TITLE 1 - GENERAL PROVISIONS REPUBLIC ACT NO.

11232
AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

TITLE 1
GENERAL PROVISIONS DEFINITIONS AND CLASSIFICATIONS

SEC. 1. Title of the Code. - This Code shall be known as the "Revised Corporation Code of the
Philippines". The present Revised Corporation Code (R.A. No. 11232), took effect on February 23, 2019.

SEC. 2. Corporation Defined. - A corporation is an artificial being created by operation of law, having the
right of succession and the powers, attributes, and properties expressly authorized by law or incidental
to its existence.

CORPORATION IS AN ARTIFICIAL BEING

A corporation is a juridical entity vested with a legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it.

1. It has a personality separate and distinct from the persons composing it, as well as from any
other legal entity to which it may be related. It is a basic principle in Corporation Law that a
corporation has a personalitv separate and distinct from the officers or members who compose
it. Not every stockholder or officer can bind the corporation considering the existence of a
corporate entity separate from those who compose it.

2. Equally well-settled is the principle that the corporate mask may be removed or the corporate
veil pierced when the corporation is just ap alter ego of a person or of another corporation. For
reasons of public policy and in the interest of justice, the corporate veil will justifiably be
impaled only when it becomes a shield for fraud, illegality or inequity committed against third
persons.3

Characteristics of a corporation
1. It is an artificial being;
2. Created by operation of law;
3. It has the right of succession;
4. It has the powers, attributes and properties expressly authorized by law or incidental to its
existence.

Note:
The above definition and characteristics refer to private corporation

Is Boy Scouts of the Philippines a private corporation?

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it.
The BSP is a public corporation not subject to the test of government ownership or control and
economic viability. As presently constituted, the BSP still remains an instrumentality of the national
government It is a public corporation created by law for a public purpose, attached to the DECS
pursuant to its Charter and the Administrative Code of 1987. It is not a private corporation which is
required to be owned or controlled by the government and be economically viable to justify its
existence under a special law.
The ownership and control test is likewise irrelevant for a public corporation like the BSP.

What is government-owned or controlled corporation?

"Government-owned or controlled corporation" refers to any agency organized as a stock or non-stock

corporation, vested with functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its
capital stock. Thus, for an entity to be considered as a GOCC, it must either be organized as a stock or
non-stock corporation. Two requisites must concur before one may be classified as a stock corporation,
namely:

1. that it has capital stock divided into shares, and

2. that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders.

If only one requisite is present, it cannot be properly classified as a stock corporation. As for non-stock
corporations, they must have members and must not distribute any part of their income to said
members.

It is clear, therefore, that a corporation is considered a government owned or -controlled corporation

only when the Government directly or indirectly owns or controls at least a majority or 51% share of
the capital stock. Applying this statutory criterion, the Court ruled in Leyson,Jr. v. Office of the
Ombudsman:

But these jurisprudential rules invoked by petitioner in support of his claim that the CllF companies
are government owned and/or controlled corporations are incomplete without resorting to the
definition of government owned or controlled corporation contained in par. (13), Sec.2, Introductory
Provisions of the Administrative Code of 1987, i.e., any agency organized as a stock or non-stock
corporation vested with functions relating to public needs whether governmental or proprietary in
nature, and owned by the government directly or indirectly through its instrumentalities either
wholly, or where applicable as in the case of stock corporations to the extent of at least fifty-one (51)
percent profits capital stock The definition mentions three (3) requisites, namely, first, any agency
organized as a stock or non-stock corporation; second, vested with functions relating to public needs
whether governmental or proprietary in nature; and, third, owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as in the case of stock corporations,
to the extent of at least fifty-one (51) percent profits capital stock.

In the present case, all three (3) corporations comprising the CllF companies were organized as stock
corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, ux. Obviously, the below 51 %
shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or
controlled corporation. x x x The Court thus concludes that the CllF are, as found by public
respondent, private corporations not within the scope of jurisdiction.

Consequently, RPN was neither a government-owned nor a controlled corporation because of the
Governments' total share in RPNs capital stock being only 32.4%.
What is "Piercing the Veil of Corporate Fiction" or "Instrumentality" or "Alter Ego" doctrine?

It is basic in corporation law that a corporation is a juridical entity vested with a legal personality
separate and distinct from those acting for and in its behalf and, in general, from the people comprising
it. The corporate veil should not and cannot be pierced unless it is clearly established that the separate
and distinct personality Of the corporation was use to justify a wrong protect fraud, perpetrate a
deception.

Factors for the application of the doctrine of piercing the corporate veil
In Concept Builders, Inc. v. NLRC, the Court enumerated the possible probative factors of identity which
could justify the application of the doctrine of piercing the corporate veil. These are:

(1) Stock ownership by one or common ownership of both corporations;

(2) Identity of directors and officers;
(3) The manner of keeping corporate books and records; and
(4) Methods of conducting the business.

The burden of proving the presence of any of these probative factors lies with the one alleging it.

Elements of piercing the veil of corporate fiction

Piercing the veil of corporate fiction may be allowed only if the following elements concur:

1. control - not mere stock control, but complete domination - not only of finances, but of policy
and business practice in respect to the transaction attacked, must have been such that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;

2. such control must have been used by the defendant to commit a fraud or a wrong to
perpetuate the violation of a statutory or other positive legal duty, or a dishonest and an unjust
act in contravention of plaintiffs legal right; and

3. the said control and breach of duty must have proximately caused the injury or unjust loss
complained of.

Doctrine of piercing the corporate veil should be done with caution.

The Supreme Court emphasize that the piercing of the veil of corporate fiction is frowned upon and
can only be done if it has been clearly established that the separate and distinct personality of the
corporation is used to justify a wrong, protect fraud, or perpetrate a deception.

Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A
court should be mindful of the milieu where it is to be applied. It must be certain that the corporate
fiction was misused to such an extent that injustice, fraud, or crime was committed against another, in
disregard of its rights. The wrongdoing must be clearly and convincingly established; it cannot be
presumed. Otherwise, an injustice that was never unintended may result from an erroneous application.

Examples:
The Supreme Court has pierced the corporate veil:
1. To ward off a judgment credit;
2. To avoid inclusion of corporate assets as part of the estate of the decedent;
3. To escape liability arising from a debt;
4. To perpetuate fraud and/or confuse legitimate issues;
5. To promote or to shield unfair objectives; and
6. To cover up an otherwise blatant violation of the prohibition against forum-shopping.
Note:
Only in these and similar instances may the veil be pierced and disregarded.

SUCCESSION (Artificial Succession)

The continuation of a corporation's legal status despite changes in ownership or management.

POWERS OF A CORPORATION
A corporation has no power except those expressly conferred on it by the Corporation Code (or special
laws) and those that are implied or incidental to its existence. In turn, a corporation exercises said
powers through its board of directors and/or its duly authorized officers and agents

RIGHT OF A CORPORATION TO OWN PROPERTY

Property acquired by a corporation is the property of a corporation and not the property of stockholders
or members.
Take note that a corporation is a juridical entity vested with a legal personality separate and distinct
from the people comprising it.

SEC. 3. Classes of Corporations. - Corporations formed or organized under this Code may be stock or
non-stock corporations. Stock corporations are those which have capital stock divided into shares and
are authorized to distribute to the holders of such shares, dividends, or allotments of the surplus
profits on the basis of the shares held. All other corporations are non-stock corporations.

What is a stock corporation?

Corporations which have capital stock divided into shares and are authorized to distribute to the holders
of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock
corporations.

Examples of GOCC organized as stock corporations:

Congress has created through special charters several government owned corporations organized as
stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of
the Philippines Other government-owned corporations organized as stock corporations under their
special charters are the Philippine Crop Insurance Corporation, Philippine International Trading
Corporation, and the Philippine National Bank before it was reorganized as a stock corporation under
the Corporation Code.

What is a non-stock corporation?

A non-stock corporation is one where no part of its income is distributable as dividends to its members,
trustees, or officers. Provided, that any profit which a non-stock corporation may obtain as an incidental
to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or
purposes for which the corporation was organized.
The provisions governing stock corporation, when pertinent, shall be applicable to non-stock
corporations.
Example of non-stock corporation:
St. Luke's Medical Center, Inc. is organized as a non-stock and non-profit charitable institution.

Is Manila International Airport Authority (MIAA) a stock or non-stock corporation?

In Manila International Airport Authority (MIAA) v. Court of Appeals, the Court made a distinction
between a GOCC and an instrumentality. Thus:

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation.

" MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it
has no capital stock divided into shares. MIM has no stockholders or voting shares.

Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into
shares and x x x authorized to distribute to the holders of such shares dividends x x x. " MIM has capital
but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not
a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation
Code (Section 86 of the Revised Corporation Code) defines a non-stock corporation as "one where no
part of its income is distributable as dividends to its members, trustees or officers. " A non-stock
corporation must have members. Even if we assume that the Government is considered as the sole
member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to
remit 20% of its annual gross operating income to the National Treasury. This prevents MIM from
qualifying as a non-stock corporation.

xxx MIAA, a public utility, is organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIM does not qualify as a government-
owned or controlled corporation

OTHER CLASSES OF CORPORATION

As to purpose
Public corporation Private corporation
A corporation organized for the government of a A corporation formed for some private purpose,
portion of the State for the general good and benefit or end.
welfare
Government-owned or controlled corporation Quasi-public corporation
A corporation owned by the Government directly A private corporation which has accepted from the
or through its instrumentalities either wholly, or, State the grant of franchise or contract involving
where applicable as in the case of stock. the performance of public duties but which is
organized for profit (examples are electric, water,
and transportation companies .
 As to legal right to corporate existence
De jure corporation De facto corporation
A corporation created in strict or substantial The due incorporation of any corporation claiming
conformity with the mandatory statutory in good faith to be a corporation under this Code,
requirements for incorporation and the right of and its right to exercise corporate powers, shall
which to exist as a corporation cannot be not be inquired into collaterally in any private suit
successfully attacked or questioned by any party to which such corporation may be a party. Such
even in a direct proceeding for that purpose by the inquiry may be made by the Solicitor General in a
State. quo warranto proceeding.
Corporation by estoppel Corporation by prescription
All persons who assume to act as a corporation One which has exercised corporate powers for an
knowing it to be without authority to do so shall indefinite period without interference on the part
be liable as general partners for all debts, liabilities of the government.
and damages incurred or arising as a result
thereof.

As to laws of incorporation
Domestic corporation Foreign corporation
A corporation incorporated under the laws of the A corporation is formed, organized or existing
Philippines. under any laws other than those of the Philippines
and whose laws allow Filipino citizens and
corporations to do business in its own country or
State.

As to whether they are open to the public or not

Open corporation Close corporation
A corporation which is open to any person who A close corporation is one whose articles of
may wish to become a stockholder or member incorporation provide that: (1) All the
thereto. corporation's issued stock of all classes, exclusive
of treasury shares, shall be held of record by not
more than a specified number of persons, not
exceeding 20; (2) all the issued stock of all classes
shall be subject to one or more specified
restrictions on transfer; and (3) The corporation
shall not list in any stock exchange or make any
public offering of any of its stock of an class.

As to relationship of management and control

Parent holding corporation Subsidiary corporation
A corporation that hold stocks in another A corporation more than 50% of the voting stock
corporation for purposes of control of which is controlled directly or indirectly by
another corporation, which thereby becomes its
parent corporation
 As to the member of persons who compose them
Corporation aggregate Corporation sole
A corporation consisting of more than on member. A corporation consisting of only one member for
the purpose of administering and managing, as
trustee, the affairs, property and temporalities of
any religious denomination, sect or church.

As to wheteher they are for religious purpose or not

Ecclesiastical corporation Lay corporation
A corporation organized for religious purposes. A corporation organized for a purpose other than
for religion

As to whether they are for charitable purpose or not

Eleemosynary corporation Civil corporation
A corporation organized for charitable purposes. A corporation organized for business or profit

SEC. 4. Corporations Created by Special Laws or Charters. Corporations created by special laws or
charters shall be governed primarily by the provisions of the special law or charter creating them or
applicable to them, supplemented by the provisions of this Code, insofar as they are applicable

General law vs. Special law

A corporation is created by operation of law. It acquires a judicial personality either by special law or a
general law. The general law under which a private corporation may be formed or organized is the
Corporation Code, the requirements of which must be complied with by those wishing to incorporate.
Only upon such compliance will the corporation come into being and acquire a juridical personality, thus
giving rise to its right to exist and act as a legal entity. On the other hand, a government corporation is
normally created by special law, referred to often as a charter.

Corporations created by special laws or charters

Section 16, Article Xll of the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.

The Constitution expressly authorizes the legislature to create "government-owned or controlled

corporations" through special charters only if these entities are required to meet the twin conditions Of
common Good economic viability In other words, Congress has no power to create government-owned
or controlled corporations with special charters unless they are made to comply with the two conditions
of common good and economic viability. The test of economic viability applies only to government
owned or controlled corporations that perform economic or commercial activities and need to compete
in the market place. Being essentially economic vehicles of the State for the common good — meaning
for economic development purposes these government-owned or controlled corporations with special
charters are usually organized as stock corporations just like ordinary private corporations.
SEC. 5. Corporators and Incorporators, Stockholders and Members. - Corporators are those who
compose a corporation, whether as stockholders or shareholders in a stock corporation or as
members in a non-stock corporation. Incorporators are those stockholders or members mentioned in
the articles of incorporation as originally forming and composing the corporation and who are
signatories thereof.

Components of a corporation
1. Corporators
Those who compose a corporation, whether as stockholders or as members.
2. Incorporators
The stockholders or members mentioned in the articles of incorporation as originally forming and
composing the corporation and who are signatories thereof.
3. Stockholders (shareholders)
The owners of shares of stock in a stock corporation.
4. Members
The corporators of a non-stock corporation
5. Board of Directors or Board of Trustees
The board of directors is the governing body in a stock corporation while the Board of Trustees is the
governing body in a non-stock corporation.
6. Corporate Officers
The president, who shall be a director, a treasurer who may or may not be a director, a secretary who
shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the
bylaws. If the corporation is vested with public interest, the board shall also elect a compliance officer.
7. Subscribers
Persons who have agreed to take and pay for original, unissued shares of a corporation formed or to be
formed.
8. Underwriter
A person who guarantees on a firm commitment and/or declared best effort basis the distribution and
sale of securities of any kind by another company.
A person or entity, especially an investment banker, who guarantees the sale of newly issued securities
by purchasing all or part of the shares for resale to the public. 23
9. Promoter
Is a person who brings about or cause to bring about the formation and organization of a corporation
by:
1. Bringing together the incorporators or the persons interested in the
enterprise;
2. Procuring subscriptions or capital for the corporation; and
3. Setting in motion the machinery which leads to the incorporation of the corporation itself.
A founder or organizer of a corporation or business venture; one who takes the entrepreneurial
initiative in funding or organizing a business enterprise.

SEC. 6. Classification of Shares. — The classification of shares, their corresponding rights, privileges, or
restrictions, and their stated par value, if any, must be indicated in the articles of incorporation. Each
share shall be equal in all respects to every other share, except as Otherwise provided in the articles
of incorporation and in the certificate of stock.

The shares in stock corporations may be divided into classes or series of shares, or both. No share may
be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares,
unless otherwise provided in this Code: Provided, That there shall always be a class or series of shares
with complete voting rights.
Holders of nonvoting shares shall nevertheless be entitled to vote on the following matters:
Amendment of the articles of incorporation;
(b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the
corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another corporation or other corporations;
(g) Investment of corporate funds in another corporation or business in accordance with this
Code; and
(h) Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote required under this Code to
approve a particular corporate act shall be deemed to refer only to stocks with voting rights.

The shares or series of shares may or may not have a par value: Provided, That banks, trust, insurance,
and preneed companies, public utilities, building and loan associations, and other corporations
authorized to obtain or access funds from the public, whether publicly listed or not, shall not be
permitted to issue no-par value shares of stock.

Preferred shares of stock issued by a corporation may be given preference in Ole distribution of
dividends and in the distribution of corporate assets in case of liquidation, or such other preferences:
Provided, That preferred shares of stock may be issued only with a stated par value. The board of
directors, where authorized in the articles of incorporation, may fix the terms and conditions of prefer
shares of stock or any series thereof: Provided, further, That such te and conditions shall be effective
upon filing of a certificate thereof the Securities and Exchange Commission, hereinafter referred to as
the "Commission".

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the
holder of such shares shall not be liable to the corporation or to its creditors in respect thereto:
provided, That no-par value shares must be issued for a consideration of at least Five pesos (P5.OO)
per share: Provided, further, That the entire consideration received by the corporation for its no-par
value shares shall be treated as capital and shall not be available for distribution as dividends.

A corporation may further classify its shares for the purpose of ensuring compliance with
constitutional or legal requirements.

Doctrine of equality of shares

Each share shall be equal in all respects (rights and liabilities) to every other share except as otherwise
provided in the articles of incorporation and stated in the certificate ofstock.

Who may classify shares?

1. Incorporators
It is to be determined by the incorporators by stating it in their articles of incorporation which will be
filed with the Securities and Exchange Commission.
2. Board of Directors and stockholders
The original classification of shares made by the incorporators which was stated in the articles of
incorporation can be amended by a majority vote of the board of directors and the vote or written
assent of the stockholders representing at least 2/3 of the outstanding capital stock.

What are voting shares?

Shares with a right to vote. There shall always be a class or series of shares which have complete voting
rights.

The Right to Vote in STOCK Corporations

The right to vote is inherent in and incidental to the ownership of corporate stocks. It is settled that
unissued stocks may not be voted or considered in determining whether a quorum is present in a
stockholders' meeting, or whether a requisite proportion of the stock of the corporation is voted to
adopt a certain measure or act. Only stock actually issued and outstanding may be voted. Under
Section 6 of the Corporation Code (Also, Section 6, Revised Corporation Code), each share of stock is
entitled to vote, unless otherwise provided in the articles of incorporation or declared delinquent under
Section 67 of the Code (Now Section 66, Revised Corporation Code).

Neither the stockholders nor the corporation can vote or represent shares that have never passed to the
ownership of stockholders; or, having so passed, have again been purchased by the corporation. These
shares are not to be taken into consideration in determining majorities. When the law speaks of a given
proportion of the stock, it must be construed to mean the shares that have passed from the corporation,
and that may be voted.

The Right to vote in NON-STOCK Corporations

In non-stock corporations, the voting rights attach to membership. Members vote as persons, in
accordance with the law and the by-laws of the corporation. Each member shall be entitled to one vote
unless so limited, broadened, or denied in the articles of incorporation or bylaws. We hold that when
the principle for determining the quorum for stock corporations is applied by analogy to non-stock
corporations, only those who are actual members with voting rights should be counted.

What are non-voting shares?

Shares without a right to vote.
The law provides that shares classified and issued as preferred or redeemable shares may be deprived of
voting right

What is a common stock?

A class of stock entitling the holder to vote on corporate matters, to receive dividends after other claims
and dividends have been paid (especially to preferred shareholders), and to share in assets upon
liquidation. Common stock is often called as capital stock if it is the corporation's only class of stock
outstanding. Also termed ordinary shares.
Is one which has no preference and entitles the shareholder to a pro rata division of the profits, if any.
The common stock shareholders have complete voting rights.

What is a preferred stock?

A preferred share of stock, on one hand, is one which entitles the holder thereof to certain preferences
over the holders of common stock. The preferences are designed to induce persons to subscribe for
shares of a corporation. Preferred shares take a multiplicity of forms. The most common forms may be
classified into two: (1) preferred shares as to assets; and (2) preferred shares as to dividends. The
former is a share which gives the holder thereof preference in the distribution of the assets of the
corporation in case of liquidation; the latter is a share the holder of which is entitled to receive dividends
on said share to the extent agreed upon before any dividends at all are paid to the holders of common
stock. There is no guaranty, however, that the share will receive any dividends.29
Preferences granted to preferred stockholders, moreover, do not give them a lien upon the property of
the corporation nor make them creditors Of the corporation, the right of the former being always
subordinate to the latter.

What are redeemable shares?

Redeemable shares may be issued by the corporation when expressly so provided in the articles of
incorporation. They 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 of the corporation, and
upon such other terms and conditions as may be stated in the articles of incorporation, which terms and
conditions must also be stated in the certificate of stock representing said shares.

Instances when holders of non-voting shares are allowed to vote

1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of authorized capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code;
and
8. Dissolution of the corporation.

Note:
Shares classified both as voting and non-voting shares are entitled to vote in eight instances enumerated
above.

What are par value shares?

Shares with a value fixed in the articles of incorporation and the certificate of stock.

What are no par value shares?

Shares with no par value.

Note:
Stocks shall not be issued for a consideration less than the par or issued price thereof.

Limitations on no par value shares

1. It cannot have an issued price of less than P5.00;
2. It is deemed fully paid and non-assessable.
3. The entire consideration for its issuance constitutes capital so that no part of it should be
distributed as dividends;
4. It cannot be issued as preferred shares;
5. It cannot be issued by banks, trust, insurance, and preneed companies, public utilities, building
and loan associations, and other corporations

authorized to obtain or access funds from the public whether publicly listed or not; and
6. The articles of incorporation must state the fact that it is issued no par value shares as well as
the number of said shares.

What is promotion/al share?

A share issued to promoters or those in some way interested in the company, for incorporating the
company, or for services rendered in launching or promoting the welfare of the company.

What is share in escrow?

A share subject to an agreement by virtue of which the share is deposited by the grantor or his agent
with a third person to be kept by the depositary until the performance of certain condition or the
happening of a certain event contained in the agreement

What is fractional share?

A share that is less than one full share.

What is over-issued stock?

It is a stock or share issued in excess of the authorized capital stock Such issuance is null and void.

What is convertible share?

A share that is convertible by the stockholders from one class to another class at a certain price and
within a certain period.

SEC. 7. Founders' Shares. — Founders' shares may be given certain rights and privileges not enjoyed
by the owners of other stocks. Where the exclusive right to vote and be voted for in the election of
directors is granted, it must be for a limited period not to exceed five (5) years from the date of
incorporation: Provided, That such exclusive right shall not be allowed if its exercise will violate
Commonwealth Act No. 108, otherwise known as the "Anti-Dummy Law"; Republic Act No. 7042,
otherwise known as the "Foreign Investments Act of 1991"; and other pertinent laws.

What arefounders' shares?

Shares classified as such in the articles of incorporation which may be given certain rights and privileges
(e.g. dividend payments) not enjoyed by the owners of other stocks.
Limitation on founders' shares
The exclusive right to vote and be voted for in the election of directors, if granted, it must be for a
limited period not to exceed 5 years from the date of incorporation.

SEC. 8. Redeemable Shares. — Redeemable shares may be issued by the corporation when expressly
provided in the articles of incorporation. They are shares which may be purchased by the corporation
from the holders of such shares upon the expiration of a fixed period, regardless of the existence of
unrestricted retained earnings in the books of the corporation, and upon such other terms and
conditions stated in the articles of incorporation and the certificate of stock representing the shares,
subject to rules and regulations issued by the Commission.
What are redeemable shares?
Redeemable shares, on the other hand, are shares usually preferred, which by their terms are
redeemable at a fixed date, or at the option of either issuing corporation, or the stockholder, or both at
a certain redemption price. A redemption by the corporation of its stock is, in a sense, a repurchase of it
or cancellation.

