No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

Revised Corporation Code (Part Two)

1. It refers to the rules of action adopted by a corporation for its internal government and for the
regulation of conduct, and it prescribes the rights and duties of its stockholders or members
towards itself and among themselves in reference to the management of its affairs.
a. By-laws
b. Articles of incorporation
c. Certificate of registration
d. Annual report

2. What is the period for submission of original corporate by-laws?

a. Within 10 days from the issuance by SEC of certificate of registration
b. Within 20 days from the issuance by SEC of certificate of registration
c. Within 30 days from the issuance by SEC of certificate of registration
d. At the same time of filing of original articles of incorporation

3. What is the required vote for approval of original corporate by-laws to be attached to the articles
of incorporation?
a. It shall be approved and signed by majority of the incorporators.
b. It shall be approved and signed by majority of subscribers.
c. It shall be approved and signed by all incorporators.
d. It shall be approved and signed by 2/3 of the incorporators.

4. In the absence of valid delegation to the board of directors, what is the required vote for
amendment of corporate by-laws?
a. At least majority vote of the board of directors or trustees and approval by at least
majority vote of the outstanding capital stock or at least majority of members
b. At least majority vote of the board of directors or trustees and approval by at least 2/3
vote of the outstanding capital stock or at least 2/3 of members
c. At least 2/3 vote of the board of directors or trustees and approval by at least majority
vote of the outstanding capital stock or at least majority of members
d. At least 2/3 vote of the board of directors or trustees and approval by at least 2/3 vote of
the outstanding capital stock or at least 2/3 of members

5. What is the required vote for delegation by the stockholders to the board of directors or trustees
of the exclusive power to amend corporate by-laws?
a. At least majority of the outstanding capital stock or at least majority of the members
b. At least 2/3 of the outstanding capital stock or at least 2/3 of the members
c. At least 3/4 of the outstanding capital stock or at least 3/4 of the members
d. At least 25% of the outstanding capital stock or at least 25% of the members

6. What is the required vote for revocation by the stockholders of the delegated power to board of
directors or trustees to exclusively amend corporate by-laws?
a. At least majority of the outstanding capital stock or at least majority of the members
b. At least 2/3 of the outstanding capital stock or at least 2/3 of the members
c. At least 3/4 of the outstanding capital stock or at least 3/4 of the members
d. At least 25% of the outstanding capital stock or at least 25% of the members

7. What is the required vote for amendment of corporate by-laws if there is valid stockholders’
delegation to the board of directors or trustees of the exclusive power to amend corporate by-
laws?
a. At least majority of the board of directors or trustees
b. At least 2/3 of the board of directors or trustees
c. At least 3/4 of the board of directors or trustees
d. At least 25% of the board of directors or trustees

1|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

8. Unless otherwise provided in Revised Corporation Code, who shall exercise the corporate powers,
conduct all business, and control all properties of the corporation?
a. Board of directors or trustees
b. General assembly
c. Executive committee
d. Stockholders’ assembly

9. Which combination of governing body of corporation is incorrect?

a. Stock Corporation – Board of Directors
b. Nonstock corporation – Board of Trustees
c. Corporation sole – Trustee
d. One Person Corporation – Single Stockholder
e. Nonstock Nonprofit Educational Institution – Board of Elders

10. Which combination of corporate board is incorrect?

a. Stock corporation – 1 to 15
b. Ordinary nonstock corporation – 1 but may exceed 15
c. Nonstock non-profit educational institution – 5 or 10 or 15
d. Corporation sole – One
e. One Person Corporation – Single Stockholder
f. Close corporation – 20

11. Which combination of term of office of members of the board of corporation is incorrect?
a. Stock corporation – one year
b. Ordinary nonstock corporation – three years
c. Nonstock non-profit educational institution – five years
d. Corporation sole – not applicable
e. One Person Corporation – not applicable
f. Close corporation – two years

12. This period is not part of the term of members of the board of a corporation. This is the period
after the expiration of the term of office of director or trustee until his successor is elected and
qualified.
a. Tenure
b. Term
c. Holdover period
d. Condition

13. Which of the following is not a qualification of members of board of directors or trustees of a
corporation?
a. He must own at least one share of the capital stock of the corporation or he must be a
member.
b. He must be of legal age.
c. He must be a resident of the Philippines.
d. The number of directors, which shall not be more than fifteen (15) or the number of
trustees which may be more than fifteen (15).
e. Compliance with the required minimum ownership of Filipino or maximum ownership of
foreigners in industries reserved to Filipinos

14. He is a person who, apart from shareholdings and fees received from the corporation, is
independent of management and free from any business or other relationship which could, or
could reasonably be perceived to materially interfere with the exercise of independent judgment
in carrying out the responsibilities as a director.
a. Independent director
b. Provisional director
c. Receiver
d. Rehabilitator

2|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

15. What is the minimum number of board of directors in corporations vested with public interest?
a. At least 10% of the board
b. At least 20% of the board
c. At least 25% of the board
d. At least 30% of the board

16. The board of the following corporations vested with public interest shall have independent
directors constituting at least twenty percent (20%) of such board, except
a. Corporation whose securities are registered with SEC, corporations listed with an
exchange (PSE)
b. Public Corporation - Corporation with assets of at least P50,000,000 and having 200 or
more shareholders, each holding at least 100 shares of a class of its equity shares
c. Banks and quasi-banks, nonstock savings and loan associations, pawnshops, corporations
engaged in money service business, preneed, trust and insurance companies, and other
financial intermediaries
d. Other corporations engaged in business vested with public interest similar to the above,
as may be determined by the SEC
e. Close corporation

17. What is the maximum period of disqualification of a director for conviction of crimes provided in
the Revised Corporation Code?
a. One year from conviction
b. Two years from conviction
c. Three years from conviction
d. Five years from conviction

18. The following are the crimes the conviction of which will result to disqualification of a director,
except
a. Offense punishable by imprisonment for a period exceeding six years
b. Violation of Revised Corporation Code of the Philippines
c. Violation of Securities Regulation Code
d. Administrative liable for an offense involving fraudulent acts
e. Conviction by a foreign court or equivalent foreign regulatory for acts, violations or
misconduct similar to above
f. Jaywalking

19. When the founders’ shares have exclusive right to elect the members of board of directors, who
has the right to nominate any director who possesses all of the qualifications and none of the
disqualifications set forth in the Revised Corporation Code?
a. Founders’ shareholders
b. Common shareholders
c. Preference shareholders
d. Redeemable preference shareholders

20. Which shares of stocks may participate in the election of board of directors?
a. Common shares
b. Nonvoting preferred shares
c. Nonvoting redeemable preference shares
d. Treasury shares

21. What is the quorum for validity of meeting of stockholders/members for election of members of
the board of directors/trustees?
a. At least majority of the outstanding capital stock or members
b. At least 1/3 of the outstanding capital stock or members
c. At least 2/3 of the outstanding capital stock or members
d. At least ¾ of the outstanding capital stock or members

3|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

22. Which shares of stocks are considered outstanding for purposes of computation of outstanding
capital stock?
a. Fully paid shares and subscribed shares
b. Treasury shares
c. Delinquent shares
d. All of the above

23. Which of the following nominees shall be declared elected as member of the Board of Directors
or Trustees?
a. The nominees for directors or trustees receiving the highest number of votes
b. The nominees for directors or trustees receiving the majority of outstanding capital stock
or members
c. The nominees for directors or trustees receiving the 2/3 of outstanding capital stock or
members
d. The nominees for directors or trustees receiving the 25% of outstanding capital stock or
members

24. ABC Incorporated has 100 outstanding common stocks. It has 9 sits in the board of directors.
What is the minimum number of common stocks to obtain one guaranteed sit in the Board of
Directors?
a. At least 9 shares
b. At least 10 shares
c. At least 11 shares
d. At least 12 shares

25. Which of the following statements about election of board of directors in stock corporation is
correct?
a. In stock corporations, stockholders entitled to vote shall have the right to vote the
number of shares of stock standing in their own names in the stock books of the
corporation at the time fixed in the bylaws or where the bylaws are silent at the time of
the election.
b. The said stockholder may: (a) vote such number of shares for as many persons as there
are directors to be elected; (b) cumulate said shares and give one (1) candidate as many
votes as the number of directors to be elected multiplied by the number of shares owned;
or (c) distribute them on the same principle among as many candidates as may be seen
fit.
c. The total number of votes cast shall not exceed the number of shares owned by the
stockholders as shown in the books of the corporation multiplied by the whole number of
directors to be elected.
d. Delinquent and treasury stocks are allowed to vote and be voted.

