Corporation Law MCQs

Take the Corporation Law MCQs – Set 1 Quiz.

Corporation Law - Set 1 [30 items]

Please wait while the activity loads.
If this activity does not load, try refreshing your browser. Also, this page requires javascript. Please visit using a browser with javascript enabled.

If loading fails, click here to try again

Corporation Law MCQs

Start

Congratulations - you have completed Corporation Law - Set 1 [30 items]. You scored %%SCORE%% out of %%TOTAL%%. Your rating is (%%PERCENTAGE%%)

Your answers are highlighted below.

Question 1

[CL0112] A stock corporation, in general, is taxed in the same manner as

A	General professional partnership
B	Cooperative
C	Sole proprietorship
D	Non-general professional partnership

Question 2

[CL0115] In which of the following corporate acts is the appraisal right not available?

A	Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of its corporate stock
B	Merger or consolidation
C	Investment of funds for the accomplishment of the primary purpose of the corporation
D	Extension or shortening of corporate existence

Question 3

[CL0128] The Balance Sheet of a manufacturing corporation shows that it has a retained surplus profit in excess of 100% of its paid in capital as of December 31, 2010. Despite the said surplus, the corporation refused to declare dividend due to the following reasons: a. It does not have enough cash to declare dividend. b. There is a pending corporate expansion. c. The retained surplus profit is unrestricted. d. There is an existing loan agreement prohibiting the declaration of dividend; Which among the above reasons justify the refusal of the corporation to declare dividends?

A	Both b and d.
B	Both a and d.
C	Only c.
D	Both a and c.

Question 4

[CL0106] A private corporation commences to have corporate existence and juridical personality from the date:

A	The SEC issues it certificate of incorporation under its seal.
B	The incorporators sign the Articles of Incorporation.
C	The officers of the corporation are elected by the stockholders.
D	The Articles of Incorporation and By-laws are presented to the SEC.

Question 5

[CL0107] The interest or right of the owner in the corporation's profits or in the net assets of the corporation on dissolution is:

A	Share of Stock
B	Dividend
C	Certificate of Stock
D	Capital

Question 6

[CL0104] Which of the following is a disadvantage of forming a corporation?

A	The shareholders are not liable for the debts of the business.
B	The free and ready transferability of ownership.
C	The subservience of minority stockholders to the wishes of the majority subject only to equitable restraints.
D	Because of the power of succession, the existence of the entity is not affected by the personal vicissitudes of the individual shareholders.

Question 7

[CL0121] Carlos is the Chairperson and President of NT Corporation and Myrna is the Director. Myrna representing the corporation appointed X Company as the exclusive distributor of NT Corporation’s products in Northern Luzon as evidenced by the Dealership Agreement. Is the dealership agreement valid?

A	Yes, because it is voidable only at the option of NT Corporation.
B	No, because Myrna alone represented NT Corporation.
C	No, because there is no showing that Myrna was authorized by NT Corporation to enter into a Dealership Agreement with X Company.
D	Yes, provided that the act of Myra is ratified by the NT Corporation through a meeting called for the purpose.

Question 8

[CL0120] Which of the following is not a characteristic of a corporation?

A	Transferability of ownership interests
B	Perpetual life
C	Ability to attract large amount of capital
D	Unlimited liability on the part of the stockholders

Question 9

[CL0105] How many number of votes of the Board of Directors are required to change the name of the corporation?

A	Majority vote of the Board
B	2/3 vote of all the members of the Board
C	Majority vote of all present constituting a quorum
D	2/3 vote of all present

Question 10

[CL0113] Which shares may be issued with or without par value?

A	Common shares
B	Neither common nor preferred shares
C	Preferred shares
D	Both common and preferred shares

Question 11

[CL0129] Mercy subscribed 1,000 shares of stock of Maawain Corporation. She paid 25% of said subscription. How many shares can Mercy vote during a stockholder’s meeting?

A	750 shares.
B	500 shares.
C	250 shares.
D	1,000 shares.

Question 12

[CL0119] Immediately after their election, the directors must formally organize by election the following officers, except:

A	President
B	Corporate Secretary
C	Treasurer
D	Vice-President

Question 13

[CL0109] 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:

A	Right of Succession
B	Right of Redemption
C	Pre-emptive Right
D	Right of Existence

Question 14

[CL0101] A corporation where vacancies in the Board of Directors, are filled only by the remaining members of the Board, is:

A	Close corporation
B	Corporation sole;
C	Eleemosynary corporation;
D	Open corporation;

Question 15

[CL0126] Because of disagreement with the Board of Directors (BOD) and a threat by the BOD to expel her for misconduct and inefficiency, Rissa offered in writing to resign as President and member of the BOD, and to sell to the company all her shares therein for PhP500,000.00. Her offer to resign was “effective as soon as my shares are fully paid”. At its meeting, the BOD accepted Rissa’s resignation, approved her offer to sell back her shares of stock to the company, and promised to buy the stocks on a staggered basis. Rissa was informed of the BOD resolution in a letter-agreement to which she affixed her consent. The Company’s new President signed the promissory note. After payment of PhP100,000.00 the company defaulted in paying the balance PhP400,000.00. Rissa wants to sue the Company to collect the balance. If you were retained by Rissa as her lawyer, where will you file the suit?

A	Labor Arbiter
B	Regional Trial Court
C	Municipal Trial Court
D	Securities and Exchange Commission

Question 16

[CL0111] Which of the following documents may be submitted before or after incorporation?

