Private Corporation - Finals

8/2/2019 Private Corporation - Finals

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Finals, Private Corporation Law reviewer

1. Give the two most common kinds of dividends

a. Cash Dividend

b. Stock dividend

2. Please state if true or false

a. When cash dividends are declared, the assets

of the corporation diminish by exactly the

amount paid off and the property of the

stockholder increases. TRUE

b. A stock dividend converts surplus or profits of

a corporation into the permanent account and

is capitalized, placing it beyond the power of

the board of directors to withdraw from

corporate use and to distribute it to the

stockholders. TRUE

c. A stock dividend is taxable as income. FALSE

d. Both cash dividend and stock dividend may be

declared only by the Board of directors without

involving the stockholders. FALSE

3. State the difference between a stock split and stock

dividend.

- The essential distinction between astock

dividend and a stock splitis that in the former,

there is capitalization of earnings or profits,

together with a distribution of the added shares

which evidence the assets transferred to capital,while in the latter, there is a mere increase in the

number of shareswhich evidence ownership

without altering the amount of the capital, surplus,

or segregated earnings.


a. In a management contract, where a

stockholder of both the managed and

managing corporation own more than 1/3 of

the total outstanding capital stock entitled to

vote of the managing corporation, themanagement contract does not need the

approval of the stockholders. FALSE

b. No management contract shall be entered into

for a period longer than five years. TRUE

c. A management contract can delegate enti

supervision and control over the officers an

business of a corporation to another. FALS

5. Please give the legal effects of the following acts a

how the defects may be cure if any;

a. Ultra vires actVOIDABLE BY

RATIFICATION

b. Illegal actsVOID

NO MORE REMEDY

c. Acts done without complying with certain

conditions and formalitiesVOIDABLE

RATIFICATION

d. Acts involving inexistent contractsVOID

NO MORE REMEDY

6. Give the rule in the following cases of ultra vires ac

a. Those which are executory on both sides

cannot be enforced by either party, ther

b. Those fully performed on both sidesnei

party can maintain to set aside transact

or to recover what has been parted with

c. Those performed on one side and the othe

received benefits by reason of such

performance.recovery is permitted in

most courts on behalf of the former

7. State the general rule for liability for acts committe

by corporate officers, directors/ trustees:

a. Tortsdamages, corporation is liable fo

the acts of officers, directors/trustees d

within the scope of their authority

b. Crimesimprisonment

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1. Define by-laws.

- As the rules of action adopted by a corpora

for its internal government and for the

government of its stockholders or member

and those having the direction, managemen

and control of its affairs in their relation to

corporation and as among themselves,

including rules for routine matters such as

calling meetings and the like.

2. Please state if true or false:


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a. Even holders of non-voting shares or non-voting

members are entitled to vote on the adoption of

by-laws. TRUE

b. By-laws may be filed either prior to incorporation

with the articles of incorporation or after receipt

of official notice of the issuance of its certificate of

incorporation by the SEC. FALSE

c. Non-filing of the by-laws on time will result to

automatic dissolution of the corporation and shall

render the corporation liable to the revocation of

its registration. FALSE

d. The corporation, its directors or trustees and

officers are bound by and must comply with their

by-laws. TRUE

e. Third persons who have no knowledge of the by-

laws of a corporation are not bound by such by-

laws. TRUE

f. The place of meeting of the stockholders or

members may be held anywhere in or outside of

the Philippines. TRUE

g. The meeting of the directors must always be held

at the city or municipality where the principal officeof the corporation is located. TRUE

h. The by-laws can dispense with the minimum legal

requirement that the director must be the

registered owner of at least one (1) share of stock.

