Compre Reviewer

LAW ON BUSINESS ORGANIZATION

MULTIPLE CHOICE. Choose the best answer. express purpose of attacking the corporate
1. Is an obligation to pay a definite sum of money at existence.
a future date at a fixed rate of interest. a. Collateral attack
a. Corporate bond b. Direct attack
b. Stock bond c. Quo warranto
c. Property bond d. Habeas Corpus
d. Cash bond 9. By this voting method, every stockholder may
2. This is the right of existing stockholders to be vote such number of shares for as many persons
offered first for any new issue of shares of stock of as there are directors
the corporation a. Cumulative voting for one candidate
a. Preferential right b. Straight voting
b. Pre-emptive right c. Cumulative voting by distribution
c. Right of first offer d. Parallel voting
d. Pre-subscription right 10. A director or trustee may be held liable for
3. Persons who have agreed to take and pay for damages, except:
original, unissued shares of a corporation formed or a. He acquires any personal or pecuniary
to be formed. interest in conflict with his duty as such
a. Subscribers director or trustee
b. Underwriter b. He is guilty of gross negligence
c. Promoters c. He willingly discloses adverse interests to
d. Shareholders the corporation
4. Portion of the capital stock which is issued and d. He willfully and knowingly votes or assents
held by persons other than the corporation itself. to patently unlawful acts of the corporation
a. Paid-up capital stock 11. Powers which are reasonably necessary to
b. Legal capital exercise the express powers and to accomplish or
c. Outstanding capital carry out the purposes for which the corporation
d. Subscribed capital was formed.
5. Written acknowledgment by the corporation of a. Incidental powers
the interest, right, and participation of a person in b. Express powers
the management, profits, and assets of a c. Inherent powers
corporation. d. Implied powers
a. Certificate of stock 13. Which of the following is not an inherent power
b. shares of a corporation:
c. par value a. succession
d. Preferred share of stock b. to sue and be sued
6. Entitles the holder thereof not only to the c. to execute promissory notes.
payment of current dividends but also to dividends d. to purchase and hold real and personal
in arrears. property
a. Preferred share as to assets 14. Right of a stockholder in the cases provided by
b. Preferred share as to dividends law to demand payment of the fair value of his
c. Cumulative preferred share shares in case of an extension of corporate term.
d. Participating preferred share a. Pre-emptive right
7. Shares which has been lawfully issued by the b. Appraisal right
corporation and fully paid for and later reacquired c. Right of first refusal
by it either by purchase, redemption, donation, d. Right of pre-emption
forfeiture or other lawful means. 15. This Is the difference between the total present
a. Redeemable shares value of its assets after deducting losses and
b. Treasury shares liabilities and the amount of its capital stock
c. Preferred shares a. Profits
d. Treasury shares b. Capital assets
8. Document prepared by the persons establishing c. Retained earnings
a corporation and filed with the Securities and d. Trust fund
Exchange Commission containing the matters
required by the Code 16. Dividend payable on unissued or increased or
a. Corporate charter additional shares of the corporation instead of in
b. Certificate of stock cash or in property.
c. Articles of incorporation a. Stock dividend
d. By-laws b. Property dividend
17-18. Corporate existence is questioned in some c. Cash dividend
incidental proceeding not provided by law for the d. Bond dividend

