Module 1

Module I: The Nature and Foundation of Corporations

Module I: Test Questions and Answers (10 Questions)

1.​ Multiple Choice: Which doctrine primarily dictates that distributions to shareholders, such as
dividends, must be paid only out of Unrestricted Retained Earnings?
A.​ Doctrine of Separate Legal Personality
B.​ Doctrine of Limited Liability
C.​ Trust Fund Doctrine
D.​ Business Judgment Rule

2.​ True or False: Under the Revised Corporation Code, the perpetual existence of a corporation
must be explicitly stated in the Articles of Incorporation; otherwise, the corporate term defaults to
fifty (50) years. (False - old corporation code)

3.​ Multiple Choice: The Trust Fund Doctrine applies to which component of the Statement of
Financial Position?
A.​ Trade Payables
B.​ Non-current Liabilities
C.​ Retained Earnings (specifically, the portion restricted by the doctrine)
D.​ Capital Stock (subscribed capital)

4.​ Short Answer: What is the most common ground cited by courts for Piercing the Corporate Veil,
especially when used in the context of tax evasion? (Alter Ego Doctrine or Mere
Instrumentality)

5.​ True or False: From an accounting perspective, the Doctrine of Separate Legal Personality
allows for the consolidation of financial statements between a corporation and its sole shareholder
for external reporting purposes. (False - distinct legal personality)

6.​ Multiple Choice: The primary aim of the Revised Corporation Code (RA 11232) was to achieve
what objective?
A.​ Centralize all businesses under government control.
B.​ Promote transparency and improve the ease of doing business in the Philippines.
C.​ Eliminate all taxation on small businesses.
D.​ Mandate unlimited liability for all stockholders.

7.​ Essay Question: Explain the significance of the "right of succession" in maintaining the
corporate entity as a going concern for external financial reporting. (The right of succession
ensures that a corporation continues to exist despite changes in ownership, management, or
death of shareholders. This is important in maintaining the corporate entity as a going
concern as this let the business operations continues independently, allowing consistent
financial reporting.)
8.​ Multiple Choice: A partnership can now be an incorporator of a private corporation. This change
primarily affects which aspect of compliance for nationalized industries?
A.​ Liability of the partners.
B.​ Verification of Filipino ownership (nationality requirements).
C.​ Calculation of net income.
D.​ Payment of dividends.

9.​ True or False: The Doctrine of Piercing the Corporate Veil may be applied even if the corporate
fiction is used merely to confuse legitimate issues, such as the relationship between employer and
employee. (True)

10.​ Identification: A corporation whose corporate term has expired may apply for revival with the
SEC. Upon approval, what is the default term granted to the revived entity? (Perpetual
Corporate Existence)
Module 2
Module II: Classification and Kinds of Corporations

Module II: Test Questions and Answers (10 Questions)

1.​ Multiple Choice: Which feature is mandatory for a Close Corporation?

A.​ Maximum of ten (10) shareholders.
B.​ Prohibition against selling shares to the public.
C.​ Mandatory issuance of no-par value shares.
D.​ At least 50% independent directors.

2.​ True or False: The income of a Non-Stock Corporation may be distributed to its members as
long as the distribution is approved by two-thirds (2/3) of the trustees. (False - not distributable)

3.​ Multiple Choice: Which corporation type is mandatorily required to have at least 20% of its
board composed of Independent Directors?
A.​ Close Corporation
B.​ One Person Corporation (OPC)
C.​ Public Corporation (GOCC)
D.​ Corporation Vested with Public Interest (e.g., publicly listed company)

4.​ Identification: In a Close Corporation, a stockholder may compel the corporation to purchase his
shares for any reason, provided the corporation has sufficient assets in its books, exclusive of
what balance sheet account? (Capital Stock)

5.​ True or False: For a non-stock educational institution, the minimum number of trustees is five
(5), and they may serve staggered terms up to five (5) years. (True)

6.​ Multiple Choice: Which entity is restricted from incorporating as a One-Person Corporation
(OPC)?
A.​ natural person who is a foreign national.
B.​ A trust managing an estate.
C.​ A licensed professional practicing his profession (unless otherwise provided by law).
D.​ An existing stock corporation converting to an OPC.

7.​ Short Answer: What is the legal name for a religious corporation formed by a single chief
archbishop or presiding elder to administer the temporalities of the religious body? (Corporation
Sole)

8.​ True or False: If a Sole Proprietorship converts to an OPC, the business owner retains the same
personal liability for business debts as before the conversion. (False)

9.​ Multiple Choice: If a corporation organized under Philippine law is subject to foreign equity
restrictions (e.g., 60% Filipino ownership), the regulatory test used to verify compliance is known
as the:
 A.​ Control Test.
B.​ Residency Test.
C.​ Nationality Test.
D.​ Primary Purpose Test.

10.​ Identification: What is the alternative title that the Revised Corporation Code allows for the
position of Corporate Treasurer? (Chief Financial Officer - CFO)
Module 3
Module III: The One Person Corporation (OPC)

Module III: Test Questions and Answers (10 Questions)

1.​ Multiple Choice: In an OPC, who bears the burden of proving that the corporate assets are
independent of the sole stockholder's personal property to maintain limited liability?
A.​ The OPC's creditors.
B.​ The Securities and Exchange Commission (SEC).
C.​ The sole stockholder.
D.​ The designated nominee.

2.​ True or False: A single stockholder of an OPC may hold the position of President,
Treasurer/CFO, and Corporate Secretary simultaneously. (False - Cannot be a secretary)

3.​ Short Answer: Under the CREATE Act, what is the reduced Regular Corporate Income Tax
(RCIT) rate for qualified domestic corporations with net taxable income not exceeding ₱5
Million? (20% Regular Corporate Income Tax - RCIT)

4.​ Multiple Choice: What is the legal consequence if the single stockholder fails to prove the
independence and adequate financing of the OPC?
A.​ The OPC is involuntarily dissolved by the SEC.
B.​ The sole stockholder is held jointly and severally liable for the OPC's debts.
C.​ The nominee automatically assumes permanent control.
D.​ The corporation is permanently deemed a sole proprietorship.

5.​ True or False: When the sole stockholder of an OPC is an estate, the term of existence of the
OPC shall be perpetual. (False - co-terminous with the existence of the estate)

6.​ Multiple Choice: Which document must contain the written consent of the nominee and alternate
nominee?
A.​ The Corporate By-laws.
B.​ The Audited Financial Statements (AFS).
C.​ The Articles of Incorporation (AOI).
D.​ The General Information Sheet (GIS).

7.​ Identification: What position, mandatory for all corporations, must be held by a resident and
citizen of the Philippines, and cannot be occupied by the single stockholder of an OPC?
(Corporate Secretary)

8.​ True or False: An existing ordinary stock corporation may convert into an OPC if a single
stockholder acquires all the outstanding shares. (True)
9.​ Short Answer: What is the primary operational objective of mandating the designation of a
nominee and alternate nominee in an OPC? (To ensure governance and continuity of corporate
operations)

10.​ Multiple Choice: Which of the following is an example of inadequate financing that might lead
to piercing the corporate veil in an OPC?
A.​ The sole stockholder holds an annual meeting.
B.​ The sole stockholder commingles personal and corporate funds.
C.​ The corporation maintains proper accounting records.
D.​ The OPC sells its shares at par value
Module 4
Module IV: Formation and Requirements for Creation

Module IV: Test Questions and Answers (10 Questions)

1.​ True or False: The minimum requirement that 25% of the Authorized Capital Stock be
subscribed and 25% of the subscribed capital be paid-in was retained in the RCC for
micro-enterprises. (False - both abolished)

2.​ Multiple Choice: Which entity is now explicitly allowed to be an incorporator under the Revised
Corporation Code?
A.​ sole proprietorship.
B.​ A juridical person, such as another corporation.
C.​ An incapacitated natural person.
D.​ A foreign government.

3.​ Short Answer: What document, formerly mandatory, is no longer required to be submitted to the
SEC during the general incorporation process due to the removal of the paid-up capital
minimum? (Certificate of Bank Deposit is no longer required due to the removal of
minimum paid-capital)

4.​ True or False: Even after the minimum capital requirements were removed, the obligation of
subscribers to pay the full amount of their subscription remains critical due to the Trust Fund
Doctrine. (True)

5.​ Multiple Choice: For most corporations, the date on which a private corporation organized under
the Code commences its corporate existence and juridical personality is the date when:
A.​ The first Board of Directors is elected.
B.​ The Articles of Incorporation are signed by the incorporators.
C.​ The Certificate of Incorporation is issued by the SEC.
D.​ The Treasurer certifies t-he paid-in capital.

6.​ Identification: What is the legal term for persons who assume to act as a corporation knowing
they lack the necessary authority, and are therefore held liable as general partners? (Corporation
by Estoppel)

7.​ True or False: The SEC has the power to summarily order a corporation to cease using a
corporate name if it finds the name is not distinguishable from one already registered. (True)

8.​ Multiple Choice: Which corporation is generally prohibited from issuing shares without a par
value?
A.​ Manufacturing corporations.
B.​ Mining corporations.
C.​ Banks and trust companies.
D.​ Educational non-stock corporations.
9.​ Short Answer: If a corporation whose term has expired applies for and receives SEC approval
for revival, what is the default term of existence granted? (Perpetual Existence, unless the
revival specifies a fixed term.)

