Accountancy Department

College of Business and Accountancy

Notre Dame University, Cotabato City 9600

Name: ________________________________ Date:

Course & Year:________________________ Subject:
Instructor: Class Schedule:

GENERAL INSTRUCTIONS: The following exam is good for two (2) hours only. ANY FORM OF
CHEATING IS PROHIBITED. Anyone who screenshots and shares the exam will automatically be
zero.

MULTIPLE CHOICES
 Choose the Best Answer. Write the CAPITAL LETTER ONLY (Sample: A) that
corresponds to your answer on the google forms.

1. The following are the attributes of a private corporation, except

A. It may exist in perpetuity under RA 11232 unless a fixed term is stated in
the articles of incorporation.
B. It has no powers, attributes and properties except those powers, attributes,
and properties expressly authorized by law or incident to its existence.
C. It can only be legally dissolved with the consent of the state.
D. It acquires juridical personality from the moment the SEC issues its certificate
of amendment.

2. How many a corporation be created under Philippine setting?

A. In case of Private Corporation, by operation of General Corporation law
particularly the Corporation Code of the Philippines (BP 68).
B. In case of public corporation, by law or enactment of special law.
C. Either A or B.
D. By mere consent of the contracting parties

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

corporation?
A. Right to due process of law
B. Right to equal protection of the law.
C. Right against unreasonable searches and seizures
D. Right against self-incrimination

4. Which of the following statements concerning the implications of being an artificial

being of a corporation is correct?
A. 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.
B. 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.
C. Both A and B.
D. Neither A nor B.

5. Which of the following corporate legal doctrines refers to the doctrine of separate
juridical personality?
A. 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 obligation incurred by the

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 corporation, acting through its directors, officers and employees are its sole
liabilities.
B. 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.
C. 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.
D. 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.
6. The following are the advantages of forming a corporation, except
A. The stockholder’s limited liability on the obligation of the corporation.
B. It has a strong juridical personality through continuity of existence.
C. It has a legal capacity to act and contract as a distinct unit in its own name.
D. Its management is centralized.
E. There is ease in transferability of shares of stocks.
F. It is subject to greater degree of governmental supervision and regulation.

7. The following are the disadvantages of forming a corporation, except

A. There is high cost of formation and operations.
B. It is subject to higher taxes or sometimes indirect double taxation.
C. Stockholders have little voice in the conduct of the business.
D. Its credit is weakened by the limited liability feature.
E. It makes feasible gigantic financial undertakings due to numerous investors.

8. Which of the following legal principles best describes the strong juridical
personality of a corporation?
A. Limited liability rule
B. Separate entity theory
C. Business judgment rule
D. Right of succession or continuity of existence

9. Are the stockholders, directors or officers personally liable for the liabilities of
the corporation after the assets of the corporation are exhausted?
A. Yes because they are considered to be general partners.
B. No under all instances.
C. Yes under all instances.
D. No as a general rule unless exceptional cases warrant the piercing of the
veil of corporate fiction.

10. Which of the following instances on itself alone may justify the court in
piercing the veil of corporate fiction?
A. The mere fact that one or more corporations are owned and controlled
by a single stockholder.
B. The mere fact that two corporations may be sister companies and that
they may be sharing personnel and resources.
C. The existence of interlocking directors, corporate officers and shareholders
between the two corporations.
D. The control of the corporation is used by the director to commit fraud or to
defeat public convenience.

11. Which of the following statements concerning the prayer for piercing the veil
of corporation fiction is incorrect?
A. Piercing application is essentially a judicial prerogative.
B. Piercing must be shown to be necessary and with factual basis.
C. Piercing is an equitable remedy and may be awarded only in cases filed by a
person with victim standing.
D. Piercing is a substantive right provided by BP 68 available as a matter of right.

Abu Jahhil L. Modiarat, CPA, MPA Business Laws and Regulations Page 2
 12. HONDA Philippines is fully owned by Japanese nationals. Its main office is located
at Tokyo, Japan but it was incorporated under the provisions of the Corporation
Code of the Philippines. It engages its business in the Philippines. What is the
classification of the corporation under the Corporation Code?
A. Resident corporation
B. Foreign corporation
C. Non-resident corporation
D. Domestic corporation

13. Which of the following types of corporations is not required to file articles of
incorporation to obtain juridical personality as a private corporation?
A. Corporation by prescription
B. De facto corporation
C. Ostensible corporation
D. De jure corporation