26. As a general rule, what is the mode of voting in election of board of directors of stock corporation?
a. Straight voting
b. Cumulative voting
c. Variation of straight and cumulative voting
d. None of the above

27. What is the manner of voting in election of board of trustees of nonstock corporation?
a. Unless otherwise provided in the articles of incorporation or in the bylaws, members of
nonstock corporations may cast as many votes as there are trustees to be elected but
may not cast more than one (1) vote for one (1) candidate.
b. Unless otherwise provided in the articles of incorporation or in the bylaws, members of
nonstock corporations may cast as only one vote.
c. Unless otherwise provided in the articles of incorporation or in the bylaws, members of
nonstock corporation may use cumulative voting.
d. Unless otherwise provided in the articles of incorporation or in the bylaws, members of
nonstock corporation may cast 10 votes.

4|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

28. How many days from the date of election of board of directors shall the secretary or any other
officer of the corporation submit to the SEC, the names, nationalities, shareholdings, and
residence addresses of the directors, trustees and officers elected?
a. Within 30 days after the election
b. Within 10 days after the election
c. Within 20 days after the election
d. Within 40 days after the election

29. How many days shall the non-holding of elections of board of directors and the reasons therefor
be reported to SEC?
a. Within 30 days from the date of the scheduled election
b. Within 10 days from the date of the scheduled election
c. Within 20 days from the date of the scheduled election
d. Within 40 days from the date of the scheduled election

30. In case of non-holding of election of board of directors, what shall be the new date for the new
election of board of directors?
a. not be later than 60 days from the scheduled date of election
b. not be later than 50 days from the scheduled date of election
c. not be later than 40 days from the scheduled date of election
d. not be later than 30 days from the scheduled date of election

31. How many days shall the secretary or director or trustee or officer of the corporation report in
writing the death, resignation, abandonment or disqualification of a director, trustee or officer of
a corporation to SEC?
a. within 7 days from knowledge thereof
b. within 6 days from knowledge thereof
c. within 5 days from knowledge thereof
d. within 10 days from knowledge thereof

32. What is the required vote for removal of member of board of directors or trustees?
a. By vote of the stockholders holding or representing at least two-thirds (2/3) of the
outstanding capital stock (common stocks only), or in a nonstock corporation, by a vote
of at least two-thirds (2/3) of the member entitled to vote.
b. By vote of the stockholders holding or representing at least majority of the outstanding
capital stock (common stocks only), or in a nonstock corporation, by a vote of at least
majority of the member entitled to vote.
c. By vote of the stockholders holding or representing at least (3/4) of the outstanding
capital stock (common stocks only), or in a nonstock corporation, by a vote of at least
(3/4) of the member entitled to vote.
d. By vote of the stockholders holding or representing at least (1/3) of the outstanding
capital stock (common stocks only), or in a nonstock corporation, by a vote of at least
(1/3) of the member entitled to vote.

33. In which meeting shall the removal of a director or trustee take place?
a. Regular meeting of stockholders/members
b. Special meeting of stockholders/members
c. Either a or b
d. Neither a nor b

34. A special meeting of the stockholders or members for the purpose of removing any director or
trustee must be called by whom after he was ordered?
a. Corporate secretary
b. Corporate president
c. Corporate treasurer
d. Chairman of the board

5|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

35. Who has the authority to order the calling of special meeting of the stockholders or members for
the purpose of removing any director or trustee?
a. Corporate secretary
b. Corporate president
c. Corporate treasurer
d. Chairman of the board

36. What is the required vote for the written demand of stockholders or members to be acted upon
by the corporate secretary and call the special meeting of the stockholders or members for the
purpose of removing any director or trustee?
a. stockholders representing or holding at least a majority of the outstanding capital stock,
or a majority of the members entitled to vote
b. stockholders representing or holding at least a 2/3 of the outstanding capital stock, or a
2/3 of the members entitled to vote
c. stockholders representing or holding at least a 1/3 of the outstanding capital stock, or a
1/3 of the members entitled to vote
d. stockholders representing or holding at least a 3/4 of the outstanding capital stock, or a
3/4 of the members entitled to vote

37. Removal of a director or trustee may be with or without cause: Provided, That removal without
cause may not be used to deprive minority stockholders or members of which right?
a. Preemptive right
b. Appraisal right
c. Right of representation to which they may be entitled under the law
d. Right of first refusal

38. When may the Board of Directors remove a member of board of directors?
a. When a member of the board of directors is disqualified
b. When a member of the board of directors represents the majority interest
c. When a member of the board of directors represents the minority interest
d. None of the above

39. How may SEC order the removal of a member of board of directors or trustee who is disqualified
or, or whose disqualification arose or is discovered subsequent to an election?
a. Moto proprio
b. Upon verified complaint
c. Either a or b
d. Neither a nor b

40. What is the legal implication if the board of directors or trustees who, with knowledge of the
disqualification of a member of the board, failed to remove such director or trustee?
a. The SEC may impose sanctions on the board of directors or trustees.
b. The SEC cannot remove the disqualified director or trustee.
c. The SEC cannot impose sanctions on the board of directors or trustees.
d. None of the above

41. The following are the reasons of vacancy in the board of directors which will allow majority of the
remaining directors with quorum to fill up the vacancy, except
a. Death
b. Resignation
c. Abandonment
d. Disqualification
e. Removal

42. The following are the reasons of vacancy in the board of directors which will not allow majority of
the remaining directors with quorum to fill up the vacancy, except
a. Removal
b. Expiration of term
c. Increase in sits
d. Disqualification

6|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

43. There are 15 sits in the Board of Directors of ABC Incorporated. 8 directors died due to Covid.
How shall the vacant sits be filled up?
a. By plurality vote of outstanding common stockholders
b. By majority vote of the remaining directors
c. Either a or b
d. Neither a nor b

44. There are 15 sits in the Board of Directors of ABC Incorporated. 4 sits are vacant due to
disqualification, death, resignation and abandonment of office. How may the vacant sits be filled
up?
a. By plurality vote of outstanding common stockholders
b. By majority vote of the remaining directors
c. Either a or b
d. Neither a nor b

45. There are 14 sits in the Board of Directors of ABC Incorporated. 3 sits are vacant due to removal,
expiration of term and increase in sits. How shall the vacant sits be filled up?
a. By plurality vote of outstanding common stockholders
b. By majority vote of the remaining directors
c. Either a or b
d. Neither a nor b

46. There are 15 sits in the Board of Directors of ABC Incorporated. 2 sits are vacant due to removal
and resignation. How shall the vacant sits be filled up?
a. By plurality vote of outstanding common stockholders
b. By majority vote of the remaining directors
c. Either a or b
d. The vacancy due to removal shall be filled up by plurality vote of outstanding common
stockholder while the vacancy due to resignation may be filled up either by plurality vote
of outstanding common stockholders or by majority vote of the remaining directors.

47. When the vacancy in the board of directors is due to term expiration, when shall the election of
board of directors to fill such vacancy be held?
a. No later than the day of such expiration
b. Day after the expiration of term
c. Within 10 days after the expiration of term
d. Within 20 days after the expiration of term

48. When the vacancy in the board of directors or trustees arises as a result of removal by
stockholders or members, when shall the election of board of directors to fill such vacancy be
held?
a. It may be held on the same day of the meeting authorizing the removal.
b. Within 10 days from the removal
c. Within 20 days from the removal
d. Within 30 days from the removal

49. When the vacancy in the board of directors or trustees arises as a result of disqualification, death,
abandonment, or resignation, when shall the election of board of directors to fill such vacancy be
held?
a. not later than forty-five (45) days from the time the vacancy arose.
b. not later than 30 days from the time the vacancy arose.
c. not later than 20 days from the time the vacancy arose.
d. not later than 10 days from the time the vacancy arose.

