Comprehensive Examinations

Reviewer

Examination: Business Law

Subject Covered: LAW 20023: Business Laws and Regulations

1. Which of the following is incorrect?

a) No share may be deprived of voting rights except those classified and issued as
preferred or redeemable shares.
b) The shares or series of shares should always have a par value.
c) Holders of non-voting shares are also entitled to vote regarding the increase or
decrease of authorized capital stock.
d) Treasury shares are deducted in the shareholder’s equity.

2. In no case shall the total yearly compensation of directors exceed 10% of the
net income _____________ of the corporation during the preceding year.
a) Before bonus
b) After bonus
c) Before income tax
d) After income tax

3. Which of the following is NOT a corporate officer?

a) Secretary
b) Treasurer
c) General manager
d) None of the choices

4. By this voting method, every stockholder may vote such a number of shares for as
many persons as there are directors to be elected.
a) Cumulative voting for one candidate
b) Straight Voting
c) Cumulative voting for two candidates
d) Cumulative voting by distribution

5. Statement 1: The debts of the stockholders are not debts of the corporation.
Statement 2: The debts of the corporation are debts of its stockholders.
a) True; true
b) False; false
c) False; true
d) True; false
6. As a general rule, the required minimum authorized capital stock for stock
corporation is?
a) 25% must be subscribed and 25% must be paid
b) More than the half of the subscribed shares
c) Not less than P5,000.00
d) None

7. A private corporation may extend or shorten its term as stated in the articles of
incorporation when approved by:
a) A majority vote of the board of directors or trustees
b) 2/3 of the outstanding capital stock or of its members
c) Half of the board of directors or trustees
d) All the members of the board of directors or trustees

8. All of the following may be provided in the bylaws of a private corporation, except:
a) The time and manner of calling and conducting regular or special meetings
b) The mode of notifying the stockholders or members of a meeting
c) Names, nationalities, and residence addresses of the trustees
d) The required quorum in meetings of stockholders or members

9. A One Person Corporation shall indicate the letters ___ either below or at the end
of its corporate name.
a) INC
b) OPC
c) CORP
d) LTD

10. Several American doctors wanted to set up a group clinic in the Philippines so they
could render modern medical services. If the clinic is to be incorporated under our
laws, what is the required foreign equity participation in such a corporation?
a) 40%
b) 0%
c) 60%
d) 70%

11. This contemplates continuance of corporate life and activities in an effort to restore
and reinstate the corporation to its former position of successful operation and
solvency.
a) Restructuring
b) Reorganization
c) Receivership
d) Rehabilitation
12. ABC Cooperative has filed and was issued a certificate of registration. Two
consecutive years have passed upon the issuance of the certificate, but LMN
Cooperative still has not commenced its business and operation. Can ABC
Cooperative carry on with the business and its operation even though they cannot
promptly provide justifiable cause for failure to operate?
a) Yes, they can carry on with the business and its operation anytime even without
justifiable cause.
b) Yes, three years has not yet passed since the issuance of the certificate.
c) No, they cannot promptly provide justifiable cause thus they are deemed
dissolved.
d) No, they must pay a fine of P1,000,000 first.

13. It is a type of cooperative which promotes and advocates cooperativism among its
members and the public through socially-oriented projects, education and training,
research and communication, and other similar activities to reach out to its
intended beneficiaries.
a) Education cooperative
b) Advocacy cooperative
c) Social cooperative
d) Marketing cooperative

14. The following are included in the universally accepted cooperative principles:
I. Member economic participation
II. Voluntary and open membership
III. Concern for an individual
IV. Education, training, and information
a) I, II, III, IV
b) I, II, IV
c) II, III, IV
d) I and II

15. The doctrine of delectus personae/personarum refers to the right of a person to

choose:
a) The persons whom he wants to be associated in partnership
b) The business in which he wishes to engage with another person(s)
c) Both (a) and (b)
d) Neither (a) nor (b)
16. Victoria, Oscar, Wilma, Eleanor, and Linda are partners in VOWEL Company, Ltd.
Victoria, Oscar, and Wilma are general partners, Eleanor is a general-limited
partner, while Linda is a limited partner. Based on the foregoing information, which
of the following statements is false?
a) Victoria, Oscar, and Wilma may be held liable with their separate property after the
exhaustion of partnership assets.
b) Eleanor may participate in the management of the partnership.
c) Eleanor may not be held liable with her separate property for partnership
debts after the exhaustion of partnership assets.
d) Linda may not be held liable with her separate property for partnership debts after
the exhaustion of partnership assets.

