2021 FINALS

1. You’re a stockholder of a corporation that has its annual stockholders meeting to be held
soon and you appointed Pia Wurtzbach to be your proxy for that meeting. If you both attend
the meeting, who will be allowed to vote? If you instead signed up a voting trust agreement
with Pia as the trustee and you both attend, who will be allowed to vote? Justify your answer.
10%
Answer:
a. The stockholder will have the right to vote because a proxy is only a representative of
the stockholder. If the stockholder is present, he or she should vote.
b. The trustee, Pia, has the right to vote. In a voting trust agreement, the right to vote is
transferred by the trustor to the trustee. In the process, the voting trust agreement will
cancel the certificate of stock and a new certificate of stock will be issued to the trustee
pursuant to Corporation Code, SECTION 58. Voting Trusts. — One or more stockholders
of a stock corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote and other rights pertaining to the shares for a
period not exceeding five (5) years at any time: Provided, That in the case of a voting
trust specifically required as a condition in a loan agreement, said voting trust may be
for a period exceeding five (5) years but shall automatically expire upon full payment of
the loan. A voting trust agreement must be in writing and notarized, and shall specify
the terms and conditions thereof.

A certified copy of such agreement shall be filed with the corporation and with the
Commission; otherwise, the agreement is ineffective and unenforceable. The certificate
or certificates of stock covered by the voting trust agreement shall be cancelled and
new ones shall be issued in the name of the trustee or trustees, stating that they are
issued pursuant to said agreement. The books of the corporation shall state that the
transfer in the name of the trustee or trustees is made pursuant to the voting trust
agreement.
2. (A) LODI Corporation and TOTGA, Inc. are negotiating to engage in a quasi-merger with the
former investing its corporate funds to acquire 90% of the latter’s assets. Which corporation
may face the possibility of its stockholders exercising their appraisal rights, LODI or TOTGA?
Briefly justify your answer. 5%
(B) If your client is thinking of exercising her appraisal right, what 2 important facts about
the corporation should you seek to determine first before she makes a decision. 5%
Answers:
a. Both corporation may face the possibility of its stockholders exercising their appraisal
rights since the law does not distinguish between the acquiring or target corporation.
 SECTION 80. When the Right of Appraisal May Be Exercised. — Any stockholder of a
corporation shall have the right to dissent and demand payment of the fair value of the
shares in the following instances:
(c) In case of merger or consolidation; and
The law allows the exercise of the appraisal right in case of merger or consolidation
regardless whether the company is an acquiring company or the target company.
b. The 2 important facts about the corporation that the client must seek to determine
before she makes a decision are the following:
1. Present of URE - Under Section 81, par. 2 Provided, That no payment shall be made
to any dissenting stockholder unless the corporation has unrestricted retained
earnings in its books to cover such payment. The right of appraisal may only be
exercised if there is unrestricted retained earnings of the corporation.
2. The financial reports of the constituent corporations in the merger. This is to check if
the merger will be beneficial to both companies.

3. If the corporations in problem 2 above proceed with the quasi-merger, in what cases may
LODI be deemed to also be assuming TOTGA’s liabilities? 10%
Answer:
No. in quasi mergers only the majority of the assets of the target corporation are being acquired
by the acquiring corporation. Hence, LODI corporation will not acquire TOTA’s liabilities.

4. (A) Suppose a stockholder has fully paid-in shares in a corporation and sells these to a non-
stockholder, how should the transfer be made to bind the parties to the transfer, the
corporation itself and the whole world?
(B) If the selling stockholder hasn’t yet fully paid his subscription, would your answer be the
same or be different? Explain your answer concisely. 20%
Answers:
a. Under Section 62 of the RCC, no transfer, however, shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation showing the names
of the parties to the transaction, the date of the transfer, the number of the certificate
or certificates, and the number of shares transferred. Hence in order for the transfer of
the shares to another person to be binding, it has to be recorded in the books of
corporation.
b. No. only fully paid stockholders can transfer his or her stocks to another person. Under
Section 62, no shares of stock against which the corporation holds any unpaid claim shall
be transferable in the books of the corporation. Also in Section 63, no certificate of stock
 shall be issued to a subscriber until the full amount of the subscription together with
interest and expenses (in case of delinquent shares), if any is due, has been paid. Hence,
a stockholder who is not fully paid cannot sell his or her shares to another person. But he
or she may assign his or her interest to another person with the consent of the
corporation.

