:
a. may be filled with board of directors only
b. may be filled with the stockholders only
c. may be filled either a or b
d. the vacancy need not to be filled until the expiration of the term of the incumbent directors
since the remaining directors constitute less than the majority
99. Directors are entitled to compensations, except when:

a. fixed by the by-laws
b. approved by the majority of the outstanding capital stock
c. approved by the directors themselves
d. the compensation is a reasonable per diem
100. The total yearly compensation of directors, as such directors, must not exceed:
a. ten percent (10%) of the net income before income tax of the corporation during the preceding
year
b. ten percent (10%) of the net income after income tax of the corporation during the preceding
year
c. fifteen percent (15%) of the net income before income tax of the corporation during the
preceding year
d. fifteen percent (15%)of the net income after income tax of the corporation during the
preceding year
101. These statement presented to you:

I. The treasurer may validly receive compensation from the corporation in such capacity, and
another compensation in his capacity as a member of the board of director if he is also a director.
II. In determining the limitation on the total yearly compensation of the directors, the
compensation of a directors if he serve the corporation in some other capacity, should not be
included in determining such limitation.

c. statement I is true; statement II is false
d. statement I is false; statement II is true
102. A,B,C,D,E,F and G are directors of Fast Auto Supply Corporation whose articles of
incorporation provide for 7 directors. During the month of February 2009, the board approved a
contract for the purchase of auto spare parts from A, one of the director of the corporation who is
an importer. Present during the meeting were A,B,C,D and E. Those who voted for approval of
the contract were A, B, and C. assuming that the contract is fair and reasonable under the
circumstances, the contract between Fast Track Auto Supply Corporation and A is:
a. valid
b. voidable
c. void
d. rescissible
103. Alvarez, Bernardo, Carlos, Dominguez, Espina, Faller, Guzman, Hornedo and Inocencio are
directors or Town and Country Appliance Sales Corporations whose articles for corporation
provide for 9 directors. The minutes of the meeting of the board of directors for January and
February 2009 show the following information:
I. January 15- Present were Alvarez, Bernardo, Carlos, Dominguez, Romero who was given a
special power of attorney by Espina to represent him in the meeting since he was abroad, and
Atty. Salas, the corporate secretary. Alvarez, Bernardo, Carlos and Dominguez voted for the
approval of a contract for the purchase of appliances from Ultrasonic Corporation.
II. February 15- Present were Alvarez, Bernardo, Carlos, Dominguez, Espina, and Atty, Salas.
Alvarez, Bernardo, Carlos and Dominguez voted for the appointment of Teresa Tesoro as the
new treasurer of the corporation.
Based on the foregoing facts:
a. both corporate acts are valid
b. both corporate acts are not valid
c. I is valid; II is not valid
d. I is not valid; II is valid
104. on January 10, 2009, the board of directors of Intrepid Sales Corporation whose articles for
incorporation provide for 7 directors, held a meeting for a purpose of removing A as a director
due to disloyalty to the corporation and electing his replacement. Present during the meeting
were the six other directors, namely, B, C, D, E, F and G. B, C, D and E voted for both removal
of A and the election of H to replace him.
a. both the removal of A and the election of H as the new director are valid
b. both the removal of A and the election of H as the new directors are not valid
c. only the removal of A is valid
d. only the election of H as the new director is valid
105. DYNAMIC Corporation, which is in the computer sales business, has for its directors
Decena, Yuson, Nebre, Altuna, Mendoza, Isleta, and Centeno. Its articles of incorporation
provide for 7 directors. The meetings of the board of directors for August and September 2008,
show the following information:
I. August 10- present were Decena, Yuson, Nebre, and Altuna. Also present was Reyes, who was
sent by Mendozza to represent him in the meeting. A contract for the purchase of supplies from
Corona Supply Company was approved by Decena, Yuson and Reyes who was authorize by
Mendoza to vote in favor of the contract.
II. September 10- present were Decena, Yuson, Nebre, Mendoza and Santos, the corporate
secretary. Directors Decena, Yuson, and Nebre voted for the approval of contract for the
purchase state-of-the-art computers from Mendoza who is an importer of the product. The
contract with Mendoza entitled the corporation to a big discount and its fair and reasonable under
the circumstances.
In your evaluation of the above contracts:

a. both corporate acts of the board of directors are valid
b. both corporate acts are not valid
c. only corporate act I is valid
d. only corporate act II is valid
106. A, B, C, D, E, F and G are directors of the Silver Mercantile Corporation (silver) whose
articles on incorporation provide for 7 directors. Silver was too enter into a contract with A. a
board meeting was held to approve the contract. In which of the following cases, will the
contract considered valid?
a. Present: A, B, C, D and E; voting: A, B, C and D
b. Present: A, B, C, and D; voting: B, C and D
c. Present: A, B, C, D, and E; voting, A, B and C
d. Present: A, B, C and D; voting, A, B and C

