Bl2: The Law On Private Corporation Final Examination General Instructions

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BL2: THE LAW ON PRIVATE CORPORATION

FINAL EXAMINATION

GENERAL INSTRUCTIONS
1. This test is composed of two parts with their own instruction.
2. Read it carefully before answering the questions.
3. You can write anything on the questionnaire.
4. Final answers MUST be written on the answer sheet provided with this questionnaire.
5. Erasures or alterations of any kind will not be given any points.
6. Please DO NOT use friction pens.
7. This test is good for one hour.
8. Submit the questionnaire along with your answer sheet.
9. Wag nang mangopya XD. Kilala na kita sa haba ng naging samahan natin. Matalino ka
naman eh, sadyang medyo may pagkatamad lang. Anyways, sa mga graduating students: God bless
sa future endeavors nyo at wag nyo ko kalimutan hah? XD. Sa mga magfifield trip naman, God bless
din at wag nyo kalimutan ang pasalubong ko. Joke lang yun. May you have a safe trip! 

MULTIPLE CHOICE. Read carefully the questions below and choose the best statement among the choices. Write only the
letter of your answer in CAPITAL letters on the answer sheet provided with this questionnaire.

1. For the purpose of interlocking directorate, an interlocking director’s interest in a corporation is considered
substantial if it is:
a. at least 20%
b. more than 20%
c. at least 25%
d. more than 25%

2. Shares that may be issued at a price lower than P5.00 per share are:
a. par value shares
b. no-par value shares.
c. both (a) and (b)
d. neither (a) nor (b)

3. The rule that protects directors who act with due care and in good faith, as long as their decisions are lawful and in
the best interests of the corporation.
a. Fairness rule
b. Business judgment rule
c. Golden rule
d. Anti-trust rule

4. 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. Removal of a director.
c. Expiration of the term of a director.
d. Disqualification of a director.

5. The articles of incorporation of Eastex Computer Corporation provide for 15 directors. Which of the following is
invalid concerning its by-laws?
a. That the quorum in the meetings of directors be at least 8 directors
b. That the quorum in the meetings of directors be at least 10 directors
c. That the quorum in the meetings of directors be at least 7 directors.
d. The by-laws do not mention anything about the quorum in the meetings of directors.

6. Which of the following is not a characteristic of a corporation?


a. Perpetual life
b. Transferability of ownership interests
c. Unlimited liability on the part of the stockholders
d. Ability to attract large amount of capital.

7. Which of the following documents may be submitted before or after incorporation?


a. Verification certificate as to the name of the corporation.
b. By-laws
c. Certificate of bank deposit as to the paid-up capital
d. Articles of incorporation
8. Who may or may not be a director of a corporation?
a. Treasurer
b. Corporation Secretary
c. Both (a) and (b)
d. Neither (a) nor (b)

9. Which cause of vacancy in the board of directors may be filled by the board of directors if the remaining directors
still constitute a quorum and by the stockholders if such quorum does not exist?
a. Removal of a director.
b. Resignation of a director.
c. Increase in the number of directors.
d. Expiration of the term of some directors.

10. Which is the operative act will give juridical personality upon a corporation?
a. The filing of the articles of incorporation
b. The filing of by-laws
c. The issuance of the certificate of incorporation
d. The execution by the incorporators of the articles of incorporation which is the contract among themselves

11. A, B, C, D, E, F and G are directors of Commonwealth Appliances Corporation, a trader of appliances, whose articles
of incorporation provide for 7 directors. On September 1, 2010, the board of directors met to approve a contract for the
purchase of appliances from A, B, C, D and E with A, B, C and D voting for the approval of the contract. Assuming that the
contract is fair and reasonable under the circumstances, what is the status of the contract between the corporation and A?
a. Valid
b. Voidable
c. Unenforceable
d. Void

12. One of the following is ground for the suspension or revocation of the certificate of incorporation by the SEC:
A. If the corporation has commenced its business transactions and afterwards ceased continuously for a period of at
least 5 years.
B. If the corporation fails to commence and start to operate and the failure is due to the causes beyond its control.
C. If the corporation does not formally commence its business transactions within 2 years from sale of incorporation.
D. If the corporation has commenced its operations and subsequently become continuously for 2 years.

13. Corporation governed by special laws, aside from the requirements specified under the corporation laws. In order
that their Articles of Incorporation may be approved or accepted, they must present before the Securities and Exchange
Commission:
a. A favorable recommendation from the Ministry of Finance.
b. A copy of previous income tax return and a statement of assets, liabilities and net worth.
c. A favorable recommendation of the appropriate government agency to the effect that such article or amendment
is in accordance with law.
d. An undertaking to change the name of the corporation if there is already registered with the SEC a name or a name
similar to the name of the corporation.

14. The secretary of a stock corporation shall be:


a. A director of the corporation
b. An incorporator of the corporation
c. A resident and citizen of the Philippines
d. Of legal age and citizen of the Philippines

15. Three of the following enumerations are not authorized to issue no par value shares of stock. Which is the
exception?
a. Insurance Companies
b. Industrial Companies
c. Public Utilities
d. Trust Companies

16. The authorized capital stock of a corporation is P 500,000 dividend into 1,000 shares with a par value of P 100
each. At least P 25,000 or 250 shares of the authorized capital stock must be subscribed. The 250 shares were subscribed by
25 subscribers. To meet the minimum amount of subscription that must be paid:
a. It is enough that 25% of the total subscription is paid, regardless of the amount paid by each individual.
b. Each and every subscriber must always pay 250 which is 25% of their individual subscription.
c. Seven of the subscribers paid P 6,250 and the rest of the subscribers did not make any payments.
d. none of these.
17. The articles of incorporation differ from the by-laws in that the articles of incorporation are:
a. The rules of action adopted by a corporation for its internal government.
b. Adopted before or after incorporation.
c. A condition precedent in the acquisition by a corporation of a juridical personality.
d. Approved by the stockholders if adopted after incorporation.

