I.

MULTIPLE CHOICE

a. Which of the following is not a qualification for membership to a primary cooperative?

1. Natural born resident of the Philippines
2. Of legal age
3. Common bond of interest
4. Actually residing or working in the intended area of operation

b. Cooperatives have maximum legal life of 50 years. An extension may be made not earlier
than __ prior to the original or subsequent expiry date unless there are justifiable reasons
for an earlier extension.
1. 3 years
2. 5 years
3. 7 years
4. 10 years

c. It is the highest policy-making body of the cooperative

1. Board of Directors
2. Board of Trustees
3. General Assembly
4. Cooperative Governance

d. The quorum in cooperative meetings is 25% of all the members entitled to vote. In the
meetings of the BOD, quorum is ½ plus one of all the members of the BOD.
1. Only the first statement is correct.
2. Only the second statement is correct.
3. Both statements are correct.
4. Both statements are incorrect.

e. A withdrawing member in a cooperative is entitled to receive a refund of his capital

contribution:
1. Even if the value of the assets of the cooperative is insufficient
2. Provided that the value of the assets of the cooperative is not less than
the aggregate amount of the cooperative’s debts and liabilities inclusive
of his share capital contribution
3. Provided that the value of the assets of the cooperative is not less than
the aggregate amount of the cooperative’s debts and liabilities
exclusive of his share capital contribution
4. Provided that the value of the assets of the cooperative is not less than
the aggregate amount of the cooperative’s debts and liabilities

f. The following may be elected as officers of a cooperative:

1. An employee of the CDA
2. An elective official of the government
3. An appointed official of the CDA
4. An employee of the government
5. All of the above
 6. 3 and 4 only

g. This is a type of cooperative engaged in medical and dental care, hospitalization,

transportation, insurance, housing, labor, electric light and power, communication,
professional and other services.
1. Multi-purpose cooperative
2. Service cooperative
3. Health Services cooperative
4. Marketing cooperative

h. Each member is entitled to 1 vote in primary cooperatives. Each member shall have 1
basic vote and as many incentive votes as provided in the secondary or tertiary
cooperative bylaws but not to exceed 3 votes.
1. Only the first statement is correct.
2. Only the second statement is correct.
3. Both statements are correct.
4. Both statements are incorrect.

i. Cooperative’s BOD shall be elected for a term of 2 years, except:

1. When no elected successors qualify
2. When removed for cause
3. In case of death
4. In case of resignation
5. All of the above
6. None of the above

j. Which of the following is not a privilege of a cooperative?

1. It has the preferential right to the management and operation of public
terminals and ports on sea transport only where the cooperative
operates
2. Exemption from pre-qualification bidding requirements for businesses
with government of the Philippines except GOCCs
3. Being represented by the provincial or city fiscal or the Office of the
Solicitor General, free of charge, even when the adverse party if the
Republic of the Philippines
4. Management of the canteen and other services related to the operation
of agricultural institution where they are employed for cooperatives
organized by faculty members
5. All of the above.
6. None of the above.

k. A corporation where vacancies in the Board of Directors are filled only by the remaining
members of the board is:
1. Open corporation
2. Corporation sole
3. Close corporation
4. General corporation
l. The following, except one, are qualification of corporate directors:
1. Must continuously own at least one share during their term as directors
2. Must own at least one share of stock
3. Ownership of shares must be recorded in the books of the corporation
4. Majority are citizens of the Philippines

m. A. contract of the corporation with one or more of its directors or trustees or officers
1. Self-dealing
2. Conflicting
3. Interlocking
4. Doctrine of Corporate Opportunity

n. Corporate profits set aside, declared and ordered to be paid by the directors for
distribution among stockholders
1. Shares
2. Retained earnings
3. Net income
4. Dividends

o. Ten persons, all Filipinos, and acting as incorporators, filed an application for the
incorporation of PNoy Bank, Inc. Which of the following is correct?
1. The incorporators are not disqualified by reason of their nationality.
2. PNoyBank, Inc. may issue no-par value shares as long as the consideration
thereof is not less than P5.00.
3. The incorporators must all be Philippine residents.
4. None of the above.

p. Which one of the following is not a characteristic of a voting trust agreement?

1. A voting trust is created for the purpose of conferring upon the trustee
the right to vote and other rights pertaining to the shares.
2. A voting trust is irrevocable during the time stipulated.
3. The stockholder remains the beneficial or equitable owner of the shares
while the trustee is the legal owner.
4. All voting trust agreements shall not exceed five (5) years.

q. When does a stock become delinquent?