I. There is interlocking directorate when one, some, or all of the directors of one corporation also
occupy seats in the board of another corporation.
II. If a contract is entered into between two corporations with interlocking directorate, the
contract is generally void because of conflict of interest.
In your evaluation of the foregoing statement:
108. Under this doctrine, directors are prohibited from uprising for, or diverting to, themselves
business deals that in equity or fairness belong to the corporation,
a. Doctrine of separate personality
b. Doctrine of alter ego
c. Doctrine of limited capacity
d. Doctrine of corporate opportunity
109. The powers of a corporation that are necessary to carry into effect the power that is
expressly granted, and which must be presumed to have been the intention in the grant of the
franchise.
a. Incidental powers
b. Implied powers
c. Express powers
d. Charter powers
110. Which of the following is not the power of a stock corporation?

a. To acquire, hold or dispose property for the furtherance of its business.
b. To make reasonable donations in aid of the political party or candidate or for purposes of
partisan political activity.
c. To establish pension funds for its employees
d. To sell treasury stocks at lower than par value provided the price is reasonable.
111. in case of decrease capital stock, the same should not prejudice corporate creditors, i.e.,
there shall be no distribution of assets to shareholders until the claim of creditors have been paid
or an appropriation of such assets has been made to satisfy such claims. This is the:
a. Trust fund doctrine
b. Doctrine of corporate opportunity
c. Doctrine of limited capacity
d. Doctrine of alter ego
112. The right of stockholder to purchase or subscribe to all issuances or disposition of shares of
any class before such shares are offered to the public.
a. Appraisal right
b. Redemptive right
c. Presumptive right
d. Pre-emptive right
113. When ay the right referred to in the preceding number be denied the existing stockholders?
a. When shares are to be issued compliance with laws requiring stock offerings or minimum
stock ownership by the public.
b. When shares are to be issued in good faith with the approval of the stockholders representing
2/3 of the outstanding capital stock in exchange for property needed for corporate purposes or in
payment of a previously constructed debt.
c. In both a and b
d. In neither a nor b because stock holders have an absolute right to maintain their proportionate
interest in the corporation.
114. In which a following cases may a corporation acquire its own shares although it has no
unrestricted retained earnings in its books?
a. Elimination of fractional shares
b. Collection of indebtedness in the sale of delinquent right
c. Payment to stockholders who exercise their appraisal right
d. Resolution of deadlock in the management of a close corporation as ordered by the Securities
Exchange Commission

I. The board of directors may abandon any sale or disposition of all or substantially all of
corporate property previously ratified by the stockholders without further approval from the
latter.
II. The sale or other disposition of all or substantially all of corporate property in the regular
course of business may be made by the board of directors without futher approval from the
stockholders.


I. The investments of funds in other corporation or business or for other than primary purpose
requires the approval of the majority of the board of directors and the ratification by the
stockholders representing 2/3 of the outstanding capital stock.
II. The vote of the board of directors is sufficient if the investment in another corporation or
business is necessary to accomplish the primary purpose.

117. The portion of the accumulated profits of a corporation which is set aside for distribution to
stockholders is known as.
a. surplus
b. retaining earnings
c. additional paid-in capital
d. dividends
118. Which dividends require the approval of only a majority of the directors present provided
there is a quorum?
a. stock dividends
b. cash dividends
c. both a and b
d. neither a nor b because the consent of the stockholders representing 2/3 of the outstanding
stock entitled to vote is required for both kinds if dividends
119. Which of the following is not the source of dividends?