5. Your client stockholder consults you on her plan to sue her corporation for planning to
engage in a corporate act requiring majority BOD and 2/3 stockholder approvals for the reason
that she disagrees with such plan.
(A) What will you advise her to make sure she won’t be accused of engaging in a strike suit?
(B) What other legal options can you provide her other than a court case? 10%
Answers:
a. I will advise to exercise his right of appraisal instead if available.
b. He or she may check the AOI or bylaws if there is a provision for arbitration. Under
SECTION 181. Arbitration for Corporations. — An arbitration agreement may be
provided in the articles of incorporation or bylaws of a corporation. When such an
agreement is in place, disputes between the corporation, its stockholders or members,
which arise from the implementation of the articles of incorporation or bylaws, or from
intra-corporate relations, shall be referred to arbitration.

The stockholder may also check if there has been any violations by the corporation of the
Corporation Code and may file for an administrative complaint before the SEC.

6. Amie Compagnie and Tout Jours Compagnie are both French corporations planning a
statutory merger under French law. If the latter has a Philippine branch and the merger
materializes, what will be the effect of the merger on the branch office? 10%
Answer:
It depends. If Tout Jours Compagnie is the surviving company, there will be no effect to its
Philippine branch since it will still continue to exist. However, if it is the one which will be
acquired, the Philippine branch must be closed or withdrawn since it will no longer exist and
have its corporate being.
7. Now that their children are adults, a husband-and-wife business team plan to incorporate
what used to be a single entrepreneurship. They consult you on whether they should set up an
OPC, a close or an open corporation and the pros and cons involved in these options. What say
you on the pros and cons and what specifically will you recommend and why? 10%
Answer:
The following are the pros and cons of an OPC, a close corporation and an open corporation:
a. As to the number of stockholders:
In an OPC, there is only stockholder. In a close corporation, the number of stockholders
should not exceed to 20. While in an open corporation there is no limit.
b. As to the public offering of the shares:
In an OPC and close corporation, their shares are not offered to the public, hence limited
sources of capital. While in an open corporation, its stocks can be offered to the public,
therefore will have more sources of capital.
c. As to the transfer of ownership of shares:

In a close corporation, there should be restrictions as to the transfer of shares. While in

an open corporation, there will be no restrictions as long as the stockholder has fully
paid his or her stock subscription.
In conclusion, I will recommend the couple to establish an open corporation because it has more
sources of capital and there is always an opportunity for expansion.

8. Why would you advise incorporation for a religious society of nuns involved in non-
profitable activities like caring for abandoned children and providing them quality nursery and
elementary education? Give more than just one legal reason, because there are several. 10%
Answer:
a. Because they are exempted from income taxes. Under Sec. 30 of the NIRC, exemptions
from income tax (E) Nonstock corporation or association organized and operated
exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the
rehabilitation of veterans, no part of its net income or asset shall belong to or inure to
the benefit of any member, organizer, officer or any specific person;
 b. Under Art. VI, Section 28 (3) of the 1987 Constitution, (3) Charitable institutions,
churches and parsonages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively
used for religious, charitable, or educational purposes shall be exempt from taxation.
c. Under Section 2 of the Corporation Code, a corporation is an artificial being created by
operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence. They will a separate
juridical personality, separate from their members. They will also have the right to
acquire properties and may have perpetual existence.
d. Under Section 86, any profit which a nonstock corporation may obtain incidental to its
operations shall, whenever necessary or proper, be used for the furtherance of the
purpose or purposes for which the corporation was organized, subject to the provisions
of this Title. A non-stock corporation may engage in profit making activities so long as
the profits will be used in the furtherance of their purpose.
9. A corporate client consults you on the legal possibility of voluntarily seeking court
rehabilitation proceedings. What important considerations will you take into account with your
client to ensure it is not engaging in a false effort just to mislead its corporate creditors and
unduly delay and/or minimize the settlement of their claims? 10%
Answer:
Under Section 12 of FRIA, if the applicant is a corporation, it has to secure a majority vote of the
board of directors or trustees and authorized by the vote of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock, or in case of nonstock corporation, by the
vote of at least two-thirds (2/3) of the members, in a stockholder's or member's meeting duly
called for the purpose, for it to apply for a voluntary rehabilitation proceedings. The ground for
the application must be due to the insolvency of the debtor or its inability to pay its obligations
as they become due and the viability of its rehabilitation.

