Since 1977
BUSINESS LAW
BL.2802 Drill 1 - Corporation
1. Corporation X has a statement of capital stock in its articles of
incorporation but it was stated in the same articles that
dividends are not supposed to be declared, that is, there is no
distribution of retained earnings. Corporation X is:
a. Stock corporation
b. Corporation by estoppel
c. Non-stock corporation
d. Corporation by prescription
2. The amendment of article of incorporation took effect upon
filing of the article of incorporation if the Securities Exchange
Commission (SEC) failed to act within?
a. Two (2) months c. Six (6) months
b. Three (3) months d. Twelve (12) months
3. Which of the following is not correct about treasury shares?
a. Treasury shares are part of issued shares
b. Treasury shares cannot be issued less than par value
c. Treasury shares are not part of outstanding shares
d. Treasury shares plus outstanding shares is equal to issued
shares.
4. Under the Revised Corporation Code (R.A. 11232), when a
founder share is given the exclusive right to vote or be voted, it
must be for a limited period of?
a. Three (3) years from the date of incorporation.
b. Three (3) years from the approval by the Securities and
Exchange Commission
c. Five (5) years from the date of incorporation.
d. Five (5) years from the approval by the Securities and
Exchange Commission
5. B is the owner of 75% of the shares in Bentong Corporation.
On one occasion, Bentong Corporation, as represented by B as
the President and General Manager, entered into a contract to
sell with K involving a townhouse. For failure of Bentong
Corporation to build the townhouse, K filed a case of recession
and damages against B and Bentong Corporation. Which is
correct?
a. The action filed against B will not prosper because
Bentong Corporation has a separate and distinct
personality from the former and that when B entered into a
contract with K, he was only acting in behalf of the
company.
b. The action filed against Bentong Corporation will prosper
because this pertain to the company and the company
alone should be held liable unless B acted maliciously or in
bad faith.
c. The action filed against Bentong Corporation and B will
prosper because the latter owns a majority of the shares in
former and as such B is personally liable for all the
transactions entered into by the corporation.
d. a and b only
6. In case of disagreement between the corporation and a
withdrawing stockholder who exercises his appraisal right
regarding the fair value of his shares, a three-member group
shall by majority vote resolve the issue with finality. May the
wife of the withdrawing stockholder be named to the three-
member group? (2011 Bar)
a. No, the wife of the withdrawing shareholder is not a
disinterested person.
b. Yes, since she could best protect her husband's
shareholdings.
c. Yes, since the rules do not discriminate against wives.
Page 1 of 2 www.prtc.com.ph
ATTY. ONG/LOPEZ
MAY 2020
d. No, since the stockholder himself should sit in the three-
member group.
7. Is a by-law provision of "X" Corporation "rendering ineligible
if elected, subject to removal, a director if he is also a director
in a corporation whose business is in competition with
antagonistic to said corporation" valid and legal?
a. Yes, under the principle of "corporate opportunity’”.
b. No, under the principle of "separate entity”.
c. Yes, provided it is approved by 2/3 of the outstanding
capital stock.
d. Yes, under the principle of "vested interest"
8. The Corporation Code sanctions a contract between two or
more corporations which have interlocking directors, provided
there is no fraud that attends it and it is fair and reasonable
under the circumstances. The interest of an interlocking
director in one corporation may be either substantial or
nominal. It is nominal if his interest:(2011 Bar)
a. does not exceed 25% of the outstanding capital stock.
b. exceeds 25% of the outstanding capital stock.
c. exceeds 20% of the outstanding capital stock.
d. does not exceed 20% of the outstanding capital stock.
9. X Corp. operates a call center that received orders for pizzas on
behalf of Y Corp. which operates a chain of pizza restaurants.
The two companies have the same set of corporate officers.
After 2 years, X Corp. dismissed its call agents for no apparent
reason. The agents filed a collective suit for illegal dismissal
against both X Corp. and Y Corp. based on the doctrine of
piercing the veil of corporate fiction. The latter set up the
defense that the agents are in the employ of X Corp. which is a
separate juridical entity. Is this defense appropriate?
a. No, since the doctrine would apply, the two companies
having the same set of corporate officers.
b. No, the real employer is Y Corp., the pizza company, with
X Corp. serving as an arm for receiving its outside orders
for pizzas.
c. Yes, it is not shown that one company completely
dominates the finances, policies, and business practices of
the other.
d. Yes, since the two companies perform two distinct
businesses.
10. A, B, C, D and E distributed calling cards identifying
themselves as directors of Summit Corporation, to several
individuals during a business conference. In reality, however,
no such corporation is registered with the Securities and
Exchange Commission. X, who received a calling card granted
credit amounting to P50.000.00 to "Summit Corporation"
believing that such a corporation really existed. When the
supposed corporation was unable to pay, X brought a court
action against it. At that time, "Summit Corporation" had assets
of P30,000.00.
a. "Summit Corporation" is liable only up to P30,000.00, its
remaining assets, since it is different from A, B, C, D and
E who are not liable in their individual capacities.
b. X can go after the separate assets of A, B, C, D, and E after
exhausting the assets of "Summit Corporation.
c. A, B, C, D and E can move for the dismissal of the court
action because "Summit Corporation" has no personality of
its own.
d. X cannot allege the lack of juridical personality on the
part of "Summit Corporation" because he is stopped from
doing so.
BL.2802
EXCEL PROFESSIONAL SERVICES, INC.