TRUE

i. Amendment or repeal of by-laws may be done by

referendum. FALSE

j. The stockholders may delegate the power to

amend or repeal the by-laws to the board of

directors/trustees by a mere majority vote of the

outstanding capital stock or a majority of the

members of a non-stock corporation.

k. The power to revoke the power delegated to the

board of directors/trustee may be effected only by

2/3 of the outstanding capital stock or 2/3 of the

members in a non-stock corporation.

l. A board resolution shall prevail over the by-laws in

case of conflict.

m. The SEC shall not accept the by-laws or

amendments thereto of a special corporations

governed by special laws, unless accompanied by

a certificate of the appropriate government

agency.3. Give the two (2) kinds of meetings.

a. Meeting of Stockholders/Members

b. Meeting of directors/trustees


a. Directors or trustees can only exercise their

powers as a board, not individually or separately.

b. The articles of incorporation of a corporation

states that the principal office of the corporatio

located at Makati, Metro Manila and the

stockholders may hold their meeting in any city

municipality located in Metro Manila, such as

Manila.

c. The date of the stockholders/members meeti

as fixed in the by-laws cannot as a general rule

be changed except for valid reasons.

d. The president shall preside over all meetings o

the stockholders/members as well as of the bo

of directors/members unless the by-laws provid

otherwise.

e. In case of pledged or mortgaged shares in sto

corporation, it is the pledgor or mortgagor who

the right to attend and vote at meetings of

stockholders, unless the pledgee or mortgagee

expressly given such right in writing which is

recorded in the proper books of the corporation

f. Holders of stock without voting rights may vote

cases provided in Sec. 6 (par. 6, nos. 1-8).

g. Preferred and redeemable shares may bedeprived of their voting rights.

5. Please indicate by no or yes if the holders of th

following shares have voting rights:

a. Delinquent shares

b. Treasury shares

c. Shares not fully paid which are not delinquent


a. Stockholders or members may vote in person

by proxy in all meetings.

b. No proxy shall be valid and effective for a perio

longer than 10 years.

c. Voting by proxy is allowed in board meetings.

d. While proxies must be In writing, oral proxies a

allowed.

e. In case of a proxy where the name is blank, it

the corporation that is constituted as the proxy

f. For corporate members, a board resolution

authorizing the signatory to the proxy should b

submitted.

7. Give the two (2) kinds of proxies.

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a. A voting trust agreement shall have a perio

not exceeding five years at any one time.

TRUE

b. In the case of a voting trust specifically

required as condition in a loan agreement,


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said voting trust may be for a period

exceeding five years which shall automatically

expire upon full payment of the loan. TRUE

c. A voting trust agreement need not be in writing

or notarized FALSE

d. A certified copy of the voting trust agreement

shall be filed with the corporation and SEC to

be effective and enforceable. TRUE

e. A voting trust is a corporate device to secure

management control with little or no

investment. TRUE

f. A voting trust agreement transfers only the

voting or other rights pertaining to the share

and also the properties or assets of the

corporation. FALSE

g. The trustee holds the equitable or beneficial

ownership while the stockholder holds title to

the shares conveyed to the trustee under thevoting trust agreement. FALSE

h. The trustee issues to the stockholders in

exchange for the shares conveyed under the

voting trust agreement voting trust certificates.

TRUE

i. To assure continuity of policy and

management is a valid and sustainable

purpose of a voting trust agreement. TRUE

j. To secure employment and salaries for the

contracting parties is a valid and sustainable

purpose of a voting trust agreement. FALSE

k. The right of a trustee to act is limited to any

particular meeting. FALSE

2. Give the three ways by which a person may become a

shareholder. S P T

a. Bysubscriptioncontract with an existing

corporation for the acquisition of unissued

shares

b. Bypurchasefrom the corporation of treasury

shares

c. Bytransferfrom a previous stockholder of the

outstanding shares or existing subscription to

shares.

3. As to subject matter, give the 2 kinds of share that

may be subject of a subscription contract.

a. original issue of stock

b. increase of capital stock

4. Give the four kinds of subscription P.P.C.A

a. Pre-incorporation subscription

b. Post incorporation subscription

c. Conditional subscription

d. Absolute subscription

5. Define stock option.

- A stock option is a privilege granted to a party

subscribe to a certain portion of the unissued

capital stock of a corporation within a certain

period and under the terms and conditions of t

grand exercisable by the grantee at any timewithin the period granted.

