TRUE/FALSE 1.

A corporation sole can acquire, alienate and/or dispose of its real properties in the same way and manner as other ordinary corporation.

member, regardless of any class shall be entitled to one vote. Thus, in the election of trustees, although a mentor may cast as many votes as there are trustees to be elected, he can not cast more than one vote for one candidate.

FALSE Like any other type of corporations, a corporation sole is also empowered to acquire and alienate properties. However, under Sec. 113, the extent of a corporation soles power to sell or mortgage real properties is subject to a certain restriction not otherwise imposed in any other corporation. That is, a proper court order must first be secured for that purpose. Intervention of the court may be dispensed with only if the rules, regulations and discipline of the religious denomination, sect or churcha concerned provide or regulate the manner or method of holding or alienating properties.

4.

Its not the lack of the requisite license but doing business without a license that bars a foreign corporation access to our courts.

FALSE Sec. 80 provides that in case of merger or consolidation, the surviving/consolidated corporation shall possess all the rights, privileges, immunities and franchises of the constituent corporations, and all property and all receivables due, including subscriptions to shares and other choses in action, and every other interest of, or belonging to or due to the constituent corporations shall be deemed transferred to and vested in such surviving/consolidated corporation.

FALSE A foreign corporation, even without license, can sue before the Philippine courts under any of the following instances:

6.

The mere appointment by a foreign corporation of a distributor domiciled in the Philippines necessarily implies doing business in the country.

a)

If the act or transaction involved is an isolated transaction (Bulakhidas) The corporation is not seeking to enforce any legal or contractual rights arising from any business which it has transacted in the Philippines (Western Machine/Gen. Garments) If the purpose of the suit is to protect its trademark, tradename, corporate name, reputation or goodwill (Puma/Gen. Garments/Western) Where the suit is from a violation of the RPC (Lacoste) It is merely defending a suit held against it (Time vs. Reyes) Where the party is stopped to challenge the personality of the corporation by entering into a contract with it (Comm. Materials)

b) 2. The by-laws of a stock corporation can validly provide that meetings of the stockholders may be held anywhere in the Philippines. c) FALSE Sec. 51 provides that meetings of stockholders must, at all times, be held in the city or municipality where the principal office of the corporation is located and, as far as practicable, in the principal office of the corporation. Sec. 51 likewise denotes that where the principal office of the corporation is located in Metro Manila, stockholders meeting may be held in any place within Metro Manila since the latter is considered as once city or municipality.

FALSE - In the case of Le Chemise Lacoste vs. Fernandez, the rules and regulations of the BOI defines doing business as one which includes appointing a representative or distributor who is domiciled in the Philippines and which acts in the name of the foreign firm, unless said representative or distributor has an independent status meaning it transacts business in its name and for its account and not in the name or for the account of a principal.

7.

d)

There is no distinction between a purchase/sale and subscription of the unissued stocks of a corporation.

e)

f)

3.

Cumulative voting is generally not allowed in nonstock corporations. 5. All corporations dissolved necessarily undertake liquidation and winding up of their corporate affairs

TRUE Sec. 60 provides that any contract for the subscription of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription, notwithstanding the fact that the parties refer to it as a purchase or some other contract. Hence, as long as the shares to be acquired from the corporation are unissued stocks of the latter, the contract will be deemed a subscription contract.

TRUE Sec. 89 provides that unless limited, broadened or denied by the AOI or By-laws, each

8.

In a corporate controversy, service of summons upon a corporation is valid if made upon any of its directors/trustees.

WHICH OF THE FOLLOWING STATEMENTS ARE CORRECT? FALSE Sec. 51 provides that if the voting requirement is met, any resolution passed in the meeting, even if improperly held or called will be valid if all the stockholders or members are present or duly represented thereat.

TRUE Under the Interim Rules of Procedure on Intracorporate Controversies, if the defendant is a domestic corporation, service shall be deemed adequate if made upon any of the statutory or corporate officers as fixed by the by-laws or their respective secretaries. If the defendant is a partnership, service shall be deemed adequate if made upon ay of the managing or general partners or upon their respective secretaries. If the defendant is an association, service shall be deemed adequate if made upon any of its officers or their respective secretaries.

