TITLE 3: BOARD OF DIRECTORS/TRUSTEES AND OFFICERS

Question 1

It is a person who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.

Answer 1

Independent director

Question 2

I. The acts of corporate officers within the scope of their authority are binding on the corporation.
II. Any 2 or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and vice-president at the same time.

Answer 2

Both are true

Question 3

Immediately after their election, the directors of a corporation must formally organize and elect:
A. A president, who must be a director.
B. A treasurer, who must be a resident.
C. A secretary, who must be a citizen and resident of the Philippines.
D. All of the above.

Answer 3

All of the above.

Question 4

I. If the corporation is vested with public interest, the board shall also elect a compliance officer.
II. The officers shall manage the corporation and perform such duties as may be provided in the bylaws and/or as resolved by the board of directors.

Answer 4

Both are true

Question 5

A person shall be disqualified from being a director, trustee or officer of any corporation if, within 5 years prior to the election or appointment as such, the person was:

A. Convicted by final judgment of an offense punishable by imprisonment for a period exceeding 6 years.
B. Found administratively liable for any offense involving fraudulent acts.
C. Found by a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct.
D. All of the above.

Answer 5

All of the above.

Question 6

I. If the corporation is vested with public interest, the board shall also elect a compliance officer.
II. The officers shall manage the corporation and perform such duties as may be provided in the bylaws and/or as resolved by the board of directors.

Answer 6

Both are true

Question 7

A person shall be disqualified from being a director, trustee or officer of any corporation if, within 5 years prior to the election or appointment as such, the person was:
A. Convicted by final judgment of an offense punishable by imprisonment for a period exceeding 6 years.
B. Found administratively liable for any offense involving fraudulent acts.
C. Found by a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct.
D. All of the above.

Answer 7

D. All of the above.

Question 8

A person shall be disqualified from being a director, trustee or officer of any corporation if, within 5 years prior to the election or appointment as such, the person was convicted by final judgment:

A. Of an offense punishable by imprisonment for a period exceeding 6 years.
B. For violating the Revised Corporation Code.
C. For violating The Securities Regulation Code.
D. All of the above.

Answer 8

D. All of the above.

Question 9

I. The SEC shall, motu proprio or upon verified complaint, and after due notice and hearing, order the removal of a director or trustee elected despite the disqualification, or whose disqualification arose or is discovered subsequent to an election.
II. The removal of a disqualified director shall be without prejudice to other sanctions that the SEC may impose on the board of directors or trustees who, with knowledge of the disqualification, failed to remove such director or trustee.

Answer 9

Both are true

Question 10

I. Any vacancy occurring in the board of directors or trustees other than by removal or by expiration of term may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum.
II. Any directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shall be filled only by an election at a regular or at a special meeting of stockholders or members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting.

Answer 10

Both are true

Question 11

I. It is well settled in this jurisdiction that where corporate directors are guilty of a breach of trust, a stockholder may institute a suit in behalf of himself and other stockholders and for the benefit of the corporation. II. The board of directors (or trustees, in case of non-stock corporations) has the sole authority to determine policies, enter into contracts, and conduct the ordinary business of the corporation within the scope of its charter.

Answer 11

Both are true

Question 12

I. The property of the corporation is not the property of its stockholders or members; however, it may be sold by the stockholders or members. II. The power and responsibility to decide whether a corporation can enter into a binding contract is lodged with the board of directors.

Answer 12

Only II is true

Question 13

I. The directors of a corporation shall not receive any compensation for being members of the board of directors, except for reasonable per diems. II. In no case shall the total yearly compensation of directors, as such directors, exceed 10% of the net income after income tax of the corporation during the preceding year.

Answer 13

Both are true

Question 14

I. The general rule is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities, and vice versa. II. A contract of the corporation with one or more of its directors or trustees or officers is void.

Answer 14

Only I is true

Question 15

It is a contract of the corporation with one or more of its directors or trustees or officers.

Answer 15

Doctrine of corporate opportunity

Question 16

The following are the limitations of an executive committee, except:
A. Approval of any action for which shareholders’ approval is also required.
B. Filling of vacancies in the board.
C. Amendment or repeal of by-laws or the adoption of new by-laws.
D. Amendment or repeal of any resolution of the board.

Answer 16

D. Amendment or repeal of any resolution of the board.

Question 17

I. The executive committee may act, by 2/3 vote of all its members. II. The act of a director violating the doctrine of corporate opportunity can be ratified by a vote of the stockholders owning or representing at least majority of the outstanding capital stock.

Answer 17

Only II is true

Question 18

I. A stockholder or member who participates through remote communication or in absentia, shall be deemed present for purposes of quorum.
II. The directors or trustees elected shall perform their duties as prescribed by law, rules of good corporate governance, and bylaws of the corporation.

Answer 18

Only II is true

Question 19

It is when the vacancy prevents the remaining directors from constituting a quorum and emergency action is required to prevent grave, substantial, and irreparable loss or damage to the corporation, the vacancy may be temporarily filled from among the officers of the corporation by unanimous vote of the remaining directors or trustees.

Answer 19

Emergency board of director

Question 20

I. Stockholders or members periodically elect the board of directors or trustees, who are charged with the management of the corporation.
II. Stockholders or members also elect the officers to carry out management functions on a day-to-day basis.

Answer 20

A. Only I is true

Question 21

I. Acts of management pertain to the stockholders or members. II. Acts of ownership pertain to the board.

Answer 21

Both are false

Question 22

I. Once the directors or trustees are elected, the stockholders or members relinquish corporate powers to the board in accordance with law. II. Contracts intra vires entered into by the board of directors are binding upon the corporation.

Answer 22

Only II is true

Question 23

I. The board of the following corporations vested with public interest shall have independent directors constituting at least 10% of such board. II. Independent directors must be elected by the other directors present or entitled to vote in absentia during the election of directors.

Answer 23

Only I is true

Question 24

I. The power to remove directors or trustees belongs to the officers exclusively.
II. Removal of directors or trustees may be with or without cause.

Answer 24

Both are false

Question 25

The requisites for removal of directors are the following, except: A. The removal should take place at a regular or special meeting duly called for the purpose. B. The director or trustee can only be removed by a vote of the stockholders representing at least majority of the outstanding capital stock or majority of the members entitled to vote in case of non-stock corporations. C. There must be a previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. D. The special meeting of the stockholders or members of a corporation for the purpose of removal must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock or a majority of the members entitled to vote.

Answer 25

D. The special meeting of the stockholders or members of a corporation for the purpose of removal must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock or a majority of the members entitled to vote.

Question 26

I. Every director must own at least 100 shares of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. II. Trustees of non-stock corporations must be members thereof.

Answer 26

Only II is true

Question 27

I. The governing body of a corporation is its board of directors. II. The board of directors of a corporation is a creation of law.

Answer 27

Both are true

Question 28

It is a doctrine where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same.

Answer 28

Doctrine of corporate opportunity

Question 29

It is a body created by the by-laws and composed of not less than three members of the board which, subject to the statutory limitations, has all the authority of the board of directors to the extent provided in the by-laws.

Answer 29

Executive committee

Question 31

Doctrine of Corporate Opportunity If a director acquires a business opportunity that should rightfully belong to the corporation, they are guilty of disloyalty. The director must return all profits earned from the opportunity to the corporation. This applies even if the director used their own funds for the venture.

Answer 31

Doctrine of Corporate Opportunity