6. True or false

a. A corporation does not need the approval

the SEC before it can grant or issue any st

option. FALSE

b. Exercise of the stock option must be done

within 3 years from approval thereof by the

commission. TRUE

c. Stock subscriptions are in the nature of tru

fund in the sense that they are to be

maintained unimpaired for the protection o

corporate creditors. TRUE

d. The liability of a stockholder for unpaid

subscription can be compensated or set-of

with the value of his shares and stock

dividends. FALSE

e. A stock corporation may release an origina

subscriber from paying his shares without

valuable consideration. FALSE

f. A subscription for share of stock of a

corporation still to be formed shall be

irrevocable for 12 months from date of

subscription. FALSE


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7. Please state the rule, at what point in time will a

subscriber become a stockholder even though he has

not paid for his shares.

- A subscriber becomes a stockholder immediately

upon acceptance of his subscription even before

full payment and may not legally be released by

the corporation from the obligation to pay for his

shares.

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a. Stocks may be issued for a consideration less

than the par or issued price thereof. FALSE

b. Property received as consideration for stocks need

not be necessary or convenient for the use of the

corporation. FALSE

c. Valuation of the consideration other than actual

cash or consisting of intangible property after

valuation there does not need the approval of the

SEC. FALSE

d. Shares of stock may be issued in exchange for

promissory notes or future services. FALSE

e. The consideration for treasury shares may be less

than par value thereof as long as the price is

reasonable. TRUE

f. Stocks issued for a consideration less than their

par or issued price are watered stocks. TRUE

g. Real property may be accepted as payment on

subscription to the capital stock only when the

same can be used in the business of the

corporation, as one engaged in real estate

development, subdivision, agro-industrialbusiness. TRUE

h. The consideration of stocks by way of services

should be for services actually performed, not

future services, otherwise an agreement to issue

stock before the same is rendered is void. TRUE

i. The consideration of no par shares should not be

less than the value of P5/share. TRUE

2. Give three (3) sources of corporate capital.

a. Funds furnished by share holders

b. Borrowings

c. Profits and stock dividends

3. Give the four (4) modes by which shares may be

issued.

a. by subscription before and after incorporation

b. by sale of treasury stock after incorporation for

money, property or service

c. by subscription to new issues of stock

d. by making a stock dividend

4. As a general rule, under the Securities Regul

Code, all securities which are offered for sale

be registered with the SEC. Please give the two

instances when such registration is not required.

a. Any security issued or guaranteed by

government of the Philippines, or by

political subdivision or agency thereof, o

any person controlled or supervised by,

acting as an instrumentality of

government.

b. Any security issued or guaranteed by

government of any country with which

Philippines maintains diplomatic relations.

5. Please identify if the following securities/transact

should be registered with the SEC by yes or no:

a. Any security issued or guaranteed by

Government of the Philippines or any pol

subdivision thereof. NO

b. Any security issued or guaranteed by

Government of any country with which Philippines maintains diplomatic relations o

any state on the basis of reciprocity. NO

c. At any judicial sale or sale by an exec

administrator, guardian or receiver or truste

insolvency or bankruptcy proceedings. NO

d. An isolated transaction by which any securi

sold, offered for sale, subscription by the ow

thereof or his representative. NO


a. The stock certificate is not stock in the corpora

but is merely evidence of the holders interes

ownership of the share represented ther

TRUE

b. The stock certificate is a negotiable instrum

FALSE

c. The corporation needs the consent of the SEC

the issuance of stock certificates. FALSE

d. Delivery, actual or constructive is essential to

issuance of a certificate of stock. TRUE

e. Transfer of shares represented by the certifica

effected by its indorsement by the owner o

agent and delivery thereof, so indorsed to

transferee. TRUEf. The assignee in an assignment of shares

enjoy the status of a stockholder and the assi

can be deprived of his rights as a stockho

FALSE

g. In order to be valid against third persons and

corporation, the transfer of shares must


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entered and noted upon the books of the

corporation. TRUE

h. A bona fide transfer of shares of a corporation not

registered in the corporate books is invalid as

against a subsequent lawful attachment or

execution of said shares regardless of whether or

not the attaching creditor had actual notice of said

transfer. TRUE

i. Shares of stock against which the corporation

holds any unpaid claim arising from any unpaid

subscription shall not be transferable in the books

of the corporation. TRUE

j. The stock certificate may be issued to a subscriber

even if the subscription has not yet been fully paid.