14. It refers to a group of persons that assumes to act as a corporation knowing it to be

without authority to do so, and enters into a transaction with a third person on the
strength of such appearance. It has no juridical personality but the persons
composing it will be liable like general partners, meaning prorata and subsidiarily,
to third persons.
A. De jure corporation
B. Corporation be prescription
C. Ostensible corporation or corporation by estoppel
D. Open corporation

15. Which of the following statements refers to a holding company or parent corporation?
A. It is a corporation which controls another as a subsidiary by the power to
elect management. It is the one that holds stocks in other companies for
purposes of control rather than for mere investment.
B. It is a company which is subject to a common control of a mother or holding
company and operated as party of a system or a corporation that is directly
or indirectly, through one or more intermediaries, is controlled or is under
the common control of another corporation.
C. It is a corporation which is being controlled by the parent corporation.
D. It is a corporation which is being influenced by the investor.
E. dividends and no more.

16. If the preferred shares are classified as cumulative and participating as to

dividends, when do the preferred stockholders become entitled to the cumulative
and participating dividends?
A. When the corporation recognizes net profit.
B. When the corporation has credit balance in unrestricted retaining earnings.
C. When the corporation’s total assets exceed total liabilities.
D. When there is declaration of dividends by board of directors.

17. Under the Corporation Code, what is the requirement for the issuance of preferred
shares?
A. Preferred shares of stock may be issued only with a stated par value.
B. Preferred shares of stock may be issued either with par or stated value.
C. Preferred shares of stock may be issued only with a stated value.
D. Preferred shares of stock may be issued only with discounted value.

18. What shares may be classified as No-Par value shares of stocks?

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

19. Which of the following statements concerning no-par value shares is false?
A. The entire consideration received by the corporation for its no-par value

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 shares shall be treated as legal capital and shall not be available for
distribution as dividends.
B. The articles of incorporation must state the fact that it issued no par value
shares as well as the number of said shares.
C. Shares of capital stock issued without par value shall be deemed fully paid
and non assessable and the holder of such shares shall not be liable to the
corporation or to its creditors in respect thereto.
D. No-par value shares can be issued by any type of corporation.

20. Which is correct as regards to legal capital of par-value shares of stocks and no-par
value shares of stocks?
A. In case of par-value shares of stocks, the legal capital is the total par
value of shares issued and subscribed.
B. In case of no par-value shares of stocks, the legal capital is the entire
consideration received.
C. Both A and B
D. Neither A nor B

21. These corporations are not allowed to issue no-par value common shares (under RA
11232), except
A. Buildings and Loans association
B. Insurance companies
C. Preneed company
D. Manufacturing, service, restaurant, real estate or merchandising companies

22. In the absence of provision in articles of incorporation and certificate of stock,

what is the presumption of law as to different shares of stocks?
A. Each type of share shall be equal in all respects to every other share.
B. Preferred shares are non-voting.
C. Common shares are non-voting.
D. Redeemable shares are non-voting.

23. Which of the following shares are allowed to be classified as shares without right to
vote or shares with limited voting rights in the articles of incorporation and stated
in the certificate of stock?
I. Redeemable shares II. Preferred shares III. Common shares
A. I only
B. I and III only
C. II and III only
D. I and II only

24. Where shall the denial of the stockholder’s right to vote be provided for such denial
to be valid?
A. By-laws of corporation
B. Articles of incorporation and certificate of stock
C. Minutes of meetings
D. Financial statements

25. The following are the fundamental corporate acts when stocks classified as without
voting or non-voting stocks or stocks with limited voting rights are still allowed to
vote or participate, except
A. Investments of corporate funds in another corporation or another
business purpose other than stated in the Articles of Incorporation as primary
and secondary purpose
B. Amendment of Articles of Incorporation for legitimate purposes including
but not limited to shortening or extending of corporate term.
C. Approval of Management Contract and/or Issuance of Stock Dividends
D. Sale, disposition, conveyance, pledge or mortgage of all or substantially all
of corporate property or assets

26. The following are the corporate acts when stocks classified as without voting or

Abu Jahhil L. Modiarat, CPA, MPA Business Laws and Regulations Page 4
 non- voting stocks or stocks with limited voting rights are not allowed to
participate, except
A. Granting compensation to directors
B. Ratification of disloyalty of a director or contract with self-dealing
director or contract between corporations with interlocking director
C. Election of Board of Directors
D. Merger and Consolidation of Corporations

27. If founder’s share classified as such in the Articles of Incorporation is given

exclusive right to vote and be voted in the election of the board of directors,
what is the maximum period or limit of that right?
A. 10 years from the approval of SEC
B. 5 years from the approval of SEC
C. 3 years from the approval of SEC
D. 2 years from the approval of SEC

