CPA Review School of the Philippines

Manila
OBLIGATIONS Dante O. Dela Cruz

1. The following are the elements of an obligation, except

a. Efficient cause
b. Active and passive subjects
c. Vinculum
d. Prescription

2. The following are the requisites of an obligation, except

a. Demand
b. Prestation
c. Efficient cause
d. Passive and active subjects

3. Which of the following is not correct in an obligation to do?

a. To require that what has been poorly done be undone
b. To sue the debtor for specific performance if he refused to voluntarily fulfill the obligation
c. The debtor shoulders the cost of execution should he fail to do so
d. To require the debtor to pay damages in case of breach

4. Unless the law or the stipulation of the parties require another standard of care, every person
obliged to give something is also obliged to take care of it with the proper diligence
a. Observing ordinary diligence
b. Observing utmost care
c. Of a father of a good family
d. Observing extraordinary care

5. A natural obligation under the New Civil Code of the Philippines is one which
a. The oblige may enforce through the court if violated by the obligor
b. Cannot be judicially enforced but authorizes the obligee to retain the obligor’s payment or
performance
c. The obligor has a moral obligation to do, otherwise entitling the obligee to damages
d. Refers to an obligation in writing to do or not to do

6. On August 1, 2021, A obliged himself to give his only dog to B if B will pass the October 2021 CPA
Examination. If the CPA examination was held on October 9, 10 and 11 and the results were
released on October 20, 2021 and B passed and took his oath on November 11, 2021, B is entitled
to the dog on
a. October 18, 2021
b. November 20, 2021
c. August 1, 2021
d. October 19, 2021

7. Using the preceding number, if the dog gave birth to a puppy on October 18, 2021, which of the
following statements is correct?
a. B is entitled to the puppy because the condition has been fulfilled and such shall retroact to
the day of constitution of the obligation
b. A shall pay damages to B if A shall appropriate the puppy
c. B may demand from A the value of the puppy and damages if A refuses to give the puppy
d. A is entitled to the puppy because in unilateral obligations, the debtor shall appropriate the
fruits

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8. Using the preceding number, if A delivered the dog and the puppy on October 20, 2021, which of
the following statements is correct?
a. A can recover the puppy but not the dog
b. A can recover the dog but not the puppy
c. B acquired real right over the dog and the puppy
d. B can sell the dog and the puppy

9. What is the basis of the liability of a school when a student is stabbed inside the campus by a
stranger in the school?
a. Quasi-contracts
b. Delicts
c. Contracts
d. Quasi-delicts

10. The following except one, are included in civil liability. The exception is
a. Restitution
b. Starvation
c. Reparation
d. Indemnification

11. The thing itself shall be restored, as a rule

a. Reparation
b. Starvation
c. Indemnification
d. Restitution

12. The court determines the amount of damage taking into consideration the price of the thing and
its sentimental value to the injured person
a. Restitution
b. Starvation
c. Indemnification
d. Reparation

13. The consequential damages suffered by the injured person and those suffered by his family or
third person by reason of the act
a. Reparation
b. Restitution
c. Starvation
d. Indemnification

14. Action to impugn or rescind acts or contracts done by the debtor to defraud the creditors
a. Accion subrogatoria
b. Accion quanti-minoris
c. Accion reinvindicatoria
d. Accion pauliana

15. A borrowed money from B payable on December 10, 2021. If A failed to pay on due date, will A
be in delay?
a. Yes, if the obligation is in writing.
b. Yes, because there is stipulation as regards the due date.
c. No, if A has the money to pay B
d. No, because demand has not been made by B

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16. Damages awarded for mental and physical anguish

a. Nominal
b. Exemplary
c. Moral
d. Temperate

17. Damages awarded to vindicate a right

a. Exemplary
b. Actual
c. Nominal
d. Liquidated

18. Damages awarded to set an example

a. Moral
b. Liquidated
c. Exemplary
d. Nominal

19. When the exact amount of damages cannot be ascertained

a. Exemplary
b. Temperate
c. Moral
d. Liquidated

20. Damages predetermined beforehand

a. Actual
b. Temperate
c. Moral
d. Liquidated

21. A obliged himself to deliver to B the following:

A. 2021 Sing-It Yamaha Organ
B. Malagona passenger jeepney with engine No. 69 and chasis No. 88

I. In case A failed to deliver a 2021 Yamaha Organ, the court may compel A to deliver a 2021
Yamaha Organ plus damages
II. In case A failed to deliver the jeepney, the court may compel A to deliver the jeepney plus
damages
a. True, True
b. True, False
c. False, True
d. False, False