50. When shall directorship or trusteeship by reason of an increase in the number of directors or
trustees be filled up?
a. In an election at a regular or at a special meeting of stockholders or members duly called
for the purpose of filling up such vacancy
b. In the same meeting authorizing the increase of directors or trustees if so stated in the
notice of the meeting
c. Either a or b
d. Neither a nor b

7|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

51. He refers to a director or trustee elected to fill the vacancy and shall serve only for the unexpired
term of the predecessor in office.
a. Replacement director or trustee
b. Successor director or trustee
c. New director or trustee
d. Succeeding director or trustee

52. It refers to a board created when the vacancy prevents the remaining directors from constituting
a quorum and emergency action is required to prevent grave, substantial, and irreparable loss or
damage to the corporation.
a. Emergency board
b. Temporary board
c. Executive committee
d. Special committee

53. In emergency board of the corporation, who may be temporarily elected as designated director
or trustee?
a. Common stockholders
b. Officers of the corporation
c. Preferred stockholders
d. SEC officers

54. What is the required vote to temporarily elect an officer of the corporation to fill up the vacancy
in order to constitute a quorum and create an emergency board?
a. Unanimous vote of the remaining directors or trustees
b. Majority vote of the remaining directors or trustees
c. 2/3 vote of the remaining directors or trustees
d. ¾ vote of the remaining directors or trustees

55. ABC Incorporation has 15 sits in the board of directors. 8 directors died. An emergency action
emergency action is required to prevent grave, substantial, and irreparable loss or damage to the
corporation. May the remaining seven directors to fill one vacancy?
a. No because there is no quorum.
b. Yes provided unanimous vote of seven directors is given to temporarily elect an officer of
a corporation as designated director.
c. No unless the director to be elected is a stockholder.
d. Yes provided majority vote of seven directors is given to elect a stockholder as a director.

56. Within how many days shall the corporation notify SEC of creation of emergency board stating
therein the reason for its creation?
a. Within 3 days from the creation of the emergency board
b. Within 5 days from the creation of the emergency board
c. Within 7 days from the creation of the emergency board
d. Within 10 days from the creation of the emergency board

57. Which of the following statements regarding emergency board is correct?

a. The action by the designated director or trustee shall be limited to the emergency action
necessary.
b. The term of designated director or trustee shall cease within a reasonable time from the
termination of the emergency or upon election of the replacement director or trustee,
whichever comes earlier.
c. Both a and b
d. Neither a nor b

58. In the absence of any provision in the bylaws fixing their compensation, what may be received
by directors or trustees in such capacity?
a. Compensation or salary
b. Reasonable per diems or honoraria
c. Neither a nor b
d. Both a and b

8|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

59. What is the required vote for granting compensation or salary to members of the board of
directors or trustees?
a. At least majority vote of the outstanding common stocks or at least majority of members
excluding the directors or trustees
b. At least 2/3 vote of the outstanding common stocks or at least 2/3 of members excluding
the directors or trustees
c. At least 3/4 vote of the outstanding common stocks or at least 3/4 of members excluding
the directors or trustees
d. At least 1/4 vote of the outstanding common stocks or at least 1/4 of members excluding
the directors or trustees

60. What is the maximum limit of compensation or salary of members of board of directors?
a. Not exceeding 10% of net income before tax of the corporation during the preceding
year
b. Not exceeding 10% of net income before tax of the corporation during the succeeding
year
c. Not exceeding 10% of net income before tax of the corporation during the current year
d. Not exceeding 10% of net income after tax of the corporation during the preceding year

61. Which of the following statements regarding compensation or salary of directors or trustees is
correct?
a. Directors or trustees shall not participate in the determination of their own per diems or
compensation.
b. Corporations vested with public interest shall submit to their shareholders and to the SEC,
an annual report of the total compensation of each of their directors or trustees.
c. Both a and b
d. Neither a nor b

62. How shall the executive committee of a corporation be created?

a. It must be created only by virtue of provision in the by-laws.
b. It must be created only by virtue of provision in the articles of incorporation.
c. It must be created only by virtue of provision in the board resolution.
d. It must be created only by virtue of provision in annual report.

63. What is the membership of executive committee?

a. It must consist of at least three (3) members of the board of directors.
b. It must consist of at least five (5) members of the board of directors.
c. It must consist of at least three (3) common stockholders.
d. It must consist of at least five (5) preferred stockholders.

64. The following powers cannot be delegated by the board of directors to executive committee,
except
a. Filling up of vacancy in the board of directors
b. Amendment or repeal of by-laws or adoption of new by-laws
c. Approval of corporate acts requiring approval or ratification by stockholders
d. Amendment of term which is not amendable or repealable
e. Distribution or declaration of any time of dividends including cash dividends, property
dividends, scrip dividends and stock dividends.
f. Selection of major supplier

65. Which committee may be created by the board of directors by mere board resolution?
a. Special committees of temporary or permanent nature
b. Executive committee
c. Both a and b
d. Neither a nor b

66. What is the quorum for validity of meeting of Board of Directors for ordinary act of management
or act of administration?
a. At least majority of the directors as stated in the Articles of Incorporation
b. At least majority of the present directors in a meeting with quorum
c. At least majority of filled up sits in the board of directors
d. At least majority of present directors even without quorum

9|P a g e Atty. Reginald Laco, CPA, REB, J

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

67. What is the required vote for approval of act of management or act of administration in a
corporation?
a. At least majority of the directors as stated in the Articles of Incorporation
b. At least majority of the present directors in a meeting with quorum
c. At least majority of filled up sits in the board of directors
d. At least majority of present directors even without quorum

68. This principle means that the decision of the board of directors on matters of management
cannot be changed by the court unless such management decision is ultra vires or destructive of
the interest of minority stockholders. Meaning, the decision of the board of directors regarding
act of management or act of administration is supreme.
a. Limited liability rule
b. Business judgment rule or doctrine of management prerogative
c. Doctrine of separate personality
d. Doctrine of piercing the veil of corporate fiction

69. How many votes does a director or trustee have for the act of management and election of
corporate officer?
a. One vote
b. Number of shares held
c. Number of shares held multiplied by number of directors
d. Number of directors

70. How may the members of board of directors or trustees attend the meeting?
a. Personally
b. Thru a proxy
c. Either a or b
d. Neither a nor b

71. What is the quorum for validity of meeting of Board of Directors for election of corporate officers?
a. At least majority of the directors as stated in the Articles of Incorporation
b. At least majority of the present directors in a meeting with quorum
c. At least majority of filled up sits in the board of directors
d. At least majority of present directors even without quorum

72. What is the required vote for election of corporate officers?

a. At least majority of the directors as stated in the Articles of Incorporation
b. At least majority of the present directors in a meeting with quorum
c. At least majority of filled up sits in the board of directors
d. At least majority of present directors even without quorum

73. The following are the qualifications of corporate president, except

a. He must be a stockholder.
b. He must be a director.
c. He must be neither secretary nor treasurer.
d. He must be a resident-citizen of the Philippines.

74. The following are the qualifications of corporate secretary, except

a. He must be a Filipino national.
b. He must be a resident of the Philippines.
c. He must not be a president of the corporation.
d. He must be a stockholder and director of the corporation.

75. The following are the qualifications of corporate treasurer, except

a. He must be a Filipino national.
b. He must be a resident of the Philippines.
c. He must not be a president of the corporation.
d. He must be of legal age.

