Suggested Answers Only Corporate Law

1.  Suggested Answer: Yes, it did. ABC Corporation violated the provisions of the Securities Regulation Code that prohibits the sale of securities to the public, like promissory notes, without a registration statement filed and approved by the SEC
2. Suggested Answer: The Securities Regulation Code is called a “ truth in securities law “ because it requires the issuer to make full and fair disclosure of information about securities being sold or offered to be sold within the Philippines and penalizes manipulative and fraudulent acts, devices and schemes.
3. TRUE . The Howey Test that there is an investment contract when a person invests money in a common enterprise and is led to expect profits primarily from the efforts of others. Suggested Answer: True.
4. Suggested Answer: No. Medici is not correct. A controversy between the condominium corporation and its members-unit owners for alleged unpaid association dues and assessments and the prevention of DC from exercising his right to vote and be voted for during the 2011 election of the Medici’s Board of Directors, partakes of the nature of an intracorporate dispute which does not fall within the jurisdiction of the HLURB despite its expansive jurisdiction. It is considered as an intra-corporate controversy falling within the jurisdiction of the Regional Trial Court designated as special commercial court. (BAR 2014)
5. Suggested Answer: Yes, such suit would constitute an intra-corporate dispute as it is a suit initiated by a stockholder against other stockholders who are officers and directors of the same corporation. Such suit should be filed in the RTC designated by the Supreme Court as a corporate or commercial court.
6. Suggested Answer: b. The effective date of the merger is always the date of the approval of the Articles of Merger by the SEC. (BAR 2012
7. Suggested Answer: (A) No, there was no merger or consolidation of the two banks from the viewpoint of the Coporation Code. In Bank of Commerce v. Radio Philippine Network Inc (G.R. No. 195615, April 21, 2014), the Court ruled that there can no merger if the requirements and procedure for merger were not observed and no certificate of merger was issued by the SEC
8.  A de facto merger is one where one corporation acquires all or substantially all of the properties of another corporation in exchange of shares of stock of the acquiring corporation. The acquiring corporation would end up with the business enterprise of the target corporation; whereas, the target corporation would end up with basically its only remaining assets being the shares of stock of the acquiring corporation
9. XXX Bank Corporation and ZZZ Corporation were merged into XX ZZ Bank Corporation. So as not to create any unnecessary conflict, all the former directors of both banks wanted to be appointed/elected as members of the Board of Directors of the merged bank. Each bank used to have 11 members of the board. The maximum number of directors of the merged bank is— a. 15; b. 22; c. 21; d. 11. Suggested Answer: d. 21. (BAR 2012)
10.  Suggested Answer: No. Philippine courts have jurisdiction over it, if it is doing business in the Philippines. Moreover, under Section 133 of the Corporation Code, while a foreign corporation doing business in the Philippines without license to do business, cannot sue or intervene in any action, it may be sued or proceeded against before our courts or administrative tribunal. (BAR 2009)
11. Suggested Answer: The defense is not tenable. The mere act of exporting from one’s own country, without doing any specific commercial act within the territory of the importing country can not be deemed as doing business in the importing country. Thus, the foreign company may sue in the Philippines despite lack of license to do business in the Philippines (Van Zuiden Bros Ltd. v. GTVL Manufacturing Industries 523 SCRA 233).
12. Suggested Answer: a. This can be a ground for revocation or suspension of its license to do business. (BAR 2012) AAA Corporation is a foreign corporation that wants to operate a representative office in the Philippines. As required by the Corporation Code, there is a need to appoint a Resident Agent as a condition precedent to the issuance of a license to transact business in the Philippines. After 2 years, AAA Corporation removed its Resident Agent and did not appoint anyone anymore. Which statement is the most accurate?
13. Suggested Answer: b. Gawsengsit Corp. is not doing business in the Philippines by its mere investment in a Philippine corporation and does not need a license from the SEC. (BAR 2013)
14.  Suggested Answer: A foreign corporation is deemed to be “doing business in the Philippines” if it is continuing the body or substance of the business or enterprise for which it was organized.