28. It refers to a stock issued not in exchange for its equivalent value either in cash,
property, share, stock dividends, or services. It resulted to overstatement of assets,
overstatement of capital or understatement of liabilities of the corporation. The
issuance of this type of shares of stocks is considered violation of trust fund
doctrine.
A. Watered stock
B. Secret reserves
C. Par value shares
D. Over-issued stocks

29. It refers to a stock issued that resulted to understatement of assets,

understatement of capital or overstatement of liabilities of the corporation. An
entity might issue this stock for competitive reasons, to hide from other businesses
that it is in a better financial position than appears in its financial statements.
A. Watered stock
B. Secret reserves
C. Par value shares
D. Over-issued stocks

30. Which of the following statements refers to the authorized capital stock?
A. It refers to the amount fixed in the articles of incorporation that may be
subscribed and paid by the stockholders of the corporation.
B. It refers to the portion of the capital stock or total shares of stock issued
to subscribers or stockholders, whether fully paid or partially paid, except
treasury shares. It pertains to capital stock entitled to dividends or right to
vote.
C. It refers to the total amount of the capital that persons have agreed to take
and pay for, which need not necessarily be, and can be more than, the par
value of the shares.
D. It refers to the portion of the authorized capital stock which has been both
subscribed and paid.
E. It refers to the amount equal to the aggregate par value of total shares
issued and subscribed in case of par value shares or total consideration
received in case of no par value shares and it cannot be returned to
shareholders until dissolution.

31. It refers to the performance of conditions, acts, deeds, and writings by

incorporators, and the official acts, certification or records, which give the
corporation its existence.
A. Incorporation
B. Operation
C. Dissolution
D. Liquidation

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 32. Under the Revised Corporation Code, the following are the qualifications of
incorporators or founders of a private corporation, except
A. Any person, partnership, association or corporation, singly or jointly may
become incorporators but not more than fifteen (15) in number may become
incorporators.
B. Majority must be residents of the Philippines in case of corporate aggregate
and all must be of legal age.
C. In stock corporations, each must own or subscribe to at least one share,
while in nonstock corporations, members are not owners of shares of stocks,
and their membership depends on terms provided in the articles of
incorporation.
D. Compliance with the required minimum ownership of Filipino or maximum
ownership of foreigners in industries reserved to Filipinos as provided in the
Constitution or Foreign Investment Act or Special Laws
E. All incorporators must be Filipino citizens.

33. Which of the following statements concerning an incorporator is correct?

A. An incorporator remains to be an incorporator even if he will later on
cease to be a corporator or stockholder because being an incorporator is an
accomplished fact.
B. An incorporator is required to be a stockholder throughout the lifetime of the
corporation.
C. An incorporator is not required to be a stockholder or member at the time
ofincorporation.
D. An incorporator is not allowed to become a director of the corporation.

34. Under the Revised Corporation Code, what is the life of a private corporation?
A. It has maximum life of 50 years.
B. It has maximum life of 20 years.
C. It has maximum life of 30 years.
D. It has perpetual existence unless its articles of incorporation provides for a
specific term.

35. What is the period for renewal of term of a private corporation prior its term
expiration?
A. Within 3-year period
B. Within 1-year period
C. Within 2-year period
D. Within 5-year period

36. Under the Revised Corporation Code, may the corporation with a fixed term whose
term has expired file an application for revival of certificate of incorporation with
SEC?
A. No because the corporation is ipso facto dissolved by operation of law upon
failure to renew the term within the deadline.
B. Yes a corporation whose term has expired may apply with SEC for the revival
of its certificate of incorporation and subject to all of its duties, debts, and
liabilities existing prior to its revival.
C. No in the absence of court order.
D. Yes but only with the consent of the Congress of the Philippines.

37. What is the implied minimum authorized capital stock of an ordinary stock
corporation?
A. P50,000
B. P15,000
C. None
D. P200,000

38. ART Inc. has an authorized capital stock of P160,000. What is the minimum

Abu Jahhil L. Modiarat, CPA, MPA Business Laws and Regulations Page 6
 subscribed capital stock?
a. P20,000
b. P30,000
c. None
d. P25,000
39. TEN Inc. has authorized capital stock of P60,000 with actual subscription of
P40,000. What is the minimum paid up capital?
A. P10,000
B. P5,000
C. None
D. P2,500

40. ART Inc. has authorized capital stock of P100,000 but the actual subscription is not
given. What is the implied minimum paid up capital for the approval of its articles
of incorporation?
A. P20,000
B. P25,000
C. None
D. P40,000
41. The following matters shall generally be included in the articles of incorporation of
private corporations to be submitted to SEC, except
A. Number of directors or trustees
B. Names, nationalities and residences of the persons who shall act as
directors or trustees until the first regular directors or trustees are duly
elected and qualified
C. If stock corporation, the amount of authorized capital stock, number of
shares, par value or no par value shares, original subscribers, amount
subscribed and paid by each
D. Penalties for violation of by-laws