10 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

76. What type of corporation must elect a compliance officer?

a. Corporation vested with public interest
b. Close corporation
c. Nonstock corporation
d. One Person Corporation

77. To whom shall the compliance officer directly report?

a. Audit Committee, an executive committee
b. Election Committee, an executive committee
c. Finance Committee, an executive committee
d. Operation Committee, an executive committee

78. Which of the following officers are required to be stockholders-directors of the corporation?
a. Secretary and Treasurer
b. Compliance Officer and Vice President
c. President and Chairman of the Board
d. Controller and Chief Financial Officer

79. The following are the three-fold duties of directors of corporation, except
a. Duty of loyalty
b. Duty of obedience
c. Duty of diligence
d. Duty of independence

80. Who among the following shall be considered within the ambit of self-dealing director, trustee or
officer concept?
a. Director, trustee or officer of the corporation
b. Spouse of the director, trustee or officer of the corporation
c. Relatives of director, trustee or officer within fourth civil degree of consanguinity or
affinity
d. All of the above

81. What is the status of contract of a corporation with self-dealing director, trustees or officers or
their spouses or relatives within the fourth civil degree of consanguinity or affinity?
a. Voidable on the part of the corporation
b. Voidable on the part of the self-dealing director, trustee or officer
c. Void on the part of the corporation
d. Unenforceable on the part of the self-dealing director, trustee or officer

82. Which of the following scenarios involving contract with self-dealing director need not be ratified
by stockholders assuming there are 15 sits in the Board of Directors?
Present Directors including SDD Approving Directors including SDD
a. 8 6
b. 9 5
c. 11 6
d. 9 6

83. What is the required ratification vote in case of voidable contract involving self-dealing director or
trustee?
a. At least 2/3 of the outstanding common stockholders or at least 2/3 of members with
voting rights
b. At least majority of the outstanding common stockholders or at least majority of
members with voting rights
c. At least 1/3 of the outstanding common stockholders or at least 1/3 of members with
voting rights
d. At least 3/4 of the outstanding common stockholders or at least 3/4 of members with
voting rights

11 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

84. Assuming there are 3 independent directors and in case of corporations vested with public
interest, material contracts involving self-dealing director must be approved by
a. Unanimous vote of all independent directors (3 out of 3)
b. At least majority vote of all independent directors (2 out of 3)
c. At least one independent director (1 out of 3)
d. There is no such requirement.

85. What is the status of contract between corporations with interlocking directors?
a. Generally valid and binding
b. Generally voidable
c. Generally unenforceable
d. Generally void

86. When is the interest of interlocking director in a corporation considered substantial?

a. When it is more than 20%
b. When it is 20% or more
c. When it is more than 50%
d. When it is 50% or more

87. When the interlocking director has nominal interest (20% or less) in one corporation and
substantial interest (more than 20%) in another corporation, what is the status of the contract
between the two corporations with interlocking director?
a. Voidable on the corporation with nominal interest
b. Voidable on the corporation with substantial interest
c. Void on the corporation with nominal interest
d. Void on the corporation with substantial interest

88. What is the required ratification vote in case of voidable contract between corporations with
interlocking director?
a. At least 2/3 of the outstanding common stockholders
b. At least majority of the outstanding common stockholders
c. At least 1/3 of the outstanding common stockholders
d. At least 3/4 of the outstanding common stockholders

89. Where a director, by virtue of such office, acquires a business opportunity which should belong to
the corporation, thereby obtaining profits to the prejudice of such corporation, the director must
account for and refund to the latter all such profits. What is the required vote to ratify this
disloyalty of a director?
a. At least 2/3 of the outstanding common stockholders
b. At least majority of the outstanding common stockholders
c. At least 1/3 of the outstanding common stockholders
d. At least 3/4 of the outstanding common stockholders

90. It means that if the director acquired a business opportunity that should belong to the
corporation, he must account to the corporation for all the profits he obtained unless his act was
ratified by the stockholders representing at least two-thirds of the outstanding capital stock.
Under such doctrine, a director of the corporation is prohibited from competing with the
business in which the corporation is engaged in, as otherwise, he would be guilty of disloyalty,
where profits he may realize will have to go to the corporate funds, except if the disloyal act is
ratified.
a. Doctrine of corporate opportunity
b. Doctrine of management prerogative
c. Doctrine of lifeblood
d. Doctrine of place of incorporation test

12 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

91. Which of the following statements regarding the duty of loyalty of a director is correct?
a. A director, trustee or officer shall not attempt to acquire, or any interest adverse to the
corporation in respect of any matter which has been reposed in them in confidence, and
upon which, equity imposes a disability upon themselves to deal in their own behalf.
b. A director who acquired interest adverse to the corporation in respect of any matter
which has been reposed in him in confidence shall be liable as a trustee for the
corporation and must account for the profits which otherwise would have accrued to the
corporation.
c. Both a and b
d. Neither a nor b

92. Directors or trustees are not personally liable for the obligations of the corporation. However, the
following are the exceptional cases whereby they are solidarily liable for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons, except
a. When they willfully and knowingly vote for or assent to patently unlawful acts of the
corporation
b. When they are guilty of gross negligence or bad faith in directing the affairs of the
corporation
c. When they acquire any personal or pecuniary interest in conflict with their duty as such
directors or trustees
d. When they acted bona fide or in good faith in directing the affairs of the corporation.

93. Which of the following acts could be ratified by a vote representing at least 2/3 of the
outstanding capital stock?
a. Acquisition of a business opportunity which should belong to the corporation thereby
acquiring profit which should belong to the corporation.
b. Acts of directors or trustees who are guilty of gross negligence or bad faith in directing
the affairs of the corporation.
c. An attempt by a director to acquire an actual acquisition of any interest adverse to that
of the corporation in respect of any matter reposed upon in confidence.
d. Acts of directors constituting an approval of patently unlawful acts.

94. What degree of diligence shall be observed by the board of directors in managing the affairs of
the corporation?
a. Extraordinary diligence
b. Diligence of a good father of a family
c. No diligence
d. Absolute diligence

95. In the absence of place set in the corporate by-laws, where shall the meeting of board of
directors of corporation be held?
a. In or out of the Philippines
b. Within the city or municipality where the principal office of the corporation is located
c. Within the principal office of the corporation
d. Within the Philippines

96. In the absence of frequency set in the corporate by-laws, when shall the meeting of board of
directors of corporation be held?
a. At least weekly
b. At least monthly
c. At least quarterly
d. At least yearly

97. What is the minimum days of giving written notice or electronic notice to directors before the
scheduled regular or special meeting?
a. At least one day
b. At least two days
c. At least three days
d. At least five days

13 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

98. It means that each share shall be equal in all respects to every other share, except as otherwise
provided in the articles of incorporation and in the certificate of stock.
a. Doctrine of equality of shares
b. Doctrine of management prerogative
c. Doctrine of juridical personality
d. Doctrine of limited liability

99. The following stocks have no voting rights whatsoever, except

a. Treasury shares
b. Delinquent shares
c. Fractional shares
d. Escrow shares before the fulfilment of suspensive condition
e. Subscribed shares

100. How may the stockholders vote in the meeting of stockholders?

a. Personal voting
b. Through an agent or proxy
c. Through a trustee in voting trust agreement
d. Through remote communication or in absentia
e. Any of the above

101. It refers to a written authorization given by one person (stockholder) to another (agent)
so that the second can act for the first. He also refers to the agent or holder of authority or
person authorized by an absent stockholder or member to vote for him at a stockholders’
meeting.
a. Proxy
b. Trustee
c. Nominee
d. Alternate nominee

102. The following persons are not allowed to vote through a proxy and therefore must
personally attend the meeting, except
a. Members of the board of directors
b. Members of the board of trustees
c. Proxy of a stockholder or a member
d. Trustee of a voting trust agreement

103. The following are the requirements for validity of proxy, except
a. It shall be valid only for the meeting which is was intended unless classified as continuing
proxy.
b. It shall be in writing.
c. It shall be filed within reasonable time before the scheduled meeting with the corporate
secretary.
d. It shall be signed by the shareholder/member concerned.
e. It shall be valid and effective for a period of 5 years at any one time.
f. It shall be notarized.

104. What is the maximum term of a proxy at any one time?

a. One year
b. Two years
c. Three years
d. Five years

105. It refers to the agreement whereby stockholders (trustors) of a stock corporation confers
upon a trustee the right to vote and other rights pertaining to the shares and it should not be
used to circumvent the law against monopolies and illegal combinations in restraint of trade or
for fraud purposes.
a. Voting trust agreement
b. Proxy agreement
c. Special agreement
d. Board resolution

14 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

106. The following are the requirements of voting trust agreement for validity, except
a. It should be in writing.
b. It should be notarized.
c. It should specify the terms and conditions thereof.
d. It should be filed before the corporate secretary.
e. It shall be valid and effective for a period of 5 years at any one time.
f. It shall be registered with registry of deeds.

107. What is the status of voting trust agreement if certified copy of voting trust agreement is
not filed with the corporate secretary and SEC?
a. It is unenforceable and ineffective.
b. It is voidable.
c. It is rescissible.
d. It is void.

