CORPORATIONS - MCQs SY 13-14 2ND SEMESTER 1.

A doctrine which states that a corporation, as an artificial being, owes its life to the state, its birth being purely dependent on the will of the state: a. theory of concession; b. enterprise theory; c. realist theory; d. symbol theory. 2. Which of the following statements is correct? Statement A: The general or primary franchise of a corporation, that is, the right to exist as such, is vested in the individuals who compose the corporation. Statement B: The special or secondary franchise of a corporation is vested in a corporation. a. only A is correct; b. only B is correct; c. both are correct; d. both are incorrect. 3. One of the attributes of a corporation is that it is an artificial being. It means that: a. it is a juridical person with a personality separate and apart from its individual members or stockholders; b. the stockholders or members composing the corporation are the corporation itself; c. it is in fact and in reality a person and may perform all actions that can be done by natural persons; d. all of the above. 4. It is a legal consequence of theory of corporate fiction or entity: a. generally, a corporation may be made to answer for acts or liabilities of its stockholders or members; b. the property of the corporation is the property of its stockholders; c. it may bring civil and criminal actions in its own name and in behalf of its members; d. a corporation is a person within the meaning of due process and equal protection clauses of the constitution. 5. Citizenship is a status usually conferred on a natural person. However, a corporation may be deemed a citizen when: a. exercising its rights as a juridical person; b. citizenship is necessary to determine jurisdiction of courts; c. citizenship is an important factor in the determination of the legality of a contract entered into by the corporation; d. all of the above; e. none of the above. 6. Under the Philippine jurisdiction, the corporate nationality of a corporation is determined by: a. control test; b. incorporation test; c. situs test;

2 d. all of the above; e. none of the above. 7. A principle based on equitable considerations, which treats a corporation and individuals composing it or two corporations as identical and one: a. doctrine of piercing the veil of corporate entity; b. principle of disregarding the fiction of corporate entity; c. doctrine of corporate alter ego; d. all of the above; e. none of the above. 8. The attribute that a corporation is created by law or by operation of law means that: a. a corporation can come into existence by mere agreement of the parties; b. creation of a corporation does not require a special grant from the State; c. corporations can only come into existence in the manner prescribed by the concerned government agencies; d. legislative authority is necessary for the creation of a corporation. 9. It is a corporation created by special law in the interest of common good and subject to the test of economic viability: a. foundation; b. government owned and controlled corporation; c. public corporation; d. private corporation; 10. The corporations right of succession means that: a. it is subject to estate tax; b. the life of the corporation is unlimited; c. its continuous existence is not affected by death, withdrawal, insolvency, or incapacity of its members; d. it has a capacity of continuous existence except when the shares of stock are eventually owned by less than five (5) stockholders. 11. A corporation commences to acquire juridical personality from: a. the moment of execution of articles of corporation; b. the filing of the articles of incorporation with the SEC; c. the recording of the articles by the SEC; d. the date of the issuance of the certificate of incorporation by the SEC. 12. What is required for a corporation to continue its corporate existence? a. adoption and submission of by-laws with the SEC; b. election of officers; c. formal organization and commencement of the transaction of its business or theconstruction of its works; d. holding of meetings. 13. A corporation, as distinguished from a partnership; a. may be organized by mere agreement of the parties; b. may exercise any power authorized by its members provided it is not contrary to law, morals, good customs, public order, or public policy; c. may be dissolved with the consent or through the action of the State; d. may be established for any period of time agreed upon by the members. 14. A similarity between a corporation and a partnership: a. they may be established for any period of time stipulated by their

3 members; b. they can be organized only where there is a law authorizing their organization; c. their members can personally sue the one managing for mismanagement; d. they may exercise any power authorized by members provided it is not contrary to law, morals, good custom, public order or public policy. 15. An advantage that may be obtained by doing business in a corporate form: a. centralized management; b. separation of management from ownership; c. no double taxation; d. less government restrictions, controls and report requirements. 16. It is one which actually exists for all practical purposes as a corporation but which has no legal right to corporate existence as against the state: a. de facto corporation; b. de jure corporation; c. ostensible corporation; d. domestic corporation. 17. All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as: a. corporation by estoppel; b. general partners; c. solidary debtors; d. joint obligors. 18. Quasi-public corporations refer to: a. corporations formed for the government of a portion of the State for the general welfare; b. those organized by the government or which the government is the majority shareholder; c. those formed for some private purpose, benefit or end; d. private corporations with franchise or contract involving the performance of public duties. 19. Ecclesiastical corporation means: a. one organized for religious purposes; b. one formed for charitable purposes; c. one established for profit; d. one organized for a purpose other than for religious. 20. A corporation related to another corporation that has the power to control the management of the latter: a. quasi-corporation; b. close corporation; c. holding corporation; d. subsidiary corporation. 21. A corporation regularly created in compliance with all legal requirements: a. de jure corporation; b. de facto corporation; c. corporation by estoppel; d. corporation by prescription.