17. A partner’s interest in the partnership is his share of the profits and surplus which
he may assign to a third person. Which of the following statements concerning such
right is correct?
a) The conveyance of a partner’s interest will cause the dissolution of a partnership.
b) The assignee becomes a partner.
c) The assignee has a right to interfere in the management.
d) The assignee has the right to receive the profits which the assigning partner
would otherwise entitled to.

18. Which of the following stipulations is valid?

a) A stipulation excluding a capitalist partner from profits.
b) A stipulation exempting a capitalist partner from losses.
c) A stipulation exempting an industrial partner from losses.
d) A stipulation exempting an industrial partner from profits.

19. Which of the following will not cause the automatic dissolution of a limited
partnership?
a) Death of a general partner
b) Death of a limited partner
c) Insolvency of a general partner
d) Insanity of a general partner

20. Which is the correct sequence of events?

a) Winding Up, Dissolution, Termination
b) Dissolution, Winding Up, Termination
c) Termination, Winding Up, Dissolution
d) Winding Up, Termination, Dissolution
21. Jin, Jimin, Jungkook, Taehyung and Suga formed a partnership. Due to a gambling
addiction, Jimin acquired losses and eventually became insolvent. Could a
dissolution happen?
a) No, because Jimin did not violate any agreement of the partners.
b) No, because Jimin has a good relationship between the other partners.
c) Yes, because Jimin's insolvency causes the dissolution.
d) Yes, because Jimin can't stop his gambling addiction.

22. Haru, Makoto and Rin are partners in a business. After two (2) years, Rin decided to
leave the partnership causing a dissolution. Will Rin be discharged of the existing
liability upon the dissolution of the partnership?
a) Yes, Rin will be discharge of the liability because he is no longer part of the
partnership.
b) Yes, Rin will be discharge from the liability of the partnership and the existing
liability will be shared by Makoto and Haru.
c) No, Rin will still be charged for the liability because as a partner, it is his
responsibility to be charged in the partnership until the end.
d) No, Rin will still be charged for the existing liability. Unless there is an
agreement between the partnership creditors and the continuing partners.

23. CLEAN Laundry Services Company is a partnership composed of Cesar, Leonard,

Erick, Adam, and Nathan. Without the knowledge of other partners, Cesar used a
coat brought to the shop by a customer and accidentally ripped it off. Who will be
liable to the customer for the damages?
a) Cesar only since he used the coat without the knowledge of the other partners.
b) CLEAN Laundry Services Company and Cesar solidarily.
c) CLEAN Laundry Services Company and all partners solidarily.
d) CLEAN Laundry Services Company and all partners jointly.

24. If a partnership has a capital of P5,000 and failed to appear in public instrument, the
partnership:
a) is void
b) still acquires juridical personality
c) has no juridical personality
d) must increase their capital contribution

25. A limited partner may contribute:

a) Money and/or property
b) Money and/or services
c) Property and/or services
d) Services only
26. The partnership will bear the risk of the loss of three of the following things. Which
is the exception?
a) Things contributed to be sold
b) Things contributed so that only their use and fruits will be for the common
benefit
c) Fungible things or those that cannot be kept without deteriorating
d) Things brought and appraised in the inventory

27. It is the delivery of property of one person to another in trust for a specific purpose,
with a contract, express or implied, that the trust shall be faithfully executed, and
the property returned or duly accounted for when a special purpose is
accomplished or kept until it is reclaimed.
a) Commodatum
b) Mutuum
c) Bailment
d) Loan

28. All the following are kinds of contractual bailment with reference to compensation,
except one:
a) For the sole benefit of the thing
b) For the sole benefit of the bailor
c) For the sole benefit of the bailee
d) For the benefit of both parties

29. The following are included in the universally accepted cooperative principles:
I. Member economic participation
II. Voluntary and open membership
III. Concern for an individual
IV. Education, training, and information
a) I, II, III, IV
b) I, II, IV
c) II, III, IV
d) I and II

