REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

LAW ON PRIVATE CORPORATIONS

Compiled by Vhin

MULTIPLE CHOICE QUESTIONS

1. Which of the following is not an attribute of a corporation?

a. It is an artificial being.
b. It is created by the agreement of the incorporators.
c. It has the right of succession.
d. It has the powers, attributes and properties expressly authorized by law or incidental to its
existence.

2. It refers to the doctrine to the effect that the separate personality of a corporation will be disregarded if it
is used to defeat public convenience, justify a wrong, protect fraud, or defend crime.
a. Doctrine of limited capacity.
b. Doctrine of corporate opportunity.
c. Trust fund doctrine.
d. Doctrine of piercing the veil of corporate entity.

3. The doctrine of piercing veil of corporate entity shall apply in the following cases, except;
a. When the separate personality of the corporation is used as a vehicle for the evasion of an
existing obligation.
b. When the corporate entity is used to justify a wrong, protect fraud, or defend a crime.
c. Where the corporation is merely a farce since it is a mere business conduit of a person.
d. Where mere majority of the outstanding capital stock is owned by a single individual.

4. Piercing the corporate veil based on the alter ego theory requires the concurrence of the following
elements, except:
a. Control of the corporation by the stockholder or parent corporation.
b. Fraud or fundamental unfairness imposed upon the other party by the corporation.
c. Harm or damage caused to the other party by the fraudulent or unfair act of the corporation.
d. The corporate name bears the name of the stockholder or parent corporation.

5. These statements are presented to you for evaluation:

Statement I-Frequent transactions between a parent company and its subsidiary are by themselves a
sufficient reason for disregarding the fiction of separate corporate personality.

Statement II -For as long as long as the separate personality of a corporation is not used for illegal or
fraudulent purpose, the other party to the transaction has no right to pierce the corporate veil.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

6. These statements are presented to you:

Statement I - Mere ownership by a single stockholder of all or nearly all of the capital stock of a
corporation is by itself sufficient reason for disregarding the fiction of separate corporate personality.

Statement II -The fact that the name of a corporation includes the name of one of the stockholders is a
valid ground to pierce the corporate veil.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
7. Mr. S and his family are the owners of the outstanding capital stock of ABC Factory Corporation (ABC)
which owed its workers certain benefits under the law. Then ABC ceased operations. The following day,
ABC was succeeded by, and its assets were turned over to, XYZ Factory Corporation (XYZ) whose
subscribed shares are also owned by Mr. S and his family. XYZ also hired its own workers. The ABC
workers now sue XYZ and Mr. S and his family for the unpaid benefits.
a. Both XYZ and Mr. S and his family are liable for the unpaid benefits.
b. Neither XYZ nor Mr. S and his family are liable for the unpaid benefits because they have a
personality separate and distinct from ABC, the actual employer of the suing workers.
c. The unpaid benefits of the ABC workers are deemed forfeited in view of the cessation of
operations of ABC.
d. Only Mr. S and his family are personally liable since they are the stockholders of both ABC and
XYZ.

8. The death of all the stockholders of a stock corporation will:

a. Result in the automatic dissolution of the corporation.
b. Automatically make the legal heirs of the deceased stockholders become the new stockholders.
c. not affect the due existence of the corporation, with the legal title to the shares being vested in
the meantime on the executor or the administrator duly appointed by the court to administer the
estate of each stockholder until their respective estates are settled.
d. be a ground for the revocation of the certificate of registration of the corporation.

9. Mr. Gregorio Atencio, the sole proprietor of GREAT Grocery Store, the only supermarket in his town,
offered to sell the business to Mr. Arturo Bautista for P20,000,000.00. Mr. Bautista accepted the offer on
the condition that Mr. Atencio would not put up any supermarket in the town within a period of five (5)
years after the consummation of the sale. Two years after the sale, Mr. Atencio, wanting to put up the
same business, created Regent Supermarket Corporation with 90% of the capital stock being registered
in his name, and the remaining 10% in the name of his relatives who merely signed the articles of
incorporation as incorporators and without knowledge that they were being made stockholders of
Regent. The store of Regent is located in the same town. Mr. Bautista, on learning that the new
supermarket was put up by Mr. Atencio, now sues the latter and Regent for breach of contract and asks
the court that Mr. Atencio and Regent be restrained from pursuing the business and demands the
payment of damages. Mr. Atencio contends that he has not committed any violation because Regent has
a personality separate from his own. Decide.
a. Mr. Atencio violated his contract. Based on the facts, he and Regent will be considered as one
under the doctrine of piercing the veil of corporate entity.
b. Mr. Atencio is correct. He has a personality and separate and distinct from that of Regent and
should not be held liable for breach of contract.
c. The provision in the contract that Mr. Atencio must not put up the same business within five (5)
years in the town is void for being in restraint of trade.
d. Mr. Bautista has a course of action against Mr. Atencio but not against Regent.

10. A corporation commences to exist:

a. upon the execution of the articles of incorporation by the incorporators.
b. upon the filing of the articles of incorporation with the Securities and Exchange Commission.
c. upon the issuance of the certificate of incorporation.
d. on the date when the incorporators acknowledged the due execution of the articles of
incorporation before a notary public.

11. These statements are presented to you for evaluation:

Statement I - A corporation continues to exist for the period for which it was formed regardless of the
changes in the ownership of its shares or in its membership.

Statement II-The existence of a corporation is not affected by the death, insolvency, or incapacity of the
individual stockholders or members.

Which of the foregoing statements refer to the right of succession of a corporation?

a. Both Statements I and II.
b. Neither Statement I nor II.
c. Statement I only.
d. Statement II only.
12. A partnership and a corporation are similar except with respect to:
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
a. having a separate personality.
b. being composed of a group of persons.
c. being artificial persons.
d. having the right of succession.

13. The following characteristics are applicable to a corporation, except one which pertains to a partnership.
Which one pertains to the latter?
a. The admission of a member to the firm requires the consent of the all the existing members.
b. It has perpetual term of existence.
c. Its members are not liable for the firm's debts.
d. It cannot be dissolved without the consent of the State.

14. A, B, C, D and E want to establish a car repair business. A, B and C each have the amount of
P200,000.00 to contribute to the business capital. D is to contribute to the firm his lot and building,
while E will contribute his services as a mechanic. All of them are of legal age. They are deciding on
what type of business organization to put up.
a. The five can only put up a partnership.
b. The five can only put up a corporation.
c. The five can put up either a partnership or a corporation.
d. The five cannot put up either a partnership or a corporation.

15. These statements are presented to you for evaluation:

Statement I- A stock corporation may be formed by the mere agreement of the incorporators.

Statement II -The insolvency or incapacity of an incorporator or a stockholder dissolves the corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

16. One of the following is not a characteristic of a stock corporation. Which is it?
a. It is formed by not more than 15 persons.
b. The stockholders are liable only to the extent of their investment.
c. The stockholders directly own the properties of the corporation.
d. It acts through a board of directors.

17. A stock corporation differs from a non-stock corporation in that in a non-stock corporation:
a. There is capital stock divided into shares.
b. There is an authority to distribute dividends or allotments from surplus profits.
c. Its income shall be used only for the furtherance of the purpose for which it was incorporated.
d. It is formed for profit.

18. It refers to a corporation which operates within the country under whose laws it was incorporated.
a. Foreign corporation
b. Offshore corporation
c. Domestic corporation
d. Public corporation

19. Under this test, the nationality of a corporation follows that of the country under whose laws it was
formed.
a. Incorporation Test
b. Control Test
c. Business Domiciliary Test
d. Grandfather Rule

20. This is the test applied in determining the nationality of a corporation during wartime where the assets of
a corporation may be confiscated by the State under whose laws it was incorporated for purposes of
national security.
a. Control Test
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
b. Incorporation Test
c. Business Domiciliary Test
d. Grandfather Rule

21. A corporation that is organized for the government of a portion of the State, like a province, city,
municipality or barangay.
a. Public corporation
b. Quasi-public corporation
c. Government-owned corporation
d. Government-controlled corporation

22. A corporation that has been created in strict compliance with all the legal requirements and whose right
to exist as a corporation cannot be successfully attacked in a direct proceeding for that purpose by the
State.
a. De facto corporation
b. De jure corporation
c. Corporation by prescription
d. Corporation by estoppel

23. A corporation that is defectively created but there is an actual exercise of corporate rights and franchise
resulting from an attempt in good faith to incorporate on the part of its members.
a. De jure corporation
b. Corporation by prescription
c. Corporation by estoppel
d. De facto corporation

24. Its due existence can be attacked directly in a quo warranto proceeding by the State.
a. De facto corporation
b. De jure corporation
c. Both de facto and de jure corporation
d. Neither de facto nor de jure corporation

25. Its due existence can be inquired into collaterally either by the State or private persons.
a. De facto corporation
b. De jure corporation
c. Both de facto and de jure corporation
d. Neither de facto nor de jure corporation

26. Assuming that a certificate of incorporation was issued by the Securities and Exchange Commission,
which of the following is not a de facto corporation?
a. A corporation that indicated an erroneous amount of paid-in capital in the treasurer's affidavit.
b. A corporation where an individual incorporator is incapable of giving consent.
c. A corporation where the acknowledgment of the incorporators is defective.
d. A corporation whose articles of incorporation provide for the exercise of a common profession
by the incorporators.

27. Donato purchased goods on credit amounting to P100,000.00 from Clover Leaf Corporation whose
certificate of incorporation was issued two months earlier by the Securities and Exchange Commission.
Donato defaulted in his payment on due date. Accordingly, Clover Leaf Corporation filed a complaint
for collection against him. Donato moved for the dismissal of the complaint on the ground that Clover
Leaf Corporation was non-existent. To prove his case, Donato attached to his motion to dismiss a
certified true copy of the articles of incorporation and the birth certificate of Antonio Alvarez, one of the
incorporators, showing that the latter was under eighteen (18) years of age on the date of incorporation
of Clover Leaf Corporation, contrary to what was stated in the articles of incorporation that all of the
incorporators were of legal age. Is Donato correct?
a. Yes, because Clover Leaf really had no right to sue.
b. No, because he cannot make a collateral attack on the due existence of Clover Leaf Corporation
in the same action that was brought against him.
c. Yes, because he can make a direct attack on the due existence of Clover Leaf Corporation in the
same action brought against him.
d. Yes, because Clover Leaf Corporation is a de facto corporation.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
28. One which is not in reality a corporation but is considered as one with respect to those who are
precluded by their admission or conduct from denying its existence.
a. Corporation by estoppel
b. Corporation by prescription
c. De jure corporation
d. De facto corporation

29. Those composing it are liable as general partners.

a. Corporation by estoppel
b. Corporation by prescription
c. De jure corporation
d. De facto corporation

30. A, B, C, D and E represented themselves to X as directors and stockholders of “Titanic Corporation”. In

reality, no such corporation is registered with the Securities and Exchange Commission. Later, X
granted credit sales to “Titanic Corporation”. When “Titanic Corporation" defaulted in its payment, X
sued “Titanic Corporation”. "Titanic Corporation" moved for the dismissal of the complaint on the
ground that it had no corporate personality. Is the defense of “Titanic Corporation” tenable?
a. Yes, because it was not registered with the Securities and Exchange Commission.
b. No, because it is estopped from raising as a defense its lack of corporate personality against X.
c. Yes, because “Titanic Corporation” does not really exist.
d. Yes, because only the Office of the Solicitor General can sue “Titanic Corporation.”

