Quiz in Corporation Law

DE LA SALLE LIPA  College of Business, Economics, Accountancy and Management Accountancy Accountancy Department Second Semester Sem ester – A.Y. A.Y. 202!20" 202!2 0" Accounting #e$ie% 2 &ui' ())) – Corporation *a% +ame-----------------------------------------------------+ame-------------------------------------------------------------------Date--------------------------Date---------------------------  --------------   -  Section-----------------------------------------------------Section-----------------------------------------------------------------Score-------------------Score---------------------------  -------------------  Directi Direction on Read and solve the following problems. Write the letter of your best answer on the space provided before each number. Erasures are not allowed and considered wrong.  ___1. A director of a corporation corporation may be removed removed by: a. Ma Maori ority vot vote e of of the the outst utsta andi nding capi capita tall st stoc! oc! c. Maor aoriity of the stoc stoc!h !hol olde derrs b. "#$ of the stoc!holders d. "#$ of the outstanding capital stoc!  ___". %n the matter matter of management of of the corporation& corporation& this is supreme: supreme: a. 'resident b. (hairman of )*+ c. ,toc!holders d. )oard of directors  ___$. A subscribed to 1&--- shares of stoc! of  corporation and paid "/0 of the said subscription. (an he vote all his subscribed shares a. 2o because the subscription has not been fully paid b. 2o because his shares have become delin3uent shares c. 4es 4es as regards the paid percentage of the subscription d. 4es 4es because shares although unpaid but not delin3uent can be voted  ___5.  (orporation posted a '1M profit in its reality b usiness and its real estate has appreciated in value to the tune of  '5M. 6he board then declared dividends computed on the basis of '/M representing profits and appreciation in value of  its real estate. %s the dividend declaration void a. 2ot valid because there was no "#$ ratification by the outstanding capital stoc! b. 7alid 7alid being based o n profits and increments in the value of the corporate assets c. 2o valid because dividends d ividends must come only from the profits d. 7alid 7alid if creditors do not obect nor protest against the same  ___/. A subscribed subscribed to 1-- shares of  corporation& paying "/0 thereof. +espite the demand by for the issuance of stoc! certificate& the corporation refuses to issue one corresponding to the "/0 paid. Meanwhile& the corporation has become insolvent and A now refuses to pay his unpaid balance on his subscription. %s the refusal to issue a stoc! certificate valid a. 2ot value because stoc! certificate can be issued for the paid portion of the subscription b. 7alid 7alid because stoc! certificate can o nly be used after full payment of the subscription c. 7alid 7alid as regards the unpaid percentage on the subscription d. 2ot valid because only delin3uent shares may be denied stoc! certificate  ___8. )ased on the facts in the preceding number& can a validly refuse to pay the unpaid balance on his subscription now that the corporation has become insolvent a. 2o under the trust fund doctrine for the protection of creditors b. 2o under the doctrine of piercing the veil of corporation fiction c. 4es 4es because of the insolvency of the corporation which also e9tinguished his obligation to pay the balance d. 4es 4es because of the denial of his right to stoc! certificate  ___. Maority of the following following must be residents residents of the 'hilippines& 'hilippines& e9cept a. +irectors b. 6rustees c. %ncorporators d. *fficers  ___;. 'rivate corporations corporations have the following attributes& attributes& e9cept a. %t is an artificial being created by operation of law. b. %t may be formed or created by mere consent. c. %t has the right of succession. d. %t has the powers& attributes and properties e9pressly authori and and > were nominated. nominated. A& A& )& (& + and E received the highest number of votes and thus proclaimed as elected. > received ten votes less than E. ,ubse3uently& ,ubse3uently& E sold his shares to >. Who& between between E and > has the right to attend as director a. E us the director because his term is one year until his successor is elected and 3ualified. b. > is the director because he has bought the shares of E. c. )oth of them shall be directors.