108. Except for a voting trust agreement executed pursuant to a loan covenant, what is the
maximum term of a voting trust agreement at any one time?
a. One year
b. Two years
c. Three years
d. Five years

109. The voting trust agreement filed with the corporation shall be subject to examination by
any stockholder of the corporation in the same manner as any other corporate book or record.
Who between the trustor or trustee of voting trust agreement may inspect the voting trust
agreement?
a. Trustor only
b. Trustee only
c. Both a and b
d. Neither a nor b

110. Which of the following statements about voting trust agreement is incorrect?
a. The trustee or trustees shall execute and deliver to the transferors, voting trust
certificates, which shall be transferable in the same manner and with the same effect as
certificates of stock.
b. Any other stockholder may transfer the shares to the same trustee or trustees upon the
term and conditions stated in the voting trust agreement, and thereupon shall be bound
by all the provisions of said agreement.
c. No voting trust agreement shall be entered into for purposes of circumventing the laws
against anti-competitive agreements, abuse of dominant position, anti-competitive
mergers and acquisitions, violation of nationality and capital requirements, or for the
perpetuation of fraud.
d. Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period. The voting trust certificates as well
as the certificate of stock in the name of the trustees shall thereby be deemed cancelled
and new certificates of stock shall be reissued in the name of the trustors.
e. The voting trustee or trustees cannot vote by proxy or in any manner authorized under
the bylaws unless permitted by the voting trust agreement.

15 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

111. The following are the differences between a proxy and voting trust agreement, except
a. As to need for notarization, proxy need not be notarized while voting trust agreement
must be notarized.
b. As to transfer of title, there is no transfer of title to proxy while there is transfer of title to
trustee.
c. As to manner of voting, the proxy must vote in person while the trustee may vote in
person or by proxy.
d. As to meeting to be attended, proxy can only act at a specified meeting if not continuing
proxy while trustee is not limited to act at any particular meeting.
e. As to revocability, proxy is revocable at any time while voting trust agreement is
irrevocable.
f. As to capacity, the proxy votes as an agent while the trustee votes as an owner.
g. As to eligibility as a director, proxy (agent) can become a director while trustee
(stockholder) cannot become a director.

112. How shall co-owners of co-owned shares of stocks vote?

a. By majority vote
b. By unanimous vote
c. By any co-owner
d. By 2/3 of the co-owner

113. When may a co-owner vote alone despite the absence of other co-owners of co-owned
shares of stocks?
a. When the certificate of stock provides “and/or”
b. When there is proxy or voting trust granted to a co-owner by the other co-owners
c. Either a or b
d. Neither a nor b

114. When may the stockholders or members vote through remote communication or in
absentia?
a. When so authorized in the by-laws
b. When authorized by a majority vote of the board of directors/trustees
c. Either a or b
d. Neither a nor b

115. Where shall the place of meeting of stockholders be held?

a. Generally in the principal office of the corporation as set forth in the Articles of
Incorporation except if it is not practicable, then anywhere in the city or municipality
where the Principal Office of the Corporation is located
b. Generally anywhere in the city or municipality where the principal office of the
corporation is located except if the principal office is more practicable
c. Place set in the bylaws except if not practicable then anywhere in the city or municipality
where the Principal Office of the Corporation is located
d. Anywhere in or out of the Philippines

116. In the absence of frequency stated in the by-laws, what is the frequency of regular
meeting of stockholders?
a. Daily
b. Weekly
c. Monthly
d. Annually

117. In the absence of date specified in the by-laws, what is the date of regular meeting of
stockholders?
a. Any date after April 15 as may be determined by the Board
b. Within 90 days after the end of fiscal year
c. April 15
d. Any date before April 15 as may be determined by the Board

16 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

118. What is the minimum days of giving written notice to Stockholders through electronic
mail or such other manner as the SEC shall allow under its guidelines before the regular meeting
of stockholders?
a. At least (21) days before the scheduled meeting
b. At least (11) days before the scheduled meeting
c. At least (31) days before the scheduled meeting
d. At least (41) days before the scheduled meeting

119. What is the minimum days of giving written notice to Stockholders through electronic
mail or such other manner as the SEC shall allow under its guidelines before the special meeting
of stockholders?
a. At least one week before the scheduled meeting
b. At least two weeks before the scheduled meeting
c. At least three weeks before the scheduled meeting
d. At least four weeks before the scheduled meeting

120. In the absence of longer period provided in the bylaws, what is the period for closure of
stock and transfer book prior to regular meeting?
a. At least (20) days before the schedule date of meeting
b. At least (10) days before the schedule date of meeting
c. At least (30) days before the schedule date of meeting
d. At least (40) days before the schedule date of meeting

121. In the absence of longer period provided in the bylaws, what is the period for closure of
stock and transfer book prior to special meeting?
a. At least (7) days before the schedule date of meeting
b. At least (14) days before the schedule date of meeting
c. At least (21) days before the schedule date of meeting
d. At least (28) days before the schedule date of meeting

122. Unless a different period is required under the bylaws, law or regulation, in case of
postponement of stockholders' or members' regular meetings, written notice thereof and the
reason therefor shall be sent to all stockholders or members of record
a. At least 2 weeks prior to the date of the meeting
b. At least 3 weeks prior to the date of the meeting
c. At least 4 weeks prior to the date of the meeting
d. At least 5 weeks prior to the date of the meeting

123. Unless the bylaws provide otherwise, what is the quorum for validity of meeting of
stockholders or members?
a. At least majority of the outstanding capital stock or at least majority of members
b. At least 2/3 of the outstanding capital stock or at least 2/3 of members
c. At least 3/4 of the outstanding capital stock or at least 3/4 of members
d. At least 1/3 of the outstanding capital stock or at least 1/3 of members

124. As a general rule, who shall preside in the meeting of directors, trustees, stockholders or
members unless the bylaws provide otherwise?
a. Chairman of the Board
b. President
c. Secretary
d. Treasurer

125. In the absence of the chairman of the board, who shall preside in the meeting of
directors, trustees, stockholders or members unless the bylaws provide otherwise?
a. President
b. Secretary
c. Treasurer
d. Compliance officer

17 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

126. May an improperly held meeting of stockholders or members result to valid business
transaction of a corporation?
a. No because of violation of due process.
b. Never.
c. No because of requirement of law.
d. Yes. All proceedings and any business transacted at a meeting of the stockholders or
members, if within the powers or authority of the corporation, shall be valid even if the
meeting is improperly held or called: Provided, That all the stockholders or members of
the corporation are present or duly represented at the meeting and not one of them
expressly states at the beginning of the meeting that the purpose of their attendance is
to object to the transaction of any business because the meeting is not lawfully called or
convened.

127. When are stockholders entitled to dividends?

a. When they are cumulative preference shares
b. Upon declaration of board of directors
c. When the corporation earns net income
d. When the corporation has unrestricted retained earnings

128. Which of the following shares are not entitled to dividends?

a. Fully paid shares
b. Subscribed shares which are not delinquent
c. Delinquent shares
d. Treasury shares

129. Which of the following is not a requirement when a stockholder exercises his right to
inspect the corporate books and records?
a. The right must be exercised during reasonable hours on business days.
b. The person demanding the right has not improperly used any information obtained
through any previous examination of the books and records of the corporation.
c. The demand is made in good faith or for legitimate purpose.
d. The stockholder must inspect the book personally and not through an authorized agent.