BLAW 102 LAW ON BUSINESS ORGANIZATION Page 1

17. Dividend which is partly in cash and partly in
stocks
a. Optional dividend
b. Scrip dividend
c. Cumulative dividend
d. Composite dividend
18. Rules of action adopted by the corporation for
its internal regulations and for the government of its
officers and of its stockholders or members
a. Articles of incorporation
b. By-laws
c. Corporate contract
d. Certificate of incorporation
19. Which among is not a requisite for a valid
meeting of stockholders or members
a. There must be a previous notice
b. There must be a quorum
c. It may be held anywhere
d. It must be called by the proper person
20. The following are the modes by which a
corporation may issue shares of stock except:
a. By making a cash dividend
b. By subscription before and after
incorporation, to original, unissued stock
c. By sale of treasury stock after incorporation
for money, property, or service
d. By subscription to new stocks, when all the
original stocks have been issued and the
amount of the capital stock increased
21. Failure to register a transfer of shares produces
the following effects, except:
a. It is valid and binding as between the
transferor and the transferee
b. It is valid insofar as the corporation is
concerned except when notice is given to
the corporation for purposes of registration
c. It is invalid as against corporate creditors,
and the transferor is still liable to the
corporation
d. It is invalid as against the creditors of the
transferor without notice of the transfer
22. The following are liabilities of a stockholder
except:
a. Liability for watered stock
b. Liability to the corporation for unpaid
subscription
c. Liability for failure to create corporation
d. Liability for dividends lawfully paid
23. Watered stock includes stock which is:
a. Issued without consideration
b. Issued as cash dividend when there are no
sufficient retained earnings or surplus
c. Issued as fully paid when the corporation
has received a greater sum of money than
its par or issued value
d. Issued for a consideration other than actual
cash, the fair valuation of which is greater
than its par or issued value
24. The percentage of stockholdings that will be
considered as substantial for purposes interlocking
directors is a percentage exceeding::
a. Fifty (50%0
b. Twenty (20%)
c. Twenty-five (25%)
d. Thirty (30%)
BLAW 102 LAW ON BUSINESS ORGANIZATION
25. Involuntary dissolution of a corporation may be
effected by:
a. By executive enactment
b. By failure to formally organize and
commence the transaction of its business
within 1 year from date of incorporation
c. By expiration of term provided for in the
amended articles of incorporation
d. By order of the Securities and Exchange
Commission
26. An advantage of a business corporation.
a. The shareholders have unlimited liability
b. The shares of stocks cannot be transferred
without the consent of the other
stockholders
c. Its management is centralized in the board
of directors
d. The corporation has no legal capacity to act
as a legal unit
27. One which is limited to selected persons or
members of a family
a. Open corporation
b. Close corporation
c. De jure corporation
d. De facto corporation
28. Those formed or organized for the government
of a portion of the State
a. Public corporations
b. Private corporations
c. Quasi-corporation
d. True corporation
29.They lay the groundwork for corporate
existence:
a. Underwriter
b. Subscribers
c. Stockholders
d. Promoters
30.Amount of the capital stock subscribed whether
fully paid or not.
a. Outstanding capital stock
b. Subscribed capital stock
c. Authorized capital stock
d. Paid-up capital stock
31. The articles of incorporation of a stock
corporation under Section 14(8) must state the
following except:
a. The amount of its authorized capital stock in
pesos
b. The number of shares into which it is
divided
c. The par value in pesos of each share
d. The amount of authorized stock subscribed
and paid by each on his subscription
32. An example of defect which will preclude the
creation of even a de facto corporation
a. Failure to file articles of incorporation with
the Securities and Exchange Commission
b. Absence of By-Laws
c. Lack of certificate of stock from the
Securities and Exchange Commission
d. The incorporators or a certain number of
them are not residents of the Philippines
33. Which is not a limitation on proxies
a. Proxies must be in writing signed by the
stockholder or member and filed before the
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 scheduled meeting with the corporate
secretary
b. It is valid only for the meeting for which it is
intended
c. Directors or trustees can attend or vote by
proxy at board meetings
d. A continuing proxy must be for a period not
exceeding 5 years at any one time
34. Which is not an attribute of a corporation
a. It is an artificial being
b. It is created by agreement of stockholders
c. It has the right of succession
d. It has only the powers, attributes and
properties expressly authorized by law or
incident to its existence
35. The steps in the creation of a corporation are
a. Subscription, Incorporation, and Dissolution
b. Promotion, Incorporation, and Liquidation
c. Promotion, Incorporation, and Formal
organization and commencement of
business operations
d. Promotion, Subscription, and Formal
organization and commencement of
business operations
36. Who among is disqualified to be elected as a
director in a corporation
a. A person who violated a provision of the
Corporation Code, committed within 6 years
prior to the date of his election
b. A person who was charged with
imprisonment of 12 years
c. A person convicted by final judgment of an
offense punishable by imprisonment of
more than 6 years
d. All of the above
37. One which is so related to another corporation
that the majority of its directors can be elected
either, directly or indirectly, by such other
corporation.
a. Parent or holding corporation
b. Subsidiary Corporation
c. Quasi-corporation
d. Corporation by prescription.
38. Those corporators mentioned in the articles of
incorporation as originally forming and composing
the corporation and who executed and signed the
articles of incorporation as such..
a. Corporators
b. Stockholders
c. Members
d. Incorporators
39. This doctrine requires that a director who, by
virtue of his office, acquires for himself a business
which should belong to the corporation, thereby
obtaining profits to the prejudice of the corporation
should account to the corporation for all such profits
by refunding the same.
a. Director disloyalty doctrine
b. Corporate opportunity doctrine
c. Mandatory refund doctrine
d. Prejudicial opportunity doctrine
40. The following power of the board of directors
cannot be delegated to their subordinates:
a. Ministerial power
b. Discretionary power
BLAW 102 LAW ON BUSINESS ORGANIZATION
c. Administrative power
d. Appraisal power
41 -45. The minimum votes required for the
approval of the following corporate acts:
41. to adopt by-laws
42. to elect directors or trustees
43. to dissolve the corporation
44. to remove directors or trustees
45. to increase or decrease capital
a. a majority of the board of directors or
trustees
b. 2/3 of the outstanding capital stock or of the
members entitled to vote
c. a majority of the outstanding capital stock or
of the members entitled to vote
d. a majority vote of the board of directors or
trustees and 2/3 of the outstanding capital
stock or of the members
46. Which of the following dividends cannot be
declared without the approval of the stockholders?
a. Cash dividends only
b. Stock dividends only
c. Other kinds of dividends
d. All kinds of dividends
47. The following positions cannot be held by one
person at the same time
a. President and Secretary
b. Treasurer and President
c. Secretary and Treasurer
d. Both A & B
e. Both B & C
ab. Both A & C
ac. Only A
ad. Only B
TRUE OR FALSE.
48. .The law governing private corporations in the
Philippines is embodied in Batas Pambansa
Blg, 86.
49. As a rule, a corporation is not liable for the
debts of its stockholders, and the latter are not
individually liable for the corporate debts.
50. A corporation is created by mere agreement of
the parties.
51. A partnership has no right of succession, while
a corporation has such right.
52. A corporation can only be dissolved with the
consent of the State.
53. Certificate of stock represents the right or
interest of a person in a corporation.
54. The rule is not one stockholder, one vote but
one share, one vote because representation
in a corporation is commensurate to extent of
ownership.
55. Common share of stock is so-called because it
is the stock which private corporations ordinarily
issue.
56. No par value shares are easily sold as the
public is more attracted to buy this kind of
shares.
57. Preferred shares may be issued only with a
stated par value.
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58. Treasury shares may be issued only when
expressly so provided in the articles of
incorporation.
59. Notice of any meeting may be waived,
expressly or impliedly by any stockholder or
member.
60. The right to act as a corporation is a natural
right.
61. A corporation can be an incorporator of another
corporation.
62. The 25% subscription and the 25% paid-up
capital is required not only during the
incorporation period but also in case of increase
of the authorized capital stock.
63. A corporation created by special law has no
articles of incorporation.
64.. A corporations right to use its corporate and
trade name is a right in rem.
65 .A corporation commences to have juridical
personality and legal existence from the
moment the Securities and Exchange
Commission issues to the incorporators a
certificate of stock under its official seal.
66 .Contracts between a corporation and third
persons must be made by or under the
authority of its stockholders.
67. Directors or trustees can bind the corporation
only by action taken at a board meeting.
68. In a corporation sole, there is no board of
directors or trustees.
69. There is a prohibition in the law against a
stockholder being a director or officer of two or
more corporation.
70. The Corporation Code prohibits a corporate
officer from occupying the same position in
another corporation organized for the same
purpose.
71. The per diems granted to directors is included
in their total yearly compensation for purposes
of the 10% limitation.
72. Certificates of stock issued by corporations are
required to be sealed with the seal of the
corporation.
73. The Corporation Code contains no prohibition
for a corporation to increase its authorized
capital stocks even if the same has not yet
been fully subscribed.
74. A corporate bond is an obligation to pay a
definite sum of money at a future date at fixed
rate of interest.
75.Any disposition which involves all or
substantially all of the corporate assets made in
the ordinary course of business does not
require the approval of the stockholders or
members.
76. Under the trust fund doctrine, the corporation is
not prohibited to use its assets for purpose of its
business.
77. Profits are not dividends until so declared or set
aside by the corporation.
77. Earnings of the corporation which have not yet
been received can be included in the profits out
of which dividends may be paid.
BLAW 102 LAW ON BUSINESS ORGANIZATION
78. The participation of each stockholder in the
earnings of the corporation is based on his total
subscription and not the amount paid by him.
79. Ultra vires acts are acts which are within the
conferred powers of a corporation or the
purposes for which it is created.
80. Until repealed, a by-law is a continuing rule for
the government of the corporation and the
individuals composing it.
81. Directors or trustees can attend or vote by
proxy at board meetings.
82. In a voting trust agreement, a stockholder of a
stock corporation parts with the voting power
only but retains the beneficial ownership of the
stock.
83 Honorary membership in a business corporation
is allowed by law.
84. A stock becomes delinquent upon failure of the
holder to pay the unpaid subscription or
balance thereof within 30 days from the date
specified in the contract of subscription.
85. Corporations which are vested with public
interest are not allowed to be incorporated as a
close corporation.
86. A dissolved corporation continues to exist but
only for a limited purpose and for a limited time.
87. A corporation may properly pay dividends from
accumulated surplus from previous years
although it did not realize any profit in the
current year.
88. A corporation can properly pay dividends if it
realized profit in the current year even if it still
has existing deficit from previous years.
89. A delinquent stock of a stock with unpaid
subscription is not entitled to receive dividends.
90. A management contract with another
corporation shall be approved by the board of
directors and majority of the outstanding capital
stock of both the managing and the managed
corporations.
91 The President, Secretary and Treasurer of a
corporation must be residents of the
Philippines.
92. Ultra vires acts are illegal acts and therefore
cannot be performed by a corporation.
93. The power to amend the articles of
incorporation is vested on the stockholders or
members and cannot be delegated to the board
of directors A
94. A corporation can exist even without a seal.
95. All members of an executive committee must
be members of the board of directors.
96. Only the stockholders, by a vote of at least a
majority of the outstanding capital may grant
compensation to the board of directors.
97. A stockholder cannot be a director or officer of
two or more corporations.
98. An example of defect which will preclude the
creation of even a de facto corporation
a. Failure to file articles of incorporation with
the Securities and Exchange Commission
b. Absence of By-Laws
c. Lack of certificate of stock from the