a. retained earnings
b. paid-in capital in excess of par value
c. paid-in capital in excess of issued price of no-par shares
d. surplus profits
120. Saavedra own 1000 shares of Portofino Corporation stock. On June 20, the board of
directors declared a semi-annual dividend of fifty cents (0.50) per share to stockholders of record
as of June 30, and payable on July 20. On July 10, Saavedra sell all of his shares to Belafonte.
The transfer of the shares was recorded in the stock and transfer book the following day, July 11.
Who is entitled to the dividend in so far as Portofino Corporation Stock is concerned?
a. Saavedra
b. Belafonte
c. Saavedra and Belafonte, equally
d. Saavedra, Belafonte and Portofino Corporation will share in the dividend equally
121. Cash dividends are different from stock dividends in that cash dividends:
a. Do not involve any disbursement of funds
b. may still reached by corporate creditors
c. require the approval of both the board of the directors and stockholders
d. do not increase the legal capital
122. Corporation are compelled to declare dividends if their surplus:

a. exceed 100% of their authorize capital stock
b. exceed 100% of their subscribed capital stock
c. exceed 100% of their paid-in capital stock
d. equal 50% of their stockholders’ equity
123. A corporation is justified in not declaring dividends although the amount of its surplus
profits compels such declaration under the requirement of the preceding number in which of the
following cases?
a. When justified by definite corporate expansion projects or programs approved by the board of
directors.
b. When such retention is necessary to meet probable contingencies.
c. When the declaration of dividends is prohibited under a loan agreement without the creditor’s
consent and such consent has not been obtained.
d. All of the foregoing
I. A corporation may delegate the management of all or substantially all of its business to another
corporation.
II. A management contract cannot be entered into between two corporation when majority of the
board of directors of the managing corporation also constitute the majority of the board of
directors of the manage corporation.

125. The following are certain corporate acts:

I. Election or appointment of an officer of the corporation
II. Declaration of cash dividends
III. Merger or consolidation
IV. Issuance of bond to finance the firms’ expansion
Which of the following acts will the approval of both the board of directors and stockholders?
a. I and II
b. II and IV
c. I and III
d. II and IV
126. An act or contract beyond the express, implied and incidental powers of a corporation is
known as:
a. intra-vires act
b. ultra-vires act
c. illegal act
d. unauthorized act
127. an ultra-vires act that is not illegal per se is?

a. voidable
b. rescissible
c. unenforceable
d. valid
128. An ultra-vires act that is not illegal per se, aside from being consummated, may be ratified if
the following requisites are present, except:
a. The creditors are not prejudice or all of them have given their consent thereto.
b. The rights of the public or of the state are not involved.
c. All the stockholders must give their consent.
d. None of the foregoing.
129. They refer to 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.
b. Committee rules and regulations
c. By-laws
d. Board of directors’ resolutions
130. When are by-laws adopted and filed?

a. Prior to incorporation
b. Within 1 month after the receipt of the official notice of the issuance of the certificate of
incorporation.
c. Either a or b
d. Neither a or b because the by-laws should be filed simultaneously with the issuance of the
certificate of incorporation.
131. When do by-laws become effective?

a. Upon their filing with the Securities and Exchange Commission
b. Upon their execution or approval by the stockholders and members
c. Upon issuance by the Securities and Exchange Commission of a certification of their contrary
to existing laws
d. Upon favorable recommendation of the appropriate government agency that they are not
contrary to existing laws
132. Which of the following by-laws is valid?

a. A by-law which provides that one must be the owner of at least 10 shares of stock to be
eligible as director.
b. A by-law which reduces the quorum from 8 to 6 in the meeting of the directors who number
15.
c. A by-law which provide that one can continue his term as a director although he has disposed
of all his shares in the corporation.
d. A by-law reducing effective immediately the compensation of incumbent directors in the
middle of their term.
133. Articles of incorporation differ from by-laws in that articles of incorporation are:
a. adopted before or after incorporation
b. the rules adopted by a corporation for its internal government
c. necessary in order that a corporation may acquire a juridical personality.
d. adopted by the incorporators or by the stockholders or members, depending on the time of
adoption
134. Tower Sales Corporations which has been experiencing financial problems has requested
for your opinion on the following proposed amendment to its by-laws to save on cost.
I. A by-law providing that the positions of president and a treasurer be held by the same person
and pay him only one compensation
II. A by-law reducing the compensation of directors from P500,000.00 to P300,000.00 per
annum to take effect upon the assumption of office of the new set of directors next year
III. A by-law providing that stockholders send their vote by mail to save on meeting expenses.
IV. A by-law reducing the number of directors from 15 to 11 with a corresponding amendment
to the articles of incorporation on the reduction to take effect upon the expiration of the term of
the incumbent directors.
Which of the proposed amendments may you validly recommend?

a. I and II
b. II and III
c. III and IV
d. II and IV

I. The vote of the stockholders representing 2/3 of the outstanding capital stock (voting and non-
voting) is necessary in order that the power to amend, repeal or adopt new by-laws may be
delegated to the board of directors.
II. The stockholders representing a mere majority of the outstanding capital stock (voting and
non-voting) may revoke the power to amend, repeal or adopt new by-laws previously delegated
to the board of directors.

