rcc titles I–IV

Question 1 (Multiple Choice)

Which of the following best describes the nature of a corporation's properties in relation to its shareholders?

A. The corporation's properties belong solely to the corporation and not to its individual shareholders.

B. The corporation's properties are jointly owned by the corporation and its incorporators.

C. The corporation's properties are held in trust by the shareholders for the corporation.

D. The corporation's properties can be directly used by shareholders to settle personal debts.

a

Question 2 (True or False)

A corporation can exercise any power it deems necessary for its business expansion, even if not explicitly stated in law or its Articles of Incorporation, provided the act generates surplus profits.

f

Question 3 (Multiple Choice)

How are corporations created by special charters primarily regulated under Philippine law?

A. They are strictly governed by the Revised Corporation Code without exception.

B. They are governed by their specific legislative charters, supplemented by the Revised Corporation Code.

C. They are governed by the Securities and Exchange Commission's special administrative rules.

D. They are governed exclusively by the specific legislation that created them, voiding general corporate laws.

b

Question 4 (True or False)

A stock corporation is defined solely by its administrative ability to issue certificates of stock to its founding corporators.

f

Question 5 (Multiple Choice)

Under the Doctrine of Equality of Shares, when can a corporation legally deny voting rights to a specific share?

A. When the Board of Directors passes a resolution to restrict minority influence.

B. When the shares are classified as common stock but issued at a significant discount.

C. When the share is specifically classified and issued as a "preferred" or "redeemable" share.

D. When the shareholder holds less than one percent of the total outstanding capital stock.

c

Question 6 (True or False)

Holders of non-voting shares are entirely excluded from participating in any corporate decision-making process.

f

Question 7 (Multiple Choice)

Which of the following corporate entities is legally permitted to issue no-par value shares?

A. A privately held life insurance company.

B. A publicly listed commercial bank.

C. A local building and loan association.

D. A privately held real estate development corporation.

d

Question 8 (True or False)

The money received by a corporation from the sale of no-par value shares can be distributed to stockholders as surplus dividends if the company exceeds its financial targets for the fiscal year.

f

Question 9 (Multiple Choice)

For no-par value shares, what is the minimum consideration required by law upon issuance?

A. At least Five pesos (P5.00) per share.

B. At least Ten pesos (P10.00) per share.

C. Any amount determined by the Board of Directors.

D. The equivalent fair market value at the time of issuance.

a

Question 10 (True or False)

The exclusive right of founders' shares to vote and be voted for in the election of directors can be granted perpetually to ensure stable management over the company's lifetime.

f

Question 11 (Multiple Choice)

What distinguishes redeemable shares from other types of shares when a corporation wishes to repurchase them?

A. They can only be repurchased if the corporation is dissolving its operations entirely.

B. They can be repurchased regardless of the existence of unrestricted retained earnings.

C. They require the unanimous consent of all common stockholders before repurchase.

D. They can be repurchased using funds directly from the locked capital of no-par shares.

b

Question 12 (Multiple Choice)

What is the legal status of treasury shares regarding voting privileges and dividend rights?

A. They retain full voting rights but are explicitly restricted from receiving dividends.

B. They receive proportionate dividends but cannot be used to vote for directors.

C. They possess no voting rights and are not entitled to receive any dividends.

D. They retain all original rights as if they were still held by external shareholders.

c

Question 13 (Multiple Choice)

Which of the following definitions accurately describes "incorporators" under the Code?

A. Any individual who purchases shares of the corporation during its initial public offering.

B. The elected members of the Board of Directors who manage the corporate affairs.

C. The legal counsels and accountants who drafted the corporate bylaws.

D. The signatories mentioned in the original articles of incorporation forming the corporation.

d

Question 14 (Multiple Choice)

Which of the following best describes the corporate attribute of "succession"?

A. The transfer of corporate liabilities to the original incorporators upon dissolution.

B. The automatic distribution of assets to heirs upon a shareholder's death.

C. The timeline required to renew the corporate charter with the SEC.

D. The ability to continue existing despite changes in stockholders or members.

d

Question 15 (Multiple Choice)

Which of the following is a strict legal requirement for the issuance of preferred shares?

