Corporate Law: Preferred Shares Quiz

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Questions and Answers

What is the requirement for the issuance of preferred shares under the Revised Corporation Code?

Preferred shares of stock may either be par value shares or no-par value shares (correct)

Preferred shares of stock must be issued with a par value

Preferred shares of stock may be issued only with discounted value

Preferred shares of stock must be no-par value shares

How is the issue price of no-par value common shares determined?

It may be fixed by the Board of Directors based on the authority given in the articles of incorporation

It may be fixed in the articles of incorporation or by-laws

It may be fixed by stockholders representing at least a majority of the outstanding capital stock at a meeting duly called for the purpose

Any of the above (correct)

Which statement is correct regarding the legal capital of par-value shares and no-par value shares?

Both A and B (correct)

For par-value shares, the legal capital is the total par value of shares issued and subscribed

For no-par value shares, the legal capital is the entire consideration received

Neither A nor B

What is the minimum issue price for no-par value common shares of stocks when issued?

P1.00 Signup and view all the answers

What is the maximum period for which founder's shares have exclusive voting rights as classified in the Articles of Incorporation?

5 years from the approval of SEC Signup and view all the answers

Which statement accurately describes authorized capital stock?

It represents the total number of shares a corporation can issue Signup and view all the answers

If preferred shares of stock are no-par value, what is a significant aspect regarding their issuance?

They may be issued for any amount determined by the board Signup and view all the answers

A company issuing no-par value shares may fix the issue price in which manner?

By the Articles of Incorporation or by-laws Signup and view all the answers

Which statement accurately describes the period for making a written demand on a corporation by a dissenting stockholder?

The demand must be made within 30 days after the vote. Signup and view all the answers

What is the correct time frame for a stockholder to submit certificates of stock for notation as dissenting stocks?

Within 10 days following the written demand to withdraw. Signup and view all the answers

Which of the following statements is false regarding the exercise of appraisal rights?

Dissenting shareholders can withdraw their demand without consent of the corporation. Signup and view all the answers

Who typically bears the cost of appraisal for the fair value of shares of a dissenting shareholder?

The corporation generally bears the cost unless the offered price is close to fair value. Signup and view all the answers

Which of the following is NOT a requisite of a non-stock corporation?

It should maintain capital stock divided into shares. Signup and view all the answers

Upon payment of the fair value of shares, what happens to the rights of dissenting stockholders?

All rights of dissenting stockholders are fully terminated. Signup and view all the answers

What happens if the price offered by the corporation is close to the fair value determined by the appraisal?

The dissenting stockholder will bear appraisal costs. Signup and view all the answers

Which of the following rights are suspended during the appraisal process?

Voting rights associated with the shares involved. Signup and view all the answers

What does a Certificate of Incorporation primarily signify for a corporation?

It evidences the existence of the juridical personality of the corporation. Signup and view all the answers

Which document specifically outlines the internal governance of a corporation?

Articles of Incorporation Signup and view all the answers

Which government agency is responsible for approving amendments to the articles of incorporation?

Securities and Exchange Commission Signup and view all the answers

Which document is NOT typically required for the primary registration of a domestic stock corporation?

Department of Finance approval Signup and view all the answers

What is a key function of the purpose clause in the articles of incorporation?

To convey the corporation's primary and secondary purposes. Signup and view all the answers

Which of the following statements about the Articles of Incorporation is true?

They prescribe rights and duties of stockholders regarding management. Signup and view all the answers

In the context of by-laws, which of the following is correct?

By-laws are essential for establishing relationships within the corporation. Signup and view all the answers

What is the significance of informing investors about a corporation's purpose clause?

It signals the type of business the corporation conducts. Signup and view all the answers

What is the correct statement regarding the filing period for legal actions involving a corporation?

Legal actions must be filed within a 3-year period. Signup and view all the answers

Which test is applied to determine the nationality of a corporation in the Philippines?

Incorporation test Signup and view all the answers

What is required for a foreign corporation to legally operate in the Philippines?

By securing a license and a certificate of authority from appropriate agencies Signup and view all the answers

When must the General Information Sheet be submitted to the SEC?

Within 90 calendar days from the actual stockholders’ meeting Signup and view all the answers

Which of the following cannot be a single stockholder of a one-person corporation?

