Chapter 6: Introduction to Corporation

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Questions and Answers

What is a corporation, according to the Revised Corporation Code of the Philippines?

A separate entity with unlimited liability

A natural being created by agreement of parties

An artificial being created by operation of law (correct)

A business partnership created by a special grant

What is a characteristic of a corporation's existence?

It can come into existence by mere agreement of parties

It is dissolved by the death of its shareholders

It has a limited lifespan

It is created by operation of law (correct)

What is an advantage of a corporation?

Shareholders have unlimited liability

The corporation is dissolved by the transfer of ownership of shares

The corporation has a legal capacity to act as a legal entity (correct)

The corporation has a limited lifespan

What is a disadvantage of a corporation?

It is relatively complicated in formation and management Signup and view all the answers

What is true about a corporation's shareholders?

They have limited liability Signup and view all the answers

What is a characteristic of a corporation's management?

It is centralized in the board of directors Signup and view all the answers

What is true about a corporation's existence?

It has perpetual existence unless its articles of incorporation provide otherwise Signup and view all the answers

What is an advantage of a corporation in terms of funding?

It is easy to acquire funds Signup and view all the answers

What is a characteristic of corporations in terms of taxation?

They are subject to heavier taxation Signup and view all the answers

What is the relationship between minority shareholders and the majority in a corporation?

They are subservient to the wishes of the majority Signup and view all the answers

What is a characteristic of management and control in large corporations?

They are separate from ownership Signup and view all the answers

What is the result of the transferability of shares in a corporation?

It permits the unification of incompatible elements Signup and view all the answers

What is the main characteristic of a stock corporation?

It has share capital divided into shares and distributes dividends Signup and view all the answers

What is the purpose of the profits earned by a non-stock corporation?

To further the purpose or purposes of the corporation Signup and view all the answers

What is a corporation aggregate?

A corporation with more than one member Signup and view all the answers

What is a domestic corporation?

A corporation formed under the Philippine laws Signup and view all the answers

Who are the owners of the corporation?

The shareholders Signup and view all the answers

What is the role of an underwriter in a securities issue?

To buy or guarantee the sale of an entire or a substantial part of an issue Signup and view all the answers

What is the primary responsibility of the board of directors?

To formulate the overall policies for the corporation Signup and view all the answers

What is the minimum issue price of par value shares?

The par value stated in the articles of incorporation Signup and view all the answers

How long are the directors elected for?

For a term of one year Signup and view all the answers

What is the characteristic of a no-par value share?

It can be issued without a stated value Signup and view all the answers

Who elects the independent directors?

The shareholders present or entitled to vote in absentia Signup and view all the answers

What is the primary role of the professional management team?

To implement the policies of the board of directors and actively manage the day-to-day affairs of the corporation Signup and view all the answers

Which type of corporation is not permitted to issue no-par value shares?

Banks, trust, insurance, and pre-need companies Signup and view all the answers

What is the primary characteristic of an independent director?

They are independent of any business or other relationship that could interfere with their judgment Signup and view all the answers

What is a requirement for a corporate secretary?

To be a resident and citizen of the Philippines Signup and view all the answers

Who is required by law to be a director of the corporation?

The president only Signup and view all the answers

What is the purpose of underwriting in a securities issue?

To provide a guarantee to the issuing corporation Signup and view all the answers

What is the characteristic of a voting share?

It has the right to vote Signup and view all the answers

How often does a corporation typically hold a shareholders' meeting?

Annually Signup and view all the answers

What is the minimum stated value of a no-par value share?

Five pesos per share Signup and view all the answers

What is the minimum number of stockholders required to form a One Person Corporation (OPC)?

One Signup and view all the answers

What type of companies are not allowed to incorporate as One Person Corporations (OPCs)?

Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies Signup and view all the answers

What is the liability of the sole shareholder in a One Person Corporation (OPC)?

Limited liability up to the amount of investment Signup and view all the answers

What is the requirement for the corporate name of a One Person Corporation (OPC)?

The letters 'OPC' must be included either below or at the end of the corporate name Signup and view all the answers

What is the burden of proof on the sole shareholder in a One Person Corporation (OPC)?

To prove that the corporation is adequately financed Signup and view all the answers

What is the requirement for filing corporate by-laws in a One Person Corporation (OPC)?

The OPC is not required to file corporate by-laws Signup and view all the answers

What is the principle that applies to One Person Corporations (OPCs) with equal force as other corporations?

The principle of piercing the corporate veil Signup and view all the answers

What is the requirement for filing Articles of Incorporation (AOI) in a One Person Corporation (OPC)?

The OPC must file AOI according to Section 14 Signup and view all the answers

Study Notes

Definition of Corporation

A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.
It is a separate entity with a personality distinct from its individual shareholders or members.

Attributes of a Corporation

A corporation has perpetual existence unless its articles of incorporation provide otherwise.
It enjoys the right of succession, meaning the death, withdrawal, insolvency, or incapacity of individual shareholders or members will not dissolve the corporation.
The transfer of ownership of shares of stock does not dissolve the corporation.
It has the powers, attributes, and properties expressly authorized by law or incident to its existence.

Advantages of a Corporation

A corporation has a legal capacity to act as a legal entity.
Shareholders have limited liability.
It has continuity of existence.
Shares of stock can be transferred without the consent of other shareholders.
Its management is centralized in the board of directors.
Shareholders are not general agents of the business.
It has greater ability to acquire funds.

Disadvantages of a Corporation

A corporation is relatively complicated in formation and management.
There is a greater degree of government control and supervision.
It requires a relatively high cost of formation and operation.
It is subject to heavier taxation than other forms of business organizations.
Minority shareholders are subservient to the wishes of the majority.
In large corporations, management and control have separated from ownership.
Transferability of shares permits the uniting of incompatible and conflicting elements in one.

Classes of Corporations

Stock corporation: A corporation that has share capital divided into shares and is authorized to distribute to the holders of such shares, dividends or allotments of the surplus profits on the basis of the shares held.
Non-stock corporation: A corporation where no part of its income is distributable as dividends to its members, trustees, or officers.

Other Classifications of Corporations

Corporation aggregate: A corporation consisting of more than one corporator.
Sole corporation: A corporation which consists of only one member or corporator and his successors.
Domestic corporation: A corporation organized under the Philippine laws.
Foreign corporation: A corporation formed, organized, or existing under laws other than the Philippines.

Classes of Shares

Par value shares: Shares with a specific amount fixed in the articles of incorporation and appearing on the certificate of stock.
No-par value shares: Shares without any value appearing on the face of the certificate of stock.
Voting shares: Shares issued with the right to vote.
Non-voting shares: Shares issued without the right to vote.

Basic Corporate Organizational Structure

The ultimate control of the corporation rests with the shareholders.
The shareholders elect the top governing body of the corporation, the members of the board of directors.
The board of directors is responsible for the formulation of overall policies for the corporation and for the exercise of corporate powers.
The board elects the chairman of the board and the professional management team or administrative officers.

One Person Corporation (OPC)

The OPC is a corporation with a single stockholder, who may be a natural person, trust, or estate.
One person may incorporate two or more OPCs.
Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and certain government-owned and controlled corporations may not incorporate as OPCs.
The OPC has a personality separate and distinct from the single stockholder.
The sole shareholder's liability is limited to his investment.
The OPC is not required to have a minimum authorized capital stock except as otherwise provided by special law.
If the corporation is an OPC, the letters "OPC" are included, either below or at the end of its corporate name.

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Description

This quiz covers the basics of corporation, including its definition, attributes, and characteristics. Learn about the concept of corporation and its legal implications.