The present Code allows redemption of shares even if there are no unrestricted retained earnings on
the books of the corporation. This is a new provision which in effect qualifies the general rule that the
corporation cannot purchase its own shares except out of current retained earnings. However, while
redeemable shares may be redeemed regardless of the existence of unrestricted retained earnings, this
is subject to the condition that the corporation has, after such redemption, assets in its books to cover
debts and liabilities inclusive of capital stock. Redemption, therefore, may not be made where the
corporation is insolvent or if such redemption will cause insolvency or inability of the corporation to
meet its debts as they mature.

Limitations on redeemable shares

1. It must be expressly provided in the articles of incorporation;
2. The terms and conditions affecting said shares must be stated both in the articles of
incorporation and in the certificate of stock;
3. It may be deprived of voting rights in the articles of incorporation; and
4. Redemption cannot be made if it will cause insolvency of the corporation.

What is retained earnings?

A corporation's accumulated income after dividends have been distributed. Also termed earned surplus;
undistributed profit.

Kinds of redeemable shares

1. Compulsory
The corporation is required to redeem the shares.
2. Optional
The corporation is not mandated to redeem the shares.

Can redeemable shares be reissued?

Redeemable shares, once redeemed are retired unless reissuance is expressly allowed in the articles of
incorporation.

What is Trust Fund Doctrine?

The Trust Fund Doctrine, first enunciated by this Court in the 1923 case of Philippine Trust Co. vs. Rivera,
provides that subscriptions to the capital stock of a corporation constitute a fund to which the creditors
have a right to look for the satisfaction of their claims. This doctrine is the underlying principle in the
procedure for the distribution of capital assets, embodied in the Corporation Code, which allows the
distribution of corporate capital only in three instances: (1) amendment of the Articles of Incorporation
to reduce the authorized capital stock, (2) purchase of redeemable shares by the corporation, regardless
of the existence of unrestricted retained earnings, and (3) dissolution and eventual liquidation of the
corporation.

The distribution of corporate assets and property cannot be made to depend on the whims and caprices
of the stockholders, officers or directors of the corporation, or even, for that matter, on the earnest
desire of the court a quo "to prevent further squabbles and future litigations" unless the indispensable
conditions and procedures for the protection of corporate creditors are followed. Otherwise, the
"corporate peace" laudably hoped for by the court will remain nothing but a dream because this time, it
will be the creditors' turn to engage in "squabbles and litigations" should the court order an unlawful
distribution in blatant disregard of the Trust Fund Doctrine.

SEC. 9. Treasury Shares. - Treasury shares are shares of stock which have been issued and fully paid
for, but subsequently reacquired by the issuing corporation through purchase, redemption, donation,
or some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the
board of directors.

What are treasury shares?

Treasury shares are shares of stock which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful
means.

Rights that are denied to the treasury shares

1. Voting rights
2. Right to dividends

Note:
Treasury shares sold below par value are not watered stock because watered stock contemplates an
original issuance of shares.

What are watered stocks?

Stocks issued for a consideration less than the par or issued price thereof or in any other form other
than cash valued in excess of its fair value.
Note:
Watered stock refers only to original issue of shares but not to a subsequent transfer of such shares by
the corporation. Thus, treasury shares may be sold for less than their par or issued value for they have
already been issued and paid for.

TITLE I
GENERAL PROVISIONS

MULTIPLE CHOICE Part 1

1. The factors for the application of the doctrine of piercing the corporate veil are the following,
except:

a. Stock ownership by one or common ownership of both corporations

b. Identity of directors and officers
c. The manner of keeping corporate books and records
d. Identity of the stockholders

2. I. Any application of the doctrine of piercing the corporate veil should be done with caution.
 II. A corporation its powers through its board of directors and/or its duly authorized officers and
agents.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

3. The continuation of a corporation's legal status despite changes in ownership or management.

a. Succession
b. Inheritance
c. Dissolution
d. Liquidation

4. I. Property acquired by a corporation is the property of stockholders or members.

Il. A corporation exercises said powers through its board of directors and/or its duly authorized
officers and agents.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
5. Corporations which have capital stock divided into shares and are authorized to distribute to
the holders of such shares dividends or allotments of the surplus profits on the basis of the
shares held.

a. Non-stock corporation
b. Stock corporation
c. Corporation aggregate
d. Corporation by prescription

6. Is one where no part of its income is distributable as dividends to its members, trustees, or
officers.

a. Non-stock corporation
b. Stock corporation
c. Corporation aggregate
d. Corporation by prescription
7. One which has exercised corporate powers for an indefinite period without interference on the
part of the government.

a. Foreign corporation
b. Domestic corporation
c. Corporation by prescription
d. Corporation by estoppel

8. A corporation incorporated under the laws of the Philippines.

a. Foreign corporation
b. Domestic corporation
c. Corporation by prescription
d. Corporation by estoppel

9. A corporation is formed, organized or existing under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporations to do business in its own
country or State.

a. Foreign corporation
b. Domestic corporation
c. Corporation by prescription
d. Corporation by estoppel

10. A corporation consisting of more than one member.

a. Open corporation
b. Close corporation
c. Corporation aggregate
d. Corporation sole

11. A corporation consisting of only one member for the purpose of administering and managing,
as trustee, the affairs, property and temporalities of any religious denomination, sect or church.

a. Open corporation
b. Close corporation
c. Corporation aggregate
d. Corporation sole

12. A corporation organized for religious purposes.

a. Ecclesiastical corporation
b. Close corporation
c. Corporation aggregate
d. Lay corporation
13. A corporation organized for charitable purposes.

a. Ecclesiastical corporation
b. Eleemosynary corporation
c. Civil corporation
d. Lay corporation

14. It is an artificial being created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or incidental to its existence.

a. Corporation sole
b. Corporation
c. Partnership
d. Sole proprietorship

15. I. A corporation is a juridical entity vested with a legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it.

II. Not every stockholder or officer can bind the corporation considering the existence of a
corporate entity separate from those who compose it.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

16. I. Well-settled is the principle that the corporate mask may be removed or the corporate veil
pierced when the corporation is just an alter ego of a person or of another corporation.

II. It is a basic principle in Corporation Law that a corporation has a personality which is the
same as the officers or members who compose it.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

17. The following are the characteristics of a corporation, except:

a. It is an artificial being
b. Created by meeting of the minds
c. It has the right of succession
 d. It has the powers, attributes and properties expressly authorized by law or incident to
its existence

18. It refers to any agency organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where applicable as in
the case of stock corporations, to the extent of at least 51 per cent of its capital stock.

a. Private corporation
b. Closed corporation
c. Government-owned or controlled corporation
d. Local government units

19. Two requisites must concur before one may be classified as a stock corporation, namely:

I. That it has capital stock divided into shares

II. That it is authorized to distribute dividends and allotments of surplus and profits to its
members.
a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

20. I. The provisions governing stock corporation, when pertinent, shall be applicable to non-stock
corporations.

Il. A non-stock corporation must have shareholders.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

21. I. Non-stock corporations can distribute 10% of their income to their members.

Il. Non-stock corporations are organized for charitable, religious educational, professional,
cultural, recreational, fraternal, literary' scientific, social, civil service, or similar purposes.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

22. A private corporation which have accepted from the State the grant of franchise or contract
involving the performance of public duties but which are organized for profit.
 a. Government-owned or controlled corporation
b. Quasi-public corporation
c. De jure corporation
d. De facto corporation

23. A corporation created in strict or substantial conformity with the mandatory statutory
requirements for incorporation and the right of which to exist as a corporation cannot be
successfully attacked or questioned by any party even in a direct proceeding for that purpose by
the State.

a. Government-owned or controlled corporation

b. Quasi-public corporation
c. De jure corporation
d. De facto corporation

24.

25.

MULTIPLE CHOICE PART2

1. I. In non-stock corporations, the voting rights does not attach to membership.

II. Members vote as persons, in accordance with the law and the by- laws of the
corporation.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
2. I. One of the rights of a stockholder is the right to participate in the control and management
of the corporation that is exercised through his vote.

Il. The right to vote is a right inherent in and incidental to the ownership of corporate stock,
but as such is not a property right.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
3. A class of stock entitling the holder to vote on corporate matters, to receive dividends after
other claims and dividends have been paid (especially to preferred shareholders), and to
share in assets upon liquidation.
a. Common stock
b. Preferred stock
c. Treasury stock
d. Watered Stock
4. Is one which entitles the holder thereof to certain preferences over the holders of common
stock.
a. Common stock
b. Preferred stock
c. Treasury stock
d. Watered stock
5. They 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 of the corporation,
and upon such other terms and conditions as may be stated in the articles of incorporation,
which terms and conditions must also be stated in the certificate of stock representing said
shares.
a. Par value stock
b. No par value stock
c. Redeemable stock
d. Class A stock

6. Shares with a value fixed in the articles of incorporation and the certificate of stock.
a. Par value stock
b. No par value stock
c. Redeemable stock
d. Class A stock
7. The following are limitations on no par value shares, except:
a. It can be issued for a consideration of at least P3.00.
b. It is deemed fully paid and non-assessable.
c. The entire consideration for its issuance constitutes capital so that no part of it
should be distributed as dividends.
d. It cannot be issued as preferred shares.
8. I. The exclusive right to vote and be voted for in the election of directors must be for a limited
period not to exceed 5 years subject to the approval of the SEC.
 Il. Preferences granted to preferred stockholders gives them a lien upon the property of the
corporation nor make them creditors of the corporation.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
9. I. The law provides that shares classified and issued as preferred or redeemable shares may
be deprived of voting right.

Il. Each member shall be entitled to one vote unless so limited, broadened, or denied in the
articles of incorporation or bylaws.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
10. Is one which has no preference and entitle the shareholder to a pro rata division of the
profits, if any.
a. Preferred stock
b. Common stock
c. Voting share
d. Non-voting share
11. Shares without a right to vote.
a. Preferred stock
b. Common stock
c. Voting share
d. Non-voting share

12. I. It acquires a judicial personality either by special law or a general law.

Il. The general law under which a private corporation may be formed or organized is the
Revised Corporation Code.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
13. The stockholders or members mentioned in the articles of incorporation as originally forming
and composing the corporation and who are signatories thereof.
a. Corporators
b. Board of directors
c. Board of trustees
d. Incorporators
14. Is the governing body in a stock corporation.
a. Corporators
b. Board of directors
c. Board of trustees
d. Incorporators
15. Is the governing body in a non-stock corporation.
a. Corporators
b. Board of directors
c. Board of trustees
d. Incorporators
16. Is a person who brings about or cause to bring about the organization of a corporation
a. Corporators
b. Promoter
c. Underwriter
d. Incorporators
17. Each share shall be equal in all respects to every other share except otherwise provided in the
articles of incorporation and stated certificate of stock.
a. Doctrine of indivisibility of shares
b. Doctrine of divisibility of shares
c. Doctrine of equality of shares
d. Doctrine of corporate opportunity
18. I. There shall always be a class or series of shares which have complete voting rights.

Il. The right to vote is inherent in and incidental to the ownership of corporate stocks. a.

Only I is true

b. Only Il is true
c. Both are true
d. Both are false
19. I. It is settled that unissued stocks may not be voted or considered in determining whether a
quorum is present in a stockholders' meeting.

Il. Only stock actually issued and outstanding may be voted.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false
20. Shares classified in the articles of incorporation which may be given certain rights and
privileges (e.g. dividend payments) not enjoyed by the owners of other stocks.
a. Over-issued stock
b. Redeemable share
c. Convertible share
d. Founders' share
21. Are shares usually preferred, which by their terms are redeemable at a fixed date, or at the
option of either issuing corporation, or the stockholder, or both at a certain redemption price.
a. Over-issued stock
b. Redeemable share
c. Convertible share
d. Founders' share
22. Subscriptions to the capital stock of a corporation constitute a fund to which the creditors
have a right to look for the satisfaction of their claims.
a. Trust fund doctrine
b. Doctrine of indivisibility
c. Doctrine of corporate opportunity
d. None of the above
23. Are shares of stock which have been issued and fully paid for, but subsequently reacquired by
the issuing corporation by purchase, redemption, donation or through some other lawful
means.
a. Treasury stock
b. Redeemable share
c. Convertible share
d. Founders' share
24. Stocks issued for a consideration less than the par or issued price thereof or in any other form
other than cash valued in excess of its fair value.
a. Preferred stock
b. Watered stock
c. Optional share
d. Founders' share
 25. I. Redeemable shares, once redeemed are retired unless reissuance is expressly allowed in
the articles of incorporation.

Il. The Corporation Code allows redemption of shares only if there are unrestricted retained
earnings on the books of the corporation.

a. Only I is true
b. Only Il is true
c. Both are true
d. Both are false

TITLE II
INCORPORATION AND ORGANIXATION OF
PRIVATE CORPORATIONS
SEC. 10. Number and Qualifications of Incorporators. - Any person, partnership, association or
corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a
corporation for any lawful purpose or purposes: Provided, That natural persons who are licensed to
practice a profession, and partnerships or associations organized for the purpose of practicing a
profession, shall not be allowed to organize as a corporation unless otherwise provided under special
laws. Incorporators who are natural persons must be of legal age.
Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the
capital stock.
A corporation with a single stockholder is considered a One Person Corporation as described in Title XIII,
Chapter III of this Code
One Person Corporation – a corporation with a single stockholder. Only a natural person, trust, or estate
may form a One person Corporation.
Banks and quasi- banks, preneed, trust, insurance, public and publicly- listed companies, non-chartered
Government Owned and Controlled Corporation may not incorporate as OPC. Provided, further, that a
natural person who is licensed professional may not organize as OPC unless otherwise provided under
special laws.
INCORPORATOR CORPORATOR
Those stockholders or members mentioned in the articles of incorporation as originally forming and
composing the corporation and who are signatories thereof. Those who compose a corporation
whether as stockholders ( stock corporation) or as members (non-stock corporation).
A signatory of the articles of incorporation. May or may not be a signatory of the articles of
incorporation.
Does not cease to be an incorporator upon sale of his shares. Ceases to be a corporator by sale of a
stock corporation. In case of a non-stock. Corporation, when the corporator ceases to be a member.
Not more that 15 persons There is no restriction as to number except for a close corporation.

Steps in the creation of a corporation

1. Promotion- this includes ctivities done by promoter for the founding and organizing of the business
or enterprise of the issuer.
2. Incorporation
a. Execution of the Articles of Incorporation and by the incorporators and other documents require for
registration of the corporation.
b. Filing of the Articles of Incorporation with the SEC together with treasurer’s affidavit. In case the
corporation is governed by special law, a favorable recommendation of the appropriate govern ment
agency eg ched or deped that such articles of incorporation and by laws is in accordance with law.

3. Formal organization and commencement of business transactions

a. Adoption of by-laws and filing the same with the SEC.
b. Election of Board Of Directors or Board Of Trustees and officers
c. Payment of shares

Number of incorporators
For the purpose of forming new domestic corporation under Revised Corporation Code, two or more
persons¸but not more than fifteen may organize themselves and form a corporation.
Only One Person Corporation OPC may have a single stockholder, as well as sole director. Accordingly,
its registration must comply with the corresponding separate guidelines on the establishment of an OPC.
Qualifications of incorporators
Each incorporator of stock corporation must own or be a subscriber to, at least one share of the capital
stock. Each incorporator of a non stock corporation must be a member of corporation.
The incorporators may be composed of any combination of natural persons . SEC registered
partnerships, SEC registered domestic corporations or association as well as foreign corporations.
Incorporators who are natural persons must be of legal age , and must sign the article of incorporation
by laws.
Partnerships as Incorporators
In the event that a SEC recorded partnership is made an incorporator, the application for registration
must be accompanied by a partners affidavit, duly executed by all the partners, to the effect that they
have authorized the partnership to invest in the corporation abut to be formed and that they have
designated one of the partners to become a signatory to the incorporation documents.
Partnerships under dissolved or expired status with the SEC shall not be authorized to become an
incorporator.

Domestic Corporations or Associations as Incorporators

In the event that a SEC registered domestic corporation or association is made an incorporator, its
investment in the new corporation must be approved by a majority of the board of directors or trustees
and ratified by the stockholders representing at least two thirds (2/3) of the members in the case of
nonstock corporations, at a meeting duly called for the purpose.
A directors / trustees certificate or a secretary ‘s certificate indicating the necessary approvals, as well
as the authorized signatory to the incorporation documents, shall be executed under oath and
submitted by the applicant .
Domestic corporations under delinquent, suspended, revoked or expired status with the SEC shall not
be authorized to become an incorporator.

Foreign corporations as incorporators

In the event that a foreign corporation is made an incorporator, the application for registration must
be accompanied by a copy of a document (i.e Board resolution, Directors’ certificate, secretary’s
certificate, or its equivalent) duly authenticated by a Philippine consulate or with an apostle affixed
thereto, authorizing the foreign corporation to invest in the corporation being formed and specifically
naming the designated signatory on behalf of the foreign corporation.

Signatories of the articles of incorporation

Each individual signing the article of incorporation/ bylaws must indicate the capacity upon which
he/she is affixing his/her signature thereto.
An individual designated to sign the articles of incorporation / bylaws on behalf of an incorporator,
which is not a natural person, must also indicate the corporate or partnership name of the entity being
represented and for whom he/she is executing the articles of incorporation/ bylaws.
The taxpayer identification number (TIN) of the principal, as well as the designated signatory, should
both be indicated in the Articles of Incorporation.
No application for incorporation shall be accepted unless the registration documents reflect the TIN or
passport number of all its foreign investors other than foreign corporations which have not yet been
issued a tax payer identification number.
After incorporation, all the foreign investors, natural or juridical, shall secure a taxpayer identification
number. All documents to be filed with the SEC after incorporation (general information sheets) shall
not be accepted unless the TIN of all its foreign investors, natural or juridical, resident or non resident,
are indicated therein.

Designation of incorporators as directors or trustees

An individual who signs the articles of incorporation on behalf of an incorporator, which is not a
natural person, may not be named as director or trustee in the same articles of incorporation, unless
when the said individual is also the owner of at least one share of stock, or is also a member, of the
corporation being formed.

Foreign nationals in the articles of incorporation

The inclusion of foreign nationals in the articles of incorporation shall be subject to the applicable
constitutional, statutory, and regulatory restrictions, as well as conditions, with respect to foreign
participation in certain investment areas or activities.
Additional requirements for certain corporations
No articles of incorporation of banks, banking and quasi-banking institutions, preneed insurance and
trust companies, nonstock savings and loan association (NSSLAS), pawnshops, and other financial
intermediaries shall be approved unless accompanied by a favorable recommendation of the
incorporation are in accordance with law.

SEC.11. Corporate Term.- A corporation shall have perpetual existence unless its articles of incorporation
provides otherwise.

Corporations with certificates of incorporation issued prior to the effectivity of this code , and which
continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its stockholders
representing a majority of its outstanding capital stock, notifies the commission that it elects to retain
its specific corporate term pursuant to its articles of incorporation: provided, that any change in the
corporate term under this section id without prejudice to the appraisal right of dissenting stockholders
in accordance with the provisions of this code.

A corporate term for specific period may be extended or shortened by amending the articles of
incorporation: provided, that no extension may be made earlier that three years prior o the original or
subsequent expiry dates unless there are justifiable reasons for an earlier extentions as may be
determined by the commissions: provided. Further, that such extension of the corporate term shall take
effect only on the day following the original or subsequent expiry dates.

A corporate whose term has expired may apply for a revival of its corporate existence, together with
all the rights and privilleges under its certificate of incorporation and subject to all of its duties, debts
and liabilities existing prior to its revival. Upon approval by the commission, the corporation shall
deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual
existence, unless its application for revival provides otherwise.

No application for revival of certificate of incorporation of banks , banking and quasi banking
institutions, preneed, insurance and trust companies, nonstock savings and loan associations,
pawnshops corporations engaged in money services business, and other financial intermediaries shall be
approved by the commission unless accompanied b a favourable recommendation of the appropriate
government agency.

General rule:
A corporation shall have perpetual existence.
Exception:
If the articles of incorporation provides otherwise of it provides for a specific period.
Note:
A corporate term for a specific period may be extended or shortened by amending the articles of
incorporation.

Note:
A corporation for a specific period ceases to exist and is dissolved ipso facto upon the expiration of
the period fixed in the original articles of incorporation, in the absence of compliance with the legal
requisites of extension of period.

REVIVAL OF CORPORATE EXISTENCE

A corporation whose term has expired may apply for a revival of its corporate existence.

General rule:
Upon approval by the SEC, the corporation shall be deemed revived and certificate of revival of
corporate existence shall be issued, giving it perpetual existence.

Exception:
If its application for revival provides otherwise or provides for a specific period.

Note:
The following corporations require the favourable recommendation of the appropriate government
agency before the SEC will approve the application for revival of certificate of incorporation:
1. Banks
2. Banking and quasi banking institutions
3. Preneed
4. Insurance and trust companies
5. Nonstock savings and loan associations
6. Pawnshops
7. Corporations engaged in money service business and
8. Other financial intermediaries

Who may apply for revival?

The following corporations may file a petition for a revival of corporate existence;
a. Generally, a corporation whose term has expired;
b. An expired corporation whose certificate of registration has been revoked for non filing of
reports ( general information sheet and audited financial statements), provided that shall file the proper
petition to lift its revoked status, which may be incorporated in its petition to revived, and must settle
the corresponding penalties thereof
c. An expired corporation whose certificate of registration has been suspended, provided that it
shall file the proper petition to lift its suspended, provide that it shall file the proper petition to lift its
suspended status, which may be incorporated in its petition to revive and must settle the corresponding
penalties thereof; or
d. An expired corporation whose corporate name has already been validly re used, and is currently
being used, by another existing corporation duly registered with sec, provided that the former shall
change its corporate name within thirty days from the issuance of its certificate of revival of corporate
existence.

Who may not apply for revival?

The following are not allowed to file a petition for revival of corporate existence:
a. An expired corporation which has completed the liquidation of its assets;
b. A corporation whose certificate of registration has been revoked for reasons other than non-
filling of reports ( general information sheet and audited financial statements)
c. A corporation dissolved by virtue of sections 6(c) and 6 (d) of presidential decree no. 902-a, as
amended by presidential decree no. 1799;
d. An expired corporation which already availed of re-registration, in accordance with
memorandum circular no. 13, series of 2019 ( amended guidelines and procedures on the use of
corporate and partnership names), or other memorandum circulars issued by the sec pertaining to re-
registration, except when
i. The re registered corporation has given its consent to the petitioner to use its corporate name,
and has undertaken to undergo voluntary dissolution immediately after the issuance of the petitioners
revival.
ii. The re registered corporation has given its consent to the petitioner to use its corporate name,
and has undertaken to undergo voluntary dissolution immediately after the issuance of the petitioners
certificate of revival.

Required vote to initiate revival

The required number of votes for the revival of an expired stock corporation is at least a majority vote
of the outstanding capital stock. For nonstock corporations, at least a majority vote of the board of
directors, and the vote of least majority of the outstanding capital stock. For nonstock corporations, at
least the majority vote of the board of trustees, and the vote of at least majority of the members.