136. The by-law of a corporation are binding upon the following, except:
a. directors or trustees
b. officers
c. stockholders or members
d. third persons transacting with the corporations without notice
137. As a rule, the quorum in the meeting of the stockholders is?

a. majority of the outstanding capital stock
b. majority of the subscribed capital stock
c. two third of the outstanding capital stock
d. two third of the subscribed capital stock
138. Unless otherwise provided in the by-laws, the presiding officer in the meetings of
stockholders is the:
a. president
b. chairman of the board of directors
c. owner of the majority of the outstanding capital stock
d. corporate secretary
139. The meeting of the stockholders or member must be held in:
a. the principal office of the corporation
b. the city or the municipality were the principal office corporation is located
c. any place that may be stated in the notice meeting
d. any place approved by the resolution of the board of directors or trustees
140. Big Save Appliances Corporation has its principal office in Manila. Its by-laws provide that
transactions amounting to at least P300,000.00 must be approved by the board of directors and
ratified by the stockholders. A contract for the purchase of appliances valued at P400,000.00 was
approved by the board of directors in a meeting duly convened. To save on cost, the meeting of
the stockholders to ratify the contract was held in Villa Escudero in Laguna during the annual
outing. Eighty percent of the stockholders were present, while 20% were duly represented by
proxies. When the voting took place, 75% of the outstanding capital stock voted for the approval
of the contract. A stockholder who was present but voted against the contract now questions the
validity of the contract on the ground that the meeting was improperly held since it was
conducted outside the venue provided by law. The contract approved in such a case is:
a. valid
b. void
c. voidable
d. resscissible
141. Unless the by-laws provide otherwise, the meetings, whether regular or special, of the board
of directors or trustees, shall be preside by the:
a. president.
b. chairman of the board of directors.
c. director who owns the controlling interest in case of stock corporations or the member who
obtained the highest number of votes in the election of trustees in case of non-stock corporations.
d. officer who gave notice of the meeting.
142. The meetings of the board of directors or trustees may be held:

a. anywhere in the Philippines.
b. anywhere outside the Philippines.
c. either (a) or (b) unless the by-laws provide otherwise.
d. only in the place where the principal office of the corporation is located
143. a stockholder may vote in stockholders’ meetings:

I. Directly or personally.
II. By representative voting such as by means of proxy or voting trust agreement or through a
legal representative such as an executor or receiver.
The statement is true with respect to:

a. Both I and II.
b. Neither I or II.
c. I only.
d. II only.
144. Sabuelba, the owner of 500 shares of stock of Zenith Corporation, pledged the shares to
secure a loan he obtained from Canillas. Sabuelba and Canillas executed a public instrument
showing the date of the pledge and a description of shares pledged with Zenith Corporation
having been furnished a copy therof. Who can vote the shares while the shares are pledged to
Canillas?
a. Salbuelba, the stocking/pledgor.
b. Canillas, the creditor/pledgee.
c. Both Salbuelba and Canillas jointly.
d. Neither Salbuelba nor Canillas because the voting right is suspended while the shares are
pledged.
145. A stock certificate shows that 1,000 shares of stock of Uptown Corporation is in the name
of “Alfredo Alvarez and/or Benito Bermudez”. Which of the following statement is incorrect?
a. Alfredo Alvarez alone may vote the shares.
b. Benito Bermudez alone may vote the shares.
c. alfredo Alvarez and Benito Bermudez may vote the shares jointly.
d. Alfredo Alvarez or Benito Bermudez either alone or jointly may not appoint a proxy to vote
the shares.
146. These statements are presents to you:

I. Executors, administrators or receivers may exercise the right to vote the shares under their
administration without the need of any written proxy.
II. The voting trustee may vote the shares entrusted to them by proxy unless the voting trust
agreement provides otherwise.
In evaluation of the foregoing statements:

147.It refers to the written authority given by a stockholder to another person to exercise the
voting without transferring title to the shares.
a. Power of attorney.
b. Voting trust agreement.
c. Proxy.
d. Street certificate.
148. A voting trust agreement differs from a proxy in that in a voting trust agreement:
a. the representative acquires legal title to the shares.
b. the stockholder may vote even in the presence if the representative.
c. is generally valid only for the meeting for which it was intended.
d. a copy of the authority is not required to be filed with the Securities and Exchange
Commission.
149. It refers to the document given by a voting trustee to a transferring stockholder under a
voting trust agreement and which can be transferred by such transferring stockholder to another
person.
a. Stock certificate
b. Voting trust certificate
c. Proxy
d. Transfer certificate
150. A suit or action brought by a stockholder or stockholders in the name and in behalf of the
corporation to protect corporate rights or redress wrongs committed against the corporation,
whenever corporate officers refuse to bring such actions or such officers are the ones to be sued
or such officers are the ones to be sued or held liable.
a. Representative suit
b. Class suit
c. Derivative suit
d. Individual suit
151. Aside from being brought in the name and for the benefit of the corporation, the following
are the requisites in order that one may file the suit referred to in the preceding number, except:
a. There must be an existing cause of action in favor of the corporation.
b. The stockholder bringing the suit must have exhausted remedies within the corporation to no
avail.
c. The stockholder bringing the suit must have been such at the time the questioned transaction
occurred.
d. The stockholder filing the suit must own a substantial number of shares in order that he may
be able to represent adequately the interests of the minority stockholders.
152. Samonte and Mater Marketing Corporation (Master) signed a contract which had for its
heading “Deed of Sale of Shares of Stock”. The contract provided for the acquisition by Samonte
of 500 shares from Master’s unissued stock at the par value of P100.00 per share, which amount
Samonte paid in cash to Master. Is the contract valid and what kind of contract is it?
a. Yes, it is a valid contract of subscription.

b. Yes, it is a valid contract of sale/purchase.
c. No, it is not valid because of the conflict between the heading and the provisions of the
contract which cover unissued shares.
d. Yes, it is valid, but it is an innominate contract.
153.A person may become a stockholder of a corporation throught any of the following means,
except by:
a. subscription of unissued stock.
b. purchase of the treasury shares of the corporation.
c. purchase of shares from a stockholder.
d. receipt of stock dividends from the corporation for services previously rendered.
154. Subscription of shares differed from purchase of shares from a corporation in the
subscription:
a. is governed by the Statue of Frauds.
b. may be made only after incorporation.
c. covers only unissued shares of stock.
d. the acquirer of the shares does not become a stockholder until he has paid his shares in full.
155, Below are contracts involving shares of stock:

Subscription of 1,000 shares of stock at P10.00 per value per share.
Purchase of 50 shares from a stockholder of a corporation at P8.00 per share.
Purchase of 100 treasure shares from corporation at P50.00 per share.
Which of the foregoing contracts involving shares of stock are valid and enforceable not in
writing and still wholly executory?
a. I and II.
b. II and III.
c. I and III.
d. II only.
156. A contract for the subscription of shares of a corporation:

a. applies to unissued shares and issued shares such as treasury shares.
b. is governed by the Statue of Frauds If the amount of the subscription is at least P500.00
c. entitles the subscriber to all the rights of a stockholder including the right to a stock certificate
although he has not paid his subscription in full to the corporation provided he is not delinquent.
d. may be made before or after incorporation.
157. The consideration for the shares of stock may be any of the following, except:
a. cash actually received.
b. promissory notes.
c. outstanding shares in case of conversion.
d. indebtedness of the corporation.
158. The consideration for the shares of stock may be any of the following, except:
a. amounts transferred from unrestricted retained earnings to stated capital.
b. services to be performed at some future time.
c. property, tangible or intangible, actually paid to the corporation and necessary for its use, at a
fair valuation equal to the par or issued value of the stock.
d. outstanding shares in the event of reclassification.
159. The issued price of no-par shares may be fixed through the following means, except:
a. in the articles of corporation.
b. in the stock certificate.
c. by the board of directos pursuant to and authority conferred upon it by the articles of
incorporation or the laws.
d. by the stockholders representing at least a majority of the outstanding capital stock in a
meeting called for the purpose, in the absence of other valid means.
160.These statements are presented to you:
I. Shares of stock issued are personaly property and may be transferred by the delivery of the
stock certificate/s endorsed by the owner or his attorney-in-fact or other person legally
authorized to make the transfer.
II. Shares of stock against which the corporation holds an unpaid claim shall be transferrable in
the books of the corporation provided the purchaser has paid the purchase price in full to the
transferring stockholder and notice of such fact is given to the corporation.