130. Which of the following is not a justifiable ground for denial of right to inspection of
corporate books and records by a stockholder?
a. To obtain information as to business secrets or to assist reveal business secrets
b. To secure business prospects or investment advertising list for the purpose of selling it to
an advertising agency
c. To find technical defects in corporate transactions in order to bring nuisance or strike
suits for purposes of blackmail or extortion
d. To obtain information intended to be published as to embarrass the company business
e. To seek the value of the business or his shares

131. Which remedy is not available to a stockholder if the denial of the right to inspect by the
corporation is unjustified?
a. File a petition for mandamus against the said corporate officer.
b. File an action for damages against the said corporate officer.
c. File a criminal action for violation of Corporation Code against the responsible officer.
d. File a civil action for annulment of subscription contract

132. How many days from the written request of stockholder or member shall the corporation
furnish the stockholder or member of its most recent financial statement?
a. Within 10 days from receipt of written request
b. Within 20 days from receipt of written request
c. Within 30 days from receipt of written request
d. Within 40 days from receipt of written request

18 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

133. When shall the board of directors or trustees present to stockholders or members a
financial report of the operations of the corporation for the preceding year, which shall include
financial statements, duly signed and certified in accordance with this Code, and the rules the
Commission may prescribe?
a. Regular meeting of stockholders or members
b. Special meeting of stockholders or members
c. Either a or b
d. Both a and b

134. What is the quantitative threshold so that the requirement of audited financial
statements be applicable to a corporation?
a. Total assets or liabilities of at least P600,000
b. Total assets or liabilities of at least P50,000
c. Net income of at least P100,000
d. Retained earnings of at least P20,000

135. If the total assets or total liabilities of the corporation are less than Six hundred thousand
pesos (₱600,000.00), or such other amount as may be determined appropriate by the
Department of Finance, who shall certify under oath the financial statements of the corporation?
a. Independent external auditor
b. Secretary and compliance officer
c. Treasurer and president
d. Auditor and finance officer

136. Which of the following books shall be kept and stored by the corporation in its principal
office?
a. The articles of incorporation and bylaws of the corporation and all their amendments;
b. The current ownership structure and voting rights of the corporation, including lists of
stockholders or members group structures, intra-group relations, ownership data, and
beneficial ownership.
c. The names and addresses of all the members of the board of directors or trustees and
the executive officers;
d. A record of all business transactions;
e. A record of the resolutions of the board of directors or trustees and of the stockholders
or members;
f. Copies of the latest reportorial requirements submitted to the Commission; and
g. The minutes of all meetings of stockholders or members, or of the board of directors or
trustees.
h. All of the above

137. Which of the following statements about the rules on right to inspect corporate books is
incorrect?
a. Corporate records, regardless of the form in which they are stored, shall be open to
inspection by any director, trustee, stockholder or member of the corporation in person
or by a representative at reasonable hours on business days, and a demand in writing
may be made by such director, trustee or stockholder at their expense, for copies of such
records or excerpts from said records.
b. The inspecting or reproducing party shall remain bound by confidentiality rules under
prevailing laws, such as the rules on trade secrets or processes under Republic Act No.
8293, otherwise known as the "Intellectual Property Code of the Philippines", as
amended, Republic Act No. 10173, otherwise known as the "Data Privacy Act of 2012"
Republic Act No. 8799, otherwise known as "The Securities Regulation Code", and the
Rules of Court.
c. A requesting party who is not a stockholder or member of record, or is a competitor,
director, officer, controlling stockholder or otherwise represents the interests of a
competitor shall have right to inspect or demand reproduction of corporate records.
d. Any stockholder who shall abuse the rights granted under this section shall be penalized
under Section 158 of this Code, without prejudice to the provisions of Republic Act No.
8293, otherwise known as the "Intellectual Property Code of the Philippines", as
amended, and Republic Act No. 10173, otherwise known as the "Data Privacy Act of
2012.

19 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

138. What is the liability of any officer or agent of the corporation who shall refuse to allow
the inspection and/or reproduction of records in accordance with the provisions of Revised
Corporation Code?
a. Civil liability for damages
b. Criminal liability punishable under Section 161 of Revised Corporation Code
c. Both a and b
d. Neither a nor b

139. What is the immediate remedy available to a stockholder or member if the corporation
denies or does not act on a demand for inspection and/or reproduction?
a. The aggrieved party may report such denial or inaction to the SEC within five (5) days
from receipt of such report, the SEC shall conduct a summary investigation and issue an
order directing the inspection or reproduction of the requested records.
b. SEC cannot order the inspection or reproduction of requested records.
c. The aggrieved party shall go to Supreme Court and file a special civil action of
mandamus.
d. The aggrieved party shall go to Barangay Conciliation Proceedings.

140. It refers to the right of shareholders to subscribe to all issues or disposition of shares of
any class in proportion to their present shareholdings unless denied in the articles of
incorporation. It is intended to protect both the proprietary and voting rights of a stockholder in a
corporation, since such proportionate interest determines his proportionate power to vote in
corporate affairs when the law gives the shareholders a right to affirm or deny board actions.
a. Pre-emptive right
b. Right of first refusal
c. Appraisal right
d. Right to inspect

141. What is the nature of pre-emptive right of stockholders of a corporation?

a. Common law right
b. Statutory right
c. Constitutional law right
d. Contractual right

142. In which of the following cases is preemptive right not available to stockholders?
a. Opening of unsubscribed shares
b. Increase in authorized capital stock
c. Reissuance of treasury shares
d. Shares to be issued in case of Initial Public Offering (IPO)

143. The following are the instances of issuance of shares where preemptive right is not
available, except
a. Shares to be issued to comply with laws requiring stock offering or minimum stock
ownership by the public such in the case of initial public offering (IPO)
b. To shares that are being reoffered by the corporation after they were initially offered
together with all the shares to the existing stockholders who initially refused them
c. Shares issued in good faith with approval of the stockholders holding 2/3 of the
outstanding capital stock in exchange for the property needed for corporate purposes
d. Shares issued, with approval of the stockholders holding 2/3 of the outstanding capital
stock, in payment of previously contracted debts of the corporation
e. Waiver of the right by the stockholder
f. In so far as the assignee is concerned, where the assignors have previously exercised
their pre-emptive rights to subscribe to new shares
g. When the pre-emptive right is denied in the articles of incorporation or amendment
thereto
h. In case of reissuance of treasury shares

144. In which type of corporation is preemptive right available?

a. Stock corporation
b. Nonstock corporation
c. Both a and b
d. Neither a nor b

20 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

145. What is the required vote for denial of pre-emptive right of stockholders?
a. At least majority of outstanding common stocks
b. At least 2/3 of outstanding common stocks
c. At least 1/3 of outstanding common stocks
d. At least ¾ of outstanding common stocks

146. In which document shall the pre-emptive right of stockholders be denied for its validity?
a. Articles of incorporation
b. Bylaws
c. Either a or b
d. Both a and b

147. It provides that a stockholder who may wish to sell or assign his shares must first offer
the shares to the corporation or to other existing stockholders of the corporation, under terms
and conditions which are reasonable; and that only when the corporation or the other
stockholders do not or fail to exercise their option, is the offering stockholder at liberty to dispose
of his shares to third parties.
a. Pre-emptive right
b. Right of first refusal
c. Appraisal right
d. Right to inspect

148. What is the nature of right of first refusal of stockholders of a corporation?

a. Common law right
b. Statutory right
c. Constitutional law right
d. Contractual right

149. It refers to the right of a dissenting stockholder to demand the payment of the fair value
of his shares after dissenting from a proposed corporate action involving a fundamental change
in the corporation in the cases provided by law when such right is available.
a. Pre-emptive right
b. Right of first refusal
c. Appraisal right
d. Right to inspect

150. The following are the grounds for the exercise of appraisal right of stockholders, except
a. Amendment to the articles of incorporation that has the effect of changing or restricting
the rights of shareholder, or of authorizing preference over those of outstanding shares
b. Investment of corporate funds in another corporation or in a purpose other than the
primary purpose and secondary purpose
c. Merger or consolidation of two or more corporations
d. Changing corporate term whether shortening or extending
e. Sale, encumbrance, pledge, mortgage or other disposition of all or substantially all of the
corporate property or assets
f. In a Close corporation, a stockholder may for any reason, compel the close corporation
to purchase his shares when the corporation has sufficient assets in its books to cover its
debts and liabilities exclusive of capital stock.
g. Increase or decrease of authorized capital stock

151. In which of the following cases is appraisal right available?

a. Incurring, creating or increasing bond indebtedness
b. Declaration of stock dividends
c. Amendment of bylaws
d. Extension of corporate term

152. What must be present in the corporate book of a corporation before a stockholder may
exercise his appraisal right?
a. Net income
b. Appropriated retained earnings
c. Unrestricted retained earnings
d. Net assets