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d. 2either of them shall be director.  ___11. A)( corporation has an authoriD >oundation %nc. a non@profit organioundationCs Articles and )y@Baws are silent on the matter. As to each of the three& what is the ma9imum number of votes that he#she can cast a. 8 b. = c. 1" d. $

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 ___"-. 6 (orp. has a corporate term of "- years under its Articles of %ncorporation or from Fune 1& 1=;- to Fune 1&"---. *n Fune 1&1==1 it amended its Articles of %ncorporation to e9tend its life by 1/ years from Fune 1&1=;- to Fune 1&"-1/. 6he ,E( approved this amendment. *n Fune 1&"-11& however& 6 (orp decided to shorten its term by 1 year or until Fune 1&"-15. )oth the 1==1 and "-11 amendments were approved by maority vote of its )oard of +irectors and ratified in a special meeting by its stoc!holders representing at least "#$ of its outstanding capital stoc!. 6he ,E( however& disapproved the "-11 amendments on the ground that it cannot be made earlier than / years prior to the e9piration date of the corporate term& which is Fune 1&"-15. %s this ,E( disapproval correct a. 2o& since the /@year rule on amendment of corporate term applies only to e9tension& not shortening of term b. 4es any amendment affecting corporate term cannot be made earlier than / years prior to the corporationCs e9piration date c. 2o& since a corporation can in fact have a corporate life of /- years. d. 4es the amendment to shorten corporate term cannot be made earlier than / years prior to the corporationCs e9piration date  ___"1.  (orp. whose business is to manufacture and sell vehicles& invested its funds in 4 (orp. an investment firm& through a resolution of its )oard of +irectors. 6he investment grew tremendously on account of 4 (orpCs e9cellent business udgment. )ut a minority stoc!holder in  (orp assails the investment as ultra vires. %s he right and if so& what is the status of the investment a. 4es it is an ultra vires act of the corporation itself but voidable only subect to stoc!holderCs ratification b. 4es it is an ultra vires act of its )oard of +irectors and thus void c. 4es it is an ultra vires act of its )oard of +irectors but voidable only subect to stoc!holderCs ratification d. 4es it is an ultra vires act of the corporation itself and conse3uently& void  ___"". 6he (orporation (ode sanctions a contract between two or more corporations which have interloc!ing directors& provided there is no fraud that attends it and it is fair and reasonable under the circumstances. 6he interest of an interloc!ing director in one corporation may be either substantial or nominal. %t is nominal if his interest a. +oes not e9ceed "/0 of the outstanding capital stoc! b. E9ceeds "/0 of the outstanding capital stoc! c. E9ceeds "-0 of the outstanding capital stoc! d. +oes not e9ceed "-0 of the outstanding capital stoc!  ___"$. %n case of disagreement between the corporation and withdrawing stoc!holder who e9ercises his appraisal right regarding the fair value of his shares& a three@member group shall by maority vote resolve the issue with finality. May the wife of the withdrawing stoc!holder be name to the three member group a. 2o the wife of the withdrawing shareholder is not a disinterested person b. 4es since she could best protect her husbandCs shareholdings c. 4es since the rules do not discriminate against wives d. 2o since the stoc!holder himself should sit in the three@member group  ___"5. 6he rule is that no stoc! dividend shall be issued without the approval of stoc!holders representing at least "#$ of  the outstanding capital stoc! at a regular or special meting called for the purpose. As to other forms of dividends a. A mere maority of the entire )oard of +irectors applies b. A mere maority of the 3uorum of the )oard of +irector applies c. A mere maority of the votes of stoc!holders representing the outstanding capital applies d. 6he same rule of "#$ vote applies  ___"/. ,everal American +octors wanted to set up a group of clinic in the 'hilippines so they could render modern medical services. %f the clinic is to be incorporated under our laws& what is the re3uired foreign e3uity participation in such corporation a. 5-0 b. -0 c. 8-0 d. -0  ___"8. 6he )oard of +irectors of 4 (orp unanimously passed a resolution approving the ta!ing of steps that in reality amounted to willful ta9 evasion. *n discovering this& the government filed a ta9 evasion charges against all the companyCs members of the board of directors. 6he directors invo!ed the defense that they have no personal liability& being mere directors of a fictional being. Are they correct a. 2o since as a rule only natural persons li!e the members of the board of directors can commit corporate crimes. b. 4es since it is the corporation that did not p ay the ta9 and it has personality distinct from its directors c. 4es since the directors officially and collectively performed acts that are imputable only to the corporation d. 2o since the law ma!es directors of the corporation solidarily liable for gross negligence and bad faith in the discharge of their duties.  ___". 6he Articles of %ncorporation must be accompanied by a 6reasurerCs Affidavit certifying under oath& among others& that the total subscription paid is a. 2ot less than '"/&--b. 2ot more than '/&--c. 2ot less than '/&--- d. 2ot more than '"/&---