31. Assume the same facts in the preceding number except that it was “Titanic Corporation” which granted
credit sales to X. When X defaulted in his payment, “Titanic Corporation” filed a collection case against
him. X moved for the dismissal of the complaint on the ground that “Titanic Corporation” was a non-
existent corporation. Is the defense of X tenable?
a. Yes, because “Titanic Corporation” was not registered with the Securities and Exchange
Commission.
b. No, because X is precluded from raising the defense that “Titanic Corporation” does not exist.
c. Yes, because “Titanic Corporation” does not really exist.
d. Yes, because “Titanic Corporation” lacks separate juridical personality.

32. Refer to No.30. The corporation formed under the circumstances is a:

a. corporation by prescription.
b. corporation by estoppel.
c. de facto corporation.
d. de jure corporation.

33. A corporation that has exercised corporate powers for such a length of time without interference from
the State and which, by fiction of law, is given the status of a corporation.
a. Corporation by estoppel
b. De facto corporation
c. Corporation by prescription
d. De jure corporation

34. In case a corporation is formed for the exercise of a profession, it shall be considered as a:
a. de facto corporation.
b. de jure corporation.
c. Either (a) or (b) depending on whether or not a certificate of incorporation was issued.
d. Non-existent Corporation even if a certificate of incorporation was issued.

35. Those mentioned in the articles of incorporation as originally forming and composing the corporation
and are signatories of such document are known as:
a. Corporators.
b. Stockholders.
c. Incorporators.
d. Members.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
36. These statements are presented to you:

Statement I - An incorporator of a corporation must be a subscriber to its capital stock in the case of a
stock corporation, or a member thereof in the case of a non-stock corporation, at the time of
incorporation.

Statement II - An incorporator remains as such even if he is no longer a stockholder or a member of the

corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

37. Which of the following statements is incorrect?

a. A promoter is personally liable for contracts he entered into in behalf of a corporation still to be
formed if the incorporation does not materialize.
b. A newly-formed corporation is automatically liable for pre-incorporation contracts entered into
in its behalf by the promoter who has facilitated the creation of the corporation.
c. A corporation becomes liable for pre-incorporation contracts entered into it its behalf by a
promoter once it ratifies the contract.
d. A promoter is released from pre-incorporation contracts he entered into once the corporation
ratifies the contract and the other party to the contract absolves him from liability.

38. The total amount of shares which a corporation is allowed to issue if the shares have par value.
a. Subscribed capital stock
b. Unissued capital stock
c. Authorized capital stock
d. Issued capital stock

39. These statements are presented to you for evaluation:

Statement I-Issued capital stock refers to the capital stock that has been fully paid and for which stock
certificates have been issued.

Statement II -Subscribed capital stock refers to the capital stock that has been subscribed but has not
been fully paid.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

40. It refers to the total par value of all issued par value shares, or the total cash or consideration received
for all issued no-par value shares.
a. Stated capital
b. Legal capital
c. Paid-up capital
d. Capital

41. It refers to the total shares of stock issued to subscribers or stockholders, whether fully or partially paid
(as long as there is a binding subscription agreement), except treasury shares.
a. Outstanding capital stock
b. Issued capital stock
c. Subscribed capital stock
d. Authorized capital stock
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
42. The articles of incorporation of Pathfinder Corporation provide, among other information,' for an
authorized capital stock of P1,000,000.00 divided into 10,000 shares with a par value of P100.00 per
share, and seven (7) directors. As of December 31, 2021,5,000 shares of the corporation had been
subscribed at par value of which 4,000 shares had been paid in full, while 1,000 shares were paid up to
80%. The issued capital stock of Pathfinder Corporation is:
a. P500,000.00.
b. P400,000.00.
c. P480,000.00.
d. P1,000,000.00.

43. Refer to the facts in the preceding number. Assume that for 2022, A, B, C, D, E, F, G and H ran for the
position of director in the annual election of directors. If you were a stockholder with 400 shares, how
many votes may you possibly cast in the election?
a. 400 votes
b. 2,800 votes
c. 3,200 votes
d. 8 votes

44. A share of stock differs from a stock certificate in that a share of stock:
a. is tangible personal property.
b. may not be issued unless the subscription has been fully paid.
c. is the written evidence of a stockholder's rights and interest in a corporation.
d. is one of the units into which the capital stock is divided.

45. The ordinary stock of a corporation that entitles the holder to a pro rata division of the dividends,
without preference or advantage over other stockholders.
a. Common stock
b. Preferred stock
c. Par value stock
d. No-par value stock

46. A stock whose nominal value is stated in the stock certificate.

a. Par value stock
b. Issued stock
c. No-par value stock
d. Redeemable stock

47. Nonvoting shares may vote in the following cases, except:

a. when the articles of incorporation are to be amended.
b. in case of merger of the corporation with another corporation or other corporations.
c. in the election of members of the board of directors.
d. nonvoting shares are not allowed to vote at all, that is why they are classified as nonvoting.

48. These statements are presented to you for evaluation:

Statement I - A stock corporation may classify all its shares as nonvoting.

Statement II-A stock corporation may not issue both par value and no-par value at the same time.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

49. Which of the following statements concerning no-par shares is incorrect?

a. Subscriptions to no-par shares shall be deemed fully paid and non-assessable.
b. The entire consideration received for no-par shares shall all be treated as capital and no part
thereof shall be available for distribution as dividends.
c. They may be issued for a consideration of less than P5.00 per share.
d. They may not be issued by banks, trust companies, insurance companies, public utilities, and
building and loan associations.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
50. Which of the following statements concerning the power of a corporation to classify its own shares is
incorrect?
a. A stock corporation may classify its shares into classes or series of shares, or both.
b. A stock corporation may classify its shares so that a certain class may be subscribed into by
foreigners only, while another class may be subscribed into by Filipinos only.
c. As a rule, only shares that are classified as “preferred” or “redeemable” may be deprived of the
voting right.
d. A corporation may not give preferences to certain shares because of the rule that each share shall
be equal in all respects to every other share.

51. These statements are presented to you for evaluation:

Statement I - Shares with par value may be issued for a consideration of less than P5.00 per share.

Statement II - Preferred shares may be issued with or without a stated par value.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

52. Which shares may be reacquired by a corporation even if it has no unrestricted retained earnings in its
books?
a. Founders' shares
b. Redeemable shares
c. Convertible shares
d. Par value shares

53. Shares that are issued without consideration or with no adequate consideration are known as:
a. watered stock.
b. redeemable stock.
c. founders' stock.
d. no-par stock.

54. Which of the following statements concerning treasury shares is incorrect?

a. They have no voting rights as long as they remain in the treasury.
b. They are not outstanding shares.
c. They are not entitled to dividends.
d. They may not be disposed of at a price lower than par value or issued price in the case of no-par
shares.

55. Which of the following documents is not required to be submitted at the time of incorporation?
a. Articles of incorporation
b. Treasurer's affidavit
c. Verification slip authorizing use of corporate name
d. Bylaws

56. Corporations that are required to submit a favorable recommendation from the appropriate government
agency before their articles of incorporation are accepted for filing by the Securities and Exchange
Commission include the following, except:
a. Trading companies.
b. Banks, banking and quasi-banking institutions.
c. Preneed, insurance and trust companies.
d. Pawnshops.

57. It refers to the right to exist as a corporation and it is vested in the individuals who compose the
corporation and not in the corporation itself.
a. Primary franchise
b. Secondary franchise
c. License
d. Certificate of authority
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
58. The charter of a corporation organized under the general law includes the following, except the:
a. Revised Corporation Code.
b. Other laws applicable to corporations.
c. Articles of incorporation.
d. Bylaws.

59. These statements are presented to you for evaluation:

Statement I - A partnership, whether or not the articles of partnership are recorded with the Securities
and Exchange Commission, may be an incorporator, since partnerships are created by the mere consent
of the partners.

Statement II - A corporation may be an incorporator of another corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

60. These statements are presented to you for evaluation:

Statement I - A person authorized to sign the articles of incorporation in behalf of a stock corporation
which is an incorporator need not be a subscriber to at least one (1) share of stock of the corporation
being formed.

Statement II - A person whose name appears in the articles of incorporation as a subscriber to at least
one (1) share of stock may not be an incorporator of the corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

61. What is the effect if a corporation has been issued a certificate of incorporation by the Securities and
Exchange Commission despite the fact that its name is identical to that of an existing corporation or one
that is protected by law?
a. The corporation shall be deemed dissolved.
b. The corporation will be allowed to change its name by amending its articles of incorporation.
c. The franchise of the corporation will be suspended.
d. The corporation will be considered unincorporated.

62. These statements are presented to you for evaluation:

Statement I - A corporation shall have perpetual existence unless the articles of incorporation provide
that the corporate term shall be for a definite period.

Statement II - If the term of existence of a corporation as provided in its articles of incorporation is for
a definite period, the same may no longer be allowed to be extended upon its expiration.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
63. These statements are presented to you for evaluation:

Statement I - An individual, who signs the articles of incorporation on behalf of a corporation which is
an incorporator, may not be named as director in the same, articles of incorporation, unless the said
individual is also the owner of at least one (1) share of stock of the corporation being formed.

Statement II - A foreign corporation may be an incorporator of a corporation in the Philippines.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

64. Which of the following corporations whose term has expired may apply for revival of corporate
existence?
a. An expired corporation whose certificate of registration has been revoked for non-filing of
reports.
b. An expired corporation which has completed the liquidation of its assets.
c. An expired corporation whose certificate of registration has been revoked for reasons other than
non-filing of reports.
d. An expired corporation which had already availed itself of re-registration.

65. These statements are presented to you for evaluation:

Statement I - Subscriptions to par value shares of stock of a corporation at the time of incorporation
need not be fully paid upon subscription.

Statement II - Stock corporations are not required to have a minimum capital stock, unless otherwise
provided by law.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

66. The articles of incorporation of Renaissance Corporation provide for a capital stock consisting of
100,000 no-par shares with an issue price of P100.00 per share. At the time of incorporation, 25% of the
authorized shares were subscribed. How much should be paid at the time of incorporation?
a. None, because stock corporations are not required to have a minimum capital stock.
b. P2,500,000.00.
c. P625,000.00.
d. Any amount may be paid.

67. The articles of incorporation of Exquisite Garments Corporation provide, among other matters, for an
authorized capital stock of P1,000,000.00,divided into 10,000 shares at the par value of P100.00 per
share and seven (7) directors.

Assuming that at the time of incorporation, 5,000 shares were subscribed at par value of which 4,000
shares had been paid in full, and 1,000 shares had been paid at 60% of the subscription price, the number
of issued shares of the corporation is:
a. 5,000 shares.
b. 4,000 shares.
c. 10,000 shares.
d. 4,600 shares.

