BASIC CONSIDERATIONS
TRUE OR FALSE
1. Preference shares of stock may be issued with par or no-par value.
2. A corporation can be a general partner in a partnership.
3. The board of directors shall exercise the corporate powers of a corporation.
4. A public corporation is one formed for the government of a portion of the state.
5. All incorporators are subscribers but a subscriber need not be an incorporator.
6. A partnership can be a corporator in a corporation.
7. No-par value shares may not be issued without being fully paid.
8. A shareholder in a corporation does not have the right to transact corporate business or to intervene in the
management of the business.
9. A corporation can come into existence by mere agreement of the parties as in the case of partnerships.
10. A corporation can be held liable for personal indebtedness of a shareholder.
11. Shareholders may be natural or juridical persons.
12. No-par value shares have a minimum stated value of P5.00 per share.
13. Each of the incorporators of a stock corporation must own or be a subscriber to at least two (2) shares of the
share capital of the corporation.
14. The board of directors is responsible for the formulation and implementation of the overall policies for the
corporation.
15. Eleemosynary corporations are those organized for public charity.
16. A corporation is an artificial being with a personality separate and apart from its individual shareholders or
members.
17. Shares of stock cannot be transferred without the consent of the other shareholders.
18. Shareholders of a corporation elect the board of directors, who in turn appoint the top officers of the
corporation.
19. Under the RCCP, at least twenty five percent of authorized share capital must be subscribed and at least
twenty-five percent of the total subscription must be paid upon subscription. In no case shall the paid-up
capital be less than P5,000.
20. A corporation has continuity of existence which permits the business to continue regardless of changes in
ownership or the death of a shareholder.
21. Only natural persons can be incorporators.
22. Any individual shareholder in a corporation may personally be held liable for all debts incurred by the
corporation.
23. Non-stock corporations may be formed or organized for charitable, religious, civic service, or similar
purposes.
educational, professional, cultural, recreational, fraternal, literary, scientific, social,
24. A corporation is created by agreement of the shareholders.
25. All incorporators (if they continue to be shareholders) are corporators of a corporation.
26. All corporations issue shares of stock and are either public or private.
27. Stock corporations have their share capital divided into shares and are authorized to distribute to the holders
of such share dividends or allotments of the accumulated profits on the basis of the shares held.
28. The president of a corporation must be a director of the corporation.
29. Incorporators can be artificial beings.
30. Death of a shareholder will not dissolve the corporation.
31. Preference shares of stock should only be issued as par value shares.
32. A de jure corporation is a corporation existing in fact and in law.
33. Shares without par value may be issued for a consideration less than P5.00 per
34. The liability of the shareholders for the payment of corporate debts is limited to the value of their shares.
35. A corporation shall have a corporate term of 50 years unless its articles of incorporation states it as of
perpetual existence.
36. Any person, partnership, association or corporation, singly or jointly with others but not more than fifteen
(15) in number, may organize a corporation for any lawful purpose or purposes.
37. Natural persons who are licensed to practice a profession, and partnerships or associations organized for
the purpose of practicing a profession, are allowed to organize as a corporation.
38. Under the old Corporation Code, the minimum number of incorporators was five.
Under the RCCP, one person can form a corporation, the one person corporation.
39. Corporations vested with public interest shall have independent directors constituting at least 25% of such
board.
40. Foreign corporations are allowed to give donations in aid of any political party or candidate or for purposes
of partisan political activity.
41. In the articles of incorporation, the principal place of business must be a specific address within the
Philippines.
42. A majority of the incorporators must be residents of the Philippines.
43. The incorporators and the treasurer sign the articles of incorporation.
44. If a corporation does not formally organize and commence its business within 3 years from the date of its
incorporation, its certificate of incorporation shall be deemed revoked as of the day following the end of the
3-year period.
45. If the corporation is vested with public interest, the board has the option to elect a compliance officer.
46. OPC is a corporation with a single stockholder, who may be a natural or artificial person, a trust or an estate.
47. The OPC has a personality separate and distinct from the single stockholder as such the sole shareholder's
liability is always limited to his investment.