30. A cooperative may invest its capital in any of the following, EXCEPT:
a) In any reputable bank in the locality, or any cooperative
b) In real state primarily for the use of the cooperative or its members
c) In shares or debentures or securities of any other cooperative
d) In securities issued or guaranteed by private corporations
31. In the case of a member patron with paid up share capital contribution, the
remaining net surplus shall be made available to the members in the form of interest
not to exceed the normal rate of return on investments and patronage refunds.
Which of the following is true?
a) Proportionate amount of patronage refund shall be set aside in a general fund for
such patrons and shall be allocated to individual nonmember patrons only upon
request and presentation of evidence of the amount of his patronage
b) Shall be credited to such patron toward payment of the minimum capital
contribution for membership
c) Proportionate amount of patronage refund shall be paid to him unless he
agrees to credit the amount to his account as additional share capital
contribution
d) Proportionate amount of patronage refund shall be credited to his account unless
his share capital contribution has been fully paid; E. Shall be credited to such
patron toward and that is proportionate amount of patronage refund

32. Disney Cooperatives was established on January 1, 2021. At the end of the year, it
was determined that the cooperatives had a net surplus of P2,500,000. What is the
minimum amount to be allocated for reserve funds?
a) P2,500,000
b) P1,250,000
c) P1,000,000
d) P0

33. Bert is a member of a cooperative located in Cavite. The cooperative has a total
share capital of P150,000 before admitting Bert as a member. Bert contributed
P25,000 to the cooperative at the time of the membership for 10% of the share
capital. Which is wrong in the statement?
a) Bert should only contribute P16,667
b) The total share capital of the cooperative must at least be P200,000
c) Bert should have only 5% of the share capital
d) Nothing is wrong in the statement

34. Which of the following are the objects of a real mortgage?

I. Animal houses intended by the owner to be permanently attached to the land
II. Animals who lived in animal houses attached to the land.
III. Fertilizer used on a piece of land.
IV. Growing fruits that have been gathered from trees planted on land.
V. Land, buildings, roads, and construction of all kinds adhered to the soil.
a) I, II, III, IV and V
b) II, III, IV and V
c) I, II, III and V
d) I, II, III and IV
35. The following are characteristics of pledge, except:
a) Accessory contract
b) Subsidiary Contract
c) Unilateral Contract
d) Primary Contract

36. Brent, a creditor of Joshua, telephoned the latter to inform him that he was
abandoning the pledge of his ring which Joshua had constituted to secure his loan
obligation to Brent amounting to P20,000. Brent told Joshua that he would
personally deliver the ring to Joshua within one week. What would be the effect of
the circumstances?
a) Only the loan obligation is extinguished.
b) Both the loan obligation and the pledge are extinguished through abandonment.
c) Neither the loan obligation nor the pledge is extinguished through
abandonment.
d) None of the above.

37. Statement I: Antichresis is perfected by the delivery of the thing pledged.

Statement II: Antichresis is a contract whereby the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to apply them
to the payment of the interest, if owing, and thereafter to the principal of his credit.
Statement III: The amount of the principal and of the interest
shall be specified in writing; otherwise, the contract of antichresis shall be void.
a) Only one statement is false
b) Only two statements are false
c) All statements are false
d) Neither of the statements are false

38. It is constituted from the moment a person receives a thing belong to another, with
the obligation of safely keeping it and of returning the same.
a) Deposit
b) Barter
c) Loan
d) Mutuum

39. What is Philippine Deposit Insurance Corp.’s (PDIC) overall mandate?

a) To provide any insurance coverage
b) To provide deposit insurance coverage for the depositing public
c) To collect deposits from individuals and banks
d) To increase the country’s GDP and GNP
40. All the following are functions of PDIC, which one is the exception?
a) Deposit insurer
b) Co-regulator of banks
c) Co-regulator of depositing individuals
d) Liquidator of closed banks

41. Are all banks member of the PDIC?

a) Yes, all banks are required to be members of PDIC.
b) Not all banks are required to be a member of PDIC, subject to government
regulations.
c) Only local banks are required to be a member of PDIC.
d) All local banks and some foreign banks, subject to government regulations, are
required to be a member of PDIC.

42. One of the exclusions from deposit insurance coverage is:

a) Funded deposit accounts
b) Bonds
c) Savings account
d) Checking account

43. The guarantor cannot demand reimbursement for indemnity because he has not
paid the obligation, EXCEPT:
a) To obtain release from the guaranty
b) To demand security that shall protect him from any proceedings by the creditor
c) To demand security that shall protect him against the insolvency of the debtor
d) To demand security that shall protect him against the solvency of the debtor

44. One of the obligations of the bailor is to refund ___ of the extraordinary expenses
arising from actual use of bailee of the thing loaned.
a) 30%
b) 45%
c) 50%
d) No threshold required