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 ___";. 6he Articles of %ncorporation of A)( 6ransport %nc. a public utility& provides for ten members in its )oard of  +irectors. What is the prescribed minimum number of >ilipino citiilipinos residing in Australia d. 1/ >ilipinos who are residents of ,A  ___$$. A corporation is deemed dissolved a. (eased operation for at least / years b. 2o commencement of business transaction within " years from issuance of certificate of incorporation c. A member of the board is convicted of an offense d. Maority of the members of the board are dead  ___$5. Every corporation whose charter e9pires by its own limitation& or annulled by forfeiture or otherwise& or whose corporate e9istence for other purposes is terminated in any other manner shall nevertheless be continued as a body corporate for $ years after the time when it would have been dissolved for the purpose of the following& e9cept a. 'rosecuting and defending suits by or against it and enabling it to settle and close its affairs b. 6o dispose and convey its property c. 6o distribute its assets d. (ontinuing the business for which it was established  ___$/. As a rule pre@incorporation subscription is irrevocable for a period of at least a. $- days b. 8- days c. 8 months d. 1 year    ___$8. A& )& (& + and E are directors of a corporation. 6wo days before the meeting of the board& where by a unanimous vote& a resolution declaring a /-0 stoc! dividend was passed& A& )& and ( sold and transferred all their shares. 6he transfers were duly registered in the boo!s of the corporation immediately after the sale. %s the dividend declaration legal a. 4es& A& ) and ( are still 3ualified to sit as members of the board in hold@over capacity until their successors shall have been elected and 3ualified. b. 2o& at the time the resolution was passed& A& ) and ( were no longer 3ualified to sit as directors since they are no longer stoc!holders. c. 4es& unanimous vote means all directors approved the resolution d. 2o& if the other members of the board were not informed of the transfers made  ___$. Which of the following is the disadvantage of forming a corporation a. 6he free J ready transferability of ownership b. 6he shareholders are not liable for the debts of the business c. )ecause of the power of succession& the e9istence of the entity is not affected by the personal vicissitudes of  the individual stoc!holders d. 6he subservience of minority stoc!holders to the wishes of the maority subect only to e3uitable restraints  ___$;. (ash dividend as distinguished from stoc! dividend a. (orporate capital is increased b. (oncurrence of the stoc!holders is re3uired c. %nvolves disbursement to the stoc!holders of accumulated earnings d. )eing part of corporate p roperty& maybe reached by corporate creditors

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 ___$=. F is one of the directors of +elightful (orporation. Bater& she sold all her shares to K. ,ubse3uently& a meeting of  the board of directors was held and both F and K attended said meeting& each claiming the right to participate in the deliberation of the board. F contended that she has the right to continue as director until the stoc!holders could elect her  successor. *n the other hand& K argued that having pu rchased all of FCs shares she has the right to ta!e the latterCs place in the board. Which of the following is not correct a. )oth F and K are dis3ualified to sit as directors in the )oard of +irectors b. F cannot 3ualify as she disposed all the shares c. K cannot 3ualify as she must have to be elected by the stoc!holders d. K can 3uality because a stoc!holder as well as the heirs and assigns of a stoc!holder of the same corporation has the right of succession  ___5-. 6he articles of incorporation is re3uired to state the name& nationalities and residence of persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and 3ualified. 6his re3uirement is intended to provide a basis by which the ,E( could determine whether the articles of incorporation has complied with the re3uirement that a. At least maority of the directors or trustees are residents of the 'hilippines b. At least maority of the directors or trustees are citialse c. >alse& 6rue d. >alse& >alse  ___/. E9cept as a condition in a loan agreement& the voting trust agreement shall not e9ceed a. 8 months b. 1 year c. $ years d. / years  ___/;. *ne of the following does not re3uire stoc!holderCs approval a. (hange of corporate name b. Merger or consolidation c. +eclaration of share dividend d. %nvestment of corporate funds outside main purpose of the corporation  ___/=. Which of the following statement is correct a. Eleemosynary corporation is one established for business o r profit b. (orporation aggregate is one established for religious purpose c. (ivil corporation is one established under laws of the 'hilippines d. Bay corporation is one established for purposes other than religion  ___8-. An individual or a domestic corporation designated in a written power of attorney by a foreign corporation authori