A. They must always be issued with a stated par value.

B. They may be issued with or without a stated par value.

C. They are required to be issued exclusively as no-par value shares.

D. They must be issued with a par value of at least five pesos.

a

Question 16 (Multiple Choice)

Under Section 6, holders of nonvoting shares are still entitled to vote on specific fundamental corporate acts. Which of the following matters does NOT grant voting rights to holders of nonvoting shares?

A. Incurring, creating, or increasing bonded indebtedness.

B. The regular election of the members of the board of directors.

C. Investment of corporate funds in another corporation or business.

D. Sale, lease, or other disposition of all or substantially all corporate property.

b

Question 17 (Multiple Choice)

A corporation might classify its shares into "Class A" and "Class B" primarily to:

A. Distinguish between shares that receive cash dividends and property dividends.

B. Separate the voting rights of original founders from subsequent public investors.

C. Ensure strict compliance with constitutional or legal requirements on foreign ownership.

D. Categorize shares based on their respective contributions to unrestricted retained earnings.

c

Question 18 (True or False)

All incorporators are automatically considered corporators, but not all corporators are necessarily incorporators.

t

Question 19 (Multiple Choice)

The exclusive right of founders' shares to vote and be voted for in the election of directors cannot be legally exercised if it violates which of the following?

A. The Anti-Dummy Law and the Foreign Investments Act.

B. The Securities Regulation Code and the Corporate Governance Code.

C. The Doctrine of Equality of Shares and the Trust Fund Doctrine.

D. The Financial Rehabilitation and Insolvency Act of the Philippines.

a

Question 20 (Multiple Choice)

What can a corporation legally do with its treasury shares once they have been reacquired?

A. Automatically cancel them to reduce the authorized capital stock.

B. Retain them in the treasury to earn regular cash dividends.

C. Convert them directly into founders' shares to maintain board control.

D. Dispose of them again for a reasonable price fixed by the board of directors.

d

Question 21

When computing the maximum five-year period for the exclusive right to vote and be voted for in the election of directors granted to founders' shares, from what specific point does this legal period commence?

A. From the exact date the corporation was officially incorporated.

B. From the date the founders' shares were first issued to the organizers.

C. From the date the Securities and Exchange Commission approves the bylaws.

D. From the first annual stockholders' meeting where directors are elected.

a

Question 22

Under the Revised Corporation Code, which of the following is generally prohibited from organizing as a corporation unless a special law permits it?

A. Natural persons licensed to practice a profession.

B. A combination of domestic and foreign corporations.

C. Partnerships seeking to enter the real estate industry.

D. Associations dedicated to charitable or religious activities.

a

Question 23

In the incorporation, what is the maximum number of incorporators allowed, and what is the minimum share ownership requirement for an incorporator in a stock corporation?

A. Ten incorporators; ownership of at least five shares of capital stock.

B. Fifteen incorporators; ownership of at least one share of capital stock.

C. Twenty incorporators; ownership of at least ten shares of capital stock.

D. Unlimited incorporators; ownership of at least one share of capital stock.

b

Question 24

For corporations existing prior to the effectivity of the Revised Corporation Code, what is the default rule regarding their corporate term?

A. They must file an application to extend their term for another fifty years.

B. They are automatically dissolved unless they re-register with the Commission.

C. They automatically transition to perpetual existence unless stockholders vote otherwise.

D. They retain their original fixed term unless the board votes for perpetual existence.

c

Question 25

If a corporation has a specific term, what is the general rule regarding the earliest time it can be extended prior to the original expiry date?

A. One year prior to the expiry date.

B. Two years prior to the expiry date.

C. Five years prior to the expiry date.

D. Three years prior to the expiry date.

d

Question 26

A banking institution whose corporate term has expired wishes to apply for a revival of its corporate existence. What specific requirement must be met for the Commission to approve this?

A. A favorable recommendation from the appropriate government agency.

B. A unanimous vote from the bank's outstanding capital stockholders.

C. A re-submission of the original articles of incorporation and bylaws.

D. A special legislative franchise issued by the Philippine Congress.

a

Question 27

What is the minimum capital stock required for stock corporations under the general provisions of the Revised Corporation Code?

