BLAW 102 – LAW ON BUSINESS ORGANIZATION Page 1
Compre Reviewer
LAW ON BUSINESS ORGANIZATION
MULTIPLE CHOICE. Choose the best answer.
1. Is an obligation to pay a definite sum of money at
a future date at a fixed rate of interest.
a. Corporate bond
b. Stock bond
c. Property bond
d. Cash bond
2. This is the right of existing stockholders to be
offered first for any new issue of shares of stock of
the corporation
a. Preferential right
b. Pre-emptive right
c. Right of first offer
d. Pre-subscription right
3. Persons who have agreed to take and pay for
original, unissued shares of a corporation formed or
to be formed.
a. Subscribers
b. Underwriter
c. Promoters
d. Shareholders
4. Portion of the capital stock which is issued and
held by persons other than the corporation itself.
a. Paid-up capital stock
b. Legal capital
c. Outstanding capital
d. Subscribed capital
5. Written acknowledgment by the corporation of
the interest, right, and participation of a person in
the management, profits, and assets of a
corporation.
a. Certificate of stock
b. shares
c. par value
d. Preferred share of stock
6. Entitles the holder thereof not only to the
payment of current dividends but also to dividends
in arrears.
a. Preferred share as to assets
b. Preferred share as to dividends
c. Cumulative preferred share
d. Participating preferred share
7. Shares which has been lawfully issued by the
corporation and fully paid for and later reacquired
by it either by purchase, redemption, donation,
forfeiture or other lawful means.
a. Redeemable shares
b. Treasury shares
c. Preferred shares
d. Treasury shares
8. Document prepared by the persons establishing
a corporation and filed with the Securities and
Exchange Commission containing the matters
required by the Code
a. Corporate charter
b. Certificate of stock
c. Articles of incorporation
d. By-laws
17–18. Corporate existence is questioned in some
incidental proceeding not provided by law for the
express purpose of attacking the corporate
existence.
a. Collateral attack
b. Direct attack
c. Quo warranto
d. Habeas Corpus
9. By this voting method, every stockholder “may
vote such number of shares for as many persons
as there are directors”
a. Cumulative voting for one candidate
b. Straight voting
c. Cumulative voting by distribution
d. Parallel voting
10. A director or trustee may be held liable for
damages, except:
a. He acquires any personal or pecuniary
interest in conflict with his duty as such
director or trustee
b. He is guilty of gross negligence
c. He willingly discloses adverse interests to
the corporation
d. He willfully and knowingly votes or assents
to patently unlawful acts of the corporation
11. Powers which are reasonably necessary to
exercise the express powers and to accomplish or
carry out the purposes for which the corporation
was formed.
a. Incidental powers
b. Express powers
c. Inherent powers
d. Implied powers
13. Which of the following is not an inherent power
of a corporation:
a. succession
b. to sue and be sued
c. to execute promissory notes.
d. to purchase and hold real and personal
property
14. Right of a stockholder in the cases provided by
law to demand payment of the fair value of his
shares in case of an extension of corporate term.
a. Pre-emptive right
b. Appraisal right
c. Right of first refusal
d. Right of pre-emption
15. This Is the difference between the total present
value of its assets after deducting losses and
liabilities and the amount of its capital stock
a. Profits
b. Capital assets
c. Retained earnings
d. Trust fund
16. Dividend payable on unissued or increased or
additional shares of the corporation instead of in
cash or in property.
