corporation mcq sy 13-14 2nd sem

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    CORPORATIONS - MCQs SY 13-14 2ND

    SEMESTER

    1. A doctrine which states that a corporation, as an artificial being, owes its life to

    the state, its birth being purely dependent on the will of the state:

    a. theory of concession;

    b. enterprise theory;c. realist theory;

    d. symbol theory.

    2. Which of the following statements is correct?

    Statement A: The general or primary franchise of a corporation, that is, the

    right to exist as such, is vested in the individuals who compose the

    corporation.

    Statement B: The special or secondary franchise of a corporation is vested

    in a corporation.

    a. only A is correct;b. only B is correct;c. both are correct;d. both are incorrect.

    3. One of the attributes of a corporation is that it is an artificial being. It means

    that:

    a. it is a juridical person with a personality separate and apart from its

    individual members or stockholders;

    b. the stockholders or members composing the corporation are the

    corporation itself;

    c. it is in fact and in reality a person and may perform all actions that can

    be done by natural persons;

    d. all of the above.

    4. It is a legal consequence of theory of corporate fiction or entity:

    a. generally, a corporation may be made to answer for acts or liabilities of

    its stockholders or members;

    b. the property of the corporation is the property of its stockholders;

    c. it may bring civil and criminal actions in its own name and in behalf of

    its members;

    d. a corporation is a person within the meaning of due process and equalprotection clauses of the constitution.

    5. Citizenship is a status usually conferred on a natural person. However, acorporation may be deemed a citizen when:

    a. exercising its rights as a juridical person;

    b. citizenship is necessary to determine jurisdiction of courts;

    c. citizenship is an important factor in the determination of the legality of a

    contract entered into by the corporation;

    d. all of the above;

    e. none of the above.

    6. Under the Philippine jurisdiction, the corporate nationality of a corporation is

    determined by:

    a. control test;b. incorporation test;

    c.situstest;

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    d. all of the above;

    e. none of the above.

    7. A principle based on equitable considerations, which treats a corporation and

    individuals composing it or two corporations as identical and one:

    a. doctrine of piercing the veil of corporate entity;

    b. principle of disregarding the fiction of corporate entity;c. doctrine of corporate alter ego;

    d. all of the above;

    e. none of the above.

    8. The attribute that a corporation is created by law or by operation of law

    means that:

    a. a corporation can come into existence by mere agreement of the parties;

    b. creation of a corporation does not require a special grant from the State;

    c. corporations can only come into existence in the manner prescribed by

    the concerned government agencies;

    d. legislative authority is necessary for the creation of a corporation.9. It is a corporation created by special law in the interest of common good andsubject to the test of economic viability:

    a. foundation;

    b. government owned and controlled corporation;

    c. public corporation;

    d. private corporation;

    10. The corporations right of succession means that:

    a. it is subject to estate tax;

    b. the life of the corporation is unlimited;

    c. its continuous existence is not affected by death, withdrawal,

    insolvency, or incapacity of its members;

    d. it has a capacity of continuous existence except when the shares of

    stock are eventually owned by less than five (5) stockholders.

    11. A corporation commences to acquire juridical personality from:

    a. the moment of execution of articles of corporation;

    b. the filing of the articles of incorporation with the SEC;

    c. the recording of the articles by the SEC;

    d. the date of the issuance of the certificate of incorporation by the SEC.

    12. What is required for a corporation to continue its corporate existence?

    a. adoption and submission of by-laws with the SEC;

    b. election of officers;c. formal organization and commencement of the transaction of its

    business or theconstruction of its works;

    d. holding of meetings.

    13. A corporation, as distinguished from a partnership;

    a. may be organized by mere agreement of the parties;

    b. may exercise any power authorized by its members provided it is not

    contrary to law, morals, good customs, public order, or public

    policy;

    c. may be dissolved with the consent or through the action of the State;

    d. may be established for any period of time agreed upon by the members.14. A similarity between a corporation and a partnership:

    a. they may be established for any period of time stipulated by their

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    members;

    b. they can be organized only where there is a law authorizing their

    organization;

    c. their members can personally sue the one managing for

    mismanagement;

    d. they may exercise any power authorized by members provided it is notcontrary to law, morals, good custom, public order or public

    policy.

