ACT1110 - Integrated Reviewer 2

Juan, 35 years old, was elected as a director of Bright Ideas Corporation, a stock corporation. He owns only 10 shares, which is less than 1% of the company’s total shares. However, five years ago, he was convicted of a crime and sentenced to 8 years in prison. According to Section 22 of the Revised Corporation Code, can Juan serve as a director?

• Yes, because he owns shares and is of legal age

• No, because he owns less than 1% of the company

• No, because he was convicted of a serious crime

• Yes, because the crime happened five years ago

Maria, 40 years old, has been very active in the activities of Green Future Foundation, a non-stock and non-profit corporation. She regularly volunteers and is well-respected by members of the organization. She was nominated to serve as a trustee of the foundation. However, it was discovered that she is not an official member of the corporation, as her membership application was never formally approved.

According to Section 22 of the Revised Corporation Code, can Maria serve as a trustee?

• Yes, because she is active and respected in the organization

• No, because she is not a member of the corporation

• Yes, because she is over 18 years old

• No, because she is not a stockholder

In the first organizational meeting of XYZ Corporation, the board of directors elected the corporate officers. They appointed Kim Shin, a lawyer who owns 60% of the company’s shares but was not elected as a director, to serve as the President of the corporation. Based on Section 24 of the Revised Corporation Code, is this appointment valid?

• Yes, because Kim Shin is the majority shareholder

• No, because only minority stockholders can be officers

• No, because the President must be a director

• Yes, because the President only needs to be of legal age

Starflower Corporation’s board of directors appointed Do Min-joon, who owns 30% of the shares but was not elected as a director, as Corporate Secretary. The bylaws of the corporation state that all corporate officers must be directors. Separately, the board also appointed Ji Eun-tak, a director, as Treasurer. Based on Section 24 of the Revised Corporation Code and the bylaws of Starflower Corporation, which of the following is true?

• Both Do Min-joon and Ji Eun-tak’s appointments are valid because stock ownership is not required for officers

• Do Min-joon’s appointment is invalid because the bylaws require all officers to be directors, and he is not a director

• Ji Eun-tak’s appointment is invalid because she does not own any shares

• Both appointments are invalid because officers cannot be appointed if they don’t own at least 1 share

In Brilliant Law Firm Corporation, the stockholders decided to hold a special meeting to remove Woo Young-woo as director. Woo Young-woo owns 20% of the shares but allegedly failed to attend board meetings and neglected her duties. The stockholders who attended the meeting represent 55% of the outstanding shares and voted in favor of removing Woo Young-woo. Based on Section 27 of the Revised Corporation Code, is the removal of Woo Young-woo valid?

• Yes, because the majority of outstanding shares voted to remove her

• No, because Woo Young-woo owns shares and cannot be removed

• No, because removal requires at least two-thirds (2/3) of the outstanding capital stock to vote in favor

• Yes, but only if Woo Young-woo agrees to the removal

In Brilliant Law Firm Corporation, minority stockholders owning 20% of the shares are entitled to have one director representing them. Stockholders holding 70% of the outstanding shares voted to remove Choi Woo-jin, the minority representative director, without any cause. Is the removal of Choi Woo-jin valid?

• Yes, because stockholders holding more than two-thirds voted to remove him

• No, because removal without cause cannot remove a minority representative director

• No, because removal requires unanimous consent

• Yes, but only if the minority stockholders agree

Justice & Co. Corporation has 7 directors. Three directors resign at once, leaving 4 directors remaining. The corporation’s bylaws require 5 directors to constitute a quorum for board meetings. At a meeting to fill the vacancies, all 4 remaining directors are present and unanimously vote to fill the 3 vacancies. Is the action of filling the vacancies valid under Section 28 of the Revised Corporation Code and the corporation’s bylaws?

• Yes, because all the remaining directors unanimously agreed

• No, because the number present did not meet the quorum requirement of the bylaws

• Yes, because the majority of the original board is represented

• No, because vacancies can only be filled by stockholders

Itaewon Enterprises, Inc. has 5 directors. During a regular stockholders’ meeting, the stockholders approve increasing the number of directors from 5 to 8. After the meeting, no director has resigned or been removed. All 5 original directors remain in office. Who has the authority to fill the 3 new board seats?

• The existing 5 directors may appoint the additional 3 directors by majority vote

• The remaining directors may appoint the new directors if they constitute a quorum

• The stockholders must elect the 3 new directors in a regular or special meeting

• The chairperson of the board may appoint the additional directors with board approval

Start-Up Holdings, Inc. has accumulated significant unrestricted retained earnings. At a regular board meeting, the directors, led by Seo Dal-mi, approve the declaration of a stock dividend equivalent to 30% of outstanding shares. However, no stockholders’ meeting was called to approve this decision. A minority stockholder, Nam Do-san, questions the validity of the stock dividend, claiming that the declaration is void. Who is correct?

• The board acted properly because only board approval is needed to declare any type of dividend

• The board may declare stock dividends at any time as long as there are retained earnings

• Nam Do-san is correct because stock dividends require approval of at least two-thirds of the outstanding capital stock

• The stock dividend is valid because minority stockholders are not entitled to vote on dividend declarations

Crash Landing Corp. has ₱50 million in unrestricted retained earnings. During a regular board meeting, the directors declared a cash dividend to be distributed to all common shareholders. Some stockholders, including Yoon Se-ri, complain that they were not asked to vote on the dividend and claim the declaration is invalid. Are the stockholders correct?

• Yes, because all dividend declarations must be approved by the stockholders

• No, because cash dividends can be declared by the board without stockholder approval

• Yes, because dividends must always be approved by at least 2/3 of the stockholders

• No, because only preferred stockholders have the right to vote on dividends