161.which of the following statements is incorrect?

a. A transfer of shares from a stockholder to another person is binding upon the corporation
when such transfer is recorded in the books of the corporation.
b. A transfer of shares from a stockholder to another person requires the approval of the
Securities and Exchange Commission for its validity.
c. A transfer of shares which is not recorded in the books of the corporation is binding between
the transfer or and the transferee.
d. A transfer of shares may be made other than by the endorsement of the stock certificate by the
owner of the shares or by his duly authorized agent.
162. Salvatierra, owner of 500 shares of stock of Prestige Corporation, sold all the shares to
Braganza. The parties executed a deed of sale duly acknowledged before a notary public.
Braganza thereafter attended a meeting of stockholders but the corporation refuse to allow him to
vote although he presented the deed of sale duly acknowledged before a notary public and the
stock certificate in the name of Salvatierra covering the shares sold. Was the Prestige
Corporation justified in denying Braganza the right to vote?
a. No, because Braganza was already the owner of the shares and so has the right to vote for
them.
b. Yes, because in so far as Prestige Corporation is concerned, Salvatierra was still the owner of
record.
c. No, the deed of sale covering the shares sold was already a public document and Prestige
Corporation is presumed to have constructive notice of the transfer of the shares.
d. No, because the sale of the shares became binding upon Salvatierra, Braganza and Prestige
Corporation on the date of the execution of the sale.
163. Sarzuelo subscribed to 100 shares of Westex Corporation at P100.00 par value per share. He
paid P4,000 upon subscription with the balcance of P6,000.00 to be paid in three equal monthly
installments of P2,000.00 beginning March 1, 2009. On February 1, 2009. Sarzuelo attended a
stockholders’ meeting but he was denied the right to vote although he presented his subscription
contract with Westex Corporation. Was the corporation justified in denying Sarzuelo the right to
vote?
a. Yes, because Sarzuelo has not yet paid the subscription price in full.
b. No, because Sarzuelo is already a stockholder entitled to vote the shares.
c. Yes, but only up t o the extent of 60 shares since Sarzuelo has still has a balance of P6,000.00.
Therefore, he must be allowed to vote for 40 shares.
d. Yes, because Sarzuelo has not yet received his stock certificate whether for 40 or 100 shares.

I. A director who consents to the issuance of watered stock or does not express his
objection thereto in writing and file the same with the corporate secretary despite having
knowledge of such issuance is liable for such issuance of watered stock.
II. In cases where a director is liable for the issuance of watered stock, such liability shall be
joint with that of the stockholder for the difference between the fair value received at the time of
issuance of the stock and the par or issue value of the same.
III. The liability of the director and the stockholder for the issuance of the watered stock shall
be in favor of the corporation and its creditors.
Which f the foregoing statements are true?
I and II.
II and III.
I and III.
I, II and III.
165. These statements are resented to you.

a. The entire balance shall become due with the interest thereon acquiring from the date of
default.
b. Only the installment defaulted shall become due with the interest thereon from the date of
default.
c. The entire balance shall become due without any interest acquiring thereon.
d. Only the installments defaulted shall become due without any interest acquiring thereon.
169.In case of delinquent subscription, which of the following remedies may be availed by the
corporation to satisfy its claim?
a. Apply the cash diviends on the balance of the subscription plus interest, cost and expense, or
withhold the stock dividends until the subscriber pays his balance plus interest and cost and
expenses.
b. File a court action to collect the unpaid subscription plus interest, cost and expenses.
c. Sell the shares in a delinquency sale.
170. The highest bidder in a delinquency sale is the one willing to pay the full amount of the
balance of the subscription, accrued interest, cost of advertisement and expenses of sale for the:
a. most number of shares.
b. least number of shares.
c. number of shares not covered by the payment made by the delinquent subscriber.
d. number of shares covered by the payments made by the delinquent subscriber.
171. Saliented subscribed to 1,000 shares of Green Acres Corporation at P10.00 par value per
share for a total subscription price of P10,000.00. Salientes gave a down payment of P4,000.00
in accordance with the contract of subscription. However, he defaulted in the payment of the
balance of P6,000.00. Accordingly, the shares were declared delinquent and were offered for
sale. Acrued interest amounted to P120.00; cost of advertisement, P500.00; and expenses of sale,
P300.00. At the delinquency sale, the following declared their bids: Almeda, P6,920 for 600
shares; Baviera, P6,920.00 for 550 shares; and Calzado, P6,500.00 for 530 shares. Who among
the three is the highest bidder?
a. Almeda
b. Baviera
c. Calzado
d. None of the three satisfied the requirements for one to be considered the highest bidder.

I. If there is n highest bidder, the corporation itself may bid in the sale of the delinquent shares.
II. A stock certificate covering the shares corresponding to the payment made by the delinquent
subscriber shall be issued to him whether there is a highest bidder or not.

