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WorksheetsCorporation Law
Total questions: 80
Worksheet time: 40mins
Which situation most clearly justifies piercing the corporate veil?
When a corporation refuses to pay dividends
When majority shareholders dominate board decisions
When the corporation is used as a mere conduit to defraud creditors
When the corporation incurs business losses
Two corporations share identical officers and the same business address. What factor of veil-piercing does this satisfy?
Fraud test
Harm test
Alter ego test
Common ownership test
A foreign corporation authorized to do business in the Philippines seeks to file suit. It may do so if:
Its license has expired
It is registered as a partnership abroad
It has a valid license to do business
It is a non-stock corporation
A corporation is considered de jure when:
It files AOI but receives no Certificate of Incorporation
It complies with substantial, but not mandatory, requirements
It fully complies with all legal requirements for incorporation
It has been in existence for more than five years
A corporation by estoppel exists when:
SEC issues a certificate that later turns out void
An invalidly formed corporation dissolves voluntarily
Parties act as a corporation even without authority
A corporation violates the RCCP
A corporation issues no-par value shares for P3.00 per share. The issuance is:
Valid if approved by the board
Valid because value is free to set
Void because minimum is P5.00 per share
Valid only for non-stock corporations
Which is NOT a characteristic of treasury shares?
They may be resold for reasonable value
They have no voting rights
They are considered outstanding shares
They were previously issued and fully paid
A preferred share may be non-voting if:
The bylaws provide for it
RCCP expressly allows denial of voting rights
Stockholders approve by majority
SEC approves the denial
Shareholders with non-voting shares retain the right to vote in which situation?
Declaration of dividends
Appointment of officers
Merger or consolidation
Election of directors
Under the Trust Fund Doctrine, unpaid subscriptions:
May be condoned by the corporation
Cannot be reached by corporate creditors
Are considered assets for creditors
May be offset by future profits
Which is NOT required in the AOI of a stock corporation?
Names of directors until first election
Names of original subscribers
Purpose clause
Bylaws of the corporation
The AOI may be amended upon:
Majority board + majority stockholders
Majority board + 2/3 stockholders
2/3 board + majority stockholders
100% stockholders
A corporation failing to formally organize within 5 years from incorporation results in:
Delinquent status
Liquidation
Automatic revocation of certificate
Dissolution by operation of law
A corporation's application for revival may be denied if it is a:
Domestic corporation with real estate assets
Closed corporation
Pawnshop without favorable recommendation
Stock corporation with 1 incorporator
The minimum number of incorporators under the RCCP is:
One
Three
Five
Ten
A director must cease office immediately when:
He fails to attend meetings
He refuses compensation
He ceases to own at least one share
His term expires
When the board fails to call an election after failure to elect directors, a stockholder may:
Sue for damages
Appoint the directors himself
Petition the SEC to order an election
Dissolve the corporation
A director is liable for corporate damages when he:
Votes for a reckless but lawful policy
Abstains from a vote
Votes for patently unlawful acts
Resigns before the vote
A conflict-of-interest contract is valid if:
The interested director voted for it
His vote was necessary for approval
His presence was needed for quorum
The contract is fair and his vote was not needed
A corporation vested with public interest must elect:
A compliance officer
A majority independent board
A foreign secretary
A permanent board chair
A director receives 15% of net income as compensation. This is:
Valid if approved by stockholders
Valid if provided in bylaws
Invalid – exceeds 10% limit
Valid if approved by board
Which board committee may exercise powers delegated by the board except certain fundamental acts?