48. The treasurer who may or may not be a director is not required to be a resident of the Philippines.
49. The single stockholder shall be the sole director and president of the OPC.
50. The single stockholder may be appointed as the corporate secretary of the OPC.
ANSWERS:
1. True - Preference shares can be issued with or without par value.
2. True - A corporation can act as a general partner in a partnership.
3. True - The board of directors exercises the corporate powers of a corporation.
4. False - A public corporation is typically formed for government purposes, not private business.
5. True - All incorporators are subscribers, but a subscriber does not have to be an incorporator.
6. True - A partnership can be a corporator in a corporation.
7. True - No-par value shares must be fully paid upon issuance.
8. True - Shareholders do not have the right to directly manage the corporation.
9. False - A corporation cannot be formed by mere agreement; it requires legal formalities.
10. False - A corporation is not liable for the personal debts of its shareholders.
11. True - Shareholders can be natural or juridical persons.
12. False - No-par value shares do not have a minimum stated value of P5.00 per share.
13. True - Each incorporator must own or subscribe to at least two shares.
14. True - The board of directors is responsible for overall corporate policies.
15. True - Eleemosynary corporations are organized for public charity.
16. True - A corporation has a separate legal personality from its shareholders.
17. False - Shares of stock can generally be transferred without other shareholders' consent.
18. True - Shareholders elect the board, which appoints top officers.
19. True - Under the RCCP, at least 25% of the authorized capital must be subscribed, and 25% of the
subscription must be paid.
20. True - A corporation has continuity of existence.
21. True - Only natural persons can be incorporators.
22. False - Shareholders are not personally liable for corporate debts.
23. True - Non-stock corporations can be formed for charitable, religious, or similar purposes.
24. False - A corporation is created by legal formalities, not just shareholder agreement.
25. True - All incorporators (if they remain shareholders) are corporators.
26. False - Not all corporations issue shares (e.g., non-stock corporations).
27. True - Stock corporations distribute dividends based on shares held.
28. False - The president does not have to be a director.
29. False - Incorporators must be natural persons.
30. True - The death of a shareholder does not dissolve the corporation.
31. False - Preference shares can be issued with or without par value.
32. True - A de jure corporation exists in fact and in law.
33. False - No-par value shares cannot be issued for less than P5.00 per share.
34. True - Shareholders' liability is limited to the value of their shares.
35. True - A corporation typically has a 50-year term unless stated otherwise.
36. True - Up to 15 persons or entities can organize a corporation.
37. True - Professionals can organize as corporations under certain conditions.
38. True - Under the old Corporation Code, the minimum was five incorporators; under RCCP, one person can
form a corporation.
39. True - Corporations vested with public interest must have at least 25% independent directors.
40. False - Foreign corporations are not allowed to donate for political purposes.
41. True - The principal place of business must be a specific address in the Philippines.
42. True - A majority of incorporators must be Philippine residents.
43. True - The incorporators and treasurer sign the articles of incorporation.
44. True - If a corporation does not organize within 3 years, its incorporation is revoked.
45. False - Corporations vested with public interest must appoint a compliance officer.
46. True - An OPC can have a single stockholder, who may be a natural or artificial person.
47. True - The OPC has a separate legal personality, and the shareholder's liability is limited.
48. False - The treasurer must be a resident of the Philippines.
49. True - The single stockholder is the sole director and president of the OPC.
50. False - The single stockholder cannot be the corporate secretary.
I. MULTIPLE CHOICE
1. An ordinary or preference shareholder is similar to a lose no more than the value of the investment.
a. general partner
b. limited partner
c. sole proprietor
d. nominal partner
e. stockbroker
2. What is the primary disadvantage of both a sole proprietorship and a partnership that a corporation overcomes?
a. No access to capital
b. Taxing complications
c. Unlimited liability
d. Ease of start-up
e. Lack of secrecy
3. A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)
a. government-owned corporation.
b. close corporation.
c. open corporation.
d. not-for-profit corporation.
4. Shares of 1st Global StratDev stock cannot be purchased in any stock exchange or by just any individual. This
means that 1st Global StratDev is a(n)
a. partnership.
b. open corporation.
c. family corporation.
d. close corporation.