----------------------------------------------------------------------------------------------------------------------------
Finals 2022
2. A. Catriona is one of the stockholders who entered into a voting trust agreement with
Rabiya as voting trustee. In a stockholders’ meeting scheduled next week, can the voting
trustee, Rabiya appoint Catriona as her proxy for that meeting? 5%
B. For a scheduled stockholders’ meeting on July 10, 2022 at 2 p.m., stockholder Pia
appointed Bea to be her proxy and the proxy appointment was signed and dated July 10, 2022
by Pia at 11 a.m. Subsequently, unknown to Bea and without being informed by Pia, Pia
executed a second proxy appointment in favor of Jeremy signed and dated July 10, 2022 by
her at 12 noon. Both Bea and Jeremy show up for the 2 p.m. meeting at 1:45 p.m. Who
between Bea and Jeremy should the corporate secretary allow to attend the meeting as proxy
for Pia? Briefly but LEGALLY justify your answer. 5%
ANSWERS:
a. Yes, Rabiya may appoint Catriona as her proxy. Under Section 58 , the voting trustee or
trustees may vote by proxy or in any manner authorized under the bylaws unless the
agreement provides otherwise.
b. It depends, before the vote by proxy may be allowed, it must comply first with the
requirements under Sec. 57 of the Corporation Code, proxies shall be in writing, signed and
filed, by the stockholder or member, in any form authorized in the bylaws and received by
the corporate secretary within a reasonable time before the scheduled meeting. Unless
otherwise provided in the proxy form, it shall be valid only for the meeting for which it is
intended. If, both appointments are in compliance with the requirements, the latter
appointment would be allowed since it has the latest intention of the stockholder.

3. Suppose a stockholder owns only 1 share of stock of a corporation which represents less
than .01% of the corporation’s outstanding shares of stock. The stockholder now wants to
inspect corporate records and make copies thereof. Can the corporate secretary refuse that
stockholder to do that on the sole ground that she is just a very minor stockholder
representing such a minuscule percentage of the outstanding stock and tells the stockholder
to just attend the next stockholders’ meeting to be informed of the corporation’s
performance so far? Briefly but LEGALLY justify your answer. 10%
ANSWER:
No, the corporate secretary cannot refuse inspection on the basis of minority. Under Section
73 of the Corporation Code, corporate records, regardless of the form in which they are stored,
shall be open to inspection by any director, trustee, stockholder or member of the corporation
in person or by a representative at reasonable hours on business days, and a demand in
writing may be made by such director, trustee or stockholder at their expense, for copies of
such records or excerpts from said records. The inspecting or reproducing party shall remain
bound by confidentiality rules under prevailing laws. The law does not distinguish; hence all
stockholders are allowed to inspect the corporate records in compliance with the requirements
under the Code.