A. Twenty-five percent of the authorized capital stock must be subscribed.

B. There is no minimum capital stock required unless provided by special law.

C. At least one million pesos must be paid up upon incorporation.

D. Five thousand pesos base capital, varying depending on the industry.

b

Question 28

Regarding the contents of the Articles of Incorporation, what is the strict geographical limitation placed on the corporation's principal office?

A. It must be located within the specific city where the majority of operations occur.

B. It must be located in the capital region of the country of incorporation.

C. It must be located within the territorial boundaries of the Philippines.

D. It must be located in the province where the incorporators primarily reside.

c

Question 29

In the incorporation, how does the Revised Corporation Code distinguish the maximum allowable number of board members between stock and nonstock corporations?

A. Both stock and nonstock corporations are strictly limited to a maximum of fifteen board members.

B. Stock corporations have unlimited directors, while nonstock corporations are limited to fifteen trustees.

C. Both types may exceed fifteen board members provided it is stated in the bylaws.

D. Stock corporations are limited to fifteen directors, while nonstock corporations may exceed fifteen trustees.

d

Question 30

In the prescribed form of the Articles of Incorporation, what specific certification must the elected Treasurer provide?

A. That the paid-up portion of the subscription has been duly received for the corporation's benefit.

B. That the corporation has opened a valid bank account in a recognized commercial bank.

C. That all incorporators possess the necessary financial capacity to fund the business operations.

D. That the corporate name chosen is fully distinguishable from any existing registered entities.

a

Question 31

If a corporation engages in an activity reserved for Filipino citizens, what specific restriction must be included in the Articles of Incorporation and stock certificates?

A. A prohibition against foreigners serving as directors or executive officers.

B. A prohibition on stock transfers that reduce Filipino ownership below the required percentage.

C. A mandatory requirement that all corporate earnings must be reinvested domestically.

D. A stipulation that foreign stockholders cannot exercise voting rights in board elections.

b

Question 32

To legitimately amend the Articles of Incorporation of a stock corporation, what is the required voting threshold?

A. A unanimous vote of the board of directors and a majority vote of the outstanding capital stock.

B. A two-thirds vote of the board of directors and a majority vote of the outstanding capital stock.

C. A majority vote of the board of directors and a two-thirds vote of the outstanding capital stock.

D. A majority vote of the board of directors and a unanimous vote of the outstanding capital stock.

c

Question 33

If the Commission fails to act on a submitted amendment to the Articles of Incorporation for a cause not attributable to the corporation, when does the amendment take effect?

A. Thirty days after the date of formal submission to the Commission.

B. Immediately upon the date of filing the amendment with the Commission.

C. One year from the date of filing, provided no objections were raised.

D. Six months from the date of filing the amendment with the Commission.

d

Question 34

Which of the following is a specific statutory ground for the Commission to disapprove the Articles of Incorporation?

A. The certification concerning the amount of capital stock subscribed is false.

B. The corporation intends to compete directly with an existing government-owned corporation.

C. The incorporators failed to submit a comprehensive five-year business projection plan.

D. The primary and secondary purposes are too similar and lack distinct operational scopes.

a

Question 35

According to the rules on corporate names, why might the Commission reject a proposed name even if the founders add the word "Incorporated" to it?

A. The word "Incorporated" is reserved exclusively for foreign-owned multinational entities.

B. Adding such a word does not make a name distinguishable from an already registered name.

C. The Commission requires all entities to use "Corporation" rather than "Incorporated".

D. Words denoting corporate status are only permitted if explicitly authorized by special law.

b

Question 36

What action can the Commission take if a corporation fails to comply with an order to cease using a name deemed indistinguishable or contrary to law?

A. It may automatically transfer the corporation's assets to the State Treasury.

B. It may forcefully replace the current board of directors with a management committee.

C. It may hold the responsible directors in contempt and revoke the corporation's registration.

D. It may double the annual reporting fees and impose a ten-year operational probation.

c

Question 37

At what precise moment does a private corporation organized under the Code officially acquire its juridical personality?