22. I. If a person obliged to do something fails to do it, the same shall be executed at his cost.
II. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are liable for damages.
a. True, True
b. True, False
c. False, True
d. False, False

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23. I. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for
fraud is void.
II. If the law or contract does not state the diligence which is to be observed in the performance
of an obligation, that which is expected of a father of a good family shall be required.
a. True, True
b. True, False
c. False, True
d. False, False

24. I. The receipt of a later installment of a debt without reservation as to prior installments, shall
give rise to a rebuttable presumption that such installments have been paid.
II. If a taxpayer pays his income tax liability for the current year, there is a presumption that tax
liability for the previous year has been paid.
a. True, True
b. True, False
c. False, True
d. False, False

25. With regard to the right as to the fruits of the thing, which is not correct?
a. If the obligation is subject to a suspensive condition, the obligation to deliver arises from the
moment the condition happens.
b. If the obligation arises from a contract of sale, the vendor has a right to the fruits of the thing
from the time the obligation to deliver arises.
c. If there is no condition or term for its fulfillment, the obligation to deliver arises from the
perfection of the contract or creation of the obligation
d. If the obligation is subject to a suspensive period, the obligation to deliver arises upon the
expiration of the term or period

26. A is obliged to deliver his only car to B on November 20, 2021. If A does not deliver, and on
November 22, 2021, a typhoon destroys the car, which is correct?
a. A is liable because he is in delay
b. A and B will divide the loss equally
c. A is not liable because the obligation is extinguished
d. A’s obligation is converted into a monetary obligation

27. I. When what is to be delivered is a determinate thing, the creditor may compel the
Debtor to make the delivery and if the debtor refuses, he creditor may ask that the
obligation be complied with at the expense of the debtor.
II. The obligation to give a determinate thing includes that of delivering all its accessions and
accessories, even though they may not have been mentioned.
a. True, True
b. True, False
c. False, True
d. False, False

28. A owes B P1,000. A, knowing that the debt has prescribed, nevertheless, still pays B. Can A
recover what he voluntarily paid?
I. Yes, because B has no right to demand the payment effected by A
II. No, the payment extinguished the natural obligation.
a. True, True
b. True, False
c. False, True
d. False, False

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Items 29 - 33 A kind of constructive delivery whereby:

29. There is delivery when the keys of a warehouse are given

a. Traditio longa-manu
b. Traditio brevi-manu
c. Traditio constitutom possessorium
d. Traditio simbolica

30. There is delivery by mere consent or the pointing out of the object.
a. Traditio brevi-manu
b. Traditio simbolica
c. Traditio constitutom possessorium
d. Traditio longa-manu

31. A possessor of a thing not as an owner, becomes the possessor as owner

a. Traditio longa-manu
b. Traditio brevi-manu
c. Traditio constitutom possessorium
d. Traditio simbolica

32. A possessor of a thing as an owner retains possession no longer as an owner, but in some other
capacity
a. Traditio simbolica
b. Traditio constitutom possessorium
c. Traditio longa-manu
d. Traditio brevi-manu

33. The opposite of brevi-manu

a. Longa-manu
b. Simbolica
c. Constitutom possessorium
d. Quasi-tradition

34. If a thing is capable of particular designation

a. Generic
b. Indeterminable
c. Specific
d. Indeterminate

35. If a thing refers to a class, to a genus and cannot be pointed out with particularity.
a. Specific
b. Determinate
c. Generic
d. Indeterminable

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36. A wife was about to deliver a child. Her parents brought her to the hospital. Who should pay the
expenses for medical attendance?
I. The husband, because it is his duty to support his wife and support includes medical
attendance.
II. The parents, because they were the persons who brought the wife to the Hospital
a. Both answers are correct
b. Only the first is correct
c. Both answers are not correct
d. Only the second is correct

37. The following are kinds of fruits of an obligation, except

a. Industrial
b. Civil
c. Penal
d. Natural

38. Spontaneous products of the soil and the offspring and other products of animals
a. Industrial
b. Civil
c. Natural
d. Penal

39. Products of the soil through cultivation or intervention of human labor.

a. Natural
b. Civil
c. Penal
d. Industrial

40. Fruits arising out of contracts – like rental payments

a. Natural
b. Civil
c. Penal
d. Industrial

41. When does the obligation to deliver arise?

I. If there is no term or condition, then from the perfection of the contract
II. If there is a term or condition, then from the moment the term arrives or the condition
happens
a. True, False
b. False, True
c. False, False
d. True, True

42. A is obliged to give B 10 kilos of sugar, which of the following is not correct?
a. B can just buy 10 kilos of sugar and charge the expenses to A
b. A can insist on just paying B damages or the monetary value of the sugar
c. B may require another person to deliver the sugar and charge the expenses to A
d. B can demand that A obtain the sugar and deliver it to him