15. Suggested Answer: c. A corporation sole, regardless of the nationality of the head, can acquire real property either by sale or donation. (BAR 2012)
16. Suggested Answer: c. Any number in multiples of 5, for as long as it is not less than 5 and no more than 15. (BAR 2012)  The number of the Board of Trustees of a non-stock, non-profit education institution be—
17. Suggested Answer: The action cannot prosper because the corporation has no more legal capacity to sue after three years from its dissolution (Alabang Development Corporation v. Alabang Hills Village Association, GR no. 187456, June 2, 2014).
18. Suggested Answer: The court is not correct. An action to be recognized as a stockholder and to inspect corporate documents is an intra-corporate dispute which does not constitute a continuation of business. The dissolution of the corporation simply prohibits it from continuing its business. Moreover, under Section 145 of the Corporation Code, no right or remedy in favor of or against any corporation, its stockholders, members, directors and officers shall be removed or impaired by the subsequent dissolution of the corporation. The dissolution does not automatically convert the parties into strangers or change their intra corporate relationship. Neither does it terminate existing causes of action which arose because of the corporate ties of the parties. The cause of action involving an intracorporate controversy remains and must be filed as an intracorporate dispute despite the subsequent dissolution of the corporation (Aguirre v. FQB +7, Inc. GR no. 170770, Jan. 9, 2013)
19. The term of GGG Corporation in accordance with its Articles of Incorporation ended last January 30, 2012. The term was not extended. What will happen to the corporation? a. The corporation is dissolved ipso facto; 
20. Suggested Answer: A. No, the sale of all the assets and liabilities of AAA Corporation to BBB Banking Corporation will not result in the automatic dissolution or termination of the existence of the former. A decision to dissolve AAA Corporation or to terminate its corporate existence would require a separate approval by a majority of the Board of Directors of AAA Corporation and its stockholders holding at least 2/3 of the total outstanding capital stock, as well as the separate approval by the Monetary Board.
21. B. A corporation may be dissolved voluntarily under Section 118 (where no creditors are affected) or under Section 119 (where creditors are affected) or by shortening of the corporate term under Section 120, or involuntarily by the SEC under Section 122, all of the Corporation Code. Dissolution under Sections 118, 119, and 120 require the same corporate approvals stated in (a) above.
22. NB We have to add that the the voluntary dissolution must be approved by the board of directors by at least majority vote and the by the stockholders representing at least 2/3s of the outstanding capital stock in a meeting duly called for that purpose with proper notice to all stockholders. In case of banks as in this case, the favorable endorsement of the BSP must be obtained and that the dissolution is effective upon approval by the SEC.
23.  The SEC has the authority under Section 6 of PD 902-A to revoke the certificate of registration of a corporation upon any grounds provided by law, including the aforementioned Section 6-A. (BAR 2012)
24. Suggested Answer: None of the answers is correct. The pledge must be foreclosed. Conrad cannot just appropriate the shares of stock. (BAR 2013)
25.  Suggested Answer: d. Yes, because the execution of the Deed of Assignment of Shares of Stock is equivalent to a lawful pledge of the shares of stock. (BAR 2013)
26. Suggested Answer: a stock and transfer book is a book which records all stocks in the name of the stockholders alphabetically arranged; the installments paid or unpaid on all stocks for which subscription has been made and the date of payment of any installment, a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. (BAR 2009)
27. Suggested Answer: d. ABC Corp. may redeem the shared at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts. (BAR 2013)
28. Suggested Answer: d. ABC Corp. may redeem the shared at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts. (BAR 2013)
29. Suggested Answer: d. Run after the unpaid subscriptions still due to ABC Corp., if any. (BAR 2013)
30.  It is settled that neither par value nor book value is an accurate indicator of the fair value of a share of stock of a corporation. As to unpaid subscriptions to its shares of stock, as they are regarded as corporate assets, they should be included in the a. Capital value. b. Book value c. Par value. d. Market value. Suggested Answer: b. Book value. (BAR 2011)
31. Suggested Answer: Jaime’s contention is not correct. Jaime may own shares of stock in PR Corporation but such ownership does not entitle him to the possession of any specific property of the corporation or a definite portion thereof. Neither is he a co-owner of a corporate property. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its stockholders. Stockholders like Jaime only own shares of stock in the corporation. Such shares of stock do not represent specific corporate property. (BAR 1996)