A. On the date the incorporators sign and notarize the Articles of Incorporation.

B. On the date the corporate name is officially verified and reserved by the Commission.

C. On the date the stockholders hold their very first organizational board meeting.

D. On the date the Commission issues the certificate of incorporation under its official seal.

d

Question 38

Who holds the exclusive authority to challenge the valid legal existence of a de facto corporation?

A. The Solicitor General through a formal quo warranto proceeding.

B. Any private individual engaged in a contractual dispute with the entity.

C. A dissenting stockholder exercising their statutory appraisal rights.

D. The local government unit where the principal office is officially located.

a

Question 39

What level of liability is imposed on individuals who assume to act as a corporation knowing they lack the legal authority to do so?

A. They are liable only up to the amount of their initial capital contributions.

B. They are liable as general partners for all debts, liabilities, and damages incurred.

C. They are completely immune from personal liability if they acted in good faith.

D. They are liable as limited partners, protecting their personal non-business assets.

b

Question 40

If a third party sues an ostensible corporation for a tort it committed, what defense is the ostensible corporation legally prohibited from using?

A. That the third party was comparatively negligent in the incident.

B. That the tort was committed outside the scope of its stated corporate purpose.

C. That it cannot be held liable because it lacks actual corporate personality.

D. That the statute of limitations for filing the civil lawsuit has already expired.

c

Question 41

What is the immediate legal consequence if a newly formed corporation fails to formally organize and commence its business within five years of incorporation?

A. It is placed under delinquent status and given a two-year period to resume operations.

B. It must pay a substantial penalty fee to retain its active corporate registration status.

C. It is required to amend its Articles of Incorporation and elect a new board of directors.

D. Its certificate of incorporation is deemed revoked the day following the end of the period.

d

Question 42

If a corporation initially commences business but subsequently becomes inoperative for at least five consecutive years, what action may the Commission take?

A. It may place the corporation under delinquent status after due notice and hearing.

B. It may automatically dissolve the corporation without the need for prior notice.

C. It may order the immediate liquidation of all remaining corporate financial assets.

D. It may reassign the registered corporate name to the next available applicant entity.

a

Question 43

To amend the articles of incorporation of a nonstock corporation, what specific voting requirement must be met?

A. The vote of two-thirds of the trustees and a majority of all the registered members.

B. The vote of a majority of the trustees and at least two-thirds of the members.

C. The unanimous vote of the trustees and a two-thirds vote of the registered members.

D. The vote of a majority of the trustees and a majority of all the registered members.

b

Question 44

When a corporation has more than one stated purpose in its Articles of Incorporation, what must the document explicitly indicate?

A. The specific estimated budget allocated for each individual corporate purpose.

B. The names of the specific directors responsible for overseeing each purpose.

C. The clear distinction between the primary purpose and the secondary purposes.

D. The projected timeline for achieving the goals outlined in the secondary purposes.

c

Question 45

The prescribed form of the Articles of Incorporation includes a mandatory undertaking by the incorporators regarding the corporate name. What does this undertaking require?

A. To register the corporate name as a protected trademark with the intellectual property office.

B. To renew the reservation of the corporate name annually with the Commission's registry.

C. To ensure the corporate name is translated into the national language on all documents.

D. To change the name immediately if it is later found to be indistinguishable or contrary to law.

d

Question 46

A corporation formed with only one stockholder is governed by the exact same rules as a standard stock corporation under Title II.

f

Question 47

Stockholders who disagree with the retention of a specific corporate term have the right to exercise their appraisal right.

t

Question 48

An arbitration agreement cannot be legally included within the Articles of Incorporation.

f

Question 49

Amendments to the articles of incorporation must be indicated by bolding and italicizing the changes made.

f

Question 50

A corporate term extension can legally take effect earlier than the original expiry date if the Commission finds justifiable reasons for it.

f

Question 51

The Commission will automatically approve a revival application for an expired bank if the vast majority of its stockholders agree to the revival.

f

Question 52

A collateral attack on a de facto corporation's legal status is a valid defense for a private party trying to escape a financial debt.

f

Question 53

A delinquent corporation has a two-year window to resume operations before its certificate of incorporation is permanently revoked.

t

Question 54

For nonstock corporations, the Articles of Incorporation must detail a list of contributors and their respective contributions rather than capital stock subscriptions.

t

Question 55

Even if varying punctuations or spacing are used, a proposed corporate name is not distinguishable if it relies on the same word or phrase as a registered name.

t

Question 56

Under Section 18, which specific document officially signals the commencement of a private corporation's juridical personality?