1. When no payment is made within fifteen (15) days from the date as fixed
in the subscription contract or in the call made by the Board of Directors.
2. When no payment is made within two (2) months as fixed in the contract
or call.
3. When no payment is made within one (1) month from date as fixed in
the contract or call.
4. None of the above.

r. The following are the requisites for the corporate power to acquire its own shares. Which
is the exception?
1. The corporation must have unrestricted earnings in its books to cover the
purchase of the shares except in the case of redeemable shares.
 2. The acquisition must be for the sole purpose of acquiring shares in order
to eliminate fractional shares.
3. The acquisition must be for a legitimate purpose.
4. The corporation must have unrestricted earnings in its books to cover the
purchase of shares.

s. Which of the following acts could be ratified by a vote representing at least 2/3 of the
outstanding capital stock?
1. Acts of directors or trustees who are guilty of gross negligence or bad
faith in directing the affairs of the corporation;
2. An attempt by a director to acquire or actual acquisition of any interest
adverse to that of the corporation in respect of any matter reposed upon
him in confidence;
3. Acts of directors constituting an approval of patently unlawful acts;
4. Acquisition of a business opportunity which should belong to the
corporation, thereby acquiring profits which should belong to the
corporation.

t. Kuliglig Corporation, a private corporation engaged in the business of importing used cars
from Japan was issued a certificate of incorporation by virtue of R.A. 27890. Because of a
failed business transaction, Kuliglig Corporation sued Mr. X for a damage arising from the
latter’s alleged breach of its contractual obligations.
1. Mr. X cannot allege “lack of legal capacity to sue’ of Kuliglig Corporation
in its motion to dismiss because it has a legal personality conferred by
law.
2. Mr. X cannot allege “lack of legal capacity” in its motion to dismiss
because it is not allowed to attack the existence of the corporation
collaterally.
3. Kuliglig Corporation is a de jure corporation and its existence can be
attacked only through a quo warranto proceeding.
4. Attacking the existence of Kuliglig Corporation may be done through a
motion to dismiss because its creation is void.

u. I. Holders of delinquent shares are not entitled to dividends. II. A transfer of shares to a
non-stockholder is binding to the corporation as long as the transfer is in a public
document.
1. Both statements are true.
2. Both statements are false.
3. No 1 is true.
4. No. 2 is false.
5. No. 2 is true.
6. No. 1 is false.

v. When can a corporation deny pre-emptive right to stockholders?

1. Where a stockholder is delinquent in the payment of unpaid balance of
his subscription.
2. Where the articles of incorporation so provides.
 3. Where the shareholder does not pay fifty percent of the value of the
shares to be subscribed.
4. None of the above

w. Which is not a consequence of the corporation’s separate personality?

1. The corporation has a nationality or citizenship.
2. The corporation may sue but it cannot be sued.
3. The corporation may acquire and dispose of properties.
4. The corporation may enter into contracts with another corporation.

x. The acquisition of shares and the declaration of cash dividends require that the
corporation has unrestricted retained earnings. The law also requires that shares should
not be issued below its par or issued value. These requirements is a consequence of the:
1. The theory of separate personality
2. The doctrine of limited capacity
3. The trust fund doctrine
4. The doctrine of general capacity

y. What is the so-called “Grandfather Rule” under the Corporation Code?

1. It is a rule that determines the nationality of a corporation on the basis
of the place where the foreign corporation is incorporated or registered.
2. It is a rule that determines the nationality of a corporation on the basis
of the nationality of the majority of the stockholders.
3. It is a rule that determines the nationality of the corporation on the basis
of the nationality of its officers and directors.
4. All of the above.
5. None of the above

II. ESSAY

a. BALAW Corporation sold securities to 18 non-qualified buyers during a 10 month period,

without registering the securities with the Securities and Exchange Commission. Did
BALAW Corporation violate the Securities Regulation Code? Explain. (3%)

ANS: No. The requirement that securities sold within the Philippines shall be registered
with and approved by the Securities and Exchange Commission is applicable only when
the public is involved. Public means twenty (20) or more investors. The sale of securities
to less than 20 investors if done during a 12 month period is an exempt transaction under
the Securities Regulation Code.

b. Securities issued by the Philippine government are “exempt securities” and therefore
need not be registered with the Securities and Exchange Commission prior to their sale
or offering to the public in the Philippines. True or False. Explain your answer. (2%)