32. Suggested Answer: A quorum consists of the majority of the totality of the shares which have been subscribed and issued. Thus the quorum for such meeting would be 289 shares or a majority of the 576 shares issued and outstanding as indicated in the articles of incorporation. This includes the 33 common shares reflected in the stocks and transfer book, there being no mention or showing of any transaction effected from the time of Triple A’s incorporation in 1960 up to the said meeting. (BAR 2009)
33. Suggested Answer: I will not accept the case. Section 43 of the Corporation Code states that no stock dividend shall be issued without the approval of the stockholders representing not less than 2/3 of the outstanding capital stock at a regular or special meeting duly called for that purpose. Conformably with Section 50 of the Corporation Code, a written notice of the holding of the regular meeting sent to the shareholders will suffice. The notice itself specifies the said subject matter. (BAR 1990
34. Suggested Answer: No. The suit will not prosper. There is no requisite demand on the officers and directors concerned. There is, therefore, no exhaustion of administrative remedies. (BAR 2009) NB We have to add that under recent jurisprudence is dismissible unless the following are alleged in the complaint : a) the stockholder is suing on behalf of the corporation to enforce a corporate right or cause of action; b) plaintiff must be a stockholder at the time the cause of action accrued and at the time of filing unless the cause of action is continuing in nature in which case it is enough that he is a plaintiff at the time of filing; c) exhaustion of intra-corporate remedies to obtain the relief he desires under the corporation’s articles of incorporation and by-laws; d) no appraisal right is available and   e) complaint is not a nuisance or harassment suit. The first two elements are alleged but the rest were not.
35. Suggested Answer: The derivative suit is not proper. The party-in-interest are the petitioners as stockholders, who were members of the 2003-2004 Board of Directors of FLP Corporation. The cause of action devolves on the petitioners, not on FLP Corporation, which did not have the right to vote. Hence, the complaint filed by A, B, C, D and E is a direct action by the petitioners, who were the members of the Board of Directors of the corporation before the election, against respondents, who are the newly-elected Board of Directors. Under the circumstances, the derivative suit filed by petitioners in behalf of FLP is improper. (BAR 2014)
36. Suggested Answer: The remaining directors cannot elect new directors to fill in the two vacancies. The board of directors may fill up vacancy only if the ground is not due to expiration of term, removal or increase in the number of board seats. In this case, the term of the two directors expired after 1 year. They remained in office in a hold-over capacity only until their resignation. The hold-over period is not part of their term. The vacancies should be filled up by election by the stockholders.
37. Suggested Answer: b. A derivative suit must be instituted in behalf of the corporation. (BAR 2012
38. The derivative suit will not prosper. The complaint did not have all the elements of a derivative suit: a) exhaustion of intra-corporate remedies available under the articles of incorporation, by-laws, and rules and regulations governing the corporation to obtain the remedy the stockholder desires; b) it is not a nuisance suit; and c) appraisal right is not available (Ching v. Subic Bay Golf and Country Club, G.R. No. 174353. September 10, 2014)
39. Dennis subscribed to 10,000 shares of XYZ Corporation with a par value of 100 per share. However, he paid only 25% of the subscription or P250,000. No call has been made on the unpaid subscription. How many shares is Dennis entitled to vote at the annual meeting of the stockholders of XYZ? a. 10,000 shares; b. 2,500 shares; c. 100 shares; d. 0 shares; e. None of the above. Suggested Answer: a. 10,000 shares (BAR 2013)
40.  Suggested Answer: a. X is a stockholder of ABC Corporation as of the time of meeting of the stockholders for the purpose of electing the members of the board. (BAR 2012)
41. Suggested Answer: a. The existing shareholders can subscribe to the new shares equivalent to their existing shareholdings because the Corporation Code provides that each of the existing stockholders will have preemptive rights to the extent of their existing shareholdings. (BAR 2012)
42.  Suggested Answer: a. Regardless of any depreciation or appreciation in the share’s fair value. (BAR 2011)
43. Suggested Answer: a. No, the wife of the withdrawing shareholder is not a disinterested person. (BAR 2011)
44. SUGGESTED ANSWER: Erica may exercise her appraisal right. Appraisal right is the right of the stockholder to demand the payment of the fair value of his shares after dissenting from a corporate act in the cases specified by law. Merger is one of those insiances (Section 81 of the Corporation Code). It is imperative, however, that she attends the stockholders' meeting or files her written dissent, and otherwise, she cannot exercise such right
