WEEK 10

QUIZZER IN CORPORATION LAW – Part 1

SET A
1. All of this corporation’s issued stock of all classes exclusive of treasury shares shall be held
of record by not more than twenty persons
A. Public corporation C. Close corporation
B. Stock corporation D. Non-stock corporation

2. Any profit which it may earn shall be used for the furtherance of the purpose for which the
corporation was organized as such profit is not distributable to its members
A. public corporation C. stock corporation
B. close corporation D. non-stock corporation

3. The right of the corporation to exist as a judicial person during its terms as stated in its
Articles of Incorporation despite the death of any of its stockholders is:
A. Right of Existence C. Right of Succession
B. Right of Redemption D. Pre-emptive Right

4. Contracts between a corporation and third persons must be made by or under the
authority of its:
A. General Manager C. Stockholders
B. President and CEO D. Board of Directors

5. Which of the following does not form part of the three-fold duty of directors?
A. Duty of Diligence C. Duty of Loyalty
B. Duty of Dependence D. Duty of Obedience

6. The difference between corporations and partnerships is that in corporations:

A. The liability extends up to private properties
B. There is no dissolution in case of death, withdrawal or resignation of an owner
C. The interest or ownership is transferable only if the other owner consents
D. It is created by mere consent of the owners

7. In which of the following cases will the doctrine of separate corporate personality apply?
A. When used as a cloak to cover fraud, illegality or it results in injustice.
B. To defeat public convenience, justify wrong, defend crime
C. Where two corporations are made to appear as one and used as a device to defeat
the ends of law or as a shield to confuse legitimate issues
D. Where two corporations have interlocking directors.

8. When a corporation is used to defeat public convenience, justify wrong, protect fraud, or
defend crime or made as a shield to confuse the legitimate issues or where a corporation
is a mere alter ago or business conduit of a person, this doctrine applies
A. Doctrine of business opportunity
B. De facto doctrine
C. Trust fund doctrine
D. Doctrine of piercing the veil of corporate fiction

SET A
9. If shares of stock are sold to a buyer, the delivery as a mode of transferring ownership
may be effected by:
A. Traditional longa-manu C. Traditio brevi-manu
B. Quasi-traditio D. Symbolical delivery

10. Which of the following is the disadvantage of forming a corporation?

A. The free and ready transferability of ownership.
B. The shareholders are not liable for the debts of the business.
C. Because of the power of succession, the existence of the entity is not affected by the
personal vicissitudes of the individual shareholders.
D. The subservience of minority stockholders to the wishes of the majority subject only
to equitable restraint.

11. The number of the Board of Trustees in a nonstock corporation.

A. Shall not be less than five but not more than eleven
B. May be more than fifteen upon its organization
C. May be less than five upon its organization
D. Shall not be less than five but not more than fifteen

12. For purposes of interlocking directors, the stockholdings shall be considered substantial if:
A. Exceeding 10% of the authorized capital stock
B. Exceeding 10% of the outstanding capital stock
C. Exceeding 20% of the authorized capital stock
D. Exceeding 20% of the outstanding capital stock

13. The corporation shall be deemed dissolved and its corporate powers cease, if from
the date of its incorporation, it does not formally organize and commence the
transaction of its business or the construction of its works within
A. 4 years B. 3 years C. 2 years D. 5 years

14. Which of the following qualifications is necessary in order that one may be a director of a
corporation?
A. He must be a citizen and a resident of the Philippines.
B. He must be a stockholder or director of a competitor corporation.
C. He must not be an officer of the government
D. He must own at least one (1) share of stock of the corporation.

15. Which of the following qualifications is necessary in order that one may be elected
secretary of the corporation?
A. He must be a citizen and a resident of the Philippines.
B. He must be a director of the corporation.
C. He must be a stockholder of the corporation.
D. He must be a treasurer of any other corporation.

16. Which of the following qualifications is necessary in order that one may be elected
president of the corporation?
A. He must be a citizen and a resident of the Philippines.
B. He must not be a stockholder or director of a competitor corporation.
C. He must not be a president of any other corporation.
D. He must be a director of the corporation.

17. A private corporation commences to have juridical personality from the date:
A. The officers of the corporation are elected by the stockholders.
B. The incorporators sign the articles of incorporation.
C. The articles of incorporation and by-laws are presented to the SEC.
D. The SEC issues a certificate of incorporation under its official seal.