FALSE

k. The stockholder by reason of his stock is a

creditor of the corporation. FALSE

7. Give the three (3) modes of stock transfer.

a. Indorsement and delivery of stock certificate

b. Transfer made in separate instrument

c. Judicial or extra-judicial settlement of the

estate8. Give the legal effect of an unregistered transfer of

shares:

a. As between the transferor and the transferee

valid and binding

b. As to the corporation - invalid and

ineffective

c. Right of the transferor to vote - valid

d. Right of the transferor to dividendsvalid

e. As against corporate creditors - invalid

9. Give two (2) rights of the dissenting minority.

a. Minority stockholders objecting to certain

corporate action may demand appraisal and

payment of their stock and thus terminate their

relation with the corporation

b. May bring actions at law in their names to

preserve and protect their interests or in the

name of the corporation to redress wrongs

committed solely against the corporation.

10. Give the three (3) actions by stockholder or members.

a. Derivative actions

b. Individual actions

c. Representative actions

11. Give the distinctions between the above actions by

stockholders as to a) who will bring the action b) in

whose name and in whose behalf c) nature of cause of

action

Who will bring the act

Derivative Stockholders/members

Individual Share holder

Representative Stockholder


a. The SEC has jurisdiction to decide cases invo

intra-corporate disputes. FALSE

b. The prohibition to issue watered stocks r

only to the original issue of stocks, but not

subsequent transfer of stocks by the corpora

for then it would no longer be an issue, but a

thereof. TRUEc. Treasury shares may be sold for less than

par value or issued value for they have alre

been issued and paid for, provided the pric

reasonable. TRUE

d. The liability of a director or officer of a corpora

consenting to the issuance of a watered stoc

joint. FALSE

e. A stock delinquent for unpaid subscription ma

voted upon or be entitled to vote at

stockholders meeting as well as have the righ

dividends. FALSEf. Notice to the stockholder is a condition prece

to recovery by the corporation for un

subscriptions. TRUE

g. The highest bidder is the person offering at

sale to pay the full amount of balance of

subscription together with accrued interest, if

cost of advertisement and expenses of the sal

the highest number of shares or fraction

share. FALSE

h. Title to all the share purchased by the corpor

of delinquent stocks shall be considered

treasury shares and may be disposed of byboard of directors for a reasonable price. TRU

13. Give the two (2) actions that may be brought by

state against a corporation.

a. Quo warranto

b. Injunction


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14. Give the three (3) remedies of a corporation to enforce

payment of stock subscription.

a. Extra judicial sale at public auction

b. Judicial auction

c. Collection form cash dividends and

withholding of stock dividends

15. Give the two (2) cases when call for payment of

unpaid subscriptions is not necessary.

a. Insolvency supervenes upon a corporation;

the payment of stock subscription may be

enforced.

b. Subscriber becomes insolvent


a. A sale of delinquent stocks may be

questioned on the ground of irregularity or

defect in the notice of sale or the sale itself

upon payment or tender by the party to

the holder of the stock such sum as

required under section 69. TRUE

b. Delinquent stock is included in

determining the presence of quorum.

FALSE

c. Delinquent members of a non-stock

corporation may be allowed to vote if

allowed by the by-laws. TRUE

d. Holders of subscribed shares not fully paid

for which are not delinquent shall similarly

be deprived of the right to vote. FALSEe. Full payment of subscription is not

required to make one a stockholder.

TRUE

f. In case of a lost stock certificate, a new

one may be issued before expiration of

the one year period after publication of the

loss upon filing of a bond for by the

registered owner thereof. TRUE

g. Publication of the loss maybe dispensed

with when no certificate has been issued,

because the corporation lost it itself.

TRUEh. Trade secrets may also be subject to

inspection. FALSE

2.

a. What are the four rights which the holders

of delinquent stock will be deprived of?

Deprived the stockholder the right

to be voted

Be voted

Be represented at any

stockholders meeting

Stockholder loses rights perta

to a stock holder the moment

unpaid subscription becomes

delinquent.

b. What right can he not be deprived of?