68. Refer to No.67.The total number of subscribed shares is:

a. 5,000 shares.
b. 4,000 shares.
c. 10,000 shares.
d. 4,600 shares.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
69. Refer to No. 67. Assume that Exquisite Garments Corporation reacquired 100 shares of the 4,000 shares
paid in full. How many shares are outstanding after the acquisition of the 100 shares?
a. 3,900 shares.
b. 4,900 shares.
c. 9,900 shares.
d. 900 shares.

70. Refer to No. 67. If you were a stockholder who owns 200 shares and 8 stockholders were nominated for
the position of director during the annual election, you will be entitled to cast a maximum of:
a. 1,600 votes.
b. 1,400 votes.
c. 200 votes.
d. 8 votes.

71. Refer to No. 67. Assuming that you were the subscriber of the 1,000 shares for which you paid 60% of
the subscription price or a total payment of P60,000.00,you shall be entitled at the time of your
subscription to the following rights of a stockholder, except the right to:
a. receive dividends.
b. vote in stockholders' meetings.
c. attend stockholders' meetings either physically, by proxy, or through remote communication.
d. a stock certificate covering 600 shares.

72. Refer to No. 67. In the election of directors, those elected were A, B, C, D, E, F and G. In the first
meeting of the board of directors, the minutes of meetings show the following information:

I. Approval of a contract for the purchase of garments from director G, who is an importer of
apparel from China. Present during the meeting were A, B, C, D and G, with A, B and G voting
for the approval of the contract. The contract is considered fair and reasonable under the
circumstances.
II. Appointment of T as the new treasurer, with A, B, and C voting for his appointment.

In your evaluation of the above corporate acts:

a. Both acts are valid.
b. Both acts are not valid.
c. Only I is valid.
d. Only II is valid.

73. The basic governing document of a private corporation which in effect serves as the application of the
incorporators with the government through the Securities and Exchange Commission to become a
corporation is the:
a. articles of incorporation.
b. bylaws.
c. certificate of incorporation.
d. verification certificate.

74. The purpose or purposes of a corporation, aside from being lawful, must comply with which of the
following requirements?
a. The purpose or purposes must be definitely stated.
b. The primary purpose must be stated separately from the secondary purpose or purposes.
c. The purposes must be susceptible of being lawfully combined.
d. All of the foregoing.

75. Which of the following provisions of the articles of incorporation cannot be amended?
a. Name of the corporation
b. Corporate term
c. Purpose or purposes of the corporation
d. Number and name of incorporators
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
76. These statements are presented to you for evaluation:

Statement I - An incorporator must also be a member of the board of directors or trustees at the time of
incorporation.

Statement II - One's name may be stated in the articles of incorporation as a subscriber or member at the
time of incorporation, but he may not be an incorporator.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

77. The document issued by the Securities and Exchange Commission under its official seal giving the
incorporators, stockholders/members and their successors the authority to constitute themselves as a
body politic and corporate under the name stated in the articles of incorporation for the period specified
therein.
a. Articles of incorporation
b. Bylaws
c. Certificate of incorporation
d. Certificate of registration

78. It is the top governing body of a corporation which exercises corporate powers, conducts corporate
business and controls and holds corporate property.
a. Executive committee
b. Board of directors/trustees
c. Council of elders
d. Steering committee

79. These statements are presented to you for evaluation:

Statement I - A director of a corporation may act individually in behalf of the corporation provided he
owns the controlling interest in the corporation.

Statement II - Directors have to act as a body only if none of them owns the controlling interest in the
corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

80. Mr. Antonio Roxas, a director and the majority stockholder of Trident Sales Corporation whose articles
of incorporation provide for nine (9) directors, was attending a business conference in Singapore when
he was offered a contract which he believed was good for Trident. He accepted the offer by signing the
contract in his capacity as director and in behalf of Trident.
a. The contract is binding on Trident since Mr. Roxas is a director thereof and can bind the
corporation in such capacity.
b. The contract is binding on Trident since Mr. Roxas is a majority stockholder.
c. The contract is binding on Trident because Mr. Roxas acted in a manner that is advantageous to
Trident.
d. The contract is not binding on Trident since Mr. Roxas had no authority from the board of
directors to act on the particular matter.

81. Directors of an ordinary stock corporation must possess the following qualifications, except:
a. They must be the owner of at least one (1) share of stock.
b. The shares of stock they own must stand in their name in the books of the corporation while they
are directors.
c. Majority of the directors must be citizens of the Philippines.
d. They must not be more than 15 in number.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
82. The articles of incorporation of Emerald Marketing Corporation provide for nine (9) directors. As of
April 30,2021, the cut-off date for purposes of the annual election of directors, the corporation had
10,000 shares outstanding. If you own 200 shares and you belong to the minority and you wish to elect
two (2) directors, what is the minimum number of shares that you must be able to solicit to be assured of
the election of your two (2) candidates for directors?
a. 2,001 shares
b. 2,223 shares
c. 1,800 shares
d. 200 shares

83. Fernando and his children, namely, Anna, Benito, Cristina and Donato are stockholders of Fontella
Corporation whose articles of incorporation provide for five (5) directors. The certificates of stock show
the following number of shares in their names: Fernando, 2,700 shares; Anna,2,000 shares; Benito,2,000
shares; Cristina, 800 shares; and Donato, 800 shares; for a total of 8,300 shares representing 83% of the
10,000 shares outstanding. The remaining 1,700 shares (equivalent to 17%) are in the name of Xavier at
1,000 shares and several minority stockholders owning the balance of 700 shares. All five seats in the
board are due to be filled up and Fernando and his 4 children have decided to run for director. Should
the family of Fernando join forces on one hand, and Xavier and the other minority stockholders unite, on
the other hand to elect their lone representative in the board. How many seats in the board may the
family of Fernando possibly win?
a. Five (5)
b. Four (4)
c. Three (3)
d. Two (2)

84. The following are corporations vested with public interest, except:
a. Corporations covered by the Securities Regulations Code whose shares are registered with the
Securities and Exchange Commission.
b. Corporations listed with an exchange.
c. Corporation with assets of at least Five Million Pesos (P5,000,000.00) and having two hundred
(200) or more holders of shares, each holding at least one hundred (100) shares of a class of its
equity shares.
d. Banks, quasi-banks and other financial intermediaries.

85. At least twenty percent (20%) of the members of the board of directors of corporations vested with
public interest must be:
a. incorporating directors
b. independent directors.
c. emergency directors.
d. provisional directors.

86. Which of the following is not a requirement for an independent director?

a. He does not own shares of stock of the corporation, but receives fees as a director.
b. He is independent of the management of the corporation.
c. He is free from any business or other relationship which could reasonably be perceived to
materially interfere with the exercise of independent judgment in carrying out the responsibilities
of a director.
d. He is elected by the shareholders of the corporation.

87. As a rule, the quorum in the meeting of the board of directors or trustees is at least:
a. a majority of the total number of directors or trustees fixed in the articles of incorporation.
b. two-thirds (2/3) of the total number fixed in the articles of incorporation.
c. three-fourths (3/4) of the total number fixed in the articles of incorporation.
d. any number as long as it is fixed.in the bylaws.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
88. The bylaws may provide that the quorum in the meetings of directors or trustees may be:

I. less than the majority of the total number of directors fixed in the articles of incorporation.

II. more than the majority. of the total number of directors fixed in the articles of incorporation

The statement is true with respect to:

a. both I and II.
b. I only
c. II only
d. Neither I nor II

89. As a rule, the vote required in the meetings of the board of directors of an ordinary stock corporation for
the validity of the corporate act taken should be at least:
a. a majority of the total number of directors fixed in the articles of incorporation.
b. a majority of the number of directors present provided there is a quorum.
c. a majority of the number of directors present even if there is no quorum.
d. two-thirds (2/3) of the total number of directors fixed in the articles of incorporation.

90. Who may attend and vote in person, by remote communication or by proxy in meetings?
a. Stockholders or members in the regular or special meetings of the stockholders or members.
b. Directors or trustees in the regular or special meetings of the board of directors or trustees.
c. Both (a) and (b).
d. Neither (a) nor (b).

91. These statements are presented to you for evaluation:

Statement I - Directors/trustees or stockholders/members who attend their respective meetings online or

through remote communication shall be considered present for purposes of determining the quorum.

Statement II - The votes cast online or by remote communication by directors/trustees or

stockholders/members during their respective meetings shall be counted in determining the total votes
cast to approve a corporate act.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

92. A, B, C, D, E, F, G and H are nominees for the position of director of Compumatrix Corporation whose
articles of incorporation provide for seven (7) directors. S is a stockholder of Compumatrix Corporation
with 500 shares in his name. Which of the following is incorrect?
a. S may cast 500 votes each for A, B, C, D, E, F, G and H.
b. S may cast 1,000 votes for A, 1,000 votes for B, 1,000 votes for C, and 500 votes for D.
c. S may cast 3,500 votes for A alone.
d. S may cast 500 votes each for A, B, C, D, E, F and G.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
93. A,B,C,D,E,F and G are directors of Cornerstone Construction Corporation, whose articles of
incorporation provide for seven (7) directors. The minutes of meetings of the board of directors for the
months of September and October of the current year show the following information:

I. September 10-Approval of a contract for the purchase of steel from Titan Steel Mills
Corporation. Present during the meeting were A, B, C and D, with A, B and C voting for the
approval of the contract.

II. October 10 -Election of a new corporate secretary of the corporation. Present were A, B, C, D
and E, with A, B and C voting for the election of S as the new corporate secretary.

Which of the foregoing acts of the board is valid?

a. Both I and II.
b. Neither I nor II.
c. I only.
d. II only.

94. Who of the following corporate officers must also be a director?

a. President
b. Treasurer
c. Corporate secretary
d. None of the foregoing officers is required to be a director for as long as each owns at least one
share of stock in his own name.
95. The president of a corporation may at the same time be the:
a. Treasurer.
b. Corporate secretary.
c. Both the treasurer and corporate secretary.
d. Chairman of the board of directors.

96. A,B,C,D,E,F and G are directors of Speedex Corporation whose articles of incorporation provide for
seven (7) directors. During the month of October 2021, the board of directors of the corporation which is
engaged in the sale of motor vehicles, held a meeting to approve a contract for the purchase of 20
motorcycles from G, one of the directors, who is an importer of motorcycles. Present during the meeting
were A,B,C,D and G, with A,B,C and G voting for the approval of the contract. Assuming that the
contract is fair and reasonable under the circumstances, the contract between Speedex Corporation and
G is:
a. valid.
b. rescissible.
c. voidable.
d. unenforceable.

97. Refer to the facts in the preceding number. If an executive committee is allowed by the bylaws of
Speedex Corporation to be formed, which of the following acts may be performed by the executive
committee?
a. Election of Y to fill a vacancy in the board of directors.
b. Declaration of stock dividends.
c. Amendment of the bylaws.
d. Approval of a contract for the purchase of 10 units of motorcycle.

98. The minimum number of members of the executive committee who must all be members of the board of
directors is:
a. Two (2).
b. Three (3).
c. majority of the number of the board of directors stated in the articles of incorporation.
d. majority of the number of the board of directors present when the members of the executive
committee were appointed.