42. Under Revised Corporation Code, for primary registration with the Securities and
Exchange Commission, the following are the documents to be submitted by the
proponents for the creation of domestic stock corporation, except
A. Cover Sheet for Registration
B. Articles of Incorporation
C. By-Laws
D. Treasurer’s Affidavit showing the compliance with minimum subscription
and paid-up capital including the certificate of deposit and letter of
authority to examine bank deposit

43. Which is correct as to the form of articles of incorporation to be filed to SEC

under Revised Corporation Code?
A. Under Revised Corporation Code, the articles of incorporation may be
signed and acknowledged by all the incorporators.
B. Under Revised Corporation Code, the articles of incorporation may be
authenticated by all the incorporators.
C. Both A and B
D. Neither A nor B
44. Is Electronic Filing of articles of incorporation and applications for amendments
thereto with SEC allowed?
A. Yes
B. No
C. Never
D. Maybe

45. The purpose clause must specify the corporation’s primary purpose and which are
secondary which need not be related to the main purpose. The significance or

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 reasons of purpose clause in the articles of incorporation are as follows, except
A. It confers as well as limits the powers which a corporation may exercise.
B. It informs prospective investors and creditors of the kind of business the
corporation deals with.
C. It notifies the management of the limits of its actions.
D. It allows the corporation to engage in any type of business or transactions.

46. It refers to the document issued by appropriate government agencies as a permit to

a newly formed corporation to engage in a particular industry. It is issued in order
for those corporations to legally transact their business.
A. Certificate of incorporation or registration or primary franchise
B. Secondary license or secondary franchise
C. Articles of incorporation
D. By-Laws

47. What is required vote for fundamental amendment of the articles of incorporation?
A. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the vote or written assent of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or the
vote or written assent of at least two-thirds (2/3) of the members if it be a
non-stock corporation.
B. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the ratification of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock or the ratification of
at least two-thirds (2/3) of the members if it be a non-stock corporation.
C. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the vote or written assent of the stockholders
representing at least majority of the outstanding capital stock or the vote or
written assent of at least majority of the members if it be a non-stock
corporation.
D. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the ratification of the stockholders representing at
least majority of the outstanding capital stock or the ratification of at least
majority of the members if it be a non-stock corporation.

48. What is required vote for simple amendment of the articles of incorporation for
legitimate purposes?
A. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the vote or written assent of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or the
vote or written assent of at least two-thirds (2/3) of the members if it be a
non-stock corporation.
B. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the ratification of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock or the ratification of
at least two-thirds (2/3) of the members if it be a non-stock corporation.
C. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the vote or written assent of the stockholders
representing at least majority of the outstanding capital stock or the vote or
written assent of at least majority of the members if it be a non-stock
corporation.
D. At least majority vote of the board of directors/trustees provided in Articles
of Incorporation and the ratification of the stockholders representing at
least majority of the outstanding capital stock or the ratification of at least
majority of the members if it be a non-stock corporation.

49. When shall the amendments of the articles of incorporation take effect?
A. Upon approval by the SEC.
B. Upon lapse of six (6) months from the date of filing to the SEC if there is
no action by SEC for a cause not attributable to the corporation.
Abu Jahhil L. Modiarat, CPA, MPA Business Laws and Regulations Page 8
 C. Either A or B
D. Neither A nor B

50. The following are matters in articles of incorporation that are beyond amendment
because they are accomplished facts at the time of incorporation, except
A. Names of the incorporators, incorporating directors/trustees, original
subscribers and their subscribed and paid-up capital
B. The treasurer-in-trust elected by the original subscribers.
C. Members who contributed to the initial capital of a nonstock corporation.
D. Witnesses and the acknowledgement thereof
E. Purpose clause and name of corporation

51. As a general rule, who is the real party-in-interest entitled to question any
amendment in the articles of incorporation or by-laws?
A. Shareholder or member
B. Creditor
C. Any third person
D. Customer

52. The following are the grounds when articles of incorporation/or its amendment
may be rejected or disapproved by Securities and Exchange Commission, except
A. The treasurer’s affidavit concerning the amount of capital stock subscribed
and or paid is false.
B. The purpose of the corporation is patently illegal, immoral, unconstitutional
or contrary to government rules and regulations.
C. If a favorable recommendation of the appropriate government agency does
not accompany the submitted amendment by banks, banking and quasi-
banking institutions, building and loan associations, trust companies and
other financial intermediaries, insurance companies, public utilities,
educational institutions, and other corporations governed by special laws.
D. The amendment of the articles of incorporation was approved only by at
least majority of the board of directors/trustees and vote or written assent
by at least 2/3 of stockholders or members but the unanimous vote of
stockholders or members was not met.