    15. An advantage that may be obtained by doing business in a corporate form:

    a. centralized management;

    b. separation of management from ownership;

    c. no double taxation;

    d. less government restrictions, controls and report requirements.

    16. It is one which actually exists for all practical purposes as a corporation but

    which has no legal right to corporate existence as against the state:

    a. de facto corporation;b. de jure corporation;

    c. ostensible corporation;

    d. domestic corporation.

    17. All persons who assume to act as a corporation knowing it to be without

    authority to do so shall be liable as:

    a. corporation by estoppel;

    b. general partners;

    c. solidary debtors;

    d. joint obligors.

    18. Quasi-public corporations refer to:

    a. corporations formed for the government of a portion of the State for the

    general welfare;

    b. those organized by the government or which the government is the

    majority shareholder;

    c. those formed for some private purpose, benefit or end;

    d. private corporations with franchise or contract involving the

    performance of public duties.

    19. Ecclesiastical corporation means:

    a. one organized for religious purposes;

    b. one formed for charitable purposes;

    c. one established for profit;d. one organized for a purpose other than for religious.

    20. A corporation related to another corporation that has the power to control the

    management of the latter:

    a. quasi-corporation;

    b. close corporation;

    c. holding corporation;

    d. subsidiary corporation.

    21. A corporation regularly created in compliance with all legal requirements:

    a. de jurecorporation;

    b. de factocorporation;c. corporation by estoppel;

    d. corporation by prescription.

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    22. Private corporation, as distinguished from public corporation:

    a. is an instrumentality of the State ;

    b. may be created without the consent of the members who compose it;

    c. is subject to dissolution by the Congress;

    d. includes government owned and controlled corporations.

    23. A contract for the acquisition of unissued stock in an existing corporation, or acorporation still to be formed:

    a. pooling agreement;

    b. subscription agreement;

    c. deed of assignment;

    d. promoters contract.

    24. A person who assist in and brings about the incorporation and organization of

    a corporation:

    a. stockholder;

    b. promoter;

    c. incorporator;d. organizer.

    25. The following are qualifications of directors in a stock corporation, except:

    a. every director must own at least one (1) share of the capital stock;

    b. at least two of the directors must be residents of the Philippines;

    c. the share of stock held by the director must be recorded in the stock and

    transfer book;

    d. every director must continuously own at least a share of stock during his

    term.

    26. Statement 1: A corporation cannot be an incorporator.

    Statement 2: A corporation may subscribe for shares of stock in another

    corporation.

    a. only statement 1 is correct;b. only statement 2 is correct;c. both statements are correct;d. both statements are incorrect.

    27. Corporators are:

    a. shareholders;

    b. trustees and directors;

    c. subscribers, promoters or entrepreneurs and members;

    d. incorporators, stockholders, or members.

    28. Statement 1: An incorporator must be a resident of the Philippines.Statement 2: An incorporator need not subscribe to the capital stock.

    a. only statement 1 is correct;b. only statement 2 is correct;c. both statements are correct;d. both statements are incorrect.

    29. A corporation may be organized either as a stock of non-stock but this entity

    can only be organized as a stock corporation:

    a. educational corporations;

    b. religious corporations;

    c. banks;d. trading corporations.

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    30. It governs the relationship between and among the stockholders or members:

    a. articles of incorporation;

    b. by-laws;

    c. voting trust agreement;

    d. proxy agreement.31. The articles of incorporation shall be disapproved by the SEC when:

    a. the articles are not in prescribed form;

    b. the purpose is unconstitutional, illegal or immoral;

    c. there is no favorable recommendation of the appropriate agency for

    corporations requiring secondary licenses;

    d. all of the above.

    32. Importance of a purpose clause in the articles of incorporation;

    a. imposes implied limitations on authority of the board of

    directors/trustees by exclusion of the lines of activity which are not

    covered;b. authorizes the board of directors/trustees to enter into all kinds of

    contracts;

    c. determines the dealings that are relevant to the stockholders;

    d. none of the above.

    33. What is the nature of a share of stock?

    a. it confers immediate title to the properties of the corporation;

    b. it represents a distinct undivided interest in the common property of the

    corporation;

    c. the shares are personal property of the corporation;

    d. the share of stock constitutes an indebtedness of the corporation to the

    stockholder.