99. What vote is required in order that the act of the executive committee will be considered valid?
a. Majority of its members
b. All of its members
c. Two-thirds of its members.
d. Majority of its members present during the executive committee meeting.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
100. Which of the following causes of vacancy in the board of directors may be filled by the remaining
directors if they still constitute a quorum?
a. Increase in the number of directors
b. Expiration of the term of directors
c. Death of a director
d. Removal of a director

101. Which of the following statements concerning the removal of a director is incorrect?
a. The stockholders in a meeting duly called for the purpose may vote for the removal of a director.
b. The directors themselves may vote for the removal of a director provided that those voting for
removal constitute the majority of the board of directors.
c. The Securities and Exchange Commission, motu proprio, may remove a director who has been
elected despite possessing a disqualification.
d. The Securities and Exchange Commission may, upon a verified complaint and after due notice
and hearing, order the removal of a director by reason of a disqualification.

102. These statements are presented to you for evaluation:

Statement I - As a rule, directors of a stock corporation may be removed with or without cause.

Statement II - Removal of a director without cause may not be used by the majority stockholders to
deprive the minority stockholders of their representation in the board of directors.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

103. A, B, C, D, E, F and G are directors of Crown Jewels Corporation whose articles of incorporation
provide for seven (7) directors. Halfway during their term, A, B, C and D resigned as directors. The
vacancy in the board caused by the resignation of A, B, C and D:
a. may be filled by the board of directors only.
b. may be filled by the stockholders only.
c. may be filled by either (a) or (b), if the bylaws give them the authority to fill the vacancy.
d. need not be filled until the expiration of the term of the incumbent directors since the remaining
directors constitute less than the majority.

104. Directors are entitled to compensation in the following cases, except when:
a. There is a provision in the bylaws fixing their compensation.
b. The giving of compensation to directors is approved by the stockholders representing at least a
majority of the outstanding capital stock.
c. The compensation refers to a reasonable per diem.
d. The giving of compensation was approved by the directors themselves.

105. The total yearly compensation of directors, as such directors, must not exceed:
a. Ten percent (10%) of the net income before income tax of the corporation during the preceding
year.
b. Ten percent (10%) of the net income after income tax of the corporation during the preceding
year.
c. Fifteen percent (15%) of the net income before income tax of the corporation during the
preceding year.
d. Fifteen percent (15%) of the net income after income tax of the corporation during the preceding
year.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
106. These statements are presented to you for evaluation:

Statement I - The treasurer may validly receive compensation from the corporation in such capacity, and
another compensation in his capacity as a member of the board of directors if he is also a director.

Statement II- In determining the limitation on the total yearly compensation of directors, the
compensation of a director if he serves the corporation in some other capacity, shall not be included in
determining such limitation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

107. A, B, C, D, E, F and G are directors of Fast Track Auto Supply Corporation whose articles of
incorporation provide for seven (7) directors. During the month of October 2021, the board approved a
contract for the purchase of auto spare parts from A, one of the directors of the corporation who is an
importer. Present during the meeting were A, B, C, D and E. Those who voted for the approval of the
contract were A, B, C and D. Assuming that the contract is fair and reasonable under the circumstances,
the contract between Fast Track Auto Supply Corporation and A is:
a. Valid.
b. Voidable.
c. Void.
d. Rescissible.

108. Alvarez, Bernardo, Carlos, Dominguez, Espina, Faller, Guzman, Hornedo and Inocencio are directors
of Town and Country Appliance Sales Corporation whose articles of incorporation provide for nine (9)
directors. The minutes of the meeting of the board of directors for January and February 2021 show the
following information:

I. January 15-Present were Alvarez, Bernardo, Carlos, Dominguez, Romero, who was given a
special power of attorney by Espina to represent him in the meeting since he was abroad, and
Atty. Salas, the corporate secretary. Alvarez, Bernardo, Carlos and Dominguez voted for the
approval of a contract for the purchase of appliances from Ultrasonic Corporation.

II. February 15 - Present were Alvarez, Bernardo, Carlos, Dominguez, Espina and Atty. Salas.
Alvarez, Bernardo, Carlos and Dominguez voted for the appointment of Teresa Tesoro as the
new treasurer of the corporation.

Based on the foregoing facts:

a. Both corporate acts are valid.
b. Both corporate acts are not valid.
c. I is valid; II is not valid.
d. I is not valid; II is valid.

109. On November 10, 2021, the board of directors of Intrepid Sales Corporation whose articles of
incorporation provide for seven (7) directors, held a special meeting for the purpose of removing A as
director due to disloyalty to the corporation and electing his replacement. Present during the meeting
were the six other directors, namely, B, C, D, E, F and G. B,C,D and E voted for both the removal of A
and the election of H to replace him.
a. Both the removal of A and the election of H as the new director are valid.
b. Both the removal of A and the election of H as the new director are not valid.
c. Only the removal of A as director is valid.
d. Only the election of H as new director is valid.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
110. DYNAMIC Corporation, which is in the computer sales business, has for its directors Decena, Yuson,
Nebre, Altuna, Mendoza, Isleta, and Centeno. Its articles of incorporation provide for seven (7)
directors. The minutes of meetings of the board of directors for August and September 2021,show the
following information:

I. August 10 - Present were Decena, Yuson, Nebre, and Altuna. Also present was Reyes, who was
sent by Mendoza to represent him in the meeting. A contract for the purchase of supplies from
Corona Supply Company was approved by Decena, Yuson and Reyes, who was authorized by
Mendoza to vote in favor of the contract.

II. September 10 - Present were Decena, Yuson, Nebre, Mendoza and Santos, the corporate
secretary. Directors Decena, Yuson and Nebre voted for the approval of a contract for the
purchase of state-of-the-art computers from Mendoza who is an importer of the product. The
contract with Mendoza entitles the corporation to a big discount and is fair and reasonable under
the circumstances.

In your evaluation of the above contracts:

a. Both corporate acts of the board of directors are valid.
b. Both corporate acts are not valid
c. Only corporate act I is valid.
d. Only corporate act II is valid.

111. A,B,C,D,E,F and G are directors of Silver Mercantile Corporation (Silver) whose articles of
incorporation provide for seven (7) directors. Silver was to enter into a contract with A. A board meeting
was held to approve the contract. In which of the following cases, will the contract be considered valid?
a. Present: A, B, C, D and E; voting: A, B, C and D.
b. Present: A, B, C and D; voting: B, C and D.
c. Present: A, B, C, D and E; voting: A, B and C.
d. Present: A, B, C and D; voting: A, B and C.

112. These statements are presented to you evaluation:

Statement I - There is interlocking directorate when one, some, or all of the directors of one corporation
also occupy seats in the board of another corporation.

Statement II - If a contract is entered into between two corporations with interlocking directorate, the
contract is generally void because of conflict of interest.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

113. The following are the requisites in order that an emergency board of directors may be created by the
remaining directors, except:
a. There is a vacancy in the board of directors.
b. The vacancy prevents the remaining directors from constituting a quorum.
c. The cause of vacancy is the valid removal of some directors.
d. Its creation is required to prevent grave, substantial, an irreparable damage to the corporation.

114. The emergency director who shall be appointed to the board of directors must be:
a. a creditor of the corporation.
b. a minority stockholder of the corporation.
c. an officer of the corporation.
d. a controlling stockholder of the corporation.

115. The term of the emergency director shall cease:

a. within a reasonable time from the termination of the emergency.
b. upon the election of the replacement director.
c. (a) or (b) whichever comes earlier.
d. (a) or (b) whichever comes later.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
116. Under this doctrine, directors are prohibited from usurping for, or diverting to, themselves business
deals that in equity or fairness belong to the corporation.
a. Doctrine of separate personality
b. Doctrine of alter ego
c. Doctrine of limited capacity
d. Doctrine of corporate opportunity

117. The powers of a corporation that is necessary to carry into effect the powers that are expressly granted,
and which must be presumed to have been the intention in the grant of the franchise.
a. Incidental powers
b. Implied powers
c. Express powers
d. Charter powers

118. Which of the following is not a power of a corporation?

a. The acquisition, holding or disposition of property for furtherance of its business.
b. The giving by a foreign corporation licensed to do business in the Philippines of reasonable
donations in aid of a political party or candidate or for purposes of partisan political activity.
c. The establishment pension funds for its employees.
d. The sale of treasury stocks at a reasonable price but which is lower than the par value.

119. In case of decrease of capital stock, the same should not prejudice corporate creditors, i.e., there shall
be no distribution of assets to shareholders until the claims of creditors have been paid or an
appropriation of such assets has been made to satisfy such claims. This is the:
a. Trust fund doctrine.
b. Doctrine of corporate opportunity.
c. Doctrine of limited capacity.
d. Doctrine of alter ego.

120. The right of a stockholder to purchase or subscribe to all issuances or disposition of shares of any class
before such shares is offered to the public.
a. Appraisal right
b. Redemptive right
c. Presumptive right
d. Preemptive right

121. When may the right referred to in the preceding number be denied the existing stockholders?
a. When shares are to be issued in compliance with laws requiring stock offerings or minimum
stock ownership by the public.
b. When shares are to be issued in good faith with the approval of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock in exchange for property needed for
corporate purposes or in payment of a previously contracted debt.
c. In both (a) and (b).
d. In neither (a) nor (b) because stockholders have an absolute right to maintain their proportionate
interest in the corporation.

122. In which of the following cases may a corporation acquire its own shares although it has no
unrestricted retained earnings in its books?
a. Elimination of fractional shares.
b. Collection of indebtedness in the sale of delinquent shares.
c. Payment to stockholders who exercise their appraisal right.
d. Resolution of deadlock in the management of a close corporation as ordered by the Securities
and Exchange Commission.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
123. These statements are presented to you for evaluation:

Statement I -The board of directors may abandon any sale or disposition of all or substantially all of
corporate property previously ratified by the stockholders without further approval from the latter.

Statement II -The sale or other disposition of all or substantially all of corporate property in the regular
course of business may be made by the board of directors without further approval from the
stockholders.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

124. These statements are presented to you for evaluation:

Statement I - The investment by a corporation of funds in another corporation or business or for other
than the primary purpose requires the approval of the majority of the board of directors and the
ratification by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock.

Statement II - The vote of the board of directors is sufficient if the investment by a corporation of its
funds in another corporation or business is necessary to accomplish the primary purpose.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

125. The portion of the accumulated profits of a corporation which is set aside for distribution to
stockholders is known as:
a. surplus.
b. retaining earnings.
c. additional paid-in capital.
d. dividends.

126. Which dividends require the approval of only a majority of the directors present provided there is a
quorum?
a. Stock dividends
b. Cash dividends
c. Both (a) and (b)
d. Neither (a) nor (b) because the consent of the stockholders representing at least two-thirds (2/3)
of the outstanding stock entitled to vote is required for-both kinds of dividends.