Securities and Exchange Commission
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 d. The incorporators or a certain number of
them are not residents of the Philippines
99. There is a prohibition in the law against a
stockholder being a director or officer of two
or more corporation.
The Corporation Code prohibits a corporate
officer from occupying the same position in
another corporation organized for the same
purpose.
a. True, True
b. False, True
c. False, False
d. True, False
100. The articles of incorporation of a
stock corporation under Section 14(8) must
state the following except:
a. The amount of its authorized capital stock
in pesos
b. The number of shares into which it is
divided
c. The par value in pesos of each share
d. The amount of authorized stock
subscribed and paid by each on his
subscription
101. Amount of the capital stock
subscribed whether fully paid or not.
a. Outstanding capital stock
b. Subscribed capital stock
c. Authorized capital stock
d. Paid-up capital stock
MULTIPLE CHOICE.
1. Which among the following is not a
characteristic of a limited partnership
e. The partnership debts are paid out only
from the individual properties of the general
partners
f. A limited partnership is formed by
compliance with the statutory requirements
g. One or more general partners control the
business and are personally liable to
creditors
h. The limited partners may ask for the return
of their capital contributions under the
conditions prescribed by law
2. Is the process of settling the business or
partnership affairs after the dissolution
e. Dissolution
f. Winding Up
g. Termination
h. Cessation
3. Is a person admitted to all the rights of a limited
partner who has died or has assigned his
interest in a partnership
e. Substituted general partner
f. Incoming limited partner
g. Substituted limited partner
h. None of the above
4. The following are the persons liable to render
an account except ______.
e. The winding up partner
f. The surviving partner
BLAW 102 LAW ON BUSINESS ORGANIZATION
g. The person or partnership continuing the
business
h. The limited partner
5. Is that point in time when all partnership affairs
are completely wound up and finally settled. It
signifies the end of the partnership life
e. Termination
f. Winding Up
g. Bankruptcy
h. Dissolution
6. A limited partner (who is not also a general
partner), being merely a contributor to the
partnership without the right to take part in the
management of the business, is not prohibited
from:
e. Receiving or holding as collateral security
any partnership property
f. Receiving a pro rata share of the
partnership assets with general creditors if
he is not also a general partner
g. Receiving any payment, conveyance, or
release from liability if it will prejudice the
right of third persons
h. All of the above
7. By an agreement of all the members stated in
the certificate, preference may be given to
some limited partners over other limited
partners as to the:
e. return of their contributions
f. their compensation by way of income
g. any other matter
h. all of the above
8. Is the change in the relation of the partners
caused by any partner ceasing to be associated
in the carrying on of the business
e. Dissolution
f. Cessation
g. Termination
h. Winding Up
9. The doctrine of __________ allows a partner to
have the power, although not necessarily the
right, to dissolve a partnership, even though his
co-partners wish to continue the business
e. delectus personae
f. limited partnership
g. estoppel
h. general partnership
10. The grounds for dissolution of a partnership by
decree of court are as follows except ______.
e. insanity
f. incapacity
g. death of any partner
h. misconduct and persistent breach of
partnership agreement
11. A partnership may be dissolved without
violation of partnership agreement, except:
e. By the express will of any partner
f. By withdrawal of a partner
g. By expulsion of any partner
h. Termination of the definite term or particular
undertaking
12. ______ deprives the offender during the time of
his sentence of the right to manage his property
and dispose of such property by any act or any
conveyance inter vivos.
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 e. Insanity
f. Insolvency
g. Civil interdiction
h. Death
13. The certificate shall be cancelled, not merely
amended, when:
e. there is a false or erroneous statement in
the certificate
f. an additional limited partner is admitted
g. a partner is substituted as a limited partner
h. the partnership is dissolved other than by
reason of the expiration of the term of the
partnership
14. The following are the requisites in order that the
assignee may become a substituted limited
partner, except:
e. Inspection of the partnership books must be
done first
f. The certificate must be amended
g. The certificate as amended must be
registered in the Securities and Exchange
Commission
h. All the members must consent to the
assignee becoming a substituted limited
partner
15. The following are the grounds for dissolution of
a partnership, except:
e. Loss of a specific thing
f. Death of any partner
g. Insolvency of any creditor
h. Civil interdiction of any partner
16. The characteristics of a limited partner are as
follows, except:
e. A limited partnership is formed by
compliance with the statutory requirements
f. One or more limited partners control the
business and are personally liable to
creditors
g. The limited partners may ask for the return
of their capital contributions under the
conditions prescribed by law
h. All of the above
17. The certificate of limited partnership must state
the following, except:
e. The character of the business
f. The right, if given, of a limited partner to
demand and receive property other than
cash in return for his contribution
g. The right, if given, of the partners to admit
additional limited partners
h. The share of the profits or the other
compensation by way of income which each
general partner shall receive by reason of
his contribution
18. The following are authorized to wind up the
affairs of the partnership:
e. The partners designated by the agreement
f. The legal representative of the last surviving
partner, not insolvent
g. All of the above
h. None of the above
19. A general partner or all of the general partners
have no authority to:
e. Admit a person as a general partner
BLAW 102 LAW ON BUSINESS ORGANIZATION
f. Do any act which would make it possible to
carry on the ordinary business of the
partnership
g. All of the above
h. None of the above
20. The manner of winding up of the dissolved
partnership may be done either:
e. with the intervention of the court
f. extrajudicially or by mutual agreement
g. judicially or extrajudicially
h. judicially or by decree of court
21. The specific rights of a limited partner in the
partnership are as follows, except:
e. To inspect and copy at any hour partnership
books or any of them
f. To demand true and full information of all