    34. A share of stock issued to organizers and promoters, which are given special

    privileges over other shares:

    a. common share;

    b. preferred share;

    c. promotion share;

    d. founders share.

    35. A corporation which may issue a no-par value share:

    a. stock corporation;

    b. non-stock corporation;

    c. banks and trust companies;d. insurance companies and building and loan associations.

    36. A share of stock which entitles its holder to receive the stipulated dividends

    only:

    a. participating preferred share;

    b. non-participating preferred share;

    c. convertible share;

    d. cumulative preferred share.

    37. A prohibited consideration for the issuance of shares of stocks:

    a. previously incurred indebtedness;

    b. stock dividends;c. patents or copyrights;

    d. future services.

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    38. The issuance of a watered stock is not permitted in order to protect subscribers

    and creditors, which of the following is not covered by the prohibition?

    a. treasury shares;

    b. bonus shares;

    c. discount shares;

    d. stock dividends issued without retained earnings;39. Where the articles of incorporation provide for non-voting shares, the holders

    of such shares shall nevertheless be entitled to vote on the following matters,

    except:

    a. amendment of the articles of incorporation and of by-laws;

    b. sale, lease, exchange, mortgage, pledge or other disposition of all or

    substantially all of the corporate property;

    c. incurring, creating, or increasing bonded indebtedness, or increasing

    or decreasing capital stock;

    d. declaration of stock dividends.

    40. What is the minimum paid up capital of a corporation?a. P5,000.00;

    b. at least 25% of the subscribed capital stock;

    c. at least 25% of the authorized capital stock has been subscribed and that

    at least 25% of said subscribed capital stock has been paid;

    d. 25% of the authorized capital stock.41. Issued or outstanding capital stock is synonymous with:

    a. capital;

    b. capital stock;

    c. authorized capital stock;

    d. subscribed capital stock.

    42. It is an aggregate issued value of all outstanding capital stock that sets the

    minimum limit of actual corporation assets that must be retained for the payment

    of corporate debts:

    a. legal or stated capital;

    b. capital stock;

    c. capital;

    d. retained earnings.

    43. A portion of the capital stock that does not vote and draws no dividends:

    a. authorized capital stock;

    b. subscribed capital stock;

    c. paid-up capital stock;d. unissued or unsubscribed capital stock.

    44. A certificate of stock is the evidence of a holders interest and status in a

    corporation, which of the following statements is not correct?

    a. one may not own shares of corporate stock without possessing a stock

    certificate;

    b. a certificate expresses the contract between the corporation and the

    stockholder;

    c. certificates are quasi-negotiable in nature;

    d. no certificate of stock shall be issued to a subscriber until the full

    amount of his subscription has been paid.45. What is the legal consequence when there is over issuance of shares in excess

    of the authorized capital stock?

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    a. both the increase in capital stock and the certificates issued are void;

    b. the over issuance is subject to ratification by the stockholders by

    increasing the authorized capital stock through the amendment of

    the articles of incorporation;

    c. the over issuance is voidable but the certificates issued are void;

    d. both the increase in capital stock and the certificates are valid aslong as they were approved by majority of the stockholders.

    46. It is a privilege granted to a party to subscribe to a certain portion of the

    unissued capital stock of a corporation within a certain period and under the terms

    and conditions of the grant exercisable by the grantee at any time within the

    period granted:

    a. stock subscription;

    b. stock option;

    c. stock split;

    d. stock dividend.

    47. A stock split, as distinguished from stock dividend:a. converts profits into permanent account;

    b. alters the amount of the capital;

    c. increases the number of shares without change in the capital;

    d. postpones realization of profits of the stockholder.

    48. At the option of the corporation, its contract with one or more of its directors

    or trustees or officers is:

    a. generally voidable;

    b. generally valid;

    c. generally rescissible;

    d. unenforceable.

    49. Contracts between two or more corporations having interlocking directors are:

    a. generally voidable;

    b. generally valid;

    c. generally rescissible;

    d. unenforceable.

    50. Doctrine of business or corporate opportunity:

    a. prohibits the corporation from engaging in business not included in its

    primary purpose;

    b. refers to the principle that no director or officer shall place his personal

    interest over and above the interest of the corporation;

    c. means that related corporations may be allowed to engage in relatedbusinesses as long as there is no monopoly;

    d. pertains to right of creditors to sue directors or officers who took

    advantage of the business opportunity belonging to the

    corporation.

