TITLE 4: POWERS OF CORPORATIONS Flashcards
(32 cards)
The requirements for the sale or other disposition of assets are the following, except:
A. Approval by the majority vote of its board of directors or trustees.
B. Ratification by the vote of the stockholders representing at least 2/3 of the outstanding capital stock, or in case of non-stock corporation, by the vote of at least to 2/3 of the members.
C. Any dissenting stockholder may exercise his appraisal right.
D. SEC approval is required.
D. SEC approval is required.
The following are instances when a corporation may acquire its own shares, except:
A. To acquire founders’ shares.
Reference: This is not typically a valid reason for the corporation to acquire its own shares.
The following are the requisites for the exercise of a corporate power to invest corporate funds in another corporation, except:
A. Any dissenting stockholder shall have pre-emptive right.
B. Approval of the majority of the board of directors or trustees.
C. Ratification by the stockholders representing at least 2/3 of the outstanding capital stock, or by at least 2/3 of the members in the case of non-stock corporations, at a stockholder’s or member’s meeting duly called for the purpose.
D. Written notice of the proposed investment and the time and place of the meeting shall be addressed to each stockholder or member by mail or served personally.
A. Any dissenting stockholder shall have pre-emptive right.
The retained earnings which have not been reserved or set aside by the board of directors for some corporate purpose.
Unrestricted retained earnings
I. No management contract shall be entered into for a period longer than 5 years for any 1 term.
II. No corporation shall possess or exercise corporate powers other than those conferred by the Revised Corporation Code or by its articles of incorporation and except as necessary or incidental to the exercise of the powers conferred.
Both are true
Where a stockholder or stockholders representing the same interest of both the managing and the managed corporations own or control more than 1/3 of the total outstanding capital stock entitled to vote of the managing corporation.
Interlocking stockholders
Where a majority of the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation.
Interlocking board of directors
I. A corporation has no power except those expressly conferred on it by the Corporation Code and those that are implied or incidental to its existence. II. In turn, a corporation exercises said powers through its board of directors and/or its duly authorized officers and agents.
Both are true.
It means that a stockholder who dissented and voted against the proposed corporate action, may choose to get out of the corporation by demanding payment of the fair market value of his shares.
Appraisal right.
Subscriptions to the capital stock of a corporation constitute a fund to which the creditors have a right to look for the satisfaction of their claims.
Trust fund doctrine
The following are the requirements of increase or decrease authorized capital stock, except:
A. No decrease of the capital stock shall be approved if its effect shall prejudice the rights of corporate creditors.
B. Approval by a majority vote of the board of directors.
C. Ratification by the stockholders holding at least 2/3 of the outstanding capital stock.
D. Approval thereof by the DTI.
Approval thereof by the DTI.
I. The right of appraisal may be exercised when there is a fundamental change in the charter or articles of incorporation substantially prejudicing the rights of the stockholders. II. A corporation can purchase its own shares, provided payment is made out of surplus profits and the acquisition is for a legitimate corporate purpose.
Both are true
The limitations on dividends are the following, except:
A. The right to dividend is based on duly recorded stockholdings.
B. The right to dividend accrues only if there is SEC approval.
C. Dividends among stockholders of the same class must always be pro rata equal and without discrimination and regardless of the time when. the shares were acquired. The right of the stockholder to be paid dividends accrues as soon as the declaration is made.
B. The right to dividend accrues only if there is SEC approval.
It is an agreement whereby a corporation delegates the management of its affairs to another corporation for a certain period of time.
Management contract.
It refers to an act outside or beyond corporate powers, including those that may ostensibly be within such powers but are, by general or special laws, prohibited or declared illegal.
Ultra vires act
I. Every corporation has the power and capacity to have perpetual existence unless the certificate of incorporation provides otherwise. II. Every corporation has the power and capacity to enter into a partnership, joint venture, merger, consolidation, or any other commercial agreement with natural and juridical persons.
Both are true
It is the preferential right of all stockholders of a stock corporation to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings.
Pre-emptive right
I. The purpose of pre-emptive right is to enable the shareholder to retain his proportionate control in the corporation. II. A suit to enforce preemptive rights in a corporation is a derivative suit.
Only I is true.
I. The corporation may only acquire its own stocks in the presence of unrestricted retained earnings.
II. Preferred shares may be acquired even without surplus profit for as long as it will not result to the insolvency of the corporation.
Both are false.
I. The requirement of unrestricted retained earnings to cover the shares is based on the doctrine of limited capacity. II. There can be no distribution of assets among the stockholders without first paying corporate creditors. Hence, any disposition of corporate funds to the prejudice of creditors is rescissible.
Only II is true
It is an action brought by a stockholder on behalf of the corporation to enforce corporate rights against the corporation’s directors, officers or other insiders.
Derivative suit.
The following are the requisites of the corporate power to extend or shorten corporate term: I. Approval by a 2/3 vote of the board of directors or trustees. II. Ratification by the stockholders representing at least 2/3 of the outstanding capital stock or by at least 2/3 of the members in case of non-stock corporations.
Both are true
Corporate profits set aside, declared, and ordered to be paid by the directors for distribution among stockholders at a fixed time.
Dividends
I. Payment of dividends to a stockholder is not a matter of right but a matter of consensus.
II. The declaration of dividends is dependent upon the availability of surplus profit or restricted retained earnings.
Both are true
