RFBT: Corporation SET A

This theory which is recognized by Corporation Code states that a corporation is not in fact and in reality a person, but the law treats it as though it were a person by process of fiction, or by regarding it as an artificial person distinct and separate from its individual stockholders. It owes its existence to law and the extent of its existence, powers and liberties is fixed by its charter.

• Concession theory or fiat theory or government paternity theory or franchise theory

• Symbol theory

• Genessonchaft theory

• Realist or inherence theory

• Contract theory

How may a corporation be created under Philippine setting?

• In case of private corporation, by operation of general corporation law particularly the Corporation Code of the Philippines (BP 68).

• In case of public corporation, by law or enactment of special law.

• Either A or B.

• By mere consent of the contracting parties

As an artificial being, which of the following constitutional rights is not available to a corporation?

• Right to due process of law

• Right to equal protection of the law.

• Right against unreasonable searches and seizures

• Right against self-incrimination

Which of the following statements concerning the implications of being an artificial being of a corporation is correct?

• As a general rule, a corporation is not entitled to moral damages because, not being a natural person, it cannot experience physical suffering or sentiments like wounded feelings, serious anxiety, mental anguish and moral shock except when a corporation has a reputation that is debased, resulting in its humiliation in the business realm particularly in the case of libel or defamation.

• As a general rule, a corporation cannot be held liable for a crime because of impossibility of imposing the penal sanction of imprisonment and because a crime committed in the name of corporation is actually committed by the individuals who act for and in behalf of such corporation. However, it may become liable for fines to be imposed in the criminal action.

• Both A and B.

• Neither A nor B.

Which of the following corporate legal doctrines refers to the doctrine of separate juridical personality?

• It means that a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it; and that obligations incurred by the corporation, acting through its directors, officers and employees are its sole liabilities.

• It means that a stockholder is personally liable for the financial obligations of the corporation to the extent only of his unpaid subscription or that a stockholder’s liability for corporate debts extends only up to the amount of his capital contribution.

• It means that the capital stock of a corporation or the assets of an insolvent corporation representing its capital is a trust fund reserved for the benefit of company’s creditors.

• It means that the corporation has the capacity for continuous existence despite the death or replacement of its shareholders or members, for it has a personality separate and distinct from those who compose it.

The following are the advantages of forming a corporation, except

• It has a strong juridical personality through continuity of existence.

• It has a legal capacity to act and contract as a distinct unit in its own name.

• It is subject to greater degree of governmental supervision and regulation.

• The stockholder’s limited liability on the obligation of the corporation.

• Its management is centralized.

The following are the disadvantages of forming a corporation, except

• There is high cost of formation and operations.

• It is subject to higher taxes or sometimes indirect double taxation.

• Stockholders have little voice in the conduct of the business.

• Its credit is weakened by the limited liability feature.

• It makes feasible gigantic financial undertakings due to numerous investors.

Which of the following legal principles best describes the strong juridical personality of a corporation?

• Limited liability rule

• Separate entity theory

• Business judgment rule

• Right of succession or continuity of existence

Are the stockholders, directors or officers personally liable for the liabilities of the corporation after the assets of the corporation are exhausted?

• Yes because they are considered to be general partners.

• No under all instances.

• Yes under all instances.

• No as a general rule unless exceptional cases warrant the piercing of the veil of corporate fiction.

What are the exceptional cases wherein the courts may pierce the veil of corporate fiction so that the stockholders, directors or officers will become personally liable for corporate debts?

• When the corporate entity is used to commit fraud or to justify a wrong or to defend a crime or to commit tax evasion. (Fraud cases)

• When the corporate entity is used as a mere alter ego, business conduit or instrumentality of a person or another entity. (Alter ego cases)

• When the corporate entity is used to defeat public convenience such as in case of labor case. (Defeat public convenience cases)

• When piercing of the corporate fiction is necessary to achieve justice or equity. (Equity cases)

• Any of the above.