a. Stock dividend
b. Property dividend
c. Cash dividend
d. Bond dividend
BLAW 102 – LAW ON BUSINESS ORGANIZATION Page 2
17. Dividend which is partly in cash and partly in
stocks
a. Optional dividend
b. Scrip dividend
c. Cumulative dividend
d. Composite dividend
18. Rules of action adopted by the corporation for
its internal regulations and for the government of its
officers and of its stockholders or members
a. Articles of incorporation
b. By-laws
c. Corporate contract
d. Certificate of incorporation
19. Which among is not a requisite for a valid
meeting of stockholders or members
a. There must be a previous notice
b. There must be a quorum
c. It may be held anywhere
d. It must be called by the proper person
20. The following are the modes by which a
corporation may issue shares of stock except:
a. By making a cash dividend
b. By subscription before and after
incorporation, to original, unissued stock
c. By sale of treasury stock after incorporation
for money, property, or service
d. By subscription to new stocks, when all the
original stocks have been issued and the
amount of the capital stock increased
21. Failure to register a transfer of shares produces
the following effects, except:
a. It is valid and binding as between the
transferor and the transferee
b. It is valid insofar as the corporation is
concerned except when notice is given to
the corporation for purposes of registration
c. It is invalid as against corporate creditors,
and the transferor is still liable to the
corporation
d. It is invalid as against the creditors of the
transferor without notice of the transfer
22. The following are liabilities of a stockholder
except:
a. Liability for watered stock
b. Liability to the corporation for unpaid
subscription
c. Liability for failure to create corporation
d. Liability for dividends lawfully paid
23. Watered stock includes stock which is:
a. Issued without consideration
b. Issued as cash dividend when there are no
sufficient retained earnings or surplus
c. Issued as fully paid when the corporation
has received a greater sum of money than
its par or issued value
d. Issued for a consideration other than actual
cash, the fair valuation of which is greater
than its par or issued value
24. The percentage of stockholdings that will be
considered as substantial for purposes interlocking
directors is a percentage exceeding::
a. Fifty (50%0
b. Twenty (20%)
c. Twenty-five (25%)
d. Thirty (30%)
25. Involuntary dissolution of a corporation may be
effected by:
a. By executive enactment
b. By failure to formally organize and
commence the transaction of its business
within 1 year from date of incorporation
c. By expiration of term provided for in the
amended articles of incorporation
d. By order of the Securities and Exchange
Commission
26. An advantage of a business corporation.
a. The shareholders have unlimited liability
b. The shares of stocks cannot be transferred
without the consent of the other
stockholders
c. Its management is centralized in the board
of directors
d. The corporation has no legal capacity to act
as a legal unit
27. One which is limited to selected persons or
members of a family
a. Open corporation
b. Close corporation
c. De jure corporation
d. De facto corporation
28. Those formed or organized for the government
of a portion of the State
a. Public corporations
b. Private corporations
c. Quasi-corporation
d. True corporation
29.They lay the groundwork for corporate
existence:
a. Underwriter
b. Subscribers
c. Stockholders
d. Promoters
30.Amount of the capital stock subscribed whether
fully paid or not.
a. Outstanding capital stock
b. Subscribed capital stock
c. Authorized capital stock
d. Paid-up capital stock
31. The articles of incorporation of a stock
corporation under Section 14(8) must state the
following except:
a. The amount of its authorized capital stock in
pesos
b. The number of shares into which it is
divided
c. The par value in pesos of each share
d. The amount of authorized stock subscribed
and paid by each on his subscription
32. An example of defect which will preclude the
creation of even a de facto corporation
a. Failure to file articles of incorporation with
the Securities and Exchange Commission
b. Absence of By-Laws
c. Lack of certificate of stock from the
Securities and Exchange Commission
d. The incorporators or a certain number of
them are not residents of the Philippines
33. Which is not a limitation on proxies
a. Proxies must be in writing signed by the
stockholder or member and filed before the
BLAW 102 – LAW ON BUSINESS ORGANIZATION Page 3
scheduled meeting with the corporate
secretary
b. It is valid only for the meeting for which it is
intended
c. Directors or trustees can attend or vote by
proxy at board meetings
d. A continuing proxy must be for a period not
exceeding 5 years at any one time
34. Which is not an attribute of a corporation
a. It is an artificial being
b. It is created by agreement of stockholders
c. It has the right of succession
d. It has only the powers, attributes and
properties expressly authorized by law or
incident to its existence
35. The steps in the creation of a corporation are
a. Subscription, Incorporation, and Dissolution
b. Promotion, Incorporation, and Liquidation
c. Promotion, Incorporation, and Formal
organization and commencement of
business operations
d. Promotion, Subscription, and Formal
organization and commencement of
business operations
36. Who among is disqualified to be elected as a
director in a corporation
a. A person who violated a provision of the
Corporation Code, committed within 6 years
prior to the date of his election
b. A person who was charged with
imprisonment of 12 years
c. A person convicted by final judgment of an
offense punishable by imprisonment of
more than 6 years
d. All of the above
37. One which is so related to another corporation
that the majority of its directors can be elected
either, directly or indirectly, by such other
corporation.
a. Parent or holding corporation
b. Subsidiary Corporation
c. Quasi-corporation
d. Corporation by prescription.