53. The following corporate names are not allowed to be used by a proposed corporation,
except
A. Names that are identical or deceptively or confusingly similar to that of
any existing corporation or to any other name protected by law.
B. Names that are deceptive, confusing and contrary to law.
C. Names that are contrary to moral, good customs, public order or public policy.
D. Names similar to that of the founder.

54. Which of the following statements is correct under the Revised Corporation Code?
A. A person or group of persons may ask SEC for verification of intended
corporate name prior to submission of Articles of Incorporation and By-laws
and after SEC’s verification, ask for reservation of corporate name.
B. The corporation shall be required to make an undertaking to change the
name of corporation immediately upon receipt of notice from SEC that
another corporation, partnership or person has acquired a prior right to the
use of such name.
C. The SEC has the power to summarily order the corporation to immediately
cease and desist from using name that (1) is not distinguishable, (2) is
already protected by law, or (3) contrary to law, rules and regulations.
D. All of the above.

55. When a change in the corporate name is approved, the SEC shall issue an amended
certificate of incorporation under the amended name. What is the effect of the
mere change of the corporate name approved by SEC?
A. It will result to dissolution of the previous corporation.
B. It results to the creation of a new corporation.

Abu Jahhil L. Modiarat, CPA, MPA Business Laws and Regulations Page 9
 C. It has no effect on the identity of the corporation, or on its property, rights or
liabilities.
D. It will extinguish all the liabilities of the said corporation.
56. When does a private corporation formed under the Corporation Code obtain its
corporate existence or juridical personality?
A. From the date of consent of the incorporators to the articles of incorporation.
B. From the date of submission of the articles of incorporation to the SEC.
C. From the date of submission of the by-laws to the SEC.
D. From the date of issuance by the SEC of the certificate of incorporation
under SEC’s official seal.

57. When does a public corporation obtain its corporate existence or juridical personality?
A. From the date of the effectivity of the law creating such public
corporation or the date stated in the said law for obtaining juridical
personality.
B. From the date of the signature of the president of the said law.
C. From the date of debates of Congress.
D. From the date of the passage of the bill by the Congress into law.

58. The following are the conditions non-compliance of which will prevent the legal
existence of a corporation, except
A. Filing of the articles of incorporation with the SEC or issuance of the
certificate of incorporation by the SEC.
B. The minimum number of 5 incorporators required by the Corporation Code
C. The legal requirements that 25% of the authorized capital stock must be
subscribed and 25% thereof paid.
D. Filing of the by-laws with the SEC

59. It refers to a corporation which actually exists both in fact and in law. It has
complied with all the requirements of law and therefore its juridical personality is
not subject to the direct attack by the state through quo warranto proceedings.
A. De jure corporation
B. Corporation by estoppel or ostensible corporaton
C. De facto corporation
D. Corporation by prescription

60. What is the status of contracts entered into by a de facto corporation?

A. Null and void and may be attacked by pointing the technical defects of
the de facto corporation.
B. Voidable on the part of the other party.
C. Unenforceable against the corporation.
D. Valid and binding to protect members of the public who deal in good
faith with a corporation who seems to be properly authorized.

61. Who has the legal standing to attack the juridical personality of a private corporation?
A. The state through Solicitor General
B. Competing corporation
C. Stockholders of private corporation
D. Creditors of private corporation

62. How may the right to exercise corporate powers or the corporate existence of
a De Facto Corporation be attacked?
A. Directly only by state through Solicitor General in Quo Warranto Proceedings
B. Only directly by creditors in a civil case
C. Only directly by Fiscal in a criminal case
D. Either directly or collaterally in a private suit to which such corporation may
be a party

63. Which of the following instances may result to a defacto corporation?

I. Absence of Certificate of Registration
II. Absence of or Failure file Articles of Incorporation

Abu Jahhil L. Modiarat, CPA, MPA Business Laws and Regulations Page 10
 III. Absence of or Failure to file Corporate By-Laws
IV. The percentage of Filipino ownership of the capital stock required for the
business is less than what is prescribed by law but the Certificate of Registration
has already been issued by SEC.
V. The Articles of Incorporation fails to state all the matters required by the Code or
defect in the execution of papers or acknowledgement but the Certificate of
Registration has already been issued by SEC.
VI. The name of the corporation closely resembles that of a pre-existing
corporation that it will tend to deceive the public but the Certificate of
Registration has already been issued by SEC.
VII. Majority of the incorporators are not residents of the Philippines but the
Certificate of Registration has already been issued by SEC.
A. IV, V, VI and VII
B. IV and V
C. I, II, III, VI, and VII
D. I, II, III and IV