Trust managed by a corporate trustee Signup and view all the answers

What is the default term of existence for a one-person corporation (OPC)?

50 years renewable for another term Signup and view all the answers

Where should the suffix 'OPC' be placed in the corporate name of a one-person corporation?

At the end of its corporate name Signup and view all the answers

What is the correct reason for a corporation's inability to bring a legal action after its dissolution?

All legal rights cease upon dissolution. Signup and view all the answers

Which statements about the one person corporation (OPC) are true?

Only Statement 1 is true Signup and view all the answers

What document is required for incorporation by a single stockholder of the OPC?

The written consent of both the nominee and alternate nominee to the designation Signup and view all the answers

Who replaces the single stockholder of an OPC in case of death or incapacity?

Either A or B Signup and view all the answers

What is the minimum authorized capital stock of a one-person corporation (OPC)?

P5,000 Signup and view all the answers

Which statements regarding the appointment of officers in an OPC are true?

Only Statement 1 is true Signup and view all the answers

Which report does not need to be submitted by the OPC to the SEC?

Annual financial performance report Signup and view all the answers

What happens when the single stockholder of an OPC becomes incapacitated?

The nominee can manage the OPC Signup and view all the answers

What is required for the change of a nominee in an OPC?

Approval from the SEC Signup and view all the answers

Study Notes

Preferred Shares

Preferred shares can be issued with either par value shares or no-par value shares under the Revised Corporation Code.
The issue price of no-par value common shares can be determined by the Board of Directors, in articles/by-laws, or by stockholders at a majority meeting.

Legal Capital

Legal capital for par-value shares equals the total par value of issued shares.
For no-par value shares, legal capital is the total consideration received.

Minimum Issue Price

There is a minimum issue price of P5.00 for no-par value common shares.

Founder’s Shares

Founder’s shares with exclusive voting rights are limited to a maximum of 5 years from SEC approval.

Authorized Capital Stock

Authorized capital stock refers to shares issued to stockholders, excluding treasury shares, and includes rights to dividends and voting.
Certificates of incorporation, by-laws, and articles of incorporation define various aspects of corporate governance.

Amendments and Compliance

The Securities and Exchange Commission (SEC) is responsible for approving or rejecting amendments to articles of incorporation.
Essential documents for primary registration of a domestic stock corporation exclude the Treasurer’s Affidavit showing minimum capital compliance.

Purpose Clause

The purpose clause in articles of incorporation defines a corporation's authority and informs stakeholders about the business nature and limits of management's powers.

Appraisal Rights

Dissenting shareholders' rights are suspended until fair payment is made for their shares, which includes conditions on withdrawal requests.
Costs related to appraisals are typically borne by the corporation unless an offered price aligns with the appraiser's fair value.

Non-Stock Corporations

Non-stock corporations must not distribute income as dividends and do not have capital stock divided into shares.

Corporation’s Legal Standing

Rights for or against corporations remain intact even after dissolution, following relevant provisions of the Revised Corporation Code.

Nationality of Corporations

The Revised Corporation Code uses a control test to determine corporate nationality, whether domestic or foreign.

Foreign Corporation Operations

Foreign corporations must secure a license from the SEC and a certificate of authority from the relevant government agency to operate in the Philippines.

General Information Sheet Submission

The General Information Sheet must be submitted to the SEC within 90 calendar days from actual annual meetings.

One Person Corporation (OPC) Regulations

Single stockholders of OPC can include natural persons, estates, or trusts, but not partnerships or corporations.
OPCs generally have a term of existence of 50 years, renewable indefinitely.
The suffix “OPC” should appear at the end of the corporate name.

Management and Nomination in OPC

The single stockholder serves as the director and president, and a nominee may assume duties if the stockholder is incapacitated.
The application for incorporation of an OPC requires the written consent of both the nominee and alternate nominee.

Minimum Authorized Capital for OPC

The minimum authorized capital stock for an OPC is P5,000 unless specified otherwise by special law.

Reports to SEC

OPCs must submit various reports, including explanations or comments on financial statements, according to SEC regulations.

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Description

Test your knowledge on the requirements for issuing preferred shares under the Revised Corporation Code. This quiz will challenge your understanding of corporate finance concepts, specifically relating to share classifications. Each statement will require careful consideration for a correct answer.