A.

True or False
1. False. Corporations incorporated in the Philippines with Filipino equity and voting shares
below 60% are not Philippine Nationals.
2. False. Corporations incorporated under the laws of other countries, but are 100% owned by
Filipino citizens; or trustee of funds or other similar benefits, 60% of the beneficiaries of
which are Filipinos, are both Filipino citizens. FIA, Sec. 3(a)
3. True. See above.
4. True. Corporate personality starts upon issuance of certificate of incorporation by the SEC.
Sec. 19
5. False. No such provision.
6. False. Not all subsidiaries are alter-egos of their parent companies. (PNB v Ritratto)
7. False. It is a cause of action to hold shareholders directly liable, not a defense.
8. False. Sec. 31 provides that directors, who must be shareholders, may be solidarily liable
with the corporation if they were to vote for or assent to acts which are patently unlawful,
grossly negligent, acquires personal and financial interest, acts in bad faith.
9. True. Generally, corporations cannot recover moral damages; however, the NCC allows for
recovery of moral damages for slander, libel, or any form of defamation even for
corporations.
10. False. In Derivative Suits, the corporate personality is not pierced, rather, the suit is in the
name of the corporation as the real party in interest.
11. False. Only the majority of the BOD is required to be Filipino citizens.
12. True. Ultra vires acts can be ratified or subjected to estoppel; only illegal acts, which are
considered void, cannot be ratified.
13. False. Contracts with Directors of a corporation are considered voidable unless: 1) vote of
the director involved is not necessary; 2) presence of director involved to obtain quorum is
not necessary; 3) fair and reasonable given the circumstances; 4) if officer, contract has been
approved by the BOD.

If 1) and 2) are absent, contract may be ratified by 2/3 vote of all voting shares; provided
that contract is fair and reasonable; and the director discloses all his interests in the
contract.

14. False. All acts under Section 6 of the Corporate Code requires the assent of 2/3 of all
shareholders.
15. False. 2/3 of all voting shares can delegate such power to the BOD, but only majority of all
shareholders is necessary to amend by-laws. Sec. 48
16. False. Only the treasurer’s affidavit and VTAs are required to be notarized under the
Corporation Code. A proxy must be in writing, signed by the stockholder and filed before the
meeting to the Corporate Secretary, as per Sec. 58.
17. False. Vacancies in the BOD can be filled up by the remaining members, provided they still
form a quorum.
18. True. Per Section 28, upon 2/3 of affirmative vote of voting shareholders.
19. False. Such power cannot be delegated.
20. False. The power to revoke prior delegation can only be exercised in a meeting.
21. True. Provided that their compensation, other than the reasonable per diem, shall be limited
to 10% of the corporation’s net income before income taxes. Sec. 30
22. False. The corporation has the power to classify shares, provided there must be a class of
shares with complete voting rights.
23. False. The President must be a director, and all directors are required to be shareholders.
24. False, except declaration of stock dividends which requires 2/3 vote of voting shareholders.
Sec. 43
25. True.
26. False. This is the one of the powers that cannot be exercised by the Executive Committee.
27. True. Proxies are generally valid for a single meeting, and must be given through an
authority in writing. It may be granted, however, for extended periods not exceeding five
years.
28. False. Only the corporate secretary is required by the Code to be a resident.
29. False. This is generally true, but ultra vires acts of the corporation can be ratified or subject
to estoppel.
30. False. This is only one requirement for a close corporation. The mere fact that shares may
have restrictions is not proof positive of a close corporation.
31. False. This is generally true, however, VTAs can be valid if loans are concerned. The VTA,
however, will expire upon full payment of the loan.
32. False. The piercing of the corporate veil only applies for the specific case and instance tried.
33. False. Only the corporate secretary is required to be a Filipino citizen.