Audit committee
Nomination committee
Executive committee
Governance committee
A director is disqualified if convicted for a crime:
Involving dishonesty only
Punishable by more than 6 years
Only if committed against the corporation
Only if committed abroad
Board approval plus 2/3 stockholder vote is required for all EXCEPT:
Increase of capital stock
Sale of substantially all assets
Amendment of AOI
Adoption of bylaws
Preemptive rights do NOT apply when shares are issued:
To existing shareholders proportionately
For property needed for corporate purposes
For public offering required by law
For cash subscription
A corporation increases its capital stock but fails to comply with the 25%-25% rule. SEC will:
Approve conditionally
Approve upon payment of penalty
Reject the application
Approve if board ratifies
The test of "substantially all assets" refers to:
Majority of assets by value
Majority of assets by number
Transaction making the corporation unable to continue business
Whether assets exceed 50% of capital
In an asset sale, the transferee becomes liable for the seller's debts when:
Seller is insolvent
Consideration is low
There is implied assumption of liability
SEC orders the sale
A corporation donates P5M to a political candidate. The donation is:
Valid if non-stock
Valid if approved by 2/3 stockholders
Valid if for humanitarian purposes
Invalid – corporations are prohibited
In a merger, stockholders who dissent may exercise appraisal right. They are entitled to:
Par value of their shares
Book value
Fair market value
Liquidation value
A contract was approved by the board. It was later discovered a director was secretly interested in the transaction, though he neither attended nor voted. The contract is:
Automatically void
Voidable unless requirements are satisfied
Valid because he did not vote
Valid because interest was small
A corporation became inoperative for 5 years and was placed under delinquent status. To avoid revocation, it must comply within:
1 year
2 years
3 years
5 years
A director acquires a business opportunity belonging to the corporation. He invested his personal funds. He is:
Not liable because he used his own resources
Liable unless ratified by 2/3 stockholders
Liable only if corporation loses money
Not liable if board approved
A corporation sells 40% of its assets, but those assets are essential and render it unable to operate. The sale is:
Not substantially all
Substantially all – requires 2/3 stockholder approval
Not substantially all – based on value only
Automatically void
XYZ Corp. has 10,000 shares outstanding. Stockholder A owns 4,000 shares. For an increase in capital stock, his required vote is:
4,000
Not required – only board votes
He has no voting rights unless a director
Vote is proportional but subject to 2/3 rule
Stockholder Y was not notified of the meeting where the AOI was amended. The amendment is:
Invalid – notice is mandatory
Valid because majority approved
Valid if Y is a non-voting shareholder
Automatically valid after SEC approval
A treasurer must be:
A director
A Filipino citizen
A resident of the Philippines
A CPA
A foreigner may be an incorporator of a stock corporation:
Always prohibited
Only if he resides in the Philippines
Unless restricted by nationality laws
Only if he owns 60% of shares
A corporation wishes to shorten its term. The vote required is:
Majority of board + majority of stockholders
Majority of board + 2/3 stockholders
2/3 board + majority stockholders
100% stockholders
A corporation issued founder's shares granting exclusive voting rights for 7 years. The provision is:
Valid – founder's shares have unlimited voting rights
Void – maximum is 5 years
Valid if approved by SEC
Valid if approved by 2/3 stockholders
Which of the following best defines a corporation under the RCCP?
A business entity owned by natural persons
A contract between private individuals
An artificial being created by operation of law
Any organization registered with the SEC
X Corp. was formed for charitable and religious purposes and does not issue shares. What kind of corporation is it?
Stock, civil
Non-stock, eleemosynary
Non-stock, lay
A corporation consisting of one natural person as the sole stockholder is called
Corporation sole
One Person Corporation
Corporation aggregate
Quasi-corporation
A de facto corporation exists when
There is SEC approval but no AOI
No attempt to incorporate was made
There is a valid law, good faith attempt to incorporate, and exercise of corporate powers
All incorporators are foreigners
The doctrine of piercing the corporate veil may be applied when the corporate fiction is used to
Maximize profits
Evade taxes in good faith
Perpetuate fraud, wrong, or deception
Avoid personal liability legally
A corporation created under a special law (e.g., PAGCOR) is governed primarily by
The RCCP only
SEC rules only
Its special charter
The BIR
Corporators are defined as
Original subscribers to shares
Those who compose the corporation
Only incorporators
Only stockholders
Which is NOT a required qualification of incorporators in a stock corporation
Not more than 15 in number
Must each subscribe to at least one share