14. Shares of stock may be validly and effectively transferred by:

11. An educational institution can have nine members

a)

A duly notarized deed of transfer without endorsement and delivery of the stock certificate which had earlier been issued WRONG Endorsement of the stock certificate couple with delivery to the transferee CORRECT A mere notarized deed if no certificate of stock has been issued CORRECT A duly notarized deed coupled with delivery of the already issued stock certificate CORRECT Endorsement couple with delivery of the stock certificate even without a notarized deed CORRECT Even if without endorsement and/or delivery of the issued stock certificate if the person sought to be a stockholder is an officer of the corporation and has custody of the books of the corporation CORRECT

FALSE For educational institutions organized as nonstock corporations, the number of trustee shall be multiples of 5. Nine members may only be allowed in educational institutions organized as stock corporations (Sec. 108)

b)

c)

When the defendant is a foreign private juridical entity which is transacting or has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines.

d) 12. A corporation is a close corporation if 2/3 of voting rights is owned by another corporation e) FALSE A corporation shall not be deemed a close corporation when at least 2/3 of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation (Sec. 96)

f)

9.

All religious corporations commence to exist and are vested with juridical personality upon filing of the articles of incorporation with the SEC.

13. Purchase of treasury shares is equivalent to subscription FALSE A corporation sole, after filing the verified AOI along with the documents required in Sec. 112 with the SEC, immediately becomes endowed with corporate personality while religious societies acquire corporate personality only upon issuance of the Certificate of Incorporation by the SEC. OBJECTIVES FALSE Purchase of treasury shares is considered as sale and not subscription. Thus, the purchasers in this case may not be liable to unpaid balance because it is considered a sale.

15. Subscriptions to shares of stock of a corporation are indivisible

10. Any meeting of stockholders/members irregularly held or called is necessarily without force and effect.

Subscriptions to shares of stock are indivisible such that a subscriber to such shares will not be entitled to

the issuance of a stock certificate until he has paid the full amount of his subscription. This is the clear intent of the law when it provides in Sec. 64 that no certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid.

Wash Sale any transaction in a security which involves no change in the beneficial ownership.

motion to dismiss contending that there is no cause of action because there is no proper party. (Rural Bank of Salinas vs. CA) The contention of the corporate secretary is untenable. Under Sec. 63, shares of stock so issued are personal property and may be transferred by delivery of certificate/s indorsed by the owner or his attorney-infact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except between the parties, until the transfer is recorded in the books of the corporation. Hence, the owner of shares, as owner of personal property, is at liberty to dispose in favor of whomever he pleases, without limitation in this respect, than the general provisions of law. The only limitation imposed by law is when the corporation holds any unpaid claim against the shares intended to be transferred, which is absent here. Therefore, the right of a transferee/assignee, Olive in this case, to have stocks transferred to her name is an inherent right flowing from her ownership of the stocks. Whenever a corporation refuses to transfer and register stock in cases like the present one, which is a ministerial duty on its part, mandamus will lie to compel the officers of the corporation to transfer said stock in the books of the corporation. 20. If it was transferred to Olive through a pledge where it was provided that in case of failure to pay, Popeye was authorized to foreclose said mortgage. Will mandamus lie? (Tay vs. CA) No, mandamus will not lie. In order that a writ of mandamus may issue, it is essential that the person petitioning for the same has a clear legal right to the thing demanded and that it is the imperative duty of the respondent to perform the act required. It neither confers powers nor imposes duties and is never issued in doubtful cases. It is simply a command to exercise a power already possessed and to perform a duty already imposed. In the present case, petitioner has failed to establish a clear legal right. He does not have any ownership rights at all by virtue of the contract of pledge. Furthermore, there is also no showing that Popeye made any attempt

16. Certificate of stock are merely quasinegotiable and are non-negotiable

Matched Order refers to an order/s for the purchase or sale of security with the knowledge that a simultaneous order of substantially the same size, time and price for the sale or purchase of such security has, or will be entered by or for the same or different parties.