21 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

153. How many days does a dissenting stockholder have to make a written demand for the
payment of the fair value of his shares in the exercise of appraisal right?
a. Within 10 days after the date on which the vote was taken
b. Within 20 days after the date on which the vote was taken
c. Within 30 days after the date on which the vote was taken
d. Within 40 days after the date on which the vote was taken

154. How many days must the withdrawing stockholders submit his certificate of stocks to the
corporation for notation of being dissenting?
a. Within 10 days from his written demand for the payment of fair value of his shares
b. Within 20 days from his written demand for the payment of fair value of his shares
c. Within 30 days from his written demand for the payment of fair value of his shares
d. Within 40 days from his written demand for the payment of fair value of his shares

155. What is the valuation of shares of stocks of a dissenting stockholder in the exercise of
appraisal right?
a. Fair value as of the day prior to the date on which the vote was taken, excluding any
appreciation or depreciation in anticipation of such corporate action
b. Fair value as of the day after to the date on which the vote was taken, excluding any
appreciation or depreciation in anticipation of such corporate action
c. Fair value as of the day prior to the date on which the vote was taken, including any
appreciation or depreciation in anticipation of such corporate action
d. Fair value as of the day after to the date on which the vote was taken, including any
appreciation or depreciation in anticipation of such corporate action

156. How many days from the determination by the Board of Appraisers of the fair value of
shares shall the corporation pay the dissenting stockholder?
a. Within 10 days from the determination of Board of Appraisers
b. Within 20 days from the determination of Board of Appraisers
c. Within 30 days from the determination of Board of Appraisers
d. Within 40 days from the determination of Board of Appraisers

157. Which of the following statements about appraisal right of a dissenting stockholder is
incorrect?
a. All rights accruing to dissenting shares shall be suspended from time of demand for
payment of the fair value of the shares until the abandonment of the corporate action.
b. Upon payment of the fair value of shares by the corporation, all the rights of dissenting
stockholders are terminated and not merely suspended.
c. Stockholder must transfer his shares to the corporation upon payment by the corporation
of the fair value shares.
d. Demand for payment or exercise of appraisal right may be withdrawn despite the
absence of consent of corporation.

158. The following are the instances when right to payment ceases thus the status of the
dissenting stockholder shall be restored, and all dividend distributions which would have accrued
on the shares shall be paid to the dissenting stockholder, except
a. The demand for payment is withdrawn by the stockholder with the consent of the
corporation.
b. The proposed corporate action is abandoned or rescinded by the corporation.
c. The proposed corporate action is disapproved by the Commission where such approval is
necessary.
d. The stockholder is not entitled to the appraisal right.
e. The stockholder is paid of fair value of shares.

159. It is an action brought by a stockholder against the corporation for direct violation of his
contractual rights. (Stockholder vs. Corporation)
a. Individual suit
b. Representative suit
c. Derivate suit
d. Corporate suit

22 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

160. It refers to an action brought by a person in his own behalf or on behalf of all similarly
situated. (Association of Stockholders vs. Corporation)
a. Individual suit
b. Representative suit
c. Derivate suit
d. Corporate suit

161. It refers to a suit brought by one or more stockholders or members in the name and on
behalf of the corporation to redress wrongs committed against it or to protect or vindicate
corporate rights, whenever the officials of the corporation refuse to sue or are the ones to be
sued or hold control of the corporation. The corporation is a necessary party to the suit. It is a
suit filed by a person who must be a shareholder to enforce a corporation’s cause of action.
(Stockholder in behalf of corporation vs. Board of Directors of Corporation)
a. Individual suit
b. Representative suit
c. Derivate suit
d. Corporate suit

162. The following are the requirements of derivative suit, except

a. The cause of action must belong to the corporation.
b. The petitioner or complainant must be a stockholder.
c. All administrative remedies available must be exhausted. (Remedy of last resort)
d. The suit must not be a nuisance or harassment suit.
e. Appraisal right must be available to the stockholder.

163. This means that a stockholder is personally liable for the financial obligations of the
corporation to the extent only of his unpaid subscription or that a stockholder’s liability for
corporate debts extends only up to the amount of his capital contribution to the corporation.
a. Doctrine of separate personality
b. Limited liability rule
c. Right of succession
d. Trust fund doctrine

164. It means that the assets of the corporations are considered trust fund reserved for
payment of liabilities to creditors of the corporation.
a. Doctrine of separate personality
b. Limited liability rule
c. Right of succession
d. Trust fund doctrine

165. The following are the instances of issuance of watered stocks, except
a. Issuance of shares without consideration – bonus share
b. issuance of shares as fully paid when the corporation has received a lesser sum of money
than its par or issued value – discount share
c. Issuance of shares for a consideration other than actual cash such as property or
services the fair valuation of which is less than its par or issued price
d. Issuance of stock dividend where there are no sufficient retained earnings or surplus to
justify it
e. Reissuance of treasury shares below par value

166. Who shall be solidarily liable to the corporation or its creditors for the issuance of
watered stocks equivalent to the difference between the value receive at the time of issuance of
the stock and the par or issued value of the same?
a. Director or officer of the corporation who consented to the issuance of stocks for a
consideration less than its par or issued value
b. Director or officer who consented to the issuance of stocks for the consideration other
than cash, valued in excess of its fair value
c. Director or officer who having knowledge of the insufficient consideration, does not file
written objection with the corporate secretary
d. Subscriber of the shares of stocks
e. Transferor and transferee of the said shares of stocks
f. All of the above

23 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

167. It an agreement between a corporation and a subscriber for the acquisition of unissued
shares of stocks in an existing corporation or a corporation still to be formed at a specified
amount.
a. Subscription agreement or contract
b. Contract of sales
c. Contract of lease
d. Contract of partnership

168. Which of the following is not a characteristic of subscription contract?

a. It is an indivisible contract.
b. It is a consensual contract
c. It is not covered by statute of fraud
d. It is an accessory contract.

169. What is the period of irrevocability of pre-incorporation subscription contract?

a. 1 month from the date of subscription but before submission to SEC
b. 2 months from the date of subscription but before submission to SEC
c. 3 months from the date of subscription but before submission to SEC
d. 6 months from the date of subscription but before submission to SEC

170. What are the instances when pre-incorporation subscription may be revoked by
subscriber?
a. All other subscribers must consent to the revocation
b. The corporation fails to incorporate within the six (6) months from the date of
subscription or within a longer period stipulated in the contract of subscription
c. Either a or b
d. Neither a nor b

171. What is the requirement before post-incorporation subscription contract may be

cancelled?
a. There must be unrestricted retained earnings.
b. There must be net income.
c. There must be net assets.
d. There must be appropriated retained earnings.

172. Which right is not available to subscriber of shares of stocks which are not yet delinquent?
a. Right to vote
b. Right to inspect corporate books
c. Right to certificate of stocks
d. Right to dividends

173. The following are valid consideration for issuance of shares of stocks as fully paid, except
a. Actual cash paid to the corporation
b. Property, tangible or intangible, actually received by the corporation and necessary or
convenient for its use and lawful purposes at a fair valuation equal to the par or issued
value of the stock issued
c. Labor performed for or services actually rendered to the corporation
d. Previously incurred indebtedness of the corporation
e. Amounts transferred from unrestricted retained earnings to stated capital
f. Outstanding shares exchanged for stocks in the event of reclassification or conversion
g. Shares of stock in another corporation
h. Other generally accepted form of consideration
i. Promissory note or Future services

174. Who shall make valuation of noncash consideration for issuance of shares of stocks?
a. The valuation thereof shall initially be determined by the stockholders or the board of
directors, subject to the approval of SEC.
b. The valuation shall be initially determined by SEC subject to approval of BIR.
c. The valuation shall be finally determined by stockholders or board of directors.
d. The valuation shall be finally determined by the court.

24 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

175. Which of the following statements regarding the rules of certificate of stocks and shares
of stocks is incorrect?
a. The capital stock of corporations shall be divided into shares for which certificates signed
by the president or vice president, countersigned by the secretary or assistant secretary,
and sealed with the seal of the corporation shall be issued in accordance with the bylaws.
b. Shares of stock so issued are personal property and may be transferred by delivery of
the certificate or certificates indorsed by the owner, his attorney-in-fact, or any other
person legally authorized to make the transfer.
c. No transfer, however, shall be valid, except as between the parties, until the transfer is
recorded in the books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or certificates, and the
number of shares transferred.
d. The Commission may require corporations whose securities are traded in trading markets
and which can reasonably demonstrate their capability to do so to issue their securities
or shares of stocks in uncertificated or scripless form in accordance with the rules of the
Commission.
e. Shares of stock against which the corporation holds any unpaid claim may be
transferable in the books of the corporation.