45. Suggested Answer: No. the suit will not prosper. Paterno cannot compel XYZ Corporation to pay dividends, which have to be declared by the Board of Directors and the latter cannot do so, unless there are sufficient unrestricted retained earnings. Otherwise, the corporation will be forced to use its capital to make said payments in violation of the trust fund doctrine. Likewise, redemption of shares cannot be compelled. While the certificate allows such redemption, the option and discretion to do so are clearly vested in the Corporation. (BAR 2009)
46. Suggested Answer: Ace is entitled to be paid cash dividends for 100,000 shares of stock. Although he has not fully paid for his shares of stock, he is not delinquent and is therefore entitled to all the rights of a stockholder. (BAR 2008)
47.  Suggested Answer: Yes, Guetze can serve as Chairman, as President, and as General Manager of the corporation all at the same time. Section 25 of the Corporation Code provides that “two or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time.” Such case does not fall within the exception under the aforesaid Section. (BAR 2014)
48. Suggested Answer: The action of the Executive Committee with regard to the purchase of a delivery van for use in the corporation’s retail business, declaration and approval of the 13th month bonus, purchase of an office condominium unit at the Fort, and the declaration of P10.00 per share cash dividend is valid, as such matters were taken by a majority vote of all its members, on such matters within the competence of the board and as delegated to it in the by-laws. (BAR 2014)
49.  Suggested Answer: A. The Corporation Code does not impose any nationality or residency requirement in respect of the Treasurer. Any such requirement or any other reasonable requirement may be adopted by the corporation and reflected in its by-laws, or required by the law(s) governing the business of the corporation or a law of general application (e.g., the AntiDummy Law which applies to all nationalized businesses). Accordingly, anybody with the qualifications required under the by-laws of the corporation or under the law(s) governing the business of the corporation, could be elected Treasurer by the Board of Directors. However, the Treasurer could not be President at the same time.
50. Suggested Answer: d. Does not exceed 20% of the outstanding capital stock. (BAR 2011)
51.  Suggested Answer: a. No. in approving the transaction, the directors were not acting in their personal capacities but rather on behalf of XYZ Corporation exercising the powers of the corporation and conducting its business. The problem contains no facts that would indicate that the directors acted otherwise.
52. b. Yes. The Board approved the supply contract and the General Manager entered into the contract, both of them acting on behalf of the XYZ Corporation.
53.  c. Yes, F could be sued in his personal capacity because he knowingly consented to the non-delivery of the promised supplies contrary to the contract that was duly approved by the Board of Directors. The problem does not indicate any circumstance that would excuse or favorably explain the action of F.
54. d. A corporation would be liable for the acts of its Board of Directors and officers if the said acts were performed by them in accordance with the powers granted to them under the Corporation Code, the articles of incorporation and by-laws of the corporation, the laws and regulations governing the business of, or otherwise applicable to, the corporation, and, in the case of officers, the resolution approved by the Board of Directors.
55.  As the directors have a personality separate from that of the corporation, they would be personally liable only if they acted willfully and knowingly vote for or assent to a patently unlawful act of the corporation, or when they are guilty of gross negligence or bad faith in directing the affairs of the corporation, or when they acquire any personal or pecuniary interest in conflict with their duty as directors, which acts result in damages to the corporation, its stockholders or other persons, when they agree to hold themselves personally and solidarily liable with the corporation, or when they are made, by a specific provision of law, to personally answer for the corporate action. (BAR 2012)
56. Suggested Answer: d. No, since the law makes directors of the corporation solidarily liable for gross negligence and bad faith in the discharge of their duties. (BAR 2011)
57. Suggested Answer: b. No, since the disqualification takes effect by operation of law, it is sufficient that he was declared no longer member of the board. (BAR 2011)
58. SUGGESTED ANSWER No, Henry cannot be removed by his fellow directors. The power to remove belongs to the stockholders and the SEC. Moreover, the removal has to be with cause because it is intended to deprive minority stockholders of the right of representation. Amotion is the premature ousting of a director or officer from his post in the corporation Any director or trustee of a corporation may be removed from office by vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or in a nonstock corporation, by a vote of at least two-thirds (2/3) of the member entitled to vote: Provided, That such removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. The Commission shall, motu propio or upon verified complaint, and after due notice and hearing, order the removal of a director or trustee elected despite the disqualification, or whose disqualification arose or is discovered subsequent to an election.