10.​ Essay Question: Explain the significance of the abolition of the minimum subscription and
paid-up capital requirements from the perspective of an auditor assessing a newly formed SME.
(The abolition of the minimum subscription and paid-up capital requirements simplifies the
incorporation process and lowers entry barriers for start-ups and SMEs. However, from an
auditor’s perspective, this change emphasizes the need to assess whether the new
corporation maintains adequate capitalization to operate as going concern.)
Module 5
Module V: Organizational Structure and Corporate Officers

Module V: Test Questions and Answers (10 Questions)

1.​ True or False: The total yearly compensation of a corporation’s directors, excluding reasonable
per diems, may not exceed ten percent (10%) of the corporation’s net income after tax during the
preceding year. (False - Sec. 29)

2.​ Multiple Choice: In a stock corporation, a director must own at least how many shares of stock?
A.​ Five (5) shares
B.​ One (1) share
C.​ Shares representing 1% of the Outstanding Capital Stock (OCS)
D.​ Zero (0) if authorized by the by-laws

3.​ Short Answer: What is the legal threshold of directors required (in percentage or fractional
terms) for corporations vested with public interest? (Corporations vested with public interest
must appoint at least 20% Independent Directors - Sec. 22 and Module)

4.​ True or False: The Corporate Treasurer may be a foreign national, provided he or she is a
resident of the Philippines. (True - Sec. 24)

5.​ Multiple Choice: Which corporate officer is the mandatory custodian of corporate records,
including the Stock and Transfer Book and Minutes of Meetings?
A.​ President
B.​ Treasurer/CFO
C.​ Corporate Secretary
D.​ Compliance Officer.

6.​ Identification: If the Board of Directors acts in good faith and with due care, but their decision
results in an honest mistake or error of judgment, what rule protects them from personal liability?
(Business Judgment Rule - Sec. 30)

7.​ True or False: Disqualification grounds for a director include having been convicted by final
judgment of an offense punishable by imprisonment exceeding five (5) years. (False - Sec. 26
REF)

8.​ Multiple Choice: Which position can now use the alternative title of Chief Financial Officer
(CFO)?
A.​ President
B.​ Treasurer
C.​ Corporate Secretary
D.​ Compliance Officer
9.​ Short Answer: What is the maximum term of office for a trustee of a non-stock corporation?
(Must not exceed 3 years - Sec. 29 and Module)

10.​ Essay Question: Explain the significance of the 10% NIBT cap on director compensation from
an audit and financial stability perspective. (From the standpoint of audit and financial
stability, the 10% NIBT (Net Income Before Tax) cap on director compensation is important
because it acts as a check on excessive compensation that may otherwise drain a company’s
profits. From the standpoint of an audit, it gives auditors a precise standard by which to
judge whether director compensation is appropriate. From the standpoint of financial
stability, it helps guarantee that a sizeable amount of the company’s profits are kept for
debt repayment, reinvestment, or shareholder distribution rather than being unduly
distributed to director salaries. This safeguards the interests of the company and its
stakeholders and encourages prudent financial management. - Sec 29)
Module 6
Module VI: Election and Filling Up of Vacancies in the BOD/BOT

Module VI: Test Questions and Answers (10 Questions)

1.​ True or False: If four (4) of nine (9) directors die, the remaining five (5) directors may fill the
four vacancies by themselves, provided three (3) of the five (5) directors vote in favor. (True -
Sec. 28 and Module, they still constitute a quorum, 5)

2.​ Multiple Choice: Which voting method is designed primarily to ensure the representation of
minority shareholders on the board?
A.​ Straight Voting
B.​ Proxy Voting
C.​ Cumulative Voting
D.​ Remote Voting

3.​ Short Answer: If a director is removed by the stockholders, who is the sole party authorized to
fill the resulting vacancy? (Stockholders or members)

4.​ True or False: When a director is elected by the remaining members of the board to fill a
vacancy caused by resignation, that director serves a full one-year term. (False - Sec. 28 and
Module)

5.​ Multiple Choice: If a vacancy in the board occurs because the director was disqualified (e.g.,
convicted of a crime), who may generally fill that vacancy if a quorum still exists?
A.​ The SEC
B.​ The remaining directors/trustees
C.​ The stockholders/members
D.​ The Compliance Officer

6.​ Identification: What is the legal requirement regarding voting method, often mandated for stock
corporations, that strengthens the influence of minority shareholders? (Cumulative Voting)

7.​ True or False: If an Emergency Board is created due to lack of quorum, the corporation must
notify the SEC within seven (7) days of its creation. (False)

8.​ Multiple Choice: A vacancy arising from the subsequent increase in the number of directors
fixed in the AOI must be filled by:
A.​ The remaining board members.
B.​ The stockholders/members in an election.
C.​ The corporate officers.
D.​ The SEC.

9.​ Short Answer: If the by-laws allow, how may stockholders participate and vote in meetings
without physical presence? (Section 23 of the Revised Corporation Code allows stockholders
 or members to participate and vote in meetings through remote communication (e.g.,
teleconferencing, videoconferencing) or in absentia when authorized by the by-laws or by a
majority of the board of directors. This provides flexibility and accessibility for all
shareholders. Stockholders can also vote by proxy.)

10.​ Essay Question: Explain the rationale for allowing the Board to fill vacancies due to "other
causes" (like death) but requiring shareholders to fill vacancies due to "removal." (Section 28 of
the Revised Corporation Code (RCC) establishes a dual system for replacing directors,
based on the reason for the vacancy: For unexpected vacancies (such as those caused by
death, resignation, or disqualification), the Board of Directors is granted the authority to
appoint a replacement. This method is prioritized for its efficiency and is viewed as
necessary to maintain the continuity of corporate operations without the significant delay
and expense of convening a special meeting of all stockholders. For vacancies due to
removal, the authority rests solely with the stockholders. The rationale here is to uphold
corporate democracy, since the stockholders deliberately voted to remove a director, they
must be the ones to elect the successor to ensure the board accurately reflects the
shareholders’ current will and prevents the remaining directors from overriding the
owners’ decision.

To put it simply, accidents and quick exits (like death or resignation) are treated as an
emergency. The Board is allowed to fill these spots fast to keep the company running
smoothly. The law trusts the Board to step in quickly so the business doesn’t stall while
waiting for a massive, expensive stockholders’ meeting. Deliberate removals are a matter of
corporate democracy. If the shareholders officially fire a director, it means they have lost
faith. To honor their decision, only the shareholders can elect the new person. This rule
makes sure the new board truly represents the will of the owners who took the trouble to
make the change in the first place.)
Module 7
Module VII: Different Kinds of Stocks (Accounting Classification)

Module VII: Test Questions and Answers (10 Questions)

1.​ True or False: Treasury shares are considered outstanding capital stock for the purpose of
computing quorum in a stockholders’ meeting. (False)

2.​ Multiple Choice: Which type of share issuance constitutes a specific exception to the general
rule that capital stock cannot be redeemed absent Unrestricted Retained Earnings (URE)?
A.​ Common shares
B.​ Founder's shares
C.​ Preferred shares (non-redeemable)
D.​ Redeemable shares

3.​ Short Answer: Where should the cost of reacquired Treasury Shares be presented on the
Statement of Financial Position? (The cost of reacquired treasury shares should be presented
as a deduction from the total of the shareholders' equity accounts on the Statement of
Financial Position.)

4.​ True or False: Holders of non-voting preferred shares are nevertheless entitled to vote on the
increase or decrease of the corporation’s authorized capital stock. (False - Sec. 6. Letter E)

5.​ Multiple Choice: The exclusive right to vote granted to founder’s shares cannot exceed:
A.​ Three (3) years from the date of incorporation.
B.​ Five (5) years from the date of incorporation.
C.​ Perpetual term.
D.​ Ten (10) years from the date of incorporation.

6.​ Identification: What mandatory feature must all preferred shares of stock possess regarding their
monetary value? (Stated Par Value/Preferred share must always have a stated par value.)