4. Tribeca Corporation, a domestic corporation in dire straits due to the pandemic lockdown,
agreed to entertain a merger and takeover offer of Move Forward Corporation, another
domestic corporation which did well despite the pandemic lockdown because of its digitalized
operations and work-from-home policies. Liza, one of the original stockholders of Tribeca and
still owning a decent number of shares of the company was against such merger and takeover.
 The offer of Move Forward was scheduled to be taken up in a scheduled stockholders’
meeting for the required 2/3 vote at least of the shareholders after majority of Tribeca’s BOD
approved the takeover. However, Liza was unable to attend said stockholders’ meeting to
oppose the offer because she contracted Covid 19 and had to be hospitalized. During the
stockholders’ meeting, the Tribeca President and Treasurer showed that the corporation had
been losing profits already even before the pandemic and was forecast to incur more losses in
the near future and the corporate action was approved. Now healed and doing well, Liza now
seeks your legal advice regarding her right as a stockholder still opposed to Tribeca’s
corporate action. Cite at least 3 good legal reasons concerning Tribeca’s situation and her own
situation that should discourage her from pursuing her appraisal right. 15%
ANSWERS:
1. Liza will not be able to exercise her appraisal right since she was not able to attend the
meeting. One of the requirements for the exercise of an appraisal right is that the
stockholder was able to vote against the corporate act.
2. Liza may not be able to exercise her appraisal right due to the absence of an unrestricted
retained earnings of the corporation. Before the stockholder may exercise her appraisal
right, there should be URE.
3. The acquiring corporation, Move Forward Corporation, did well despite the pandemic
lockdown. It would be better to see if the company will continue to do well and make more
profits.
5. Jack and Jill, a husband-and-wife business team with their 4 adult children all have been able
to start and operate a very successful family business in their hometown in Laguna and appear
ready to go big-time. The couple with their children consults you on whether they should set up
a close or an open corporation and the pros and cons involved in these options. What say you
on the pros and cons and what specifically will you recommend and why? I hope you
understand what this problem asks of you: the advantage versus disadvantage of one type of
corporation versus the other. 10%
ANSWERS:
a. As to the number of stockholders:
In a close corporation, the number of stockholders should not exceed to 20. While in an
open corporation there is no limit.
b. As to the public offering of the shares:
In a close corporation, their shares are not offered to the public, hence limited sources of
capital. While in an open corporation, its stocks can be offered to the public, therefore
will have more sources of capital.
c. As to the transfer of ownership of shares:
 In a close corporation, there should be restrictions as to the transfer of shares. While in
an open corporation, there will be no restrictions as long as the stockholder has fully
paid his or her stock subscription.
In conclusion, I will recommend the couple to establish an open corporation because it has more
sources of capital and there is always an opportunity for expansion.

6. Cite at least 3 good reasons why you would advise incorporation for a religious association of
friars involved in non-profitable activities. 15%
Answers:
a. Because they are exempted from income taxes. Under Sec. 30 of the NIRC, exemptions
from income tax (E) Nonstock corporation or association organized and operated
exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the
rehabilitation of veterans, no part of its net income or asset shall belong to or inure to
the benefit of any member, organizer, officer or any specific person;
b. Under Art. VI, Section 28 (3) of the 1987 Constitution, (3) Charitable institutions,
churches and parsonages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively
used for religious, charitable, or educational purposes shall be exempt from taxation.
c. Under Section 2 of the Corporation Code, a corporation is an artificial being created by
operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence. They will a separate
juridical personality, separate from their members. They will also have the right to
acquire properties and may have perpetual existence.
d. Under Section 86, any profit which a nonstock corporation may obtain incidental to its
operations shall, whenever necessary or proper, be used for the furtherance of the
purpose or purposes for which the corporation was organized, subject to the provisions
of this Title. A non-stock corporation may engage in profit making activities so long as
the profits will be used in the furtherance of their purpose.