59. Suggested Answer: c. Unless otherwise provided in the Articles of Incorporation or in the By-laws. (BAR 2011)
60.  To constitute a quorum for the transaction of corporate business, only a majority of the number of Board of Directors is required:  b. As fixed in the articles of incorporation
61. EFG Foundation, Inc., a non-profit organization, scheduled an election for its sixmember Board of Trustees. X, Y and Z, who are minority members of the foundation, wish to exercise cumulative voting in order to protect their interest, although the Foundation’s Articles and By-laws are silent on the matter. As to each of the three, what is the maximum number of votes that he/she can cast? a. 6 b. 9 c. 12 d. 3 Suggested Answer: a. 6 (BAR 2011)
62. Suggested Answer: The remaining directors cannot elect new directors to fill in the two vacancies. The board of directors may fill up vacancy only if the ground is not due to expiration of term, removal or increase in the number of board seats. In this case, the term of the two directors expired after 1 year. They remained in office in a hold-over capacity only until their resignation. The hold-over period is not part of their term. The vacancies should be filled up by election by the stockholders.
63.  Suggested Answer: a. This is allowed provided there is a valid and justifiable reason for not calling for an election of the new members of the Board. (BAR 2012)
64. Suggested Answer: X, Y, Z and T could be directors (subject to the residency requirement mentioned in (a) above and any nationality requirement under the law governing the business of the corporation) but not GGG Corporation, CCC Corporation, and KKK Corporation as they are not natural persons. However, the aforementioned corporations could have their respective representatives nominated and possibly elected as directors by the stockholders. Each director must own at least one share of the capital stock of the corporation. (BAR 2012)
65.  X is a director in T Corp. who was elected to a 1-year term on Feb. 1, 2010. On April 11, 2010, X resigned and was replaced by R, who assumed as director on May 17, 2010. On Nov. 21, 2010, R died. S was then elected in his place. Until which time should S serve as director? a. April 11, 2011 b. Feb. 1, 2011 c. May 17, 2011 d. Nov. 21, 2011 Suggested Answer: B. Feb. 1, 2011 (BAR 2011)
66. Suggested Answer: Every director must own at least 1 share of the capital stock of the corporation, which must be recorded in his name on the books of the corporation, and a majority of the directors must be residents of the Philippines. The president must also be a director. The secretary must be a resident and citizen of the Philippines. (BAR 2010) NB: Under the Revised Corporation Code, Treasurer is required to be a resident of the Philippines.
67. Suggested Answer: The corporation must have at least 5 directors. It must also have a president, treasurer, and a secretary. NB: Under the Revised Corporation Code, a One Person Corporation with a single stockholder is already allowed
68. Suggested Answer: b. X, as President, cannot be personally held liable for the obligation of the corporation even though he signed all the loan documents, because the loan was authorized by the Board. (BAR 2012)
69. Suggested Answer: c. A majority of the directors present at the meeting at which there is a quorum (BAR 2014)
70.  Section 38 of the SRC defines an independent director as a person who must not have a relation with the corporation which would interfere with his exercise of independent judgment in carrying out the responsibilities of a director. To ensure independence therefore, he must be— a. Nominated and elected by the entire shareholders; b. Nominated and elected by the minority shareholders; c. Nominated and elected by the majority shareholders; d. Appointed by the board. Suggested Answer: c. Nominated and elected by the majority shareholders. (BAR 2012)
71. Define: Trust fund doctrine. (2015) Suggested Answer: By the trust fund doctrine subscriptions to the capital stock of a corporation constitute a fund to which the creditors have the right to look for satisfaction of their claims. The scope of the doctrine encompasses not only the capital stock but also other property and assets generally regarded in equity as a trust fund for the payment of corporate debts (Halley v. Printwell, GR No. 157549, May 30, 2011; Ong v. Tiu, 401 SCRA 1).
