Commercial Law Quiz – Lex Rex Ph

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Created by Bryan Villarosa

Commercial Law Quiz

1 / 10

Which of the following conditions is NOT required for a minority stockholder to properly assert their right to inspect the books and other corporate records of a corporation?

The purpose of the inspection is legitimate and germane to the stockholder's interest

The right is exercised during reasonable hours on a business day

The stockholder has obtained consent from the majority shareholders

The stockholder has not improperly used any information secured in a previous examination

2 / 10

When does a stock become delinquent?

1 year from the date of subcription

60 days after the date of issuance of certificate of incorporation

after the 30-day grace period from the date of stated in the call of the board of directors or contract of subscription

5 days before the end of the fiscal year

3 / 10

Which of the following statements is most accurate regarding dividends?

Dividends can be declared from any corporate earnings

Dividends can only be declared from unrestricted retained earnings

Dividends can be declared even if the corporation has outstanding debts

Dividends must be declared if the corporation is profitable

4 / 10

In a corporation engaged in a nationalized activity requiring at least 60% Filipino ownership, how is the required Filipino ownership percentage applied?

Only to the total number of outstanding shares of stock entitled to vote in the election of directors

Only to the total number of outstanding shares of stock, whether or not entitled to vote

Separately to (a) the total number of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not entitled to vote

To each class of shares

The Filipinos should own 60% of the voting common shares and 60% of the outstanding capital stock (the 580,000 common shares and 400,000 non-voting preferred shares). Treasury shares, while issued shares, do not form part of the outstanding capital stock (SEC-OGC Opinion No. 16-16 June 27, 2016 ). In the case of Jose Roy III v. Teresita Herbosa, the Supreme Court clarified that the term “capital” in Section 11, Article XII of the 1987 Constitution refers to shares with voting rights, as well as with full beneficial ownership. This is precisely because the right to vote in the election of directors, coupled with full beneficial ownership of stocks, translates to effective control of a corporation. It is not necessary that the Filipinos own 60% of each type of shares. Thus, for purposes of determining compliance with the constitutional or statutory ownership, the required percentage of Filipino ownership shall be applied to BOTH (a) the total number of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not entitled to vote (Jose M. Roy III v. Teresita Herbosa, et al., G.R. No. 207246, April 18, 2017)

5 / 10

[2013 Bar] Dennis subscribed to 10,000 shares of XYZ Corporation but paid only 25% of the subscription. Assuming no call has been made on the unpaid subscription, how many shares is Dennis entitled to vote at the annual meeting of the stockholders of XYZ?

0 shares

10,000 shares

2,500 shares

100 shares

Holders of subscribed shares that are not fully paid but also not delinquent retain all stockholder rights. (Section 71 RCC)

6 / 10

What is the trust fund doctrine?

A rule that allows corporations to invest in trusts

A principle stating that a corporation's capital stock is a fund accessible to creditors for satisfying claims

A regulation for managing employee pension funds

A method of protecting shareholder investments from market fluctuations

7 / 10

(Bar 2017) Erica dissents from a corporate act like a merger. What must she do to exercise her appraisal right?

a) Attend the stockholders' meeting

File a written dissent

Either attend the stockholders' meeting or file a written dissent

Neither attend the stockholders' meeting nor file a written dissent

8 / 10

(2012 Bar) What is the primary purpose of the "Tender Offer" Rule?

To ensure that majority shareholders can sell their shares at a premium

To guarantee minority shareholders the same opportunity as majority shareholders in selling their shares

To allow shareholders to sell their shares for a better price

To provide an advantage to shareholders who want to maintain control of the company

9 / 10

When does the right of inspection extend to books and records of the corporation's wholly-owned subsidiary?

Never, as the subsidiary is a separate legal entity

Only when the subsidiary is also in receivership

When the books and records are in the corporation's possession and control

Only when there is a court order

it is settled that the right of inspection extends to books and records of the corporation’s wholly-owned subsidiary which are in the corporation's possession and control as it is more in accord with equity, good faith and fair dealing to construe the statutory right of a stockholder to cover such books and records (John Gokongwei, Jr. vs. Securities and Exchange Commission, et al., G.R. No. L-45911, April 11, 1979)

10 / 10

2014 Bar: What constitutes a quorum for the transaction of corporate business?

A majority of all shareholders

A majority of the directors present at a meeting

A majority of the number of directors as fixed by by-laws

Two-thirds of the directors present at the meeting

The required quorum for a meeting of the Board of Directors, under general corporate practice, is indicated in the By-laws and not in the Articles of Incorporation. This prac-tice is supported by the fact that both Secs. 14 (Contents of articles on incorporation) and 15 (Form of articles on incorporation) of the Corporation Code (particularly, Sec. 15 do not require mention of the quorum at meetings of the Board in the Articles of Incorporation.

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