A certificate of stock is not regarded as negotiable in the same sense that a bill or note is negotiable, even if it is endorsed in blank. Thus, while it may be transferred by endorsement coupled with delivery thereof, and therefore merely quasi-negotiable, it is nonetheless non-negotiable in that the transferee takes it without prejudice to all the rights and defenses which the true and lawful owner may have except in so far as the principles governing estoppels may apply.

Short Sale or selling security which the vendor does not own.

Wash sale and matched orders are not by themselves illegal. To be illegal, thus subject to penal sanctions, they must be used as a means to create a false or misleading appearance of active trading in the security concerned. While short sale is now illegal per se unless it is done in accordance with the rules and regulations of the SEC.

17. Director/Stockholder whose shares are declared delinquent is not automatically disqualified to be and act as director

Director/stockholder whose shares are declared delinquent is not automatically disqualified to be and act as director in a sense that we should first wait if there are remaining shares, if any, shall be credited in favor of the delinquent stockholder who shall likewise be entitled to the issuance of a certificate of stock covering such shares sold at a public auction.

CASE 19. Popeye subscribed to shares of stock and paid it. He did not however register it. On Feb. 14, 2000, he assigned said shares of stock to his girlfriend Olive through a duly notarized deed. Olive asked the corporate secretary to register it but refused to do so. So Olive filed mandamus. The corporate secretary filed a

18. Define: Wash Sale; Matched Order; Short Sale. State whether they are illegal per se or when they become illegal

to foreclose or sell the shares through public or private auction. Therefore, ownership of the shares could not have passed to him. The pledgor remains the owner during the pendency of the pledge and prior to foreclosure and sale, as explicitly provided under the NCC. 21. What if Olive stole it from Popeye and forged his signature and sold it to her other boyfriend Brutus (in good faith and for value). Who has better right/title to the shares of stock? (Forged and unauthorized transfer of stocks) Popeye has better right/title to the shares of stock. In forged or unauthorized transfer, it is settled that the purchaser/s thereof, no matter how innocent they may have been, will acquire no title as against the lawful owner thereof by virtue of the doctrine of nonnegotiability of certificates of stock. The purchaser of shares of stock, in such a case, will have no right or remedy against the corporation because he took the shares not by virtue of misrepresentation made by the corporation but on the faith of a forged endorsement or unauthorized transfer. Thus, the corporation incurs no liability to the person in whose favor the certificates is endorsed or issued. If the old certificate is cancelled and new on is issued by the corporation, the holder thereof may be required to return the same for its cancellation. In forged and unauthorized transfer, what is forged or unauthorized is the transfer of the certificate from the true and lawful owner to another person. 22. What if Olive after stealing and forging signature asked to corporation to register it in her name? The corporation thinking that the signature was genuine cancelled the certificate of Popeye and issued a certificate to Olive. Olive then sold it to Brutus. Who is the owner? Who has better title? (Unauthorized issuance of stock) Brutus has the better title to the shares of stock. This falls under the unauthorized issuance of certificate of stock which refers to the act of the corporation in issuing the certificate, either fraudulently or by mistake.

If the new certificate issued by the corporation, either by virtue of a forged or unauthorized transfer, however, passes into the hands of a subsequent bona fide purchaser, the latter may fully acquire title thereto since the corporation will be stopped to deny the validity thereof. The subsequent purchaser in good faith took the shares, not by virtue or a forged or unauthorized transfer but on reliance on the genuineness of the certificate issued by the corporation or by virtue of the representation made by the corporation that the same is valid and subsisting and that the person named therein is the stockholder of the corporation. He may, therefore, compel the corporation to recognize him as a stockholder or claim reimbursement and damages against the latter.

equal to the par or issued value of the stocks issued c) Labor performed for or services actually rendered to the corporation Previously incurred indebtedness of the corporation Amounts transferred from URE to stated capital Outstanding shares exchanged for stocks in the event of reclassification or conversion

d)

e) f)