SET A
18. The articles of incorporation were prepared, signed and filed with the Securities and
Exchange Commission. After some time, the corresponding certificate of incorporation
was issued. Later, it was discovered that the corporation failed to submit one requirement
for registration. What is the status of the corporation?
A. Corporation by estoppel C. De jure corporation
B. Open corporation D. De facto corporation

19. The corporation has a 15-member board. Three of the members of the Board have sold
their shares while three others are abroad. To have a quorum, this number is required:
A. Seven C. Six
B. Five D. Eight

20. The subscriber of unpaid shares which are not delinquent shall be entitled to the following
rights, except the right to:
A. Vote.
B. Inspect corporate books.
C. A stock certificate.
D. Dividends.

21. One of the following acts may be performed by the executive committee of a corporation.
Which is it?
A. Declaration of stock dividends.
B. Filling of vacancies in the board of directors.
C. Amendments or repeal of the by-laws or adoption of new by-laws.
D. Approval of contracts in the ordinary course of business.

22. 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.

23. In case the members of the board of directors of a corporation still constitute a quorum,
and there are vacancies, who will fill up such vacancies?
Removal Resignation Expiration of Increase in the number of
term Directors
A. Stockholders Board Stockholders Board
B. Board Board Stockholders Stockholders
C Stockholders Board Stockholders Stockholders
.
D Stockholders Stockholders Board Stockholders
.
24. Which of the following statements relative to a corporation is false?
A. A corporation has a legal personality distinct and separate from its stockholders.
B. A corporation may be entitled to an award of moral damages where its good
reputation is besmirched resulting into social humiliation.
C. The interest of shareholders in corporate property is purely inchoate.
D. A corporation is not within the protection of the Constitution regarding the right to be
secure against unreasonable searches and seizures.

25. This is an element of the doctrine of “piercing the veil of corporate entity?”
A. Complete control over the business
B. Control is used to commit fraud or wrong
C. Control and breach of duty are the proximate cause of the injury or loss
D. All of the foregoing

26. The doctrine of “piercing the veil of corporate entity” shall not be applied where:
A. The corporation operates for the benefit of a single individual who exercises
complete control over its funds.
B. The corporation controls the majority stock of another corporation.

SET A
 C. The corporation is a mere alter ego of another corporation.
D. The corporation is organized as a device to evade an outstanding legal obligation.

27. Which of the following statements is true?

A. A corporation enjoying a legislative franchise to supply electricity may engage in
buying and selling agricultural lands.
B. A corporation engaged in car dealership may engage in land transportation business.
C. A corporation engaged in deep-sea fishing may operate an ice plant as a public
service operator.
D. A corporation engaged in the manufacture of rubber shoes may engage in the
manufacture of rubber cement.

28. One of the following attributes is not common to both a corporation and a partnership:
A. Succession
B. Juridical personality
C. Income tax rate
D. Can act through agents only

29. One of the following entities cannot be organized as a stock corporation:

A. Bank
B. Close corporation
C. Religious corporation
D. Education corporation

30. What is the term of corporate existence?

A. The term as specified in the articles of incorporation which must not be less than fifty
(50) years.
B. The term as specified in the articles of incorporation which must not be more than
fifty (50) years.
C. Fifty (50) years.
D. Indefinite number of years unless a specified term is specified in the Articles of
Incorporation

31. Determine which of the following “purpose clauses” contained in the articles of
incorporation shall be accepted by the SEC?
A. To practice law in the Philippines
B. To carry out any lawful business or purpose
C. Both a and b
D. Neither a nor b

32. Which of the following statements relative to de jure and de facto corporations is false?
A. A de jure corporation is one that was able to comply substantially with all the
requirements of the law for its incorporation.
B. A de facto corporation is one that was able to make colorable compliance of the legal
requirements for its incorporation.
C. A de jure corporation’s existence can be attacked in a quo warranto proceeding.
D. None of the foregoing.

33. Which of the following is not a characteristic of a de facto corporation?

A. There is a bona fide attempt to comply with the requirements of the law in organizing
the corporation.
B. There is an actual exercise of corporate powers in good faith.
C. Non issuance of Certificate of Incorporation
D. Good faith

34. Which of the following statements relative to a corporation by estoppel is false?

A. It is an ostensible corporation.
B. It is treated as a de jure or de facto corporation between the persons
misrepresenting themselves as a corporation and the persons who relied on their
misrepresentation.
C. Those who assume to act as a corporation shall be liable as general partners for all
debts, liabilities and damages resulting therefrom.

SET A
 D. None of the foregoing.