173. The following are the effects of delinquency of shares, except:

a. The delinquent stock shall not be voted.
b. The delinquent stock shall not be entitled to vote or to representation at any stockholders’
meeting.
c. The holder shall not be entitled to any rights of a stockholder.
d. The shares shall not be entitled to dividends.
174. On march 1, 2009, Suplico signed a subscription contract for the acquisition of 1,000 shares
of Elite Corporation at P100.00 par value per share. The subscription contract, provides, among
other matters, the following terms: down payment of P40,000.00; balance in 3 equal monthly
installments payable in the first day of each month beginning on May 1, 2009.
180. Gamma Corporation and Sigma Corporation have agreed to a corporate combination. After
the combination, only Gamma Corporation subsits. Such corporate combination is called:
a. merger.
b. consolidation.
c. amalgamation.
d. conglomeration.
181.Zenith Corporation and Alpha Corporation agreed to a corporate combination. FTER THE
COMBINATION, Xenith Corporation and Alpha Corporation ceased to exist and a new
corporation named ZEAL Corporation emerges. Such corporation combination is called:
a. joint venture.
b. merger.
c. consolidation.
d. absorption.
182. It refers to the right of a stockholder to demand payment of the fair value of his shares in
case he votes against a certain corporate acts.
a. Pre-emptive right
b. Appraisal right
c. Presumptive right
d. Appreciation right
183.In which of the following cases is the right referred to in the preceding number not available
to a dissenting stockholder?
a. Amendment to extend corporate term.
b. Amendment to change corporate name.
c. Merger or consolidation of the corporation with another corporation or other corporations.
d. Amendment giving preferential rights to certain stockholders.
184, The right referred to in No. 182 is available to a dissenting stockholder in the following
cases, except:
when an amendment of the articles of incorporation has the effect of changing or restricting the
rights of any stockholders of any class.
in case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property.
In case of investment of funds by the corporation to accomplish its primary purpose.
when an amendment of the articles of incorporation has the effect of shortening the corporate
existence.
185. A demand made by a stockholder from the corporation for the payment of the fair value of
his shares in case he dissents from certain corporate acts produces the following effects, except:
a. the suspension of his voting right.
b. the suspension of his dividend right.
c. the suspension of his right to receive payment of the fair value of his shares.
d. none of the foregoing.
186. The right of a dissenting stockholder to be paid the value of his shares ceases in the
following cases, except:
a. when he withdraws his demand for the payment of his shares but the corporation does not
consent thereto.
b. if the proposed corporate action is abandoned by the corporation.
c. if the shares are sold by the dissenting stockholder after notation on the stock certificate that
the shares are dissenting shares.
d. if the proposed corporate action is disapproved by the Securities and Exchange Commission
where such approval is necessary.
187. Which of the following statements pertaining to non-stock corporate is incorrect?

a. Members may vote by mail if allowed by the by-laws.
b. Membership is transferable like shares of stock.
193. The management of the business of a close corporation by the stockholders instead of by a
board of directors produces which of the following effects?
a. No, meeting of stockholders need be called to elect directors.
b. The stockholders of the corporation shall be deemed to be directors.
c. The stockholders shall be subject to all liabilities of directors.
194. Any action by the board of directors of a close corporation even without a meeting shall be
valid in which of the following cases?
a. When written consent thereto is signed by all the directors, whether before or after such action
was taken.
b. When all the stockholders/directors have knowledge, whether actual or implied of the action
and make now prompt objection thereto in writing.
c. When the directors are accustomed to take informal action with the express or implied
acquiescence of all the stockholders.
195. The Securities and Exchange Commission, upon written petition by any stockholder, shall
have the authority to make such order as it may deem appropriate in order to break a deadlock in
the management of a close corporation, except:
a. to cancel or alter any provision contained in the articles of incorporation, by-laws or any
stockholders’ agreement.
b. to appoint a provisional director who must be a stockholder or a creditor of the corporation.
c. to require the purchase at their fair value of shares of any stockholder, either by the
corporation regardless of the availability of unrestricted retained earnings in its books, or by the
other stockholders.
d. to dissolve the corporation.
196. The number of trustees of educational institutions organized as non-stock corporations may
be:
a. either 5, 10 or 15.
b. any number provided it is not less than 5 and not more than 15.
c. not less than five but may be more than 15.
d. any number as the incorporators may deem appropriate.
197. The term of office of trustees of non-stock educational corporations, unless other wise
provided in the articles of incorporation, shall be:
a. 5 years.
b. 4 years.
C. 3 years.
d. 1 year.
198. The chief archbishop, bishop, minister, priest, rabbi or other presiding elder shall become a
corporation sole:
a. upon the issuance of the certificate of incorporation.
b. from and after the filing of the articles of incorporation.
c. upon the execution of the articles of the incorporation.
d. on the date stated in the articles of incorporation.
199.These statements are presented to you:

I. A corporation sole has no nationality.
II. Upon the death of the incumbent in a corporation sole, church properties of law, not to his
personal heirs, but to his successors in office.