18. A delinquent stockholder is not entitled to the following rights except the right:
a. To be voted
b. To vote or be represented in the in the meetings of stockholders
c. To dividends
d. He is not entitled to all rights of a stockholder

19. The right of a stockholder to demand payment of the fair value of his shares when he dissents from certain
corporate acts is known as:
a. Pre-emptive right
b. Appraisal right
c. Redemption right
d. Appreciation right

20. These statements pertaining to the meetings of directors are presented to you for evaluation:
I. Directors of trustees may attend or vote by proxy at board meetings
II. The articles of incorporation or the by-laws of a corporation may provide for a greater majority for its quorum
during the meetings of the board of directors
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

21. A stock that is issued price without consideration or below par value or the issued price is known as:
a. Watered stock
b. Delinquent stock
c. Redeemable stock
d. Preferred stock

22. A non-voting stock may vote in the following corporate acts, except in case of:
a. Approval of compensation of directors
b. Merger or consolidation
c. Increase or decrease in capital stock
d. Sale, lease, exchange, mortgage, pledge or other disposition of all substantially all of corporate property

23. This is the equitable right of stockholders to subscribe to newly issued shares of the corporation in proportion to their
present shares in order to maintain their equity in the corporation.
a. Right of redemption
b. Concept of corporate entity
c. Right to sue and be sued
d. Pre-emptive right

24. This in an authority to vote in a corporation’s stockholders’ meeting.


a. Proxy
b. By-laws
c. Certificate of stock
d. Share of stock

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


A. Proxy acquires legal title to the shares of the stockholder.
B. A proxy votes even in the presence of stockholders.
C. The proxy is voted only for the meeting for which it was intended.
D. A proxy is irrevocable at any time.

26. The voting requirement to increase or decrease capital stock.


a. Majority vote of the board of directors and consented to by the stockholders representing 2/3 of the outstanding
capital stock
b. 2/3 of the board of directors with the consent of majority of the outstanding capital stock
c. Majority vote of the board of directors with the consent of majority of the outstanding capital stock
d. Majority vote of the board of directors and 3/4 vote of the outstanding capital stock
27. The voting requirement to amend by-laws
a. Majority vote of the board of directors and consented to by the stockholders representing 2/3 of the outstanding
capital stock
b. 2/3 of the board of directors with the consent of majority of the outstanding capital stock
c. Majority vote of the board of directors with the consent of majority of the outstanding capital stock
d. Majority vote of the board of directors and 3/4 vote of the outstanding capital stock

28. The voting requirement to amend articles of incorporation


a. Majority vote of the board of directors and consented to by the stockholders representing 2/3 of the outstanding
capital stock
b. 2/3 of the board of directors with the consent of majority of the outstanding capital stock
c. Majority vote of the board of directors with the consent of majority of the outstanding capital stock
d. Majority vote of the board of directors and 3/4 vote of the outstanding capital stock

29. The voting requirement to grant compensation to the directors


a. Majority vote of the board of directors and consented to by the stockholders representing 2/3 of the outstanding
capital stock
b. 2/3 of the board of directors with the consent of majority of the outstanding capital stock
c. Majority vote of the board of directors with the consent of majority of the outstanding capital stock
d. Majority vote of the board of directors and 3/4 vote of the outstanding capital stock

30. The voting requirement to invest funds in another corporation


a. Majority vote of the board of directors and consented to by the stockholders representing 2/3 of the outstanding
capital stock
b. 2/3 of the board of directors with the consent of majority of the outstanding capital stock
c. Majority vote of the board of directors with the consent of majority of the outstanding capital stock
d. Majority vote of the board of directors and 3/4 vote of the outstanding capital stock

TRUE OR FALSE. Write AAA if the statement is correct and BBB if it is wrong.

31. Redeemable shares may be reacquired by a corporation only if it has unrestricted retained earnings. f
32. Treasury shares, since they are issued, are outstanding shares. f
33. Non-voting shares are not allowed to vote in all corporate acts. f
34. Shares without par value may be issued for a consideration less than P5.00 per share. f
35. The entire consideration received for the issuance of no-par shares shall all be treated as capital and no part
thereof shall be available for distribution as dividends. t
36. The by-laws of a corporation may validly provide that one may be the President and Secretary or President and
Treasurer at the same time. f
37. As a rule, directors of a corporation may be removed with or without cause. t
38. When a vacancy in the board arises from the death of a director. Such vacancy may be filled by the remaining
directors provided they still constitute a quorum. t
39. The stockholders or members cannot delegate to the board of directors the power to amend, repeal or adopt new
by-laws. f
40. The meetings of directors may be held in or outside the Philippines, unless the by-laws provide otherwise. t

BL2: THE LAW ON PRIVATE CORPORATION


FINAL EXAMINATION

Name:______________________________________ Score: ________


Section: _______

1 6 11 16 21 26 31 36
2 7 12 17 22 27 32 37
3 8 13 18 23 28 33 38
4 9 14 19 24 29 34 39
5 10 15 20 25 30 35 40

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