A. The certificate of incorporation issued under the Commission's official seal.

B. The approved articles of incorporation signed by all the original founders.

C. The official receipt confirming the payment of the required filing fees.

D. The verified certificate of corporate name reservation from the Commission.

a

Question 57

If a group of individuals forms a business and acts as a corporation, but they are fully aware they never actually filed any paperwork with the Commission, what is their liability status if sued by a supplier?

A. They are liable only up to the amount of money they initially invested.

B. They are liable as general partners for all resulting debts and damages.

C. They are protected by limited liability because the supplier assumed they were a corporation.

D. They are completely immune from civil liability but face criminal sanctions.

b

Question 58

What is the crucial difference in the Commission's process when placing a corporation under delinquent status compared to automatically revoking its charter for initial non-use?

A. Delinquency requires the approval of the Solicitor General, whereas revocation is done solely by the Commission.

B. Delinquency status applies only to nonstock corporations, whereas revocation applies exclusively to stock corporations.

C. Delinquency requires prior notice and hearing, whereas revocation for initial non-use happens automatically.

D. Delinquency triggers an immediate asset liquidation, whereas revocation allows a five-year grace period.

c

Question 59

If the Commission disapproves an amendment to the Articles of Incorporation because the stated corporate purpose is contrary to government rules, what mandatory procedural step must the Commission take?

A. It must forward the case to the Department of Justice for immediate criminal prosecution.

B. It must permanently ban the incorporators from registering any future business entities.

C. It must automatically draft the necessary corrections and impose a modification fee.

D. It must give the incorporators a reasonable time to modify the objectionable portions.

d

Question 60

If the Commission summarily orders a corporation to cease using a name that is indistinguishable from another, what additional enforcement action is explicitly mentioned in the Code?

A. The removal of all visible signages, marks, and advertisements bearing the name.

B. The immediate freezing of all the corporation's registered bank accounts.

C. The automatic suspension of the corporation's local mayor's permit.

D. The physical closure of the corporation's principal office location.

a

Question 61

Which of the following correctly distinguishes the statutory term and qualification requirements between a director and a trustee under the Revised Corporation Code?

A. Directors serve one-year terms and must own at least one share, while trustees serve terms up to three years and must be members.

B. Directors serve three-year terms and must be members, while trustees serve one-year terms and must own at least one share.

C. Both directors and trustees serve one-year terms, but only directors are required to maintain continuous stock ownership.

D. Both directors and trustees serve terms up to three years, but trustees must hold a minimum of ten shares to qualify.

a

Question 62

For a publicly listed company to be mandated to have independent directors constituting at least 20% of its board, it must have assets of at least Fifty million pesos (P50,000,000.00) and how many shareholders?

A. 100 or more holders of shares, each holding at least 200 shares of a class of its equity shares.

B. 200 or more holders of shares, each holding at least 100 shares of a class of its equity shares.

C. 500 or more holders of shares, each holding at least 50 shares of a class of its equity shares.

D. 1,000 or more holders of shares, regardless of the minimum number of shares held by each.

b

Question 63

In a corporation vested with public interest, what is the rule regarding a stockholder's right to vote through remote communication or in absentia during the election of directors?

A. It is only permitted if the majority of the board of directors explicitly authorizes it in a formal resolution.

B. It is strictly prohibited unless the corporation's original articles of incorporation expressly allow for it.

C. It is a statutory right that may be exercised notwithstanding the absence of a provision in the bylaws.

D. It is allowed only for stockholders who physically reside completely outside of the Philippine territory.

c

Question 64

Regarding the mechanics of voting in a nonstock corporation during the election of trustees, which of the following is the default rule unless the articles or bylaws provide otherwise?

A. Members may cumulate their votes and give one candidate as many votes as the number of trustees.

B. Members are strictly required to vote by straight ballot for a single pre-approved slate of candidates.

C. Members can distribute their votes fractionally among various candidates based on their capital contribution.

D. Members may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate.

d

Question 65

Immediately after their election, the directors must formally organize and elect specific corporate officers. What are the strict statutory qualifications for the corporate secretary?