    51. Doctrine of limited capacity means that:

    a. the corporation has limited power to invest in other corporations;

    b. it has only such powers as are expressly and impliedly granted, and

    incidental to its existence;

    c. it may perform only those acts provided by its by-laws;

    d. it is subject to limitation that the exercise of its power must not becontrary tolaw, morals, good customs, public order, and public

    policy.

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    52. Trust fund doctrine holds that the assets of the corporation are trust funds to

    be maintained unimpaired, for whose benefit is the trust fund?

    a. stockholders;b. creditors;c. corporation;d. all of the above.

    53. Trust fund doctrine forbids the corporation from distributing its assets to

    stockholders without provision being first made for the payment of corporate

    debts, what is the effect of such disposition of assets?

    a. the disposition is unenforceable;

    b. the disposition is void;

    c. the disposition is voidable;

    d. the disposition is subject to resolution or rescission.

    54. Cash dividend, as distinguished to stock dividend:

    a. diminishes the asset of the corporation;

    b. needs concurrence of the stockholders;c. increases the capital of the corporation;

    d. may be reached by corporate creditors.

    55. A certificate issued to shareholders in lieu of a dividend, entitling them to

    money, stock, bonds, land or other benefits at some future time:

    a. bonds dividends;

    b. script dividends;

    c. property dividends;

    d. liquidating dividends.

    56. It is the amount that would be paid on each share to retiring stockholders or in

    the event the company is liquidated:

    a. fair market value;

    b. appraised value

    c. book value;

    d. liquidation value.

    57. A corporation the sole purpose of which is to invest its capital in a specific

    property and thereafter to consume that property or extract its value for profit:

    a. sole corporation;

    b. wasting assets corporation;

    c. close corporation;

    d. joint venture.

    58. Stock corporations are prohibited from retaining surplus profits in excess of100% of their paid-in capital stock, except:

    a. it is justified by a definite expansion projects approved by the board;

    b. declaration of dividends is barred under a loan agreement;

    c. special reserve is needed for probable contingencies;

    d. all of the above.

    59. The power to sue is one of the expressed powers of the corporation, it is

    lodged with the:

    a. stockholders;

    b. president of the corporation;

    c. board of directors;d. executive committee.

    60. What is the nature of the powers of the board of directors or trustees?

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    a. the powers are original and undelegated;

    b. they are conferred and can be revoked by the stockholders;

    c. they are subject to the maxim delegate potestas non potest delegare;

    d. acts of ownership.

    61. The following are classes of corporate powers, except:

    a. those expressly granted or authorized by law;b. those that are implied or necessary to the exercise of the express or

    incidental powers;

    c. those incidental to corporations existence;

    d. those that may be useful to its business

    62. Incidental powers of the corporation are those that attach to a corporation at

    the moment of its creation, which of the following is not incidental?

    a. power to have a corporate seal;

    b. power to adopt and amend its by-laws;

    c. power to merge or consolidate;

    d. power to sue and be sued;e. power to invest corporate funds for any other purpose other than the

    primary purpose.

    63. The following are limitations to the exercise of power of a corporation to enter

    into management contract, except:

    a. the contract must be approved by the board of directors and ratified by

    stockholders of both corporations;

    b. the period of the contract must not be longer than five years for any one

    term;

    c. the contract must always be subject to the power of the board;

    d. the articles of incorporation of the managed corporation must be

    amended.

    64. Forever Earning Corp. (FEC), through its board of directors, sold its goodwill

    to Lasting Profit, Inc. (LPI). The goodwill constitutes substantially all of FECs

    property and assets. However, despite the sale of its goodwill, FEC continues to

    do its business and earns profit therefrom. Mr. Luser, a minority stockholder of

    FEC, questions the sale of goodwill alleging that the sale must be authorized by

    the vote of its stockholders representing at least 2/3 of the outstanding capital

    stock. Is Mr. Luser correct?

    a. Yes, although FEC may sell or otherwise dispose all or substantially all

    of its property and assets, including its goodwill, the sale or

    disposition must be authorized by the stockholders;b. Yes, FECs sale of its goodwill is ultra vires;

    c. No, FEC can still continue the business for which it was organized;

    d. No, Mr. Luser has no right to question the action of the board.