Appriasal right
The revival of the corporate existence is without prejudice to the appraisal right of dissenting stock
holders in accordance with the provisions of revised corporation code.
Section 12. Minimum Capital Stock Not Required of Stock Corporations. - Stock corporations shall not be
required to have minimum capital stock, except as otherwise specially provided by special law.
General rule: there is no minimum authorized capital stock
Exception: if provide by special law

Section 13. Contents of the Articles of Incorporation. - All corporations shall file with the Commission
articles of incorporation in any of the official languages, duly signed and acknowledged or authenticated,
in such form and manner as may be allowed by the Commission, containing substantially the following
matters, except as otherwise prescribed by this Code or by special law:
(a) The name of corporation;
(b) The specific purpose or purposes for which the corporation is being formed. Where a corporation has
more than one stated purpose, the articles of incorporation shall indicate the primary purpose and the
secondary purpose or purposes: Provided, That a nonstock corporation may not include a purpose which
would change or contradict its nature as such;
(c) The place where the principal office of the corporation is to be located, which must be within the
Philippines;
(d) The term for which the corporation is to exist, if the corporation has not elected perpetual existence;
(e) The names, nationalities, and residence addresses of the incorporators;
(f) The number of directors, which shall not be more than fifteen (15) or the number of trustees which
may be more than fifteen (15);
(g) The names, nationalities, and residence addresses of persons who shall act as directors or trustees
until the first regular directors or trustees are duly elected and qualified in accordance with this Code;
(h) If it be a stock corporation, the amount of its authorized capital stock, number of shares into which it
is divided, the par value of each, names, nationalities, and subscribers, amount subscribed and paid by
each on the subscription, and a statement that some or all of the shares are without par value, if
applicable;
(i) If it be a nonstock corporation, the amount of its capital, the names, nationalities, and residence
addresses of the contributors, and amount contributed by each; and
(j) Such other matters consistent with law and which the incorporators may deem necessary and
convenient.
An arbitration agreement may be provided in the articles of incorporation pursuant to Section 181 of
this Code.1âwphi1
The Articles of incorporation and applications for amendments thereto may be filed with the
Commission in the form of an electronic document, in accordance with the Commission's rule and
regulations on electronic filing.

Section 14. Form of Articles of Incorporation. - Unless otherwise prescribed by special law, the articles of
incorporation of all domestic corporations shall comply substantially with the following form:
Articles of Incorporation
of
_____________________
(Name of Corporation)
The undersigned incorporators, all of legal age, have voluntarily agreed to form a (stock) (nonstock)
corporation under the laws of the Republic of the Philippines and certify the following:
First: That the name of said corporation shall be "_________________", Inc. Corporation or OPC";
Second: That the purpose or purposes for which such corporation is incorporated are: (If there is more
than one purpose, indicate primary and secondary purposes);
Third: That the principal office of the corporation is located in the City/Municipality of
_______________, Province of ______________________, Philippines;
Fourth: That the corporation shall have perpetual existence or a term of ___________ years from the
date of issuance of the certificate of incorporation;
Fifth: That the names, nationalities, and residence addresses of the incorporators of the corporation are
as follows:
Name Nationality Residence
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
Sixth: That the number if directors or trustees of the corporation shall be ___________________; and
the names, nationalities, and residence addresses of the first directors or trustees of the corporation are
as follows:
1âwphi1
Name Nationality Residence
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
Seventh: That the authorized capital stock of the corporation is ____________________ PESOS
(₱______), dividend into ____ shares with the par value of ___________________ PESOS
(₱_____________) per share. (In case all the shares are without par value): That the capital stock of the
corporation is __________________ shares without par value.
(In case some shares have par value and some are without par value): That the capital stock of said
corporation consists of ________________________________ shares, of which
_______________________ shares have a par value of ___________________________PESOS
(₱_______) each, and of which ____________________ shares are without par value.
Eight: That the number of shares of the authorized capital stock-stated has been subscribed as follows:
Name of Subscriber Nationality No. of Shares Subscribed Amount Subscribed
Amount Paid

(Modify No. 8 if shares are with no-par value. In case the corporation is nonstock, Nos. 7 and 8 of the
above articles may be modified accordingly, and it is sufficient if the articles may be modified
accordingly, and it is sufficient if the articles state the amount of capital or money contributed or
donated by specified persons, stating the names, nationalities, and residence addresses of the
contributors or donors and the respective amount given by each.)
Ninth: That _______________________ has been elected by the subscribers as Treasurer of the
Corporation to act as such until after the successor is duly elected and qualified in accordance with the
bylaws, that as Treasurer, authority has been given to receive in the name and for the benefit of the
corporation, all subscriptions, contributions or donations paid or given by the subscribers or members,
who certifies the information set forth in the seventh and eighth clauses above, and that the paid-up
portion of the subscription in cash and/or property for the benefit and credit of the corporation has
been duly received.
Tenth: That the incorporators undertake to change the name of the corporation immediately upon
receipt of notice from the Commission that another corporation, partnership or person has acquired a
prior right to the use of such name, that the name has been declared not distinguishable from a
corporation, or that it is contrary to law, public morals, good customs or public policy.
Eleventh: (Corporations which will engage in any business or activity reserved for Filipino citizens shall
provide the following):
"No transfer of stock or interest which shall reduce the ownership of Filipino citizens to less than the
required percentage of capital stock as provided by existing laws shall be allowed or permitted to be
recorded in the proper books of the corporation, and this restriction shall be indicated in all stock
certificates issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation, this ______ day of
_____, 20___ in the City/Municipality of _________________, Province of ________________, Republic
of the Philippines.
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
(Names and signatures of the incorporators)
____________________________
(Name and signature of Treasurer)

Subscription
A written contract to purchase newly issued shares of stock or bonds. Also termed stock subscription.

What is paid up capital?

Paid up capital is that portion of the authorized capital stock which has been both subscribed and paid.
To reiterate, such must form part of the authorized capital stock of the corporation, subscribed and then
actually paid up.

ARTICLES OF INCORPRATION
The articles of incorporation has been described as one that defines the charter of the corporation and
the contractual relationships between the state and the corporation, the stockholders and the state, and
between the a corporation and its stockholders.
There is no gain saying that the contents of the articles of incorporation are binding , not only on the
corporation, but also on its shareholders.

Three-fold nature of the articles of incorporation

1. A contract between the state and its stock holders and corporation
2. A contract between the corporation and its stockholders and
3. A contract between the stockholders inter se.

The name of the corporation

A name is perculiarly important as necessary to the very existence of a corporation. Its name is one of its
attributes, an element of its existence, and essential to its identity. The general rule as to corporation is
that each corporation must have a name by which it is to sue and be sued and do all legal acts. The
name of a corporation in the same manner as the name of an individual designates the person; and the
right to use its corporate name is as much apart of the corporate franchise as any other privilege
granted.

Limitations on the use of corporate name

The name must be identical, deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law, or patently deceptive, confusing or contrary to law.
It must contain the word Inc., Corporation or OPC.

Change of corporate name

A corporation can change its name by amending its articles of incorporation.

PURPOSE CALUSE
This will confer, as well as limits, the powers which a corporation may exercise. Any act beyond its
powers is known as ultra vires acts.
Where a corporation shall state which is the primary purpose and which is are the secondary purpose or
purposes to determine which investment of corporate funds require the authority of both the board and
stock holders.

NOTE: section 41 of this code provides

Subject to the provisions of this code, a private corporation may invest its funds in any other
corporation, business or for any other corporation, business, or for any purpose other than the primary
purpose for which it was organized, when approved by a majority of the board of directors or trustees
and ratified by the stockholders representing at least two-thirds of the capital stock, or by at least two
thirds of the members in the case of nonstock corporations, at a meeting duly called for the purpose.

PRINCIPAL OFFICE OF THE CORPORATION

Purposes:
1. To fix the residence of the residence of the corporation in a define place
2. To determine the venue of court cases involving the corporations
3. For purposes of stockholders or members meting; and
4. To determine the place where the books and records of the corporation are ordinary kept.

TERM OF EXISTENCE
A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.

NUMBER OF BOARD OF DIRECTORS OR TRUSTEES

The number of directors shall not be more than fifteen (15). The number of trustees may be more than
fifteen (15).

AUTHORIZED CAPITAL STOCK

This is the maximum amount fixed in the articles of incorporation that may be subscribed and paid by
the stockholders of the corporation. The articles of incorporation of a stock corporation should contain
the amount of its authorized capital stock in lawful money of the Philippines, the number of shares into
which it is divided, and in case the share are par value shares, the par value of each, the names,
nationalities and residences of the original subscribers, and the amount subscribed and paid by each on
his subscription, and if some or all of the shares are without par value, such fact must be stated.
SEC. 15. Amendment of Articles of Incorporation. – Unless otherwise prescribed by this Code or by
special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation
may be amended by a majority vote of the board of directors or trustees and the vote or written assent
of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without
prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.
The articles of incorporation of a nonstock corporation may be amended by the vote or written assent of
majority of the trustees and at least two-thirds (2/3) of the members. The original and amended articles
together shall contain all provisions required by law to be set out in the articles of incorporation.
Amendments to the articles shall be indicated by underscoring the change or changes made, and a copy
thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees,
with a statement that the amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the Commission.
The amendments shall take effect upon their approval by the Commission or from the date of filing with
the said Commission if not acted upon within six (6) months from the date of filing for a cause not
attributable to the corporation.
Limitations in the amendment of the articles of incorporation
I. The amendment must be for legitimate purposes and must not be contrary to the Corporation Code
and special laws;
2. The amendment must be approved by a majority of the board of directors or board of trustees;
3. The amendment requires the vote or written assent of stockholders39; representing 2/3 of the
outstanding capital stock or 2/3 members if it be a non-stock corporation;
4. The original and amended articles together shall contain all provisions required by law to be set out in
the articles of incorporation. Such articles, as amended, shall be indicated by underscoring the changes
made;
5. Certification under oath by the corporate secretary and a majority of the board of directors or board
of trustees stating the fact that said amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the SEC;
6. The amendment must be approved by the SEC;
7. The amendment must be accompanied by a favorable recommendation of the appropriate
government agency in cases of :
a. Banks;
b. Banking and quasi-banking institutions;
c. Preneed;
d. Insurance and trust companies;
e. Nonstock savings and loan associations (NSSLAs);
f. Pawnshops; and
g. Other financial intermediaries.

SEC. 16. Grounds When Articles of Incorporation or Amendment may be Disapproved. - The Commission
may disapprove the articles of incorporation or any amendment thereto if the same is not compliant
with the requirements of this Code: Provided, That the Commission shall give the incorporators,
Directors, trustees, or officers a reasonable time from receipt of the disapproval within which to modify
the objectionable portions of the articles or amendment. The following are grounds for such
disapproval:
(a) The articles of incorporation or any amendment thereto is not substantially in accordance with the
form prescribed herein;
(b) The purpose or purposes of the corporation are patently unconstitutional, illegal, immoral or
contrary to government rules and regulations;
(c) The certification concerning the amount of capital stock subscribed and/or paid is false; and
(d) The required percentage of Filipino ownership of the capital stock under existing laws or the
Constitution has not been complied with.

No articles of incorporation or amendment to articles

incorporation of banks, banking and quasi-banking institution — preneed, insurance and trust
companies, nonstock savings and loan associations (NSSLAs), pawnshops, and other financial
intermediaries shall be approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the effect that such articles or amendment is
in accordance with law.

Note:
Before disapproving the articles of incorporation or its amendments, the SEC should give the
incorporators, directors, trustees, or officers, a reasonable time within which to correct or modify the
objectionable portions of the articles or amendment.

Section 17. Corporation Name. - No corporate name shall be allowed by the Commission if it is not
distinguishable from that already reserved or registered for the use if another corporation, or if such
name is already protected by law, rules and regulations.

A name is not distinguishable even if it contains one or more of the following:

(a) The word "corporation", "company", incorporated", "limited", "limited liability", or an abbreviation
of one if such words; and
(b) Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different tenses,
spacing, or number of the same word or phrase.

The Commission upon determination that the corporate name is: (1) not distinguishable from a name
already reserved or registered for the use of another corporation; (2) already protected by law; or (3)
contrary to law, rules and regulations, may summarily order the corporation to immediately cease and
desist from using such name and require the corporation to register a new one. The Commission shall
also cause the removal of all visible signages, marks, advertisements, labels prints and other effects
bearing such corporate name. Upon the approval of the new corporate name, the Commission shall
issue a certificate of incorporation under the amended name.

If the corporation fails to comply with the Commission's order, the Commission may hold the
corporation and its responsible directors or officers in contempt and/or hold them administratively,
civilly and/or criminally liable under this Code and other applicable laws and/or revoke the registration
of the corporation.

Amended Guidelines and Procedures on The Use of Corporate and Partnership Names
To keep abreast with developments in business and information technology in the country, the SEC, is
adopting the following guidelines and procedures in the registration of corporate, one person corporate
and partnership names;
1. a) The corporate name shall contain the word “corporation” or “incorporated”, or the
abbreviations “Corp.” or “Inc.” respectively.
b) In case of a One Person Corporation, the corporate name shall contain the “OPC” either below or at
the end of its corporate name.
c) The partnership name shall bear the word “Company” or “Co.” and if it is a limited partnership, the
word “Limited” or “Ltd.” A professional partnership name may bear the word “Company”, “Associates”
or “Partners”, or the similar descriptions.
d) the corporate name of a foundation shall use the word “Foundation”.
e) The corporate name of all non-stock, non-profit corporations including non-governmental
organizations and foundations, engaging in microfinance activities shall use the word “Microfinance” or
“Microfinancing”; provided that said corporations shall state in the purpose clause of their articles of
incorporation that they shall conduct microfinance operations pursuant to Republic Act No. 8425 or the
Social Reform and Poverty Alleviation Act.

2. A term that describes the business of a corporation in its name should refer to its primary
purpose. If there are two such terms, the first should refer to the primary purpose and the second to the
secondary purpose.
3. a) the name shall be distinguishable from other corporate or partnership name registered with
the SEC, or with the Department of Trade and Industry, in the case of sole proprietorship.
b) If the name applied for is similar to that of a registered corporation or partnership, the applicant shall
add one or more distinctive words to the proposed name to remove similarity or differentiate it from
the registered name.
However, the addition of one or more distinctive words shall not be allowed if the
registered name is coined or more unique unless the board of Directors or majority of the partners of
the subject corporation or partnership gives its consent to the applied name.

c) Punctuation marks, spaces, signs, symbols and other similar characters, regardless of their form of
arrangement, shall not be acceptable as distinguish words for purposes of differentiating a proposed
name from a registered name.

d) A name that consist solely of special symbols, punctuations marks or specially designated characters
shall not be registered.

4. Business or trade name which is different from the corporate or partnership name shall be
indicated in the articles of incorporation or partnership. A company may have more than one business
or trade name.

5. A trade name or trademark registered with the Intellectual Property Officer may be used as part
of the corporate or partnership name of a party other than its owner if the latter gives its consent such
to use.

6. a) The full name or surname of a person may be used in a corporate or partnership name if he
or she is stockholder, member or partner of the said entity and has consented to such use; if the person
is already deceased, the consent shall be given by his or her estate;
b) A single stockholder of a One Person Corporation (OPC) may use his/her name; provided, that said
name shall be accompanied with descriptive words aside from the suffix OPC.

The single stockholder may also use the name of another person provided consent was given by
the said person or if deceased, his estate. Provided that the name shall be accompanied by the
descriptive words other than the suffix OPC.

c) The SEC may require a registrant to explain to its satisfaction the reason for the use of a person’s
name.

d) The meaning of initials used in a name shall be stated by the registrant in the Articles of
Incorporation, Articles of Partnership or in a separate document signed by an incorporator, director, or
partner, as the case may be.

7. The name of an internationally known foreign corporation, or something similar to it, cannot be
used by a domestic corporation unless it is its subsidiary and the parent corporation has consented to
such use.

However, a name written in a foreign language, even if registered in another country, shall not
be registered if the name violates good morals, public order or policy, or has an offensive or indecorous
meaning in any of the country’s official languages or major dialects.
8. The name of a local geographical unit, site or location cannot be used as corporate or
partnership name unless it is accompanied by a descriptive word or phrase, e.g. Pasay Food Store, Inc.

9. Pursuant to existing laws, the following words and phrases can be used in the corporate or
partnership name in the manner enumerated below:

a) “Finance Company”, “Financing Company”, “Finance and Leasing Company”, “Leasing

Company”, “Investment Company”, “Investment House” by entities engaged in financing or investment
house business (R.A. 8556 and Pres. Decree 129)
b) “Lending Company” and “Lending Investors” by lending companies (R.A. 9474), or “Pawnshop”
by entities authorized to operate pawnshops (P.D. 114).
c) “Bank”, “Banking”, “Banker”, “Savings and Loan Association” (R.A. 8367), “Trust Corporation”,
“Trust Company”, or words of similar meaning by entities engaged in the banking or trust business (R.A.
8791).
d) “United Nations”, “UN”, in full abbreviated form exclusively by the United Nations and its
attached agencies (R.A. 226).
e) “Bonded” by entities with licensed warehouse (R.A. 247).
f) “SPV-AMC” by corporations authorized to act as special purpose vehicle (R.A. 9182).
g) The name of an international government organization, such as “International Criminal Police
Organization” (INTERPOL),
“International Monetary Fund” (IMF), and “International Labor Organization” (ILO) may not be used as
part of a corporate or partnership name unless when duly authorized or allowed by the SEC.
h) ASEAN (protected under Article 6ter of the Paris Convention for the Protection of Industrial
Property, adopted in 1883 and revised in Stockholm in 1976).
10. The practice of a profession regulated by a special law which, among others, provides for the
permissible use of the profession’s name in a firm, partnership or association ion shall govern the use of
the name, e.g. “Engineer” or “Engineering” (R.A. 1582), “Architect” (R.A. 9266), or “Geodetic Engineer”
(R.A. 8560).
Notwithstanding the limitations mentioned above, any association registered by entities engaged in the
listed activities may use the profession’s name, e.g. Association of Engineers of the Philippines, Inc.

11. Unless otherwise authorized by the SEC, the words and phrases enumerated below can be used
only by the entities mentioned:

A) “Investment(s) or “Capital” by entities organized as investment house or investment company.

B) “Capital” by entities organized as Investment House, Investment company or holding company.
C) “Asset / Investment / Fund / Financial Management”, or “Asset / Investment / Fund / Financial
Adviser”. Or any similar words or phrases by entities organized as investment company adviser or
holders of investment management activities (IMA) license from the Bangko Sentral ng Pilipinas.
D) “National’, “Bureau”, “Commission”, “State”, and other similar words acronyms, abbreviations
that have gained wide acceptance in the Philipppines by entities that perform governmental functions.
E) “Association” and “Organization” or similar words which pertain to non-stock corporations by
entities primarily engaged in non-profit activities.
F) “Stock Exchange/Futures Exchange/Derivatives Exchange”. “Stock Broker/Securities
Broker/Derivatives Broker”, “Commodity/Financial Futures Merchant/Broker”, “Securities clearing
Agency/Stock Clearing Agency”, “Plans” or any similar words or phrases by entities organized as an
exchange, broker dealer, commodity futures broker, clearing agency, or pre-need company under the
Securities Regulation Code (R.A. 8779).

12. Pursuant to Republic Act 10530, or “The Act Defining The Use And Protection Of The Red Cross,
Red Crescent And Red Crystal Emblems”, The use of the word “red cross”, “red crescent”, or “red
crystal” or their translation in any official language and dialect cannot be used or registered as part of a
corporate or partnership name, unless with the consent of the Philippine Red Cross.
13. The enumeration in paragraphs 10, 11 and 12 are not exclusive and may increase or decrease
depending on future legislative issuances or administrative orders of the appropriate or duly authorized
government offices.
14. The name of a corporation or partnership that has been dissolved or whose registration has
been revoked shall not be used by another corporation or partnership within five (5) years from the
approval of dissolution or five (5) years from the date of revocation, unless its use has been allowed at
the time of the dissolution or revocation by the stockholders, members or partners who represent a
majority of the outstanding capital stock or membership of the dissolved corporation or partnership, as
the case may be.

No application for re-registration of the expired corporation, however, shall be processed by the SEC
unless the application is accompanied by the following documents:

i. Board Resolution, executed and signed under oath by the hold-over board of directors/trustees
of the expired corporation, attesting that:

a) the applicant for re-registration is a new corporation intending to use the name of the expired
corporation (specially identifying the corporate name and registration number);
b) the re-registration is approved by the majority vote of the directors or trustees and the vote of
the stockholders representing the majority of the outstanding capital stock or membership•

c) they shall include a statement in the articles of incorporation of the new corporation that the
same is using the name of the expired corporation; and

d) if applicable, they will no longer file a petition to set aside the order of revocation.

ii. Latest General Information Sheet of the expired corporation, stamped "received" by the SEC;
and
iii. Affidavit, executed under oath by the hold-over corporate secretary, attesting that:

a) there are no properties owned by the dissolved/revoked corporation due for liquidation, or in
case there are properties owned by the expired corporation, no property is transferred to the new
corporation or, in case of stock corporations, used for subscription payment without undergoing
corporate liquidation process;
b) there is no pending intra-corporate dispute or claim involving the expired corporation; and
c) that the expired corporation has no derogatory information with the SEC at the time of its
application for re-registration.

Upon approval of the re-registration, the certificate of registration to be issued to the new corporation
shall indicate its new SEC registration number and pre-generated Tax Identification Number (TIN) as
confirmation that the same is a separate and distinct entity from the expired corporation.

15. A corporate or partnership name, which was previously used but become the subject of amendment,
shall not be re-registered or used by another corporation or partnership for a period of three (3) years
from the date of the approval of the adoption of the new corporate or partnership name.

An earlier period may be allowed for the registration or use of the former corporate or partnership
name provided that the corporation or partnership, which previously owned the used corporate or
partnership name, gives its consent. The requirement to wit, as:

For Corporations:

a) Directors/Trustees' Certificate approved by the majority of the Directors /Trustees approving

the use of the former name by another corporation or partnership; and

b) Secretary's Certificate of non-existence of intracorporate dispute from the Corporation that use
the former corporate name.

For Partnerships:
Partnership's Resolution approved by the majority of the Partners approving the use of the former name
by another corporation or partnership.

For One Person Corporations

The consent of the sole stockholder or, in cases of incapacity or death, his/her designated nominee
given in a notarized instrument and countersigned by the Corporate Secretary.
16. Names of absorbed/constituent corporation may not be used unless it is the surviving corporation
intending to use the said absorbed/constituent corporate name. Provided, however, that another
corporation may use the names of absorbed/constituent corporation if consent of the surviving
corporation is obtained such as:

a) Directors' Certificate of the surviving corporation permitting the usage of the said
absorbed/constituent corporation by another corporation; and

b) Secretary's Certificate of non-existence of intracorporate dispute of the Corporation from the

Surviving Corporation.

17. a) The reservation or notice of availability of a name shall not constitute an approval of the use of
such name or an application for a change of name;
b) No erasures, changes, modifications, or alterations on a name reservation form shall be allowed; and
c) Appeals from or opposition to the approval of corporate and partnership names of new companies, or
complaints against proposed new names of existing companies or partnerships, shall be resolved by the
Company Registration and Monitoring Department (CRMD). The decisions of CRMD may be appealed to
the SEC En Banc through the Office of the General Counsel.

18. At the time of its registration, a corporation or partnership shall submit an affidavit containing an
unqualified undertaking to change its name immediately upon receipt of notice from the SEC that
another Corporation, partnership or person has acquired a prior right to the use Of such name, that the
name has been declared not distinguishable from a name already registered or reserved for the use of
another corporation, Or that it is contrary to law, public morals, good customs or public policy. The
affidavit shall be signed by at least two incorporators or partners in the form prescribed by the SEC. This
affidavit shall not be required if the undertaking is already included as one of the provisions of the
Articles of Incorporations or Partnership of the registrant.