things affecting the partnership
g. To ask for dissolution and winding up by
decree of court
h. To demand a formal account of partnership
affairs whenever circumstances render it
just and reasonable
22. A limited partner is considered as trustee for the
partnership for:
e. Money wrongfully paid or conveyed to him
on account of his contribution
f. Specific property of the partnership which
had been wrongfully returned to him
g. Specific property stated in the certificate as
contributed by him but which he had not
contributed
h. All of the above
23. On application by or for a partner, the court
shall decree a dissolution whenever:
e. The business of the partnership can only be
carried on at a loss
f. A partner becomes in any other way
incapable of performing his part of the
partnership contract
g. All of the above
h. None of the above
24. The following are the requirements to amend a
certificate, except:
e. The amendment must be in writing
f. Approval of the Securities and Exchange
Commission of the amendment
g. It must be signed and sworn to by all the
members
h. The certificate, as amended, must be filed
for record in the Securities and Exchange
Commission
25. Which among is a right of a partner who has not
caused the dissolution wrongfully
e. To be released from all existing and future
liabilities of the partnership
f. To have the surplus, if any, applied to pay in
cash the net amount owing to the respective
partners
g. To possess partnership property should
they decide to continue the business
h. To have the partnership property applied to
discharge the liabilities of the partnership
TRUE OR FALSE.
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1. Dissolution may be caused involuntarily when a
supervening event makes the business itself of
the partnership unlawful.
2. If the loss occurred after the delivery of the
thing promised, then the partnership is
dissolved.
3. A limited partner contributes money or property
to the partnership but not services.
4. The creation of a limited partnership is a formal
proceeding and is not a mere voluntary
agreement as in the case of a general
partnership.
5. A strict compliance with the legal requirement
for the formation of a limited partnership is not
necessary.
6. An insolvent partner has authority to act for the
partnership.
7. The dissolution of a partnership does not of
itself discharge the existing liability of a partner.
8. If one is induced by fraud or misrepresentation
to become a partner, the contract is void.
9. Upon liquidation, partners do not have the
implied authority to sell partnership property
and to collect obligations due to the partnership.
10. The contribution of each limited partner must be
paid before the formation of the limited
partnership.
11. After a limited partnership has been formed,
additional limited partners can no longer be
admitted.
12. The individual property of a deceased partner
shall be liable for all obligations of the
partnership incurred while he was a partner.
13. Any change in membership dissolves a
partnership and creates a new partnership.
14. No liquidation is necessary when there is
already a settlement or an agreement as to
what each partner shall receive.
15. A general partner is personally liable for
partnership obligations while a limited partners
liability extends only to his capital contribution.
16. In determining the liabilities of the partnership,
the liabilities to the limited partners for their
contributions and to general partners, whether
for contributions or not, are included.
17. Unless otherwise stipulated, every partner is
considered the agent of the partnership with
authority to bind the partnership as well as the
other partners with respect to the transaction of
its business.
18. The general partners have the power to bind
the limited partners beyond the latters
investment in the partnership.
19. Any partner may cause the dissolution of the
partnership at any time without the consent of
his co-partners at his sole pleasure.
20. A person has notice of a fact not only when he
has actual knowledge thereof, but also when he
has knowledge of such other facts as in the
circumstances show bad faith.
21. A partner may be a general partner and a
limited partner in the same partnership at the
same time even if it is not stated in the
certificate.
BLAW 102 LAW ON BUSINESS ORGANIZATION
22. The partnership agreement cannot provide that
that the death, withdrawal, or admission of a
partner will not effect a dissolution.
23. If the business is continued by the remaining
partners under the right given in the certificate
or with the consent of all the members, the
certificate of limited partnership need not be
amended.
24. A limited partner may not be an industrial
partner without being a general partner.
25. Limited partnership is formed where there has
been substantial compliance in good faith with
the requirements of the law.
26. The individual property of a deceased partner
shall not be liable for obligations of the
partnership incurred while he was a partner.
27. Persons who extended credit to the partnership
prior to its dissolution must have knowledge or
notice of the dissolution to relieve the
partnership from liability.
28. The liabilities of a limited partner may be
waived or compromised.
29. The limited partner is not liable for the
difference between the amount of his actual
contributions and that stated in the certificate of
limited partnership.
30. The substitution of a person as a limited partner
in place of an existing limited partner does not
necessarily dissolves the partnership.
31. The dissolution being by act of any partner, the
partner acting for the partnership must have
notice of the dissolution.
32. Dissolution terminates the partnership.
33. Where there are several limited partners the
members may agree that one or more of the
limited partners shall have a priority over other
limited partners as to the return of their
contributions.
34. The interest of the debtor-partner charged with
the payment of the unsatisfied amount of the
judgment debt may be redeemed with
partnership property without the consent of the
partners whose interest are not so charged or
sold.
35. The cancellation of a certificate of partnership
need not be signed by all the members for as
long as it is filed with the Securities and
Exchange Commission.
36. Even if a limited partner has contributed
property, he has only the right to demand and
receive cash for his contribution.
37. The name of the general partner may appear in
the firm name, while, as a general rule, that of a
limited partner must not.
38. The partnership debts are paid out of the
common fund and the individual properties of
the general and limited partners.
39. The rights of a limited partner are greater than
those of a general partner.
40. There is no prohibition against a limited partner
engaging in business for himself.
26. A limited partner contributes money or property
to the partnership but not services.
Page 7

