BM1905
QUIZ ON POWERS OF A CORPORATION PT. 1
NAME: SECTION: DATE: SCORE:
MULTIPLE CHOICE: Encircle the letter of the correct answer. (25 items x 1 point)
1. What is the governing body of a corporation?
a. Incorporators c. Stockholders
b. Board of Directors/Trustees d. Members
2. Under this principle, courts cannot undertake to control the discretion of the board of directors about
administrative matters as to which they have legitimate powers of action.
a. Business judgment rule c. Theory of concession
b. Doctrine of separate entity d. Limited liability rule
3. It is a method of concentrating votes devised to give sufficient opportunity to minority shareholders to secure
representation in the board.
a. Straight voting c. Participative voting
b. Cumulative voting d. Simple voting
4. It is a method of voting wherein a member can only cast one vote per share for each director.
a. Straight voting c. Participative voting
b. Cumulative voting d. Simple voting
5. Under the cumulative voting, the formula to determine the number of shares needed to elect a single director is as
follows: [S/(D+1)]+1, wherein S is the total number of shares voting and D is the number of directors to be
elected. If there are 1,000 outstanding shares in the corporation and five (5) directors will be elected, and all the
shares are present and are going to vote, what is the minimum required number of voting shares to elect one
director?
a. 151 votes c. 201 votes
b. 167 votes d. 251 votes
6. Where should complaints involving election contests be filed?
a. Securities and Exchange Commission c. Municipal Trial Court
b. Regional Trial Court d. Court of Tax Appeals
7. The following are three-fold duties of corporate directors, trustees, and officers, EXCEPT:
a. Duty of obedience c. Duty of loyalty
b. Duty of diligence d. Duty of independence
8. As a general rule, what is the status of a contract entered into by two (2) or more corporations, having interlocking
directors?
a. Null and void
b. Valid and without defect provided there is no fraud and the contract is fair and reasonable
c. Voidable at the option of the director
d. Voidable at the option of the corporation
9. Which of the following is/are considered grounds for disqualification of directors, trustees, or corporate officers?
I. Conviction by final judgment of an offense punishable by imprisonment for a period exceeding six
(6) years
II. Commission or conviction of an act in violation of the Corporation Code within five (5) years prior to
his election or appointment as director, trustee, or corporate officer
a. Statement I c. Both statements
b. Statement II d. None of the statements
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10. What is the liability of a director, who by virtue of his office, acquired for himself a business opportunity which
should belong to the corporation, thereby obtaining profits to the prejudice of the corporation?
a. The director is not liable.
b. The director is liable only if he acted in bad faith.
c. The director is liable only if he acted in gross negligence.
d. The director is liable to refund to the corporation all the profits he realized on a business opportunity which
the corporation is financially able to undertake.
11. This refers to the powers expressly provided, enumerated, and granted by the Corporation Code or special law
to a corporation.
a. Express powers c. Incidental or inherent powers
b. Implied or necessary powers d. Discretionary powers
12. This refers to powers attached to a corporation the moment of its creation without regard to its particular primary
purpose.
a. Express powers c. Incidental or inherent powers
b. Implied or necessary powers d. Discretionary powers
13. This refers to powers inferred from or reasonably necessary for the exercise of the provided powers of the
corporation.
a. Express powers c. Incidental or inherent powers
b. Implied or necessary powers d. Discretionary powers
14. Which statement pertains to a general express power?
I. To sue and be sued in its corporate name II. To extend or shorten corporate term
a. Statement I c. Both statements
b. Statement II d. None of the statements
15. Which statement pertains to a specific express power?
I. To adopt and use a corporate seal II. To deny preemptive right
a. Statement I c. Both statements
b. Statement II d. None of the statements
16. Which of the following is NOT a level of corporate control?
a. Board of Directors/Trustees c. Incorporators
b. Corporate Officers d. Stockholders/Members
17. It refers to the right of shareholders to subscribe to all issues or disposition of shares of any class in proportion to
their present shareholdings in order to preserve their ownership interest in the corporation unless properly denied
in the articles of incorporation.
a. Appraisal right c. Right of first refusal
b. Preemptive right d. Redeemable right
18. In which document shall the denial of preemptive right of a stockholder be stated for denial to be valid and
binding?
a. Articles of Incorporation c. Either A or B
b. By-laws d. Neither A nor B
19. What is the required vote for the sale, disposal, lease, or encumbrance of all or substantially all of corporate
assets?
I. Approval by at least majority vote of the board of directors/trustees and ratification by stockholders
representing at least 2/3 of the outstanding capital stock or at least 2/3 of members
II. Approval by at least majority vote of the board of directors/trustees and ratification by stockholders
representing at least majority of the outstanding capital stock or members
a. Statement I c. Both statements
b. Statement II d. None of the statements
20. Which of the following has the discretion to declare dividends?
a. Board of Directors/Trustees c. Incorporators
b. Corporate Officers d. Stockholders/Members
21. As a general rule, what is the maximum surplus profits that can be retained by a stock corporation?
a. 100% of legal capital c. 100% of subscribed capital
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b. 100% of authorized capital stock d. 100% of paid-up capital
22. As a general rule, what is the maximum period for one (1) term of management contract?
a. One (1) year c. Five (5) years
b. Three (3) years d. Ten (10) years
23. In nonstock corporations where there are no members with voting rights, what vote is required for the approval of
the sale, disposal, lease, or encumbrance of all or substantially all of corporate assets?
a. Vote of at least majority of the trustees c. Vote of at least 1/4 of the trustees
b. Vote of at least 2/3 of the trustees d. Unanimous vote of the trustees
24. Which of the following statements is TRUE?
I. By-laws are meant to regulate the manner of conducting the internal affairs of the corporation.
II. A corporation may exist even without the by-laws.
a. Statement I c. Both statements
b. Statement II d. None of the statements
25. When is preemptive right available?
I. To new issues of shares arising from any increase of capital stock
II. To disposition or re-issuance of treasury shares
a. Statement I c. Both statements
b. Statement II d. None of the statements
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