45. The lender is called the _______. The borrower is called the _______.
a) bailor; bailee
b) bailee; bailor
c) debtor; creditor
d) debtor; bailor
46. When there are two or more bailees to whom a thing is loaned in the same contract,
they are liable
a) Jointly
b) Solidarily
c) Separately
d) Both a and b

47. An officer appointed to control accounts and to check expenditures.

a) Treasurer
b) Secretary
c) General manager
d) Comptroller

48. Statement I. A corporation can conclude any management contract with another
corporation.
Statement II. Should a director, trustee or officer die, resign or in any manner case
to hold office, the secretary or the director, trustee or officer of the corporation,
shall, within seven (7) days form knowledge thereof, report in writing such fact to
the Commission.
a) True, False
b) True, True
c) False, False
d) False, True

49. Which is/are the disadvantage of cumulative voting?

a) A majority shareholder with 100 shares will have a greater influence over who is
elected than a minority shareholder with 50 shares
b) It does not ensure that a minority group of shareholders can be represented on the
board
c) It makes it easy for disruptive single candidates to get on the board of
directors
d) A and B

50. There are special corporation not organized with the Corporation Code where
directors are required to be citizens of the Philippines. Which of the following is not
one of these special corporations?
a) Rural banks
b) Private development banks
c) Bank and banking institution
d) None of the above
 Summary of Answers

1. B 11. D 21. C 31. C 41. A

2. C 12. C 22. D 32. B 42. B
3. D 13. B 23. C 33. A 43. D
4. B 14. B 24. B 34. C 44. C
5. D 15. A 25. A 35. D 45. A
6. D 16. C 26. B 36. B 46. B
7. A 17. D 27. C 37. A 47. D
8. C 18. C 28. A 38. A 48. D
9. B 19. B 29. B 39. B 49. C
10. B 20. B 30. D 40. C 50. D

Summary of Answers - Explained

1. (B) Sec. 6 R.A. 11232: The shares or series of shares may or may not have a par value:
Provided, that banks, trust, insurance, and preneed companies, public utilities, building
and loan associations, and other corporations authorized to obtain or access funds from
the public, whether publicly listed or not, shall not be permitted to issue no-par value
shares of stock.

2. (C) Sec. 29 R.A. 11232: In no case shall the total yearly compensation of directors exceed
ten (10%) percent of the net income before income tax of the corporation during the
preceding year.

3. (D) All three are corporate officers.

4. (B)

5. (D) The debts of the corporation are not the debts of its stockholders, nor are the debts of
the stockholders the debts of the corporation.

6. (D) Sec. 12 R.A. 11232: Stock corporations shall not be required to have a minimum
capital stock, except as otherwise specifically provided by special law.

7. (A) Sec. 36 R.A. 11232: A private corporation may extend or shorten its term as stated in
the articles of incorporation when approved by a majority vote of the board of directors or
trustees.

8. (C)
9. (B) Sec. 120 R.A. 11232: OPC means One Person Corporation.

10. (B) Under Executive Order No. 184, there should be no foreign equity on practice of all
professions including but not limited to engineering, medicine and all allied professions,
accountancy, architecture, criminology, chemistry, customs brokerage, environmental
planning, forestry, geology, interior design, landscape and architecture, law, librarianship,
marine desk officers, marine engine officers, master plumbing, sugar technology, social
work, teaching, agriculture, fisheries, guidance counselling, real estate service, respiratory
therapy, psychology.

11. (D)

12. (C) Art. 68 R.A. 9520: Failure of the cooperative to promptly provide justifiable cause for
its failure to operate shall warrant the Authority to delete its name from the roster of
registered cooperatives and shall be deemed dissolved.

13. (B) Art. 23 R.A. 9520

14. (B) Art. 4 R.A. 9520: Concern for an individual is not included because it should be
“concern for community”.

15. (A)

16. (C) Art. 1843 R.A. 386: Only limited partners shall not be bound by the obligations of the
partnership.

17. (D) Art. 1813 R.A. 386: A conveyance by a partner of his whole interest in the partnership
does not of itself dissolve the partnership, or, as against the other partners in the absence
of agreement, entitle the assignee, during the continuance of the partnership, to interfere
in the management or administration of the partnership business or affairs, or to require
any information or account of partnership transactions, or to inspect the partnership books;
but it merely entitles the assignee to receive in accordance with his contract the profits to
which the assigning partner would otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail himself of the usual remedies.

18. (C) Art. 1797 R.A. 386: An industrial partner shall not be liable for the losses.