He cannot be deprived of his

rights to dividends.

3. What are the 4 kinds of books corporations are

required to keep?

a. Minutes of all meetings of directors or

trustees

b. Record of all business transactions

c. Stock and transfer book

d. Minutes of all meetings of stockholder

members.

4. Give the 4 parties who can inspect the corpora

books?

a. Any director, trustee, or stockholder omember

b. Voting trust certificate holder

c. Stockholder of a sequestered compan

d. Beneficial owner of shares

5. Identify the parties of the following

a. Merger

i. Absorbed corporation

ii. Acquired corporation

b. Consolidation

i. Constituent

ii. Consolidated

6. A, Inc. and B, Inc, are existing corporations. A

Inc. transfers all of its assets to B, Inc. B, Inc.

absorbs and acquires all the property, rights an

liabilities of A, Inc. which is dissolved. B, Inc.

continues its corporate existence.

a. What is the corporate combination cal

MERGER

b. What is A. Inc called?

ABSORBED CORPORATION

c. What is B, Inc. called? ABSORBING CORPORATION

d. Identify the surviving corporation

B, Inc.

e. The stockholders of A, Inc. become th

stockholders of what corporation?


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B, Inc.

7. A, Inc. and B, Inc. are existing corporations. They

unite to form C, Inc. to which they will transfer all

their assets. A, Inc. and B, Inc. are dissolved by

the consolidation. The title to their property passes

to C, Inc. and all their rights and liabilities are

assumed by C, Inc.

a. What are A, Inc. and B, Inc. called?

Constituent corporation

b. What is C, Inc. called?

Consolidated corporation

c. Who become stockholders of C, Inc.

Stockholders of A, Inc and B, Inc.

become stockholders of C, Inc.

8. State if true or false

a. There is still winding up of affairs in

merger and consolidation. FALSE

b. There is automatic assumption of liabilitiesof the absorbed or constituents

corporations in merger and consolidation.

TRUE

c. The consent of creditors of a corporation

is not necessary in merger, consolidation,

it being authorized by law. TRUE

d. The absorbed or constituent corporations

are ipso facto dissolved. TRUE

9. Give the 3 instances when the appraisal right may

be exercised.

a. In case any, amendment to the articles of

incorporation has the effect of changing or

restricting the rights of any stockholder or

clash of shares, or of authorizing

preferences is any respect superior to

those of outstanding shares of any clash,

or of extending or shortening the term of

corporate existence.

b. In case of sale, lease, exchange, transfer,

mortgage pledge or other disposition of all

or substantially all of the corporate

property and assets are provided in thiscode.

c. In case of merger or consolidation.

10. Who shall bear the cost of appraisal of the shares:

a. When the fair valuation ascertained by the

appraiser is approximately the same as

the price which the corporation may be

offered.by the dissenting stockholder

b. When the fair valuation offered by the

corporation is lower than the fair value

the appraiser. by the corporation

c. Where an action is filed by the dissent

stockholder to recover fair value, and t

refusal of the stockholder is found by t

court to be justified. by the corpora

11. State the distinction between a non-stock and

stock corporation on the following:

Non-stock stoc

profit Non-profit Prof

Distribution of

dividends

No

distribution

Distribu

of divide

allow

Number of member of

the BOD/BOT

More than

15

15

Term of the BOD/BOT 3 years 1 yea

Qualifications ofdirector/trustee

Member Directoshar

Election of officers if

done directly by

shareholders/members

member BOD

Place of meeting of the

BOD/BOT

At any

place even

outside the

principal

office of the

corporation

p. 68

Manner of voting Only one

vote

1 shar

vote

Right to vote of holders

of delinquent stock

Can vote Cannot

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1. Give the 3 features which the articles of

incorporation of a close corporation shall provi

for.a. All of the corporations issued stock of

classes exclusive of treasury shares s

be held of record by not more than a

specified number of persons, not

exceeding twenty.


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b. All of the issued stock of all classes shall

be subject to one or more specified

instruction or transfer

c. The corporation shall not be enlisted in

any stock exchange of any class.