127. Which of the following is not a source of dividends?

a. Retained earnings
b. Paid-in capital in excess of par value
c. Paid-in capital in excess of issued price of no-par shares
d. Surplus profits

128. Saavedra had been the owner of 1,000 shares of stock of Portofino Transport Corporation for more
than five (5) years. On June 20, 2021, the board of directors declared a semi-annual dividend of fifty
cents (P0.50) per share to stockholders of record as of June 30, 2021 and payable on July 20, 2021. On
July 10, 2021, Saavedra sold all his shares to Belafonte. The transfer of the shares was recorded in the
stock and transfer book the following day, July 11, 2021. Who is entitled to the dividend in so far as
Portofino Transport Corporation is concerned?
a. Saavedra
b. Belafonte
c. Saavedra and Belafonte, equally.
d. Saavedra, Belafonte and Portofino Transport Corporation will share in the dividend equally.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
129. Cash dividends are different from stock dividends in that cash dividends:
a. do not involve any disbursement of funds.
b. may still be reached by corporate creditors.
c. require the approval of both the board of directors and stockholders.
d. do not increase the legal capital.

130. Stock corporations are compelled to declare dividends from their surplus profits in an amount
equivalent to the excess of such surplus profits over:
a. 100% of their authorized capital stock.
b. 100% of their subscribed capital stock.
c. 100% of their paid-in capital stock.
d. 50% of their stockholders' equity.
131. A corporation is justified in not declaring dividends although the amount of its surplus profits compels
such declaration under the requirement of the preceding number in which of the following cases?
a. When justified by definite corporate expansion projects or programs approved by the board of
directors.
b. When such retention is necessary to meet probable contingencies.
c. When the declaration of dividends is prohibited under a loan agreement without the creditor's
consent and such consent has not been obtained.
d. All of the foregoing.

132. These statements are presented to you for evaluation:

Statement I - A corporation may delegate the management of all or substantially all of its business to
another corporation.

Statement II - A management contract cannot be entered into between two corporations when majority
of the board of directors of the managing corporation also constitute the majority of the board of
directors of the managed corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

133. The following acts require the approval of both the board of directors and the stockholders, except in
case of:
a. merger or consolidation of the corporation with another corporation or other corporations.
b. sale or other disposition of all or substantially all of the corporate property.
c. declaration of cash dividends.
d. increase or decrease of capital stock.

134. An act or contract beyond the express, implied and incidental powers of a corporation is known as:
a. intra-vires act.
b. ultra-vires act.
c. illegal act.
d. unauthorized act.

135. An ultra-vires act that is not illegal per se if there has not yet been performance on both the side of the
corporation and the other party is:
a. voidable.
b. rescissible.
c. unenforceable.
d. valid.

136. An ultra-vires act that is not illegal per se, aside from being consummated, may be ratified if the
following requisites are present, except:
a. The creditors are not prejudiced or all of them have given their consent thereto.
b. The rights of the public or of the State are not involved.
c. All the stockholders must give their consent.
d. None of the foregoing.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
137. They refer to the rules of action adopted by a corporation for its internal government and for the
government of its stockholders or members and those having the direction, management and control of
its affairs.
a. Articles of incorporation
b. Committee rules and regulations
c. Bylaws
d. Board of directors' resolutions

138. When are bylaws adopted and filed?

a. Prior to incorporation.
b. After incorporation.
c. Either (a) or (b).
d. Neither (a) nor (b) because the bylaws should be filed simultaneously with the issuance of the
certificate of incorporation.

139. When do bylaws become effective?

a. Upon their filing with the Securities and Exchange Commission.
b. Upon their execution and approval by the stockholders or members.
c. Upon issuance by the Securities and Exchange Commission of a certification that they are not
contrary to existing laws.
d. Upon favorable recommendation of the appropriate government agency that they are not contrary
to existing laws.

140. Which of the following bylaws is valid?

a. A bylaw which provides that one must be the owner of at least ten (10) shares of stock to be
eligible as director.
b. A bylaw which reduces the quorum from eight (8) to six (6) members in the meetings of
directors whose total number in the articles of incorporation is fifteen (15).
c. A bylaw which provides that one can continue his term as director although he has disposed of
all his shares in the corporation.
d. A bylaw reducing effective immediately the compensation of incumbent directors in the middle
of their term.

141. Articles of incorporation differ from bylaws in that articles of incorporation are:
a. adopted before or after incorporation.
b. the rules adopted by a corporation for its internal government.
c. necessary in order that a corporation may acquire juridical personality.
d. adopted by the incorporators or by the stockholders or members, depending on the time of
adoption.

142. Tower Sales Corporation, whose articles of incorporation provide for fifteen (15) directors, has been
experiencing financial problems. It requested your opinion on the following proposed amendment to its
bylaws to save on cost:

I. A bylaw providing that the positions of president and treasurer be held by the same person and
pay him only one compensation.
II. A bylaw reducing the compensation of directors from P500,000.00 to P300,000.00 per annum to
take effect upon the assumption of office of the new set of directors next year.
III. A bylaw providing that stockholders be given the option to attend and vote at meetings through
remote communication to save on meeting expenses.
IV. A bylaw reducing the number of directors to eleven (11) to take effect upon the expiration of the
term of the incumbent directors.

Which of the above proposed amendments may you validly recommend?

a. I and II.
b. II and III.
c. III and IV.
d. II and IV.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
143. These statements are presented to you for evaluation:

Statement I-The vote of stockholders representing at least two-thirds (2/3) of the outstanding capital
stock (voting and nonvoting) is necessary in order that the power to amend, repeal or adopt new bylaws
may be delegated to the board of directors.

Statement II- The power to amend, repeal or adopt new bylaws which was delegated to the board of
directors by the stockholders may be revoked by the stockholders representing a majority of the
outstanding capital stock (voting and nonvoting).
In your evaluation of the foregoing statements:
a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

144. The bylaws of a corporation are binding upon the following, except with respect to:
a. directors or trustees.
b. officers.
c. stockholders or members.
d. third persons transacting with the corporation without notice.

145. As a rule, the quorum in the meetings of stockholders is:

a. majority of the outstanding capital stock.
b. majority of the subscribed capital stock.
c. two-thirds (2/3) of the outstanding capital stock.
d. two-thirds (2/3) of the subscribed capital stock.

146. Unless otherwise provided in the bylaws, the presiding officer in the meetings of stockholders is the:
a. President.
b. Chairman of the board of directors.
c. Owner of the majority of the outstanding capital stock.
d. Corporate secretary.

147. Unless the bylaws provide otherwise, the meetings of stockholders or members must be held in:
a. the principal office of the corporation if practicable.
b. the city or municipality where the principal office of the corporation is located.
c. any place that may be stated in the notice of meeting.
d. any place approved by a resolution of the board of directors or trustees.

148. Big Save Appliances Corporation has its principal office in Manila. Its bylaws provide that
stockholders may participate in meetings through remote communication and that transactions
amounting to at least P3,000,000.00 must be approved by the board of directors and ratified by the
stockholders. A contract for the purchase of appliances valued at P4,000,000.00 was approved by the
board of directors in a meeting duly convened. To save on costs, the meeting of stockholders to ratify
the contract was held in Villa Escudero in Laguna in conjunction with the company's annual outing.
Sixty percent (60%) of the stockholders were physically present, twenty-five percent (25%) participated
through remote communication, while the remaining fifteen percent (15%) were duly represented by
proxies. When the voting took place, seventy-five percent (75%) of the outstanding capital stock voted
for the approval of the contract. A stockholder who was present but voted against the contract now
questions the validity of the contract on the ground that the meeting was improperly held since it was
conducted outside of the venue provided by law. The contract approved in such a case is:
a. valid.
b. void.
c. voidable.
d. rescissible.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
149. Unless the bylaws provide otherwise, the meetings, whether regular or special, of the board of directors
or trustees, shall be presided by the:
a. president.
b. chairman of the board of directors.
c. director who owns the controlling interest in case of stock corporations or the member who
obtained the highest number of votes in the election of trustees in case of non-stock corporations.
d. officer who gave notice of the meeting.

150. The meetings of the board of directors or trustees may be held:

a. anywhere in the Philippines.
b. anywhere outside the Philippines.
c. either (a) or (b) unless the bylaws provide otherwise.
d. only in the place where the principal office of the corporation is located.

151. A stockholder may vote in stockholders' meetings:

a. by being physically present.
b. through a proxy.
c. through remote communication if so provided in the bylaws.
d. through any of the foregoing means.

152. Sabuelba, the owner of 500 shares of stock of Zenith Corporation, pledged the shares to secure a loan
of P20,000.00 that he obtained from Canillas by delivering the stock certificate covering the shares to
the latter. The parties executed a public instrument showing the date of the pledge and a description of
shares pledged with Zenith Corporation having been furnished a copy thereof. Who can vote the shares
while the shares are pledged to Canillas?
a. Sabuelba, the stockholder/pledgor.
b. Canillas, the creditor/pledgee.
c. Both Sabuelba and Canillas jointly.
d. Neither Sabuelba nor Canillas because the voting right is suspended while the shares are
pledged.

153. A stock certificate shows that 1,000 shares of stock of Uptown Corporation is in the name of “Alfredo
Alvarez and/or Benito Bermudez”. Which of the following statements is incorrect?
a. Alfredo Alvarez alone may vote the shares.
b. Benito Bermudez alone may vote the shares.
c. Alfredo Alvarez and Benito Bermudez may vote the shares jointly.
d. Alfredo Alvarez or Benito Bermudez either alone or jointly may not appoint a proxy to vote the
shares.

154. These statements are presented to you for evaluation:

Statement I - Executors, administrators, receivers and other legal representatives appointed by the court
may exercise the right to vote the shares under their administration without the need of any written
proxy.

Statement II - The trustee in a voting trust agreement may vote through a proxy the shares entrusted to
him unless the agreement provides otherwise.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

155. It refers to the written authority given by a stockholder to another person to exercise the voting right
without transferring title to the shares.
a. Special power of attorney
b. Voting trust agreement
c. Proxy
d. Stock certificate
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
156. A voting trust agreement differs from a proxy in that in a voting trust agreement:
a. the representative acquires legal title to the shares.
b. the stockholder may vote even in the presence of the representative.
c. the same is generally valid only for the meeting for which it was intended.
d. a copy of the authority is not required to be filed with the Securities and Exchange Commission.

157. Which of the following statements pertaining to a voting trust agreement is incorrect?
a. The stockholder who transferred all his shares to the trustee is qualified to run as director.
b. The voting trust agreement must be notarized and a copy thereof filed with the Securities and
Exchange Commission; otherwise, it is ineffective and unenforceable.
c. The trustee is qualified to run as director.
d. The transferring stockholder, other stockholders who have not transferred their shares and the
trustee may exercise the right of inspection of corporate books and records including the voting
trust agreement.

158. It refers to the document given by a voting trustee to a transferring stockholder under a voting trust
agreement and which can be transferred by such transferring stockholder to another person.
a. Stock certificate
b. Voting trust certificate
c. Proxy
d. Transfer certificate

159. A suit or action brought by a stockholder or stockholders in the name and in behalf of the corporation
to protect corporate rights or redress wrongs committed against the corporation, whenever corporate
officers refuse to bring such actions or such officers are the ones to be sued or held liable.
a. Representative suit
b. Class suit
c. Derivative suit
d. Individual suit

160. Aside from being brought in the name and for the benefit of the corporation, the following are the
requisites in order that one may file the suit referred to in the preceding number, except:
a. There must be an existing cause of action in favor of the corporation.
b. The stockholder bringing the suit must have exhausted remedies within the corporation to no
avail.
c. The stockholder bringing the suit must have been such at the time the questioned transaction
occurred.
d. The stockholder filing the suit must own a substantial number of shares in order that he may be
able to represent adequately the interests of the minority stockholders.