72. Suggested Answer: When a corporate officer enters into a contract on behalf of the corporation without having been so expressly or impliedly authorized by the board of Directors, even when the act or contract falls within the corporation’s express, implied or incidental power, then the unauthorized act of the corporate officer is deemed to be ultra vires. (BAR 2009)
73.  Y, as President of and in behalf of AAA Corporation, as a way to accommodate X, one of its stockholders, endorsed the check issued by X. Which statement is most accurate? a. It is an ultra vires act; b. It is a valid indorsement; c. The corporation will be held liable to any holder in due course; d. It is an invalid indorsement. Suggested Answer: Page 107 of 205 Mercantile Law a. It is an ultra vires act. d. It is a valid indorsement. (BAR 2012)
74. Define: Doctrine of apparent authority. (2015) Suggested Answer: By the doctrine of apparent authority, the corporation will be estopped from denying the agent’s authority if it knowingly permits one of its officers or any other agent to act within the scope of an apparent authority and it holds him out to the public as possessing the power to do those acts (Advance Paper Corporation v. Arma Traders Corporation, GR No. 176897, Dec. 11, 2013)
75. Suggested Answer: When the Board engages in an activity or enters into a contract without the ratificatory vote of the stockholders in those instances where the Corporation Code so requires such ratificatory vote, such as when the corporation is made to invest in another corporation or engage in a business which is not in pursuit of its primary purpose, the board resolution not ratified by stockholders owning or representing at least 2/3 of the outstanding capital stock would make the transaction void, as being ultra vires. (BAR 2009)
76. SUGGESTED ANSWER Under Sec. 45 of the Corporation Code, no corporation shall possess or exercise any corporate power except those conferred by the Code or by its articles of incorporation and except such as are necessary or incidental to the exercise of the powers so conferred. When the corporation does an act or engages in an activity which is outside of its express, implied or incidental powers set out in its articles of incorporation, the act is deemed to be ultra vires. (BAR 2009)
77. Suggested Answer: True. Dividends on shares of stock of a corporation, whether cash dividend or stock dividend, can be validly declared only out of unrestricted retained earnings. It cannot be declared out of the capital. Otherwise, such declaration of dividend will violate the trust fund doctrine. (BAR 2009)
78. Suggested Answer: No. the suit will not prosper. Paterno cannot compel XYZ Corporation to pay dividends, which have to be declared by the Board of Directors and the latter cannot do so, unless there are sufficient unrestricted retained earnings. Otherwise, the corporation will be forced to use its capital to make said payments in violation of the trust fund doctrine. Likewise, redemption of shares cannot be compelled. While the certificate allows such redemption, the option and discretion to do so are clearly vested in the Corporation. (BAR 2009
79. Suggested Answer: a. A mere majority of the quorum of the Board of Directors applies. (BAR 2011)
80.  Suggested Answer: Yes. As a general rule, Stock corporations are prohibited from retaining surplus profits in excess of 100% of their paid-in capital stock. However, Stock Corporations are allowed to retain surplus profits in excess of 100 of their paid-in capital stock when the corporation is prohibited under any loan agreement with any financial institution or creditor; whether local or foreign, from declaring dividends without the consent of the creditor and such consent has not been secured. This one of the execptions provided under Section 43 of the Corporation Code.
81. Suggested Answer: b. Buying back the shares may be allowed provided it is with the approval of the Monetary Board and disposed of within 6 months. (BAR 2012)
82.  Suggested Answer: a. No, since the by-laws cannot deny a shareholder his right of pre-emption. (BAR 2011)
83. Suggested Answer: a. No, since the 5-year rule on amendment of corporate term applies only to extension, not shortening, of term. (BAR 2011)
84.  Suggested Answer: d. Ratified by at least 2/3 of the stockholders representing the outstanding capital stock. (BAR 2011) NB: Under Section 11 of the Revised Corporation Code “A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.