19. (B) Art. 1860 R.A. 386: The retirement, death, insolvency, insanity or civil interdiction of
a general partner dissolves the partnership, unless the business is continued by the
remaining general partners.

20. (B) Art. 1829 R.A. 386: On dissolution the partnership is not terminated, but continues
until the winding up of partnership affairs is completed.

21. (C) Art. 1860 R.A. 386: Insolvency of a general partner may dissolve a partnership.
22. (D) Art. 1835 R.A. 386: The dissolution of the partnership does not of itself discharge the
existing liability of any partner.

23. (C) Art. 1824 (1823b) R.A. 386: All partners are liable solidarily with the partnership for
everything chargeable to the partnership under ordinary course of business. When the
property received is misapplied by any partner while it is in the custody of the partnership.

24. (B) Art. 1772 R.A. 386: Every contract of partnership having a capital of three thousand
pesos or more, in money or property, shall appear in a public instrument, which must be
recorded in the Office of the Securities and Exchange Commission.

Failure to comply with the requirements of the preceding paragraph shall not affect the
liability of the partnership and the members thereof to third persons.

25. (A) Art. 1845 R.A. 386: The contributions of a limited partner may be cash or property,
but not services.

26. (B) Art. 1795 R.A. 386: If the things contribute are fungible, or cannot be kept without
deteriorating, or if they were contributed to be sold, the risk shall be borne by the
partnership. In the absence of stipulation, the risk of things brought and appraised in the
inventory, shall also be borne by the partnership, and in such case the claim shall be
limited to the value at which they were appraised.

27. (C)

28. (A)

29. (B) Concern for an individual is not included because it should be “concern for community.”

30. (D) Art. 78 R.A. 9520: A cooperative may invest its capital in securities issued or
guaranteed by the Government and not by private corporations, unless authorized in the
by-laws.

31. (C) Art. 86 R.A. 9520: Order of Distribution (a) In the case of a member patron with paid
up share capital contribution, his proportionate amount of patronage refund shall be paid
to him unless he agrees to credit the amount to his account as additional share capital
contribution

32. (B) An amount for the reserve fund shall be at least ten per centum (10%) of net surplus:
provided, that, in the first five (5) years of operation after registration, this amount shall not
be less than fifty per centum (50%) of the net surplus. Thus, P2,500,000 multiplied by
50%, which is equal to P1,250,000 should be the minimum reserve funds.
33. (A) Bert should only contribute P16,667 ((150,000 / (1 - 10%)) x 10%) in the cooperative.
The cooperative should return the excess of P8,333 (25,000 - 16,667) to Bert. R.A. 9520
Art. 73. Limitation on Share Capital Holdings. - No member of a cooperative other than a
cooperative shall own or hold more than ten per centum (10%) of the share capital of the
cooperative.

34. (C)

35. (D)

36. (C) To extinguish a loan obligation and the pledge through abandonment, the renunciation
or abandonment shall be in writing by the pledgee of the pledge. The acceptance of the
pledgor or owner of renunciation is not necessary to extinguish a loan obligation and the
pledge.

37. (A) Art. 2132 R.A. 386: By the contract of antichresis the creditor acquires the right to
receive the fruits of an immovable of his debtor, with the obligation to apply them to the
payment of the interest, if owing, and thereafter to the principal of his credit. Art. 2134
R.A. 386: The amount of the principal and of the interest shall be specified in writing;
otherwise, the contract of antichresis shall be void.

38. (A)

39. (B)

40. (C)

41. (A) Membership of banks to PDIC is mandatory; hence, all operating banks are members
of PDIC.

42. (B)

43. (D)

44. (C) Art. 1949 R.A. 386: If the extraordinary expenses arise on the occasion of the actual
use of the thing by the bailee, even though he acted without fault, they shall be borne
equally by both the bailor and the bailee, unless there is a stipulation to the contrary.

45. (A)

46. (B) Art. 1945 R.A. 386: When there are two or more bailees to whom a thing is loaned in
the same contract, they are liable solidarily.
47. (D) Sec. 25 R.A. 11232: Corporation Officers

48. (D) Sec. 43 R.A. 11232: No corporation shall conclude a management contract with
another corporation unless such contract is approved by the board of directors and by the
stockholders owning at least the majority of the outstanding capital stock, or by at least a
majority of the members in the case of a nonstock corporation, or both the managing and
the managed corporation, at a meeting duly called for the purpose.

49. (C)

50. (D)