Corporation Law Finals Practice Questions

Coverage: Meetings until SRC

TRUE OR FALSE:
1. There is no distinction between a purchase/sale and subscription of the unissued stocks of a
corporation.
2. Purchase of treasury shares is equivalent to subscription.
3. Issuance of a certificate of stock is necessary to consider X a stockholder?
4. A stockholder of a holding company may inspect the books and records of a wholly-owned
subsidiary?
5. The dissolved constituent corporation in a merger should necessarily liquidate its corporate affairs.
6. All corporations dissolved necessarily undertake liquidation and winding up of their corporate
affairs.
7. No stockholder in a stock corporation can ever demand if the principal office is amended, changing
it from QC to Manila.
8. No stockholder may be able to compel the corporation to pay the value of his shares if the
corporation has no unrestricted retained earnings
9. In amendment of the by-laws, appraisal right is available.
10. Generally, a member in a non-stock corporation may vote cumulatively?
11. A transferee has the same power, right and privilege to compel the corporation to record it in the
books of the corporation.
12. Cumulative voting is generally not allowed in non-stock corporations.
13. A corporation is a close corporation if 2/3 of voting rights is owned by another corporation.
14. A corporation must at all times have unrestricted retained earnings
15. A corporation sole is possessed with the same power, rights and privileges, to own, acquire and
hold or convey properties like any other corporation.
16. The power and authority of a corporation sole to own dispose and alienate real properties is the
same as in any other corporation.
17. All educational corporations must have a governing board of only either 5, 10 or 15 members.
18. A religious society does not commence to have a juridical personality until the issuance of the
certificate of registration/incorporation by the SEC.
19. All religious corporations commence to exist and are vested with juridical personality upon filing
of the Articles of Incorporation with SEC.
20. An educational institution can have 9 members.

Enumeration:
1. What may be used as a consideration?
2. What are the requisites for the issuance of a valid certificate of stock?
3. What are the modes of transferring shares of stock?
4. Effects of merger and consolidation?
5. Enumerate three (3) specific instances when this right may be exercised?
6. What are the requisites of a close corporation?
7. Grounds for involuntary dissolution provided for in the Code.
8. Three (3) methods of Liquidation
9. Three (3) methods of voluntary dissolution.
10. The twin requirements before a stockholder may validly institute an action to question the
validity of the sale of his delinquent stocks.
11. Two possible remedies available to the corporation to enforce payment of unpaid subscription.
12. The three (3) requisites before a foreign corporation licensed to do business in the Philippines
may validly withdraw its license.
13. Remedies of a stockholder who is denied inspection of corporate books.
14. Instances when the stockholder cannot avail of its voting rights.
15. Grounds for revocation of license (foreign corporation)

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 Corporation Law Finals Practice Questions
Coverage: Meetings until SRC
16. Instances when a foreign corporation with no license to do business in the Philippines can sue
17. Requirements for a valid transfer of stocks

Explain the following statements:

1. Subscriptions to shares of stock of a corporation are not divisible.
2. Certificates of stock are merely quasi-negotiable and are non-negotiable.
3. There is a distinction of the right of inspection of a stockholder and that of a director.
4. The provisions governing stock corporations also apply to non-stock corporation.
5. There is a distinction between voting rights of stock holders in a stock corporation and members
in a non-stock corporation.
6. The right of a stockholder to compel the corporation to pay the value of his shares is broader in a
close corporation in a close corporation than in an ordinary stock corporation.
7. In cases of deadlock in a close corporation the courts can interfere in the management of the
corporate affairs.
8. The court can determine the rules in the corporation sole when there is no rule or discipline.
9. The statement that the mere appointment of a distributor/representative domiciled in the Philippines
made by a foreign corporation does not necessarily imply doing business in the country.
10. A director/stockholder whose shares are declared delinquent is not automatically disqualified to be
and act as director.
11. In cases of deadlocks in a close corporation, the courts can interfere in the management of the
corporate affairs.
12. The effects of declaration of delinquency vis-à-vis the right of the stockholder.
i) To be voted and be voted upon.
ii) To receive cash and stock dividends.

Define:
1. What is appraisal right?
2. What is a close corporation?
3. Wash Sale
4. Matched Order
5. Short Sale
6. Insider Trading
7. Marking the Close
8. Foreign Corporation
9. Special Corporations
10. Merger and Consolidation

Case problem:

1. Further assume that the corporation enters into a contract of sale/purchase of some of its remaining
unsubscribed share with X who pays a down payment of 50% with a condition that he (X) will not
be considered a stockholder until the full payment of the acquisition cost and that then and only
then shall he be issued a stock certificate. Pending payment of the balance, the properties,
inventories and all assets of the corporation was razed by fire. The corporation now wants to collect
the unpaid portion of the acquisition cost of the shares. X seeks exception in that the contract is
one of sale and the obligation of the parties is reciprocal and dependent on one another. Rule and
explain.

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 Corporation Law Finals Practice Questions
Coverage: Meetings until SRC
2. Popeye subscribed to shares of stock and paid it. He did not however register it. On February 14,
2000, he assigned said shares of stock to his girlfriend Olive through a duly notarized deed. Olive
asked the corporate secretary to register it but she refused to do so. So olive filed mandamus. The
corporate secretary filed a motion to dismiss contending that there is no cause of action because
there is no proper party.
a. Decide the case.
b. What if it was transferred to Olive through a pledge where it was provided that in case of
failure to pay, Popeye was authorized to foreclose said mortgage, will mandamus lie?
3. Assume that “A” is now the owner of Stock Certificate No. 008, “B”, his brother stole the
certificate, forged the signature of A and sold the same to “C” who is a purchaser in good faith and
for value. Who has a better right over the shares covered by Stock Cerificte No. 008? “A” or “C”?
Explain.

4. Assume that before C transferred the shares, he surrendered Stock Cert. 008 to the corporate
secretary for registration/cancellation and for the issuance of a new stock certificate in his (C’s)
favor. The corporation cancelled Stock Cert 008 and issued Stock Cert 010 in the name of C who
thereafter transferred the latter certificate by endorsing and delivering it to D.
a. Will D acquire title? Explain
b. Will A be deprived of his title? Explain

5. Popeye subscribed to shares of stock and paid it. He did not however register it. On February 14,
2000, he assigned said shares of stock to his girlfriend Olive through a duly notarized deed. Olive
asked the corporate secretary to register it but she refused to do so. So olive filed mandamus. The
corporate secretary filed a motion to dismiss contending that there is no cause of action because
there is no proper party.
a. What if Olive stole it from Popeye and forged his signature and sold it to her other
boyfriend Brutus (in good faith and for value)? Who has better right/title to the shares of
stock?
b. What if olive after stealing and forging signature asked the corporation to register it in her
name? The corporation thinking that the signature was genuine cancelled the certificate of
Popeye (USD 500) and issued a new certificate to Olive (USD 600). Olive then sold it to
Brutus. Who is the owner? Who has better title?

6. X is the owner of 1M shares are being traded at P1.00 per share. He has an account in two broker
firms, B1 and B2. He directs B1 to sell 250T shares at 10.30 at P1.25 per share and at 10.32, he
directs B2 to buy the same number of shares at the same price.
a) Can X be held liable for wash sale and matched order? Explain.
b) If he sells shares of stock which he does not own, what unlawful act will be commit?

7. State whether they are illegal per se or when they may become illegal.
a. Wash sale
b. Matched order
c. Short sale

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