The creation of a limited partnership is a formal
proceeding and is not a mere voluntary
agreement as in the case of a general
partnership.
a. True, True
b. False, True
c. False, False
d. True, False
27. Is a person admitted to all the rights of a limited
partner who has died or has assigned his
interest in a partnership
i. Substituted general partner
j. Incoming limited partner
k. Substituted limited partner
l. None of the above
28. After a limited partnership has been formed,
additional limited partners can no longer be
admitted.
A general partner is personally liable for
partnership obligations while a limited partners
liability extends only to his capital contribution.
a. True, True
b. False, True
c. False, False
d. True, False
29. A limited partner (who is not also a general
partner), being merely a contributor to the
partnership without the right to take part in the
management of the business, is not prohibited
from:
i. Receiving or holding as collateral security
any partnership property
j. Receiving a pro rata share of the
partnership assets with general creditors if
he is not also a general partner
k. Receiving any payment, conveyance, or
release from liability if it will prejudice the
right of third persons
l. All of the above
30. By an agreement of all the members stated in
the certificate, preference may be given to
some limited partners over other limited
partners as to the:
i. return of their contributions
j. their compensation by way of income
k. any other matter
l. all of the above
31. The following are the requisites in order that the
assignee may become a substituted limited
partner, except:
i. Inspection of the partnership books must be
done first
j. The certificate must be amended
k. The certificate as amended must be
registered in the Securities and Exchange
Commission
l. All the members must consent to the
assignee becoming a substituted limited
partner
32. The characteristics of a limited partner are as
follows, except:
i. A limited partnership is formed by
compliance with the statutory requirements
BLAW 102 LAW ON BUSINESS ORGANIZATION
j. One or more limited partners control the
business and are personally liable to
creditors
k. The limited partners may ask for the return
of their capital contributions under the
conditions prescribed by law
l. All of the above
33. A partner may be a general partner and a
limited partner in the same partnership at the
same time even if it is not stated in the
certificate.
A limited partner may not be an industrial
partner without being a general partner.
a. True, True
b. False, True
c. False, False
d. True, False
34. The liabilities of a limited partner may be
waived or compromised.
The limited partner is not liable for the
difference between the amount of his actual
contributions and that stated in the certificate of
limited partnership.
a. True, True
b. False, True
c. False, False
d. True, False
35. The certificate of limited partnership must state
the following, except:
i. The character of the business
j. The right, if given, of a limited partner to
demand and receive property other than
cash in return for his contribution
k. The right, if given, of the partners to admit
additional limited partners
l. The share of the profits or the other
compensation by way of income which each
general partner shall receive by reason of
his contribution
36. The substitution of a person as a limited partner
in place of an existing limited partner does not
necessarily dissolves the partnership.
Where there are several limited partners the
members may agree that one or more of the
limited partners shall have a priority over other
limited partners as to the return of their
contributions.
a. True, True
b. False, True
c. False, False
d. True, False
37. A general partner or all of the general partners
have no authority to:
i. Admit a person as a general partner
j. Do any act which would make it possible to
carry on the ordinary business of the
partnership
k. All of the above
l. None of the above
Page 8
38. Even if a limited partner has contributed reacquired by it either by purchase, redemption,
property, he has only the right to demand and donation, forfeiture or other lawful means.
receive cash for his contribution. a. Redeemable shares
b. Treasury shares
The name of the general partner may appear in c. Preferred shares
the firm name, while, as a general rule, that of a d. Treasury shares
limited partner must not. 46. Document prepared by the persons establishing
a. True, True a corporation and filed with the Securities and
b. False, True Exchange Commission containing the matters
c. False, False required by the Code
d. True, False i. Corporate charter
j. Certificate of stock
39. The law governing private corporations in the k. Articles of incorporation
Philippines is embodied in Batas Pambansa l. By-laws
Blg, 86. 47. No par value shares are easily sold as the
public is more attracted to buy this kind of
As a rule, a corporation is not liable for the shares.
debts of its stockholders, and the latter are not
individually liable for the corporate debts. Preferred shares may be issued only with a
a. True, True stated par value.
b. False, True a. True, True
c. False, False b. False, True
d. True, False c. False, False
40. One which is so related to another corporation d. True, False
that the majority of its directors can be elected 48. A director or trustee may be held liable for
either, directly or indirectly, by such other damages, except:
corporation. i. He acquires any personal or pecuniary
a. Parent or holding corporation interest in conflict with his duty as such
b. Subsidiary Corporation director or trustee
c. Quasi-corporation j. He is guilty of gross negligence
d. Corporation by prescription. k. He willingly discloses adverse interests to
41. Those corporators mentioned in the articles of the corporation
incorporation as originally forming and l. He willfully and knowingly votes or assents
composing the corporation and who executed to patently unlawful acts of the corporation
and signed the articles of incorporation as 49. Powers which are reasonably necessary to
such.. exercise the express powers and to accomplish
i. Corporators or carry out the purposes for which the
j. Stockholders corporation was formed.
k. Members i. Incidental powers
l. Incorporators j. Express powers
42. A corporation is created by mere agreement of k. Inherent powers
the parties. l. Implied powers