SEC. 18. Registration, Incorporation and Commencement of Corporate Existence. - A person or group of
persons desiring to incorporate shall submit the intended corporate name to the Commission for
verification. If the Commission finds that the name is distinguishable from a name already reserved or
registered for the use of another corporation, not protected by law and is not contrary to law, rules and
regulations, the name shall be reserved in favor of the incorporators. The incorporators shall then
submit their articles of incorporation and bylaws to the Commission.

If the Commission finds that the submitted documents and information are fully compliant with the
requirements of this Code, other relevant laws, rules and regulations, the Commission shall issue the
certificate of incorporation.

A private corporation organized under this Code commences its corporate existence and juridical
personality from the date the Commission issues the certificate of incorporation under its official seal
and thereupon the incorporators, stockholders/members and their successors shall constitute a body
corporate under the name stated in the articles of incorporation for the period of time mentioned
therein, unless said period is extended or the corporation is sooner dissolved in accordance with law.
It is the certificate of incorporation that gives juridical personality to a corporation and places it under
the jurisdiction of the securities and exchange commission.
A corporation commences its corporate existence and juridical personality and is deemed incorporated
from the date the Securities and Exchange Commission issues certificate of incorporation under its
official seal.

SEC. 19. De facto Corporations. - The due incorporation of any corporation claiming in good faith to be a
corporation under this Code, and its right to exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such corporation may be a party. Such inquiry may be made by
the Solicitor General in a quo warranto proceeding.

Requirements before one can qualify as a de facto corporation:

1. The existence of a valid law under which it may be incorporated;
2. An attempt in good faith to incorporate; and
3. Assumption of corporate powers

Two conflicting public interest under de facto doctrine

The defacto doctrine thus effects a compromise between two conflicting public interests:

1.The one opposed to an unauthorized assumption of corporate privileges; and

2.The other in favor of doing justice to the parties and of establishing a general assurance of security in
business dealing with corporations.

Generally, the de facto doctrine exists to protect the public dealing with supposed corporate entities,
not to favor the defective or non-existent corporation.

SEC. 20. Corporation by Estoppel. - All persons who assume to act as a corporation knowing it to be
without authority to do so shall be liable as general partners for all debts, liabilities and damages
incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation is
sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not
be allowed to use its lack of corporate personality as a defense. Anyone who assumes an obligation to
an ostensible corporation as such cannot resist performance thereof on the ground that there was in
fact no corporation.

Doctrine of estoppel
The doctrine of estoppel is predicated on, and has its origin in, equity which, broadly defined, is justice
according to natural law and right. It is a principle intended to avoid a clear case of injustice. The term is
hardly distinguishable from a waiver of right. Estoppel, like its said counterpart, must be unequivocal
and intentional for, w en misapplied, it can easily become a most convenient and effective means of
injustice. Estoppel is not understood to be a principle that, as a rule, should prevalently apply but, such
as it concededly is, as a mere exception from the standard legal norms of general application that can be
invoked only in highly exceptional and justifiable cases.

SEC. 21. Effects of Non-Use of Corporate Charter and Continuous Inoperation. - If a corporation does not
formally organize and commence its business within five (5) years from the date of its incorporation, its
certificate of incorporation shall be deemed revoked as of the day following the end of the five (5)-year
period.
However, if a corporation has commenced its business but subsequently becomes inoperative for a
period of at least five (5) consecutive years, the Commission may, after due notice and hearing, place
the corporation under delinquent status.
A delinquent corporation shall have a period of two (2) years to resume operations and comply with all
requirements that the Commission shall prescribe. Upon compliance by the corporation, the
Commission shall issue an order lifting the delinquent status. Failure to comply with the requirements
and resume operations within the period given by the Commission shall cause the revocation of the
corporation's certificate of incorporation.

The Commission shall give reasonable notice to, and coordinate with the appropriate regulatory agency
prior to the suspension or revocation of the certificate of incorporation of companies under their special
regulatory jurisdiction.

FAILURE To FORMALLY ORGANIZE AND COMMENCE ITS BUSINESS WITHIN 5 YEARS FROM THE DATE OF
ITS INCORPORATION
The certificate of incorporation shall be deemed revoked as of the day following the end of the five (5)
year period.

Examples of acts constituting formal organization

1. Adoption of by-laws and filing of the same with the SEC.
2. Election of Board of Directors or Board of Trustees as well as the officers like the President,
Secretary, Treasurer, and other officers as stated in its by-laws
3. Establishment of the principal office.
4. Providing for the subscription and payment of its shares of stock.
5. Other acts necessary to enable the corporation to transact business or accomplish the purpose
for which it was created.

Examples of acts constituting commencement of business

1. Entering into contracts or negotiation for lease or sale of properties to be used as business or
factory site.
2. Making plans for and the construction of the factory.
3. Taking steps to expedite the construction of the corporation's working equipment.

II. CONTINUOUS INOPERATION FOR AT LEAST 5 CONSECUTIVE YEARS

The SEC may, after due notice and hearing, place the corporation under delinquent status.
Note:
A delinquent corporation shall have a period of two (2) years to resume operations and comply with all
requirements that the Commission shall prescribe. Upon compliance by the corporation, the
Commission shall issue an order lifting the delinquent status. Failure to comply with the requirements
and resume operations within the period given by the Commission shall cause the revocation of the
corporation 's certificate of incorporation.

Title II – INCORPORATION AND ORGANIZATION OF PRIVATE

CORPORATIONS
1. I. Only a natural person, trust, or an estate may form a One Person Corporation.
 II. Banks and quasi-banks, preneed, trust, insurance, public and Publicly-listed companies, and
nonchartered government-owned and – Controlled corporations may not incorporate as One Person
Corporations.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. This is the maximum amount fixed in the articles of incorporation that may be subscribed and paid by
the stockholders of the corporation.

a. Outstanding capital stock

b. Paid-up capital stock

c. Authorized capital stock

d. None of the above

3. The following are limitations in the amendment of the articles of incorporation, except:

a.The amendment must be for legitimate purposes and must not be contrary to the Corporation Codeand
special laws.

b. The amendment requires the vote stockholders’ representing majority of the outstanding capital
stockor majority members if it be a non-stock corporation.

c.The amendment must be approved by a majority of the board of Directors or board of trustees.

d. The original and amended articles together shall contain all provisions required by law to be set out
inthe articles of incorporation.

4. I. A corporation shall have perpetual existence unless its articles of Incorporation provides otherwise.

II. The general rule as to corporations is that each corporation must have a name by which it is to sue
and be sued and do all legal acts.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. It is the certificate of incorporation that gives juridical personality to a corporation and places it
under the jurisdiction of the Securities and Exchange Commission.
II. A corporation commences its corporate existence and juridical personality and is deemed
incorporated from the date the DTI issues certificate of incorporation under its official seal. a. Only I is
true

b. Only Il is true

c. Both are true

d. Both are false

6. The following are the requirements before one can Facto corporation, except:

a. The existence of a valid law under which it may be incorporated.

b. An attempt in good faith to incorporate.

c. Assumption of corporate powers.

d. None of the above.

7. The following are the three-fold nature of the articles of incorporation,

Except:

a. A contract between the corporations inter se.

b. A contract between the State and the corporation.

c. A contract between the corporation and its stockholders.

d. A contract between the stockholders inter se.

8. The purpose of the principal of the corporation are the following except:

a. To fix the residence of the corporation in a definite place.

b. For purposes of stockholders or members meeting.

c. To determine the venue of court cases involving the stockholders.

d. To determine the place where the books and records of the corporation are ordinarily kept.

9. I. The number of directors shall not be more than 15.

II. The number of trustees may be more than 15.

a. Only I is true
b. Only II is true

c. Both are true

d. Both are false

10. I. The articles of incorporation of a non-stock corporation may amended by the vote or written
assent of majority of the trustees and at least 2/3 of the members.

II. The amendment of the articles of incorporation shall take effect upon their approval by the SEC or
from the date of filing with the SEC if not acted upon within 9 months from the date of filing for a cause
not be attributable to the corporation.

a. Only I is true

b. Only II is truec Both are true

d. Both are false

11. The following are grounds for such disapproval, except:

a. The purpose or purposes of the corporation are patently unconstitutional, illegal, immoral or
contraryto government rules and regulations.

b. The certification concerning the amount of capital stock subscribed and/or paid is false.

c. The required percentage of Filipino ownership of the capital stock under existing laws or
theconstitution has not been complied with.

d. The articles of incorporation or any amendment thereto is not substantially in accordance with
theform prescribed by the Philippine Cooperative Code.

12. No corporate name shall be allowed by the SEC if it is not distinguishable from that already reserved
or registered for the use of another corporation. A name is not distinguishable even if it contains one or
more of the following:

I. The word “corporation”, “company”, “incorporated”, “limited”, “limited liability”, or an

abbreviation of one of such words;
II. Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different
tenses, spacing, or number of the same word or phrase. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

13. I. If a corporation does not formally organize and commence its business within 5 years from the
date of its incorporation, its certificate of incorporation shall be deemed revoked.

II. If a corporation has commenced its business but subsequently becomes inoperative for a period of at
least SEC may, after due notice and hearing, place the corporation under delinquent status. a. Only I is
true

b. Only II is true

C. Both are true

d. Both are false

14. I. If a delinquent corporation shall have a period of 2 years to resume operations and comply with all
requirements that the SEC shall prescribe.

II. Upon compliance by the corporation, the SEC shall issue an order lifting the delinquent status. Failure
to comply with the requirements and resume operations within the period given by the SEC shall cause
the revocation of the corporation’s certificate of incorporation.

a. Only I is true

b. Only II is true

с. Both are true

d. Both are false

15. I. Any person, partnership, association or corporation, singly or jointly with others but not more than
15 in number, may organize a corporation for any lawful purpose or purposes.

II. Natural persons who are licensed to practice a profession, and partnerships or associations organized
for the purpose of practicing a profession, shall not be allowed to organize as a corporation. a. Only I is
true

b. Only II is true

c Both are true

d. Both are false

16. I. Incorporators who are natural persons must be of legal age.

II. Each incorporator of a stock corporation must own or be a subscriber to at least 1 share of the capital
stock.

a. Only I is true
b. Only II is true n002abtn

c. Both are true

d. Both are false

17. A written contract to purchase newly issued shares of stock.

a. Sales contract

b. Redemption contract

c. Purchase contract

d. Subscription contract

18. Is that portion of the authorized capital stock which has been both subscribed and paid.

a. Authorized capital stock

b. Unissued capital stock

C. Paid-up capital

d. Outstanding capital

19. I. The contents of the articles of incorporation are binding, not only on the corporation, but also on
its shareholders.

II. The general rule as to corporations is that each corporation must have a name by which it is to sue
and be sued and do all legal acts.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

20. I. A corporation can change its name by amending its by-laws

II. A corporation with a single stockholder is considered a One Person Corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

21. The following are the reasons that a principal office of the corporation ust be stated in its articles of
incorporation, except:
a. To fix the residence of the corporation in a definite place.

b. For purposes of board of directors’ meeting.

c. To determine the venue of court cases involving corporation.

d. To determine the place where the books and records of the corporation are ordinarily kept.

22. I. A corporation is in a metaphysical sense a resident of the place where its principal office is located
as stated in the articles of incorporation.

II. The place where the principal office of the corporation is to be located is one of the required contents
of the by-laws.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

23. I. The filing of articles of incorporation and the issuance of the Certificate of incorporation are
essential for the existence of a de facto corporation.

II. An organization not registered with the SEC cannot be considered a

Corporation in any concept, not even as a corporation de facto.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

24. It applies when persons assume to form a corporation and exercise corporate functions and enter
into business relations with third persons.

a. De facto corporation

b. Corporation by prescription

C. De Jure Corporation

d. Corporation by estoppel

25. I. Stock corporations shall not be required to have a minimum capital Stock.

II. All corporations shall file with the Commission articles of

Incorporation in any of the official languages.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

26. I. An unincorporated association, which represented itself to be a corporation, will be estopped from
denying its corporate capacity in a suit against it by third person who relied in good faith on such
representation.

II. A third party who, knowing an association to be unincorporated, nonetheless treated it as a

corporation and received benefits from it, may be barred from denying its corporate existence in a suit
brought against the alleged corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

27. I. Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and
unfairness.

II. Consolidation becomes effective not upon mere agreement of the members but only upon issuance
of the certificate of consolidation by the SEC.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

28. The amendment of the articles of incorporation, requires merely that:

I. The amendment is not contrary to any provision or requirement under the Corporation Code.

II. It is for a legitimate purpose.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

Title III – BOARD OF DIRECTORS/TRUSTEES AND OFFICE

1. The following are the qualifications of a board of director/trustee, except:

a. For a stock corporation, ownership of at least 1 share of the capital or Stock of the corporation in
hisown name. For Non-stock Corporation, only members of the corporation can be elected.

b. Majority of the board of directors or trustees must be citizens of the Philippines.

c. The director or trustee must be capacitated.

d. The director or trustee must be of legal age.

2. I. The board of the following corporations vested with public interest shall have independent directors
constituting at least 10% of such board.

II. Independent directors must be elected by the other directors present or entitled to vote in absentia
during the election of directors.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

3. It is a person who, apart from shareholdings and fees received from the corporation, is independent
of management and free from any business or other relationship which could, or could reasonably be
perceived to materially interfere with the exercise of independent judgment in carrying out the
responsibilities as a director.

a. Dependent director

b. Independent director.c Authorized director.

d. Outstanding director.

4. I. The acts of corporate officers within the scope of their authority are binding on the corporation.

II. Any 2 or more positions may be held concurrently by the same person, except that no one shall act as
president and secretary or as president and vice-president at the same time. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. The power to remove directors or trustees belongs to the officers exclusively.

II. Removal of directors or trustees may be with or without cause.

a. Only I is true

b. Only II is trueС. Both are true

d. Both are false

6. The requisites for removal of directors are the following, except:

a. The removal should take place at a regular or special meeting duly called for the purpose.

b. The director or trustee can only be removed by a vote of the stockholders representing at
leastmajority of the outstanding capital stock or majority of the members entitled to vote in case of
nonstock corporations.

c. There must be a previous notice to stockholders or members of the corporation of the intention
topropose such removal at the meeting.

d. The special meeting of the stockholders or members of a corporation for the purpose of removal
mustbe called by the secretary on order of the president or on the written demand of the
stockholders representing or holding at least a majority of the outstanding capital stock or a majority
of the members entitled to vote.

7. Immediately after their election, the directors of a corporation must formally organize and elect:

a. A president, who must be a director.

b. A treasurer, who must be a resident.

c. A secretary, who must be a citizen and resident of the Philippines.

d. All of the above.

8. I. If the corporation is vested with public interest, the board shall also elect a compliance officer.

II. The officers shall manage the corporation and perform such duties as may be provided in the bylaws
and/or as resolved by the board of Directors.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

9. A person shall be disqualified from being a director, trustee or officer of any corporation if, within 5
years prior to the election or appointment as such, the person was:

a. Convicted by final judgment of an offense punishable by imprisonment for a period exceeding 6 years.
b. Found administratively liable for any offense involving fraudulent Acts

c. Found by a foreign or equivalent foreign regulatory authority for acts, violations or misconduct.

d. All of the above.

10. A person shall be disqualified from being a director, trustee or officer of any corporation if, within 5

years prior to the election or appointment as such, the person was convicted by final judgment.

a. of an offense punishable by imprisonment for a period exceeding 6 years;

b. For violating the Revised Corporation Code.

c. For violating The Securities Regulation Code.

d. All of the above.

11. The SEC shall, motu proprio or upon verified complaint, and after due notice and hearing, order the
removal of a director or trustee elected despite the disqualification, or whose disqualification arose or is
discovered subsequent to an election.

The removal of a disqualified director shall be without prejudice to other sanctions that the SEC may
impose on the board of directors or trustees who, with knowledge of the disqualification, failed to
remove such director or trustee.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

12. I. Any vacancy occurring in the board of directors or trustees other than by removal or by expiration
of term may be filled by the vote of at least a majority of the remaining directors or trustees, if still
constituting a Quorum.

II. Any directorship or trusteeship to be filled by reason of an increase In the number of directors or
trustees shall be filled only by an election at a regular or at a special meeting of stockholders or
members duly called for the purpose, or in the same meeting authorizing the increase of directors or
trustees if so stated in the notice of the meeting.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

13. I. Every director must own at least 100 share of the capital stock of the corporation of which he is a
director, which share shall stand in his name on the books of the corporation.
II. Trustees of non-stock corporations must be members thereof.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

14. I. The governing body of a corporation is its board of directors.

II. The board of directors of a corporation is a creation of law.

a. Only I is true

b. Only II is true

Both are true

d. Both are false

15. I. It is well settled in this jurisdiction that where corporate directors are guilty of a breach of trust, a
stockholder may institute a suit in behalf of himself and other stockholders and for the benefit of the
corporation.

II. The board of directors (or trustees, in case of non-stock corporations) has the sole authority to
determine policies, enter into contracts, and conduct the ordinary business of the corporation within
the scope of its charter.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

16. A corporation's board of directors is understood to be that body which, except:

a. Exercises all powers provided for under the Corporation Code.

b. Conducts all business of the corporation.

c. Controls and holds all property of the corporation.

d. None of the above.

17. I. The property of the corporation is not the property of its stockholders or members; however, it
may be sold by the stockholders or members.

II. The power and responsibility to decide whether a corporation can enter into a binding contract is
lodged with the board of directors.
a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

18. I. The directors of a corporation shall not receive any compensation for being members of the board
of directors, except for reasonable per diems.

II. In no case shall the total yearly compensation of directors, as such directors, exceed 10% of the net
income after income tax of the corporation during the preceding year. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

19. I. The general rule is that obligations incurred by the corporation, acting through its directors,
officers and employees, are its sole liabilities, and vice versa.

II. A contract of the corporation with one or more of its directors or trustees or officers is void.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

20. A contract of the corporation with one or more of its directors or trustees or officers.

a. Doctrine of self-dealing board of directors

b. Doctrine of corporate opportunity

c. Doctrine of double compensation

d. Doctrine of trust fund

21. The requisites for a contract of the corporation with one or more of its directors or trustees or
officers to be valid are the following, except

a. That the presence of such director or trustee in the board meeting in which the contract was
approvedwas not necessary to constitute a quorum for such meeting.

b. That the vote of such director or trustee was not necessary for the approval of the contract.

c. That the contract is fair and reasonable under the circumstances.

d. That in case of an officer, the contract has been previously authorized by the stockholders.
22. A director, by virtue of his office, acquires for himself a business opportunity which should belong to
the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the
latter for all such profits by refunding the same.

a. Doctrine of self-dealing board of directors

b. Doctrine of corporate opportunity

c. Doctrine of double compensation

d. Doctrine of trust fund

23. It is a body created by the by-laws and composed of not less than three members of the board
which, subject to the statutory limitations, has all the authority of the board of directors to the extent
provided in the bylaws.

a. Board committee

b. Trust committee

c. Officers' committee

d. Executive committee

24. The following are the limitations of an executive committee, except:

a. Approval of any action for which shareholders' approval is also required.

b. Filling of vacancies in the board.

c. Amendment or repeal of by-laws or the adoption of new by-laws.

d. Amendment or repeal of any resolution of the board.

25. I. The executive committee may act, by 2/3 vote of all its members.

II. The act of a director violating the doctrine of corporate opportunity can be ratified by a vote of the
stockholders owning or representing at least majority of the outstanding capital stock. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

26. I. A stockholder or member who participates through remote of communication or in absentia, shall
be deemed present for purposes of quorum.

II. The directors or trustees elected shall perform their duties as prescribed by law, rules of good
corporate governance, and bylaws of the corporation.

a. Only I is true
b. Only II is true

c. Both are true

d. Both are false

27. When the vacancy prevents the remaining directors from constituting a quorum and emergency
action is required to prevent grave, substantial, and irreparable loss or damage to the corporation, the
vacancy may be temporarily filled from among the officers of the corporation by unanimous vote of the
remaining directors or trustees.

a. Emergency board of director

b. Temporary board of director

c. Provisional board of director action

d. Interim board of director

28. I. Stockholders or members periodically elect the board of directors or trustees, who are charged
with the management of the corporation.

II. Stockholders or members also elects officers to carry out management functions on a day-to-day
basis.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

29. I. Acts of management pertain to the stockholders or members.

II. Acts of ownership pertain to the board.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

30. I. Once the directors or trustees are elected, the stockholders - members relinquish corporate
powers to the board in accordance with or law.

II. Contracts intra vires entered into by the board of directors are binding upon the corporation.

a. Only I is true

b. Only Il is true
c. Both are true

d. Both are false

Title IV – POWERS OF CORPORATIONS

1. It is the preferential right of all stockholders of a stock corporation to subscribe to all issues or
disposition of shares of any class, in proportion to their respective shareholdings. a. Appraisal right

b. Pre-emptive right

c. Right to vote

d. Voting right

2. I. The purpose of pre-emptive right is to enable the shareholder to retain his proportionate control in
the corporation.

II. A suit to enforce preemptive rights in a corporation is a derivative suit.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

3. The requirements for the sale or other disposition of assets are the following, except:

a. Approval by the majority vote of its board of directors or trustees.

b. Ratification by the vote of the stockholders representing at least 2/3 of the outstanding capital
stock,or in case of non-stock corporation, by the vote of at least to 2/3 of the members.

c. Any dissenting stockholder may exercise his appraisal right.

d. SEC approval is required.

4. The following are instances when a corporation may acquire its own shares, except:

a. to acquire founders’ shares.

b. To eliminate fractional shares arising out of stock dividends.

c. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in

adelinquency sale, and to purchase delinquent shares sold during said sale.

d. To pay dissenting or withdrawing stockholders entitled to payment for their shares under
theprovisions of the corporation code.

5. I. The corporation may only acquire its own stocks in the presence of unrestricted retained earnings.
II. Preferred shares may be acquired even without surplus profit for as long as it will not result to the
insolvency of the corporations.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. I. The requirement of unrestricted retained earnings to cover the shares is based on the doctrine of
limited capacity.

II. There can be no distribution of assets among the stockholders without first paying corporate
creditors. Hence, any disposition of corporate funds to the prejudice of creditors is rescissible. a. Only I
is true

b. Only II is true

c. Both are true

d. Both are false

7. The following are the requisites for the exercise of a corporate power to invest corporate funds in
another corporation, except:

a. Any dissenting stockholder shall have pre-emptive right.

b. Approval of the majority of the board of directors or trustees.

c. Ratification by the stockholders representing at least 2/3 of the outstanding capital stock, or by at
least2/3 of the members in the case of non-stock corporations, at a stockholder’s or member’s
meeting duly called for the purpose.

d. Written notice of the proposed investment and the time and place of the meeting shall be
addressedto each stockholder or member by mail or served personally.

8. The retained earnings which have not been reserved or set aside by the board of directors for some
corporate purpose.

a. Restricted retained earnings

b. All of the above

c. Unrestricted retained earnings

d. None of the above

9. I. No management contract shall be entered into for a period longer than 5 years for any 1 term.
II. No corporation shall possess or exercise corporate powers other than those conferred by the Revised
Corporation Code or by its articles of incorporation and except as necessary or incidental to the exercise
of the powers conferred.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

10. Where a stockholder or stockholders representing the same interest of both the managing and the
managed corporations own or control more than 1/3 of the total outstanding capital stock entitled to
vote of managing corporation.

a. Interlocking board of directors

b. Interlocking members

c. Interlocking stockholders

d. None of the above.

11. Where a majority of the members of the board of directors of the managing corporation also
constitute a majority of the members of the board of directors of the managed corporation. a.
Interlocking stockholders

b. Interlocking members

c. Interlocking board of directors

d. None of the above.