38. Those corporators mentioned in the articles of
incorporation as originally forming and composing
the corporation and who executed and signed the
articles of incorporation as such..
a. Corporators
b. Stockholders
c. Members
d. Incorporators
39. This doctrine requires that a director who, by
virtue of his office, acquires for himself a business
which should belong to the corporation, thereby
obtaining profits to the prejudice of the corporation
should account to the corporation for all such profits
by refunding the same.
a. Director disloyalty doctrine
b. Corporate opportunity doctrine
c. Mandatory refund doctrine
d. Prejudicial opportunity doctrine
40. The following power of the board of directors
cannot be delegated to their subordinates:
a. Ministerial power
b. Discretionary power
c. Administrative power
d. Appraisal power
41 -45. The minimum votes required for the
approval of the following corporate acts:
41. to adopt by-laws
42. to elect directors or trustees
43. to dissolve the corporation
44. to remove directors or trustees
45. to increase or decrease capital
a. a majority of the board of directors or
trustees
b. 2/3 of the outstanding capital stock or of the
members entitled to vote
c. a majority of the outstanding capital stock or
of the members entitled to vote
d. a majority vote of the board of directors or
trustees and 2/3 of the outstanding capital
stock or of the members
46. Which of the following dividends cannot be
declared without the approval of the stockholders?
a. Cash dividends only
b. Stock dividends only
c. Other kinds of dividends
d. All kinds of dividends
47. The following positions cannot be held by one
person at the same time
a. President and Secretary
b. Treasurer and President
c. Secretary and Treasurer
d. Both A & B
e. Both B & C
ab. Both A & C
ac. Only A
ad. Only B
TRUE OR FALSE.
48. .The law governing private corporations in the
Philippines is embodied in Batas Pambansa
Blg, 86.
49. As a rule, a corporation is not liable for the
debts of its stockholders, and the latter are not
individually liable for the corporate debts.
50. A corporation is created by mere agreement of
the parties.
51. A partnership has no right of succession, while
a corporation has such right.
52. A corporation can only be dissolved with the
consent of the State.
53. Certificate of stock represents the right or
interest of a person in a corporation.
54. The rule is not “one stockholder, one vote” but
“one share, one vote” because representation
in a corporation is commensurate to extent of
ownership.
55. Common share of stock is so-called because it
is the stock which private corporations ordinarily
issue.
56. No par value shares are easily sold as the
public is more attracted to buy this kind of
shares.
57. Preferred shares may be issued only with a
stated par value.
58. Treasury shares may be issued only when
expressly so provided in the articles of
incorporation.
59. Notice of any meeting may be waived,
expressly or impliedly by any stockholder or
member.
60. The right to act as a corporation is a natural
right.
61. A corporation can be an incorporator of another
corporation.
62. The 25% subscription and the 25% paid-up
capital is required not only during the
incorporation period but also in case of increase
of the authorized capital stock.
63. A corporation created by special law has no
articles of incorporation.
64.. A corporation’s right to use its corporate and
trade name is a right in rem.
65 .A corporation commences to have juridical
personality and legal existence from the
moment the Securities and Exchange
Commission issues to the incorporators a
certificate of stock under its official seal.
66 .Contracts between a corporation and third
persons must be made by or under the
authority of its stockholders.
67. Directors or trustees can bind the corporation
only by action taken at a board meeting.
68. In a corporation sole, there is no board of
directors or trustees.
69. There is a prohibition in the law against a
stockholder being a director or officer of two or
78. The participation of each stockholder in the
earnings of the corporation is based on his total
subscription and not the amount paid by him.
79. Ultra vires acts are acts which are within the
conferred powers of a corporation or the
purposes for which it is created.
80. Until repealed, a by-law is a continuing rule for
the government of the corporation and the
individuals composing it.
81. Directors or trustees can attend or vote by
proxy at board meetings.
82. In a voting trust agreement, a stockholder of a
stock corporation parts with the voting power
only but retains the beneficial ownership of the
stock.
83 Honorary membership in a business corporation
is allowed by law.
84. A stock becomes delinquent upon failure of the
holder to pay the unpaid subscription or
balance thereof within 30 days from the date
specified in the contract of subscription.
85. Corporations which are vested with public
interest are not allowed to be incorporated as a
close corporation.
86. A dissolved corporation continues to exist but
only for a limited purpose and for a limited time.
87. A corporation may properly pay dividends from
accumulated surplus from previous years
although it did not realize any profit in the
current year.
88. A corporation can properly pay dividends if it
realized profit in the current year even if it still