85. Suggested Answer: a. No, since the stockholders cannot delegate their right to amend the By-laws to the Board. (BAR 2011) NB The correct answer is d) because under Section 48 of the Corporation Code, the stockholders representing at least 2/3s of the outstanding capital stock may delegate to the Board the authority to amend the by laws
86. Answer: Yes, the SEC should accept the Articles of Incorporation. If the Articles of Incorporation substantially comply with the statute and all other requirements are met, the SEC has no discretion, but may be compelled by mandamus to file them. The discretion exercised by SEC does not extend to the merits of an application for incorporation, although it may be exercised as to matters of form. (BAR 2014) NB As an alternative answer, the SEC should reject the articles of incorporation because majority of the incorporators are not Philippine residents
87. A corporation organized under the Corporation Code commences to have corporate existence and juridical personality and is deemed incorporated: a. From the date the application for incorporation is filed with the SEC. b. From the date the SEC issues a certificate of incorporation under its official seal. c. 30 days after the date the application for incorporation is filed with the SEC. d. 30 days after the date the SEC issues a certificate of incorporation under its official seal. Answer: b. From the date the SEC issues a certificate of incorporation under its official seal. (BAR 2014)
88.  Answer: No, the Articles of Incorporation may not be amended to reduce the number of directors to two. Section 14 of the Corporation Code requires that the Articles of Incorporation shall contain the number of directors, which shall not be less than 5 nor more than 15. Hence, the reduction of the number of directors to two, to reflect the real owners of the shares of stock, is not valid (BAR 2014)
89. The Articles of Incorporation must be accompanied by a Treasurer’s Affidavit certifying under oath, among others, that the total subscription paid is: a. Not less than P25,000.00 b. Not more than P5,000.00 c. Not less than P5,000.00 d. Not more than P25,000.00 Answer: c. Not less than P5,000.00 (BAR 2011)
90.  A, the proprietor of a fleet of 10 taxicabs, decides to adopt, as his business name, “A Transport Co., Inc.” May this be allowed? a. No, it would be deceptive since he is a proprietor, not a corporation. b. No, since “A” is a generic name, not suitable for registration. c. Yes, since his line of business is public transportation. d. Yes, since such name would give his business a corporate identity. Answer: a. No, it would be deceptive since he is a proprietor, not a corporation. (BAR 2011)
91. Answer: A. X, Y, Z and T could all be incorporators and subscribers. Note, however, that Section 10 of the Corporation Code requires that there must be at least 5 but not more than 15 incorporators (who must all be natural persons) and that a majority of the incorporators must be residents of the Philippines. S, being a minor, could neither be an incorporator nor a subscriber. GGG Corporation, CCC Corporation, and KKK Corporation could not be incorporators as they are not natural persons. However, they could be subscribers. B. Some of the differences are as follows: first, all the incorporators are required to sign and acknowledge the Articles of Incorporation while the subscribers, as such, are not subject to the same requirement; second, the incorporators are all required to be natural persons while the subscribers could either be natural or juridical persons; and third, the number of incorporators cannot exceed 15 while the number of subscribers could be more than 15 (subject to compliance, in the appropriate cases, with the requirements of the SRC). (BAR 2012)
92.  Answer: No, the RTC is not correct. The court must have first acquire jurisdiction over the corporation(s) involved before its or their separate personalities are disregarded; and the doctrine of piercing the veil of corporate entity can only be raised during a full-blown trial over a cause of action duly commenced involving parties duly brought under the authority of the court by way of service of summons or what passes as such service. (BAR 2014)
93. Answer: c. SSS Corporation and TTT Corporation, although both are owned by X, are 2 distinct corporations with separate juridical personalities hence, the TTT Corporation cannot automatically be held liable for the loan of SSS Corporation. (BAR 2012)
94.  . Despite the change in shareholder, there is actually no change in the juridical entity and therefore existing employees cannot automatically be considered separated. (BAR 2012)
95. Answer: c. Yes, it is not shown that one company completely dominates the finances, policies, and business practices of the latter. (BAR 2011)
96. ALTERNATIVE ANSWER On the assumption that DRI's legal personality may be pierce to make it one and the same with Matteo, the garnishment of deposits an levy of assets are lawful and proper because the court has not issued yet commencement order prior to the garnishment and levy.