A	Verification certificate as to the name of the corporation
B	Certificate of bank deposit as to the paid-up capital
C	By-laws
D	Articles of Incorporation

Question 17

[CL0122] Strong Cement Corporation was organized primarily for cement manufacturing. Anticipating substantial profits, its President proposed that the corporation invest in quarry operations for limestone in the manufacture of cement. What corporate approvals or votes are needed for the proposed investments?

A	By the majority vote of the Board of Directors only.
B	By a majority of the Board of Directors and the ratification of such approval by the stockholders representing at least 2/3 of the outstanding capital stock.
C	By the President of Strong Cement Corporation only.
D	By at least 2/3 votes of stockholders owning outstanding capital stock.

Question 18

[CL0116] Director may be given compensation through any of the following ways, except by:

A	A provision in the by-laws
B	The vote of the Board of Directors if the compensation is other than per diems
C	The vote of the Board of Directors if the compensation is a reasonable diem
D	The vote of the stockholders representing at least a majority of the outstanding capital stock

Question 19

[CL0108] Requirement to effect the amendment of the by-laws of a corporation

A	Majority vote of the Board of Directors
B	Vote of 2/3 of the outstanding capital stock
C	Majority vote of the Board of Directors and majority vote of the outstanding capital stock
D	Majority vote of the outstanding capital stock

Question 20

[CL0110] The following person cannot be an incorporator of a corporation:

A	A subscriber on the shares of the corporation who pays less than 25% of his subscription
B	A married woman without the consent of the husband even if the payment of her shares is her paraphernal property
C	A resident alien
D	A corporation organized under the laws of the Philippines

Question 21

[CL0118] The subscriber of unpaid shares which are not delinquent shall be entitled to the following rights, except the right to:

A	A stock certificate
B	Vote
C	Inspect corporate books
D	Dividends

Question 22

[CL0114] Who may vote the shares without the need of any written proxy?

A	The stockholder who transferred his shares in a voting trust agreement.
B	The executor of an estate which owns the shares of stock
C	The mortgagee of shares of stock
D	The pledgee of shares of stock

Question 23

[CL0125] In 2010, ABC Manufacturing Inc. finally regained its financial liquidity after the economic reverses suffered from previous years. In the regular meeting held by the corporation this year, its President proposed to the Board of Directors that a bonus of 15% of the company’s net income before tax during the preceding year be distributed as bonus to its directors. The President’s proposal was unanimously approved by the Board of Directors. A stockholder of ABC Manufacturing Inc. questioned the approved bonus. Is there a valid ground for the said objection?

A	Yes, because the 15% bonus exceeded the amount allowed by law.
B	None, because the 15% bonus was approved by the Board of Directors as within its powers granted under the law.
C	None, because the law provides that a bonus of 15% can be distributed as bonus to Board of Directors.
D	Yes, because the 15% should be based on company’s net income after income tax.

Question 24

[CL0117] Under this theory, the nationality of a corporation is that of the country under whose laws it was formed

A	Incorporation test
B	Domiciliary test
C	Grandfather rule
D	Control test

Question 25

[CL0102] The following, except one, are qualifications of corporate directors:

A	Must own at least one share of stock.
B	Must continuously own at least one share during their term as directors.
C	Majority are citizens of the Philippines.
D	Ownership of shares must be recorded in the books of the corporation.

Question 26

[CL0127] A subscription contract was entered into which stated that the authorized capital stock was PhP250,000.00. It turned out that it was increased to PhP500,000.00 but it was not disclosed to the subscriber. What is the effect of non-disclosure to the subscriber of the increase of the authorized capital stock?

A	The subscription was not binding and subscriber may annul the increase in the amount of capital stock.
B	The subscription was binding and the subscriber can be compelled to pay his subscription.
C	The subscription was binding and the subscriber may retain the shares of capital stock subscribed.
D	The subscription was not binding and the subscriber cannot be compelled to pay his subscription.

Question 27

[CL0130] Four months before his death, MS assigned 100 shares of stock registered in his name in favor of his wife and his children. When the deed of assignment was brought to the proper corporate officers for registration it was refused on the ground that another heir is contesting the validity of the deed of assignment. When can transfer of share be refused?

A	If the corporation holds any unpaid claim.
B	If another person is contesting the transfer of shares.
C	None of the choices
D	If the shares is not paid in full.

Question 28

[CL0123] In a complaint filed against ABC Corporation, Luzon Trading Corporation alleged that its President and General Manager, who is also a stockholder, suffered mental anguish, fright, social humiliation and serious anxiety as a result of the tortuous acts of ABC Corporation. May Luzon Trading Corporation recover damages based on the allegations of the complaint?

A	No, because a counterclaim may be resorted by ABC Corporation against Luzon Trading Corporation.
B	Yes, because a valid complaint was filed against ABC Corporation.
C	Yes, because the President and General Manager of ABC Corporation suffered mental anguish, fright, social humiliation and serious anxiety.
D	No, because Luzon Trading Corporation is an artificial being.

Question 29

[CL0124] In 2004, ABC Corporation passed a board resolution removing X from his position as manager of said corporation. The by-laws of ABC Corporation provide that the officers are the president, vice-president, treasurer and secretary. Upon complaint filed with the Securities and Exchange Commission, it held that a manager could be removed by mere resolution of the board of directors. On motion for reconsideration, X alleged that he could only be removed by the affirmative vote of the stockholders representing 2/3 of the outstanding capital stock. Is the contention X legally tenable?

A	Yes, because X is a corporate officer.
B	Yes, for the removal of a corporate officer or employee, the affirmative vote of the stockholders representing 2/3 of the outstanding capital stock is needed.
C	No, because X is not a named officer in the by-laws of the Corporation.
D	No, the approval of stockholder is necessary only for the removal of the members of the Board of Directors.