ANS: True. Since the government is presumed to be always solvent, the public is protected
even without the registration of the securities with the SEC.
c. Noy and Bam invested their money with Dilaw Bank. After discovering that the securities
are not registered with the Securities and Exchange Commission (SEC) in violation of the
Securities Regulation Code (SRC), Noy and Bam filed for nullity of contract and recovery
of sum of money with the Regional Trial Court acting as commercial court. Dilaw Bank
argued that the SEC has primary jurisdiction involving violations of SRC. If you were the
judge, how will you rule? (3%)

ANS: I will rule in favor of Noy and Bam. Civil suits under the SRC (ex: selling unregistered
securities) are under the exclusive original jurisdiction of the RTC and there is no need to
file a prior case before the SEC unlike in criminal cases.

d. France owns 60% of Andorra Corp.’s subscribed capital stock. Portugal and Morocco own
the remaining stock equally. Morocco owns a security agency, a janitorial company and
catering business. On behalf of Andorra Corp., Morocco engaged his companies to render
services to Andorra. Are the service contracts valid? Explain. (5%)

ANS: Under the Revised Corporation Code, “a contract of the corporation with one or
more of its directors or trustees or officers is voidable at the option of such corporation,
unless the following conditions are present: i. the presence of Morocco in the board
meeting was not necessary to constitute quorum; ii. Morocco’s vote at such meeting was
not necessary for the approval of the contracts; iii. Each of the contract are fair and
reasonable. If i. or ii. Is absent, RCC requires that the contracts should be ratified by
stakeholders representing at least 2/3 of the outstanding capital stock.

e. Kobe Corporation sold all its assets and liabilities to Wagyu Corporation. Will the sale of
all assets and liabilities of Kobe Corporation automatically dissolve or terminate the
corporate existence of Kobe Corporation? (2%)

ANS: No, the sale of all of Kobe Corporation’s assets and liabilities to Wagyu Corporation
will not result in the automatic dissolution or termination of the former. A decision to
dissolve requires a separate approval by a majority of the BOD of Kobe Corporation and
its stockholders holding at least 2/3 of the total outstanding capital stock.

f. TVPhil is a public utility corporation duly incorporated and registered with the Securities
and Exchange Commission. Pinoy, a Filipino, owns 60% of the issued common shares and
Koala, an Australian, owns 40%. TVPhil issued preferred shares to Koala equivalent to his
outstanding common shares. Maalam filed an action on the ground that the foreign
equity now exceeds 40% foreign equity allowed under the Constitution for public utilities.
Rule on the legality of Koala’s current holdings. (5%)

ANS: The Constitution requirement of 60% Filipino ownership of the capital of public
utilities applies not only to voting control but also to beneficial ownership of the
corporation, it should also apply to preferred shares. Preferred shares are also entitled to
vote in certain corporate matters. Thus, Koala’s holdings including preferred shares
should not exceed 40%.

g. D, P, W and H formed a partnership for the purpose of contracting with the government
in the construction of skyway. On 01 July 2020, the skyway was turned over to the
 government. On 01 August 2020, Villa, supplier of materials for the skyway, sued W for
collection of debt. W argued DPWH partnership has been dissolved upon completion of
the project for which purpose the partnership was formed. If you were the judge, whose
side will you take, Villa or W? Explain (5%).

ANS: I will rule in favor of Villa. Dissolution of partnership caused by termination of the
particular undertaking specified in the agreement does not extinguish obligations, which
must be liquidated during the winding up of the partnership affairs.

h. Helsinki, Turku, Tampere and Oulu organized Finland general partnership with Helsinki
and Turku as industrial partners and Tampere and Oulu as capitalist partners. Tampere
contributed Php1M and Oulu contributed Php0.5M to the common fund. By unanimous
votes, Helsinki and Turku were appointed managing partners without specification of
their respective powers and duties.

Sweden applied for Legal Counsel and Russia applied as Accountant.

Hiring of Sweden was decided by Helsinki and Turu, but opposed by Tampere and Oulu.

Russia’s hiring was decided by Helsinki and Oulu, but opposed by Turku and Tampere.

Who of the applicants should be hired? Explain (5%)

ANS: Sweden should be appointed as Legal Counsel since his hiring is an act of
administration which can be duly performed by the appointed managing partners,
Helsinki and Turku.

Russia cannot be hired. In case of tie in the decision of managing partners, the deadlock
must be decided by the partners owning the controlling interest. Since Tampere holds the
controlling interest, his vote is necessary for Russia’s appointment.