7. Which of the following 3 foreign corporations are deemed to be doing business in the
Philippines and why do you say so?
A. Belle du Jour Compagnie is a French corporation which appoints Rustan’s Department Store
to be the only store in the whole Philippines to sell exclusively Belle du Jour cosmetics products.
5%
ANSWER:
Belle du Jour Compagnie is not doing business in the Philippines. Under the FIA, a foreign
company that has appointed a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account is not considered to be a corporation
doing business in the country.
B. Lexington Corporation, is a British corporation which decided to sue in a Philippine court,
Lexington, Inc., a domestic corporation, because the latter is using the trademark Lexington for
its corporate name and producing leather luggage domestically that are similar in design to the
leather luggage that Lexington Corporation manufactures for export throughout the world. 5%
ANSWER:

C. Tokugawa Corporation is a Japanese corporation that decides to invest in a newly formed

Philippine corporation called Digital Philippines, Inc. (DPI). Because of Tokugawa’s investment,
this Japanese corporation can appoint its nominee to seat as a DPI board member, Mr. Haruko,
a Japanese resident in the Philippines who is married to a Filipina. 5%
ANSWER:
No, Tokugawa Corporation is not doing business in the Philippines. Under the FIA, "doing
business" shall not be deemed to include mere investment as a shareholder by a foreign entity
in domestic corporations duly registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its interests in such corporation.
Hence, Tokugawa Corp is not considered as doing business in the country.

8. A corporation grants to its employees with a 10-year employment record, such as Jasmin
Alindog, secretary of the corporation’s president, the option to own shares of the corporation.
Such employees can sell or transfer their option to non-employees of the corporation. If Juan
de la Cruz claims to be a new stockholder of the corporation after purchasing Jasmin Alindog’s
option, when can Juan de la Cruz actually begin to exercise the rights of a stockholder, such as
the right to vote, right to dividends, etc. In short, is Juan already a new stockholder? What does
the law require for Juan to possess stockholder’s rights? 10%
ANSWERS:
Under Section 62 of the RCC, no transfer, however, shall be valid, except as between the parties,
until the transfer is recorded in the books of the corporation showing the names of the parties
to the transaction, the date of the transfer, the number of the certificate or certificates, and the
number of shares transferred. Hence in order for the transfer of the shares to another person to
be binding, it has to be recorded in the books of corporation. Hence in order for Juan Dela Cruz
to be recognized as the new owner of the stocks of Jasmin Alindog and be able to exercise
stockholder’s right, the transfer must be recorded in the corporate books.
9. How would you distinguish dissolution from rehabilitation in terms of the purpose for the
State’s role in these corporate actions, in terms of what is the ultimate objective of these
corporate actions and when is a corporation deemed qualified for rehabilitation and not be
dissolved and liquidated? 5% However you get an extra bonus with a score of 10% instead of
5% for this problem with 3 questions to answer if you answer briefly but substantively; i.e.
“Binigay mo na babeh!”
ANSWERS:
In rehabilitation, there is still a chance that the corporation may be rehabilitated. However, in
dissolution, there is no change of rehabilitation because of the great loss in the company.

Finals 2023
1. The Articles of Incorporation of Keizi Perfumes Corporation (KPC) was approved by SEC. After
the receipt of the Certificate of Incorporation and Approval from the SEC, KPC decided to
immediately start the operation of its business despite the fact that it has no approved By-Laws.
What is the legal status of the Keizi Perfumes Corporation: de facto, de jure or a corporation by
estoppel? Legally but briefly justify your answer.
Answer:
KPC is a de jure corporation. Under Section 18, a private corporation organized under this Code
commences its corporate existence and juridical personality from the date the Commission
issues the certificate of incorporation under its official seal. Bylaws is not a requirement for
incorporation. Hence, KPC is a de jure corporation.

2. Sakura Corporation and Arigato Inc. are both Japanese corporations planning a statutory
merger under their country’s law. If the latter has a Philippine branch and the merger
materializes, what will be the effect of the merger on the branch office?
Answer:
It depends. If Arigato Inc. is the surviving company, there will be no effect to its Philippine
branch since it will still continue to exist. However, if it is the one which will be acquired, the
Philippine branch must be closed or withdrawn since it will no longer exist and have its
corporate being.
3. Ang Bowang Holdings Company, an Indonesian corporation, owns 10% of the outstanding
stock of Masagana Foods Corporation, a domestic corporation. Due to the policy change of the
holding company to shift its investments to Vietnam, Ang Bowang Holding Company wants to
sell its shareholdings in the local company. However, due to the inflationary situation in the
country, the weak peso, high interest rates and the uncertain state of the stock market, nobody
is interested to buy Ang Bowang’s 10% shareholdings. To shore up the price of its shares, the
Masagana board of directors is thinking whether it would be a good idea to buy back the shares
owned by Ang Bowang. Thus, they ask your legal advice on this possibility. What would you tell
the board?
Answer:

4. In the March 1, 2019 stockholder’s meeting of Golden Jewelry Corporation, 9 directors were
elected to the board. The directors assumed their posts on that date. Since no stockholders’
meeting was held in 2020 till 2021 due to the pandemic lockdown, the 9 directors served in a
holdover capacity and thus continued discharging their powers. On October 12, 2022, 2 of the
corporation’s directors resigned from the board. The remaining 7 directors elected 2 new
directors to fill in the vacancies caused by the resignations. Stockholder Erlyn Bautista
questioned the election of the new directors through two successive letter-complaints
addressed to the board. Unheeded by the board, she now seeks your legal advice on the
possibility of filing a suit with the courts on the ground that she believes the board vacancies
should have been filled up by the vote of the corporation’s stockholders. She asks you:
(A) whether she should institute a derivative suit or an intracorporate dispute; and
(B) if her complaint may be filed with the SEC or should she file with any regular RTC having
territorial jurisdiction of the corporation’s principal office. What would you tell her and why so?
Make sure you have a legally complete advice for her.
Answer:
a. Erlyn Bautista cannot file a derivative suit because in a derivative suit she is suing on
behalf of the corporation. In this case the individual rights as a stockholder is the issue
hence it partakes more of an election contest under the rules on intra-corporate
controversy.
b. She may file in the RTC having territorial jurisdiction of the corporation’s principal office
since the case is an intra-corporate controversy and the jurisdiction on intra-corporate
controversy has already been transferred from the SEC to the courts of general
jurisdiction which is the RTC.
5. Is the consent of all creditors of both corporations engaged in a statutory merger required
before the SEC approves the merger? Explain your answer briefly with sufficient legal basis.
Answer:
No. Under SECTION 76. of the Corporation Code, upon approval by a majority vote of each of
the board of directors or trustees of the constituent corporations of the plan of merger or
consolidation, the same shall be submitted for approval by the stockholders or members of each
of such corporations at separate corporate meetings duly called for the purpose...The
affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital
stock of each corporation in the case of stock corporations or at least two-thirds (2/3) of the
members in the case of nonstock corporations shall be necessary for the approval of such plan.
Only the approval of the BOD and 2/3 of the outstanding capital stock for stock corporations
and 2/3 members for non-stock corporations are needed

6. Being the control freak and micro-manager that he is, Mr. Gutierrez consults you—his astute
legal adviser— if he can serve as Chairman of the Board of Directors, as President, and as
General Manager of the corporation, all at the same time. Please advise very well as he is very
argumentative and astute like you as well.
Answer:
Yes, Mr. Gutierrez may hold those positions all of the same time. Under Section 24 of the
Corporation Code, the same person may hold two (2) or more positions concurrently, except
that no one shall act as president and secretary or as president and treasurer at the same time.

