DE LEON, JURY ANN P.

CORPORATION LAW APRIL 8, 2021

1. False. Only corporations which are vested with public interest are required to have
independent directors and compliance officers in their Board of Directors / Trustees /
Members. All other corporations which are not vested with public interest are not required to
have independent directors and compliance officers.

2. True. Although not all corporations are created thru a legislative act such as in the case of
Government Owned and Controlled Corporations, nevertheless, all corporations must be duly
organized in accordance with law. This means that these corporations must acquire the basic
requirements in the creation of the corporation which is provided for in the Corporation Code.

3. False. A stock corporation may be converted into a non-stock corporation. This can be done
by mere amendment of the articles of incorporation. However, a non-stock corporation may
not become a stock corporation by mere amendment of the articles of incorporation. It must
necessarily dissolve and create a new one. This is so because the conversion would be
tantamount to a distribution of its assets or income to its members. The asset of the
corporation would now be treated as payment to the subscriptions of the members who will
become the stockholders of the corporations.

4. False. As a general rule, Non-voting shareholders are not entitled to vote and be voted upon
during stockholder’s meetings. However, the law provides for instances when non-voting
shareholders may vote, such as:
[1] Amendment of articles of incorporation;
[2] Adoption and amendment of by‐laws;
[3] Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of
the corporate property;
[4] Incurring, creating or increasing bonded indebtedness;
[5] Increase or decrease of capital stock;
[6] Merger or consolidation of the corporation with another corporation or other corporations;
[7 Investment of corporate funds in another corporation or business in accordance with the
Revised Corporation Code; and
[8] Dissolution of the corporation.

5. False. Before the passage of the amendments to the Corporation Code, the law provides for a
corporate existence of 50 years unless extended five years before the expiration thereof.
However, in 2019, the Revised Corporation Code took effect which provided for a perpetual
corporate existence unless otherwise indicated or specified by the incorporators in their
Articles of Incorporation.

6. True. In order not to arouse confusion, corporations must each have a distinct name to which
they may be called. The law provides that the corporate name must not be identical or
deceptively or confusingly similar to that of any existing corporation or to any other name
already protected by law or is patently deceptive, confusing or contrary to existing laws.
DE LEON, JURY ANN P. CORPORATION LAW APRIL 8, 2021

7. True. Although not necessarily board directors of a corporation who are given the task of
directly managing a corporation, stockholders may still intervene or participate in the affairs
and management of a corporation by simply exercising their right to vote. They may also
exercise such other rights in accordance with the articles and by-laws of the corporation, such
as entering into voting trust agreements, exercise pre-emptive and appraisal rights, filing of a
derivative suit, and inspecting books, among others.

8. True. While not all outstanding capital stock may be considered paid-up capital stock,
nevertheless, a paid-up capital stock is considered outstanding capital stock in the sense that
they are both part of the authorized capital stock. Outstanding capital stocks include both
subscribed capital stocks, and paid-up and subscribed capital stocks.

9. True. At the option of a corporation, a contract entered into by the corporation with a director
or trustee for the latter’s own benefit is only voidable. However, such contract may be valid if
the following conditions are present:
[a] That the presence of such director or trustee in the board meeting in which the contract
was approved was not necessary to constitute a quorum for such meeting;
[b] That the vote of such director or trustee was not necessary for the approval of the
contract;
[c] That the contract is fair and reasonable under the circumstances; and
[d] That in case of an officer, the contract has been previously authorized by the Board of
Directors.

10. True. Stockholders or members may limit or regulate the powers of the Board of Directors /
Trustees in instances where the concurring vote or ratification of stockholders representing at
least 2/3 of the outstanding capital stock or at least 2/3 of the members in a meeting. In such
cases, even when the Board of Directors have already come up with a decision regarding
corporate affairs, if the 2/3 of the stockholders or members nevertheless disagree with such
decision, then the powers of the Board are overturned and thus limited or regulated.

11. True. A Corporation may be a natural person in the case of a corporation sole which is an
incorporated office occupied by a single natural person. A corporation may also be juridical in
the sense that it acquires a separate juridical personality apart from the persons that compose
it. A corporation may both be a natural and a juridical person in cases of a sole corporation
but the corporation itself has a personality separate and distinct from the person that composes
it.

12. True. Under the Revised Corporation Code, an ordinary domestic corporation can be
incorporated with a minimum of at least two (2) incorporators who may also serve as the first
set of board directors. A maximum of 15 Board Directors / Members / Trustees is also
imposed.
DE LEON, JURY ANN P. CORPORATION LAW APRIL 8, 2021

13. True. A corporation may exercise powers which are incidental to its existence. A restatement
of which may be considered the secondary purposes to which the Corporation is organized.

14. True. Partnerships can be incorporated. A general partnership can be converted into a
distinct business entity by forming a corporation. Incorporating a partnership firm protects the
owners from the liabilities of the business. Corporations may also be partners as to each other.

15. True. Prior to incorporation, a corporation may be considered a Corporation by Estoppel or a

De Facto Corporation. Despite lack of registration of the corporation, or its failure to comply
with legal requirements for incorporation, the law treats those who purport to act as a
corporation liable as a corporation. Thus, acts performed prior to incorporation including
liabilities incurred thereon may hold the corporation accountable after incorporation.

16. True. Non-stock corporations may engage in proprietary or business activities, as long as it
does not distribute shares or dividends to its members. In the same way, a stock corporation
may perform non-profit activities as long as it still distributes dividends / shares to its
stockholders / members.

17. True. Treasury shares, redeemable shares, preferred shares and non-voting shares have
similar features and attributes. They are all in the nature of a non-voting share which indicates
a limited right to vote.

18. True. The Revised Corporation Code allowed foreign nationals as incorporators, as long as
they do not constitute, hold, or share more than 40% of the capital stock.

19. False. The Revised Corporation Code provides for specific qualifications for corporate
officers. A board of director or trustee who does not possess such qualification is not entitled
to acquire such position. Thus, while foreigners may be members of the Board, they may not
be corporate officers.

20. True. Stockholders have the right to vote and be voted upon as a member of the Board.