7.​ True or False: If a publicly listed company is a public utility, it is generally prohibited from
issuing no-par value shares. (True)

8.​ Multiple Choice: When a corporation reacquires its own shares for the purpose of paying
dissenting stockholders exercising their appraisal right, those shares are classified as:
A.​ Unrestricted Shares
B.​ Watered Stock
C.​ Treasury Shares
D.​ Delinquent Shares

9.​ Short Answer: Name two financial/structural corporate acts on which holders of non-voting
shares are entitled to vote. (1. Increase or decrease of the capital stock.; 2. Incurring, creating,
or increasing bonded indebtedness.)
10.​ Essay Question: Explain how the classification and treatment of Redeemable Shares can pose a
challenge in financial reporting under PFRS. (The biggest challenge with Redeemable Shares
under PFRS is that while they are legally considered a form of stock, their accounting
treatment depends on their economic features. If the company is required to buy them back
or if the shareholder can force the company to do so, PFRS dictates they should be treated
like a loan and reported as a liability on the balance sheet. This reclassification from equity
to debt can make a company's financial position look riskier and will also turn dividend
payments into interest expenses, lowering reported net income. This creates a complicated
situation where the legal definition of the shares is different from how they must be shown
in financial reports, which can confuse investors and affect important financial ratios.)
Module 8
Module VIII: Subscription, Transfer of Stocks, and Collection of Payments

Module VIII: Test Questions and Answers (10 Questions)

1.​ True or False: A delinquent stockholder retains the right to cash dividends, which must be
immediately paid out to them. (False)

2.​ Multiple Choice: If a stockholder fails to pay the balance of their subscription on the due date,
the stock automatically becomes delinquent after:
A.​ Seven (7) days
B.​ Fifteen (15) days
C.​ Thirty (30) days
D.​ Sixty (60) days

3.​ Short Answer: From an accounting perspective, what is the nature of the "Unpaid Subscription
Receivable" balance in relation to the Trust Fund Doctrine? (The “Unpaid Subscription
Receivable” balance is considered part of the corporation’s capital stock. Under the Trust
Fund Doctrine, this capital stock is a trust fund for the benefit of the corporation's
creditors. Therefore, this balance represents a claim the corporation has on its stockholders,
which is part of the fund that creditors can rely on for payment of their claims.)

4.​ True or False: Stock dividends declared on delinquent shares are applied to the unpaid
subscription balance. (True)

5.​ Multiple Choice: For a transfer of stock to be binding upon the corporation, it must be officially
recorded in the:
A.​ General Information Sheet (GIS)
B.​ Audited Financial Statements (AFS)
C.​ Stock and Transfer Book
D.​ Articles of Incorporation

6.​ Identification: What specific legal restriction must be stated on a stock certificate if the
corporation is engaged in a nationalized industry (e.g., public utilities)? (The corporation is
prohibited from allowing any transfer that would reduce the required Filipino ownership
percentage in nationalized industries.)

7.​ True or False: The consideration for the issuance of shares must always be cash or property, and
not services previously rendered. (False)

8.​ Multiple Choice: What is the legal effect of delinquency on a stockholder's right to vote?
A.​ The stockholder loses the right to vote.
B.​ The stockholder retains the right to vote but cannot be elected as a director.
C.​ The stockholder must exercise the right through a proxy.
D.​ The right to vote is suspended for 60 days.
9.​ Short Answer: Who ultimately benefits from the preservation of the capital stock under the Trust
Fund Doctrine? (Creditors)

10.​ Essay Question: Explain the accounting entry or mechanism used to satisfy the delinquency
when cash dividends are declared on delinquent stock. (When cash dividends are declared on
delinquent stock, the corporation does not pay the dividend directly to the delinquent
shareholder. Instead, the declared dividend is applied to reduce the amount the shareholder
owes to the corporation for unpaid subscriptions or assessments. This mechanism ensures
that only shareholders who have fully paid for their shares receive the benefits of
ownership, such as dividends. In accounting terms, when the dividend is declared, the
corporation debits Retained Earnings and credits Dividends Payable. However, for
delinquent stock, instead of paying out the dividend, the company debits Dividends Payable
and credits Subscription Receivable, thereby reducing the outstanding balance owed by the
shareholder. This process satisfies the delinquency in part or in full, depending on the
amount of the dividend relative to the unpaid subscription. The shareholder will not receive
any cash dividends until the full amount of the delinquency is paid. This approach
maintains fairness among shareholders and upholds the principle that rights such as
dividends are tied to full payment for shares.)
Module 9
Module IX: Rights of Stockholders and Members

Module IX: Test Questions and Answers (10 Questions)

1.​ Multiple Choice: Which corporate action does not trigger the Appraisal Right of a dissenting
stockholder?
A.​ Merger or consolidation.
B.​ Amendment of the Articles of Incorporation changing stockholder rights.
C.​ Declaration of cash dividends.
D.​ Sale of substantially all corporate assets.

2.​ True or False: The preemptive right extends to shares issued by the corporation to settle a
previously contracted debt, even if approved by 2/3 of the OCS. (False)

3.​ Short Answer: What is the legal term for the reduction in the value of a shareholding due to the
issue of additional shares in a company without an increase in assets of a shareholder’s
percentage of ownership caused by the issuance of new shares to external parties?
(Dilution/Share Dilution)

4.​ Multiple Choice: The written demand by a dissenting stockholder to exercise the Appraisal Right
must be made within how many days after the date on which the corporate vote was taken?
A.​ Fifteen (15) days
B.​ Thirty (30) days
C.​ Sixty (60) days
D.​ Ninety (90) days

5.​ True or False: Stockholders holding at least 10% of the Outstanding Capital Stock (OCS) may
propose corporate actions and resolutions. (false)

6.​ Identification: In which type of corporation can a stockholder compel the corporation to
purchase their shares for any reason, provided the corporation has sufficient assets exclusive of
capital stock? (Close Corporation)

7.​ True or False: When inspecting corporate records, the stockholder is bound by confidentiality
rules concerning trade secrets and proprietary processes. (True)

8.​ Multiple Choice: Which of the following is considered a proprietary right of a stockholder?
A.​ Right to elect directors
B.​ Right to propose resolutions
C.​ Right to receive dividends, when declared
D.​ Right to attend board meetings

9.​ Short Answer: What specific PFRS-related process is typically required to determine the
payment amount when a stockholder exercises their appraisal right? (Fair Value Determination)
10.​ Essay Question: Explain how the statutory exemptions to the preemptive right (e.g., for property
or debt payment) balance minority protection against corporate needs. (The statutory
exemptions to the preemptive right, such as issuing shares in exchange for property or in
payment of corporate debts, help the corporation access needed resources quickly,
supporting its growth and operations. These exemptions allow flexibility for corporate
financing without needing to offer all new shares to existing shareholders. However, the law
balances this by ensuring minority stockholders are protected from unfair dilution by
requiring proper approvals and limiting exemptions to specific cases. This way,
corporations can pursue legitimate business needs without disregarding shareholder rights.)
Module 10
Module X: Powers of Corporations

Module X: Test Questions and Answers (10 Questions)

1.​ True or False: Cash dividends may be declared from the corporation’s total retained earnings,
whether restricted or unrestricted, provided the declaration is approved by the stockholders.
(False)

2.​ Multiple Choice: If a stock corporation retains surplus profits exceeding 100% of its paid-in
capital, which is a permissible justification for this retention?
A.​ The board wishes to increase director compensation next year.
B.​ The retention is justified by a definite, approved corporate expansion project.
C.​ The corporation anticipates a decrease in sales next quarter.
D.​ The funds are earmarked for future political donations.

3.​ Short Answer: What fraction of the Outstanding Capital Stock (OCS) must approve the
declaration of a stock dividend? (At least two-thirds (⅔) of the Outstanding Capital Stock
(OCS))

4.​ True or False: A corporation may acquire its own shares to pay dissenting stockholders
exercising the appraisal right, even if it does not have URE. (False)

5.​ Multiple Choice: An act by a corporation that is outside the scope of the powers conferred by the
Code or its Articles of Incorporation is known as:
A.​ Intra Vires Act
B.​ Quo Warranto Act
C.​ Ultra Vires Act
D.​ Estoppel Act

6.​ Identification: What is the legal percentage cap imposed on the retention of surplus profits
relative to the corporation's paid-in capital stock? (100% of the paid-in capital stock)

7.​ True or False: A corporation has the power to make reasonable donations, including those for
public welfare, but is prohibited from giving donations in aid of any political party or candidate.
(True)

8.​ Multiple Choice: Which corporate power requires a simple majority vote of the Board but also
requires a 2/3 vote of the OCS for ratification?
A.​ Sale of substantially all corporate assets.
B.​ Approval of the annual budget.
C.​ Election of corporate officers.
D.​ Granting per diems to directors.
9.​ Short Answer: What must a corporation file with the SEC if it wishes to exercise its power to
increase its authorized capital stock? (Amended Articles of Incorporation)

10.​ Essay Question: Describe the two purposes for acquiring its own shares that are related to
subscription collection and minority protection. (A corporation may acquire its own shares for
two important purposes. First, it may do so as a means of enforcing subscription collection.
When a stockholder fails to pay the required subscription, the corporation can buy back the
delinquent shares to ensure compliance and maintain its proper capitalization. Second, the
corporation may acquire its own shares to protect minority shareholders. This happens
when dissenting stockholders choose to exercise their appraisal right in cases involving
fundamental corporate changes, such as mergers or amendments to the articles of
incorporation. By allowing them to be paid the fair value of their shares, the corporation
provides an equitable way for these shareholders to withdraw from the company without
being forced to accept unwanted changes.)
Module 11
Module XI: Powers of the BOD or BOT, and Stockholders/Members

Module XI: Test Questions and Answers (10 Questions)

1.​ True or False: For a contract between a director and the corporation to be non-voidable, the
director's presence in the board meeting must be unnecessary to constitute a quorum, and the
contract must be fair and reasonable. (True)

2.​ Multiple Choice: For a corporation vested with public interest, approval of a material Related
Party Transaction (RPT) requires the vote of:
A.​ All stockholders.
B.​ A majority of the independent directors voting on the contract.
C.​ The Compliance Officer and the Corporate Secretary.
D.​ A simple majority of the entire board.