161. Samonte and Master Marketing Corporation (Master) signed a contract which had for its heading
“Deed of Sale of Shares of Stock”. The contract provided for the acquisition by Samonte of 500 shares
from Master's unissued stock at the par value of P100.00 per share, which amount Samonte paid in cash
to Master. Is the contract valid and what kind of contract is it?
a. Yes, it is a valid contract of subscription.
b. Yes, it is a valid contract of sale/purchase.
c. No, it is not valid because of the conflict between the heading and the provisions of the contract
which cover unissued shares.
d. Yes, it is valid, but it is an innominate contract.

162. A person may become a stockholder of a corporation through any of the following means, except by:
a. subscription of unissued stock.
b. purchase of the treasury shares of the corporation.
c. purchase of shares from a stockholder.
d. receipt of stock dividends from the corporation for services previously rendered.

163. Subscription of shares differs from purchase of treasury shares from a corporation in that subscription:
a. is governed by the Statute of Frauds.
b. may be made only after incorporation.
c. covers only unissued shares of stock.
d. the person acquiring the shares does not become a stockholder until he has paid his shares in full.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
164. Which of the following contracts involving shares of stock is valid and enforceable although it is not in
writing and still executory?
a. Subscription to 1,000 shares of stock at P10.00 par value per share.
b. Purchase of 100 treasury shares from the corporation at P50.00 per share.
c. Purchase of 100 shares of stock from a stockholder of a corporation at P8.00 per share.
d. Donation of 1,000 shares of stock with a total fair market value of P6,000.00.

165. A contract for the subscription of shares of a corporation:

a. applies to unissued shares and issued shares such as treasury shares.
b. is governed by the Statute of Frauds if the amount of the subscription is at least P500.00.
c. entitles the subscriber to all the rights of a stockholder including the right to a stock certificate
although he has not paid his subscription in full to the corporation provided he is not delinquent.
d. may be made before or after incorporation.

166. The consideration for the shares of stock may be any of the following, except:
a. cash actually received.
b. promissory notes.
c. outstanding shares in case of conversion.
d. indebtedness of the corporation.

167. The consideration for shares of stock may be any of the following, except:
a. amounts transferred from unrestricted retained earnings to stated capital.
b. services to be performed at some future time.
c. property, tangible or intangible, actually paid to the corporation and necessary for its use, at a
fair valuation equal to the par or issued value of the stock.
d. outstanding shares in the event of reclassification.

168. The issued price of no-par shares may be fixed in the following means, except:
a. in the articles of corporation.
b. in the stock certificate.
c. in the resolution by the board of directors pursuant to an authority conferred upon it by the
articles of incorporation or the bylaws.
d. in the resolution by the stockholders representing at least a majority of the outstanding capital
stock in a meeting called for the purpose.

169. These statements are presented to you for evaluation:

Statement I-Shares of stock issued are personal property and may be transferred by the delivery of the
stock certificate/s endorsed by the owner or his attorney-in-fact or other person legally authorized to
make the transfer.

Statement II - Shares of stock against which the corporation holds an unpaid claim shall be transferable
in the books of the corporation provided the purchaser has paid the purchase price in full to the
transferring stockholder and notice of such fact is given to the corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

170. Which of the following statements is incorrect?

a. A transfer of shares from a stockholder to another person is binding upon the corporation when
such transfer is recorded in the books of the corporation.
b. A transfer of shares from a stockholder to another person requires the approval of the Securities
and Exchange Commission for its validity.
c. A transfer of shares which is not recorded in the books of the corporation is binding between the
transferor and the transferee.
d. A transfer of shares may be made other than by the endorsement of the stock certificate by the
owner of the shares or by his duly authorized agent.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
171. Salvatierra, owner of 500 shares of stock of Prestige Corporation, sold all the shares to Braganza. The
parties executed a deed of sale duly acknowledged before a notary public. Braganza thereafter attended a
meeting of stockholders but the corporation refused to allow him to vote although he presented the deed
of sale which was duly acknowledged before a notary public and the stock certificate in the name of
Salvatierra covering the shares sold. Was Prestige Corporation justified in denying Braganza the right to
vote?
a. No, because Braganza was already the owner of the shares and so has the right to vote them.
b. Yes, because in so far as Prestige Corporation is concerned, Salvatierra was still the owner of
record.
c. No, the deed of sale covering the shares sold was already a. public document and may be used in
lieu of any written proxy.
d. No, because the sale of the shares became binding upon Salvatierra, Braganza and Prestige
Corporation on the date of the execution of the sale.

172. On February 1,2021, Sarzuelo subscribed to 100 shares of stock of Westex Corporation at P100.00 par
value per share. He paid P4,000.00 upon subscription with the balance of P6,000.00 to be paid in three
equal monthly installments of P2,000.00 on the first day of each month beginning March 1,2021. On
February 15, 2021, Sarzuelo attended a stockholders' meeting but he was denied the right to vote
although he presented his subscription contract with Westex Corporation. Was the corporation justified
in denying Sarzuelo the right to vote?
a. Yes, because Sarzuelo had not yet paid the subscription price in full.
b. No, because Sarzuelo was already a stockholder entitled to vote the shares.
c. Yes, but only up to the extent of 60 shares since Sarzuelo had still a balance of P6,000.00.
Therefore, he should have been allowed to vote for 40 shares.
d. Yes, because Sarzuelo has not yet received his stock certificate whether for 40 shares or 100
shares.

173. A director or officer of a corporation shall be liable for watered stock in which of the following cases?
a. By consenting to the issuance of stocks for a consideration less than their par or issued value.
b. By consenting to the issuance of stocks for a consideration other than cash, valued in excess of
their fair value.
c. By not filing a written objection with the corporate secretary of the insufficient consideration for
the stocks despite having knowledge thereof.
d. All of the foregoing.

174. These statements are presented to you for evaluation:

Statement I - Subscribers to shares of stock shall pay to the corporation interest on all unpaid
subscriptions from the date of subscription if so required by the bylaws.
Statement II - Although interest on unpaid subscription is not provided in the bylaws, interest shall
accrue on the unpaid subscription upon the subscriber's default.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

175. On July 15, 2021, Samonte subscribed to 1,000 shares of stock of Apex Corporation at P100.00 par
value per share for a total subscription price of P100,000.00. The subscription contract provides for the
following terms: down payment of P20,000.00; balance payable in 4 equal monthly installments of
P20,000.00 payable on the first day of each month starting August 1,2021. Samonte paid the first
installment, but failed to pay the installment due on due September 1, 2021. In such a case, delinquency
will occur:
a. on September 1,2021.
b. on September 2, 2021.
c. on October 2, 2021, if no payment is made up to October 1,2021.
d. on November 2,2021, the day following the due date of the last installment due.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
176. Refer to the preceding number. Assume that delinquency occurs on the date provided by law. How
many shares will be considered delinquent?
a. 1,000 shares
b. 800 shares
c. 600 shares
d. 200 shares

177. Refer to the two preceding numbers. The non-payment by Samonte of the installment on September
1,2021 produced which of the following effects?
a. The entire balance of P60,000.00 shall become due with the interest thereon accruing from the
date of default.
b. The installment defaulted amounting to P20,000.00 shall become due with the interest thereon
from the date of default.
c. The entire balance of P60,000.00 shall become due without any interest accruing thereon.
d. The installment defaulted amounting to P20,000.00 shall become due without any interest
accruing thereon.

178. In case of delinquent subscription, which of the following remedies may be availed of by the
corporation to satisfy its claim?
a. Apply the cash dividends on the balance of the subscription plus interest, cost and expenses, or
withhold the stock dividends until the subscriber pays his balance plus interest and cost and
expenses.
b. File a court action to collect the unpaid subscription plus interest, cost and expenses.
c. Sell the shares in a delinquency sale.
d. Any of the foregoing.

179. The highest bidder in a delinquency sale is the one willing to pay the full amount of the balance of the
subscription, accrued interest, cost of advertisement and expenses of sale for the:
a. most number of shares.
b. least number of shares.
c. number of shares not covered by the payment made by the delinquent subscriber.
d. number of shares covered by the payment made by the delinquent subscriber.

180. Salientes subscribed to 1,000 shares of Green Acres Corporation at P10.00 par value per share for a
total subscription price of P10,000.00. Salientes gave a down payment of P4,000.00 in accordance with
the contract of subscription. However, he defaulted in the payment of the balance of P6,000.00.
Accordingly, the shares were declared delinquent and were offered for sale. Accrued interest amounted
to P120.00; cost of advertisement, P500.00; and expenses of sale,P300.00. At the delinquency sale, the
following declared their bids: Almeda, P6,920.00 for 600 shares; Baviera, P6,920.00 for 550 shares; and
Calzado,P6,500.00 for 530 shares. Who among the three is the highest bidder?
a. Almeda
b. Baviera
c. Calzado
d. None of the three satisfied the requirements for one to be considered the highest bidder.

181. These statements are presented to you for evaluation:

Statement I - If there is no highest bidder in the delinquency sale, the corporation itself may bid in the
sale of the delinquent shares.

Statement Il- A stock certificate covering the shares corresponding to the payment made by the
delinquent subscriber shall be issued to him whether there is a highest bidder or not.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
182. The following are the effects of delinquency of shares, except:
a. The delinquent stock shall not be voted.
b. The delinquent stock shall not be entitled to vote or to representation at any stockholders'
meeting.
c. The holder shall not be entitled to any rights of a stockholder.
d. The shares shall not be entitled to dividends.

183. On November 10, 2021, Suplico signed a subscription contract for the acquisition of 1,000 shares of
Elite Corporation at P100.00 par value per share. The subscription contract, provides, among other
matters, the following terms: down payment of P40,000.00;balance in 3 equal monthly installments
payable on the first day of each month beginning on December 1,2021. Upon perfection of the
subscription contract, Suplico shall be entitled to the following rights, except the right to:
a. vote in stockholders' meetings.
b. receive dividends.
c. ask for a stock certificate covering 400 shares.
d. inspect corporate books and records.

184. On March 1, 2021, Servillano subscribed to 1,000 shares of stock of Universal Machineries
Corporation at P10.00 par value per share. Servillano gave a down payment of P2,000.00 under the
terms of the subscription contract which provides that the balance of P8,00.00 shall be paid in 4 equal
monthly installments of P2,000.00 beginning on April 1,2021.
a. Servillano may already ask for a stock certificate covering 200 shares immediately upon
subscription.
b. If Servillano fails to pay the installment due on April 1, 2021,the shares will become delinquent
on April 2, 2021.
c. In case of delinquency for the failure of Servillano to pay the installment due on April 1, 2021,
only 800 shares will be declared delinquent.
d. If Servillano fails to pay the installment due on April 1, 2021, the entire balance of P8,000.00
shall become due and shall be subjected to interest.