    65. The legal effect of merger or consolidation:

    a. liquidation of the enterprise of the selling corporation;

    b. the acquiring corporation assumes only those obligations set forth in the

    agreement;

    c. the constituent corporations are not necessarily dissolved;

    d. there is automatic assumption of the liabilities of the absorbed or

    dissolved corporations.

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    66. Appraisal right of a stockholder refers to his right to demand payment of the

    fair value of his shares after dissenting from a corporate action, in what case this

    right is not applicable?

    a. merger or consolidation;

    b. sale, conveyance, mortgage, or other disposition of all or substantially

    all of the corporate properties and assets;c. amendment of the articles of incorporation or by-laws;

    d. investing funds in another corporation or business for any purpose other

    than its primary purpose.

    67. The following are limitations to the appraisal right of a stockholder, except:

    a. the dissenting stockholder must have fully paid his subscription;

    b. the dissenting stockholder must have voted against the proposed

    corporate action;

    c. there must be a written demand on the corporation for payment of his

    shares;

    d. payment of the shares must be made only out of the unrestrictedretained earnings of the corporation.

    68. A stockholder has a pre-emptive right which a corporation may deny, what is

    the purpose of a pre-emptive right?

    a. to protect from impairment and dilution the basic rights of a stockholder

    in the corporation;

    b. to protect the investors from mismanagement by the board of directors;

    c. to prevent dissipation of corporate assets;

    d. to prevent discrimination among stockholders and creditors of a

    corporation.

    69. Right of pre-emption is given to a stockholder:

    a. as an option of the stockholder to subscribe to a new allotment of shares

    whenever the capital stock of a corporation is increased or new

    shares of stock are issued;

    b. to safeguard the right of stockholders to preserve their proportionate

    corporate interests;

    c. to compensate the stockholders for the risk in investing their money;

    d. all of the above.

    70. The extent of a stockholders rightof inspection of corporate books:

    a. the stockholder may be allowed to take books from the office of the

    corporation;

    b. the corporation has the duty to supply any stockholder, upon hisrequest, with a list of its stockholders showing their respective

    subscriptions;

    c. the right extends to subsidiaries of a parent corporation domiciled and

    with its books and records in another jurisdiction;

    d. the right includes the right to make copies, abstracts and memoranda of

    the contents of the books, records or any document by his

    representative either with or without his attendance.

    71. Basis of right of a stockholder to inspect records of a corporation:

    a. stockholders beneficial interest through ownership of shares and the

    necessity of self protection;b. trust fund doctrine;

    c. doctrine of limited capacity;

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    d. stockholders right to participate in the management of the corporation.

    72. Which of the following must be presented to the stockholders or members at

    their regular meeting?

    a. books and records;b. minutes of all meetings;c. stock and transfer book;d. financial reports.

    73. Cumulative voting by distribution for directors in stock corporations

    means:

    a. every stockholder may vote such number of shares for as many persons

    as there are directors;

    b. a stockholder may give one candidate as many votes as the number of

    directors to be elected multiplied by the number of his shares shall

    equal;

    c. a corporator may cumulate his shares by multiplying the number of

    sharesby the number of directors to be elected and allocate thesame among as many candidates as he shall see fit.

    d. corporators may cast as many votes as there are directors to be elected.

    74. In the election of directors by cumulative voting, if a stockholder owns 500

    shares of stock and there are seven (7) directors to be elected, how many votes is

    he entitled?

    a. 500;

    b. 3,500;

    c. 7;

    d. 1.

    75. Intra vires means:

    a. not within the express, implied and incidental powers of a corporation;

    b. beyond the purpose of a corporation;

    c. within the legitimate powers of a corporation;

    d. it can be enforced by ratification.

    76. A derivative suit is a judicial action to protect the interest of a corporation,

    who has the right to institute the suit?

    a. a creditor for the benefit of the corporation;

    b. any stockholder of record in the name and behalf of the corporation;

    c. the majority stockholder in behalf of the corporation;

    d. the board of directors.