12. I. A corporation has no power except those expressly conferred on it by the Corporation Code and
those that are implied or incidental to its existence.

II. In turn, a corporation exercises said powers through its board of

Directors and/or its duly authorized officers and agents.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

13. It is an action brought by a stockholder on behalf of the corporation to enforce corporate rights
against the corporation’s directors, officers or other insiders.

a. Individual suit
b. Derivative suit

c. Corporate suit

d. Representative suit

14. The following are the requisites of the corporate power to extend or shorten corporate term:

I. Approval by a 2/3 vote of the board of directors or trustees.

II. Ratification by the stockholders representing at least 2/3 of the outstanding capital stock or by
at least2/3 of the members in case of non-stock corporations.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

15. It means that a stockholder who dissented and voted against the proposed corporate action, may
choose to get out of the corporation by demanding payment of the fair market value of his shares. a.
Pre-emptive right

b. Appraisal right C

Stockholders right

d. Right to liquidation

16. Subscriptions to the capital stock of a corporation constitute a fund to which the creditors have a
right to look for the satisfaction of their claims.

a. Trust fund doctrine

b. Doctrine of corporate opportunity

c. Doctrine of piercing the veil of corporate fiction

d. Entity doctrine

17. The distribution of corporate capital happens in only in three instances, amendment of the articles
of incorporation to reduce the except:

a. Authorized capital stock.

b. Purchase of redeemable shares by the corporation, regardless of the existence of

unrestrictedretained earnings.

c. Dissolution and eventual liquidation of the corporation.

d. Amendment of the by-laws to reduce the authorized capital stock

18. The following are the requirements of increase or decrease authorized capital stock, except:

a. No decrease of the capital stock shall be approved if its effect shall prejudice the rights of
corporatecreditors. 85

b. Approval by a majority vote of the board of directors.

c. Ratification by the stockholders holding at least 2/3 of the outstanding capital stock.

d. Approval thereof by the DTI.

19. I. The right of appraisal may be exercised when there is a fundamental change in the charter or
articles of incorporation substantially prejudicing the rights of the stockholders.

II. A corporation can purchase its own shares, provided payment is made out of surplus profits and the
acquisition is for a legitimate corporate purpose.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

20. Corporate profits set aside, declared, and ordered to be paid by the directors for distribution among
stockholders at a fixed time.

a. Income

b. Dividends

c. Revenue

d. Sales

21. I. payment of dividends to a stockholder is not a matter of right but a matter of consensus.

II. The declaration of dividends is dependent upon the availability of surplus profit or restricted retained
earnings.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

22. The limitations on dividends are the following, except:

a. The right to dividend is based on duly recorded stockholdings.

b. The right to dividend accrues only if there is SEC approval.

c. Dividends among stockholders of the same class must always be pro rata equal and
withoutdiscrimination and regardless of the time when the shares were acquired. The right of the
stockholder to be paid dividends accrues as soon as the declaration is made.

d. Declaration of dividends is discretionary upon the board of directors.

23. It is an agreement whereby a corporation delegates the management of Its affairs to another
corporation for a certain period of time.

a. Voting trust agreement

b. Contract of agencyC. Self-dealing contract

d. Management contract

24. It refers to an act outside or beyond corporate powers, including those that may ostensibly be within
such powers but are, by general or special laws, prohibited or declared illegal. a. Intra vires act

b. Doctrine of limited capacity

c. Ultra vires act

d. Doctrine of piercing the veil of corporate fiction

25. I. Every corporation has the power and capacity to have perpetual existence unless the certificate of
incorporation provides otherwise.

II. Every corporation has the power and capacity to enter into a partnership, joint venture, merger,
consolidation, or any other commercial agreement with natural and juridical persons. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

Title V – BYLAWS
1. I. It is the generally accepted rule that third persons are bound by by-laws.

II. By-laws may be necessary for the “government” of the corporation but these are subordinate to the
articles of incorporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. I. Bylaws may be adopted and filed prior to incorporation.

II. In all cases, bylaws shall be effective only upon the issuance by the SEC of a certification that the
bylaws are in accordance with the Revised Corporation Code.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

3. It is a condition precedent in the acquisition of corporate existence.

a. By-laws

b. Shares of stock

c. Articles of incorporation

d. Rules, regulation and discipline

4. I. The owners of majority of the outstanding capital stock or majority of the members in a non-stock
corporation may delegate to the board of directors or trustees the power to amend or repeal any bylaws
or adopt new by-laws.

II. The amended or new by-laws shall only be effective upon the issuance by the SEC of a certification
that the same are not inconsistent with the Revised Corporation Code. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. Any power delegated to the board of directors or trustees to amend repeal any by-laws or adopt
new by-laws shall be considered as revoked whenever stockholders owning or representing 2/3 of the
outstanding capital stock or 2/3 of the members in non-stock corporations, shall so vote at a regular or
special meeting.

II. Whenever the bylaws are amended or new bylaws are adopted, the corporation shall file with the SEC
such amended or new bylaws.

a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

6. It constitutes the charter or fundamental law of the corporation.

a. By-laws
b. Rules, regulation and discipline

c. Articles of incorporation

d. None of the above

7. A private corporation may provide the following in its bylaws:

a. The modes by which a stockholder, member, director, or trustee may attend meetings and cast
theirvotes.

b. The form for proxies of stockholders and members and the manner of voting them.

c. The manner of election or appointment and the term of office of all officers other than directors
ortrustees.

d. All of the above.

8. The rules and regulations or private laws enacted by the corporation to regulate, govern and control
its own actions, affairs and concerns and its stockholders or members and directors and officers with
relation thereto and among themselves in their relation to it

a. articles of incorporation

b. Resolution

c. Rules, regulation and discipline

d. By-laws

9. I. The purpose of a by-law is to regulate the conduct and define the duties of the members towards
the corporation and

II. By-laws are the relatively permanent and continuing rules of action adopted by the corporation for its
own government and that of the individuals composing it and having the direction, management and
control of its affairs, in whole or in part, in the management and control of its affairs and activities. a.
Only I is true

b. Only II is true

c. Both are true

d. Both are false

10. I. The bylaws shall be signed by the stockholders or members voting for them and shall be kept in
the principal office of the corporation.

II. A copy of the bylaws, duly certified by a majority of the directors or trustees and countersigned by the
secretary of the corporation, shall be filed with the SEC and attached to the original articles of
incorporation.

a. Only I is true
b. Only II is true

c. Both are true

d. Both are false

Title VI - MEETINGS
1. I. As a rule, a quorum shall consist of the stockholders representing a majority of the outstanding
capital stock or a majority of the members the case of nonstock corporations.

II. Unless the articles of incorporation or the bylaws provides for a greater majority, a majority of the
directors or trustees as stated in the articles of incorporation shall constitute a quorum to transact
corporate business.

a. Only I is true

b. Only Il is true

c. Both are true

d. Both are false

2. Is the book which records the names and addresses of all stockholders arranged alphabetically, the
installments paid and unpaid on all stock for which subscription has been made, and the date of
payment thereof.

a. Check book

b. Journals

c. Ledgers

d. Stock and transfer book

3. I. Every decision of at least a majority of the directors or trustees present at a meeting at which there
is a quorum shall be valid as a corporate act.

II. The election of officers which requires the vote of a majority of all the members of the board.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. The requirements for board meeting are the following, except:

a. Meeting of the directors or trustees duly assembled as a Board.

b. Decision of the majority of all the members of the board.

c. Presence of the required quorum.

d. Meeting at the place, time, and manner provided in the by-laws.

5. I. Meetings of directors or trustees of corporations may be held anywhere in or outside of the

Philippines, unless the bylaws provide otherwise.

II. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to
every director or trustee at least 1 day prior to the scheduled meeting, unless a longer time is provided
in the bylaws.

a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

6. I. In case of pledged or mortgaged shares in stock corporations, the pledgee or mortgagee shall have
the right to attend and vote at meetings of stockholders.

II. In case of shares of stock owned jointly by two or more persons, in order to vote the same, the
consent of all the co-owners shall be necessary.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

7. I. Treasury shares shall have no voting right as long as such shares remain in the Treasury.

II. Directors or trustees cannot attend or vote by proxy at board meetings but there is no prohibition for
them to act as proxies in stockholders' meetings.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

8. I. Directors or trustees who cannot physically attend or vote at board meetings can participate and
vote through remote communication such as videoconferencing, teleconferencing, or other alternative
modes of communication that allow them reasonable opportunities to participate.

II. Directors or trustees can attend or vote by proxy at board meetings.

a. Only I is true

b. Only II is true
c. Both are true

d. Both are false

9. I. The chairman or, in his absence, the president shall preside at meetings of the directors or trustees
as well as of the stockholders or members, unless the bylaws provide otherwise.

II. In case a stockholder grants security interest in his or her shares In stock corporations, the
stockholder-grantor shall have the right w attend and vote at meetings of stockholders. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

10. I. Executors, administrators, receivers, and other legal representative’s stockholders duly appointed
by the court may attend and vote in behalf of the stockholders or members without need of any written
proxy.

II. When the shares are owned in an "and/or" capacity by the holders thereof, any one of the Joint
owners can vote said shares or appoint a proxy therefor.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

11. I. Stockholders and members may vote in person or by proxy in all meetings of stockholders or
members.

Il. When so authorized in the bylaws or by a majority of the board of directors, the stockholders or
members of corporations may also vote through remote communication or in absentia.

II. A stockholder or member who participates through remote communication or in absentia shall be
deemed present for purposes of quorum.

a. Only I is true

b. Only II is trueC. Only III is true

d. I, II and III are true

12. I. The general rule is that every member of a non-stock corporation, and every legal owner of shares
in a stock corporation, has a right to be present and to vote in all corporate meetings.

II. Voting may be expressed personally, or through proxies who vote in their representative capacities.

a. Only I is true
b. Only II is true

c. Both are true

d. Both are false

13. I. Directors must act as a body in a meeting called pursuant to the law or the corporation's by-laws,
otherwise, any action taken therein may questioned by any objecting director or shareholder.

II. The general rule is that a corporation, through its board of directors, should act in the manner and
within the formalities, if any, prescribed by its charter or by the general law. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

14. I. An action of the board of directors during a meeting, which was I for lack of notice, may not be
ratified.

II. Notice of meeting may not be waived, expressly or stockholder or member.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

15. The requirements for a valid meeting are the following, except:

a. It must be held at the stated date and at the appointed time.

b. . It must be called by the proper person

c. The person or persons designated in the by-laws have authority to call stockholders or
membersmeeting.

d. It must be held always at the principal place of business.

16. I. Stockholder's or member's meetings shall be held in the city or municipality where the principal
office of the corporation is located.

II. Regular meetings of stockholders or members shall be held annually on a date fixed in the bylaws, or
if not so fixed, on any date after April 15 of every year as determined by the board of directors or
trustees. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

17. I. In regular meetings of stockholders or members, a written notice of regular meetings shall be sent
to all stockholders or members of at least 10 days prior to the meeting.

II. Written notice of regular meetings may be sent to all stockholders or members of record through
electronic mail or such other manner as the SEC shall allow under its guidelines. a. Only I is true

b. Only II is true

Both are true

d. Both are false

18. I. Any city or municipality in Metro Manila, Metro Cebu, Metro Davao, and other Metropolitan areas
shall, for purposes of stockholders' or members' meetings, be considered a city or municipality.

II. Notice of meetings shall be sent through the means communication provided in the bylaws, which
notice shall state the time, place and purpose of the meetings.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

19. The requirements for a valid proxy are the following, except:

a. It shall be in writing.

b. It shall be filed before the scheduled meeting with the corporate secretary.

c. It shall be signed by the corporate secretary.

d. Unless otherwise provided in the proxy, it shall be valid only for the meeting which it is intended.

20. The purposes of proxies are the following, except:

a. For convenience.

b. It enables those who do not wish to attend the meeting to protect their interest.c. It

assures the presence of all.

d. n It secures voting control.

21. Revocation of proxy may be made through the following, except:

a. Formal notice;

b. Verbal communication; or
c. Conduct

d. None of the above

22. A trust created by an agreement between a group of the stockholders of a corporation and the
trustee or by a group of identical agreements between individual stockholders and a common trustee,
whereby it is provided that for a term of years, or for a period contingent upon a certain event, or until
the agreement is terminated, control over the stock owned by such stockholders, either for certain
purposes or for all purposes, is to be lodged in the trustee, either with or without a reservation to the
owners, or persons designated by them, of the power to direct how such control shall be used. a. Proxy

b. Management contract

c. Voting trust agreement

d. Executive committee

23. The following are the requirements imposed on a voting trust agreement, except:

a. The agreement must be in writing and notarized and specify the terms and conditions thereof.

b. A certified copy of such agreement shall be filed with the corporation and with the Securities
andExchange Commission; non-compliance, however, said agreement is effective and enforceable.

c. The certificate or certificates of stock covered by the voting trust agreement shall be cancelled
andnew ones shall be issued in the name of the trustee or trustees stating that they are issued
pursuant to said agreement.

d. It shall be noted that the transfer in the name of the trustee or trustees is made pursuant to
saidvoting trust agreement.

24. The three tests of voting trust agreement are the following:

a. That the voting rights of the stock are separated from the other attributes of ownership

b. That the voting rights granted are intended to be irrevocable for a definite period of time.

c. That the principal purpose of the grant of voting rights is to acquire long o gaits voting control of
thecorporation.

d. All of the above.

25. I. A stockholder or member may propose the holding of a special meeting and items to be included
in the agenda.

II. Whenever for any cause, there is no person authorized or the person authorized unjustly refuses to
call a meeting, the SEC, upon petition of a stockholder or member on a showing of good cause therefor,
may issue an order, directing the petitioning stockholder or member to call a meeting of the corporation
by giving proper notice.

a. Only I is true
b. Only II is true

c. Both are true

d. Both are false

26. I. Unless the bylaws provide for a longer period, the stock and transfer book or membership book
shall be closed at least 20 days for regular meetings and 7 days for special meetings before the
scheduled date of the meeting.

II. The right to vote of stockholders or members may be exercised in person, through a proxy, or when
so authorized in the bylaws, through remote communication or in absentia. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

Title VII – STOCKS AND STOCKSHOLDERS

1. I. As long as the shares are not considered delinquent, stockholders are entitled to all rights granted
to it whether or not subscribed capital stocks are fully paid.

II. Shares of stock shall not be issued in exchange for promissory notes or future service.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. I. Stocks shall not be issued for a consideration less than the par or issued price thereof.

II. Where the consideration is other than actual cash, or consists of intangible property such as patents
of copyrights, the valuation thereof shall initially be determined by the incorporators or the board of
directors, subject to approval of the SEC.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

3. Unit of interest in a corporation.

a. Treasury stock
b. Certificate of stock

c. Shares of stock

d. Par value stock

4. Evidence of the holder’s ownership of the stock and of his right as a shareholder.

a. Treasury stock

b. Certificate of stock

c. Shares of stock

d. Par value stock

5. I. The stock and transfer book is the basis for ascertaining the persons entitled to the rights and
subject to the liabilities of a stockholder.

II. On the death of a shareholder, the executor or administrator duly appointed by the Court is vested
with the legal title to the stock but not entitled to vote it.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. For a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed by
law. The following are the requirements, except:

a. There must be delivery of the stock certificate.

b. The certificate must be endorsed by the owner or his attorney-in- fact or other persons legally
authorized to make the transfer.

c. To be valid against third parties, the transfer must be recorded in the books of the corporation.

d. To be valid against third parties, the transfer must be recorded in the SEC.

7. Solidary liabilities may be incurred and the veil of corporate fiction may be pierced when directors
and trustees or, in appropriate case, the officers of a corporation does the following, except:

a. Vote for or assent to patently unlawful acts of the corporation.

b. Act in bad faith or with gross negligence in directing the corporate affairs.

c. Are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and
other persons.

d. Habitual absence in the directors' meeting.

8. I. As a rule, the doctrine of corporate opportunity is violated where the to stocks are issued by the
corporation for a consideration which is less than its par value.

II. Subscribers for stock shall pay to the corporation interest on all unpaid subscriptions from the date
of subscription, if so required by, and at the rate of interest fixed in the by-laws. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

9. Bidder who shall offer to pay the full amount of the balance on the subscription together with
accrued interest, costs of advertisement and expenses of sale, for the smallest number of shares or
fraction of a share.

a. Lowest bidder

b. Winning bidderC. Highest bidder

d. Losing bidder

10. I. A subscription of shares in a corporation still to be formed shall be irrevocable for a period of at
least six (6) months from the date of subscription.

II. No pre-incorporation subscription may be revoked after the articles of incorporation is submitted to
the Commission.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

11. Consideration for the issuance of stock may be:

a. Actual cash paid to the corporation.

b. Labor performed for or services to be rendered to the corporation;

c. Property, tangible or intangible, actually received by the corporation and necessary or convenient for
its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued.

d. Previously incurred indebtedness of the corporation.

12. I. In stock corporations, shareholders may generally transfer their

Shares.
II. Membership in and all rights arising from a non-stock corporation are personal and non-transferable.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

13. Is an action brought by minority shareholders in the name of the corporation to redress wrongs
committed against it, for which the directors refuse to sue.

a. Derivative suit

b. Individual suit

c. Representative suit

d. Class suit

14. The following are the requisites of a derivative suit:

a. The party bringing suit should be a shareholder as of the time of the act or transaction
complained of, the number of his shares not being material;

b. He has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of
directors for the appropriate relief but the latter has failed or refused to heed his plea; and

c. The cause of action actually devolves on the corporation wrongdoing or harm having been, or
being caused to the corporation and not to the particular stockholder bringing the suit. d. All of the
above

15. Where a stockholder or member is denied the right of inspection, his suit would be individual
because the wrong is done to him personally and not to the other stockholders or the corporation.
a. Representative suit

b. Class suit

c. Derivative suit

d. Individual suit

16. Where the wrong is done to a group of stockholders, as where preferred stockholders’ rights are
violated, a class suit will be proper for the protection of all stockholders belonging to the same group.
a. Individual suit

b. Corporate suit

c. Representative suit
d. Derivative suit

17. Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to
be formed shall be deemed a subscription notwithstanding the fact that the parties refer to it as a
purchase or some other contract.

a. Contract of sale

b. Management contract

c. Subscription contract

d. None of the above

18. I. The rule is that the endorsement of the certificate of stock by the owner or his attorney-in-fact or
any other person legally authorized to make the transfer shall be sufficient to effect the transfer of
shares only If the same is coupled with delivery.

II. The delivery of the stock certificate duly endorsed by the owner is the operative act of transfer of
shares from the lawful owner to the new transferee.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

19. I. The certificate of stock itself once issued is a continuing affirmation or representation that the
stock described therein is valid and genuine.

II. Stock issued without authority and in violation of law is voidable and confers no rights on the person
to whom it is issued and subjects him to no liabilities.

a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

20. I. A certificate of stock is one, entire and divisible contract.

II. The stockholder shall not be entitled to a certificate until he has remitted the full payment of
his subscription together with any interest or expenses, if any is due. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

21. I. The general rule is that obligations incurred by the corporation, acting through its directors,
officers and employees, are their joint

II. It is basic that a corporation is a juridical entity with legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

22. The following, except one, are the exceptional circumstances warranting the disregard of the
doctrine of separate personality:

a. When a director, trustee or officer is made, by specific provision of by-laws, personally liable for
his corporate action.
b. When directors and trustees or, in appropriate case, the officers of a corporation vote for or
assent to patently unlawful acts of the corporation.
c. When a director or officer has consented to the issuance of watered down stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto.
d. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarity liable with the corporation.

Title VIII – CORPORATE BOOKS AND RECORDS

1. The books and records required to be kept by the corporation are the following, except:

a. Minutes of meetings of stockholders or members.

b. Minutes of all meetings of directors or trustees.

c. Stock and transfer book, in case of stock corporations.

d. Daily time record.

2. The following are the limitations on the right of inspection by a stockholder, except:

a. The right can be exercised only by the common stockholders.

b. The right must be exercised during reasonable hours on business days.

c. The person demanding the right has not improperly used any information obtained through any
previous examination of the books and records of the corporation.

d. The demand is made in good faith or for a legitimate purpose.

3. I. The corporate secretary has the duty to record and prepare the minutes of the meeting.

II. Without the certification of the corporate secretary, it is incumbent upon the other directors or
stockholders as the case may be, to submit proof that the minutes of the meeting is accurate and
reflective of what transpired during the meeting.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. I. A corporation shall furnish a stockholder or member, within 10 days from receipt of their written
request, its most recent financial statement, in the form and substance of the financial reporting
required by the Commission.

II. At the regular meeting of stockholders or members, the board of directors or trustees shall present to
such stockholders or members a financial report of the operations of the corporation for the preceding
year, which shall include financial statements.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. The proper custodian of the books, minutes and official records of a corporation is usually the
corporate treasurer.

II. The signature of the corporate president gives the minutes of the meeting probative value and
credibility.

a. Only I is true

b. Only Il is true

c. Both are true

d. Both are false

6. I. The stockholder's right of inspection of the corporation's books and records is based upon
their ownership of the assets and property of the corporation. II. The right of inspection granted to
stockholders is absolute.

a. Only I is true

b. Only II is true
c. Both are true

d. Both are false

7. I. Corporate records, regardless of the form in which they are stored shall be open to inspection by
any director, trustee, stockholder or member of the corporation in person or by a representative at
reasonable hours on business days.

II. The inspecting or reproducing party shall remain bound by confidentiality rules under prevailing laws.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

8. I. A requesting party who is not a stockholder or member of record, or is a competitor, director,

officer, controlling stockholder or otherwise represents the interests of a competitor shall have no right
to inspect or demand reproduction of corporate records.

II. If the corporation denies or does not act on a demand for inspection and/or reproduction, the
aggrieved party may report such denial or inaction to the SEC

a. Only I is true.

b. Only II is true

c. Both are true

d. Both are false

9. Stock corporations must also keep a stock and transfer book, which

a. A record of all stocks in the names of the stockholders

b. The installments paid and unpaid on all stocks for which shall contain: subscription has been made,
and the date of payment of any instalment.

c. A statement of every alienation, sale or transfer of stock made, date thereof, by and to whom

made.d. All of the above.

Title IX – MERGER AND CONSOLIDATION

1. It is the union of two or more existing entities to form a new entity called the consolidated
corporation.

a. Merger
b. Acquisition

c. Consolidation

d. Business combination

2. I. Merger or consolidation become effective upon the mere agreement of the constituent
corporations.

II. Ordinarily, in the merger of two or more existing corporations, one of the corporations survives and
continues the combined business, while the rest are dissolved and all their rights, properties, and
liabilities are acquired by the surviving corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

3. I. Upon approval by majority vote of each of the board of directors or trustees of the constituent
corporations of the plan of merger or consolidation, the same shall be submitted for approval by the
stockholders or members of each of such corporations at separate corporate meetings duly called for
the purpose.

II. The affirmative vote of stockholders representing at least 2/3 of the outstanding capital stock of each
corporation in the case of stock corporations or at least 2/3 of the members in the case of non-stock
corporations shall be necessary for the approval of such plan.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. I. In the merger of two existing corporations, one of the corporations survives and continues the
business, while the other is dissolved, and all its rights, properties, and liabilities are acquired by the
surviving corporation.

II. By operation of law, upon the affectivity of the merger, the absorbed corporation ceases to exist but
its rights and properties, liabilities, shall be taken and deemed transferred to and vested in tie surviving
corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. Any amendment to the plan of merger or consolidation may be made.