3.​ Short Answer: If stockholders ratify the sale of substantially all corporate assets, what body
retains the discretion to subsequently abandon the sale without seeking further shareholder
approval? (Board of Directors)

4.​ True or False: The fiduciary duty of loyalty requires a director to ensure they do not commit
gross negligence in handling corporate funds. (False)

5.​ Multiple Choice: Which violation directly leads to the personal liability of a director for
damages?
A.​ Failing to ensure profitability for one year.
B.​ Wilfully voting for an unlawful act of the corporation.
C.​ Declaring dividends from URE.
D.​ Exercising the Business Judgment Rule.

6.​ Identification: If a director acquires an interest adverse to the corporation in respect of a matter
reposed in them in confidence, the law holds the director liable as a trustee for the corporation,
requiring them to account for the profits. What is this concept known as? (Doctrine of Corporate
Opportunity)

7.​ True or False: A contract between the corporation and one of its corporate officers must have
been previously authorized by the board of directors to be valid. (True)

8.​ Multiple Choice: The Board of Directors' authority is limited to:

A.​ Making policy decisions and conducting all business of the corporation.
B.​ Electing the directors and approving fundamental changes.
C.​ Certifying the financial statements to the SEC.
D.​ Determining the fair value of stocks for appraisal.
9.​ Short Answer: Name one specific violation by a director related to capital stock issuance that
results in personal liability for damages. (Issuing Watered Stocks)

10.​ Essay Question: Discuss the Business Judgment Rule and its relevance to the fiduciary duties of
directors. (The Business Judgment Rule protects directors from liability when they make
decisions in good faith, with due care, and in the best interest of the corporation. It
recognizes that directors are not expected to always make perfect decisions, as long as they
act with honest judgment and without self-interest. This rule is closely tied to their fiduciary
duties of diligence and loyalty, ensuring that directors can exercise sound business
discretion without fear of personal liability when acting properly.)
Module 12
Module XII: Voting Requirements in Different Corporate Decisions

Module XII: Test Questions and Answers (10 Questions)

1.​ True or False: For a stock corporation to declare a cash dividend, approval is required from both
the Board of Directors and the stockholders representing 2/3 of the OCS. (False)

2.​ Multiple Choice: What voting threshold is generally required for the approval of the Plan of
Merger in each constituent corporation?
A.​ Majority of the Board and majority of the OCS.
B.​ Majority of the Board and 2/3 of the OCS.
C.​ 2/3 of the Board and majority of the OCS.
D.​ Unanimous vote of the Board and OCS.

3.​ Short Answer: What vote is required from the Board of Directors to elect the corporate officers?
(Majority vote of the Board of Directors)

4.​ True or False: The quorum required for a stockholders' meeting is generally a majority of the
shares subscribed. (False)

5.​ Multiple Choice: Incurring or creating bonded indebtedness requires the approval of the majority
of the Board and what vote from the stockholders?
A.​ Simple majority of OCS
B.​ 2/3 of OCS
C.​ Majority of the subscribers
D.​ No stockholder vote required

6.​ Identification: What specific corporate act, requiring 2/3 OCS approval, effectively changes the
composition of the capital stock account by capitalizing retained earnings? (Declaration of Stock
Dividends)

7.​ True or False: Directors may attend and vote by proxy at board meetings. (False)

8.​ Multiple Choice: When amending the Articles of Incorporation, the stockholder vote
requirement is:
A.​ Majority of the OCS.
B.​ 2/3 of the shares with voting rights.
C.​ 2/3 of the OCS.
D.​ 3/4 of the OCS.

9.​ Short Answer: Why does the law require a higher voting threshold (Majority of All Members)
for the election of officers compared to routine board decisions? (Because electing officers is a
critical decision that affects the corporation’s direction, the law requires a higher voting
threshold to ensure stronger consensus and stability in leadership.)
10.​ Essay Question: Explain the rationale for requiring a supermajority (2/3 OCS) vote for actions
like the sale of substantially all assets. (The rationale for requiring a supermajority vote of 2/3
of the outstanding capital stock for actions like the sale of substantially all assets is to
protect the interests of all stockholders, especially the minority. Such transactions can
fundamentally change or even dissolve the corporation’s business, so broader consent
ensures that major decisions are not made solely by a small controlling group. This
requirement promotes fairness, accountability, and shared decision-making in critical
corporate actions.)
Module 13
Module XIII: Reportorial Requirements (CPA/Audit Responsibility)

Module XIII: Test Questions and Answers (10 Questions)

1.​ True or False: A corporation's Audited Financial Statements (AFS) must be filed with the SEC
within 90 days from the end of its fiscal year. (False)

2.​ Multiple Choice: Which report must be filed annually within 30 days from the date of the annual
stockholders' meeting?
A.​ Audited Financial Statements (AFS)
B.​ Certificate of Bank Deposit
C.​ General Information Sheet (GIS)
D.​ Current Report (SEC Form 17-C)

3.​ Short Answer: What is the mandatory qualification/requirement for the person who prepares and
signs the Audited Financial Statements (AFS) submitted to the SEC? (An accredited Certified
Public Accountant (CPA))

4.​ True or False: The SEC’s Online Submission Tool (OST) is the required mode for submitting the
AFS and GIS. (True)

5.​ Multiple Choice: The failure of a corporation to file its mandatory reports (AFS/GIS) may lead
to which of the following actions by the SEC?
A.​ Imprisonment of the stockholders.
B.​ Immediate compulsory liquidation.
C.​ Fines, administrative sanctions, and potential dissolution.
D.​ Automatic conversion to an OPC.

6.​ Identification: What is the specific declaration required to be filed, often alongside the GIS, that
aims to disclose the true individual owners or controllers of the company? (Beneficial
Ownership (BO) Declaration)

7.​ True or False: The Corporate Secretary is responsible for ensuring that the AFS is prepared in
accordance with Philippine Financial Reporting Standards (PFRS). (False)

8.​ Multiple Choice: Which SEC form is used to report a "material event" or significant change
affecting a publicly listed company, such as a major contract win or loss?
A.​ SEC Form 17-A (Annual Report)
B.​ SEC Form 17-C (Current Report)
C.​ SEC Form 20-IS (Information Statement)
D.​ General Information Sheet (GIS)

9.​ Short Answer: If an OPC was incorporated on January 15, 2024, when is the due date for its first
annual GIS? (January 15 2025)
10.​ Essay Question: Explain how the digitalization of reportorial requirements (OST) aids the SEC
in upholding the corporate integrity objectives of the RCC. (The Online Submission Tool (OST)
allows digital filing and monitoring of corporate reports (AFS, GIS, BO).It enhances
transparency, accountability, and efficiency, ensuring that all corporations comply with
reporting deadlines. Through digital tracking, the SEC can detect non-compliance, impose
penalties, and prevent fraud. This supports the Revised Corporation Code’s goal of
corporate integrity, good governance, and ease of doing business.)
Module 14
Module XIV: Merger and Consolidation (Financial and Accounting Treatment)

Module XIV: Test Questions and Answers (10 Questions)

1.​ True or False: The surviving corporation in a merger must file a new set of Articles of
Incorporation with the SEC. (False)

2.​ Multiple Choice: Which statement regarding the liabilities of the absorbed entities is correct after
a merger takes effect?
A.​ The liabilities are extinguished.
B.​ The liabilities are assumed only if explicitly agreed upon by the creditors.
C.​ The surviving corporation is automatically responsible and liable for all liabilities.
D.​ The liabilities are split proportionally among the former stockholders.

3.​ Short Answer: What specific SEC certificate must be issued before a merger or consolidation
legally becomes effective? (Certificate of Merger or Consolidation)

4.​ True or False: For a consolidation, the approval of the Plan requires a 2/3 OCS vote only from
the corporation with the smaller capital. (False)

5.​ Multiple Choice: Which of the following is a mandatory financial reporting requirement for the
Articles of Merger/Consolidation submitted to the SEC?
A.​ The average market value of the shares over the last five years.
B.​ The carrying amount and fair values of the assets and liabilities of the respective
companies.
C.​ A sworn statement that the merger will result in zero goodwill.
D.​ The audited financial statements of the last ten years.

6.​ Identification: What process, governed by PFRS 3, is immediately necessary after a merger or
consolidation is legally completed? (Identification of the acquirer and determination of fair
value of net assets (used to calculate goodwill or gain on acquisition)

7.​ True or False: A stockholder who voted against a merger is entitled to exercise the appraisal
right. (True)

8.​ Multiple Choice: In a consolidation, what happens to the separate existence of the original
constituent corporations?
A.​ It continues perpetually.
B.​ It ceases entirely.
C.​ It continues for a three-year winding up period.
D.​ It is suspended until dissolution.
9.​ Short Answer: In case the SEC finds a proposed merger contrary to law, what must the SEC do
before making a final decision? (The SEC must notify the corporations involved and give
them an opportunity to be heard.)