64. What is the nature of liability of officers and directors of corporation by

estoppel also known as ostensible corporation to the contracts they entered into in
behalf of such entity?
A. They are liable only up to the extent of their subscription even they acted in
bad faith.
B. They are liable only up to the extent of their subscription unless they acted in
bad faith.
C. They are not liable.
D. They are liable like general partners meaning prorata and subsidiarilly.

65. In case of contract entered into by an ostensible corporation or corporation by

estoppel, which is correct?
A. When such ostensible corporation is sued on any transaction entered by it as
a corporation or on any tort committed by it as such, it shall not be allowed
to use as defense its lack of corporate personality.
B. When persons entered into a contract or obligation with ostensible
corporation as such, such persons cannot resist performance of the
obligation on the ground that there was in fact no corporation.
C. Both A and B.
D. Neither A nor B.
66. What is the mandatory period for a newly formed corporation to formally organize
and to commence business transaction from the date of its incorporation to prevent
automatic dissolution of the corporation?
A. 5 years
B. 6 years
C. 4 years
D. 2 years

67. What is the effect if a corporation does not formally organize and commence the
transaction of its business or the construction of its works within five (5) years
from the date of its incorporation or issuance of certificate of registration by SEC
under SEC’s official seal for causes within the corporation’s control?
A. The corporation is ipso facto dissolved by operation of law.
B. That shall be a non-automatic ground for suspension or revocation of
corporate charter or corporate dissolution making such entity a de facto
corporation.
C. The corporation is considered de facto corporation.
D. The corporation shall be criminally liable.

68. What is the effect if a corporation has commenced the transaction of its business
within five (5) years from the date of its incorporation but subsequently becomes
continuously inoperative for a period of at least five (5) years?
A. The corporation is ipso facto dissolved by operation of law.
B. That shall be a non-automatic ground for suspension or revocation of
corporate charter or corporate dissolution making such entity a de facto

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 corporation.
C. The corporation is considered an ostensible corporation.
D. The corporation shall be criminally liable.

69. Under the Revised Corporation Code, it refers to a corporation that becomes
continuously inoperative for a period of at least five (5) years after its formal
organization within the period provided by law.
A. Delinquent corporation
B. Deficient corporation
C. Delayed corporation
D. Defaulting corporation

70. Under the Revised Corporation Code, what is the period allowed by law to a
delinquent corporation to resume its operation from the notice given by SEC in
order for SEC to lift the delinquency status of such delinquent corporation?
A. Within 2 years
B. Within 1 year
C. Within 3 years
D. Within 5 years

71. Under Revised Corporate Code, the following are the qualifications of directors of a
stock corporation, except
A. He must own at least one share of the capital stock of the corporation.
B. He must be of legal age.
C. Majority must be residents of the Philippines.
D. They must be not more than 15 directors.
E. Compliance with the required minimum ownership of Filipino or maximum
ownership of foreigners in industries reserved to Filipinos
F. He must be an incorporator of the corporation.

72. Under Revised Corporation Code, he refers to a person who, apart from
shareholdings and fees received from the corporation, is independent of
management and free from any business or other relationship which could, or could
reasonably be perceived to materially interfere with the exercise of independent
judgment in carrying out the responsibilities as a director.
A. Independent director
B. Provisional director
C. Disloyal director
D. Rehabilitation receiver

73. Under Revised Corporation Code, what is minimum number of Independent

Directors in corporations vested with public interest?
A. At least 20% of the directors
B. At least 10% of the directors
C. At least 25% of the directors
D. At least 1/3 of the directors

74. Under Revised Corporation Code, the following are the corporations vested with
public interest that are required to have independent directors in its Board of
Directors, except
A. Corporations covered by Section 17.2 of “Securities Regulation Code”
namely those whose securities are registered with SEC, corporations listed
with an exchange (PSE) or with assets of at least P50,000,000 and having
200 or more shareholders, each holding at least 100 shares of a class of its
equity shares.
B. Banks and quasi-banks, nonstock savings and loan associations, pawnshops,
corporations engaged in money service business, preneed, trust and
insurance companies, and other financial intermediaries
C. Other corporations engaged in business vested with public interest similar to
the above, as may be determined by the SEC, after taking into account
relevant factors which are germane to the objective and purpose of

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 requiring the election of an independent director, such as the extent of
minority ownership, type of financial products, or securities issued or
offered to investors, public interest involved in the nature of business
operations, and other analogous factors.
D. Closely-held corporation or family-owned corporation or One Person
Corporation (OPC).