B. Essay
1. Yes, Danny Driver is correct. The SUVs are part of the compensation duly awarded to
Directors by the corporation, and as a director, he has a right to use the same. Furthermore,
the SUVs belong to the corporation. As a juridical entity, it is owned by the corporation and
not its shareholders.
2. The suit against Estafador, Inc. will prosper because it is an obligation validly entered into by
the corporation. The suit against Boga, however, must fail. Estafador has a personality
distinct from that of Boga, a shareholder. Based on jurisprudence, the corporate veil of a
corporation may be pierced to make shareholders liable in three instances only: 1) the
corporation is being used to defeat public convenience; 2) protect fraud and illegal acts; and
3) it is a mere alter-ego of the shareholder. Moreover, the three-pronged test shall be used
to test if a corporation is a mere alter-ego. This takes into account the control over such
corporation; fraud employed; and that the control and fraud was the approximate cause of
an injury. No showing of any of these was shown in the case, thus no cause of action will
prosper against Boga.
3. Stock Corporation since there would be limited liability. If the organization be organized as a
partnership, there would be greater liability, whereas the extent of their contribution will be
the limit of their liability in a corporation.
4. A. Yes, grant of compensation is invalid (without majority of voting) B. Remove Bert as
treasurer C. Bert will call for a special meeting where he can either overturn the grant of
compensation or remove the other directors. As a last resort, intra-corporate dispute.
5. Yes, because the act was not done with the approval of the majority of the directors in a
meeting if the board considers it as a compensation to Bert as a director.
The answer would still be the same had the motor been registered under the name of Bert
because of Section 31 paragraph two.
Call for a special meeting of the stockholders, being the owner of more than the majority of
the voting stocks, he can approve the purchase as a form of compensation for a director.
6. Yes, there is no disqualification for Philippine National corporations to own assets in the US.
Yes it can own assets in the Philippines except for lands, which is prohibited by Sec. 3 Art. XII
of the Phil. Constitution.
 If the parents and Sarah own at least 60% of the voting and outstanding stock, Katas ng
Sipag… can own the Boracay lot. Otherwise, it is prohibited by the Constitution.
7. Originally, there were 6 directors. The number of seats was increased to 9, but the latter
three were not validly included as they must have been elected. Thus, there were only 6
directors out of 9, which was still quorum. However, two resigned, leaving only 4 out of 9
directors. Because there was already a loss of quorum, the remaining BOD members can’t
appoint replacements. Marcelo, Marcelito and Marcelita were improperly included as
directors. When there is an increase in the number of seats in the BOD, the same must be
filled by election. For the same reason, Marcelita is not authorized to sign the deed of sale.
As regards shareholder approval, the Corporation Code only requires the same in instances
when the investment is not in accordance with the purpose of the corporation. In this case,
no information was given.

C. MCQ/ESSAY
1. B. Appraisal right is available in the following instances: 1) merger and consolidation; 2)
extension or reduction of corporate term; 3) sale, lease, exchange, merger, pledge and
other forms of disposition of all, or substantially all, corporate assets; 4) amendment of
the Articles of incorporation which involves change in the rights of stockholders,
authorize preferences superior to those stockholders, or restrict the right of any
stockholder; and 5) investment of corporate funds in another corporation or any other
purpose.
2. B. Shareholders are only liable up to the extent of their investment, this is the doctrine
of limited liability. Since the spouses invested P5M in 6M shares valued at P1 per share,
they still have an unpaid subscription of P1M. Since the corporation has been declared
insolvent and the spouses have already paid P5M, they are liable only for their unpaid
subscription.
3. Maybe the question is which must not be satisfied since all, except c, are necessary for
the validity?
4. B. As a manufacturer of firearms and ammunition, Guns and Bullets has foreign equity
restriction of 40%. In this case, foreign equity is only 35%, therefore it is a Filipino
corporation which can acquire up to 100% of equity in Barilan, Inc. There is no doubt as
to the nationality of G&B making the application of the grandfather rule unnecessary.
However, if the gf rule was applied, G&B can only acquire up to 65% of the shares of
Barilan.
5. A. Under the FIA, corporations incorporated under foreign laws but are 100%-owned by
Filipinos are still Filipino citizens. Thus, it is not restricted by any foreign equity
restriction.
6. C. A corporation incorporated abroad needs to be 100% owned by Filipinos for it to be a
Filipino national, since M&G is only 80% owned by Filipino, it is subject to foreign equity
restrictions and can only own 25% of the recruitment agency, pursuant to the law.
7. A. 25% of 8 = 2
8. D. No showing of requisites of piercing the veil nor alter-ego three-pronged test.
9. B. 9 x 0.8 is 7.2. Round down.
10. B. 7 x .75 is 5.25, round down.
11. D. The answer is March 16, the date when the certificate was issued per the Corporation
Code, Sec.19.