5. When organizing a corporation, the incorporators submit articles of incorporation to
a. a judge.
b. the Securities and Exchange Commission.
c. the National Bureau of Investigation.
d. the Board of Investments.
6. Ordinary shares carry all the following rights except the right to
a. a.share in profits.
b. receive information about the corporation.
c. receive part of the profit before other classes of shares.
d. attend the annual shareholders' meeting.
7. How can the following statement be best explained: "Shareholders control the activities of a corporation"?
a. All shareholders vote on all the major issues and problems that a corporation faces on a monthly basis.
b. Shareholders are intricately involved in the daily operations of a corporation.
c. Shareholders elect the board of directors, and this board is responsible for appointing
corporate officers who manage the daily business of the corporation.
d. Shareholders vote for the members of the board of directors and this board makes all the daily business
decisions for the corporation.
e. Shareholders usually call corporation management and tell executives better ways to run the organization.
8. The top governing body of a corporation is known as the
a. incorporators.
b. shareholders.
c. management.
d. officers.
e. board of directors.
9. Corporate officers are
a. elected by shareholders.
b. appointed by the board of directors.
c. appointed by management.
d. elected by incorporators.
10. Which of the following is not a disadvantage of the corporate form of ownership?
a. Difficulty of formation
b. Limited liability
c. Expense of incorporation and selling stock
d. Lack of secrecy
11. The order of difficulty and expense, from most to least, when forming a business organization is as follows:
a. corporation, sole proprietorship, partnership.
b. corporation, partnership, sole proprietorship.
c. partnership, corporation, sole proprietorship. partnership, sole proprietorship, partnership.
d. sole proprietorship, partnership, corporation.
II. MULTIPLE CHOICE
1. Which of the following qualifications is necessary in order that one may be elected president of the corporation?
a. He must be a citizen and a resident of the Philippines.
b. He must be a director of the corporation.
c. He must not be a shareholder or director of a competitor corporation.
d. He must not be a president of any other corporation.
e. All of the above.
2. It is the supreme authority in matters of management of the regalar and business affairs of a corporation.
a. board of directors
b. majority shareholders
c. minority shareholders
d. none of the above
3. The following are the steps in the creation and organization of a corporation except
a. incorporation.
b. promotion.
c. formal organization and commencement of business operations.
d. none of the above.
4. The par value of ordinary shares is equal to
a. the amount received by the corporation when the share was originally issued.
b. the amount at which the share is currently trading in an organized market.
c. a designated peso amount per share established in the articles of incorporation.
d. the book value of the ordinary shares.
5. The arbitrary value assigned to a share of stock is called
a. market value.
b. par value.
c. liquidation value.
d. book value.
6. Right of the corporation to continue as a juridical entity for the period stated in the Articles of Incorporation despite
the death of any shareholder:
a. right of succession
b. right of pre-emption
c. right of existence
d. none of the above
7. The directors of a corporation are responsible for declaring dividends.
a. maintaining shareholder records.
b. the day to day managing of the business.
c. preparation of accounting records and financial statements.
8. A corporation has the tollowing attributes except
a. an artificial being with a personality separate and apart from its shareholders.
b. created by operation of law
c. enjoys the right of succession
d. has the powers, attributes and properties expressly authorized by law or incident to its existence.
e. none of the above
9. The owners of shares in a stock corporation are called
a. incorporators.
b. promoters.
c. members.
d. shareholders.
10. Refers to an equitable right of shareholders to subscribe to newly issued shares of the corporation in proportion to
their present shares in order to maintain their equity in their surplus as well as proportionate standing in the
corporation.
a. right of redemption
b. pre-emptive right
c. right to be sued
d. concept of corporate entity
11. The advantage of a corporation from a partnership is
a. The death of a shareholder will not dissolve the corporation because of its power of succession.
b. Its management is centralized on the board of directors.
c. Shareholders have limited liability.
d. Shareholders are not general agents of the business.
e. all of the above
12. The most powerful person in a corporation is the
a. incorporator.
b. president.
c. vice-president.
d. chairman of the board.