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43. Where demand by the creditor shall be necessary in order that delay may exist
a. When the obligor has expressly acknowledged that he is in default
b. When time is of the essence of the contract
c. When the obligor requested for an extension of time
d. When demand would be useless

44. Debtor’s default in real obligation

a. Compensatio morae
b. Mora solvendi ex persona
c. Mora solvendi ex-re
d. Mora accipiendi

45. Debtor’s default in personal obligation

a. Mora accipiendi
b. Mora solvendi ex-re
c. Compensatio morae
d. Mora solvendi ex persona

46. Default on the part of the creditor

a. Mora accipiendi
b. Mora solvendi ex-re
c. Mora solvendi ex persona
d. Compensatio morae

47. Default on the part of both parties

a. Mora solvendi ex persona
b. Compensatio morae
c. Mora accipiendi
d. Mora solvendi ex-re

48. Which of the following is a civil obligation?

a. A obliges himself to pay B P10,000 on October 30, 2021
b. C is a debtor of D for P20,000 due on September 30, 2001.
c. The obligation of a husband and wife to observe fidelity
d. The obligation of a catholic to hear mass every Sunday

49. Specific performance may not be possible in this civil obligation

a. A, a painter, obliges himself to paint the portrait of B on January 8, 2021
b. C, a farmer, obliges himself to give his only cow to D on February 14, 2021
c. E, a veterinarian, obliges himself to give one of his dogs to F on May 1, 2021
d. G, a registrar of deeds, obliges himself to effect registration of H’s parcel of land on June 20,
2021

50. Upon the proposal of a third person, a new debtor substituted the original debtor without the
latter’s consent. The creditor accepted the substitution. Later, however, the new debtor became
insolvent and defaulted in his obligation. What is the effect of the new debtor’s default upon the
original debtor?
a. The original debtor shall pay or perform the obligation with recourse to the new debtor
b. The original debtor shall pay or perform 50% of the obligation to avoid unjust enrichment on
his part
c. The original debtor remains liable since he gave no consent to the substitution
d. The original debtor is freed of liability since novation took place and this relieved him of his
obligation

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51. Lennie bought a business class ticket from Alta Airlines. As she checked in, the manager
downgraded her to economy on the ground that a Congressman had to be accommodated in the
business class. Lennie suffered discomfort and embarrassment of the downgrade. She sued the
airlines for quasi-delict but Alta Airlines countered that, since her travel was governed by a contract
between them, no quasi-delict could arise. Is the airline correct?
a. Yes, since the facts show a breach of contract, not a quasi-delict
b. Yes, since quasi-delict presupposes the absence of a pre-existing contractual relation between
the parties
c. No, the breach of contract may in fact be tortious as when it is tainted as in this case with
arbitrariness, gross bad faith and malice
d. No, denying Lennie the comfort and amenities of the business class as provided in the ticket
is a tortious act

52. Romeo borrowed P1M from Mario and Felix who acted as solidary creditors. When the loan
matured, Mario wrote a letter to Romeo demanding payment of the loan directly to him. Before
Romeo could comply, Felix went to see him personally to collect and he paid him. Did Romeo make
a valid payment?
a. No, since Romeo should have split the payment between Mario and Felix
b. Yes, since Felix was a solidary creditor, payment to him extinguished the obligation
c. Yes, since the payment covers the whole obligation
d. No, since Mario, the other solidary creditor, already made a prior demand for payment from
Romeo

53. A lawful and voluntary act resulting to a benefit, except

a. Solutio indebiti
b. Quasi-contract
c. Negotiorum gestio
d. Quasi-delict

54. The right of the creditor that is enforceable against anybody is, what kind of right?
a. Natural
b. Real
c. Personal
d. Moral

55. Which of the following is not correct in an obligation to give a specific thing?
a. To deliver the fruits of the thing
b. To deliver the thing itself
c. To deliver the accessions and accessories
d. To preserve or take care of the thing due

56. Mark and Ken both undertook a contract to deliver to Casey in Manila a boat docked in Subic.
Before they could deliver it, however, the boat sank in a storm. The contract provides that
fortuitous event shall not exempt Mark and Ken from their obligation. Owing to the loss of the
motor boat, such obligation is deemed converted into one of indemnity for damages. Is the liability
of Mark and Ken joint or solidary?
a. Neither solidary nor joint since they cannot waive the defense of fortuitous event to which
they are entitled
b. Solidary or joint upon the discretion of Casey
c. Solidary since Mark and Ken failed to perform their obligation to deliver the motor boat
a. Joint since the conversion of their liability to one of indemnity for damages made it joint