II. The amendment to the plan of merger or consolidation must be approved by a majority vote of the
respective boards of directors or trustees of all the constituent corporations and ratified by the
affirmative vote of stockholders representing at least 2/3 of the outstanding capital stock or of 2/3 of
the members of each of the constituent corporations.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. The merger or consolidation shall have the following effects:

a. The constituent corporations shall become a single corporation.

b. The separate existence of the constituent corporations shall cease.

c. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities, and
powers and shall be subject to all the duties and liabilities of a corporation. d. All of the above.

7. As a rule, a corporation that purchases the assets of another will not be liable for the debts of the
selling corporation, except when any of the following circumstances is present. Which is the exception?
a. Where the transaction is validly entered into.

b. Where the purchaser expressly or impliedly agrees to assume the debts.

c. Where the transaction amounts to a consolidation or merger of the corporations.

d. Where the purchasing corporation is merely a continuation of the selling corporation.

8. 1. Two or more corporations may merge into a single corporation which shall be one of the
constituent corporations.

II. Two or more corporations may consolidate into a new single corporation which shall be the
consolidated corporation.

a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

9. It is a union whereby one or more existing corporations are absorbed another corporation that
survives and continues the combined a business.
a. Consolidation

b. Acquisition

c. Business combination

d. Merger

10. I. For a valid merger or consolidation, the approval by the SEC of the articles of merger or
consolidation is required.

II. If, upon investigation, the SEC has reason to believe that the proposed merger or consolidation is
contrary to the provisions of the corporation Code or existing laws, it shall set a hearing to give the
corporations concerned the opportunity to be heard.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

11. I. The merger shall only be effective upon the issuance of a certificate of merger by the SEC.

II. Consolidation becomes effective not upon mere agreement of the members but only upon issuance
of the certificate of consolidation by the SEC.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

12. I. When the SEC is satisfied that the consolidation of the corporations is not inconsistent with the
provisions of the Corporation Code and existing laws, it issues a certificate of consolidation which makes
the reorganization official.

II. Since there is a dissolution of the absorbed corporations, there is winding up of their affairs or
liquidation of their assets.

a. Only I is true

b. Only II is true

с. Both are true

d. Both are false

 Title X – APPRAISAL RIGHT
1. I. The dissenting stockholder shall be entitled to receive payment of the fair value of his shares as
agreed upon between him and the corporation or as determined by the appraisers chosen by them.

II. Payment may be made regardless if the corporation has unrestricted Retained earnings in its books to
cover the same.

a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

2. The following are instances where a dissenting stockholder who Demands payment of his shares is
no longer allowed to withdraw from His decision, except: A. The corporation consents to the
withdrawal.

b. The proposed corporate action is approved by the SEC where its approval is necessary.

c. The proposed corporate action is abandoned or rescinded by the corporation.

d. The SEC determines that such stockholder is not entitled to appraisal right.

3. I. The corporation shall bear the costs of appraisal, as a rule.

II. Clearly, the right of appraisal may be exercised when there is a minor change in the charter or
articles of incorporation substantially prejudicing the rights of the stockholders. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value
of his shares in the following instances, except:

a. In case any amendment to the articles of incorporation has effect of changing or restricting the rights
of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of
outstanding shares of any class, or of extending or shortening the term of corporate existence.

b. In case of sale, lease, exchange, transfer, mortgage, pledge o disposition of all or substantially all of
thecorporate property and or other assets.

c. In case of increase or decrease of capital stock.

d. In case of merger or consolidation.

5. The following are the instances of appraisal right, except:

a. In case of investing of corporate funds in another corporation or

b. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially
all of the corporate property and business assets.

c. In case of merger or consolidation.

d. In case any amendment to the articles of incorporation.

6. I. In a close corporation, any stockholder of a close corporation may, for any reason, compel the said
corporation to purchase his shares at their fair value, which shall not be less than their par or issued
value, when the corporation has sufficient assets in its books to cover its debts and liabilities exclusive of
capital stock.

II. The appraisal right may be exercised by any stockholder who shall have voted against the proposed
corporate action, by making a written demand on the corporation within 30 days after the date on
which the vote was taken for payment of the fair value of his shares.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

7. I. If within a period of 60 days from the date the corporate action was approved by the stockholders,
the withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be
determined and appraised by 5 disinterested persons.

II. That no payment shall be made to any dissenting stockholder unless the corporation has unrestricted
retained earnings in its books to cover such payment.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

8. The effects of transfer of dissenting shares are the following:

I. The rights of the transferor as a dissenting stockholder shall cease and the transferee shall
have all the rights of a regular stockholder.

II. All dividend distributions which would have accrued on such shares shall be paid to the

transferee.a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

9. I. From the time of demand for payment of the fair value of a stockholder's shares until either the
abandonment of the corporate action involved or the purchase of the said shares by the corporation, all
rights accruing to such shares, including voting and dividend rights, shall be suspended.

II. If the dissenting stockholder is not paid the value of his shares within 10 days after the award, his
voting and dividend rights shall immediately be restored.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

10. It means that a stockholder who dissented and voted against the proposed corporate action,
may choose to get out of the corporation by demanding payment of the fair market value of his
shares. a. Pre-emptive right

b. Voting right

c. Appraisal right

d. Management right

Title XI – NONSTOCK CORPORATION

1. I. In stock corporations, shareholders may generally transfer their shares.

II. Membership in and all rights arising from a non-stock corporation are transferable.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. The Plan of Distribution of Assets may be adopted by a majority vote of the board of trustees and
approval of majority of the members having voting rights present or represented by proxy at the
meeting during which said plan is adopted.

II. Members’ meetings may be held at any place outside the principal office of the corporation provided
it shall be within the Philippines.

a. Only I is true

b. Only II is true
c. Both are true

d. Both are false

3. I. No person shall be elected as trustee unless he is a member of the corporation.

II. Unless otherwise provided in the articles of incorporation or the by-laws, officers of a non-stock
corporation may be directly elected by the members.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. I. Membership shall be terminated in the manner and for the causes provided in the articles of
incorporation or the by-laws.

II. Termination of membership shall have the effect of extinguishing all rights of a member in the
corporation or in its property, unless otherwise provided in the articles of incorporation or the by-laws.
a. Only I is true

b. Only II is true

C. Both are true

d. Both are false

5. It is one where no part of its income is distributable as dividends to its members, trustees, or officers.

a. Stock corporation

b. Close corporation

c. Corporation sole

d. Non-stock corporation

6. I. Any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever
necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation
was organized.

II. A non-stock corporation can be converted into a stock e by mere amendment of its articles of
incorporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

7. The following are the characteristics of a non-stock corporation, except:

a. It does not have capital stock divided into shares.

b. As a general rule, it is not empowered to engage in business. Moreover, it is prohibited to make

income or profits as an incident to its operation.

c. No part of its income during its existence is distributable as dividends to its members, trustees, or
officers.

d. There is non-transferability of membership.

8. The following are the characteristics of a non-stock corporation, except:

a. The right to vote of members may be limited, broadened, or even denied in the articles of
incorporation or the by-laws.

b. By-laws may provide that the members may hold their meetings at any place even outside the
place where the principal office of the corporation is located, even if that such place is outside the
Philippines.

c. Non-stock corporation may, through their articles of incorporation or their by-laws designate
their governing boards by any name other than as board of trustees.

d. A non-stock corporation is not allowed to distribute any of its assets or any incidental income or
profit made by the corporation during its existence.

9. I. The determination of whether or not “dead members” are entitled to exercise their voting rights,
depends on those articles of incorporation or by-laws.

II. In stock corporations, on the death of a shareholder, the executor or administrator duly appointed
by the Court is vested with the legal title to the stock and entitled to vote it. a. Only I is true

b. Only Il is true

c. Both are true

d. Both are false

10. I. Membership in and all rights arising from a non-stock corporation a personal and non-transferable.

II. Unless otherwise provided in the articles of incorporation or the by-Laws, a member may not vote by
proxy.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

11. I. The number of trustees shall be fixed in the articles of incorporation or bylaws which may or may
not be more than 15.

II. Except with respect to independent trustees of nonstick corporations vested with public interest, only
a member of corporation shall be elected as trustee.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

Title XII – CLOSE CORPORATIONS

1. An action by the directors of a close corporation without a meeting shall not be deemed valid if:

a. All the stockholders have actual or implied knowledge of the action and make no prompt objection
thereto in wring.

b. the directors are accustomed to take informal action with the express or implied acquiescence of all
the stockholders.

c. all the directors have express or implied knowledge of the action in question and none of them makes
prompt objection thereto in writing.

d. Before or after such action is taken, written consent thereto is signed by a majority the directors.

2. I. The pre-emptive right of stockholders in close corporation shall extend to all stock to be issued,
excluding reissuance of treasury shares.

II. A close corporation may, at its option, refuse to register the transfer of the stock in the name of
the transferee if the person is not qualified to be a stockholder and has notice thereof. a. Only I is
true

b. Only II is true

c. Both are true

d. Both are false

3. An impartial person who is neither a stockholder nor a creditor of the corporation or any subsidiary of
the corporation, and whose further qualifications, if any, may be determined by the SEC. a. Provisional
stockholder

b. Provisional member
c. Provisional trustee

d. Provisional director

4. Any stockholder of a close corporation may by written petition to the sec compel the dissolution of
such corporation whenever:

I. Any of act of the directors or officers is illegal or fraudulent or dishonest or oppressive or

unfairly prejudicial to the corporation or any stockholder II. Corporate assets are being misapplied
or wasted.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. A provisional directory is not a receiver of the corporation and does not have the title and powers of
a custodian or receiver.

II. A provisional director shall have all the rights and powers of a duly elected director of the
corporation, including the right to notice of and to vote at meetings of directors, until such time as he
shall be removed by order of the Commission or by all the stockholders. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. A close corporation is one whose articles of incorporation provides the following, except:

а. All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by
not more than specified number of persons, not exceeding 20;

b. All the issued stock of all classes shall be subject to 1 or more specified restrictions on transfer.

c. The corporation shall not list in any stock exchange or make any public offering of its stocks of any
class.

d. All of the above.

7. The following are corporations that cannot incorporate as a close corporation, except:

a. Industrial companies

b. Mining or oil companies

c. Stock exchanges
d. Banks

8. The following are characteristics of a close corporation, except:

a. Where the articles of incorporation provide that the business of the corporation shall be managed by
the stockholders themselves rather than by the board of directors, then the stockholders shall be
deemed to be the directors with all the liabilities imposed by the Corporation Code on directors. The
stockholders shall not be personally liable for corporate torts.

b. Quorum may be greater than mere majority.

c. Restrictions on transfer of shares can be validly imposed.

d. Any action by the directors of a close corporation without a meeting shall nevertheless be deemed
valid.

9. The following are characteristics of a close corporation, except.

a. Any action by the directors of a close corporation without a meeting shall nevertheless be deemed
valid.

b. Deadlock in the board is settled by the SEC upon the written petition by any stockholder.

c. Pre-emptive right does not extend to all stock issuances.

d. A stockholder may withdraw and avail of his right of appraisal.

10. The articles of incorporation of a close corporation may provide, except

a. A classification of shares or rights and the qualifications for owning or holding the same and
restrictions on their transfers as may be stated therein, subject to the provisions of the
following section.
b. A lesser quorum or voting requirements in meetings of stockholders or directors.
c. A classification of directors into one or more classes, each of whom may be voted for and
elected solely by a particular class of stock.
d. The business of the corporation shall be managed by the stockholders of the corporation rather
than by a board of directors.

11. Any person to whom stock or a close corporation has been issued or transferred has, or is
conclusively presumed to have notice.

a. That he is a person not eligible to be a holder of stock of the corporation

b. That transfer of stock to him would cause the stock of the corporation to be held by more than the
number of persons permitted by its articles of incorporation to hold stock of the corporation; or

c. That the transfer of stock is in violation of a restriction on transfer of stock.d. All of the above
 Title XIII – SPECIAL CORPORATIONS
1.. Any corporation sole may purchase and hold real estate and personal property for its church,
charitable, benevolent or educational purposes, and may receive bequests or gifts for such purposes.

II. Such corporation sole may sell or mortgage real property held by it by obtaining an order for that
purpose from the Regional Trial Court.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. A corporation sole must have an articles of incorporation setting forth the following:

a. That the applicant chief archbishop, bishop, priest, minister, rabbi Or presiding elder of his religious
denomination, sect or church which desires to become a corporation sole.

b. That the rules, regulations and discipline of his religious denomination, sect or church are not
inconsistent with becoming a corporation sole and do not forbid it.

c. That as such chief archbishop, bishop, priest, minister, rabbi or presiding elder, he is charged with the
administration of the temporalities and the management of the affairs, estate and properties of his
religious denomination, sect or church within the territorial jurisdiction, describing such territorial
jurisdiction.

d. All of the above

3. I. A majority of the trustees shall constitute a quorum for the transaction of business.

II. Trustees elected thereafter in educational corporation to fill vacancies caused by expiration of term
shall hold office for 3 years.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. I. Any corporation sole may purchase and hold real estate and personal property for its church,
charitable, benevolent or educational purposes, and may receive bequests or gifts for such purposes.

II. In cases where the rules, regulations and discipline of the religious denomination, sect or
church, religious society or order concerned represented by such corporation sole regulate the
method of acquiring such holding, selling and mortgaging real estate and personal property such
as rules, regulations and discipline shall control, and the intervention of the courts shall not be
necessary. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. 1. The One Person Corporation shall appoint a treasurer, corporate secretary, and other officers as it
may deem necessary.

II. The single stockholder may be appointed as the corporate secretary.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. In addition to the functions designated by the One Person Corporation, the corporate secretary shall:

a. Be responsible for maintaining the minute’s book and/or records of the corporation.

b. Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which
notice shall be given no later than 5 days from such occurrence.

c. Notify the SEC of the death of the single stockholder within 5 days from such occurrence and stating
insuch notice the names, residence addresses, and contact details of all known legal heirs. d. All of the
above.

7. I. The single stockholder shall designate a nominee and an alternate nominee who shall, in the event
of the single stockholder's death or incapacity, take the place of the single stockholder as director and
shall manage the corporation's affairs.

II. The articles of incorporation shall state the names, residence addresses and contact details of the
nominee and alternate nominee, as well as the extent and limitations of their authority in managing the
affairs of the One Person Corporation.

a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

8. I. When the incapacity of the single stockholder is temporary, the nominee shall sit as director and
manage the affairs of the One Person Corporation until the stockholder, by self-determination, regains
the capacity to assume such duties.
II. In case of death or permanent incapacity of the single stockholder, nominee shall sit as director
and manage the affairs of the One Person Corporation until the legal heirs of the single stockholder have
been lawfully determined, and the heirs have designated one of them or have agreed that the estate
shall be the single stockholder of the One Person Corporation.

III. The alternate nominee shall sit as director and manage the One Person Corporation in case of
the nominee's inability, incapacity, death, or refusal to discharge the functions as director and manager
of the corporation, and only for the same term and under the same conditions applicable to the
nominee. a. Only I is true

b. Only II is true

c. Only III is true

d. I, II, and III are true

9. I. The single stockholder may, at any time, change its nominee and alternate nominee by submitting
to the SEC the names of the nominees and their corresponding written consent.

II. A One Person Corporation shall maintain a minute’s book which shall contain all actions, decisions,
and resolutions taken by the One Person Corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

10. I. When action is needed on any matter, it shall be sufficient to prepare a written resolution, signed
and dated by the single stockholder, and recorded in the minute’s book of the One Person Corporation.

II. The date of recording in the minute’s book shall be deemed to be the date of the meeting for all
purposes.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

11. I. The One Person Corporation converted from an ordinary stock corporation shall succeed the latter
and be legally responsible for all the latter's outstanding liabilities as of the date of conversion.

II. The ordinary stock corporation converted from a One Person Corporation shall succeed the latter
and be legally responsible for all the latter's outstanding liabilities as of the date of conversion. a. Only I
is true
b. Only II is true

c. Both are true

d. Both are false

12. I. Trustees of educational institutions organized as nonstick corporations shall not be less than 5 nor
more than 15.

II. The number of trustees shall be in multiples of 5.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

13. I. The board of trustees shall, as soon as organized, so classify themselves that the term of office of
1/5 of their number shall expire every year.

II. Religious corporations may be incorporated by one or more persons. Such corporations may be
classified into corporations sole and religious societies.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

14 A corporation formed by the chief archbishop, bishop, priest, minister, rabbi or other presiding
elder of a religious denomination, sect, or church, for the purpose of administering or managing, as
trustee, the affairs, properties and temporalities of such religious denomination, sect or church, a.
Corporation aggregate

b. Close corporation

c. Corporation de facto

d. Corporation sole

15. A corporation formed for the same purpose as corporation sole. It consists of two or more persons.

a. Corporation sole

b. Close corporation

c. Corporation aggregate

d. Corporation de facto
16. I. For the purpose of administering and managing, as trustee, the affairs, property and temporalities
of any religious denomination, sect or church, a corporation sole may be formed by the chief
archbishop, bishop, priest, minister, rabbi, or other presiding elder of such religious denomination, sect
or church.

II. In order to become a corporation sole, the chief archbishop, bishop, priest, minister, rabbi, or
presiding elder of any religious denomination, sect or church must file with the Commission articles of
incorporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

17. I. A corporation sole may be dissolved and its affairs settled voluntarily by submitting to the
Commission a verified declaration of dissolution.

II. Upon approval of such declaration of dissolution by the SEC, the corporation shall cease to carry on its
operations except for the purpose of winding up its affairs.

a. Only 1 is true

b. Only II is true

c. Both are true

d. Both are false

18. I. A One Person Corporation is a corporation with a single stockholder.

II. Only a natural person, trust, or an estate may form a One Person Corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

19. I. Banks and quasi-banks, preneed, trust, insurance, public and publicly- listed companies, and
nonchartered government-owned and controlled corporations may not incorporate as One Person
Corporations.

II. A natural person who is licensed to exercise a profession may organize as a One Person Corporation
for the purpose of exercising such profession.

a. Only I is true
b. Only II is true

c. Both are true

d. Both are false

20. I. A One Person Corporation shall not be required to have a minimum authorized capital stock.

II. The One Person Corporation is required to submit and file corporate bylaws.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

21. I. A One Person Corporation shall indicate the letters "OPC" either below or at the end of its
corporate name.

II. The single stockholder shall be the sole director and president of the One Person Corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

22. The One Person Corporation shall submit the following within such period as the SEC may prescribe:

a. Annual financial statements. OE

b. A report containing explanations or comments by the president on every qualification, reservation, or

adverse remark or disclaimer made by the auditor in the latter’s report;

c. A disclosure of all self-dealings and related party transactions entered into between the One Person
Corporation and the single stockholder.

d. All of the above.

24. I. A sole shareholder claiming limited liability has the burden of Affirmatively showing that the
corporation was adequately financed.

II. Where the single stockholder cannot prove that the property of the One Person Corporation is
independent of the stockholder’s personal Property, the stockholder shall be jointly and severally
liable for the Debts and other liabilities of the One Person Corporation. a. Only I is true

b. Only II is true

C. Both are true

d. Both are false

24. I. The principles of piercing the corporate veil applies with equal force To One Person Corporations
as with other corporations.

II. The Commission may place the corporation under delinquent status should the corporation fail to
submit the reportorial requirements 3 times, consecutively or intermittently, within a period of 5 years.
a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

25. I. When a single stockholder acquires all the stocks of an ordinary stock corporation, the latter may
apply for conversion into a One Person Corporation.

II. A One Person Corporation may be converted into an ordinary stock corporation after due notice to
the SEC of such fact and of the circumstances leading to the conversion, and after compliance with all
other requirements for stock corporations.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

Title XIV - DISSOLUTION

1. I. Where the dissolution of a corporation may prejudice the rights of any creditor, the petition for
dissolution shall be filed with the SEC.

II. The petition shall be signed by a majority of its board of directors or trustees and that its
dissolution was resolved upon by the affirmative vote of the stockholders representing at least
majority of the outstanding capital stock or by at least majority of the members. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. I. In the case of dissolution where creditors are affected, the SEC may appoint a receiver to take
charge of the liquidation of the corporation.

II. An involuntary dissolution may be effected by amending the articles of incorporation to shorten the
corporate term.
a. Only I is true

b. Only II is trueC. Both are true

d. Both are false

3. I. No application for dissolution of banks, banking and quasi-banking institutions, preneed, insurance
and trust companies, nonstock savings and loan associations, pawnshops, and other financial
intermediaries shall be approved by the SEC unless accompanied by a favorable recommendation of the
appropriate government agency.

II. In the case of expiration of corporate term, dissolution shall automatically take effect on the day
following the last day of the corporate term stated in the articles of incorporation, without the need for
the issuance by the SEC of a certificate of dissolution.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. The following are voluntary modes of dissolution of a corporation, except:

a. By expiration of corporate term provided for the articles of incorporation.

b. By legislative enactment.

C. By failure to formally organize and commence its business within 5 years from the date of
incorporation.

d. By the judgment of the SEC after hearing of petition for voluntary dissolution where creditors are
affected.

5. I. A corporation formed or organized under the Corporation Code may be dissolved voluntarily or
involuntarily.

II. If dissolution of a corporation does not prejudice the rights creditor having a claim against it, the
dissolution may be effected by majority vote of the board of directors or trustees, and by a resolution
adopted by the affirmative vote of the stockholders owning at least majority of the outstanding capital
stock or majority of the members,

а. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. I. A withdrawal of the request for dissolution shall be made in writing duly verified by any
incorporator, director, trustee, shareholder member and signed by the same number of incorporators,
director, trustee, shareholder, or members necessary to request for dissolution.

II. Upon receipt of a withdrawal of request for dissolution, the SEC shall withhold action on the request
for dissolution.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

7. The following may be grounds for involuntary dissolution of the corporation:

a. Non-use of corporate charter.

b. Continuous inoperation of a corporation.

c. Upon receipt of a lawful court order dissolving the corporation.

d. All of the above.

8. The following are voluntary modes of dissolution of a corporation, except:

a. By the vote of the board of directors or trustees and the resolution adopted by the stockholders or
members where no creditors are affected.

b. By legislative enactment.

c. By amending the articles of incorporation to shorten the corporate term.

d. In case of a corporation sole, by submitting to the SEC a verified declaration of the dissolution for
approval.

9. I. Every corporation whose charter expires pursuant to its articles of incorporation, is annulled by
forfeiture, or whose corporate existence is terminated in any other manner, shall nevertheless remain
as a body corporate for 5 years after the effective date of dissolution.

II. Upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or
member who is unknown or cannot be found shall be escheated in favor of the national government.
a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

 Title XV – FOREIGH CORPORATIONS
1. I. If a foreign corporation does business in the Philippines without a License, a Philippine citizen or
entity which has contracted with said corporation may be estopped from challenging the foreign
corporation’s corporate personality in a suit brought before Philippine courts.

II. If a foreign corporation does business in the Philippines with the required license, it can sue before
Philippine courts only on isolated transaction.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. I.A foreign corporation’s by-laws, though originating from a foreign jurisdiction, are valid and effective
in the Philippines.

II. The appointment of a resident agent of a foreign corporation is Revocable at any time at the instance
of the corporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

3. A resident agent of a foreign corporation can either be:

I. An individual residing in the Philippines regardless of solvency.

II. A domestic corporation lawfully transacting business in the Philippines.a. Only I is

true

b. Only II is true

c. Both are true

d. Both are false

4. The purposes of appointing a resident agent are the following:

I. Notice affecting the corporation pending the establishment of its local office. II.

Summons and other legal processes in all proceedings for or against the corporation.

a. Only I is true

b. Only II is true
c. Both are true

d. Both are false

5. I. Actual transaction of business within the Philippine territory is an Essential requisite for the
Philippines to acquire jurisdiction over a foreign corporation and thus require the foreign corporation to
secure Philippine business license.