4 22. Private corporation, as distinguished from public corporation: a. is an instrumentality of the State ; b. may be created without the consent of the members who compose it; c. is subject to dissolution by the Congress; d. includes government owned and controlled corporations. 23. A contract for the acquisition of unissued stock in an existing corporation, or a corporation still to be formed: a. pooling agreement; b. subscription agreement; c. deed of assignment; d. promoters contract. 24. A person who assist in and brings about the incorporation and organization of a corporation: a. stockholder; b. promoter; c. incorporator; d. organizer. 25. The following are qualifications of directors in a stock corporation, except: a. every director must own at least one (1) share of the capital stock; b. at least two of the directors must be residents of the Philippines; c. the share of stock held by the director must be recorded in the stock and transfer book; d. every director must continuously own at least a share of stock during his term. 26. Statement 1: A corporation cannot be an incorporator. Statement 2: A corporation may subscribe for shares of stock in another corporation. a. only statement 1 is correct; b. only statement 2 is correct; c. both statements are correct; d. both statements are incorrect. 27. Corporators are: a. shareholders; b. trustees and directors; c. subscribers, promoters or entrepreneurs and members; d. incorporators, stockholders, or members. 28. Statement 1: An incorporator must be a resident of the Philippines. Statement 2: An incorporator need not subscribe to the capital stock. a. only statement 1 is correct; b. only statement 2 is correct; c. both statements are correct; d. both statements are incorrect. 29. A corporation may be organized either as a stock of non-stock but this entity can only be organized as a stock corporation: a. educational corporations; b. religious corporations; c. banks; d. trading corporations.

30. It governs the relationship between and among the stockholders or members: a. articles of incorporation; b. by-laws; c. voting trust agreement; d. proxy agreement. 31. The articles of incorporation shall be disapproved by the SEC when: a. the articles are not in prescribed form; b. the purpose is unconstitutional, illegal or immoral; c. there is no favorable recommendation of the appropriate agency for corporations requiring secondary licenses; d. all of the above. 32. Importance of a purpose clause in the articles of incorporation; a. imposes implied limitations on authority of the board of directors/trustees by exclusion of the lines of activity which are not covered; b. authorizes the board of directors/trustees to enter into all kinds of contracts; c. determines the dealings that are relevant to the stockholders; d. none of the above. 33. What is the nature of a share of stock? a. it confers immediate title to the properties of the corporation; b. it represents a distinct undivided interest in the common property of the corporation; c. the shares are personal property of the corporation; d. the share of stock constitutes an indebtedness of the corporation to the stockholder. 34. A share of stock issued to organizers and promoters, which are given special privileges over other shares: a. common share; b. preferred share; c. promotion share; d. founders share. 35. A corporation which may issue a no-par value share: a. stock corporation; b. non-stock corporation; c. banks and trust companies; d. insurance companies and building and loan associations. 36. A share of stock which entitles its holder to receive the stipulated dividends only: a. participating preferred share; b. non-participating preferred share; c. convertible share; d. cumulative preferred share. 37. A prohibited consideration for the issuance of shares of stocks: a. previously incurred indebtedness; b. stock dividends; c. patents or copyrights; d. future services.