25. Registration is necessary for the ff reasons ENUMERATION 23. Exceptions to the inherent right to vote a) Non-voting shares are not entitled to vote except in those instances provided for in the penultimate paragraph of Sec. 6 (However, only preferred and redeemable shares may be deprived of the right to vote) Treasury shares have no voting rights while they remain in the treasury Shares of stock declared delinquent are not entitled to vote at any meeting Unregistered transferees of shares of stock 26. Watered stock may be issued in either of the ff ways a) For monetary consideration less than its par or issued value For a consideration in property, tangible or intangible, valued in excess of its FMV Gratuitously or under an agreement that nothing shall be paid at all a) To enable the corporation to know who its stockholders are To enable the transferee to exercise his rights as stockholders To afford the corporation an opportunity to object or refuse registration of the transfer in case allowed by law (as when it has unpaid claims on the shares transferreed) To avoid fictitious and fraudulent transfers To protect creditors who have the right to look upon stockholders, in case of non-payment or watered shares, for the satisfaction of their claims

b)

c)

b)

d) e)

c)

d)

24. Consideration for the issuance of stock may be any or a combination of any two or more of the ff: a) b) Actual cash paid to the corporation Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation

b)

c)

d)

In the guise of stock dividends when there are no surplus profits of the corporation f)

solidarily against the responsible directors/officers and the stockholders concerned As against transferees of the watered stock his right is the same as that of his transferor. However, a certificate of stock has been issued and duly indorsed to a bona fide purchaser, without knowledge, actual or constructive, the latter cannot be held liable, at least as against the corporation, since he took the shares on reliance of the misrepresentation made by the corporation that the stock certificate is valid and subsisting.

transferred to and vested in such surviving or consolidate corporation without further act and deed e) The rights of creditors or any lien on the property of the constituent corporations shall not be impaired by the merger or consolidation Employees of absorbed corporation are neither assets nor liabilities that are deemed absorbed by the surviving corporation

27. Stock watering is proscribed in view of its evil effects. Among them are: a) The corporation is deprived of its capital thereby hurting its business prospects, financial capability and responsibility Stockholders who paid their subscriptions in full, or promised to pay the same, are injured and prejudiced by the reduction of their proportionate interest in the corporation Present and future creditors are deprived of the corporate assets for the protection of their interest

f)

b)

29. Call is not necessary in the ff: a) If the contract of subscription provides for a date or dates when payment is due; or When the corporation has become insolvent

31. Instances when appraisal right may be exercised Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances: a) In case any amendment to the AOI has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Code In case of merger or consolidation Investment of funds in another corporation or business or for any other purpose other than its primary purpose In a close corporation, a stockholder has the unbridled right to compel the corporation for any reason to purchase his shares at their fair value which shall not be less than the par or issued value, when the corporation has sufficient assets to cover its debts and liabilities, exclusive of capital stock.

c)

b) 28. Effects of the issuance of watered stock a) As to the corporation when a corporation is guilty of ultra-vires or illegal acts which constitute an injury to or fraud upon the public, or which will tend to injure or defraud the public, the State may institute a quo warranto proceeding to forfeit its charter for the misuse or abuse of its franchise As between the corporation and the subscriber the subscription is void. Such being the case, the subscriber is liable to pay the full par or issued value thereof, to render it valid and effective c) c) As to the consenting stockholders they are estopped from raising any objection thereto As to disssenting stockholders in view of the dilution of their proportionate interest in the corporation, they may compel the payment of the water in the stock solidarily against the responsible and consenting directors and officers inclusive of the holder of the watered stock As to creditors they may enforce payment of the difference in the price or the water in the stock,

30. Effects of merger or consolidation a) There will only be a single corporation. In case of merger, the surviving corporation or the consolidated corporation in case of consolidation. The termination of the corporate existence of the constitutent corporations, except that of the surviving corporation or the consolidated corporation The surviving corporation or the consolidate corporation will possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under the Code The surviving or consolidated corporation shall possess all the rights, privileges, immunities and franchises of the constituent corporations, and all proprety and all receivables due, including subscriptions to shares and other choses in action, and every other interest of, or belonging to or due to the constituent corporations shall be deemed

b)

b) b)

c) d)

d)

e)

d)

e)

32. Instances when the right of a dissenting stockholder to be paid the fair value of his shares ceases a) When he withdraws his demand for payment and the corporation consents thereto When the proposed action is abandoned or rescinded by the corporation When the proposed action is disapproved by the SEC where such approval is necessary When the SEC determines that he is not entitled to exercise his appraisal right When he fails to submit the stock certificate within 10 days from demand of the corporation for notation that such shares are dissenting shares If the shares are transferred and the certificate subsequently cancelled

will not likewise apply because the dissolved corporation is substituted by the receiver who may sue or be sued even after that period

appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

b)