10.​ Essay Question: Explain the accounting implications of the mandatory assumption of liabilities
in a merger. (Upon merger, the surviving corporation automatically assumes all liabilities of
the absorbed entities. These liabilities and assets are recorded at their carrying and fair
values as of the agreed cut-off date. Under PFRS 3, this process determines the fair value of
net assets and leads to the recognition of goodwill or gain on acquisition. The surviving
entity must disclose this assumption in its financial statements, ensuring transparency and
compliance with reporting standards.)
Module 15
Module XV: Dissolution and Liquidation (Tax and Financial Exit)

Module XV: Test Questions and Answers (10 Questions)

1.​ True or False: The liquidation of a corporation's assets must be completed within the mandatory
three (3) year winding-up period, after which all remaining assets are forfeited to the government.
(False)

2.​ Multiple Choice: Which agency issues the mandatory clearance certifying that a dissolving
corporation has no outstanding tax liabilities?
A.​ Securities and Exchange Commission (SEC)
B.​ Bureau of Internal Revenue (BIR)
C.​ Bureau of Customs (BOC)
D.​ Department of Trade and Industry (DTI)

3.​ Short Answer: What is the required vote of the Outstanding Capital Stock (OCS) to initiate a
Voluntary Dissolution without creditors being affected? (Majority BOD/BOT approval and 2/3
OCS/member approval.)

4.​ True or False: After dissolution and conveyance of assets to a trustee, the corporation remains
liable for new debt contracted by the trustee in the course of winding up. (False)

5.​ Multiple Choice: In the event of involuntary dissolution, which ground requires continuous
non-operation for a minimum period of five (5) years?
A.​ Fraudulent incorporation
B.​ Non-use of corporate charter
C.​ Continuous inoperation
D.​ Serious violation of the RCC

6.​ Identification: During liquidation, which party has the highest priority claim on the corporation's
assets? (Creditors)

7.​ True or False: Dissolution by shortening the corporate term is often preferred because it
automatically bypasses the need for a BIR Tax Clearance. (False)

8.​ Multiple Choice: Assets distributable to unknown or unfound creditors or stockholders upon
completion of liquidation shall be:
A.​ Forfeited to the corporate liquidator.
B.​ Escheated (transferred) to the city or municipality where such assets are located.
C.​ Transferred to the SEC.
D.​ Distributed equally among the known stockholders.
9.​ Short Answer: Name two methods by which a dissolved corporation may conduct its liquidation.
(1. Assets must first be used to satisfy all liabilities to creditors; [Link] the remaining net
assets may be distributed proportionally to shareholders/members.)

10.​ Essay Question: Explain the rationale for the three-year winding-up period and the use of a
trustee. (The dissolved corporation retains its legal existence for a maximum of three (3)
years solely for liquidation purposes. If not completed in three years, the corporation may
transfer all its assets to a trustee or liquidator.)
Module 16
Module XVI: Penalized Acts and Penalties (Accountant/Auditor Liability)

Module XVI: Test Questions and Answers (10 Questions)

1.​ True or False: The penalty for willfully certifying a report with incomplete or false information
applies only to the Corporate Secretary. (False)

2.​ Multiple Choice: Which fine is specifically designated for a director or officer who knowingly
fails to report or tolerate fraudulent acts committed by the corporation?
A.​ ₱10,000 to ₱100,000
B.​ ₱100,000 to ₱600,000
C.​ ₱500,000 to ₱1,000,000
D.​ ₱4,000,000 to ₱5,000,000

3.​ Short Answer: What is the legal doctrine that prevents shareholders from receiving any assets
from the corporation during liquidation until all creditors are fully satisfied? (Trust Fund
Doctrine)

4.​ True or False: If the SEC dissolves a corporation due to a violation of the RCC, the responsible
directors and officers are automatically absolved from all civil and criminal liability. (False)

5.​ Multiple Choice: Which of the following is a classic factor that courts look for when determining
if the corporate veil should be pierced under the Alter Ego/Instrumentality Test?
A.​ The corporation is profitable.
B.​ The corporation has properly registered with the SEC.
C.​ Intermingling of corporate and personal assets (Unity of Interest and Ownership).
D.​ The corporation pays taxes on time.

6.​ Identification: What is the penalty range for obtaining corporate registration through fraud that is
injurious or detrimental to the public? (₱400,000 – ₱5,000,000)

7.​ True or False: The Doctrine of Piercing the Corporate Veil is a remedy of first resort whenever a
corporation defaults on its obligations. (False)

8.​ Multiple Choice: The removal of the minimum capitalization requirement for most corporations
reflects the RCC’s goal to:
A.​ Increase the corporate tax base.
B.​ Simplify the regulatory burden (Ease of Doing Business).
C.​ Encourage Ultra Vires Acts.
D.​ Promote unlimited personal liability.

9.​ Short Answer: What is the minimum fine for violating any general provision of the Revised
Corporation Code not otherwise specifically penalized? (10, 000)
10.​ Essay Question: Explain the specific difference in the burden of proof for the Doctrine of
Piercing the Corporate Veil between an ordinary stock corporation and a One Person Corporation
(OPC). (For ordinary corporations, the burden of proof is on the party claiming fraud to
prove that the corporation was used as a mere alter ego or tool. For a One Person
Corporation(OPC), the single stockholder must prove financial separation between
personal and corporate assets to preserve limited liability. If no clear separation is shown,
the veil may be pierced more easily.)
Multiple Choices Questions
Part I: The Assessment Instrument (Questions 1-100)

Section 1: General Principles, Incorporation, and Corporate Term (20 Items)

1. Question: Under the Revised Corporation Code (RCC), what is the maximum number of natural and/or juridical
persons allowed to organize an ordinary stock corporation?
A.​ Ten (10)
B.​ Fifteen (15)
C.​ Twenty (20)
D.​ Unlimited

2. Question: Which statement accurately describes the default corporate term under the RCC?
A.​ The corporate term remains fixed at 50 years, subject to extension.
B.​ Corporations now have a default term of 75 years.
C.​ Corporations automatically have perpetual existence unless otherwise specified in the Articles of
Incorporation (AOI).
D.​ The corporate term is determined annually by the Securities and Exchange Commission (SEC).

3. Question: A corporation incorporated in 2010 under the old Code (with a 50-year term) continues to exist upon
the RCC's effectivity. What is the effect on its corporate term?
A.​ It must automatically retain its 50-year term and apply for extension upon expiry.
B.​ It is automatically granted perpetual existence.
C.​ It is automatically granted perpetual existence, but stockholders may vote to retain the specific
50-year term.
D.​ It is automatically dissolved since the 50-year term is no longer mandatory.

4. Question: When does a private corporation organized under the RCC commence its corporate existence and
juridical personality?
A.​ From the date the AOI and By-Laws are submitted to the SEC.
B.​ From the date the AOI is notarized.
C.​ From the date the SEC issues the Certificate of Incorporation under its official seal.
D.​ From the date the corporation formally organizes and commences business operations.

5. Question: Which entity is generally prohibited from organizing as a corporation under the RCC unless otherwise
allowed by special laws?
A.​ Trusts or estates acting as single stockholders (OPC).
B.​ Natural persons licensed to practice a profession (e.g., CPA firm).
C.​ Non-stock organizations formed for charitable purposes.
D.​ Partnerships organized for commercial purposes.

6. Question: What is the maximum period granted to a corporation to formally organize and commence the
transaction of its business from the date of incorporation, failure of which may lead to dissolution?
A.​ Two (2) years
B.​ Three (3) years
C.​ Five (5) years
D.​ Ten (10) years
7. Question: If a corporation has commenced the transaction of its business but subsequently becomes continuously
inoperative, how long must this inoperation last to constitute a ground for the suspension or revocation of its
corporate franchise?
A.​ At least three (3) years
B.​ At least five (5) years
C.​ At least seven (7) years
D.​ At least ten (10) years

8. Question: Which corporate action, relating to the corporate term, triggers the appraisal right of dissenting
stockholders?
A.​ Only the shortening of the corporate term.
B.​ Only the extension of the corporate term.
C.​ Both the extension and shortening of the corporate term.
D.​ Neither extension nor shortening of the term.

9. Question: To amend the Articles of Incorporation (AOI) of a stock corporation, what is the required vote of the
stockholders?
A.​ Majority of the Outstanding Capital Stock (OCS).
B.​ At least two-thirds (2/3) vote of the OCS.
C.​ Majority of the quorum.
D.​ Unanimous vote of all stockholders.

10. Question: For a non-stock corporation, what majority is required for the members to amend the Articles of
Incorporation?
A.​ Majority of the members.
B.​ At least two-thirds (2/3) of the members.
C.​ At least three-fourths (3/4) of the members.
D.​ Unanimous vote of all members.

11. Question: When may a corporate term for a specific period be extended by amending the AOI?
A.​ At any time prior to the original expiry date.
B.​ Not earlier than three (3) years prior to the original expiry date.
C.​ Only within one (1) year prior to the original expiry date.
D.​ Only upon expiration, through a revival application.

12. Question: Under what conditions may a corporation whose term has expired apply for revival of its corporate
existence?
A.​ Revival is prohibited for all corporations under the RCC.
B.​ Revival is allowed only if the corporation was dissolved due to capital deficiency.
C.​ Revival is generally allowed through an application to the SEC, except for those expressly disallowed
by SEC regulations.
D.​ Revival is allowed only within five (5) years of the expiration date.

13. Question: Which of the following details must be included in the Articles of Incorporation?
A.​ The number of non-voting shares issued.
B.​ The policy on director compensation.
C.​ The corporate name, purposes, and office location.
D.​ Detailed business transaction reports.
Key: C. The corporate name, purposes, and office location. Justification: The AOI must contain mandatory details
such as the corporate name, purposes, office location, term, incorporators, and stock or capital information.

14. Question: If the SEC finds that a corporate name is not distinguishable from an already reserved name, what
action may the Commission take?
A.​ Summarily order the corporation to immediately cease and desist from using such name and require
registration of a new one.
B.​ Impose a minor administrative fine without requiring a name change.
C.​ Issue the certificate of incorporation but require a name change within six months.
D.​ Refer the matter to the Department of Justice (DOJ).

15. Question: What vote is required for existing corporations (pre-RCC) to elect to retain their specific corporate
term instead of automatically accepting perpetual existence?
A.​ Majority vote of the board of directors.
B.​ Majority vote of the stockholders representing the Outstanding Capital Stock.
C.​ Two-thirds (2/3) vote of the stockholders.
D.​ Majority vote of the directors and two-thirds (2/3) vote of the stockholders.

16. Question: In the context of amending the Articles of Incorporation, what specific procedure must be followed
regarding the physical document submitted to the SEC?
A.​ A new set of Articles must be drafted entirely.
B.​ Amendments must be indicated by bolding the changes made.
C.​ Amendments must be indicated by underscoring the change or changes made.
D.​ Only a summary of the amendments is required.

17. Question: If an incorporator is a natural person, what is the mandatory age requirement?
A.​ At least twenty-one (21) years of age.
B.​ At least eighteen (18) years of age (legal age).
C.​ At least fifteen (15) years of age, with parental consent.
D.​ ]The law does not specify an age requirement.

18. Question: Which scenario is a ground for involuntary dissolution under the RCC?
A.​ The corporation’s primary purpose is achieved.
B.​ The corporation fails to formally organize and commence business within five (5) years from
incorporation.
C.​ The corporation suffers net losses for three (3) consecutive years.
D.​ A shareholder possessing at least 10% of the OCS petitions for dissolution.

19. Question: Juridical persons, such as partnerships or corporations, are allowed to function as incorporators under
the RCC. This provision contrasts with the Old Corporation Code and primarily aims to:
A.​ Increase foreign ownership restrictions.
B.​ Mandate higher capitalization rules.
C.​ Introduce flexibility in incorporation criteria and simplify business group structuring.
D.​ Ensure stricter governmental control over corporate formation.

20. Question: If the SEC orders a corporation to change its name after being found non-distinguishable or contrary
to law, failure to comply may result in which administrative penalty against the corporation and its responsible
officers?
A.​ Imposition of a permanent P500,000 fine.
 B.​ Automatic conversion to a partnership.
C.​ Holding the corporation in contempt and/or revocation of its registration.
D.​ Mandatory issuance of non-voting shares to the public.

Section 2: Capital Structure, Shares, and Financial Rules (20 Items)

21. Question: Which rule applies to the minimum capital requirement for a non-specialized stock corporation under
the RCC, which is a key barrierto-entry issue for entrepreneurs?
A.​ A minimum of P5,000 paid-in capital is required.
B.​ A minimum subscribed capital of P25,000 is required.
C.​ No minimum capital stock is required, unless provided by special law.
D.​ A minimum of P1,000,000 capital stock is imposed.

22. Question: Which type of share acquisition by the issuing corporation may be made regardless of the existence of
unrestricted retained earnings (URE), provided the corporation remains solvent?
A.​ Acquisition to eliminate fractional shares.
B.​ Acquisition of redeemable shares, upon expiration of a fixed period.
C.​ Acquisition to pay dissenting stockholders for their shares.
D.​ Acquisition of delinquent shares at a delinquency sale.

23. Question: For a stock corporation, what is the maximum permissible percentage of retained surplus profits
relative to its paid-in capital stock, unless justified by approved expansion projects (relevant to the Improperly
Accumulated Earnings Tax concept)?
A.​ Fifty percent (50%)
B.​ One hundred percent (100%)
C.​ Two hundred percent (200%)
D.​ There is no statutory limit.

24. Question: What corporate action requires the approval of stockholders representing at least two-thirds (2/3) of
the Outstanding Capital Stock?
A.​ Declaration of cash dividends.
B.​ Declaration of property dividends.
C.​ Declaration of stock dividends.
D.​ Appointment of a transfer agent.

25. Question: What is the legal status of a stockholder whose shares have been declared delinquent due to
non-payment of the subscription price?
A.​ The stockholder loses all rights, including the right to dividends.
B.​ The stockholder loses the right to vote but retains the right to dividends.
C.​ The stockholder retains the right to vote but loses the right to dividends.
D.​ The stockholder is automatically expelled from the corporation.

26. Question: Treasury shares may be disposed of by the issuing corporation for a reasonable price fixed by which
body?
A.​ The stockholders holding a majority of the OCS.
B.​ The board of directors.
C.​ The Corporate Treasurer.
D.​ The SEC, upon petition.
27. Question: The Preemptive Right of a stockholder applies to which specific actions of the corporation?
A.​ The issuance or disposition of shares of any class.
B.​ The issuance of bonds or other debt instruments.
C.​ The declaration of stock dividends.
D.​ The sale of treasury shares.

28. Question: Preemptive right does not extend to shares issued under which circumstance?
A.​ Shares issued in exchange for property needed for corporate purposes, approved by 2/3 OCS in good
faith.
B.​ Shares issued as part of a stock split.
C.​ Shares issued to cover a stock dividend declaration.
D.​ Shares issued to existing majority shareholders.

29. Question: In which instance does the Appraisal Right allow a dissenting stockholder to demand payment for the
fair value of their shares?
A.​ Amendment to the AOI changing or restricting the rights of any class of shares.
B.​ Election of new corporate officers.
C.​ Declaration of cash dividends.
D.​ Adoption of a new set of corporate by-laws.

30. Question: If the corporation's board of directors, subsequent to the required two-thirds (2/3) stockholder
authorization, decides to abandon the sale of all or substantially all corporate assets, may they do so?
A.​ No, once stockholders approve, the sale is final.
B.​ Yes, the board may abandon the sale in its discretion, subject to the rights of third parties under
contract.
C.​ Yes, but only with a two-thirds (2/3) vote of the board.
D.​ No, unless they obtain unanimous stockholder approval for the abandonment.

31. Question: Which of the following may be legally acquired by a corporation for its own shares, subject to the
URE rule (except for specific cases)?
A.​ Shares required for issuance to a competitor to prevent a hostile takeover.
B.​ Shares needed to pay dissenting or withdrawing stockholders entitled to payment.
C.​ Shares purchased speculatively to increase Earnings Per Share (EPS).
D.​ Shares acquired from employees who resigned without paying the full subscription price.

32. Question: Holders of non-voting shares (e.g., non-voting Preferred Stock) are nonetheless entitled to vote on
which of the following matters?
A.​ Election of Directors.
B.​ Removal of the Corporate Secretary.
C.​ Incurring, creating, or increasing bonded indebtedness.
D.​ Adoption of the annual budget.

33. Question: If a corporation is required to maintain a stock and transfer book, who may maintain this book?
A.​ Only the Corporate Secretary.
B.​ The corporation itself, or a licensed transfer agent.
C.​ Only the Corporate Treasurer.
D.​ The SEC, upon the corporation's request.
34. Question: Who is granted the right to inspect corporate books and records, subject to confidentiality laws?
A.​ Directors, trustees, and stockholders/members.
B.​ Only the President and the Treasurer.
C.​ Only the independent auditors.
D.​ Only stockholders holding at least 10% of the OCS.

35. Question: What is the legal implication if a stockholder abuses their right of inspection of corporate records
(e.g., using information for competitive purposes)?
A.​ The stockholder is penalized.
B.​ The stockholder is granted appraisal rights.
C.​ The corporation is dissolved.
D.​ The board of directors is removed.

36. Question: For a corporation to legally make investments in any other business or purpose outside of its primary
purpose, what approvals are required?
A.​ Majority board approval only.
B.​ Majority board approval and 2/3 stockholder consent.
C.​ Unanimous board approval only.
D.​ Unanimous stockholder consent only.

37. Question: What is the statutory source for dividends payable by a stock corporation, which is fundamental to the
Trust Fund Doctrine?
A.​ Paid-in capital.
B.​ Treasury shares.
C.​ Unrestricted retained earnings (URE).
D.​ Proceeds from the sale of corporate assets.

38. Question: Shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing
corporation through lawful means are classified as:
A.​ Authorized shares.
B.​ Redeemable shares.
C.​ Treasury shares.
D.​ Delinquent shares.