7. The BIR assessed Abakada Corp. for deficiency income tax for taxable year 2021 in the
amount of P34,567,890.00, inclusive of surcharge and interest. The corporation’s board of
directors ask your legal opinion, given the insufficiency of their current cash on hand, how they
may address and resolve their funding problem. The board has the following options in mind:
(i) contribute their personal finances as corporate directors since they manage the operations
of the corporation which includes its financial operations; or
(ii) solicit funds from both themselves and from all the corporate officers to finance the
deficiency tax as they are agents of the corporation; or
(iii) compel all the stockholders to contribute additional capital as they are the real owners of
the corporation; or
(iv) compel corporate stockholders with unpaid subscriptions still due to the corporation, if any,
to pay up as these stockholders are actually debtors of the corporation and their substantial
unpaid subscriptions are accounts payable to the corporation. The board asks based on your
CORPORATE LAW expertise as follows:
(A) which of these options is legally viable from a corporate law perspective or are none of
these possible?
(B) The board also asks you if the BIR can compel the board to do any one of these options or all
just to pay up the deficiency tax due from the corporation. The board doesn’t want to pursue
protesting the assessment as it is valid and correct and the process of protesting will also entail
added expenses and take up business time and the board neither wants the BIR to proceed
with BIR’s collection methods such as distraint and levy of corporate properties. Briefly explain
for both these issues raised by the board.
Answers:
a. Only iv is allowed under the Trust Fund Doctrine. The first three options are not allowed
due to the Doctrine of Separate Juridical Entity of the corporation. Its stockholders and
officers cannot be made liable to its debts and liabilities.
b. No, the BIR cannot compel the corporation to do any of these things.
Alternative answer: Yes, the BIR may compel the doing of iv since the BIR is considered
as creditor of the corporation.

8. Father Franchesco, an Italian priest who came from his prior post in Seoul, South Korea, was
assigned to head the Diocese of Iloilo City of the Roman Catholic Church which was
incorporated as a corporation sole. There were years when the head of the Diocese was a
Filipino, but there were more years when the heads were foreigners. Mr. Chi-Young donated a
piece of land located in Iloilo City to the corporation sole for use as an elementary and high
school location as the schools will be run by the Diocese. May the Iloilo City Register of Deeds,
Mr. J. Roma, refuse to register and transfer the title to the land to the Diocese for any and all of
the following reasons: (i) because a corporation sole is not legally allowed to own real property;
(ii) because the present head of the corporation sole is not a Filipino; and
(iii) the Iloilo City parishioners should first authorize acceptance or not of said donation and
there was no documentary evidence in the deed of donation of such acceptance except only
the signature of Father Franchesco for the acceptance. Being the city attorney tasked to provide
legal advice to the city’s officials, what will you tell Mr. Roma, the Register of Deeds, about his
reasons for his refusal?
Answer:
Reason No. 1 is not a valid reason for refusal since the Corporation Code allows the corporation
sole the acquisition of properties.
Reason No. 2 is not tenable since a corporation sole may be a foreigner. There is no qualification
of citizenship for the appointment to a corporation sole.
Reason No. 3 is also not tenable since the approval of the parishioners is not required. As the
corporation sole, he has the authority of receive the donation on behalf of the Diocese of Iloilo
City of the Roman Catholic Church.

9. Your client, Myra Rosario, consults you on the viability of exercising her appraisal rights as
stockholder in a corporation whose corporate action she disagreed to but which was
overwhelmingly approved by both the directors and more than 2/3 of its outstanding
stockholders of record. You were able to determine that the corporate act may be subject to
appraisal rights by a stockholder, but in addition to this piece of information, what other advice
do you need to provide Miss Rosario to ensure that she won’t regret proceeding with the
exercise of such right?
Answer:
The 2 important facts about the corporation that the client must seek to determine before she
makes a decision are the following:
a. Present of URE - Under Section 81, par. 2 Provided, That no payment shall be made to
any dissenting stockholder unless the corporation has unrestricted retained earnings in
its books to cover such payment. The right of appraisal may only be exercised if there is
unrestricted retained earnings of the corporation.
b. The financial reports of the constituent corporations in the merger. This is to check if the
merger will be beneficial to both companies
10. Erlyn Paula Bautista is one of the stockholders who entered into a voting trust agreement
with Jinmarie Arabes as voting trustee. In a stockholders’ meeting scheduled next week, can the
voting trustee, Jinmarie appoint Erlyn Paula as her proxy for that meeting? What is your very
legally sharp opinion and why so?
Answer:
Yes, Jinmarie may appoint Erlyn as her proxy. Under Section 58 , the voting trustee or trustees
may vote by proxy or in any manner authorized under the bylaws unless the agreement
provides otherwise. The Code allowed voting by proxy under a voting trust agreement.