6 38. The issuance of a watered stock is not permitted in order to protect subscribers and creditors, which of the following is not covered by the prohibition? a. treasury shares; b. bonus shares; c. discount shares; d. stock dividends issued without retained earnings; 39. Where the articles of incorporation provide for non-voting shares, the holders of such shares shall nevertheless be entitled to vote on the following matters, except: a. amendment of the articles of incorporation and of by-laws; b. sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; c. incurring, creating, or increasing bonded indebtedness, or increasing or decreasing capital stock; d. declaration of stock dividends. 40. What is the minimum paid up capital of a corporation? a. P5,000.00; b. at least 25% of the subscribed capital stock; c. at least 25% of the authorized capital stock has been subscribed and that at least 25% of said subscribed capital stock has been paid; d. 25% of the authorized capital stock. 41. Issued or outstanding capital stock is synonymous with: a. capital; b. capital stock; c. authorized capital stock; d. subscribed capital stock. 42. It is an aggregate issued value of all outstanding capital stock that sets the minimum limit of actual corporation assets that must be retained for the payment of corporate debts: a. legal or stated capital; b. capital stock; c. capital; d. retained earnings. 43. A portion of the capital stock that does not vote and draws no dividends: a. authorized capital stock; b. subscribed capital stock; c. paid-up capital stock; d. unissued or unsubscribed capital stock. 44. A certificate of stock is the evidence of a holders interest and status in a corporation, which of the following statements is not correct? a. one may not own shares of corporate stock without possessing a stock certificate; b. a certificate expresses the contract between the corporation and the stockholder; c. certificates are quasi-negotiable in nature; d. no certificate of stock shall be issued to a subscriber until the full amount of his subscription has been paid. 45. What is the legal consequence when there is over issuance of shares in excess of the authorized capital stock?

7 a. both the increase in capital stock and the certificates issued are void; b. the over issuance is subject to ratification by the stockholders by increasing the authorized capital stock through the amendment of the articles of incorporation; c. the over issuance is voidable but the certificates issued are void; d. both the increase in capital stock and the certificates are valid as long as they were approved by majority of the stockholders. 46. It is a privilege granted to a party to subscribe to a certain portion of the unissued capital stock of a corporation within a certain period and under the terms and conditions of the grant exercisable by the grantee at any time within the period granted: a. stock subscription; b. stock option; c. stock split; d. stock dividend. 47. A stock split, as distinguished from stock dividend: a. converts profits into permanent account; b. alters the amount of the capital; c. increases the number of shares without change in the capital; d. postpones realization of profits of the stockholder. 48. At the option of the corporation, its contract with one or more of its directors or trustees or officers is: a. generally voidable; b. generally valid; c. generally rescissible; d. unenforceable. 49. Contracts between two or more corporations having interlocking directors are: a. generally voidable; b. generally valid; c. generally rescissible; d. unenforceable. 50. Doctrine of business or corporate opportunity: a. prohibits the corporation from engaging in business not included in its primary purpose; b. refers to the principle that no director or officer shall place his personal interest over and above the interest of the corporation; c. means that related corporations may be allowed to engage in related businesses as long as there is no monopoly; d. pertains to right of creditors to sue directors or officers who took advantage of the business opportunity belonging to the corporation. 51. Doctrine of limited capacity means that: a. the corporation has limited power to invest in other corporations; b. it has only such powers as are expressly and impliedly granted, and incidental to its existence; c. it may perform only those acts provided by its by-laws; d. it is subject to limitation that the exercise of its power must not be contrary tolaw, morals, good customs, public order, and public policy.

8 52. Trust fund doctrine holds that the assets of the corporation are trust funds to be maintained unimpaired, for whose benefit is the trust fund? a. stockholders; b. creditors; c. corporation; d. all of the above. 53. Trust fund doctrine forbids the corporation from distributing its assets to stockholders without provision being first made for the payment of corporate debts, what is the effect of such disposition of assets? a. the disposition is unenforceable; b. the disposition is void; c. the disposition is voidable; d. the disposition is subject to resolution or rescission. 54. Cash dividend, as distinguished to stock dividend: a. diminishes the asset of the corporation; b. needs concurrence of the stockholders; c. increases the capital of the corporation; d. may be reached by corporate creditors. 55. A certificate issued to shareholders in lieu of a dividend, entitling them to money, stock, bonds, land or other benefits at some future time: a. bonds dividends; b. script dividends; c. property dividends; d. liquidating dividends. 56. It is the amount that would be paid on each share to retiring stockholders or in the event the company is liquidated: a. fair market value; b. appraised value c. book value; d. liquidation value. 57. A corporation the sole purpose of which is to invest its capital in a specific property and thereafter to consume that property or extract its value for profit: a. sole corporation; b. wasting assets corporation; c. close corporation; d. joint venture. 58. Stock corporations are prohibited from retaining surplus profits in excess of 100% of their paid-in capital stock, except: a. it is justified by a definite expansion projects approved by the board; b. declaration of dividends is barred under a loan agreement; c. special reserve is needed for probable contingencies; d. all of the above. 59. The power to sue is one of the expressed powers of the corporation, it is lodged with the: a. stockholders; b. president of the corporation; c. board of directors; d. executive committee. 60. What is the nature of the powers of the board of directors or trustees?

