CORPORATION LAW
SET 1:
1. The following are the attributes of a private corporation.
What is the exception?
A. It is an artificial being
B. It is created by law
C. It has the right of succession
D. Its power attributes, or properties are expressly
authorized by law or incident to its existence
E. None of the above
2. A corporation has a personality of its own because it is legal partners for all debts, liabilities and damages incurred or
or a juridical person. Which among the following is not a
consequence of its separate personality?
A. It may acquire and possess property of all kinds are
well as incur debts and other contractual
obligations.
B. It has a nationality or citizenship of its own apart from
that of the stockholder’s
C. Its obligations are obligations of the majority
shareholder:
D. It enjoys constitutional protection.
3. Piercing the veil of corporate entity is considered an
exception to the rule of corporate fiction, i.e, that a
corporation possesses a personality of its own separate and
distinct from the personalities of the corporators of the
corporation. Which of the following is the consequence of
‘piercing the veil of corporate entity’?
A. The corporation will be considered a mere
association of persons without a personality of its own entered into a contract with it. When sued for the breach of
B. The persons composing the corporation will be
considered the same as the corporation;
C. The liabilities of the corporation may be considered
the liabilities of the stockholders or vice-versa;
D. All the above
4. Which of the following is not a similarity between a
corporation and a partnership?
A. Both have juridical personalities distinct from those of
the individuals composing them;
B. Both can act only through their agents
C. Both have continuity of existence
D. Both may own property in their own names
5. They are corporations formed or organized for the
government of a portion of state or those created by the state
as its own device for the accomplishment of its own public
purposes.
A. Private corporations
B. Public Corporation
C. Quasi-public corporation
D. Corporation by prescription
6. The following are typical examples of public corporations.
Which is the exception?
A. Province of Romblon
B. City of Manila
C. Municipality of Malolos
D. Social Security System
7. They are corporations consisting of one member only. It is
usually organized for the purpose of administering and
managing as trustee, the affairs, property and temporalities of
any religious denomination, sect or church. It may be formed
by the chief archbishop, bishop, priest, minister, rabbi or
other presiding elder of such religious denomination, sect or
church.
A. Ecclesiastical corporations
B. Lay corporations
C. Corporation sole
D. Religious societies
8. They are corporations that are organized for spiritual
purposes or for the furtherance of religion as opposed to lay
corporations that are created for secular or temporal purpose.
A. Ecclesiastical corporations
B. Eleemosynary corporations
C. Civil corporations
D. Corporation aggregate
9) It is a corporation whose articles of incorporation provide
that (1) all the corporation’s issued stock of all classes,
exclusive of treasury shares, shall be held of record by not
more than twenty (20) persons; (2) all the issued stock of all
classes shall be subject to one or more restrictions on transfer; which it is to conduct its operations. It limits the maximum
and (3) the shares shall not be listed in any stock exchange or
be offered to the public.
A. Open corporation
B. Restrictive corporation
C. Corporation by estoppel
D. Close corporation
10. If certain persons assume to act as a corporation knowing it
to be without authority to do so, they are liable as general
arising as a result of such assumptions as a corporation. This
situation gives rise to a
A. De facto corporations
B. Corporation by prescription
C. Corporation by estoppel
D. Corporation by misrepresentation
11. No. I – Five persons without organizing a corporation
pretended to be members of a non-existent corporation,
which they called ‘Ocean Quest Corporation’. Through this
misrepresentation they obtained a loan of P5 million from Mr.
X. When the debt was not paid, Mr. X sued Ocean Quest. The
purported members thereof may invoke the defense that
Ocean Quest cannot be sued because it is in truth and in fact
not a corporation.
No. II – Spice Boys Corporation is in truth and in fact not a
corporation but a mere association composed of five
members. Mr. X, knowing it to be a unincorporated entity
the contract, Mr. X may interpose the defense that Spice Boys
Corporation has no legal capacity to sue
A. Both are true
B. Both nos. are false
C. Only no. 1 is true
D. Only no. 1 is false
12. It is a corporation formed or organized or existing under
any laws other than those of the Philippines.
A. Domestic corporation
B. Foreign corporation
C. De jure corporation
D. De facto corporation
13. No. 1 – A foreign corporation is not automatically allowed
to engage in business in the Philippines. It must first obtain a
license in the Philippines if it wants to engage in business
locally. If it engages in business in the Philippines without
obtaining a license, it may be sued but it cannot sue.
No. 2 – A foreign corporation that it not engaged in business in
the Philippines need not obtain a license because a license is
required only for business purposes. Such foreign
corporation may however, sue in the Philippines where the
suit arises out of an isolated transaction or in order to protect
its reputation, corporate name or goodwill.
A. Both nos. are correct
B. Both nos. are wrong
C. Only no. I is correct
D. Only no. II is correct.
14. No I – Every corporator is an incorporator and vice versa
No. II – Corporators in a stock corporation are either
stockholders or members
A. Both statements are true
B. Both statements are false
C. Only first statement is true
D. Only the second statement is false
15. They are persons who bring about or cause to bring about
the formation and organization of a corporation by bringing
together the incorporators or the persons interested in the
enterprise, procuring subscriptions or capital for the
corporation and setting in motion the machinery that leads to
the incorporation of the applicant corporation.
A. Underwriters
B. Promoters
C. Subscribers
D. Incorporators
16. It is the amount fixed in the articles on incorporation. To
be subscribed and paid in by the shareholders of a
corporation, either in money or property, labor or services, at
the organization of the corporation or afterwards and upon
amount or number of shares that may be issued by the
corporation without formal amendment of the articles of
incorporation.
A. Legal capital
B. Subscribed capital
C. Outstanding capital stock
D. Authorized capital stock
17. Incorporators should have the following qualifications.
Which is the exception?
A. They must be of legal ages and must be natural
persons
B. They must not less than five (5) but not more than
fifteen (15) majority of whom are citizens of the
Philippines
C. They must number not less than five (5) but not more
than fifteen (15), majority of whom must be residents
of the Philippines
D. Each of the incorporators of the stock corporation
must be a subscriber to at least one (1) share of the
capital stock of the corporation
18. Which among the following situations will justify a denial of
an application for incorporation?
Authorized Subscription Paid Up
Capital Stock
A) P500,000 P125,000 P31,5000
B) 200,000 60,000 12,000
C) 50,000 12,500 5,000
D) 100,000 25,000 6,250
19. Which among the following are the limitations to the
corporate power to amend its articles of incorporation?
A. The amendment must be for a legitimate purpose
B. The amendment must be approved by the required
vote of the board and the stockholders or members
C. Both the original and amended articles must be filed
with the Securities and Exchange Commission
D. All of the above
20. When does the corporate existence commence?
A. From the date the Securities and Exchange
Commission issues a certificate of incorporation
under its official seal
B. From the date the corporation is notified by the
Securities and Exchange Commission of the issuance
of the certificate of incorporation
C. From the date the certificate of incorporation is
actually received by the corporation
D. From the date of the publication of the issuance of the
certificate of incorporation in a newspaper of general
circulation
21. What is the effect of the issuance of the certificate of
incorporation?
A. The corporation commences to have corporate
existence and judicial personality
B. The corporation may now exercise corporate powers
C. The incorporators, stockholders/members and their
successors shall constitute a body politic and
corporate under the name stated in the articles of
incorporation
D. All of the above
22. A corporate doctrine which holds that the stockholders are
not personally liable for corporate debts.
A. Trust fund Doctrine
B. Doctrine of corporate fiction
C. Right of succession
D. Piercing the veil of corporate entity
23. No. 1 – A director is removed from office by a vote of the
stockholders representing at least 2/3 of the outstanding
capital stock. The vacancy occasioned by such removal can
be filled up by the vote of a least a majority of the remaining
directors if still constituting a quorum
No. 2 – Treasury shares are entitled to dividends and can be
used in voting matters involving fundamental corporate
actions
A. Both nos. are true
B. Both nos. are false
C. Only no. 1 is true
D. Only no. 1 is false
24. Which of the following is a ground for the suspension or
revocation of the certificate of incorporation by SEC?
A. Failure of the corporation to commence operations
within five years from its incorporation.
B. Failure of the corporation to commence operation
within two years from its incorporation
C. Continuous inactivity for at least five years after it had
formally organized and commenced operations
D. Continuous inactivity for at least two years after it had
organized and commenced operations
25. Which of the following defects will preclude the creation of
even a de facto corporation?
A. A name resembles that of another corporation
B. Failure to comply with the minimum paid up
requirement
C. Absence of a certificate of incorporation
D. Failure to formally organized immediately from the
issuance of a certificate of incorporation
26. It is a corporate scheme that enables a stockholder to
dispose of his share and still retain the right to vote for a
period not exceeding five years at any one time.
A. Proxy
B. Special Power of Attorney
C. Voting trust agreement
D. Management right
27. A corporation that is created in strict or substantial
conformity with the statutory requirements for the
incorporation and whose right to exist as a corporation cannot
be successfully attacked even in a direct proceeding by the
state is known as
A. de jure corporation
B. de facto corporation
C. corporation by estoppel
D. corporation by prescription
28. The articles of incorporation is required to state the names,
nationalities and residences of persons who shall act as
directors or trustees until the first regular members of the
Board elected. This requirement is intended to provide a
basis by which the SEC could determine whether the articles
of incorporation has complied with the requirement that
A. At least a majority of the directors or trustees are
residents of the Philippines
B. All of the directors or trustees are residents of the
Philippines
C. At least a majority of the directors or trustees are
citizens of the Philippines
D. At least 2/3 of the directors or trustees are residents
of the Philippines
29. They are shares of stocks issued by a corporation for a
consideration less than its par value or issued price or for a
consideration in any form other than cash, valued in excess of
its fair value
A. Treasury shares
B. Preferred shares
C. Common shares
D. Watered stocks
30. The following corporations cannot issue no par value
shares. Which is the exception?
A. Banks
B. Trust companies
C. Manufacturing companies
D. Insurance companies
31. An officer of a corporation may hold two or more positions
in the corporation but not as
A. Chairman of the board and president
B. President and treasurer
C. Secretary and treasurer
D. Vice President and Secretary
32. The right of a corporation to exist as a juridical person
during its term as stated in its articles of incorporation despite
the death of any of its stockholders is called
A. Right of existence
B. Right of redemption
C. Right of succession
D. Pre-emptive right
33. What is the requirement to effect the amendment of the by-
laws of the corporation?
A. Majority vote of the board and 2/3 of the outstanding
capital stock
B. 2/3 vote of the board and 2/3 vote of the outstanding
capital stock
C. Majority vote of the board and majority vote of the
outstanding capital stock
 D. Majority vote of the board and unanimous vote of the
outstanding capital stock
34. Which of the following does not form part of the three-fold
duty of directors or trustees?
A. Duty of obedience
B. Duty of efficiency
C. Duty of diligence
D. Duty of loyalty
35. The holder of non-voting shares may nevertheless be
allowed to vote on the following matters. What is the
exception?
A. Amendment of the articles of incorporation
B. Adoption and amendment of the by-laws
C. Increase or decrease of the capital stock
D. Every sale of corporate property
36. The board of directors or trustees has the following powers
except
A. To exercise corporate powers
B. To conduct the business of the corporation
C. To grant compensation to its members
D. To hold and control corporate property
37. The nationality of the corporation is determined by the
state under the laws of which the corporation was organized.
This refers to
A. Domiciliary test
B. Incorporation test
C. Control test
D. Organization test
38. Contracts between a corporation and third persons must
be made by or under authority of the
A. Stockholders
B. Board of directors or trustees
C. President
D. General Manager
39. A contract of the corporation with one or more of its
directors or trustees or officers is
A. void
B. voidable at the option of the director, trustee or
officer
C. voidable at the option of the corporation
D. unenforceable
40. A director who acquires for himself a business opportunity
which should belong to the corporation, must account to the
latter for all such profits by refunding the same because the
act is an act of disloyalty. The disloyal act
A. cannot be ratified
B. can be ratified by at least 2/3 of the outstanding
capital stock
C. can be ratified by at least a majority of the
outstanding capital stock
D. can be ratified by a majority vote of the board
41. The corporate by laws may create a committee composed
of not less than three members of the board to be appointed
by the board. Said committee may act, by majority vote of all
its members, on such specific matters within the competence
of the board. This committee is called
A. Executive committee
B. Steering committee
C. Ways and means committee
D. Management Committee
42. The stockholders right to subscribed to all issues or
disposition of shares of any class in proportion to their present
stockholdings, the purpose being to enable the shareholders
to retain his equity in the surplus, is called
A. Preferential right
B. Subscription right
C. Pre-emptive right
D. Stockholders’ equity
43. No. 1 – Every declaration of dividend requires the
approval of the stockholders.
No. 2 – Every ultra vires act is illegal.
A. Both are false
B. Both are true
C. Only No. 1 is true
D. Only No. 2 is true
44. The following are the legal effects of merger or
consolidation. Which is the exception?
A. The consolidated or surviving corporation shall enjoy
the same rights, powers, privileges and immunities of
corporations established under the Corporation Code
B. All pending actions by or against the dissolved
corporation shall be litigated by the surviving or
consolidated corporation.
C. All claims pertaining to the dissolved corporation
shall now pertain to the surviving or consolidated
corporation
D. The surviving or consolidated corporation does not
assume the liabilities of the dissolved corporations
because of the theory of separate legal entity
45. The subscriber of unpaid shares which are not delinquent
shall be entitled to the following rights, except the right to
A. vote
B. inspect corporate books
C. a stock certificate
D. dividends
46. Their names are mentioned in the articles of incorporation
as originally forming the corporation and are signatories
thereof
A. Corporators
B. Stockholders
C. Incorporators
D. Members
47. The right of the stockholders to demand payment of the
fair value of his shares when he dissents from certain
corporate acts known as
A. pre-emptive rights
B. appraisal right
C. redemption right
D. appreciation right
48. Which of the following statements is false concerning
treasury shares?
A. They are entitled to dividends
B. They have no voting right
C. They may be disposed of for a price lower than the
par value provided such price is reasonable
D. They are not outstanding
49. Which is the operative act that will give judicial
personality upon a corporation?
A. The filing of the articles of incorporation
B. The filing of the by-laws
C. The issuance of the certificate of incorporation
D. The execution by the incorporators of the articles of
incorporation which is the contract among
themselves
50. Which of the following special corporations is requires by
the Corporation Code to have its number of directors in
multiples of 5?
A. A stock educational corporation
B. A non-stock educational corporation
C. A corporation sole
D. A religious society

SET 2
1. Which of the following reflects a correct legal precept?
A. Private corporations under the Corporation Code are
created by law.
B. A private corporation may always be held civilly liable
for negligent acts committed by its employees.
C. The corporate obligations are, as a rule, not the
obligations of the corporate officers as long as the
absence of liability of the latter is reflected in the
corporate by laws.
D. Private corporations under the Corporation Code may
either be de facto or de jure.
2. Which of the following is in conformity with both law and
jurisprudence?
A. The separate personality of a corporation may be
disregarded when an incorporator dominates and
controls the outstanding capital stock.
B. Shareholders cannot maintain a suit in their own
names to recover corporate property.
C. A corporation does not fall within the constitutional
protection against unreasonable searches and
seizures.
D. A corporation has a right against self-incrimination.
3. Ten persons, all Filipinos, and acting as incorporators,
filed an application for the incorporation of XYZ Bank,
Inc. Which of the following is correct?
A. The incorporators are not disqualified by reason of
their nationality.
B. XYZ Bank, Inc. may issue no-par value shares as
long as the consideration thereof is not less than
P5.00.
C. The incorporators must all be Philippine residents.
D. None of the above.
4. When the articles of incorporation provide for non-voting
shares, the holders of such shares shall nevertheless be
entitled to vote on the following matters, except:
A. Dissolution of the corporation.
B. Sale, lease, exchange, mortgage, pledge or other
disposition of all or substantially all of corporate
property. Amendment of the articles of incorporation.
C. Incurring, creating, increasing or assignment of
bonded indebtedness.
D. None of the above.
5. ABC Corporation, a private corporation engaged in the
business of importing used cars from Japan was issued a
certificate of incorporation by virtue of R.A. 27890.
Because of a failed business transaction, ABC
Corporation sued Mr. X for a damage arising from the
latter’s alleged breach of its contractual obligations.
A. Mr. X cannot allege “lack of legal capacity to sue’ of
ABC Corporation in its motion to dismiss because it
has a legal personality conferred by law.
B. Mr. X cannot allege “lack of legal capacity” in its
motion to dismiss because it is not allowed to attack
the existence of the corporation collaterally.
C. ABC Corporation is a de jure corporation and its
existence can be attacked only through a quo
warranto proceeding.
D. Attacking the existence of ABC Corporation may be
done through a motion to dismiss because its
creation is void.
6. No 1 - Within five (5) years from issuance of its certificate
of incorporation, the newly-formed corporation must
formally organize and commence business operations.
Failure to do so within such period is a ground for
dissolution. No. 2 - Every member of the board of every
corporation must own at least one (1) share of stock
standing in his name in the books of the corporation.
A. Both statements are false.
B. Both statements are true.
C. The first statement is true; the second is false.
D. The second statement is true; the first is false.
7. A corporation was formed by fifteen (15) incorporators
and its certificate of incorporation was duly issued. A
year after its attainment of juridical personality, the
stockholders, who are themselves the members of the
board adopted a resolution, providing for the following (i)
That all of the corporation’s issued stock of all classes,
exclusive of treasury shares, shall be held of record by
not more than a specified number of persons, not
exceeding twenty (20); (ii) That all of the issued stock of
the corporation shall be subject to certain specified
restrictions; and (iii) That the corporation shall not list in
any stock exchange or make any public offering of any of
its stocks of any class.
A. The corporation is a close corporation because the
resolution contains the elements of a close
corporation;
B. The corporation is de facto because although it has a
certificate of incorporation, the provisions in the
resolution should have been contained in the
articles.
C. The corporation is an open corporation.
D. The corporation is a corporation by estoppel because
although it operates as a corporation, it did not
comply with certain legal requirements for the
establishment of a close corporation.
8. Which of the following is correct?
A. The secretary of a corporation must be a citizen of
the Philippines and a resident of the Philippines. He
must be also a member of the board.
B. The members of the board are liable whenever they
vote for unlawful acts.
C. If there are only ten (1) directors elected although the
articles of incorporation provide for fifteen (15)
directors, the quorum in a board meeting is eight (8).
D. A director may be removed by the vote of all the
stockholders in any meeting.
9. Which of the following acts could be ratified by a vote
representing at least 2/3 of the outstanding capital
stock?
A. Acts of directors or trustees who are guilty of gross
negligence or bad faith in directing the affairs of the
corporation;
B. An attempt by a director to acquire or actual
acquisition of any interest adverse to that of the
corporation in respect of any matter reposed upon
him in confidence;
C. Acts of directors constituting an approval of patently
unlawful acts;
D. Acquisition of a business opportunity which should
belong to the corporation, thereby acquiring profits
which should belong to the corporation.
10. The pre-emptive right extends to the right to
subscribe;
A. Only to new issues of shares arising out of an
increase of the capital stock.
B. Only to the issuance of previously unissued portions
of the outstanding capital stock.
C. To all issues of shares or dispositions of shares of
any class;
D. To all issues or dispositions of shares of any class
other than redeemable or treasury shares.
11. The following are the requisites for the corporate power to
acquire its own shares. Which is the exception?
A. The corporation must have unrestricted earnings in
its books to cover the purchase of the shares except
in the case of redeemable shares.
B. The acquisition must be for the sole purpose of
acquiring shares in order to eliminate fractional
shares.
C. The acquisition must be for a legitimate purpose.
D. The corporation must have unrestricted earnings in
its books to cover the purchase of shares.
12. Which of the following is correct?
A. Dividends may be declared out of a reappraisal
surplus or revaluation increment because they
constitute profits.
B. Dividends are profits but not all profits are dividends.
C. All dividends are taxable as income of the
stockholder.
 D. The declaration of any kind of dividend requires the
assent of at least 2/3 of the outstanding capital
stock.
13. X subscribed to 1,000 shares of stock in ABC He paid
50% of the subscription but such subscription was later
on declared delinquent. The total liability of X, including
the balance, accrued interest, costs and other expenses
amounted to P50,000. Which bidder is considered the
highest bidder in the delinquency sale?
A. A bid of P45,000 for 500 shares;
B. A bid of P43,000 for 504 shares;
C. A bid of P50,000 for 900 shares;
D. A bid of P40,000 for 300 shares;
14. No. 1 – Holders of delinquent shares are not entitled to
dividends. No. 2 – A transfer of shares to a non-
stockholder is binding to the corporation as long as the
transfer is in a public document.
A. Both statements are true.
B. Both statements are false.
C. No 1 is true; No. 2 is false.
D. No. 2 is true; no. 1 is false.
15. No. 1 – A foreign corporation intending to sue in
Philippine courts must always have a license to engage in
business n the Philippines. No. 2 – A foreign corporation
engaged in business in the Philippines may sue and be
sued n the Philippines.
A. Both statements are false.
B. Both statements are true.
C. No. 1 is true; No. 2 is false.
D. No. 1 is false; no. 2 is true.
16. The distribution of dividends from capital and the
acquisition of corporate shares without corporate
unrestricted retained earnings is not allowed by law
because of:
A. The trust fund doctrine.
B. The corporate opportunity theory.
C. The corporate entity doctrine.
D. None of the above.
17. When can a corporation deny pre-emptive right to
stockholders?
A. Where a stockholder is delinquent in the payment of
unpaid balance of his subscription.
B. Where the articles of incorporation so provides.
C. Where the shareholder does not pay fifty percent of
the value of the shares to be subscribed.
D. None of the above
18. What are watered stocks?
A. Stocks issued for a consideration less than P10.
B. Stocks issued for a consideration more than its par
or issued value.
C. Stocks issued for a consideration less than its par or
issued value.
D. None of the above
19. When does a stock become delinquent?
A. When no payment is made within fifteen (15) days
from the date as fixed in the subscription contract or
in the call made by the Board of Directors.
B. When no payment is made within two (2) months as
fixed in the contract or call.
C. When no payment is made within one (1) month from
date as fixed in the contract or call.
D. None of the above.
20. Ultra vires acts are acts of a corporation which are:
A. Exercised by the Board of Directors but not ratified
by the stockholders.
B. Not within the corporate powers conferred by the
Code or articles of incorporation.
C. Necessary and incidental to the exercise of the
powers conferred upon the corporation.
D. None of the above
21. Why is a de facto corporation not considered a de jure
corporation?
A. Because it failed to incorporate under existing
statutory authority.
B. The corporation’s exercise of corporate powers is not
recognized by the courts for reason of public policy.
C. Its corporate existence may be challenged in court by
any taxpayer.
D. None of the above.
22. Which one of the following is not a characteristic of a
voting trust agreement?
A. A voting trust is created for the purpose of conferring
upon the trustee the right to vote and other rights
pertaining to the shares.
B. A voting trust is irrevocable during the time
stipulated.
C. The stockholder remains the beneficial or equitable
owner of the shares while the trustee is the legal
owner.
D. All voting trust agreements shall not exceed five (5)
years.
23. As used in the Corporation Code, “outstanding capital
stock” means:
A. The same as authorized capital stock.
B. The same as subscribed capital stock.
C. It represents the paid up capital stock.
D. The total shares issued to subscribed or stock
holders, whether or not, fully or partially paid, as
long as there is a binding subscription agreement,
except treasury shares.
24. Which is not a consequence of the corporation’s separate
personality?
A. The corporation has a nationality or citizenship.
B. The corporation may sue but it cannot be sued.
C. The corporation may acquire and dispose of
properties.
D. The corporation may enter into contracts with
another corporation.
25. Which of the following conforms with the requirements of
the Corporation Code?
A. Every incorporator must be residents of the
Philippines, must be a natural person and must own
or subscribe to at least one share of stock.
B. Corporators are those who compose a corporation
and is a term which includes stockholders, members
and incorporators.
C. Incorporators are those who originally compose the
corporation, whose names are mentioned in the
articles of incorporation majority of whom have
signed the said articles.
D. An incorporator in a domestic corporation may be an
alien and a non-resident.
26. The pre-emptive right if not denied by the corporation
generally extends to all issues of shares in proportion to a
stockholder’s shareholdings. Even if not denied, the right
does not extend to certain specified issuances
enumerated below. Which is the exception?
A. Shares to be issued in compliance with laws
requiring stock offerings to the public.
B. Shares to be issued in good faith with the approval of
the stockholders representing 2/3 of the outstanding
capital stock in exchange for property needed for
corporate purposes.
C. Shares to be issued to incorporators.
D. Shares to be issued in payment of a previously
contracted debt.
27. The acquisition of shares and the declaration of cash
dividends require that the corporation has unrestricted
retained earnings. The law also requires that shares
should not be issued below its par or issued value. These
requirements is a consequence of the.
A. The theory of separate personality.
B. The doctrine of limited capacity.
C. The trust fund doctrine.
D. The doctrine of general capacity.
28. The Board of Directors alone may declare the following
type of dividends, except in case of;
A. cash dividends
B. property dividends
C. stock dividends
D. script dividends
29. The following are the corporate officers of a corporation,
except:
A. President
 B. Vice-President 37. It is a business or service engaged in regularly supplying
the public with some commodity or service of public
C. Treasurer
consequence such as electricity, gas, water,
D. Secretary transportation, telephone or telegraph service.
30. In the following cases, the Trust Fund Doctrine is
violated, except:
A. Public Service
A. When the corporation allows the issuance of watered B. Public Corporation
stocks. C. Public Utility
B. When there is payment of dividends without D. Commodities Trader
unrestricted retained earnings. 38. What is the so-called “Grandfather Rule” under the
Corporation Code?
C. When the corporation releases or condones payment A. It is a rule that determines the nationality of a
of the unpaid subscription.
corporation on the basis of the place where the
D. None of the above. foreign corporation is incorporated or registered?
31. Which of the following are prohibited considerations for B. It is a rule that determines the nationality of a
the issuance of stocks? corporation on the basis of the nationality of the
A. goodwill majority of the stockholders.
B. past services C. It is a rule that determines the nationality of the
C. accounts receivables corporation on the basis of the nationality of its
officers and directors.
D. None of the above D. All of the above
32. The following are remedies available to a corporation to E. None of the above
enforce payment of stocks except:
A. Mandamus
B. Extra-judicial sale
C. Withholding of stock dividends
D. Deduction from cash dividends
33. In the following instances, appraisal right may be NAME:
exercised, except:
A. Investment of corporate funds in another business or ________________________________
purpose.
B. Extension of term
C. Appointment of an executive committee.
D. Reduction of term.
34. Which of the following cannot be a close corporation? 1 11 21 31
A. mining corporation 2 12 22 32
B. stock exchange
C. educational institution 3 13 23 33
D. All of the above 4 14 24 34
35. In the following instances, approval of the majority of the
board and concurrence of the stockholders representing
2/3 of the outstanding capital stock is necessary in the
5 15 25 35
exercise of the powers except: 6 16 26 36
A. To deny pre-emptive right.
B. To adopt, amend or repeal the by-laws. 7 17 27 37
C. To increase or decrease capital stock.
D. To declare stock dividends.
8 18 28 38
36. This doctrine is a recognition by the courts that the
fiduciary standards could not be upheld where the
9 19 29 --END
fiduciary is acting for two entities with competing
interests. It rests on fundamentally on the unfairness of a
10 20 30
corporate officer or director taking advantage of a
prospect for his own personal benefit when the interest of
the corporation justly needs protection.
A. Corporate Entity Doctrine
B. Corporate Interest Doctrine
C. Business Judgment Rule
D. Corporate Opportunity Doctrine.