75. May the articles of incorporation and corporate by-laws provide for additional
qualifications as a director in addition to the qualifications stated by BP 68?
A. No because it violates the provision of Corporate Code
B. Yes even if it is violative of the provision of Corporate Code
C. Yes provided the additional qualifications are reasonable and not contrary
to Corporation Code
D. Never.

76. Which of the following may become a director of a corporation?

A. Creditor of the corporation
B. Resident Filipino Minor stockholder
C. Nonresident Foreign stockholder
D. Nonresident Filipino Insane stockholder

77. Which of the following statements is incorrect?

A. Incorporators are required to be stockholders only at the time of
incorporation but directors must be stockholders at the time of their term or
tenure.
B. Any provision in the by-laws giving a stockholder a permanent seat in
the Board of Directors is null and void.
C. Any provision in the by-laws authorizing the board of director to remove a
director Is Null and void.
D. Any provision requiring a guaranteed sit to a president of a foundation
even without election in the board of trustees of a nonstock corporation is
valid.

78. What is the maximum term of office of directors of a stock corporation?

A. Term of two years but he may continue to serve until their successors are
elected and qualified.
B. Term of three years but he may continue to serve until their successors are
elected and qualified.
C. Term of one year but he may continue to serve until their successors are
elected and qualified.
D. Term of four years but he may continue to serve until their successors are
elected and qualified.

79. Which of the following statements concerning number of directors/trustees of a

corporation is true?
A. In a stock corporation, it must not be less than five nor more than fifteen.
B. In ordinary non-stock corporation, the board of trustees must be at least 5
but may be more than 15 in number.
C. Trustees of nonstock educational corporation shall be 5 or 10 or 15.
D. In a corporation sole, the number of directors is at least 5.

80. What is the quorum or required number of present stockholders for validity of
election of board of directors in a stock corporation?
A. Owners of at least majority of the outstanding capital stock allowed to vote.
B. Owners of at least majority of the outstanding capital stock.
C. Owners of at least 100% of the outstanding capital stock.
D. Owners of at least 25% of the outstanding capital stock.

81. It is defined as a method of concentrating votes devised to give sufficient

opportunity to minority shareholders to secure representation in the board. It is

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 the manner of voting required by the Corporation Code for election of board of
directors in a stock corporation.
A. Straight voting
B. Cumulative voting
C. Participative voting
D. Simple voting

82. It is defined as method of voting wherein a member can only cast one vote per
share for each director.
A. Straight voting
B. Cumulative voting for one candidate
C. Cumulative voting by distribution
D. Members of non-stock corporations may cast as many votes as there are
trustees elected but may cast not more than one vote for one candidate.

83. It is the manner of voting for election of board of trustees in a non-stock

corporation.
A. Straight voting
B. Cumulative voting for one candidate
C. Cumulative voting by distribution
D. Members of non-stock corporations may cast as many votes as there are
trustees elected but may cast not more than one vote for one candidate.

84. Which of the following statements concerning the election of

directors/trustees is false?
A. The election must be by ballot if requested by any voting member or
stockholder.
B. The candidates receiving the higher number of votes shall be declared
elected and a majority vote is not necessary as long as there is a quorum
during the election.
C. Delinquent stocks may be voted.
D. At any meeting of stockholder or members called for the election of
directors or trustees, there must be present either in person or by
representative authorized to act by written proxy, the owners of a majority
of the outstanding capital stock or majority of members entitled to vote.

85. What is the effect if the election of Board of Directors does not result to
completely elected directors?
A. The election is void.
B. The election would still be valid and the directors, though incomplete, can
still perform their functions provided that a quorum remains.
C. The corporation shall be deemed dissolved.
D. That will be a ground for automatic dissolution.