200. A corporation is automatically dissolved.

207. A foreign corporation doing business in the Philippines with a license:
a. may not sue and be sued in Philippine courts.
b. may not sue but may be sued in Philippines courts.
c. may sue and be sued in Philippine courts.
d. may sue but may not be sued in Philippine courts.
208. A foreign corporation no doing business in the Philippines:

a. must obtain a license before it can sue and may be sued in Philippine courts.
b. need not obtain a license before it can sue and may be sued in Philippine courts.
c. must obtain a license before it can sue in Philippine courts. However, no such license is
required before if may be sued in the Philippine courts.
d. need not obtain a license before it can sue, but such license is required before it may be sued in
the Philippine courts.
209. Who may be a resident agent in the Philippines of a foreign corporation?

a. Any individual residing in the Philippines who must be of good moral character and of sound
financial condition.
b. A domestic corporation lawfully transacting business in the Philippines.
c. Either (a) or (b).
d. Regional area headquarters of the foreign corporation.
210. Any foreign corporation lawfully doing business in the Philippines shall be bound by all
laws, rules and regulations applicable to domestic corporations of the same class, except with
respect to:
a. its creation, formation, organization or dissolution.
b. the fixing of relations, liabilities, responsibilities, or duties of its stockholders, members or
officers to each other or to the corporation.
c. both (a) and (b).
d. neither (a) nor(b).

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DIAGNOSTIC EXERCISES

1. Which of the following is not an attribute of a corporation?

3. These statements are presented to you:

In your evaluation of the foregoing statements:

4. These statements are presented to you:

In your evaluation of the foregoing statements:

6. A corporation commences to exist:

7. These are presented to you:

Which of the foregoing statements refer to the right of succession of a corporation?

8. The following independent situations concerning Coronet Corporation, a stock

9. The following cases are presented to you for evaluation:

13. These statements are presented to you:

In your evaluation of the foregoing statements:

15. A stock corporation differs from a non-stock corporation in that in a non-stock

28. those composing it are liable as general partners.

29. A, B, C, D, and E represented themselves to X as directors and stockholders of “Titanic

31. refer to No. 29 the corporation formed under the circumstances is a:

35. These statements are presented to you:

In your evaluation of the foregoing statements:

In your evaluation of the foregoing statements:

46. Non-voting shares may vote in the following cases, except:

47. These statements are presented to you:

In your evaluation of the foregoing statements:

48. Which of the following statements concerning no-par shares is incorrect?

50. These statements are presented to you:

In your evaluation of the foregoing statements:

53. Which of the following statements concerning treasury shares is incorrect?

Items 66 to 72 based on the following information:

68. The total number of shares subscribed is:

In your evaluation of the above corporate acts:

76. These statements are presented to you:

In your evaluation of the foregoing statements:

79. These statements are presented to you:

87. Who may attend and vote in person or proxy in meetings?

88. A, B, C, D, E, F, G, and H are candidates for the position of director of Compumatrix

Which of the above acts of the board is valid?

90. Who of the following corporate officers must also be a director ?

97. These statements are presented to you:

99. Directors are entitled to compensations, except when:

101. These statement presented to you:

In your evaluation of the foregoing statements:

In your evaluation of the above contracts:

107. These statements are presented to you:

110. Which of the following is not the power of a stock corporation?

115. These statements are presented to you:

In your evaluation of the foregoing statements:

116. These statements are presented to you:

In your evaluation of the foregoing statements:

119. Which of the following is not the source of dividends?

122. Corporation are compelled to declare dividends if their surplus:

In your evaluation of the foregoing statements:

125. The following are certain corporate acts:

127. an ultra-vires act that is not illegal per se is?

130. When are by-laws adopted and filed?

131. When do by-laws become effective?

132. Which of the following by-laws is valid?

Which of the proposed amendments may you validly recommend?

135. These statements are presented to you: