CHAPTER 1 (Section 1-8)

1. What are the scope of the Code?

2. What is a corporation as defined by the Code? (Section 2)
3. Based on the definition above, what are the 4 attributes or characteristics of a corporation?
4. What are the implications of a corporation being an artificial, legal or juridical person?
5. T/F. A corporation as a juridical person is allowed to engage in the practice of profession.
6. What is the “doctrine of piercing the veil of corporate entity?”
7. What are the instances where corporate fiction is disregarded?
8. T/F. The notion of corporate entity will be pierced or disregarded and the individuals
composing it will be treated as different if the corporate entity is being used as a cloak or
cover for fraud or illegality; as a justification for a wrong; or as an alter ego, an adjunct, or a
business conduit for the sole benefit of the stockholders.
9. Classification of Piercing Cases (fraud piercing, alter-ego piercing, equity cases)
a. When corporate entity used to commit fraud or do a wrong.
b. When corporate entity merely a farce since the corporation is merely the alter ego,
business conduit, or instrumentality of a person or another entity.
c. When piercing the corporate fiction is necessary to achieve justice or equity.
10. T/F. A corporation can come into existence by mere assignment of the parties as in the case
of partnership.
11. T/F. The Executive Department shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special characters in the interest of the
common good and subject to the test of economic viability.
12. T/F. A corporation is dissolved when stockholders die or withdraw or is insolvent just like in
the case of partnership.
13. Case: Kristita Corporation is authorized under its articles of incorporation to engage in real
property business. However, in reality the corporation also deals with the business of crude
refinery. Does Kristita Corporation also has the authority to engage in refinery business?
Why?
14. Distinction between a partnership and a corporation
Partnership Corporation
Manner of creation
Number of incorporators
Commencement of juridical
personality
Powers
Management
Effect of mismanagement
Right of succession
Existence of liability to third
persons
Transferability of interest
Term of existence
Firm name
Dissolution
Laws which govern
 15. What are the similarities between a partnership and a corporation?
16. What are the advantages and disadvantages of a business corporation?
17. T/F. Non-stock corporations which have capital stock dividend into shares and are authorized
to distribute to the holders of such share dividends or allotments of the surplus profits on the
basis of the shares held.
18. T/F. A non-stock corporation may have capital stock divided into shares and provided that it is
not authorized to distribute to the holders of such share dividends or allotments of the
surplus profits on the basis of the shares held.

Classifications of Corporations

19. Identify. As to number of persons composing it:

a. Consists of many persons united together into one society, and are kept up by a
perpetual succession of members, so as to continue forever…”
b. Consists of one person only and his successors.
20. As to whether the purpose id public or private:
a. Created for public purposes only, connected with the administration of the
government.
b. Created for private as distinguished from purely public purposes.
c. Applied to otherwise private corporations engaged in the business of providing
goods and services of a peculiarly public nature.
21. T/F. All government-owned or controlled corporations are public corporations.
22. T/F. The character of a corporation as public or private is determined by the terms of its
charter and the general law under which it is organized and the characteristics of its
stockholders or the number of persons engaged in the enterprise.
23. Identify. As to its relation to another corporation.
a. It has working control through stock ownership of its subsidiary corporations.
b. It is controlled by another corporation.
c. It is a term used in carious senses ranging from a company operated for the sole
purpose of controlling stock in other corporations to that of an ordinary operating
company, which quite incidentally owns stock in another corporation. It has been
defined as a super corporation, which owns or at least control such a dominant
interest in one or more other corporations. Such a dominant interest in one or more
other corporations that it is enabled to control or materially influence the
management of one or more corporations.
d. It controls a group of other companies engaged in unrelated activites.
24. As to whether its purpose it religious or not:
a. One organized for religious purposes
b. Organized other than for religion.
25. As to whether its purpose is charitable or not:
a. A corporation for profit which primarily a business corporation.
b. One established for charitable purposes or for those support by charity.
26. As to the country under whose laws it was created or incorporated:
a. One incorporated under the law of the Philippines.
b. One formed under the laws other than those of the Philippines.
27. T/F. Procter & Gamble Philippines Inc. and McDonalds Philippines are domestic corporations.
28. T/F. Identify. As to its legal status:
 a. A corporation existing in fact and in law.
b. A corporation existing in fact but not in law.
29. As to whether they are open to the public or not:
a. One which is limited to selected persons or members of a family.
b. One which is open to any person which may wish to become a stockholder or
member thereto.
30. As to its existence:
a. One which exists by statutory authority.
b. One which exists without formal legislative grant, e.g. corporation by prescription
c. One which has exercised corporate powers for an indefinite period without
interference on the part of the sovereign power and which, by fiction of law, is given
the status of a corporation.
d. Not a corporation, either de jure or de facto because it is so defectively formed but is
considered as a corporation in relation to those who, by reason of their acts or
admissions, are precluded from asserting that it is not a corporation.
31. T/F. Corporations created by special laws or charters shall be governed primarily by the
provisions of the special law or charterscreating them or applicable to them, supplemented
by the provisions of this Code, insofar as they are applicable (See Section 4)
32. Identify.
a. Those who compose a corporation, whether as stockholders or as members.
b. Corporators in a stock corporation.
c. Corporators in a non-stock corporation.
d. Those stockholders or members mentioned in the articles of incorporation as
originally forming and composing the corporation and who are signatories thereof.
33. T/F. All stockholders are corporators but all corporators are not stockholders.
34. When may a classification of shares be made?
35. Distinguish capital stock from capital
36. Distinguish capital stock from legal capital
37. What is stock or share of stock and what is its nature?
38. Distinguish stock from stock certificate.
39. Distinguish capital stock from share of stock.
40. Distinguish authorized capital stock from subscribed capital stock, outstanding capital stock,
paid up capital stock, unissued capital stock and legal capital.
subscribed capital stock
outstanding capital stock
paid up capital stock
unissued capital stock
legal capital

41. Case: Disciples Corp. is authorized to issue 10,000 capital stock with a par value of P100 per
share. Peter, James, John, Matthew and Andrew subscribed 3,000 shares for P120 per share.
As per subscription agreement, the subscribers paid P90 per share and the balance to be paid
after 3 years.
a. What is the total authorized capital stock?
b. What is the total subscribed capital stock?
c. What is the total paid up capital stock?
d. What is the total unissued capital stock?
 e. What is the total legal capital?
f. What is the total contributed capital?
42. Discuss the following:
a. Par value share
b. No par value share
c. Voting share
d. Non-voting share
e. Common share of stock
f. Preferred share of stock
g. Promotion share
h. Share in escrow
i. Convertible stock
43. Differentiate par value from book value and market value.
44. True or False.
a. The shares of stock of stock corporations may be divided into classes or series of
shares, or both, any of which classes or series of shares may have such rights,
privileges or restrictions as may be stated in the articles of incorporation.
b. All shares issued may be deprived of voting rights like those classified and issued as
“preferred” or “redeemable” shares.
c. A corporation should issue only a class or series of shares which have complete
voting rights.
d. Any or all the shares or series of shares may have a par value or have no par value as
may be provided for in the articles of incorporation.
e. Banks, trust companies, insurance companies, public utilities, and building loan
associations are permitted to issue no-par value shares of stock.
f. General Rule: Each share shall be equal in all respects to every other share.
g. Preferred shares of stock may be issued with a stated par value or no-par value share.
h. Shares without par value may not be issued for a consideration less than the value of
ten pesos per share.
i. Holders of non-voting shares are not entitled to any vote.
j. As a general rule, preferred share may be given preference in the distribution of the
assets of the corporation in case of liquidation and in the distribution of dividends, or
such other preferences as may be stated in the articles of incorporation.
k. Terms and conditions as to preferred shares fix by the board shall be effective upon
the approval thereof with the Securities and Exchange Commission.
45. What are the matters where holders of non-voting shares are entitled to vote?
46. What are the kinds of preferred shares as to dividends?
47. They are classified as such in the articles of incorporation as they may be given certain rights
and privileges not enjoyed by the owners of other stocks.
48. T/F. Where the exclusive right to vote and be voted for in the election of directors is granted
to the holder/s of founders’ share, it must be for a limited period not to exceed 7 years
subject to the approval of the Securities and Exchange Commission. The seven-year period
shall commence from the date of the aforesaid approval by the Securities and Exchange
Commission.
49. Redeemable shares may be issued by the corporation when even if it is not expressly so
provided un the articled of incorporation.
50. They may be purchased to taken up by the corporation upon the expiration of a fixed period,
provided there exists available restricted retained earnings in the books of the corporation,
 and upon such other terms and conditions as may be stated in the articles of incorporation
which terms and conditions must also be stated I the certificate of stock representing said
shares.
51. Treasury shares are shares of stock which have been issued and fully paid for, but
subsequently reacquired by the issuing corporation by purchase, redemption, donation or
through some other lawful means, regardless of the existence of unrestricted retained
earnings in the books of the corporation.
52. Treasury shares may be disposed only above its par value.