A. The secretary must be a citizen and a resident of the Philippines.

B. The secretary must be a director and a resident of the Philippines.

C. The secretary must be a citizen of the Philippines, regardless of residency.

D. The secretary must be a director and a citizen of the Philippines.

a

Question 66

While a single individual may hold multiple corporate officer positions concurrently, the Revised Corporation Code strictly prohibits certain combinations to maintain checks and balances. Which of the following concurrent holdings is explicitly prohibited?

A. Serving as the corporate treasurer and the corporate secretary simultaneously.

B. Serving as the corporate president and the corporate secretary simultaneously.

C. Serving as the corporate president and the corporate compliance officer simultaneously.

D. Serving as a regular board director and the corporate treasurer simultaneously.

b

Question 67

If a scheduled election of directors is not held, what is the mandatory reporting requirement and the timeline for scheduling a new election?

A. Report to the SEC within 15 days; specify a new date no later than 30 days from the original schedule.

B. Report to the SEC within 15 days; specify a new date no later than 45 days from the original schedule.

C. Report to the SEC within 30 days; specify a new date no later than 60 days from the original schedule.

D. Report to the SEC within 30 days; specify a new date no later than 90 days from the original schedule.

c

Question 68

If the SEC summarily orders an election to be held because of an unjustified non-holding of an election, what is the unique rule regarding the quorum for this specific SEC-ordered meeting?

A. A minimum of two-thirds of the outstanding capital stock must be present.

B. A majority of the outstanding capital stock must physically attend the meeting.

C. The quorum requirements set in the corporation's bylaws must be strictly followed.

D. The shares or memberships represented at the meeting shall constitute a valid quorum.

d

Question 69

If a corporate director suddenly dies or resigns, what is the strict deadline for the corporation to report this specific vacancy to the Commission?

A. Within seven days from the moment of knowledge of the vacancy.

B. Within fifteen days from the moment of knowledge of the vacancy.

C. Within thirty days from the moment of knowledge of the vacancy.

D. Within forty-five days from the moment of knowledge of the vacancy.

a

Question 70

A person is disqualified from being a director if, within five years prior to the election, they were convicted by final judgment of an offense punishable by imprisonment for a period exceeding how many years?

A. A period exceeding three years.

B. A period exceeding six years.

C. A period exceeding nine years.

D. A period exceeding twelve years.

b

Question 71

While a director may generally be removed with or without cause, what is the statutory exception where removal without cause is strictly prohibited?

A. When the director also serves concurrently as the corporate president.

B. When the director is an independent director of a public interest corporation.

C. When it is used to deprive minority stockholders of their right of representation.

D. When the director was appointed to an emergency board to prevent corporate loss.

c

Question 72

Under Section 27, the Commission has the authority to order the removal of a director who was elected despite being disqualified. How may the Commission initiate this action?

A. Only upon a unanimous formal resolution passed by the remaining board of directors.

B. Only after receiving a direct order from the appellate courts or the Solicitor General.

C. Only upon the written demand of stockholders representing a majority of the capital stock.

D. Motu proprio (on its own) or upon a verified complaint, after due notice and hearing.

d

Question 73

When a vacancy in the board of directors arises strictly because a director's term has expired, what is the deadline for holding the election to fill this vacancy?

A. No later than the day of the term expiration, at a meeting called for that purpose.

B. No later than fifteen days after the official date of the term expiration.

C. No later than thirty days after the official date of the term expiration.

D. No later than forty-five days after the official date of the term expiration.

a

Question 74

If vacancies prevent the remaining directors from constituting a quorum, and emergency action is required to prevent irreparable loss, how may an emergency board be created?

A. By a majority vote of the remaining directors appointing any qualified stockholder.

B. By a unanimous vote of the remaining directors appointing a corporate officer.

C. By a two-thirds vote of the remaining directors appointing an independent auditor.

D. By a unilateral decision of the corporate president appointing a temporary director.

b

Question 75

If a vacancy on the board is created because the corporation officially increased the number of directorships, who holds the exclusive authority to fill this specific type of vacancy?

A. The existing board of directors, provided they still constitute a valid quorum.

B. The executive committee, upon delegation of authority from the board president.

C. The stockholders or members, through an election at a regular or special meeting.

D. The corporate secretary, through a direct appointment confirmed by the Commission.

c

Question 76

What is the strict statutory ceiling placed on the total yearly compensation that can be granted to the board of directors?

A. It cannot exceed five percent of the corporation's gross revenue during the preceding year.

B. It cannot exceed ten percent of the corporation's gross revenue during the preceding year.

C. It cannot exceed five percent of the corporation's net income after tax during the preceding year.

D. It cannot exceed ten percent of the corporation's net income before tax during the preceding year.

d

Question 77

Under what circumstances are directors held jointly and severally liable for damages suffered by the corporation, stockholders, or other persons?

A. If they willfully and knowingly vote for patently unlawful acts, or act in gross negligence or bad faith.

B. If they make a business judgment error that results in a severe financial loss for the company.

C. If they fail to declare regular cash dividends for three consecutive operational fiscal years.

D. If they delegate administrative tasks to an executive committee without shareholder consent.

a

Question 78

A contract between a corporation and its director is generally voidable. However, this rule also applies if the contract is with a director's relatives up to which civil degree of consanguinity or affinity?

A. Up to the second civil degree.

B. Up to the fourth civil degree.

C. Up to the fifth civil degree.

D. Up to the sixth civil degree.

b

Question 79

If a contract with a director is defective because the director's presence was necessary for a quorum, how can the stockholders legally ratify this defective contract?

A. By a majority vote of the outstanding capital stock, provided there is full disclosure.

B. By a unanimous vote of the outstanding capital stock, regardless of the contract's fairness.

C. By a two-thirds vote of the outstanding capital stock, provided it is fair and reasonable.

D. By a three-fourths vote of the outstanding capital stock, and approval from the Commission.

c

Question 80

When assessing contracts between corporations with interlocking directors, the law distinguishes between nominal and substantial interests. What threshold defines a "substantial" stockholding interest?

A. Exceeding five percent of the outstanding capital stock.

B. Exceeding ten percent of the outstanding capital stock.

C. Exceeding fifteen percent of the outstanding capital stock.

D. Exceeding twenty percent of the outstanding capital stock.

d

Question 81

Under the Corporate Opportunity Doctrine, what happens if a director acquires a business opportunity belonging to the corporation, but uses entirely their own personal funds for the venture?

A. The director must still account for and refund all profits to the corporation unless ratified by stockholders.

B. The director may keep all profits because the corporation bore no financial risk in the transaction.

C. The director must split the profits equally with the corporation to compensate for the lost opportunity.

D. The director may keep the profits but must resign from the board immediately to avoid conflicts.

a

Question 82

If authorized by the bylaws, the board may create an executive committee. Which of the following actions is this executive committee legally permitted to undertake?

A. Approving the distribution of cash dividends to the current shareholders.

B. Acting on specific matters within the competence of the board delegated to it.

C. Filling sudden vacancies that occur within the corporate board of directors.

D. Adopting new corporate bylaws to align with updated governance standards.

b

Question 83

In identifying a true independent director, what defines their independence according to the Revised Corporation Code?

A. They must have absolutely zero shareholdings in the corporation they are serving.

B. They must have served as a regular director for at least five consecutive years prior.

C. They are independent of management and free from relationships that interfere with objective judgment.

D. They are appointed directly by the Commission rather than elected by the stockholders.

c

Question 84

If a vacancy on the board arises strictly as a result of removal by the stockholders, what is the timeline for holding the election to replace that director?