185. Saltierra, a stockholder of PRONTO Corporation, visited the latter's principal office and demanded the
presentation to him of the firm's sales book for the past three months. Ortiz, the officer in charge of the
sales book, refused, under authority of the board of directors, to allow him to inspect such record on the
ground that six months earlier, Saltierra was found to have furnished a copy of the sales report of, and
which he obtained from, ANDER Corporation of which he was also a stockholder, to a competitor of
ANDER. May PRONTO deny Saltierra the right to inspect its records on such ground?
a. No, because the sales report that Saltierra furnished to another did not involve PRONTO but
ANDER, another corporation.
b. Yes, PRONTO is justified in denying Saltierra's right to inspect its records even if the earlier
sales report that Saltierra obtained involved another corporation.
c. No, because the right to. inspect the records of a corporation where one is a stockholder is
absolute, and may not be denied.
d. No, the refusal by PRONTO to allow Saltierra to inspect its books constitutes a violation of the
Revised Corporation Code.

186. A stockholder has the right to inspect the following books and records of his corporation, except:
a. The minutes of meetings of the stockholders.
b. The stock and transfer book.
c. Records of business transactions.
d. Formula of certain products of the corporation.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
187. These statements pertaining to the right of stockholders to inspect corporate books are presented to
you:

Statement I- A stockholder may delegate the right to inspect corporate books and records to an agent.

Statement II - The right of a stockholder to inspect books and records of the corporation includes the
right to inspect those of its wholly-owned subsidiary.

In your evaluation of the foregoing statements:

a. Both I and II are true.
b. Neither I nor II is true.
c. Only I is true.
d. Only II is true.

188. Merger and consolidation differ from each other in that in merger:
a. a new corporation with a separate personality of its own emerges.
b. all the constituent corporations will lose their separate personalities.
c. one of the constituent corporations survives the corporate combination.
d. the corporation that emerges is called the consolidated corporation.

189. Gamma Corporation and Sigma Corporation have agreed to a corporate combination. After the
combination, only Gamma Corporation subsists. Such corporate combination is called:
a. merger.
b. consolidation.
c. integration.
d. conglomeration.

190. Zenith Corporation and Alpha Corporation agreed to a corporate combination. After the combination,
Zenith Corporation and Alpha Corporation ceased to exist and a new corporation named ZEAL
Corporation emerges. Such corporation combination is called:
a. joint venture.
b. merger.
c. consolidation.
d. absorption.

191. Which of the following is incorrect as regards the effects of merger or consolidation?
a. The surviving or consolidated corporation shall possess all the rights, privileges, immunities and
powers of a corporation organized under the Revised Corporation Code.
b. The surviving or consolidated corporation shall possess all the rights, privileges, immunities and
franchises of the constituent corporation/s.
c. The surviving or consolidated corporation shall be responsible for all. the liabilities and
obligations of each constituent corporation
d. All the real and personal property of the constituent corporations shall be transferred to the
surviving or consolidated corporation after the execution of a deed of transfer.

192. It refers to the right of a stockholder to demand payment of the fair value of his shares in case he
dissents from certain corporate acts.
a. Preemptive right
b. Appraisal right
c. Stock right
d. Appreciation right

193. In which of the following cases is the right referred to in the preceding number not available to a
dissenting stockholder?
a. Amendment to extend corporate term.
b. Amendment to change corporate name.
c. Merger or consolidation of the corporation 'with another corporation or other corporations.
d. Amendment giving preferential rights to certain stockholders.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
194. The right referred to in No. 192 is available to a dissenting stockholder in the following cases, except:
a. when an amendment of the articles of incorporation has the effect of changing or restricting the
rights of any stockholders of any class.
b. in case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property.
c. in case of investment of funds by the corporation to accomplish its primary purpose.
d. when an amendment of the articles of incorporation has the effect of shortening the corporate
existence.

195. A demand made by a stockholder from the corporation for the payment of the fair value of his shares in
case he dissents from certain corporate acts will result in the suspension of his rights to the following,
except the right to:
a. vote.
b. receive dividends.
c. receive payment of the fair value of his shares.
d. attend stockholders' meetings.

196. The right of a dissenting stockholder to be paid the fair value of his shares ceases in the following
cases, except:
a. when he withdraws his demand for the payment of his shares but the corporation does not
consent thereto.
b. if the proposed corporate action is abandoned by the corporation.
c. if the shares are sold by the dissenting stockholder after notation on the stock certificate that the
shares are dissenting shares.
d. if the proposed corporate action is disapproved by the Securities and Exchange Commission
where such approval is necessary.

197. Which of the following statements pertaining to non-stock corporations is incorrect?

a. The members may directly elect the officers, instead of being appointed by the board of trustees,
unless the articles of incorporation or the bylaws provide otherwise.
b. Membership is transferable like shares of stock.
c. The number of trustees may be more than fifteen (15).
d. The right of members to vote may be limited, broadened or denied.

198. These statements pertaining to non-stock corporations are presented to you for evaluation:

Statement I - The articles of incorporation of a non-stock corporation may provide for the issuance of
shares of stock.

Statement II- A non-stock corporation that earns profits incident to its operations will lose its status as
such and will be considered a stock corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

199. Which of the following statements concerning the place of meetings of members of a non-stock
corporation is incorrect?
a. The meetings of members may be held in any place within the city or municipality where the
principal office of the corporation is located.
b. The meetings of members may be held in the principal office of the corporation.
c. The meetings of members may be held even if outside the place where the principal office is
located provided it is stated in the bylaws and such place is within the Philippines.
d. The meetings of members may be held even outside the Philippines provided it is stated in the
bylaws.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
200. These statements are presented to you for evaluation:

Statement I - In the election of trustees of a non-stock corporation, a member may cast as many votes as
there are trustees to be elected and may cast more than one (1) vote in favor of a nominee.

Statement II - The trustees of a non-stock corporation, including independent trustees, must be members
of the corporation.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

201. These statements are presented to you for evaluation:

Statement I -The assets of a non-stock corporation which is in the process of dissolution may not be
distributed to any member because of the prohibition on the distribution of any profits to any member.

Statement II - The plan of distribution of assets of a non-stock corporation in the process of liquidation
may provide that they may be distributed even to corporations organized for profit.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

202. A close corporation in order that it may be considered as such must provide in its articles of
incorporation the following, except:
a. All of the corporation's issued stock of all classes, excluding treasury shares, shall be held of
record by not more than a specified number of persons not exceeding 20.
b. All of the issued stock of all classes shall be subject to one or more restrictions on transfer.
c. The corporation shall not list in any stock exchange or make any public offering of any of its
stock of any class.
d. That none of the stockholders is the owner of at least two-thirds (2/3) of the corporation.

203. The management of the business of a close corporation by the stockholders instead of by a board of
directors produces which of the following effects?
a. No meeting of stockholders need be called to elect directors.
b. The stockholders of the corporation shall be deemed to be directors.
c. The stockholders shall be subject to all liabilities of directors.
d. All of the foregoing.

204. Any action by the board of directors of a close corporation even without a meeting shall be valid in the
following cases, except:
a. when written consent thereto is signed by all the directors whether before, or after such action
was taken.
b. when all the stockholders/directors have knowledge, whether actual or implied, of the action and
make no prompt objection thereto in writing.
c. when the directors are accustomed to take informal action with the express or implied
acquiescence of all the stockholders.
d. none of the foregoing, because the board must act as a body which will only be possible if they
personally attend its meetings.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
205. The Securities and Exchange Commission, upon written petition by any stockholder, shall have the
authority to make such order as it may deem appropriate in order to break a deadlock in the management
of a close corporation, except:
a. to cancel or alter any provision contained in the articles of incorporation, by-laws or any
stockholders' agreement.
b. to appoint a provisional director who must be a stockholder or a creditor of the corporation.
c. to require the purchase at their fair value of shares of any stockholder, either by the corporation
regardless of the availability of unrestricted retained earnings in its books, or by the other
stockholders.
d. to dissolve the corporation.

206. In order to break a deadlock in the management of a close corporation, thè SEC, on written petition by
any stockholder, may appoint a provisional director who must be:
a. a stockholder of the corporation.
b. a creditor of the corporation.
c. a receiver of the corporation.
d. an impartial person.

207. The number of trustees of educational institutions organized as non-stock corporations may be:
a. either 5, 10 or 15.
b. any number provided it is not less than 5 and not more than 15.
c. not less than five but may be more than 15.
d. any number as the incorporators may deem appropriate.

208. The term of office of trustees of non-stock educational corporations, unless otherwise provided in the
articles of incorporation, shall be:
a. 5 years.
b. 4 years.
c. 3 years.
d. 1 year.

209. The chief archbishop, bishop, minister, priest, rabbi or other. presiding elder shall become a
corporation sole:
a. upon the issuance of the certificate of incorporation.
b. from and after the filing of the articles of incorporation.
c. upon the execution of the articles of incorporation.
d. on the date stated in the articles of incorporation.

210. These statements are presented to you for evaluation:

Statement I - The nationality of a corporation sole follows that of the chief archbishop or other presiding
elder of the corporation.

Statement II - Upon the death of the incumbent in a corporation sole, church properties acquired by him
shall pass, by operation of law, not to his personal heirs, but to his successor in office.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

211. The following may form a One Person Corporation, except:

a. a natural person including a foreign national.
b. a trust, which is managed by a trustee.
c. an estate.
d. a banking corporation.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
212. These statements are presented to you for evaluation:

Statement I - A One Person Corporation may be organized for the. purpose of the exercise of the
profession of the single stockholder.

Statement II - Except as provided by special law, a One Person Corporation is not required to have a
minimum authorized capital stock.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

213. Which of the following statements concerning a One Person Corporation is incorrect?
a. The single stockholder may be the president, treasurer, and sole director of the corporation at the
same time.
b. The corporate name must include the letters “OPC”.
c. A One Person Corporation, as a rule, has perpetual existence just like an ordinary corporation.
d. A One Person Corporation, just like an ordinary corporation, is required to submit and file
corporate bylaws.

214. Which of the following statements concerning a One Person Corporation is incorrect?
a. The single stockholder may not be appointed as corporate secretary.
b. If the single stockholder is likewise the self-appointed treasurer, he must give a bond to the
Securities and Exchange Commission in such a sum as may be required.
c. In case of death of the single stockholder, the nominee shall take his place as director and
manage the affairs of the corporation until the heirs of 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.
d. If the nominee named in the articles of incorporation is to be changed by the single stockholder,
the articles of incorporation need to be amended to reflect the designation of the new nominee.

215. These statements are presented to you for evaluation:

Statement I - A written resolution, signed and dated by the single stockholder in a One Person
Corporation and recorded in the minutes book shall be sufficient to evidence any action taken by the
single stockholder on any matter.

Statement II - A One Person Corporation is required to disclose in its report to the Securities and
Exchange Commission any contract between the One Person Corporation and the single stockholder.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

216. Which of these statements concerning a One Person Corporation is incorrect?

a. The single stockholder who claims he has a limited liability has the burden of affirmatively
showing that the One Person Corporation was adequately financed.
b. A One Person Corporation has no personality separate and distinct from the single stockholder.
c. The doctrine of piercing the veil of corporate entity applies with equal force to a One Person
Corporation as with other corporations.
d. The single stockholder shall be solidarily liable with the One Person Corporation for the latter's
debts if he cannot prove that the latter's property is independent of his separate property.

217. The death of the single stockholder in a One Person Corporation who has several heirs:
a. will automatically cause the dissolution of the corporation.
b. will make the heirs the new stockholders.
c. will convert the corporation into an ordinary corporation with several stockholders.
d. does not affect the due existence of the One Person Corporation.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
218. A corporation may be dissolved by the Securities and Exchange Commission based on any of the
following grounds, except:
a. For failure to formally organize and commence its business within five (5) years from
incorporation.
b. For continuous inoperation for a period of at least five (5) years after it has commenced business.
c. Upon finding by final judgment that the corporation procured its incorporation through fraud.
d. Upon its failure to submit the financial statements and general information sheet.

219. The corporation is deemed dissolved in the following cases, except:

a. in case of expiration of corporate term as originally provided in the articles of incorporation.
b. upon the order of the Securities and Exchange Commission for its failure to formally organize
and commence its business with five (5) years from the date of its incorporation.
c. upon rendition by final judgment of, a lawful court dissolving the corporation.
d. upon the expiration of the shortened term of corporate existence if the articles of incorporation
were amended.

220. These statements concerning the dissolution of a corporation is presented to you for evaluation:

Statement I - Although it has been dissolved, a corporation shall continue as a body corporate for three
(3) years for, among other purposes, to prosecute and defend suits by or against it.

Statement II - The liquidation of a corporation may be effected by the corporation itself, either through
the board of directors or trustees, or by the stockholders or members who were authorized to liquidate.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

221. During the liquidation of a corporation, the appointment of a receiver produces the following effects,
except:
a. The corporation is substituted for purposes of liquidation by the receiver.
b. During the continuance of the receivership, claims can be presented and allowed if they are not
barred by the statute of limitations.
c. Claims can be presented against the receiver even beyond the three-year period after dissolution
d. The corporation continues to exist as a corporate entity despite the appointment of a receiver.

222. During the three-year period, the corporation is authorized and empowered to convey all its property to
trustees for the benefit of stockholders, members, creditors, and other persons in interest. Such
conveyance of all the property to a trustee produces the following effects, except:
a. All interest which the corporation has in the property terminates.
b. The legal interest vests in the trustees
c. The corporation continues to exist as a corporate entity during such three-year period despite the
appointment of a trustee.
d. Claims can be presented against the trustee even beyond the three-year period if they are not
barred by the statute of limitations.

223. It is a corporation which derives its existence from the laws of another country or state and has no legal
status beyond the bounds of sovereignty by which it was created, but is nevertheless allowed, by reason
of state comity, to transact business in other states.
a. Offshore corporation
b. Foreign corporation
c. Non-resident corporation
d. Regional area headquarters
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
224. A foreign corporation is considered to be doing business in the, Philippines when it does any of the
following, except:
a. Soliciting orders.
b. Opening offices, whether liaison offices or branches.
c. Participating in the management, supervision, or control of any domestic business, firm or entity
or corporations in the Philippines.
d. Appointing a representative or distributor domiciled in the Philippines which transacts business
in its own name and for its own account.

225. A foreign corporation doing business in the Philippines without the required license:
a. may not sue and be sued in Philippine courts.
b. may not sue but may be sued in Philippines courts.
c. may sue and be sued in Philippine courts.
d. may sue but may not be sued in Philippine courts.

226. A foreign corporation doing business in the Philippines with a license:

a. may not sue and be sued in Philippine courts.
b. may not sue but may be sued in Philippines courts.
c. may sue and be sued in Philippine courts.
d. may sue but may not be sued in Philippine courts.

227. A foreign corporation not doing business in the Philippines:

a. must obtain a license before it may sue and be sued in Philippine courts.
b. need not obtain a license before it may sue and be sued in Philippine courts.
c. must obtain a license before it may sue in Philippine courts, but no such license is required
before it may be sued in Philippine courts.
d. need not obtain a license before it may sue, but such license is required before it may be sued in
Philippine courts.

228. Who may be a resident agent in the Philippines of a foreign corporation?

a. Any individual residing in the Philippines who must be of good moral character and of sound
financial condition.
b. A domestic corporation lawfully transacting business in the Philippines, of sound financial
standing, and which must show proof that is in good standing as certified by the SEC.
c. Either (a) or (b).
d. Regional area headquarters of the foreign corporation.

229. Any foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules
and regulations applicable to domestic corporations of the same class, except with respect to:
a. its creation, formation, organization or dissolution.
b. the fixing of relations, liabilities, responsibilities, or duties of its stockholders, members, or
officers to each other or to the corporation.
c. Both (a) and (b).
d. Neither (a) nor (b).

230. Which of the following is not a power of the SEC?

a. To investigate alleged violations of the Revised Corporation Code.
b. To publish its findings for any violation of the Revised Corporation Code as may be relevant to
the general public or to the parties concerned, regardless of the provisions of the Data Privacy
Act.
c. To issue subpoena and subpoena duces tecum in any inquiry or investigation.
d. To issue cease and desist orders when it has reasonable basis to believe that a person is about to
violate the Revised Corporation Code.

231. Which of the following acts is not punishable?

a. Unauthorized use of a corporate name which is protected by law.
b. Willful concealment by a director, trustee or officer of his disqualification to hold office.
c. Refusal to permit a director to inspect corporate books and records on the ground that he
improperly used information which. he previously obtained from another corporation where is
also a stockholder.
d. Certification by an independent auditor, in collusion with a corporation's director, of an
incomplete or inaccurate report.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
232. These statements are presented to you for evaluation:

Statement I - The finding that any director or officer is engaged in graft and corrupt practices is a prima
facie evidence of corporate liability.

Statement II- A corporation that acted as an intermediary or agent in the commission of fraud is not
subject to penalty because it was not the principal in the commission of the act.

In your evaluation of the foregoing statements:

a. Both statements are true.
b. Both statements are false.
c. Only Statement I is true.
d. Only Statement II is true.

233. It refers to the person who provides useful information relating to the commission or possible
commission of any offense or violation under the Revised Corporation Code.
a. Whistleblower
b. Eyewitness to the commission of the violation or offense
c. Secret informant
d. Undercover employee

234. In case a corporation fails to submit the reportorial requirements which include, among other
documents, the annual financial statements and the general information sheet, to the SEC three (3) times,
consecutively or intermittently, within a period of five (5) years, the SEC may:
a. revoke the certification of incorporation of the corporation.
b. place the corporation under delinquent status.
c. suspend the operations of the corporation.
d. dissolve the corporation.

235. Which of the following courts shall have jurisdiction to issue a restraining order, preliminary
injunction, or preliminary mandatory injunction in any case that interferes with the SEC's exercise of its
powers?
a. Court of Appeals
b. Regional Trial Court
c. Metropolitan Trial Court
d. Municipal Trial Court

236. If the articles of incorporation of a corporation provide for an arbitration agreement to settle intra-
corporate disputes, but such a dispute was filed before the Regional Trial Court, the Regional Trial
Court shall, before the termination of the pretrial conference:
a. dismiss the case.
b. suspend the hearing of the case.
c. refer the case to the arbitrators.
d. assume jurisdiction of the case.

237. The following are some cases of intra-corporate disputes that may be settled through arbitration, if the
latter, is provided in the articles of incorporation or bylaws. Which is the exception?
a. Complaint filed by a stockholder against the corporation for the refusal of the records custodian
to allow the former to inspect corporate books.
b. A dispute between two stockholders who were nominees in the election for directors and are
contesting the last seat in the board of directors.
c. A complaint filed by a stockholder against another stockholder who issued an unfunded check to
the former.
d. A derivative suit filed by a stockholder in behalf of the corporation.

238. Which of the following government bodies shall have the powers, authorities, and responsibilities over
party-list organizations?
a. Commission on Elections
b. Securities and Exchange Commission
c. Office of the President
d. House of Representatives
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
239. The primary authority over banks and nonbank financial institutions shall be with the:
a. Department of Finance.
b. Bangko Sentral ng Pilipinas.
c. Monetary Board.
d. Finance Committee of Senate and the House of Representatives.

240. Any right or remedy in favor of or against any corporation, its stockholders, members, directors,
trustees, or officers, or any liability incurred by any of them shall not be removed or impaired by:
a. the subsequent dissolution of the corporation.
b. any subsequent amendment or repeal of the Revised Corporation Code or any part thereof.
c. both(a) and (b).
d. neither (a) nor (b) because of the policy of the State on non-impairment of vested rights.
RFBT – LAW ON PRIVATE CORPORATIONS Compiled by Vhin
Answers to Law on Private Corporations

1 B 41 A 81 C 121 C 161 A 201 D

2 D 42 A 82 A 122 D 162 D 202 D
3 D 43 B 83 B 123 A 163 C 203 D
4 D 44 D 84 C 124 A 164 A 204 D
5 D 45 B 85 B 125 D 165 D 205 B
6 B 46 A 86 A 126 B 166 B 206 D
7 A 47 C 87 A 127 C 167 B 207 A
8 C 48 B 88 B 128 A 168 B 208 A
9 A 49 C 89 B 129 D 169 C 209 B
10 C 50 D 90 A 130 C 170 B 210 D
11 A 51 C 91 A 131 D 171 B 211 D
12 D 52 B 92 A 132 C 172 B 212 D
13 A 53 A 93 C 133 C 173 D 213 D
14 A 54 D 94 A 134 B 174 A 214 D
15 B 55 D 95 D 135 C 175 C 215 A
16 C 56 A 96 A 136 D 176 A 216 B
17 C 57 A 97 D 137 C 177 A 217 D
18 C 58 D 98 B 138 C 178 D 218 D
19 A 59 D 99 B 139 C 179 B 219 C
20 C 60 A 100 C 140 A 180 B 220 A
21 A 61 B 101 B 141 C 181 C 221 D
22 B 62 C 102 A 142 B 182 D 222 C
23 D 63 A 103 B 143 A 183 C 223 B
24 A 64 A 104 D 144 D 184 D 224 D
25 D 65 A 105 A 145 B 185 B 225 B
26 D 66 B 106 A 146 B 186 D 226 C
27 B 67 A 107 A 147 A 187 A 227 B
28 A 68 A 108 B 148 A 188 C 228 C
29 A 69 B 109 B 149 B 189 A 229 C
30 B 70 B 110 B 150 C 190 C 230 B
31 B 71 D 111 A 151 D 191 D 231 C
32 B 72 B 112 C 152 A 192 B 232 B
33 C 73 A 113 C 153 D 193 B 233 A
34 D 74 D 114 C 154 A 194 C 234 B
35 C 75 D 115 C 155 C 195 C 235 A
36 B 76 D 116 D 156 A 196 A 236 A
37 B 77 C 117 B 157 A 197 B 237 C
38 C 78 B 118 A 158 B 198 C 238 A
39 B 79 B 119 A 159 C 199 D 239 B
40 B 80 D 120 D 160 D 200 B 240 D