35. Determine which of the following omissions shall result into the automatic cessation of
corporate powers and dissolution of the corporation?
A. Failure of a corporation to formally organize and commence business transactions or
construction of its works within two (2) years from the date of its incorporation.
B. Subsequent continuous in operation for at least five (5) years.
C. Failure of a corporation to formally organize and commence business transactions or
construction of its works within five (5) years from the date of its incorporation.
D. Subsequent continuous in operation for at least five (5) years

36. Which of the following statements relative to the board of directors of a stock corporation is
false?
A. The number of directors must not be more than fifteen (15).
B. The majority of the directors must be citizens of the Philippines.
C. Each director must own at least one share of the capital stock registered in his name
in the corporate books
D. The term of office of directors is one (1) year

37. Which of the following statements relative to the board of directors of a stock corporation is
false?
A. A director must not have been convicted by final judgment of an offense punishable
by more than six (6) years imprisonment, or committed a violation of the Corporation
Code within five (5) years prior to the date of election or appointment.
B. A director may be removed from office by a vote of the majority of the outstanding
capital stock with or without cause; provided, that removal without cause may not be
used to deprive minority stockholders, who used cumulative voting to elect such
director, of the right of representation.
C. No director shall receive any compensation (other than per diems) as such, unless
the same is granted under the by-laws or by a vote of at least 2/3 of the outstanding
capital stock; provided; that the total yearly compensation (excluding per diems and
compensation as officers) shall not exceed ten (10%) percent of the net income
before income tax of the corporation during the preceding year.
D. Additional qualification may be provided in the by-laws (e.g. a director is disqualified
for nomination or election if he owns at least 10% of the stocks of another competing
corporation).

38. A, B, C, D, E, F, and G are the members of the board of directors of a corporation.

Unfortunately, E, F, and G resigned for personal reasons. How shall the vacancies be
filled up?
A. The vacancies shall be filled up by the majority vote of the board of directors.
B. The vacancies shall be filled up by the majority vote of the stockholders in a regular
or special meeting.
C. The vacancies shall be filled up by the vote of at least 2/3 of the stockholders in a
regular or special meeting.
D. None of the foregoing.

39. A, B, C, D, E, F, and G are the members of the board of directors of a corporation.

Unfortunately E, F, and G were removed from office due to fraudulent practices. How
shall the vacancies be filled up?
A. The vacancies shall be filled up by the majority vote of the board of directors.
B. The vacancies shall be filled up by the majority vote of the stockholders in a regular or
special meeting.
C. The vacancies shall be filled up by the vote of at least 2/3 of the stockholders in a
regular or special meeting.
D. None of the foregoing.

40. The contract entered into by a self-dealing director, trustee or officer is valid where:
A. The presence of the director, trustee or officer in the board meeting in which the
contract was approved was necessary to constitute a quorum for such meeting.
B. The vote of such director, trustee or officer was necessary for the approval of the
contract.

SET A
 C. Both a and b.
D. Neither a nor b.

41. X is a director owning 20% of the outstanding capital stock of ABC Corporation and 40%
of RST Corporation. The two corporations entered into a contract whereby ABC
Corporation sold its commercial lot to RST Corporation. The contract was approved as
follows: ABC Corporation – 4 out of 5 directors voted in the affirmative, including X; RST
Corporation – 5 out of 7 directors voted in the affirmative, including X. The contract
entered into by the two corporations is:
A. Valid
B. Voidable
C. Unenforceable
D. Void

42. A corporation has an authorized capital stock of P4,000,000 composed of 40,000 shares
@ P100 par value, of which only 10,000 shares have been offered for subscription.
These 10,000 shares are now fully subscribed and paid for. The board of directors, by
majority vote that is ratified by 2/3 vote of the outstanding capital stock, increased its
capital stock by an additional 20,000 shares @ P100 par value.
Which of the following shall meet the minimum subscription requirement?

A. At least 15,000 shares must be subscribed and 3,750 shares thereof must be paid
before the increase in capital stock will be approved by the SEC.
B. At least 12,500 shares must be subscribed and 3,125 shares thereof must be paid
before the increase in capital stock will be approved by the SEC.
C. At least 5,000 shares must be subscribed and 1,250 shares thereof must be paid
before the increase in capital stock will be approved by the SEC.
D. None of the foregoing.

43. A corporation is organized for the purpose of manufacturing and processing fruit stuffs.
Which of the following transactions shall be deemed an ultra vires act?
A. Manufacture of canned tomato products
B. Manufacture of shabu
C. Both a and b
D. Neither a nor b

44. Which of the following statements relative to corporate board meetings is false?
A. It may be held within or outside the Philippines.
B. It cannot be done through teleconferencing or videoconferencing.
C. It is held on a monthly basis.
D. It may be attended by means of proxy.