176. In case of subscription contract with stated maturity date, when shall the interest of
subscription contract start to accrue?
a. In the date for accrual stated in the subscription contract
b. In the date of delinquency of shares
c. From the date of call by board of directors
d. From the date of judicial demand by corporation

177. In case of subscription contract without stated maturity date, when shall the interest of
subscription contract start to accrue?
a. In the date for accrual stated in the subscription contract
b. In the date of delinquency of shares
c. From the date of call by board of directors
d. From the date of judicial demand by corporation

178. In the absence of stated rate in the subscription contract, what is the interest rate to be
accrued in the subscription contract?
a. Legal rate
b. Unconscionable rate
c. Immoral rate
d. Contra bonus rate

179. How many days shall lapse from the stated maturity date of subscription contract or the
date provided in the call of board of directors for the shares to be considered delinquent?
a. Upon lapsing of 10 days
b. Upon lapsing of 20 days
c. Upon lapsing of 30 days
d. Upon lapsing of 40 days

180. Which right is still available to delinquent shares?

a. Right to vote
b. Appraisal right
c. Preemptive right
d. Right to dividends

181. What legal remedies are available to corporation for delinquent shares?
a. Civil action by filing before a regular court an action to collect a sum of money
b. Sale of delinquent shares in public auction after proper publication
c. Either a or b
d. Neither a nor b

182. What is the required vote for public sale of delinquent shares?
a. At least majority of the directors as stated in the Articles of Incorporation

25 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

b. At least majority of the present directors in a meeting with quorum

c. At least majority of filled up sits in the board of directors
d. At least majority of present directors even without quorum

183. What is the period fixed by law for public sale of delinquent shares?
a. Not less than thirty (30) days nor more than sixty (60) days from the date the stocks
become delinquent
b. Not less than (10) days nor more than (20) days from the date the stocks become
delinquent
c. Not less than (20) days nor more than (40) days from the date the stocks become
delinquent
d. Not less than (100) days nor more than (200) days from the date the stocks become
delinquent

184. Which of the following statements regarding notice and publication of public sale of
delinquent shares is correct?
a. Notice of the sale, with a copy of the resolution, shall be sent to every delinquent
stockholder either personally, by registered mail, or through other means provided in the
bylaws.
b. The notice of the sale shall be published once a week for two (2) consecutive weeks in
newspaper of general circulation in the province or city where the principal office of the
corporation is located.
c. Both a and b
d. Neither a nor b

185. Who is the highest bidder in public sale of delinquent shares?

a. He refers to the bidder who is willing to pay the aggregate of the subscription balance,
interest on subscription and expenses of delinquency sale for the lowest number of
shares.
b. He refers to the bidder who is willing to pay the aggregate of the subscription balance,
interest on subscription and expenses of delinquency sale for the highest number of
shares.
c. He refers to the bidder who is willing to pay the aggregate of the subscription balance,
interest on subscription and expenses of delinquency sale for the midpoint number of
shares.
d. He refers to the bidder who is willing to pay the aggregate of the subscription balance,
interest on subscription and expenses of delinquency sale for the higher number of
shares.

186. In case there is highest bidder in public sale of delinquent shares, how many shares will
go to the highest bidder and delinquent stockholder?
a. All delinquent shares to highest bidder
b. Purchased shares to highest bidder and the remainder to the delinquent stockholder
c. All to delinquent subscribers
d. Purchased shares to delinquent stockholder and the remainder to highest bidder

187. In the absence of highest bidder and provided there is unrestricted retained earnings,
what will happen to delinquent shares?
a. They will be acquired by the corporation and become treasury shares.
b. They will revert to unissued shares.
c. There will be decrease of authorized capital stock.
d. They will become donated shares.

188. In case the corporation purchased the delinquent shares, how many shares will go to
treasury shares?
a. All the delinquent shares will become treasury shares.
b. Half of the delinquent shares will become treasury shares.
c. Only the unpaid subscribed shares will become treasury shares.
d. Nothing will go treasury shares.

26 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

189. What is the prescriptive period available to delinquent stockholders to maintain an action
on the ground of irregularity or defect in the notice of sale, or in the sale itself of the delinquent
stock?
a. within (6) months from the date of sale
b. within (1) month from the date of sale
c. within (3) months from the date of sale
d. within (4) months from the date of sale

190. It refers to tangible evidence of shares of stocks.

a. Negotiable instruments
b. Certificate of stocks
c. Certificate of registration
d. Bylaws

191. What is the operative act that transfers ownership of shares of stocks from the seller to
the buyer in a contract of sale?
a. Upon constructive delivery of shares of stocks
b. Upon indorsement of certificate of stocks
c. Upon registration in the corporate book
d. Upon payment of the price

192. To be valid to the corporation and to third persons, what are the requirements of Revised
Corporation Code regarding transfers of shares of stocks?
a. There must be delivery of the certificate of stock.
b. The share of stock or certificate of stock must be indorsed by the owner or his agent.
c. The transfer must be duly recorded in the books of the corporation showing the names
of the parties, transaction date, number of certificate and shares transferred.
d. All of the above.

193. If the formality provided by the Revised Corporation Code is not complied with regarding
the transfer of shares of stocks, what is the remedy available to the buyer of shares of stocks?
a. The transferee may file a civil action to compel the transfer to observe the formality
provided by the Revised Corporation Code for valid transfer of certificate of stocks.
b. The transferee may file a special civil action of mandamus.
c. The transferee may file a special civil action of quo warranto proceedings
d. The transferee may file an action for rescission.

194. It refers to corporate book which contains the record of all stocks in the names of the
stockholders alphabetically arranged; the installment paid and unpaid on all stock 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.
a. Stock and transfer book
b. Minutes of meetings
c. Financial statements
d. Annual report

195. When shall the stock and transfer book be registered with SEC by the corporation?
a. within 30 days from receipt of its certificate of registration
b. within 10 days from receipt of its certificate of registration
c. within 20 days from receipt of its certificate of registration
d. within 40 days from receipt of its certificate of registration

196. In the absence of a stock and transfer agent employed by the corporation, which officer
is authorized to make an entry in the stock and transfer book for the entry to be valid?
a. Corporate secretary
b. Corporate treasurer
c. Corporate president
d. Chairman of the board

27 | P a g e Atty. Reginald Laco, CPA, REB,

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
LACO CPA REVIEW Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

197. When may a stock transfer agent or one engaged principally in the business of
registering transfers of stocks in behalf of a stock corporation be allowed to operate in the
Philippines?
a. Upon securing a license from the SEC and the payment of a fee to be fixed by the SEC,
which shall be renewable annually
b. Upon incorporation of the stock and transfer agent
c. Upon obtaining mayor’s permit by stock and transfer agent
d. Upon registration by stock and transfer agent with BIR

198. They refer to the interests or rights which the owner has in the management of the
corporation and its surplus profits, and on dissolution, in all of its assets remaining after the
payment of its debts. They do not represent co-ownership in the assets of the corporation but
such interests are merely indirect and inchoate.
a. Shares of stocks
b. Certificate of stocks
c. Membership in a corporation
d. Capital interest

199. Which of the following is a nature of shares of stocks?

a. It is an intangible asset.
b. It is a personal asset.
c. Both a and b
d. Neither a nor b

200. What is the requirement for certificate of stocks covering subscribed shares to be issued?
a. The subscribed shares of stocks must be fully paid.
b. The subscribed shares of stocks must be partially paid.
c. The subscribed shares of stocks must not be paid.
d. There must be subscription of shares.

201. The stockholders, as owners of the corporation have the following rights expressly
recognized by the corporation law, except the right ___________:
a. to elect and remove directors
b. as a co- owner of the corporate property
c. to inspect corporate books and records
d. to receive dividends when declared

-End-
For the Glory of God

28 | P a g e Atty. Reginald Laco, CPA, REB,