34. Doing business with regard to Foreign Corporations vs. Doing business under the Foreign Investment Act a) As to what constitutes doing business or transacting business which would bar a foreign corporation from access to our courts, no general rule or governing principle can be laid down. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. The term implies a continuity of commercial dealings and arrangements and contemplates, to the extent, the performance of acts or works or the exercise of some functions normally incident to and in progressive prosecution of the purpose and objects of its organization. Under the FOI, the phrase doing business would include soliciting orders, service contracts opening offices, whether called liason offices or branches. Appointing representatives or distributor domiciled in the Philippines or who in any calendar year stay in the country for a period/s totaling 180 days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the business organization: Provided, however, that the phrase doing business shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interest in such corporation; nor

35. Special Commercial Courts shall have original and exclusive jurisdiction to hear and decide cases involving: a) b) Intra-corporate controversies Devices or schemes amounting to fraud and misrepresentation detrimental to the public and/or the stockholders Controversies in the election or appointment of DTOM Petitions for suspension of payments

c)

d)

e)

c)

d)

f)

36. For intra-corporate controversy to exist, there must: a) There must necessarily be an intra-corporate relationship; and The controversy must arise out of said relationship

33. Liquidation may be undertaken in either of 3 ways a) By the corporation itself through the BOD usual method or procedure of liquidating a corporation and although there is no law authorizing it, neither is there anything that prohibits the BOD from undertaking the same. If this method is resorted to, the board will only have a period of 3 years to finish its task of liquidation By a trustee appointed by the corporation the corporation may opt to convey all corporate assets to a trustee who will take charge of liquidation. The 3-year period imposed by section 122 will not apply provided the designation of the trustee is made within that period By appointment of a receiver a receiver may be appointed by the proper forum on petition or motu proprio upon the dissolution of the corporation. If a receiver is appointed, the 3-year period fixed by law within which to complete the task of liquidation

b)

b)

37. To be an intra-corporate controversy, it must pertain to any of the ff relationship a) Between the corporation, partnership, association and the public Between the corporation, partnership, association and its stockholders, partners, members or officers Between the corporation, partnership, association and the State Among the stockholders, partners or associates themselves

b)

b)

c)

c)

d)

c) 38. 3 possible remedies available to cash-strapped corporation seeking to suspend payment of its obligations a) Simple Suspension of Payments mere deferment of payment of debts and it refers to a petition which is filed by a corporation which possesses sufficient assets to cover its liabilities but foresees the impossibility of meeting them when they respectively fall due owing to temporary liquidity problems Suspension of Payments Accompanied by a Proposal for Rehabilitation petition for said suspension with a plan for the rehabilitation of the distressed company and corresponding repayment scheme for all its debts and liabilities Suspension of Payments Where the Corporation is Under a Management Committee or Rehabilitation Receiver may be availed of by the petitioning CPA which has no sufficient assets to cover its liabilities. It may likewise be availed of by any distressed corporation having mere liquidity problems provided it prays for the appointment or is under a management committee or rehabilitation receiver. Once a management committee or rehabilitation receiver is appointed, all actions for claims against the corporation pending before any court or tribunal are suspended accordingly and automatically.

That there is serious paralyzation of its operations to the detriment of the stockholder, parties-litigants of the general public

40. Rules of Thumb for the Guidance of the Bench and Bar a) All claims against CPAs that are pending before any court, tribunal or board, without distinction as to whether or not a creditor is secured or unsecured, shall be suspended effective upon the appointment of a ManCom, RehabRec, board or body, in accordance with the provisions of PD 902-A Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is equally suspended upon the appointment of a ManCom, RehabRec, board or body. In the event that the assets of the CPA are finally liquidated, however, secured and preferred credits under the applicable provisions of the Civil Code will definitely have preference over unsecured ones.

b)

b)

c)

39. Requisites before the appointment of management committee, board or body: a) It must be shown that the corporate property is in danger of being wasted or destroyed That the business of the corporation is being diverted from the purpose from which it is organized

b)