9 a. the powers are original and undelegated; b. they are conferred and can be revoked by the stockholders; c. they are subject to the maxim delegate potestas non potest delegare; d. acts of ownership. 61. The following are classes of corporate powers, except: a. those expressly granted or authorized by law; b. those that are implied or necessary to the exercise of the express or incidental powers; c. those incidental to corporations existence; d. those that may be useful to its business 62. Incidental powers of the corporation are those that attach to a corporation at the moment of its creation, which of the following is not incidental? a. power to have a corporate seal; b. power to adopt and amend its by-laws; c. power to merge or consolidate; d. power to sue and be sued; e. power to invest corporate funds for any other purpose other than the primary purpose. 63. The following are limitations to the exercise of power of a corporation to enter into management contract, except: a. the contract must be approved by the board of directors and ratified by stockholders of both corporations; b. the period of the contract must not be longer than five years for any one term; c. the contract must always be subject to the power of the board; d. the articles of incorporation of the managed corporation must be amended. 64. Forever Earning Corp. (FEC), through its board of directors, sold its goodwill to Lasting Profit, Inc. (LPI). The goodwill constitutes substantially all of FECs property and assets. However, despite the sale of its goodwill, FEC continues to do its business and earns profit therefrom. Mr. Luser, a minority stockholder of FEC, questions the sale of goodwill alleging that the sale must be authorized by the vote of its stockholders representing at least 2/3 of the outstanding capital stock. Is Mr. Luser correct? a. Yes, although FEC may sell or otherwise dispose all or substantially all of its property and assets, including its goodwill, the sale or disposition must be authorized by the stockholders; b. Yes, FECs sale of its goodwill is ultra vires; c. No, FEC can still continue the business for which it was organized; d. No, Mr. Luser has no right to question the action of the board. 65. The legal effect of merger or consolidation: a. liquidation of the enterprise of the selling corporation; b. the acquiring corporation assumes only those obligations set forth in the agreement; c. the constituent corporations are not necessarily dissolved; d. there is automatic assumption of the liabilities of the absorbed or dissolved corporations.

10 66. Appraisal right of a stockholder refers to his right to demand payment of the fair value of his shares after dissenting from a corporate action, in what case this right is not applicable? a. merger or consolidation; b. sale, conveyance, mortgage, or other disposition of all or substantially all of the corporate properties and assets; c. amendment of the articles of incorporation or by-laws; d. investing funds in another corporation or business for any purpose other than its primary purpose. 67. The following are limitations to the appraisal right of a stockholder, except: a. the dissenting stockholder must have fully paid his subscription; b. the dissenting stockholder must have voted against the proposed corporate action; c. there must be a written demand on the corporation for payment of his shares; d. payment of the shares must be made only out of the unrestricted retained earnings of the corporation. 68. A stockholder has a pre-emptive right which a corporation may deny, what is the purpose of a pre-emptive right? a. to protect from impairment and dilution the basic rights of a stockholder in the corporation; b. to protect the investors from mismanagement by the board of directors; c. to prevent dissipation of corporate assets; d. to prevent discrimination among stockholders and creditors of a corporation. 69. Right of pre-emption is given to a stockholder: a. as an option of the stockholder to subscribe to a new allotment of shares whenever the capital stock of a corporation is increased or new shares of stock are issued; b. to safeguard the right of stockholders to preserve their proportionate corporate interests; c. to compensate the stockholders for the risk in investing their money; d. all of the above. 70. The extent of a stockholders right of inspection of corporate books: a. the stockholder may be allowed to take books from the office of the corporation; b. the corporation has the duty to supply any stockholder, upon his request, with a list of its stockholders showing their respective subscriptions; c. the right extends to subsidiaries of a parent corporation domiciled and with its books and records in another jurisdiction; d. the right includes the right to make copies, abstracts and memoranda of the contents of the books, records or any document by his representative either with or without his attendance. 71. Basis of right of a stockholder to inspect records of a corporation: a. stockholders beneficial interest through ownership of shares and the necessity of self protection; b. trust fund doctrine; c. doctrine of limited capacity;