13. The shareholders or members mentioned in the Articles of Incorporation originally forming and composing the
corporation and who are signatories thereof are called
a. incorporators.
b. corporators.
c. promoters.
d. subscribers.
14. One of the following is not a characteristic of the corporate form of organization.
a. limited liability of shareholders
b. mutual agency
c. continuous existence
d. centralized authority
15. The ordinary stock of the corporation entitling the owner to pro-rata dividends without any priority over any other
shareholders but equally with all other shareholders except preference shareholders is
a. preference share.
b. guaranteed share.
c. convertible share.
d. ordinary share.
16. One who has agreed to take shares from the corporation on the original issue of such share is called
a. incorporator.
b. member.
c. promoter.
d. subscriber.
e. none of the above
17. No par value shares cannot be issued ,a. for less than P5.00.
a. with preference as to assets or as to dividends.
b. without being fully paid
c. by banks, trust, insurance and preneed companies, public utilities, building and loan associations and other
corporations obtaining funds from the public.
d. all of the above.
18. Which of the following is a disadvantage of the corporate form of business?
a. Corporations lack mutual agency.
b. There is a greater degree of government control and supervision.
c. Ownership shares can be easily transferred
d. Owners' liability is limited
ANSWERS:
I. MULTIPLE CHOICE
1. b. limited partner (A shareholder, like a limited partner, risks only the value of their investment.)
2. c. Unlimited liability (Both sole proprietorships and partnerships have unlimited liability, which corporations
overcome.)
3. c. open corporation (An open corporation's stock is publicly traded and can be purchased by anyone.)
4. d. close corporation (A close corporation restricts stock ownership and is not publicly traded.)
5. b. the Securities and Exchange Commission (Incorporators submit articles of incorporation to the SEC.)
6. c. receive part of the profit before other classes of shares (Ordinary shareholders do not have priority over
preference shareholders in receiving profits.)
7. c. Shareholders elect the board of directors, and this board is responsible for appointing corporate officers
who manage the daily business of the corporation. (Shareholders control the corporation indirectly by
electing the board of directors.)
8. e. board of directors (The board of directors is the top governing body of a corporation.)
9. b. appointed by the board of directors (Corporate officers are appointed by the board, not elected by
shareholders.)
10. b. Limited liability (Limited liability is an advantage, not a disadvantage, of corporations.)
11. b. corporation, partnership, sole proprietorship (Corporations are the most difficult and expensive to form,
followed by partnerships, then sole proprietorships.)
II. MULTIPLE CHOICE
1. b. He must be a director of the corporation (The president of a corporation must be a director.)
2. a. board of directors (The board of directors is the supreme authority in managing a corporation.)
3. d. none of the above (All the listed steps—incorporation, promotion, and formal organization—are part of
creating a corporation.)
4. c. a designated peso amount per share established in the articles of incorporation (Par value is a fixed
amount assigned to shares in the articles of incorporation.)
5. b. par value (Par value is the arbitrary value assigned to shares.)
6. a. right of succession (The right of succession allows a corporation to continue despite the death of a
shareholder.)
7. a. maintaining shareholder records (Directors are responsible for declaring dividends, not maintaining
shareholder records.)
8. e. none of the above (All the listed attributes are true of a corporation.)
9. d. shareholders (The owners of shares in a stock corporation are called shareholders.)
10. b. pre-emptive right (Pre-emptive rights allow shareholders to maintain their proportional ownership.)
11. e. all of the above (All the listed points are advantages of a corporation over a partnership.)
12. d. chairman of the board (The chairman of the board is typically the most powerful person in a corporation.)
13. a. incorporators (Incorporators are the original signatories of the articles of incorporation.)
14. b. mutual agency (Mutual agency is a characteristic of partnerships, not corporations.)
15. d. ordinary share (Ordinary shares entitle owners to pro-rata dividends without priority.)
16. d. subscriber (A subscriber agrees to take shares from the corporation during the original issue.)
17. b. without being fully paid (No-par value shares cannot be issued without being fully paid.)
18. b. There is a greater degree of government control and supervision (Corporations face more government
regulation compared to other business forms.)