A partnership has no right of succession, while 50. Which of the following is not an inherent power
a corporation has such right. of a corporation:
a. True, True i. succession
b. False, True j. to sue and be sued
c. False, False k. to execute promissory notes.
d. True, False l. to purchase and hold real and personal
43. Persons who have agreed to take and pay for property
original, unissued shares of a corporation 51. A corporation can be an incorporator of another
formed or to be formed. corporation.
a. Subscribers
b. Underwriter The 25% subscription and the 25% paid-up
c. Promoters capital is required is required not only during
d. Shareholders the incorporation period but also in case of
44. Portion of the capital stock which is issued and increase of the authorized capital stock.
held by persons other than the corporation a. True, True
itself. b. False, True
i. Paid-up capital stock c. False, False
j. Legal capital d. True, False
k. Outstanding capital 52. An advantage of a business corporation.
l. Subscribed capital e. The shareholders have unlimited liability
45. Shares which has been lawfully issued by the
corporation and fully paid for and later

BLAW 102 LAW ON BUSINESS ORGANIZATION Page 9

 f. The shares of stocks cannot be transferred A corporations right to use its corporate and
without the consent of the other trade name is a right in rem.
stockholders a. True, True
g. Its management is centralized in the board b. False, True
of directors c. False, False
h. The corporation has no legal capacity to act d. True, False
as a legal unit
53. Treasury shares may be issued only when 61. A corporation commences to have juridical
expressly so provided in the articles of personality and legal existence from the
incorporation. moment the Securities and Exchange
Commission issues to the incorporators a
The right to act as a corporation is a natural certificate of stock under its official seal.
right.
a. True, True Contracts between a corporation and third
b. False, True persons must be made by or under the
c. False, False authority of its stockholders.
d. True, False a. True, True
54. One which is limited to selected persons or b. False, True
members of a family c. False, False
e. Open corporation d. True, False
f. Close corporation
g. De jure corporation
h. De facto corporation 1. Which of the following is not among the
55. Those formed or organized for the government consequences of a partnership formed for an
of a portion of the State unlawful purpose:
e. Public corporations i. The instruments or tools and proceeds of
f. Private corporations the crime shall be forfeited in favor of the
g. Quasi-corporation government.
h. True corporation j. The contract is void ab initio and the
56. They lay the groundwork for corporate partnership never existed in the eyes of the
existence: law.
e. Underwriter k. The profits shall not be confiscated.
f. Subscribers l. The contribution of the partners shall not be
g. Stockholders confiscated unless they are instruments or
h. Promoters tools and proceeds of the crime.
57. Which is not an attribute of a corporation
a. It is an artificial being 2. One whose liability to third persons extends to
b. It is created by mere agreement his separate property.
c. It has the right of succession e. Capitalist partner
d. It has only the powers, attributes and f. Limited partner
properties expressly authorized by law or g. Liquidating partner
incident to its existence h. General partner
58. The steps in the creation of a corporation are
a. Subscription, Incorporation, and Dissolution 3. One who does takes active part and known to
b. Promotion, Incorporation, and Liquidation the public as a partner in the business,
c. Promotion, Incorporation, and Formal whether or not he has an actual interest in the
organization and commencement of firm.
business operations i. Dormant partner
d. Promotion, Subscription, and Formal j. Silent partner
organization and commencement of k. Secret partner
business operations l. Ostensible partner
59. Who among is disqualified to be elected as a
director in a corporation 4. One wherein the existence of certain persons
a. A person who violated a provision of the as partners is not avowed or made known to
Corporation Code, committed within 6 years the public by any of the partners is called:.
prior to the date of his election i. open partnership
b. A person who was charged with j. ostensible partnership
imprisonment of 12 years k. de facto partnership
c. A person convicted by final judgment of an l. secret partnership
offense punishable by imprisonment of 6
years 5. It comprises all that the partners may acquire
d. All of the above by their industry or work during the existence
60. A corporation created by special law has no of the partnership.
articles of incorporation. i. universal partnership of all present
property

BLAW 102 LAW ON BUSINESS ORGANIZATION Page 10

 j. limited partnership o. Partnership debts
k. universal partnership of profits p. Partnership credits
l. particular partnership 12. The net income of the partnership for a given
period of time.
6. . A stipulation which excludes one or more i. capital
partners from any share in the profits or losses j. credit
is ______. k. profit
m. valid l. surplus
n. irregular 13. Real property may be registered or owned in
o. correct the name of ______.
p. void i. the partnership
j. all the partners
7. The receipt by a person of a share of the k. one or more but not all the partners
profits of a business is prima facie evidence l. all of the above
that he is a partner in the business, but no 14. Is one in which no time is specified and is not
such inference shall be drawn if such profits formed for a particular undertaking or venture
were received in payment as: and which may be terminated anytime by
mutual agreement of the partners.
i. wages of an employee or rent to a i. Limited Partnership
landlord j. Particular Partnership
j. the consideration for the sale of a k. Partnership at will
goodwill of a business or other property l. General Partnership
by installments or otherwise
k. all of the above 15. The following are the requisites before a
l. none of the above capitalist partner may be obliged to sell his
interest to the others, except:
8. The following are the obligations of the i. There is an agreement that even in case of
partners with respect to the partnership capital, an imminent loss of the business the
except: partners are not obliged to contribute.
m. To reimburse any amount he may have j. There is an imminent loss of the business of
taken from the partnership coffers and the partnership
converted to his own use. k. The majority of the capitalist partners are of
n. To pay the agreed or legal interest, if he the opinion that an additional contribution to
fails to pay his contribution on time or in the common fund would save the business.
case he takes any amount from the l. The capitalist partner refuses to contribute
common fund and converts it to his own an additional share to the capital.
use.
o. To contribute on the date due the amount 16. The following are the typical incidents of a
he has undertaken to contribute to the partnership, except:
partnership. i. A fiduciary relation exists between the
p. To answer for eviction in case the partners.
partnership is deprived of the determinate j. The partners share in profits and losses
property contributed. k. They have unequal rights in the
9. The following are the property rights of a management and conduct of the partnership
partner, except: business
m. His right to participate in the management. l. Every partner is an agent of the partnership,
n. His right to dispose of the goodwill of the and entitled to bind the other partners by his
business. acts, for the purpose of its business.
o. His interest in the partnership.
p. His rights in specific partnership property. 17. The partnership bears the risk of loss of the
10. Any partner shall have the right to a formal things contributed to the partnership in the
account as to partnership affairs: following instances, except:
m. If he is rightfully excluded from the a. Things contributed to be sold
partnership business or possession of its b. Things brought and appraised in the
property by his co-partners inventory
n. If the right does not exists under the terms c. Specific and determinate things which are
of the agreement not fungible where only the use is
o. all of the above contributed
p. none of the above d. Specific and determinate things the
11. Includes not only the original capital ownership of which is transferred to the
contribution of the partners, but all property partnership
subsequently acquired on account of the 18. Remains unchanged as the amount fixed by
partnership or with partnership funds. agreement of the partners, and is not affected
m. Partnership capital by fluctuations in the value of partnership
n. Partnership property property.