    77. A call is an official declaration by the corporation and it pertains to:a. a demand requiring the payment of all or a certain prescribed portion of

    a subscribers stock subscription;

    b. a levy made upon the stock of a corporation;

    c. a process to remind stockholders to fulfill their obligations to the

    corporation;

    d. a remedy to address the corporations deficit.

    78. When does a stock become delinquent?

    a. upon failure to pay the unpaid subscription within 30 days from the date

    specified in subscription contract;

    b. upon failure to pay the unpaid subscription from the date stated in thecall;

    c. upon sale of the shares of stock to third party without paying in full the

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    subscription;

    d. a and b only;

    e. none of the above.

    79. Under this arrangement, the stockholder remains the beneficial or equitable

    owner of the shares, but legal ownership is transferred to another who will

    exercise his voting rights:a. pooling agreement;

    b. voting agreement;

    c. voting trust agreement;

    d. management contract.

    80. In voluntary dissolution of a corporation where no creditors are affected, a

    corporation is deemed dissolved only upon:

    a. approval of a resolution by the board of directors or trustees to dissolve

    the corporation;

    b. filing with the SEC of the resolutions of the board of directors and

    stockholders dissolving the corporation;c. issuance of the certificate of dissolution;

    c. publication of the SECs order approving the dissolution.

    81. A voluntary method of corporate dissolution:

    a. shortening of corporate term;

    b. legislative enactment;

    c. expiration of the term;

    d. by order of the SEC.

    True of False:

    a. The Roman Catholic Church even without registration with the SEC isconsidered a corporation by the State.

    b. A private corporation which is neither owned nor controlled by thegovernment may be created by special law.

    c. Authorized capital stock limits the number of shares that may beissued by a corporation.

    d. Non-voting shares are not allowed to vote on all matters affecting thecorporation.

    e. A meeting of stockholders or members is always required for theamendment of the articles of incorporation.

    f. A corporation may deny the pre-emptive right of its stockholders;g. Holders of delinquent stocks are not entitled to dividends.h. Merger is when two or more constituent corporations decide to

    amalgamate, as a result of which, a new corporation is born.

    i. A no par value share has always an issued value based on theconsideration for which it was issued.

    j. A no par valueshare may not be issued for less P5.00 per share;k. Redeemable shares may be issued only when expressly so provided in

    the articles of incorporation and upon expiration of the period fixed,

    they may be taken up or purchased, regardless of the existence of

    unrestricted retained earnings.

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    l. A corporation may purchase or acquire its own shares provided thatthe acquisition is for a legitimate purpose and that there be unrestricted

    retained earnings.

    m. Incorporators must be natural persons, not less than five but not morethan fifteen, all of legal age, and a majority of whom are residents of

    the Philippines.n. Redeemable or callable shares may be purchased or taken up by the

    corporation upon the expiration of a fixed period, regardless of the

    existence of unrestricted retained earnings in the books.

    o. In a voting trust agreement, a trustee acquires legal title to the sharesof the transferring stockholders.

    p. An executive committee, composed of not less than three members ofthe board, may be created by the board of directors.

    q. Any two (2) or more positions in a corporation may be heldconcurrently by the same person without exception.

    r. The secretary of the corporation must be a director, and a resident andcitizen of the Philippines.s. A person convicted by final judgment of an offense punishable by

    imprisonment for a period exceeding six (6) years, or a violation of the

    Corporation Code, committed within five (5) years prior to the date of

    his election or appointment is disqualified from being elected or

    appointed as a director, trustee or officer.

    t. Vacancies occurring in the board other than by removal may be filledby the remaining directors if still constituting a quorum.

    u. An incumbent director or trustee may be removed by merely electing anew director or trustee.

    v. Directors shall not receive any compensation as such directors exceptfor reasonable per diems.

    w. When a quorum is present, the vote of a majority of those present issufficient to elect directors, or to decide any question.

    x. Holders of watered stock are liable for water in their stock andsolidarily liable with the guilty directors and officers.

    y. Stock certificates are sometimes regarded as quasi-negotiableinstruments.

    z. A proxy shall be valid only for the meeting for which it is intended.However, a proxy may, by agreement, be valid and effective for a

    period of five (5) years at any one time.aa.After dissolution, a corporation shall continue as a body corporate for

    five (5) years only for the purpose of winding up and liquidation.