Must all be residents of the Philippines
Must be of legal age
Which of the following shares may legally have no voting rights
Common shares
Preferred or redeemable shares
Founder’s shares after 5 years
Voting shares
Non-voting shares are still entitled to vote on which of the following
Increase of board size
Election of officers
Amendment of Articles of Incorporation
Declaration of dividends
No-par value shares must be issued at a minimum value of
P1
P5
P10
No minimum
Treasury shares
Have full voting rights
Receive dividends if declared
Are previously issued, fully paid shares reacquired by the corporation
May be issued without board approval
Under the Trust Fund Doctrine, unpaid subscriptions
May be condoned by the corporation
Cannot be reached by corporate creditors
Are considered assets available to creditors
May be offset by future profits
Founder’s shares may enjoy exclusive voting rights for a maximum of
1 year
3 years
5 years
10 years
A private corporation acquires juridical personality on
Filing of the AOI
Approval of the bylaws
Issuance of the Certificate of Incorporation
First stockholders' meeting
The maximum number of directors in a stock corporation is
10
12
15
20
The earliest time a corporation may extend its corporate term is
Anytime
5 years before expiry
3 years before expiry
1 year before expiry
Which corporation CANNOT apply for revival without favorable recommendation
Manufacturing corporation
Corporation sole
Pawnshop
Beverage corporation
Which is NOT a ground for SEC disapproval of the AOI
Illegal corporate purpose
Name not distinguishable
False paid-up capital certification
AOI signed by 10 incorporators
A corporation that becomes inoperative for 5 consecutive years will be placed under
Suspension
Delinquent status
Liquidation
Dissolution
Directors must be elected from
Any natural person
Any incorporator
Holders of at least one share
Any resident of the Philippines
Independent directors must constitute at least 20% of the board in
Small stock corporations
All domestic corporations
Corporations vested with public interest
Non-stock corporations only
The business judgment rule states that
Courts may reverse board decisions anytime
Courts cannot interfere with decisions made in good faith
Courts must approve board decisions
Stockholders may veto all board decisions
Removal of a director requires:
Majority of the board
100% vote of stockholders
2/3 vote of outstanding capital stock
Approval of the president
A director who ceases to own at least one share:
Remains director for the full term
Must be removed by stockholders
Automatically ceases to be a director
May remain if approved by board
Officers required by law include all EXCEPT:
President
Treasurer
Corporate Secretary
Vice President
Directors generally may NOT receive compensation unless:
Approved by the SEC
Provided in the bylaws or approved by majority of stockholders
Approved by the president
Voted by the board
A director is liable to the corporation when he:
Is absent during meetings
Votes for patently unlawful acts
Disagrees with the majority
Abstains from voting
A contract between the corporation and a director is valid if:
The director attended the meeting
The director’s vote was necessary
The contract is fair and his vote was not needed
The president approves it
A director who takes a corporate business opportunity for himself is liable for:
Simple negligence
Corporate disobedience
Disloyalty
Breach of bylaws
Amendment of the Articles of Incorporation requires:
Majority of board + majority of stockholders
Majority of board + 2/3 stockholders
2/3 board + majority stockholders
100% stockholders
Preemptive rights allow stockholders to:
Demand dividends
Buy new shares proportionately
Appoint officers
Inspect corporate books anytime
The preemptive right does NOT apply when shares are issued:
For cash
For property needed for corporate purposes
For stock dividends
For public offering required by law
A sale of “substantially all” corporate assets requires:
Board approval only
Approval of the president
Majority board + 2/3 stockholders
No approval if sale is advantageous
A sale is considered to cover “substantially all” assets when:
Amount exceeds 50% of assets
It leaves the corporation unable to continue business
Sale results in change of ownership
Sale is approved by board
Under the Nell Doctrine, the transferee corporation becomes liable for the transferor’s debts when:
Sale was for cash
Sale was arm’s length
Purchaser is a continuation of the seller
Assets were undervalued
ABC Corp. has 10 directors. How many must compose the executive committee?
At least 1
At least 2
At least 3
All 10
Juan, Pedro, and Ana voted for an illegal contract. Who is liable?
Only Juan
Only the president
All directors who assented
The corporation only
Failure to hold an election must be reported to the SEC within:
10 days
30 days
60 days
90 days
XYZ Corp. was incorporated in 2020 but never started operations. In 2026, the SEC revoked its certificate because:
It has unpaid subscriptions
It became inoperative
It failed to organize and start business within 5 years
It dissolved voluntarily