BLAW 102 LAW ON BUSINESS ORGANIZATION Page 11

 a. assets o. Civil interdiction
b. profits p. Death
c. capital 27. The following are the grounds for dissolution of
d. liabilities a partnership, except:
i. Loss of a specific thing
19. Refers to the assets of the partnership after j. Death of any partner
partnership debts and liabilities are paid and k. Insolvency of any creditor
settled and the rights of the partners among l. Civil interdiction of any partner
themselves are adjusted. 28. The following are authorized to wind up the
a. Surplus affairs of the partnership:
b. Profit a. The partners designated by the agreement
c. Interest b. The legal representative of the last surviving
d. Credit partner, not insolvent
20. One of the rights withheld from an assignee of c. All of the above
a partner is his right to: d. None of the above
a. receive in accordance with his contract the
profits accruing to the assigning partner 29. On application by or for a partner, the court
b. interfere in the management shall decree a dissolution whenever:
c. receive the assignors interest in case of a. The business of the partnership can only be
dissolution carried on at a loss
d. avail himself of the usual remedies provided b. A partner becomes in any other way
by law in the event of fraud in the incapable of performing his part of the
management partnership contract
21. The following are considered acts of strict c. All of the above
dominion, except: d. None of the above
a. Acts for apparently carrying on in the usual 30. Which among is a right of a partner who has
way the business of the partnership not caused the dissolution wrongfully
b. Confess a judgment a. To be released from all existing and future
c. Renounce a claim of the partnership liabilities of the partnership
d. Dispose of the goodwill of the business b. To have the surplus, if any, applied to pay in
22. The liability of all partners with the partnership cash the net amount owing to the respective
for everything chargeable to the partnership for partners
a partners wrongful act or omission. c. To possess partnership property should
a. subsidiary they decide to continue the business
b. solidary d. To have the partnership property applied to
c. pro-rata discharge the liabilities of the partnership
d. jointly
23. The doctrine allows a partner to have the TRUE OR FALSE.
power, although not necessarily the right, to 31. The mere sharing of gross returns alone does
dissolve a partnership, even though his co- not indicate a partnership.
partners wish to continue the business 32. No special form is required for the validity or
a. delectus personae existence of the contract of partnership.
b. limited partnership 33. An industrial partner is exempted from liability
c. estoppel to third persons for the debts of the
d. general partnership partnership.
24. . The grounds for dissolution of a partnership 34. In the absence of any stipulation to the
by decree of court are as follows except:. contrary, every partner is an agent of the
a. insanity partnership for the purpose of its business.
b. incapacity 35. As a general rule, a partner is entitled to
c. death of any partner compensation for his services to the
d. misconduct and persistent breach of partnership.
partnership agreement 36. Subpartnership agreements affect the
25. A partnership may be dissolved without composition, existence or operation of the firm.
violation of partnership agreement, except: 37. A partner is a co-owner with his partner of
m. By the express will of any partner specific partnership property therefore, the
n. By withdrawal of a partner rules on co-ownership shall apply.
o. By expulsion of any partner 38. A partners right in specific partnership
p. Termination of the definite term or property is not assignable.
particular undertaking 39. The liability of the partners is subsidiary
26. It deprives the offender during the time of his because the partners become personally liable
sentence of the right to manage his property only after all the partnership assets have been
and dispose of such property by any act or any exhausted.
conveyance inter vivos. 40. An admission made by a partner who was no
m. Insanity longer a partner at the time of the declaration
n. Insolvency

BLAW 102 LAW ON BUSINESS ORGANIZATION Page 12

 is admissible in evidence against the 61. Any change in membership dissolves a
partnership. partnership and creates a new partnership.
41. If personal property, aside from real property is 62. No liquidation is necessary when there is
contributed, the inventory need not include the already a settlement or an agreement as to
former. what each partner shall receive.
42. Articles of universal partnership, entered into 63. Any partner may cause the dissolution of the
without specification of its nature, only partnership at any time without the consent of
constitute a universal partnership of all present his co-partners at his sole pleasure.
property. 64. Persons who extended credit to the
43. Persons who are prohibited from giving each partnership prior to its dissolution must have
other any donation or advantage can enter into knowledge or notice of the dissolution to
a universal partnership. relieve the partnership from liability.
44. The partners may stipulate some other date for 65. The dissolution being by act of any partner, the
the commencement of the partnership. partner acting for the partnership must have
45. Every partner is a creditor of the partnership notice of the dissolution.
for whatever he may have promised to 66. Dissolution terminates the partnership.
contribute thereto.
46. The designation of losses and profits cannot
be entrusted to one of the partners.
47. Every partner is responsible to the partnership
for damages suffered by it through his fault but
he can compensate them with the profits and
benefits which he may have earned for the
partnership by his industry.
48. A contract of partnership is nominate because
it does not depend for its existence or validity
upon some other contract.
49. The appraisal of the value of the goods
contributed is necessary to determine how
much has been contributed by the partners.
50. A separate creditor of a partner can attach or
levy upon specific partnership property for the
satisfaction of his credit.
51. A partner who makes a secret profit out of the
operation of the partnership is not duty bound
to account such profit or commission with his
co-partner.
52. A partner may assume a separate undertaking
under his name with a third party to perform a
partnership contract or make himself solidarily
liable on a partnership contract.
53. Registration of a partnership is necessary as a
condition for the issuance of license to engage
in business or trade.
54. Partnership is a matter of intention, each party
giving his consent to become a partner.
55. A partnership is essentially a business
enterprise established for profit.
56. Notice to or knowledge of any partner of any
matter relating to partnership affairs operates
as a notice to or knowledge of the partnership
except in case of fraud.
57. A partnership is an organization for production
of income to which each partner contributes
one or both of the ingredients of income which
capital or service
58. The dissolution of a partnership does not of
itself discharge the existing liability of a
partner.
59. The individual property of a deceased partner
shall be liable for all obligations of the
partnership incurred while he was a partner.
60. Any change in membership dissolves a
partnership and creates a new partnership.

BLAW 102 LAW ON BUSINESS ORGANIZATION Page 13