A. The election must be held no later than 45 days after the meeting authorizing the removal.

B. The election must be held at the next regularly scheduled annual stockholders' meeting.

C. The election must be scheduled within 30 days and the Commission must be notified prior.

D. The election may be held on the same day as the removal if stated in the agenda and notice.

d

Question 85

A director who ceases to own at least one share of stock automatically ceases to be a director of the corporation.

t

Question 86

In a stock corporation, voters are strictly prohibited from giving a single candidate more votes than the number of shares they actually own.

f

Question 87

Corporations vested with public interest are required to submit an annual report to both shareholders and the SEC detailing the exact total compensation of each individual director.

t

Question 88

A contract between a corporation and its own director is automatically void and cannot be legally enforced under any circumstances.

f

Question 89

Directors are legally prohibited from participating in the board's determination of their own per diems or compensation amounts.

t

Question 90

Under the Corporate Opportunity Doctrine, if a director seizes a deal that belongs to the corporation, they can still keep the profits as long as they prove they discovered the deal outside of normal corporate working hours.

f

Question 91

According to Section 22, what is the precise legal definition of an independent director?

A. A person who, apart from shareholdings and fees, is independent of management and free from relationships that materially interfere with independent judgment.

B. A person who is a major stockholder and appointed specifically to represent the interests of the government in a private corporation.

C. A person who formerly served as the corporate president but has been retired from the company for at least five consecutive years.

D. A person appointed directly by the Commission to act as an impartial observer during annual stockholders' meetings.

a

Question 92

Except when the exclusive right is reserved for a specific group, each stockholder has the right to nominate any qualified director. Which group can hold this exclusive right under Section 7?

A. The original incorporating board of directors.

B. The holders of founders' shares.

C. The holders of redeemable preferred shares.

D. The members of the executive committee.

b

Question 93

In addition to the president, treasurer, and secretary, what specific officer must be elected by the board of a corporation vested with public interest?

A. An internal auditor.

B. A chief risk officer.

C. A compliance officer.

D. A public relations director.

c

Question 94

Within 30 days after the election of directors and officers, who is statutorily responsible for submitting the report of their names, nationalities, and shareholdings to the Commission?

A. The newly elected president of the corporation exclusively.

B. The outgoing board of directors collectively.

C. The external auditor of the corporation.

D. The secretary, or any other officer of the corporation.

d

Question 95

If a special meeting is to be called for the purpose of removing a director, who is authorized to order the secretary to call this meeting?

A. The president, or stockholders representing at least a majority of the outstanding capital stock.

B. Any single stockholder, regardless of the number of shares they own.

C. The Commission, upon receiving an anonymous tip regarding a director's misconduct.

D. The independent directors, acting through a unanimous written resolution.

a

Question 96

If a vacancy prevents a quorum and an emergency board is created to prevent grave corporate loss, what is the strict deadline for notifying the Commission about its creation?

A. Within twenty-four hours from the creation of the emergency board.

B. Within three (3) days from the creation of the emergency board.

C. Within seven (7) days from the creation of the emergency board.

D. Within fifteen (15) days from the creation of the emergency board.

b

Question 97

Under the concept of director liability, what does the term "patently unlawful" specifically mean in this context?

A. An act that violates an unwritten corporate custom or tradition.

B. An act that results in a minor financial loss but is otherwise legally permitted.

C. An act that is plainly visible, obvious, and explicitly forbidden by a law that imposes penalties.

D. An act that is only deemed unlawful after a retroactive legal review by the courts.

c

Question 98

For a corporation vested with public interest, what is the specific voting threshold required to approve a material contract with a self-dealing director?

A. A unanimous vote of the entire board, including all independent directors.

B. A majority vote of the entire board, with at least one independent director assenting.

C. A majority vote of the stockholders representing the outstanding capital stock.

D. At least two-thirds (2/3) of the entire board, with at least a majority of the independent directors approving.

d

Question 99

If a contract involves two corporations with an interlocking director, under what specific circumstance does the contract become subject to the strict self-dealing rules of Section 31?

A. If the director's interest in one corporation is substantial and the interest in the other is merely nominal.

B. If the director's interest in both corporations is strictly equal and substantial.

C. If the director owns less than five percent of the outstanding capital stock in both entities.

D. If the interlocking director is also the legal counsel for both corporations.

a

Question 100

Aside from the executive committee, what is the board's authority regarding the creation of other committees?

A. The board can only create committees explicitly mandated by the Securities Regulation Code.

B. The board is prohibited from creating any committee that lasts longer than the board's one-year term.

C. The board may create special committees of temporary or permanent nature and determine their composition and powers.

D. The board must obtain a two-thirds vote from the stockholders to create any temporary committee.

c