45. Which of the following statements relative to corporate stockholders’ or members’

meetings is true?
A. It may be attended by means of proxy
B. It is always held on any day of April each year
C. It can be conducted anywhere in the Philippines
D. It cannot be called on a special basis

46. One of the following is not an attribute of a close corporation:

A. Restriction can be made prohibiting the transfer of stock to outsiders unless and
until the corporation buys these stocks from the transferring stockholder.
B. Management of the corporation may be entrusted to the stockholders rather than to
a board of directors.
C. The number of stockholders may exceed 20 persons
D. The stocks are not listed in any stock exchange or offered to the public.

47. One of the following is not an attribute of a close corporation:

A. The officers or employees may be elected or appointed by the stockholders
themselves rather than by the board of directors as may be provided in the articles of
incorporation.

SET A
 B. Notwithstanding the presence of the foregoing characteristics of a close corporation,
a corporation is deemed not a close corporation when at least 2/3 of its voting stock
is owned or controlled by another corporation which is not a close corporation.
C. The pre-emptive right of the stockholders does not extend to treasury shares
D. A corporation vested with public interest cannot be organized as a close corporation.

48. One of the following statements is not a characteristics of an ordinary non-stock

corporation:
A. It does not distribute dividends to its members, although its membership may in
some cases be expressed in terms of “shares of stock.”
B. It is prohibited to engage in business with object of making profits, although it may
earn income as an incident to its operation which must be used in the furtherance of
its purpose.
C. Each member is titled to one vote which cannot be broadened or denied in the
articles of incorporation or by-laws
D. Straight-voting can be used in the election of the board of trustees, unless
cumulative voting is expressly provided in the articles of incorporation or by-laws.

49. One of the following statement is not a characteristics of an ordinary non-stock

corporation:
A. Membership can be terminated in the manner and for the causes provided in the
articles of incorporation and by-laws.
B. The term of the office of the trustees shall be five (5) years, with one-fifth (1/5) of
their number to expire each year.
C. The board of trustees must be composed of its members; provided, that the
representatives of corporate members may be nominated and elected in the board of
trustees as may be provided in the articles of incorporation or by-laws;
D. The number of trustees may be composed of more than fifteen (15) as may be
provided in the articles of incorporation or by-laws;

50. Starbucks is a foreign corporation that entered into a contract with Farronccino, a domestic
corporation. After several transactions were made, Farronccino, ceased to honor its
contract with Starbucks. However, Starbucks failed to secure any license to do business
in the Phil. Which of the following statements is correct?
A. Starbucks can sue Farronccino before the Philippine courts.
B. Farronccino cannot sue Starbucks before the Philippine courts.
C. The contract between Starbucks and Farronccino is null and void.
D. Starbucks can secure the requisite license even after the breach and then sue
Farronccino.

51. Which of the following activities of foreign corporations were held by the Court as “doing
business in the Philippines?”
A. A foreign corporation sold construction equipment in an isolated transaction.
B. A foreign corporation that is engaged in the manufacture of uniforms purchased
soccer jerseys from the Philippines.
C. A foreign insurance company issued a policy to the consignee of exporter steel pipes.
D. A foreign subsidiary assumed the payment of the loan by a foreign corporation doing
business in the Philippines, and the subsequent acquisition by the former of the latter.

52. Which of the following activities of foreign corporations were held by the Court as “not
doing business in the Philippines?”
A. A foreign corporation that manufactures cars appointed a Philippine distributor who
merely transmits to it orders from buyers, the former fixing the price and the down
payment, receiving payment directly from buyers, and shipping the cars directly to the
buyers.
B. A foreign corporation licensed a domestic corporation to manufacture its products.
C. A foreign shipping company loaded cargoes in the Philippines once a year for two
consecutive years.
D. A foreign corporation appointed an exclusive distributor of its products in the
Philippines, registered its trade name, and sent an officer to conduct a training
program four times.

SET A
53. Which type of corporate officer is required to be a director of the corporation?
A. President
B. Secretary
C. Vice-President
D. Treasurer

54. In which type of corporation is foreign ownership prohibited by 1987 Constitution?

A. Advertising company
B. Public utility
C. Mass media
D. Educational institution

55. In the matter of management of the business affairs of the corporation, this is supreme
A. Board of directors
B. President of the corporation
C. 2/3 of the stockholders
D. Majority of stockholder
56. An officer of a corporation my hold two or more positions in the corporation but not as:
A. Vice president and Secretary
B. President and Treasurer
C. President and Chairman of the Board
D. Secretary and Treasurer