39. Question: A dissenting stockholder exercising the right of appraisal must make a written demand on the
corporation for the payment of the fair value of their shares within how many days following the vote against the
proposed corporate action?
A.​ Ten (10) days
B.​ Fifteen (15) days
C.​ Thirty (30) days
D.​ Sixty (60) days

40. Question: What key characteristic must the offerer at a delinquency sale meet to be considered the highest
bidder?
A.​ Offering the highest total monetary value.
B.​ Offering to pay the full amount due for the largest number of shares.
C.​ Offering to pay the full amount due for the smallest number of shares.
D.​ Offering to pay the subscription balance plus interest, but excluding costs of advertisement.
Section 3: Directors, Trustees, and Corporate Governance (25 Items)

41. Question: What is the term of office for directors in a stock corporation?
A.​ Three (3) years.
B.​ Five (5) years.
C.​ One (1) year.
D.​ Perpetual, unless stated otherwise.

42. Question: What is the maximum term of office for trustees in a non-stock corporation, unless they are trustees
of an educational corporation?
A.​ One (1) year.
B.​ Three (3) years.
C.​ Five (5) years.
D.​ Ten (10) years.

43. Question: What is the statutory term of office for trustees in an educational corporation?
A.​ One (1) year.
B.​ Three (3) years.
C.​ Five (5) years.
D.​ Seven (7) years.

44. Question: A director of a stock corporation automatically ceases to be a director if they cease to possess which
mandatory qualification?
A.​ Being a Filipino citizen.
B.​ Owning at least one (1) share of stock registered in the corporation's books.
C.​ Being a resident of the Philippines.
D.​ Being actively involved in management.

45. Question: The total yearly compensation of directors is subject to a statutory ceiling determined by what
financial metric?
A.​ Ten percent (10%) of the gross revenues of the preceding year.
B.​ Ten percent (10%) of the net income before income tax (NIBT) of the preceding year.
C.​ Twenty percent (20%) of the net income after tax (NIAT) of the preceding year.
D.​ The amount is determined solely by shareholder vote, without a statutory cap.

46. Question: Who is prohibited from participating in the determination of their own per diems or compensation?
A.​ Corporate Officers only.
B.​ Directors or trustees.
C.​ Independent Auditors.
D.​ Stockholders.

47. Question: For a corporation vested with public interest, what is the minimum percentage of the board that must
consist of Independent Directors (IDs)?
A.​ At least ten percent (10%).
B.​ At least fifteen percent (15%).
C.​ At least twenty percent (20%).
 D.​ At least fifty percent (50%).

48. Question: Which of the following is considered a corporation vested with public interest and must comply with
the independent director requirement?
A.​ A non-listed small and medium-sized enterprise (SME).
B.​ A corporation whose securities are registered with the SEC and has assets of at least P50,000,000 and
200 or more shareholders.
C.​ A newly formed One Person Corporation (OPC).
D.​ A non-stock, non-profit charitable foundation.

49. Question: An independent director must be a person who is:

A.​ A non-shareholder, non-management employee of the corporation.
B.​ Independent of management and free from any relationship that could materially interfere with
independent judgment.
C.​ A legal expert appointed by the SEC.
D.​ A shareholder possessing at least 10% of the voting shares.

50. Question: What corporate officers must the directors of a corporation elect immediately after their own
election?
A.​ Chief Financial Officer (CFO), Chief Operating Officer (COO), and Chief Marketing Officer (CMO).
B.​ President, Treasurer, and Secretary.
C.​ Chairman of the Board, Lead Independent Director, and Compliance Officer.
D.​ CEO, COO, and General Counsel.

51. Question: For corporations vested with public interest, the Revised Corporation Code requires the election of an
additional corporate officer known as the:
A.​ Investor Relations Officer.
B.​ Compliance Officer.
C.​ Risk Management Officer.
D.​ Chief Executive Officer (CEO).

52. Question: Who, under the RCC, may be designated as the alternative title for the Corporate President?
A.​ Chief Operating Officer (COO).
B.​ Chief Executive Officer (CEO).
C.​ Chief Strategy Officer (CSO).
D.​ Chairman of the Board.

53. Question: Directors owe fiduciary duties to the corporation, prioritizing its interests above personal gains. This
duty, which encompasses acting prudently, diligently, and in good faith, is generally referred to as the:
A.​ Duty of Solvency.
B.​ Duty of Care and Loyalty.
C.​ Duty of Disclosure.
D.​ Duty of Appraisal.

54. Question: The principle that directors are generally protected from liability for business decisions made in good
faith, even if they later prove unwise or unsuccessful, is known as the:
A.​ Doctrine of Piercing the Corporate Veil.
B.​ Business Judgment Rule.
C.​ Trust Fund Doctrine.
 D.​ Doctrine of Corporate Opportunity.

55. Question: What is the rule regarding a director's participation and voting in board meetings under the RCC?
A.​ Directors must physically attend and vote in person.
B.​ Directors or trustees may participate and vote through remote communication (e.g.,
videoconferencing).
C.​ Directors may only participate via teleconferencing if approved by the SEC.
D.​ Directors may attend and vote by proxy.

56. Question: For a board of directors meeting to transact corporate business, what is the required quorum, unless
the articles of incorporation or by-laws provide for a greater majority?
A.​ Two-thirds (2/3) of the number of directors.
B.​ Majority of the number of directors or trustees as fixed in the AOI.
C.​ Majority of the directors present.
D.​ Majority of all directors, excluding independent directors.

57. Question: Which of the following items must be explicitly set forth in detail in the minutes of all meetings of
stockholders or of the board of directors?
A.​ The time and place of the meeting, the agenda, and those present and absent.
B.​ The personal tax returns of all directors.
C.​ The full transcript of all discussions.
D.​ A list of all creditors of the corporation.

58. Question: In the absence of a provision in the by-laws, who shall preside over all meetings of the board of
directors?
A.​ The Corporate Secretary.
B.​ The Chief Financial Officer.
C.​ The Chairman of the Board.
D.​ The Corporation’s President.

59. Question: The board of directors is generally responsible for making which level of decisions?
A.​ Day-to-day managerial decisions.
B.​ Minor operational expenditures.
C.​ Major business and policy decisions.
D.​ Clerical record-keeping functions.

60. Question: What document sets forth the number of directors or trustees the corporation shall have, or a
minimum and maximum number?
A.​ The General Information Sheet (GIS).
B.​ The Corporate Seal.
C.​ The Articles of Incorporation or By-laws.
D.​ The Board Resolution for the previous year.

61. Question: If the by-laws do not fix the date for the regular stockholders' meeting, the meeting should now be
held on which general schedule, as determined by the board?
A.​ Any date in January.
B.​ Any date after April 15 of every year.
C.​ The 15th of December.
D.​ The date specified in the Certificate of Incorporation.
62. Question: If the corporation’s principal office location is not practicable for a meeting, where may the
stockholders’ meeting be held?
A.​ Anywhere in the Philippines.
B.​ Anywhere in the same province.
C.​ Elsewhere within the same city/municipality.
D.​ Anywhere, provided the stockholders agree unanimously.

63. Question: The period within which to serve the notice for a regular stockholders' meeting has been changed
from two weeks to how many days prior to the meeting, unless the by-laws specify a different period?
A.​ Seven (7) days
B.​ Fourteen (14) days
C.​ Twenty-one (21) days
D.​ Thirty (30) days

64. Question: For a director’s regular meeting, the notice must now be served within how many days prior to the
meeting, unless otherwise fixed in the by-laws?
A.​ One (1) day.
B.​ Two (2) days.
C.​ Three (3) days.
D.​ Five (5) days.

65. Question: Which director's activity is specifically regulated under the RCC by mandating that guidelines be set
in the by-laws?
A.​ The director's choice of personal legal counsel.
B.​ The director's investment portfolio outside the corporation.
C.​ The maximum number of other board representations that an independent director may have.
D.​ The director's vacation schedule.

Section 4: Corporate Actions and Meetings (15 Items)

66. Question: The sale or disposition of all or substantially all of the corporate property and assets requires the
authorization of what majority of stockholders?
A.​ Majority of the board and majority of the OCS.
B.​ Majority of the board and two-thirds (2/3) vote of the OCS.
C.​ Majority of the board and unanimous vote of the OCS.
D.​ Majority of the board only, as it is a management decision.

67. Question: If a proposed corporate action involves merger or consolidation, a dissenting stockholder is entitled to
exercise which specific proprietary right?
A.​ The right to redeem their shares.
B.​ The right to preemptive subscription.
C.​ The Appraisal Right.
D.​ The right to initiate a derivative suit.

68. Question: Which of the following transactions triggers the appraisal right?
A.​ Declaring dividends from unrestricted retained earnings.
B.​ Amending the articles of incorporation to extend the corporate term.
C.​ Appointing a new Corporate Secretary.
 D.​ Approving an operating budget.

69. Question: What is the rule concerning the ability of directors or trustees to vote by proxy in board meetings
under the RCC?
A.​ Voting by proxy is allowed if provided in the by-laws.
B.​ Voting by proxy is prohibited.
C.​ Voting by proxy is allowed only if the director is overseas.
D.​ Voting by proxy is allowed only for routine matters.