II. If a foreign corporation does not transact such kind of business in the Philippines has no jurisdiction to
require such foreign corporation to secure a Philippine business license. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. Is one formed, organized or existing under any laws other than those of the Philippines and
whose laws allow Filipino citizens and corporations to do business in its own country or state. a.
Domestic corporation

b. Government owned-and controlled corporation

c. Foreign corporation

d. None of the above

7. The following are the requisites for a foreign corporation under the Corporation Code:

I. It must be formed, organized, or existing under any laws other than those of the Philippines.
II. The laws of the country where the corporation was organized allow Filipino citizens and
corporations to do business in its own country or state. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

8. I. A foreign corporation must first obtain a license from the SEC and a certificate from the SEC before
it can transact business in the Philippines.

II. Where a foreign corporation does business in the Philippines without the proper license, it cannot
maintain any action or proceeding before Philippine courts.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

9. I. The purpose of the law in requiring that a foreign corporation doing business in the Philippines be
licensed to do so is to subject such corporation to the jurisdiction of the courts.

II. It is not the absence of the prescribed license but “doing business” in the Philippines without
such license which debars the foreign corporation from access to our courts. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

10. I. If a foreign corporation does business in the Philippines without a license, it cannot sue before the
Philippine courts.

II. If a foreign corporation is not doing business in the Philippines, it still needs a license to sue before
Philippine courts on an isolated transaction or on a cause of action entirely independent of any business
transaction.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

11. I. A foreign corporation without a license is not ipso facto incapacitated from bringing an action in
Philippine courts. A license is necessary only if a foreign corporation is "transacting" or "doing business"
in the country.

II. A party is estopped from challenging the personality of a corporation after having acknowledged the
same by entering into a contract with it.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

12. I. A foreign corporation licensed to transact business in the Philippines may not be allowed to
withdraw from the Philippines.

II. The license of a foreign corporation to transact business in the Philippines may be revoked or
suspended by the SEC.

a. Only I is true

b. Only II is true
c. Both are true

d. Both are false

13. I. A foreign corporation authorized to transact business in the Philippines need not obtain an
amended license in the event it changes its corporate name, or desires to pursue in the Philippines other
or additional purposes.

II. A foreign corporation applying for a license to transact business in The Philippines shall submit to
the SEC a copy of its articles of incorporation and by-laws, certified in accordance with law, and their
translation to an official language of the Philippines, if necessary. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

Title XVI – INVESTIGATIONS, OFFENSES, AND

PENALTIES

1. I. An independent auditor who, in collusion with the corporation’s Directors or representatives,

certifies the corporation’s financial Statements despite its incompleteness or inaccuracy, its failure to
give a pair and accurate presentation of the corporation’s condition, or despite containing false or
misleading statements, shall be punished with a fine Ranging from P80,000.00 to P500,000.00.

II. Those responsible for the formation of a corporation through fraud, or who assisted directly
or indirectly therein, shall be punished with a fine ranging from P200,000.00 to P2,000,000.00. a.
Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. I. A corporation that conducts its business through fraud shall punished with a fine ranging from
P200,000.00 to P2,000,000.00.

II. A Corporation used for fraud, or for committing or concealing graft and corrupt practices as
defined under pertinent statutes, shall be liable for a fine ranging from P100, 000.00 to P5,
000,000.00. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

2. I. A director, trustee, or officer who knowingly fails to sanction, report, or file the appropriate action
with proper agencies, allows or tolerates the graft and corrupt practices or fraudulent acts committed by
a Corporation’s directors, trustees, officers, or employees shall be punished with a fine ranging from
P500,000.00 to P1,000,000.00.

II. If the offender is a corporation, the penalty may, at the discretion of the court, be imposed upon
such corporation and/or upon its director, trustees, stockholders, members, officers, or employees
responsible for the violation or indispensable to its commission. a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. I. The unauthorized use of a corporate name shall be punished with a fine ranging from P10,000.00 to
P200,000.00.

II. When, despite the knowledge of the existence of a disqualification, a director, trustee or officer
willfully holds office, or willfully conceals such disqualification, such director, trustee or officer shall be
punished with a fine ranging from P10,000.00 to P200,000.00 at the discretion of the court, but shall not
be permanently disqualified ground for from being a director, trustee or officer of any corporation. a.
Only I is true

b. Only II is true

c. Both are true

d. Both are false

5. I. The unjustified failure or refusal by the corporation, or by those responsible for keeping and
maintaining corporate records, to comply on the inspection and reproduction of records shall be
punished with a fine ranging from P10,000.00 to P200,000.00, at the discretion of the court, taking into
consideration the seriousness of the violation and its implications.

II. Any person who willfully certifies a report required under the revised Corporation Code, knowing that
the same contains incomplete, inaccurate, false, or misleading information or statements, shall be
punished with a fine ranging from P20,000.00 to P200,000.00.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. It refers to any person who provides truthful information relating to the SEC or possible commission
of any offense or violation under the revised Corporation Code.

a. Whistleblower

b. Intermediary

c. Mediator

d. Conciliator

7. I. The SEC may investigate an alleged violation of the Revised Corporation Code, or of a rule,
regulation, or order of the SEC.

II. The SEC may administer oaths and affirmations, issue subpoena and subpoena duces tecum, take
testimony in any inquiry or investigation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

8. I. Whenever the SEC has reasonable basis to believe that a person has violated, or is about to violate
the Revised Corporation Code, a rule, regulation, or order of the SEC, it may direct such person to desist
from committing the act constituting the violation.

II. The Commission may issue a cease and desist order ex parte to enjoin an act or practice which is
fraudulent or can be reasonably expected to cause significant, imminent, and irreparable danger or
injury to public safety or welfare.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

9. I. Any person who, without justifiable cause, fails or refuses to with any lawful order, decision, or
subpoena issued by the SEC shall, after due notice and hearing, be held in contempt and fined in an
amount not exceeding P30,000.00.

II. When the refusal amounts to clear and open defiance of the Commission's order, decision, or
subpoena, the SEC may impose a daily fine of P1, 000.00 until the order, decision, or subpoena is
complied with.

a. Only I is true
b. Only II is trueC. Both are true

d. Both are false

Title XVII – MISCELLANEOUS PROVISIONS

1. The SEC shall have the power and authority to:

a. Exercise supervision and jurisdiction over all corporations and persons acting on their behalf.

b. Impose sanctions for the violation of the Revised Corporation Code, its implementing rules and orders
of the SEC.

c. Promote corporate governance and the protection of minority investors, through, among others, the
issuance of rules and regulations consistent with international best practices. d. All of the above.

2. The SEC shall have the power and authority to:

a. Issue opinions to clarify the application of laws, rules and regulations.

b. Issue cease and desist orders ex parte to prevent imminent fraud or injury to the public.

c. Hold corporations in direct and indirect contempt.

d. All of the above.

3. I. An arbitration agreement may be provided in the articles of incorporation or bylaws of a

corporation.

II. Regulators such as the Bangko Sentral ng Pilipinas and the Insurance Commission shall exercise
primary authority over special corporations such as banks, nonbank financial institutions, and insurance
companies under their supervision and regulation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

4. Every corporation, domestic or foreign, doing business in the Philippines shall submit to the SEC:

a. Annual financial statements audited by an independent certified Public accountant: Provided, That if
the total assets or total liabilities of the corporation are less than P600,000.00, the financial
statements shall be certified under oath by the corporation’s treasurer or chief financial officer.

b. A general information sheet.

c. All of the above.

d. None of the above.

5. I. The SEC shall exercise visitorial powers over all corporations, which powers shall include the
examination and inspection of records, regulation and supervision of activities, enforcement of
compliance and imposition of sanctions.

II. Should the corporation, without justifiable cause, refuse or obstruct the SEC’s exercise of its visitorial
powers, the SEC may revoke its Certificate of incorporation.

a. Only I is true

b. Only II is true

c. Both are true

d. Both are false

6. The SEC shall have the power and authority to:

a. Issue writs of execution and attachment to enforce payment of fees, administrative fines, and other
dues collectible under the Revised Corporation Code.

b. Prescribe the number of independent directors and the minimum criteria in determining the
independence of a director.

c. Impose or recommend new modes by which a stockholder, member, director, or trustee may attend
meetings or cast their votes, as technology may allow, taking into account the company's scale,
number of shareholders or members, structure, and other factors consistent with the basic right of
corporate suffrage.

d. All of the above.

7. It means the total shares of stock issued under binding subscription contracts to subscribers or
stockholders, whether or not fully or partially paid, except treasury shares.

a. Authorized capital stock

b. Issued capital stock

c. Paid in capital stock

d. Outstanding capital stock

8. I. Non-stock or special corporations may, through their articles of incorporation or their by-laws,
designate their governing boards by any name other than as board of trustees.

II. The SEC may place the corporation under delinquent status in case of failure to submit the
reportorial requirements 3 times, consecutively or intermittently, within a period of 5 years. a. Only I is
true

b. Only II is true

c. Both are true

d. Both are false

jTITLEjTITLE III

BOARD OF DIRECTORS/TRUSTEES AND OFFICERS

Correlation of the board of directors/trustees, officers, and stockholders

Under the Corporation Code, stockholders or members periodically elect the board of directors or
trustees, who are charged with the

management of the corporation. The board, in turn, periodically elects

officers to carry out management functions on a day-to-day basis. As owners,

though, the stockholders or members have residual powers over

fundamental and major corporate changes.

Acts of management and ownership

While stockholders and members (in some instances) are entitled to

receive profits, the management and direction of the corporation are lodged

with their representatives and agents-- the board of directors or trustees. In

: other words, acts of management pertain to the board; and those of

ownership, to the stockholders or members. In the latter case, the board

cannot act alone, but must seek approval of the stockholders or members.

Where do corporate powers reside?

Conformably with the foregoing principles, one of the most

important rights ofa qualified shareholder or member is the right to vote --

either personally or by proxy for the directors or trustees who are too

manage the corporate affairs. The right to choose the persons who will direct,

manage and operate the corporation is significant, because it is the main way

in which a stockholder can have a voice in the management of corporate

affairs, or in which a member in a nonstock corporation can have a say on

how the purposes and goals of the corporation may be achieved. Once the
directors or trustees are elected the stockholders or members relinquish

corporate powers to the board in accordance with law.

What is business judgment rule?

Contracts intra vires entered into by the board of directors

binding upon the corporation and courts will not interfere unlesS Such

contracts are so unconscionable and oppressive as to amount to wanton

destruction to the rights of the minority, as when plaintiffis aver that the

defendants (members of the board), have concluded a transaction among

nemselves as will result in serious injury to the plaintiffs, stockholders.

The reason behind the rule is aptly explained by Dean Cesar L.

Villanueva, an esteemed author in corporate law, thus:

Courts and other tribunals are wont to override the business

judgment of the board mainly because, courts are not in the business of

business, and the laissez faire rule or the free enterprise system

prevailing in our social and economic set-up dictates that it is better for the State and its organs to leave
business to the businessmen;

especially so, when courts are ill-equipped to make business decisions

More importantly, the social contract in the corporate family to decide

the course of the corporate business has been vested in the board and

not with courts

SEC. 22. The Board of Directors or Trustees ofa Corporation;: Qualification

and Term. Unless otherwise provided in this Code, the board of

directors or trustees shall exercise the corporate powers, conduct all

business, and control all properties of the corporation.

Directors shall be elected for a term of one (1) year from among
the holders of stocks registered in the corporation's books, while

trustees shall be elected for a term not exceeding three (3) years from

among the members of the corporation. Each director and trustee shall

hold office until the successor is elected and qualified. A director who

ceases to own at least one (1) share of stock or a trustee who ceases to

be a member of the corporation shall cease to be such.

The board of the following corporations vested with st twenty

(a) Corporations covered by Section 17.2 of Republic Act w ely

be a mempe

publ

interest shall have independent directors constituting at least t

percent (20%) of such board:

8799, otherwise known as "The Securities Regulation Code", nam

those whose securities are registered with the Commissio

corporations listed with an exchange or with assets of at least Fif

million pesos (P50,000,000.00) and having two hundred (200) or

ore holders of shares, each holding at least one hundred (100)

shares ofa class ofits equity shares;

0 2100

(b) Banks and quasi-banks, nonstock savings and loan

associations, pawnshops, corporations engaged in money service

business, preneed, trust and insurance companies, and other

financial intermediaries; and

(C) Other corporations engaged in businesses vested with public

interest similar to the above, as may be determined by the

Commission, after taking into account relevant factors which are

germane to the objective and purpose of requiring the election orau

independent director, such as the extent of minority ownersu

type of financial products or securities issued or offered

investors, public interest involved in the nature of business

operations, and other analogous factors.

An independent director is a person who, apart from

chareholdings and fees received from the corporation, is independent

management and free from any business or other relationship which

could, or could reasonably be perceived to materially interfere with the

exercise of independent judgment in carrying out the responsibilities as

a director

Independent directors must be elected by the shareholders

present or entitled to vote in absentia during the election of directors.

independent directors shall be subject to rules and regulations

governing their qualifications, disqualifications, voting requirements,

duration of term and term limit, maximum number of board

memberships and other requirements that the Commission will

prescribe to strengthen their independence and align with

international best practices.

Governing body of a corporation

The governing body of a corporation is its board of directors. The

concentration in the board of the powers of control of corporate business and

of appointment of corporate officers and managers is necessary for efficiency

in any large organization. Stockholders are too numerous, scattered, and

unfamiliar with the business of a corporation to conduct its business directly.

And so the plan of corporate organization is for the stockholders to choose

the directors who shall control and supervise the conduct of corporate

business.

The board shall exercise good faith

The board of directors of a corporation is a creation of the

stockholders. The board of directors, or the majority thereof, controls and

directs the affairs of the corporation; but in drawing to itself the power of the

corporation, it occupies a position of trusteeship in relation to the minority

of the stock. The board shall exercise good faith. care and diligence in the

administration of the affairs of the corporation. and protect not only the

interest of the maiority but also that of the minority of the stock

It is well settled in this jurisdiction that where corporate directors

are guilty of a breach of trust-not of mere error of judgment or abuse of

discretionand intracorporate remedy is futile or useless, a stockholder

may institute a suit in behalf of himself and other stockholders and for the

henefit of the corporation, to bring about a redress of the wrong inflicted

directly upon the corporation and indirectly upon the stockholders.

Derivative suit

In cases of mismanagement where the wrongful acts are committed by the directors or trustees
themselves, a stockholder or member may find

that he has no redress because the former are vested by law with the right to

decide whether or not the corporation should sue, and they will never be

willing to sue themselves. The corporation would thus be helpless to seek

remedy. Because of the frequent occurrence of such a situation, the common

law gradually recognized the right of a stockholder to sue on behalf of a

corporation in what eventually became known as a "derivative suit "It has

nbeen proven to be an effective remedy of the minority against the abuses of

management. Thus, an individual stockholder is permitted to institute a

derivative suit on behalf of the corporation wherein he holds stock in order

to protect or vindicate corporate rights, whenever officials of the corporation

refuse to sue or are the ones to be sued or hold the control of the corporation.

In such actions, the suing stockholder is regarded as the nominal party, with

the corporation as the party in interest.

Authority of the board of directors or trustees

With the exception only of some powers expressly granted by law to

stockholders (or members, in case of non-stock corporations), the board of

directors (or trustees, in case of non-stock corporations) has the sole authority

to determine policies, enter into contracts, and conduct the ordinary business

of the corporation within the scope of its charter, ie, its articles f

incorporation, by-laws and relevant provisions of law. Verily, the authority oftis

board of directors is restricted to the management of the regular business

affairs of the corporation unless more extensive power is expressly

conferred.

The raison d'etre behind the conferment of corporate powers on the

board of directors is not lost on the Court. Indeed, the concentration in the

board of the powers of control of corporate business and of appointment of

corporate officers and managers is necessary for efficiency in any large

organization. Stockholders are too numerous, scattered, and untamiliar with

the business of a corporation to conduct its business directly. And so the plan

of corporate organization is for the stockholders to choose the directors who

shall control and supervise the conduct of corporate business.6

Corporation exercises its powers through its board of directors

A corporation exercises its powers through its board of directors

and/or its duly authorized officers and agents, except in instances where the
Corporation Code requires stockholders' approval for certain specific acts.

A corporation's board of directors is understood to be that body which:

(1) exercises all powers provided for under the Corporation Code;

(2) conducts all business of the corporation; and

(3) controls and holds all property of the corporation.

Its members have been characterized as trustees or directors clothed

with a fiduciary character. Moreover, the directors may appoint officers and

agents, and as incident to this power of appointment, they may discharge those appointed. Accordingly,
the property of the corporation is not the property of its stockholders or members and may not be sold by
the stockholders or members without express authorization from the corporation's board of directors.
Moreover, unless duly authorized, a treasurer, whose powers are limited, cannot bind the corporation in a
sale of its assets.

THREE LEVELS OF CONTROL

1. The Board of Directors

They are responsible for corporate policies and the general

management of the business affairs of the corporation. However, just

as a natural person may authorize another to do certain acts in his

behalf, so may the board of directors of a corporation validly delegate

some of its functions to individual officers or agents appointed by it.

2. The Officers

They, in theory, execute the policies laid down by the board,

but in practice often have wide latitude in determining the course of

business operations.

3. The Stockholders

They have the residual power Over fundamental corporate changes, like amendments of the articles of
incorporation.
Note:

As a general rule, all corporate powers are to be exercised by the board

of directors, exceptions are made where the Code provides otherwise.

Power to Decide Whether a Corporation can Enter into a Bindin.

Contract

A corporation, as a juridical entity, primarily acts through its board

of directors, which exercises its corporate powers. In this capacity, tho

general rule is that, in the absence of authority from the board of directors

no person, not even its officers, can validly bind a corporation.

In People's Aircargo and Warehousing Co, Inc. v. Court of Appeals, the

Supreme Court held that the power andresponsibility to decide whether a

corporation can enter into a binding contract is lodged with the board of

directors, subject to the articles of incorporation, by-laws, or relevant

provisions of law. As we have clearly explained in another case:

A corporate officer or agent may represent and bind the

corporation in transactions with third persons to the extent that the

authority to do so has been conferred upon him, and

which have been intentionally conferred, and also such powers as, in the

usual course of the particular business, are incidental to, or may be

implied from, the powers intentionally conferred, powers added by custom

and usage, as usually pertaining to the particular officer or agent, and such

apparent powers as the corporation has caused persons dealing with the

officer or agent to believe that it has conferred.

May Corporate Powers be Directly Conferred upon Corporate Officers?

The directors of the corporation shall elect its corporate officers.

It is clear that corporate powers may be directly conferred unon

Orporate officers or agents by statute, the articles of incorporation, the by-laws or by resolution or other
act of the board of directors In addition, an

officer who is not a director may also appoint other agents when so

authorized by the by-laws or by the board of directors. Such are referred to

as express powers. There are also powers incidental to express powers

conferred. It is a fundamental principle in the law of agency that every

delegation of authority, whether general or special, carries with it, unless the

contrary be expressed, implied authority to do all of those acts, naturally and

ordinarily done in such cases, which are reasonably necessary and proper to

be done in order to carry into effect the main authority conferred.

Qualifications of a board of director/trustee

1. For a stock corporation, ownership of at least 1 share of the capital stock

of the corporation in his own name. For a non-stock corporation, only

to members of the corporation can be elected.

2. The director or trustee must be capacitated.

3. The director or trustee must be of legal age.

4. Other qualifications as may be prescribed in the by-laws of t

corporation.

Independent Director

An independent director is a person who, apart from shareholdinps

and fees received from the corporation, is independent of management and

free from any business or other relationship which could, or could reasonabi

be perceived to materially interfere with the exercise of independent

judgment in carrying out the responsibilities as a director.

Note:

Independent directors must be elected by the shareholders

present or entitled to vote in absentia during the election of directors.

Note:

The board of the following corporations vested with public

interest shall have independent directors constituting at least twenty

percent (20%) of such board:

1. Corporations covered by Section 17.2 of The Securities Regulation

Code;

Banks and quasi-banks, nonstock savings and loan associations,

pawnshops, corporations engaged in money service business, preneed,

trust and insurance companies, and other financial intermediaries;

2.

and

3. Other corporations engaged in businesses vested with public interest

similar to the above, as may be determined by the Commission.

usive

SEC. 23. Election of Directors or Trustees. - Except when the exclusives

right is reserved for holders of founders' shares under Section 7 of th

any

Code, each stockholder or member shall have the right to nominate an.

director or trustee who possesses all of the qualifications and none of

the disqualifications set forth in this Code.

At all elections of directors or trustees, there must be present

either in person or through a representative authorized to act by

written proxy, the owners of majority of the outstanding capital stock,

or if there be no capital stock, a majority of the members entitled to

vote. When so authorized in the bylaws or by a majority of the board o

directors, the stockholders or members may also vote through remote

communication or in absentia: Provided, That the right to vote through

such modes may be exercised in corporations vested with public

interest, notwithstanding the absence of a provision in the bylaws o

such corporations.

A stockholder or member who participates through remote

communication or in absentia, shall be deemed present for purposes of

quorum.

The election must be by ballot if requested by any voting

stockholder or member.

In stock corporations, stockholders entitled to vote shall have the

right to vote the number of shares of stock standing in their own names

in the stock books of the corporation at the time fixed in the bylaws or

where the bylaws are silent, at the time of the election. The said

stockholder may: (a) vote such number of shares for as many persons

as there are directors to be elected; (b) cumulate said shares and give

one (1) candidate as many votes as the number of directors to be elected

multiplied by the number of the shares owned; or (c) distribute them on

the same principle among as many candidates as may be seen fit:

Provided, That the total number of votes cast shall not exceed the
number of shares owned by the stockholders as shown in the books of

the corporation multiplied by the whole number of directors to be

elected: Provided, however, That no delinquent stock shall be voted.

Unless otherwise provided in the articles of incorporation or in the

bylaws, members of nonstock corporations may cast as many votes as

there are trustees to be elected but may not cast more than one (1) vote

for one (1) candidate. Nominees for directors or trustees receiving the

highest number of votes shall be declared elected.

If no election is held, or the owners of majority of the outstanding

capital stock or majority of the members entitled to vote are not present

in person, by proxy, or through remote communication or not voting in

absentia at the meeting, such meeting may be adjourned and the

corporation shall proceed in accordance with Section 25 of this Code.

The directors or trustees elected shall perform their duties as

prescribed by law, rules of good corporate governance, and bylaws of

the corporation.

Requirements for the election of directors/trustees

ba 1. The owners of majority of the outstanding capital stock or if there be no

Rgs capital stock, a majority of the members entitled to vote, of the

ulpCorporation must be present, either in person or through a

Uerepresentative authorized to act by written proxy. bs so

2. When so authorized in the bvlaws or by a majority of the board of

directors, the stockholders or members may also vote through remote

communication or in absentia.

3. The election must be by ballot, if requested by any voting stockholder or

member.
4. In stock corporations, the total number of votes cast shall not exceed the

number of shares owned by the stockholder as shown in the books of

the corporation multiplied by the whole number of directors to be

elected. Provided, that no delinquent stock shall be voted. ns l0s

5. In nonstock corporations, the members of nonstock corporations may

cast as many votes as there are trustees to be elected but may not cast

more than one (1) vote for one (1) candidate.