11. X Corp., whose business purpose is to manufacture and sell
vehicles, invested its funds in Y Corp., an investment firm,
through a resolution of its Board of Directors. The investment
grew tremendously on account of Y Corp.'s excellent business
judgment. But a minority stockholder in X Corp. assails the
investment as ultra vires. Is he right and, if so, what is the
status of the investment? (2011 Bar)
a. Yes, it is an ultra vires act of the corporation itself but
voidable only, subject to stockholders’ ratification.
b. Yes, it is an ultra vires act of its Board of Directors and
thus void.
c. Yes, it is an ultra vires act of its Board of Directors but
voidable only, subject to stockholders’ ratification.
d. Yes, it is an ultra vires act of the corporation itself and,
consequently, void.
12. The rule is that the valuation of the shares of a stockholder who
exercises his appraisal rights is determined as of the day prior
to the date on which the vote was taken. This is true – (2011
Bar)
a. regardless of any depreciation or appreciation in the share's
fair value.
b. regardless of any appreciation in the share's fair value.
c. regardless of any depreciation in the share's fair value.
d. only if there is no appreciation or depreciation in the
share's fair value.
13. The corporate term of a stock corporation is that which is
stated in its Articles of Incorporation. It may be extended or
shortened by an amendment of the Articles when approved by
majority of its Board of Directors and: (2011 Bar)
a. approved and ratified by at least 2/3 of all stockholders.
b. approved by at least 2/3 of the stockholders representing
the outstanding capital stock.
c. ratified by at least 2/3 of all stockholders.
d. ratified by at least 2/3 of the stockholders representing the
outstanding capital stock.
14. Mrs. Baby owns a substantial portion of the outstanding capital
of X corporation. Is the mere ownership of substantial portion
alone of the outstanding capital in a corporation justify the
application of doctrine of piercing the veil of corporate entity?
a. No. Mere ownership by a single stockholder or by any
corporation of all or substantially all of the capital stock of
the corporation does not justify the application of the
doctrine of piercing the veil of corporate entity. There must
be other circumstances that must be present.
b. No. It requires that the stockholders must own at least
more than 50% of the outstanding capital stock to justify
the application of piercing the veil of corporate entity.
c. Yes. A substantial ownership of the outstanding capital
stock alone is sufficient for the application of piercing the
veil of corporate entity.
d. Yes. Piercing the veil of corporate entity applies whenever
there is parent subsidiary relationship which means that the
parent owns at least more than 50% of the outstanding
capital stock of the subsidiary.
15. Which oh the following corporation commences to have
corporate existence and juridical personality and is deemed
incorporated from the date the Securities and Exchange
Commission issues a certificate of incorporation under its
official seal:
I. Public corporation
II. Private corporation
III. Foreign corporation
IV. Corporation sole
a. I and II c. II only
b. II and III d. II and IV
16. Which of the following are not powers that can be exercised by
the corporation?
a. Express power c. Incidental power
Page 2 of 2 www.prtc.com.ph
b. Implied power d. Residual power
17. In 2018, Corporation "A" passed a board resolution removing
"X" from his position as manager of said corporation. The by-
laws of "A" corporation provides that the officers are the
president, general-manager, treasurer and secretary. Upon
complaint filed with the SEC, it held that the general manager
could be removed by mere resolution of the board of director
On motion for reconsideration, "X" alleged that he could only
be removed by the affirmative vote of the stockholders
representing 2/3 of the outstanding capital stock. Is "X's"
contention legally tenable.
a. No, the vote required is majority of the board and 2/3 OCS
consenting
b. Yes, the voting requirement is only 2/3 of the outstanding
capital stock.
c. No, the required vote is MBD consented by MOCS.
d. No, the voting requirement is only majority of the Board of
Directors.
18. ABC Corp. increased its capital stocks from Php10 Million to
Php15 Million and, in the process, issued 1,000 new shares
divided into Common Shares “B” and Common Shares “C.” T,
a stockholder owning 500 shares, insists on buying the newly
issued shares through a right of pre-emption. The company
claims, however, that its By-laws deny T any right of pre-
emption. Is the corporation correct? (2011 Bar)
a. No, since the By-Laws cannot deny a shareholder his right
of pre-emption.
b. Yes, but the denial of his pre-emptive right extends only to
500 shares.
c. Yes, since the denial of the right under the By-laws is
binding on T.
d. No, since pre-emptive rights are governed by the articles of
incorporation.
19. An auditing firm composed of Certified Public Accountants
may validly form:
I. a partnership
II. a corporation
a. The statement is true with respect to both business
organizations.
b. The statement is false with respect to both business
organizations.
c. The statement is false with respect to partnership; true with
respect to corporation.
d. The statement is true with respect to partnership; false with
respect to corporation.
20. Which of these tests for determining the nationality of a
corporation is applicable under our Corporation Code?
a. Incorporation test only
b. Control test only
c. Business domicile test only
d. Both incorporation test as the general rule and control test
as the exception
21. The following statements pertain to the express powers of a
corporation.
I. A corporation may establish pension, retirement, and
other plans for the benefit of its directors, trustees,
officers and employees.
II. A corporation may make donations for the benefit of a
political party or candidate or for purposes of partisan
political activity provided the donations are reasonable.
a. Both statements are true
b. Both statements are false.
c. Statement I is true; Statement II is false.
d. Statement I is false; Statement II is true.
BL.2702