86. If a stockholders’ meeting was called but the directors were not elected during
the meeting, the meeting can be
A. Adjourned to a definite day only
B. Adjourned sine die or indefinitely only
C. Either A or B.
D. Neither A nor B.
87. Under the Revised Corporation Code, what is the period for reporting to SEC of
non- holding of elections of directors/trustees and the reasons therefore?
A. within 30 days from the date of the scheduled election
B. within 20 days from the date of the scheduled election
C. within 10 days from the date of the scheduled election
D. within 40 days from the date of the scheduled election

88. Under the Revised Corporation Code, what are the duties to be performed by
the directors or trustees?
A. Duties prescribed by law
B. Duties prescribed by rules of good governance
C. Duties prescribed by the by-laws of the corporation
D. All of them

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 89. Which of the following is allowed concurrent positions to a single person?
A. President and Secretary
B. President and Treasurer
C. Secretary and Treasurer
D. None of the above

90. What is the period for reporting the names, nationalities and residences of
directors, trustees and officers elected to the SEC by the corporate secretary or any
other officer?
A. Within 30 days after the election
B. Within 20 days after the election
C. Within 10 days after the election
D. Within 40 days after the election

91. Under Revised Corporation Code, when may the vacancy in the board be filled up
by the unanimous vote of the remaining directors or trustees who do not
constitute a quorum to form an emergency board?
A. When emergency action is required to prevent grave, substantial, and
irreparable loss or damage to the corporation.
B. When the remaining directors/trustees do not constitute a quorum.
C. When the remaining directors/trustees constitutes a quorum.
D. When the Board of Directors/Trustees can easily call an election.

92. What is the compensation of the directors of corporation, in such capacity?

A. They are not entitled to any form of compensation.
B. They are allowed a huge amount of compensation.
C. They are not entitled to receive any compensation except (1) for reasonable
per diems or
(2) unless the compensation is fixed by by-laws or when granted by the
vote of stockholders.
D. They are entitled to receive the compensation of the president.

93. If the interlocking director’s interest in one corporation is substantial (more than
20% of outstanding capital stock) and his interest in the other corporation is
merely nominal (20% or less of outstanding capital stock), then all the requisites for
contracts with self-dealing directors must all be present to be perfectly valid. If
either of the first two first requires are absent, the contract can by ratified by how
many vote?
A. Owners of at least majority of the outstanding capital stock.
B. Owners of at least 2/3 of the outstanding capital stock in the
corporation where the interlocking director has nominal interest.
C. At least majority vote of the directors and at least 2/3 of the outstanding
capital stock.
D. At least majority vote of the directors and at least majority vote of the
outstanding capital stock
94. What is the status of ultra vires contracts entered by a corporation which are not
illegal per se but outside the primary and secondary purpose of the corporation?
A. Voidable on the part of the other party
B. Voidable on the part of the corporation
C. Unenforceable
D. Null and Void
95. In which document shall the denial of pre-emptive right of a stockholder be
stated for denial to be valid and binding?
A. Articles of incorporation
B. By-Laws
C. Either A or B
D. Neither A nor B

96. What is the required vote for validity of denial of pre-emptive right?
A. Approval by at least majority vote of the board of directors and ratification

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 by at least 2/3 of stockholders.
B. Approval by stockholders representing at least 2/3 of the outstanding capital
stock.
C. Approval by at least majority vote of the board of directors and
ratification by stockholders representing at least majority of the outstanding
capital stock.
D. Approval by at least majority vote of the board of directors.

97. When is pre-emptive right available?

I. To new issues of shares arising from any increase of capital stock
II. When the board decides to open them for subscription, to existing unsubscribed
portion of the authorized capital stock not previously offered to existing
stockholders
III. To disposition or reissuance of treasury shares

A. I only
B. II only
C. I and II only
D. I, II and III

98. What is the required vote for the sale, disposal, lease or encumbrance of all or
substantially all of corporate assets?
A. Approval by at least majority vote of the board of directors/trustees and
ratification by stockholders representing at least 2/3 of the outstanding
capital stock or at least 2/3 of members.
B. Approval by stockholders representing at least 2/3 of the outstanding capital
stock or members.
C. Approval by at least majority vote of the board of directors/trustees and
ratification by stockholders representing at least majority of the outstanding
capital stock or members.
D. Approval by majority vote of the board of directors/trustees.

99. Under Revised Corporation Code, what is the additional requirement for the
validity of sale, disposal, lease or encumbrance of all or substantially all of
corporate assets?
A. There must compliance with Philippine Competition Act or R.A. No.
10667 and other related laws.
B. There must be approval by Commissioner of Internal Revenue.
C. There must be approval by Commissioner of Customs.
D. There must be approval by Regional Trial Court.

100. Under Revised Corporation Code, what is the basis for computation to
determine whether the sale involves all or substantially all of the corporation’s
properties and assets of the corporation?
A. It must be computed based on its net asset value, as shown in its
latest financial statements.
B. It must be computed based on its total asset value, as shown in its
latest financial statements.
C. It must be computed based on its liability value, as shown in its latest
financial statements.
D. It must be computed based on its fair market value, as shown in its
latest financial statements.

*End of Examination*

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