2. True or false

a. The articles of incorporation of a close

corporation may provide for the

classification of shares or restrictions on

the transfer of shares. TRUE

b. The articles of incorporation of a close

corporation may not provide for the

classification of directors into one or more

classes, each of which may be voted upon

solely by a particular class of stock.

FALSE

c. A greater quorum or voting requirement

may not be provided for in meetings of

stockholders or directors in close

corporations. FALSE

d. The articles of incorporation of a close

corporation may provide that the businessof the corporation shall be managed by

the stockholders rather than by a board of

directors. TRUE

e. The objective of imposing restrictions on

the transfer of shares in a close

corporation is to prevent change of control

of the corporation which might otherwise

result from the transfer of voting shares.

TRUE

3. Name the 2 kinds of valid agreements by

stockholders allowed for close corporations.

a. Stockholders agreement in general

b. Voting or pooling agreement in particular

4. True or false

a. In close corporations, any action by the

board of directors without a meeting shall

be deemed valid under certain conditions

under Sec. 101 of the Corporation Code.

TRUE

b. The pre-emptive right of stockholders in a

close corporation extends only to new

issues of shares out of an increase of thecapital stock and not to all stocks to be

issued. FALSE

c. Where the directors or stockholders in a

close corporation are so divided in the

management of the corporations business

and affairs, so that there is a paralyzation

of corporate operations, this is called a

deadlock. TRUE

d. In case of deadlock, it is the RTC that

jurisdiction to conduct the arbitration.

FALSE

5. Give the 2 kinds of special corporations

a. Educational corporation

b. Religious corporation

6. Give the 2 kinds of religious corporations

a. Corporation sole

b. Religious societies

7. True or false

a. A corporation sole may mortgage and

real property without need of obtaining

court order.

b. A corporation sole may be dissolved u

submission of a declaration of dissolut

to the SEC which needs no SE approv

c. A corporation sole consists of two or mincorporators.

d. The approval of the SEC of the articles

incorporation is necessary before it ca

considered a corporation sole.

e. The title to the properties of a corporat

sole shall be in the name of the

archbishop, etc. in trust for the use,

purpose and benefit of the religious

denomination.

8. Give the 2 kinds of dissolution under the

Corporation Code

a. Voluntary dissolution

b. Involuntary dissolution

9. Give the 3 kinds of voluntary dissolution

a. By the vote of the board of directors a

the stockholders where no creditors ar

affected.

b. By judgment of the SEC after hearing

petition for voluntary dissolution where

creditors are affected

c. By amending the articles of incorporat

to shorten the corporate terms.

10. Give 3 kinds of involuntary dissolution

a. By the expiration of the term provided

in the articles of incorporation

b. By legislative enactment

c. by failure to formerly organize and

commence the transaction of its busin


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within two years from date of

incorporation.

11. Give the legal effect of non-use of the corporate

charter and non-continuous inoperation of a

corporation on a) whether it is deemed dissolved

under sec. 22, or b) is there automatic dissolution,

or c) when will it be lawfully considered d) what is

the effectivity of such dissolution.

a. Shall be deemed dissolved

b. There is no automatic dissolution

c. The corporation shall be lawfully be

dissolved upon issuance of the SEC

certificate of dissolution after notice and

hearing

d. Retroact

12. True or false

a. The dissolution of a corporation results in

the vesting of legal title to the corporate

property in the stockholders who become

co-owners thereof. TRUE

b. Upon dissolution, the corporation ceases

as a body corporate to continue thebusiness for which it was established.

TRUE

c. The dissolved corporation continues as a

body corporate for 5 years for purposes of

winding up or liquidation. FALSE

13. Give the 3 purposes of winding up of the affairs of

a dissolved corporation

a. For the purpose of prosecuting and

defending suits by or against it

b. Enabling it to settle and close its affairs

c. To dispose of and convey its properties

and to distribute to assets; but not for the

purpose of continuing the business for

which it was established.

14. Give the 3 methods by which a dissolved

corporation may wind up its affairs.

a. Liquidation by the corporation itself

b. Liquidation by a duly appointed receiver

c. Liquidation by a trustee to when the

corporation had conveyed the corporate

assets.

Private Corporation - Finals

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