11 d. stockholders right to participate in the management of the corporation. 72. Which of the following must be presented to the stockholders or members at their regular meeting? a. books and records; b. minutes of all meetings; c. stock and transfer book; d. financial reports. 73. Cumulative voting by distribution for directors in stock corporations means: a. every stockholder may vote such number of shares for as many persons as there are directors; b. a stockholder may give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal; c. a corporator may cumulate his shares by multiplying the number of sharesby the number of directors to be elected and allocate the same among as many candidates as he shall see fit. d. corporators may cast as many votes as there are directors to be elected. 74. In the election of directors by cumulative voting, if a stockholder owns 500 shares of stock and there are seven (7) directors to be elected, how many votes is he entitled? a. 500; b. 3,500; c. 7; d. 1. 75. Intra vires means: a. not within the express, implied and incidental powers of a corporation; b. beyond the purpose of a corporation; c. within the legitimate powers of a corporation; d. it can be enforced by ratification. 76. A derivative suit is a judicial action to protect the interest of a corporation, who has the right to institute the suit? a. a creditor for the benefit of the corporation; b. any stockholder of record in the name and behalf of the corporation; c. the majority stockholder in behalf of the corporation; d. the board of directors. 77. A call is an official declaration by the corporation and it pertains to: a. a demand requiring the payment of all or a certain prescribed portion of a subscribers stock subscription; b. a levy made upon the stock of a corporation; c. a process to remind stockholders to fulfill their obligations to the corporation; d. a remedy to address the corporations deficit. 78. When does a stock become delinquent? a. upon failure to pay the unpaid subscription within 30 days from the date specified in subscription contract; b. upon failure to pay the unpaid subscription from the date stated in the call; c. upon sale of the shares of stock to third party without paying in full the

12 subscription; d. a and b only; e. none of the above. 79. Under this arrangement, the stockholder remains the beneficial or equitable owner of the shares, but legal ownership is transferred to another who will exercise his voting rights: a. pooling agreement; b. voting agreement; c. voting trust agreement; d. management contract. 80. In voluntary dissolution of a corporation where no creditors are affected, a corporation is deemed dissolved only upon: a. approval of a resolution by the board of directors or trustees to dissolve the corporation; b. filing with the SEC of the resolutions of the board of directors and stockholders dissolving the corporation; c. issuance of the certificate of dissolution; c. publication of the SECs order approving the dissolution. 81. A voluntary method of corporate dissolution: a. shortening of corporate term; b. legislative enactment; c. expiration of the term; d. by order of the SEC. True of False: a. The Roman Catholic Church even without registration with the SEC is considered a corporation by the State. b. A private corporation which is neither owned nor controlled by the government may be created by special law. c. Authorized capital stock limits the number of shares that may be issued by a corporation. d. Non-voting shares are not allowed to vote on all matters affecting the corporation. e. A meeting of stockholders or members is always required for the amendment of the articles of incorporation. f. A corporation may deny the pre-emptive right of its stockholders; g. Holders of delinquent stocks are not entitled to dividends. h. Merger is when two or more constituent corporations decide to amalgamate, as a result of which, a new corporation is born. i. A no par value share has always an issued value based on the consideration for which it was issued. j. A no par value share may not be issued for less P5.00 per share; k. Redeemable shares may be issued only when expressly so provided in the articles of incorporation and upon expiration of the period fixed, they may be taken up or purchased, regardless of the existence of unrestricted retained earnings.

13 l. A corporation may purchase or acquire its own shares provided that the acquisition is for a legitimate purpose and that there be unrestricted retained earnings. m. Incorporators must be natural persons, not less than five but not more than fifteen, all of legal age, and a majority of whom are residents of the Philippines. n. Redeemable or callable shares may be purchased or taken up by the corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books. o. In a voting trust agreement, a trustee acquires legal title to the shares of the transferring stockholders. p. An executive committee, composed of not less than three members of the board, may be created by the board of directors. q. Any two (2) or more positions in a corporation may be held concurrently by the same person without exception. r. The secretary of the corporation must be a director, and a resident and citizen of the Philippines. s. A person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of the Corporation Code, committed within five (5) years prior to the date of his election or appointment is disqualified from being elected or appointed as a director, trustee or officer. t. Vacancies occurring in the board other than by removal may be filled by the remaining directors if still constituting a quorum. u. An incumbent director or trustee may be removed by merely electing a new director or trustee. v. Directors shall not receive any compensation as such directors except for reasonable per diems. w. When a quorum is present, the vote of a majority of those present is sufficient to elect directors, or to decide any question. x. Holders of watered stock are liable for water in their stock and solidarily liable with the guilty directors and officers. y. Stock certificates are sometimes regarded as quasi-negotiable instruments. z. A proxy shall be valid only for the meeting for which it is intended. However, a proxy may, by agreement, be valid and effective for a period of five (5) years at any one time. aa. After dissolution, a corporation shall continue as a body corporate for five (5) years only for the purpose of winding up and liquidation.