57. Under this test, a corporation is a national of the country pursuant to whose laws it is
incorporated:
A. Nationality test C. Control test
B. Capitalization test D. Incorporation test

58. The stockholders or members mentioned in the Articles of Incorporation originally forming
and composing the corporation and who are signatories thereof are called:
A. incorporators C. subscribers
B. promoters D. founders

59. I. Any vacancy in the board of directors in a stock corporation, other than by expiration of
term, any be filled by the vote of at least a majority of the remaining directors, if still
constituting a quorum; otherwise, the vacancy must be filled by 2/3 votes of the
stockholders entitled to vote, in special meeting called for the purpose.
II. Any vacancy in the board of directors in a stock corporation, other than by removal
from office, may be filled by the vote of at least a majority of the remaining directors, if
still constituting a quorum; otherwise, the vacancy must be filled by majority votes of
the stockholders entitled to vote.
A. Only I is true
B. Only II is true
C. Both are true
D. Both are false

60. The Board of Directors of XYZ Corp. unanimously passed a Resolution approving the
taking of steps that in reality amounted to willful tax evasion. On discovering this, the
government filed tax evasion charges against all the company’s members of the board of
directors. The directors invoked the defense that they have no personal liability, being
mere directors of a fictional being. Are they correct?
A. No, since as a rule only natural persons like the members of the board of directors can
commit corporate crimes.
B. No, since the law makes directors of the corporation solidarily liable for gross
negligence and bad faith in the discharge of their duties.
C. Yes, since it is the corporation that did not pay the tax and it has a personality distinct
from its directors.
D. Yes, since the directors officially and collectively performed acts that are imputable
only to the corporation.

SET A
61. The term of one (1) year of the Board of Directors of AAA Corporation expired last July 15,
2020. No new election of the Board of Directors was called, hence, the existing members
of Board continue as Directors in hold over capacity. Which statement is most accurate?
A. This is not allowed because the term of the directors must only be for one (1) year.
B. This is allowed provided there is a valid and justifiable reason for not calling for an
election of the new members of the Board.
C. The positions of the members of the Board of Directors will be automatically
declared vacant.
D. Acting as members of the Board of Directors in a hold over capacity must be ratified
by the stockholders.

62. To constitute a quorum for the transaction of corporate business, only a majority of the
number of Board of Directors is required:
A. As fixed by the corporate by-laws
B. As fixed in the articles of incorporation
C. Actually serving in the board
D. Actually serving in the board but constituting a quorum

63. At the annual meeting of the Corporation for the election of five (5) directors as provided
for in its Articles of Incorporation, A, B, C, D, E, F and G were nominated. A, B C, D and E
received the highest number of votes and were proclaimed elected. F received ten votes
less than E. Subsequently, E sold all his shares to F. At the next meeting of the Board of
Directors both E and F appeared. Who is entitled to sit as member of the board?
A. E
B. Neither E or F
C. E and F
D. F

64. Removal of directors by the stockholders may be with or without cause provided that
removable without cause may not be used to deprive the minority stockholders of their
____________.
A. pre-emptive right.
B. right of representation to which they may be entitled under the law.
C. right to file derivative suit against the majority stockholders.
D. appraisal right.

65. ABC Corporation corporate existence expired on July 31, 2020. The stockholders of ABC
Corporation wish to continue its operation and asked your advice what legal action is
required? What is your BEST advice?
A. Secure from the Securities and Exchange Commission, a Certificate of Revival of
corporate existence subject to all the requirements prescribed by the SEC.
B. File with the Securities and Exchange Commission (SEC) for an extension of the
corporate term of the corporation for another fifty (50) years.
C. Establish a new corporation, since the corporation has no legal personality.
D. No action is required; as corporations shall have perpetual existence and hence,
the corporation shall continue its business operations.

66. What vote is needed to consider every decision of the Board of Directors to be a valid
corporate act?
A. At least a majority of the directors present at the meeting.
B. Two-thirds of the directors present at the meeting at which there is a quorum.
C. At least majority of the directors present at the meeting which there is a quorum.
D. Two-thirds of the directors present at the meeting.

67. One of the following cannot be a close corporation.

A. Mining corporations
B. Public utilities
C. Industrial corporations
D. Banks

68. Corporations which are organized for profit but doing governmental functions.

SET A
 A. public corporation C. non stock corporation
B. close corporation D. quasi - public corporation

69. Corporations which are organized for charitable purposes

A. quasi corporation C. ecclesiastical corporation
B. eleemosynary corporation D. lay corporation
70. Corporations which are not formally organized but recognized.
A. public corporation C. quasi- corporation
B. close corporation D. quasi - public corporation

SET A