97. SUGGESTED ANSWER The garnishment and levy of Matteo's assets are not valid, because Mateo is not covered by the rehabilitation proceedings or any stay order that the rehabilitation court may issue. It is DRI, with a legal personality separate and distinct from Matteo, which filed the petition for rehabilitation and would have been entitled to the effects of any commencement order (and stay order) that the court may issue. The commencement order would have the effect of setting aside any seizure o property or attempt to enforce a claim against the debtor. It would have been different if Matteo acted as surety and the court issues a commencement order with stay order, the effects of which are   retroactive to the filing of the petition. In which event, the garnish meat of his deposits and level of assets would have been valid.
98. Answer: The holding of Bernard Fleet equivalent to the outstanding common shares is illegal. His holdings of preferred shares should not exceed 40%. Since the constitutional requirement of 60% Filipino ownership of the capital of public utilities applies not only to voting control but also to beneficial ownership of the corporation, it should also apply to the preferred shares. Preferred shares are also entitled to vote in certain corporate matters. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. The effective control here should be mirrored across the board on all kinds of shares. (BAR 2013
99. SUGGESTED ANSWER: The grandfather rule should apply. The Supreme Court held in a similar case that even though on paper the capital shareholding in a mining corporation is 60% owned by Filipinos and 40% by foreigners, if there is a doubt as to the locus of the beneficial ownership and control, the grandfather rule should apply. Based on the facts, B Corporation, a Chinese corporation, practically exercises control over O, P, and Q Corporations. Such circumstance creates a doubt as to where control and beneficial ownership reside that warrants application of the grandfather rule (Narra Nickel Mining and Development Corporation v. Redmont Consolidated Mines Corp., G.R. No. 195580, April 21, 2014)
100. Several American doctors wanted to set up a group clinic in the Philippines so they could render modern medical services. If the clinic is to be incorporated under our laws, what is the required foreign equity participation in such a corporation? 1. 40% 2. 0% 3. 60% 4. 70% Answer: b. 0% (BAR 2011) 
101. [Note: An answer based on the most recent case of Roy v. Herbosa, G.R. 207246, April 18,2017 ( a case decided after the cut-off date of the 2017 exams) where the SC held that the term capital means both the voting sh and the total outstanding'eapital stock should also be considered correct].
102. 2. Corporation by Estoppel Unknown to the other four proponents, Enrico (who had been given the task of attending to the Articles of Incorporation of the proposed corporation, Auto Mo, Ayos Ko) misappropriated the filing fees and never filed the Articles of Incorporation with the SEC. instead, he prepared and presented to the proposed incorporators a falsified SEC certificate approving the Articles. Relying on the falsified SEC certificate, the latter began assuming and discharging corporate powers. Auto Mo, Ayos Ko is a ______. A. De jure corporation; B. De facto corporation; C. Corporation by estoppel; D. General partnership; E. None of the above. Answer: c) Corporation by estoppel— if the term “latter” refers to the incorporators. e) None of the above—if the term “latter” refers to Enrico. (BAR 2013)
103. The Articles of Incorporation of AAA Corporation was approved by SEC. After the receipt of the Certificate of Approval from the SEC, AAA Corporation decided to immediately start the operation of its business despite the fact that it has no approved By-Laws. What is the legal status of the AAA Corporation? a. A de jure corporation; b. A de facto corporation; c. A corporation by estoppels; d. An unregistered corporation. Answer: a. A de jure corporation. (BAR 2012)
104. The exceptions to the Nell doctrine are as follows: (I) When the buyer expressly or impliedly assumes the liabilities of the seller; (II) If the sale amounts to a merger or consolidation; (III) If the sale is entered into fraudulently or made in bad faith; (IV) If the buyer is merely a continuation of the personality of the seller or the so called business - enterprise transfer rule.
105. Under the Nell Doctrine, so called because it was first pronounced by the Supreme Court in the 1965 ruling in Nell v. Pacific Farms, Inc. (GR No. 20850, November 29, 1965, 15 SCRA 415), the general rule is that where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor. State the exceptions to the Nell Doctrine. (4%) (2017 BAR)