70. Question: For stockholder or member meetings, which mode of voting is now explicitly permitted under the
RCC, provided it is authorized by a board resolution or the by-laws?
A.​ Voting by proxy only.
B.​ Voting via remote communication or in absentia.
C.​ Voting by mail courier only.
D.​ Voting only through representatives present in the same physical location.

71. Question: In determining the existence of a quorum for a board meeting, how are attendees via remote
communication treated?
A.​ They are counted as present for discussion but not for quorum determination.
B.​ They are counted as present in determining quorum.
C.​ They are only counted if their votes are cast in writing.
D.​ They are only counted if the majority of the board is physically present.

72. Question: Under the statutory rule for board meetings, may the board validly act upon an extraordinary matter
not included in the notice of meeting?
A.​ No, under no circumstances.
B.​ Yes, but only if all members of the board are present and agree to discuss the matter, and none are
estopped from questioning the validity of the resulting act.
C.​ Yes, provided a simple majority of the board votes in favor of the action.
D.​ Yes, if the matter is approved by the President.

73. Question: If a corporation's term has expired, what is the maximum statutory period granted to the corporation
to undertake the winding-up or liquidation process?
A.​ One (1) year.
B.​ Three (3) years.
C.​ Five (5) years.
D.​ Seven (7) years.

74. Question: For corporations seeking voluntary dissolution where no creditors are affected, what is the required
publication period for the notice of the stockholders’ meeting?
A.​ Once a week for two (2) consecutive weeks.
B.​ Once a week for three (3) consecutive weeks.
C.​ Once a week for four (4) consecutive weeks.
D.​ Only a single publication is required.

75. Question: What right do holders of subscribed shares not fully paid, which are not delinquent, retain?
A.​ They have all the rights of a stockholder, including voting rights.
B.​ They lose all voting rights.
C.​ They lose the right to dividends until fully paid.
 D.​ They are only entitled to proportional dividends based on the paid amount.

76. Question: The process of corporate dissolution necessitates the dissolving corporation to file a final income tax
return covering which period?
A.​ The entire calendar year of dissolution.
B.​ The period from the start of its taxable year up to the date of dissolution.
C.​ The three years prior to dissolution.
D.​ The entire lifespan of the corporation.

77. Question: Under the RCC, stockholders may be allowed to vote in absentia under which condition?
A.​ Only if they are also directors.
B.​ Only if authorized by a resolution of the majority of the board of directors.
C.​ Only if the meeting is special.
D.​ They must always be physically present or vote by proxy.

78. Question: In the context of the Trust Fund Doctrine, which action is inherently restricted because it involves the
return of capital to shareholders, which serves as a shield for creditors?
A.​ Declaring dividends.
B.​ Issuing bonds.
C.​ Incurring debt.
D.​ Paying for services rendered by officers.

79. Question: When converting a specific corporate term (retained by an existing corporation) to perpetual
existence, what is the required shareholder approval?
A.​ Majority of the Board and majority of the OCS.
B.​ Majority of the Board and two-thirds (2/3) of the OCS.
C.​ Unanimous vote of all shareholders.
D.​ Approval only by the SEC.

80. Question: When does the closing of the stock and transfer book need to occur prior to a regular stockholders'
meeting, unless the by-laws provide a longer period?
A.​ At least 5 days prior.
B.​ At least 7 days prior.
C.​ At least 20 days prior.
D.​ At least 30 days prior.

Section 5: Special Corporations: OPCs and Close Corporations (20 Items)

81. Question: Which characteristic defines a One Person Corporation (OPC)?

A.​ A corporation whose sole shareholder is a public utility corporation.
B.​ A corporation with a maximum of three stockholders, one of whom acts as the sole director.
C.​ A corporation with a single stockholder, who may be a natural person, trust, or estate.
D.​ A corporation without a board of directors, regardless of shareholder number.

82. Question: Which of the following entities is explicitly excluded from organizing as an OPC?
A.​ A non-bank financial intermediary (e.g., trust company).
B.​ A natural person who is a licensed engineer.
C.​ An estate acting as a single stockholder.
D.​ A non-stock corporation converted to a stock corporation.
83. Question: If the single stockholder of an OPC acts as the Treasurer, what mandatory compliance requirement
must be met?
A.​ They must be a non-resident.
B.​ They must secure a majority vote of the nominees.
C.​ They must post a surety bond, the amount based on the authorized capital stock or gross sales.
D.​ They must appoint an independent co-treasurer.

84. Question: An OPC with an Authorized Capital Stock (ACS) of P4,500,000 where the single stockholder acts as
the Treasurer is required to post a surety bond. Based on SEC regulations, what is the minimum required coverage of
this bond?
A.​ P4,500,000
B.​ P4,000,000
C.​ P5,000,000
D.​ Equal to the Paid-in Capital

85. Question: Who acts as the sole director and President of an OPC?
A.​ The designated Nominee.
B.​ The Corporate Secretary.
C.​ The single stockholder.
D.​ The Alternate Nominee.

86. Question: What is the rule regarding the Corporate Secretary of an OPC?
A.​ The single stockholder must hold the position of Secretary to maintain full control.
B.​ The Secretary must be a Filipino citizen and resident, and cannot be the sole stockholder.
C.​ The Secretary must be a resident, but citizenship is irrelevant.
D.​ The Secretary must be an Independent Director.

87. Question: What is the primary purpose of designating a Nominee and an Alternate Nominee in an OPC?
A.​ To provide management expertise during periods of expansion.
B.​ To manage the company upon the death or incapacity of the single stockholder.
C.​ To handle legal representation in case of litigation.
D.​ To ensure compliance with the minimum capital requirements.

88. Question: How does an OPC indicate its corporate status in its name?
A.​ The name must be prefixed with "OPC."
B.​ The name must include the suffix "OPC" either below or at the end.
C.​ The name must include "One Person" within the title.
D.​ There is no specific requirement for the name.

89. Question: In the event the single stockholder dies, who takes over the management of the OPC initially?
A.​ The legal heirs, immediately upon death.
B.​ The designated Nominee.
C.​ The Corporate Secretary.
D.​ A court-appointed receiver.

90. Question: A Close Corporation is characterized by stock being held of record by not more than a specified
number of persons, not exceeding:
A.​ Ten (10)
 B.​ Fifteen (15)
C.​ Twenty (20)
D.​ Fifty (50)

91. Question: What mandatory restriction must be imposed on the stock of a Close Corporation?
A.​ Stock must be fully paid upon subscription.
B.​ Stock must be common stock only.
C.​ Stock must be subject to one or more specified restrictions on transfer.
D.​ Stock cannot be sold below par value.

92. Question: A Close Corporation loses its classification if it engages in which activity?
A.​ Appointing an Independent Auditor.
B.​ Listing in any stock exchange or making any public offering of its stock.
C.​ Issuing redeemable shares.
D.​ Declaring cash dividends.

93. Question: If the single stockholder of an OPC cannot prove that the property of the corporation is independent
of their personal property, what is the consequence?
A.​ The corporation is automatically dissolved.
B.​ The single stockholder shall be jointly and severally liable for the debts and liabilities of the OPC.
C.​ The SEC will impose a fine but not pierce the corporate veil.
D.​ The OPC will be converted into a sole proprietorship.

94. Question: A corporation shall not be deemed a close corporation when at least two-thirds (2/3) of its voting
stock or voting rights is owned or controlled by which entity?
A.​ A non-stock foundation.
B.​ Another close corporation.
C.​ A corporation which is not a close corporation.
D.​ A sole proprietorship.

95. Question: What is the minimum capital required for a Filipino-owned OPC?
A.​ $200,000 USD.
B.​ P5,000 PHP.
C.​ P1,000,000 PHP.
D.​ No minimum paid-up capital is required.

96. Question: Within how many days of incorporation must an OPC appoint a Treasurer and a Corporate Secretary?
A.​ Seven (7) days.
B.​ Fifteen (15) days.
C.​ Thirty (30) days.
D.​ Sixty (60) days.

97. Question: Which annual compliance document is required for an OPC if its annual gross sales exceed
P3,000,000?
A.​ General Information Sheet (GIS).
B.​ Audited Financial Statements (AFS).
C.​ Quarterly Value Added Tax (VAT) returns.
D.​ Annual report on intellectual property assets.
98. Question: When converting a One Person Corporation to an Ordinary Stock Corporation, what must be done
regarding the Nominee and Alternate Nominee?
A.​ They must be retained as the first directors.
B.​ They are automatically removed upon conversion.
C.​ The Nominee and Alternate Nominee must file a deed of assignment of shares.
D.​ They must be designated as the new corporate officers.

99. Question: If the single stockholder of an OPC is a natural person licensed to exercise a profession (e.g., CPA,
Doctor), may they organize the OPC?
A.​ Yes, always.
B.​ No, never.
C.​ Yes, but only if otherwise provided under special laws governing their profession.
D.​ Yes, only if they hire an independent managing director.

100. Question: Which violation carries the highest maximum fine of up to P5,000,000 for responsible officers when
the violation is injurious or detrimental to the public?
A.​ Failure to timely file the General Information Sheet (GIS).
B.​ Fraudulent Registration or Fraudulent Conduct of Business.
C.​ Failure to hold annual stockholders’ meeting.
D.​ Violation of the 100% surplus profit retention limit.