6. Nominees for directors or trustees receiving the highest number of votes

shall be declared elected.

SEC. 24. Corporate Officers. Immediately after their election, the

directors of a corporation must formally organize and elect: (a) a

president, who must be a director; (b) a treasurer, who must be a

resident; (c) a secretary, who must be a citizen and resident of the

Philippines; and (d) such other officers as may be provided in the

bylaws. If the corporation is vested with public interest, the board shall

also elect a compliance officer. The same person may hold two (2) or

more positions concurrently, except that no one shall act as president

and secretary or as president and treasurer at the same time, unless

otherwise allowed in this Code.

gavThe officers shall manage the corporation and perform Such

duties as may be provided in the bylaws and/oras resolved by the board

of directors.

Corporate officer

The position must be expressly mentioned in the by-laws in order to

be considered as a corporate office.

As a general rule, the acts of corporate officers within the scope o

their authority are binding on the corporation. But when these officers

exceed their authority, their actions "cannot bind the corporation, unless It

has ratified such acts or is estopped from disclaiming them."

Note:

Any 2 or more positions may be held concurrently by the same

person, except that no one shall act as president and secretary or as

president and treasurer at the same time,

What is QUORUM at the meeting of directors or trustees

A majority of the directors or trustees, as fixed in the articles of

incorporation, shall constitute a quorum for the transaction of corporate

business (unless the articles of incorporation or the bylaws provide for a greater

majority). Majority means fifty percent plus one (50% +1).

General rule:

A majority of the number of directors or trustees, as fixed in the

articles of incorporation, shall constitute a quorum for the transaction of

corporate business, and every decision of at least a majority of the directors or trustees present at a
meeting at which there is a quorum shall be valid as

a corporate act, except for the election of officers which shall require the vote

of a majority of all the members of the board.

Exception:

If the articles of incorporation or the by-laws provide for a greater

majority.

SEC. 25. Report of Election of Directors, Trustees and 0fficers, Non-

holding of Election and Cessation from office. - Within thirty (30) days

after the election of the directors, trustees and officers of the

corporation, the secretary, or any other officer of the corporation, shall

submit to the Commission, the names, nationalities, shareholdings, and

residence addresses of the directors, trustees and officers elected.

The non-holding of elections and the reasons therefor shall be

reported to the Commission within thirty (30) days from the date of the

scheduled election. The report shall specify a new date for the election,

which shall not be later than sixty (60) days from the scheduled date.

Ifno new date has been designated, or if the rescheduled election

is likewise not held, the Commission may, upon the application of a

stockholder, member, director or trustee, and after verification of the

unjustified non-holding of the election, summarily order that an

election be held. The Commission shall have the power to issue such orders as may be appropriate,
including orders directing the issuaneo

of a notice stating the time and place of the election, designated

presiding officer, and the record date or dates for the determination of

stockholders or members entitled to vote.

Notwithstanding any provision of the articles of incorporation or

bylaws to the contrary, the shares of stock or membership represented

at such meeting and entitled to vote shall constitute a quorum for

purposes of conducting an election under this section.

Should a director, trustee or officer die, resign or in any manner

cease to hold office, the secretary, or the director, trustee or officer of

the corporation, shall, within seven (7) days from knowledge thereof,

report in writing such fact to the Commission.

Objective of the Report of Election

By the express mandate of the Corporation Code, all corporation

duly organized pursuant thereto are required to submit within the perio

therein stated (30 days) to the Securities and Exchange Commission th

names, nationalities, shareholdings, and residences of the directors, trustes

and officers elected.

Evidently, the objective sought to be achieved by Section 26 Nov

Section 25, Revised Corporation Code) is to give the public information.unde

sanction of oath of responsible officers of the nature of business. finanda

conditionand operational status of the companv together with informatin

on its key oficers or managers so that those dealing with it and those whs

intend to do business with it may know or have the means of knowing facs

concerning the

responsibility.16

corporation's

financial

resources and business

SEC. 26. Disqualification of Directors, Trustees or Ofjficers. A peree

corporation if, within five (5) years prior to the election or appointme

as such, the person was:

shall be disqualified from being a director, trustee or officer of an ent

btele
(a) Convicted by final judgment: e

(1) of an offense punishable by imprisonment for a period

exceeding six (6) years;

(2) For violating this Code; and

(3) For violating Republic Act No. 8799, otherwise known as

"The Securities Regulation Code";

b) Found administratively liable for any offense involving

fraudulent acts; and

() By a foreign court or equivalent foreign regulatory authority for

acts, violations or misconduct similar to those enumerated in

paragraphs (a) and (b) above.

The foregoing is without prejudice to qualifications or other

disqualifications, which the Commission, the primary regulatory

agency, or the Philippine Competition Commission may impose in its

promotion of good corporate governance or as a sanction in its

administrative proceedings.

DIsqualification of directors, trustees or officers

1. If within five (5) years prior to the election or appointment as such,the

Directors, Trustees or Officers were convicted by final judgment of an

offense punishable by imprisonment for a period exceeding six (6)

years:

a. For violating the Revised Corporation Code; and

b. For violating Republic Act No. 8799, otherwise known as "The

Securities Regulation Code"

2. If within five (5) years prior to the election or appointment as such, the

Directors, Trustees or Officers were found administratively liable for

any offense involving fraudulent acts.

3. 1f within five (5) years prior to the election or appointment as such, the

Directors, Trustees or Officers were found by a foreign court or

equivalent foreign regulatory authority for acts, violations or

misconduct similar to those enumerated in paragraphs (1) and (

above.

139

SEC. 27. Removal of Directors or Trustees. - Any director or trustee ot

corporation may be removed from office by a vote of the stockholders

holding or representing at least two-thirds (2/3) of the outstanding

capital stock, or in a nonstock corporation, by a vote of at least two thirds (2/3) of the members entitled to
vote: Provided, That such

removal shall take place either at a regular meeting of the corporation

or at a special meeting called for the purpose, and in either case, after

previous notice to stockholders or members of the corporation of the

intention to propose such removal at the meeting. A special meeting of

the stockholders or members for the purpose off removing any director

or trustee must be called by the secretary on order of the president, or

upon written demand of the stockholders representing or holding at

least a majority of the outstanding capital stock, or a majority of the

members entitled to vote. If there is no secretary, or if the secretary,

despite demand, fails or refuses to call the special meeting or to give

otice thereof, the stockholder or member of the corporation signing

the demand may call for the meeting by directly addressing the

stockholders or members. Notice of the time and place of such meeting,

as well as of the intention to propose such removal, must be given by

publication or by written notice prescribed in this Code. Removal may

be with or without cause: Provided, That removal without cause may not

be used to deprive minority stockholders or members of the right of

representation to which they may be entitled under Section 23 of this

Code.

The Commission shall, motu proprio or upon verified complaint,

and after due notice and hearing, order the removal of a director or

trustee elected despite the disqualification, or whose disqualification

arose or is discovered subsequent to an election. The removal of a

disqualified director shall be without prejudice to other sanctions that

the Commission may impose on the board of directors or trustees who,

with knowledge of the disqualification, failed to remove such director

or trustee.

Power to remove directors or trustees

The power to remove directors or trustees belongs to the

stockholders or members exclusively.

However, the Securities and Exchange Commission shall, motu

proprio or upon verified complaint, and after due notice and hearing, order

the removal of a director or trustee elected despite the disqualification or

Whose disqualification arose or is discovered subsequent to an election. The

removal of a disqualified director shall be without prejudice to other

Sanctions that the Commission may impose on the board of directors or

rustees who, with knowledge of the disqualification, failed to remove such

director or trustee.
General Rule:

Removal of directors or trustees may be with or without cause.

Exception:

Removal without cause may not be used to deprive minority

stockholders or members of the right of representation to which they may be

entitled under Section 23 of this Code.bloibbota of oo/hposogen

Requisites for removal

1. The removal should take place at a regular or special meeting duly called

for the purpose;

2. The director or trustee can only be removed bya vote of the stockholders

representing at least 2/3 of the outstanding capital stock or 2/3 of the

members entitled to vote in case of non-stock corporations;

3. There must be a previous notice to stockholders or members of the

corporation of the intention to propose such removal at the meeting; and

4. The special meeting of the stockholders or members of a corporation for

the purpose of removal must be called by the secretary on order of the

president or on the written demand of the stockholders representing or

holding at least a majority of the outstanding capital stock or a majority of

the members entitled to vote.

SEC. 28. Vacancies in the Office of Director or Trustee; Emergency Bogrd

- Any vacancy occurring in the board of directors or trustees other than

by removal or by expiration of term may be filled by the vote of at least

a majority of the remaining directors or trustees, if still constituting a

quorum; otherwise, said vacancies must be filled by the stockholders or

members in a regular or special meeting called for that purpose.

When the vacancy is due to term expiration, the election shall be

held no later than the day of such expiration at a meeting called for that

purpose.

When the vacancy arises as a result of removal by the

stockholders or members, the election may be held on the same day of

the meeting authorizing the removal and this fact must be so stated in

the agenda and notice of said meeting. In all other cases, the election

must be held no later than forty-five (45) days from the time the vacancy

se. A director or trustee elected to fill a vacancy shall be referred to

replacement director or trustee and shall serve only for the

unexpired term of the predecessor in office. iowever, when the vacancy prevents the remaining directors

Cnstituting a quorum and emergency action 1s required to

prevent grave, substantial, and irreparable loss or damage to the

corporation, the vacancy may be temporarily filled from among the

officers of the corporation by unanimous vote of the remaining

directors or trustees. The action by the designated director or trustee

shall be limited to the emergency action necessary, and the term shal

cease within a reasonable time from the termination of the emergency

or upon election of the replacement director or trustee, whichever

comes earlier. The corporation must notify the Commission within

three (3) days from the creation of the emergency board, stating therein

the reason for its creation.

Any directorship or trusteeship to be filled by reason of an

increase in the number of directors or trustees shall be filled only by an

election at a regular or at a special meeting of stockholders or members

duly called for the purpose, or in the same meeting authorizing the

increase of directors or trustees if so stated in the notice of the meeting

Replacement Director/Trustee

A director or trustee elected to fill a vacancy shall be referred to

as replacement director or trustee and shall serve only for the unexpired

term of the predecessor in office.

When the vacancy is due to term expiration

When the vacancy is due to term expiration, the election shall be held

no later than the day of such expiration at a meeting called for that purpose.

When the vacancy arises as a result of removal by the stockholders or

members
When the vacancy arises as a result of removal by the stockholders

or members, the election may be held on the same day of the meeting

authorizing the removal and this fact must be so stated in the agenda and

notice of said meeting

Other causes of vacancy

In all other cases, the election must be held no later than forty-five

(45) days from the time the vacancy arose.

Emergency Board of Director

When the vacancy prevents the remaining directors from

Cons

auuting a quorum and emergency action is required to prevent grave,

hntal, and irreparable loss or damage to the corporation, the vacancy

n etemporarily filled from among the ofñicers of the corporation by

ous vote of the remaining directors or trustees. The action by the designated director or trustee shall be
limited to the emergency action

necessary, and the term shall cease within a reasonable time from the

termination of the emergency or upon election of the replacement director or

trustee, whichever comes earlier. The corporation must notify the

Commission within three (3) days from the creation of the emergency board,

stating therein the reason for its creation.

SEC. 29. Compensation of Directors or Trustees. In the absence of any

provision in the bylaws fixing their compensation, the directors or

trustees shall not receive any compensation in their capacity as sucn,

except for reasonable per diems: Provided, however, That the

stockholders representing at least a majority of the outstanding capital

stock or majority of the members may grant directors or trustees with

compensation and approve the amount thereof at a regular or special

meeting.

In no case shall the total yearly compensation of directors exceed

ten percent (10%) of the net income before income tax of the

corporation during the preceding year.

Directors or trustees shall not participate in the determination of

their own per diems or compensation.

Corporations vested with public interest shall submit to their

shareholders and the Commission, an annual report of the total

compensation of each of their directors or trustees.

Note:

The provision on compensation of directors does not include corporate

officers who are not directors.

General rule:

Directors or Trustees shall not receive any compensation, as such

directors or trustees, except for reasonable per diems.

Exception:

1. When it is fixed by the corporation's by-laws; or

2. When the stockholders, representing at least a majority of the

Outstanding capital stock, or majority of the members, vote to grant the

same.

In construing the said provision, it bears stressing that the directors

of a corporation shall not receive any compensation for being members of theboard of directors, except
for reasonable per diems. The two instances whers

the directors are to be entitled to compensation shall be when it is fixedbythe

corporation's by-laws or when the stockholders representing_at least

maiority of the outstanding capital stock. vote to arant the same at a regular or

special stockholder's meeting, subject to the qualification that, in any of the

two situations, the total yearly compensation of directors, as such directors

shall in no case exceed ten (106) percent of the net income before income

tax of the corporation during the preceding year. 20

There is no argument that directors or trustees, as the case may be,

are not entitled to salary or other compensation when they perform nothing

more than the usual and ordinary duties of their office. This rule is founded

unon a presumption that directors/trustees render service aratuitouse and

that the return upon their shares adequately furnishes the motives for

service, without compensation. Under the foregoing section, there are only 2

ways by which members of the board can be granted compensation apart

from reasonable per diems:

1. When there is a provision in the by-laws fixing their compensation; and

2. When the stockholders representing a majority of the outstanding

capital stock at a regular or special stockholders' meeting agree to give

it to them.

Limitation on compensation
In no case shall the total yearly compensation of directors, as such

directors, exceed 10% of the net income before income tax of the corporation

during the preceding year.

Note:

Directors or trustees shall not participate in the determination of

their own per diems or compensation.

Note:

Corporations vested with public interest shall submit to their

shareholders and the Commission, an annual report of the total

compensation of each of their directors or trustees.m bosomoqse

SEC. 30. Liability of Directors, Trustees or Oficers. - Directors or trustees

who willfully and knowingly vote for or assent to patently unlawful acts

of the corporation or who are guilty of gross negligence or bad faith in

directing the affairs of the corporation or acquire any personal or

pecuniary interest in conflict with their duty as such directors or

trustees shall be liable jointly and severally for all damages resulting

therefrom suffered by the corporation, its stockholders or members

and other persons.

A Director, Trustee or Officer shall not attempt to acquire, or

acquire any interest adverse to the corporation in respect of any matter

which has been reposed in them in confidence, and upon which, equity

imposes a disability upon themselves to deal in their own behalf;

otherwise, the said director, trustee or officer shall be liable as a trustee

for the corporation and must account for the profits which otherwise
would have accrued to the corporation.

Doctrine of corporate opportunity

Section 31 (Now Section 30, Revised Corporation Code) lays down the

doctrine of corporate opportunity" and holds personally Iiable corporate

directors found guilty of aross nealigence or bad faith in directing the affairs

of the corporation, which results in damage or injury to the corporation, its

stockholders or members, and other persons.

Bad faith implies breach of faith and willful failure to respond to plain

and well understood obligation. It does not simply connote bad judgment or

negligence; it imports a dishonest purpose or some moral obliquity and

conscious doing of wrong; it means breach of a known duty through some

motive or interest or ill will. It partakes of the nature of fraud,

Gross negligence, on the other hand, is the want of even slight care,

acting or omitting to act in a situation where there is duty to act, not

inadvertently but willfully and intentionally, with a conscious indifference

consequences insofar as other persons may be affected. It evinces a thoughtes

disregard of consequences without exerting any effort to avoid them; the want

or absence of or failure to exercise slight care or diligence, or the entire absen

of care.

Avamples when solidary liability attach to the directors, officers or

employees

It is basic that a corporation is a juridical entity with legal personality

cenarate and distinct from those acting for and in its behalf and, in general,

from the people comprising it. The general rule is that obligations incurred by

the corporation, acting through its directors, officers and employees, are its

sole liabilities, and vice versa.

There are times, however, when solidary liabilities may be incurred

and the veil of corporate fiction may be pierced. Exceptional circumstances

warranting such disregard of a separate personality are summarized as

follows:

1. When directors and trustees or, in appropriate case, the officers of a

corporation:

a vote for or assent to patently unlawful acts of the corporation:

blact in bad faith or with aross nealiaence in directina the corporate affairs:

cl are auilty of conflict of interest to the preiudice of the corporation its

stockholders or members and other persons:

2. When a director or officer has consented to the issuance of watered down

stocks or who, having knowledge thereof, did not forthwith file with the

corporate secretary his written objection thereto;

3. When a director, trustee or officer has contractually agreed or stipulated to

hold himself personally and solidarily liable with the corporation; or

When a director, trustee or officer is made, by specific provision of law,

personally liable for his corporate action.

Requisites:

Before a director or officer of a corporation can be held personally

Tiable for corporate obligations, however, the following requisites must

concur:

1. The complainant must allege in the complaint that the director or officer

assented to patently unlawtul acts of the corporation, or that the officer

was guilty of gross negligence or bad faith; and

2. The complainant must clearly and convincingly prove such unlawful acts,

negligence or bad faith.

obibdios

Error in business judgment

If the cause of the losses is merely error in business iudgment. not

amounting to bad faith or negligence directors and/or oficers are not

Iable. For them to be held accountable, the mismanagement and the resulting

SSes on account thereof are not the only matters to be proven; it is likewise

necessary to shov that the directors and/or officers acted in bad faith and

With malice in doing the assailed acts. Bad faith does not simply connote bad

SEC. 31. Dealings of Directors, Trustees or Officers with the Corporation

- A contract of the corporation with one (1) or more of its directore

trustees, officers or their spouses and relatives within the fourth civi

degree of consanguinity or affinity is voidable, at the option of Such

corporation, unless all the following conditions are present:

(a) The presence of such director or trustee in the board meeting in

which the contract was approved was not necessary to

constitute a quorum for such meeting;

b) The vote of such director or trustee was not necessary for the
approval of the contract;

(c) The contract is fair and reasonable under the circumstances;

(d) In case of corporations vested with public interest, material

contracts are approved by at least two-thirds (2/3) of the entire

membership of the board, with at least a majority of the

independent directors voting to approve the material contract

and

(e) In case of an officer, the contract has been previously authorized

by the board of directors.

Where any of the first three (3) conditions set forth in the

preceding paragraph is absent, in the case ofa contract with a director

or trustee, such contract may be ratified by the vote of the stockholders

representing at least two-thirds (2/3) of the outstanding capital stock

or of at least two-thirds (2/3) of the members in a meeting called for tne

purpose: Provided, That full disclosure of the adverse interest of the

directors or trustees involved is made at such meeting and the contra

is fair and reasonable under the circumstances.

SELF-DEALING DIRECTORS OR TRUSTEES OR OFFICERS

9b a A contract of the corporation with one or more of its directors or

trustees, officers or their spouses and relatives within the fourth civil

bub degree of consanguinity or affinity.

ss General Rule:

ietB6 CA contract of the corporation with one or more of its directors or

trustees, officers or their spouses and relatives within the fourth civil degree

of consanguinity or affinity is voidable, at the option of such corporation.

Exceptions:
2101 1. That the presence of such director or trustee in the board meeting in

Rvio Awhich the contract was approved was not necessary to constitute a

doue quorum for such meeting;

id 2. That the vote of such director or trustee was not necessary for the

begapprovalof the contract;

un 3. That the contract is fair and reasonable under the circumstances;

oP 4. In case of corporations vested with public interest, material contracts are

rapproved by at least two-thirds (2/31 of the entire membership of the

siff 6 board, with at least a maiority of the independent directors voting to

approve the material contract; and

e5. That in case of an officer, the contract has been previously authorized by

it1 the board of directors.

RATIFICATION by stockholders on self-dealing directors or trustees,

officers

s, Or

A contract of the corporation with directors or trustees or offices

may be ratified by the vote of the stockholders representing at least tw

thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) o

the members in a meeting called for the purpose. The requisites are:

1. Any of the first three conditions set forth in the first paragraph of the

above section is absent;

1cers

2. Full disclosure of the adverse interest of the directors or trustees

involved is made at such meeting; and

3. That the contract is fair and reasonable under the circumstances.

SEC. 32. Contracts Between Corporations with Interlocking Directors.

Except in cases of fraud, and provided the contract is fair and

reasonable under the circumstances, a contract between two (2) or

more corporations having interlocking directors shall not be

invalidated on that ground alone: Provided, That if the interest of the

interlocking director in one (1) corporation is substantial and the

interest in the other corporation or corporations is merely nominal, the

contract shall be subject to the provisions of the preceding section

insofar as the latter corporation or corporations are concerned.

Stockholdings exceeding twenty percent (20%) of the outstanding

capital stock shall be considered substantial for purposes 0

interlocking directors

anInterlocking Directorss9

epe These are the members of the board of directors in a certain

tCorporation who are also directors in another corporation. ongino

General rule:

A contract between two or more corporations having interlocking

directors shall not be invalidated on that ground alone.

to 2 Requisites:

obre

beod ods ni
o 1. The contract is not fraudulent; and

2. The contract is fair and reasonable under the circumstances.

Exception:

ers If the interest of the interlocking director in one corporation is

substantial and his interest in the other corporation or corporations is merely

nominal, he shall be subject to the provisions of section 31 insofar as the

latter corporation or corporations are concerned.

Substantial interest

obol Stockholdings exceeding twenty percent (20%) of the outstanding

capital stock shall be considered substantial for purposes of interlocking

directors.

SEC. 33. Disloyalty of a Director. Where a director, by virtue of such

office, acquires a business opportunity which should belong to the

corporation, thereby obtaining profits to the prejudice of such

corporation, the director must account for and refund to the latter all

such profits, unless the act has been ratified by a vote of the

stockholders owning or representing at least two-thirds (2/3) of the

outstanding capital stock. This provision shall be applicable,

notwithstanding the fact that the director risked one's own funds in the

venture.

Doctrine of Corporate Opportunity

A director, by virtue of his office, acquires for himself a business

o opportunity which should belong to the corporation, thereby obtaining

ote profits to the prejudice of such corporation, he must account to the latter

for all such profits by refunding the same.

b brs

Note:

The doctrine shall be applicable, notwithstanding the fact that the

director risked his own funds in the venture.

Ratification by the stockholders

The act of a director violating the doctrine of corporate opportunity

can be ratified by a vote of the stockholders owning or representing at least

two-thirds (2/3) of the outstanding capital stock.

SEC. 34. Executive, Management, and Other Special Committees. If the

bylaws so provide, the board may create an executive committee

composed of at least three (3) directors. Said committee may act, hu

majority vote of all its members, on such specific matters within the

competence of the board, as may be delegated to it in the bylaws or by

majority vote of the board, except with respect to the: (a) approval of

any action for which shareholders' approval is also required; (b) filling

of vacancies in the board; (c) amendment or repeal of bylaws or the

adoption of new bylaws; (d) amendment or repeal of any resolution of

the board which by its express terms is not amendable or repealable;

and (e) distribution of cash dividends to the shareholders.

The board of directors may create special committeesof

temporary or permanent nature and determine the members' term,

composition, compensation, powers, and responsibilities.

Executive Committee
It is a body created by the by-laws and composed of not less than

three members of the board which, subject to the statutory limitations, has

all the authority of the board of directors to the extent provided in the by-

laws.

Limitations on the powers of the executive committee

1. Approval of any action for which shareholders' approval is also required

2. Filing of vacancies in the board;

3. Amendment or repeal of by-laws or the adoption of new by-laws

4. Amendment or repeal of any resolution of the board which by its express

terms is not amendable or repealable; and

5. Distribution of cash dividends to the shareholders.

Quorum required of the executive committee

The committee may act, by majority vote of all its members, on such

specific matters within the competence of the board.