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57. The right of the creditor that is enforceable against a definite debtor is
a. Moral right
b. Personal right
c. Real right
d. Natural right

58. The person in whose favor the obligation is constituted

a. Obligee
b. Passive subject
c. Debtor
d. Obligor

59. Synonymous to oblige

1. Creditor 2. Active subject 3. Debtor 4. Passive subject
a. 1 and 4
b. 2 and 3
c. 3 and 4
d. 1 and 2

60. The person who has the duty of giving, doing or not doing
a. Obligee
b. Obligor
c. Active subject
d. Creditor

61. Synonymous to obligor

1. Creditor 2. Active subject 3. Debtor 4. Passive subject
a. 1 and 4
b. 2 and 3
c. 3 and 4
d. 1 and 2

62. Ordinary diligence is

a. Diligence of a good father of a family
b. Extraordinary diligence
c. Diligence required by law
d. Diligence of a father of a good family

63. The creditor has a right to the fruits of the thing

a. From the time the obligation to deliver it arises
b. From the time the fruits have been delivered
c. From the time there is meeting of the minds
d. From the perfection of the contract

64. From the time the fruits have been delivered, the creditor shall acquire
a. Real right
b. Personal right
c. Moral right
d. Inchoate right

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65. If A sells to B a Vase, the giving by A to B of the Vase is

a. Actual tradition
b. Constructive delivery
c. Symbolical tradition
d. Traditio longa-manu

66. A was employed as professional driver of B Transit Bus owned by C. In the course of his work, A hit
a concrete post causing serious injury to passenger W and pedestrian Y. The victims sued the driver
and the owner of the bus for damages. Which of the following statements is correct?
a. C is not liable if C can prove that he exercised the diligence of a good father of a family in the
selection and supervision of his employees
b. The conviction of A in a criminal case makes C liable for damages arising from criminal act
c. The liability of C shall cease if the driver A is acquitted in the criminal case
d. The guilt of driver A must be established beyond reasonable doubt to make C liable

67. A juridical necessity to give, to do or not to do

a. Civil obligation
b. Natural obligation
c. Moral obligation
d. Social obligation

68. They give a right of action to compel their performance

a. Moral obligation
b. Natural obligation
c. Social obligation
d. Civil obligation

69. The obligee has a right to enforce the obligation against the obligor in a court of law
a. Civil obligation
b. Moral obligation
c. Natural obligation
d. Social obligation

70. This is based on equity and justice

a. Moral obligation
b. Natural obligation
c. Social obligation
d. Civil obligation

71. The object or subject matter of the obligation

a. Vinculum
b. Active subject
c. Passive subject
d. Prestation

72. The efficient cause or juridical tie why the obligation exists
a. Passive Subject
b. Prestation
c. Vinculum
d. Active subject

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73. The duty not to recover what has voluntarily been paid although payment was no longer required
a. Natural obligation
b. Moral obligation
c. Juridical obligation
d. Civil obligation

74. The following are sources of obligations derived from law, except
a. Contracts
b. Quasi-contracts
c. Delicts
d. Quasi-delicts

75. The duty to pay taxes and to support one’s family are obligations arising from
a. Contracts
b. Quasi-contracts
c. Delicts
d. Law

76. The obligation of husband and wife to render mutual help and support arises from
a. Law
b. Quasi-contract
c. Quasi-delict
d. Contract

77. A supports B, a minor, because B’s father refuses to support B. The father is obliged to
reimburse A. The source of obligation is
a. Quasi-contract
b. Delict
c. Quasi – delict
d. Contract

78. A juridical relation resulting from a lawful, voluntary, and unilateral act and which has for its
purpose the payment of indemnity to the end that no one shall be unjustly enriched or benefited
at the expense of another.
a. Delict
b. Quasi – delict
c. Quasi-contract
d. Contract

79. When a person voluntarily takes charge of another’s abandoned business or property without the
owner’s authority where reimbursement must be made for necessary and useful expenses.
a. Quasi-contract
b. Quasi-delict
c. Negotiorum gestio
d. Solutio indebiti

80. When something is received when there is no right to demand it, and it was unduly delivered thru
mistake, the recipient has the duty to return it
a. Quasi-delict
b. Negotiorum gestio
c. Solutio indebiti
d. Quasi-contract

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81. A quasi-contract is an implied contract

A defendant who is acquitted in a criminal case is no longer liable civilly
a. True, False
b. False, True
c. False, False
d. True, True

82. Tort or culpa aquiliana is

a. Quasi-delict
b. Negotiorum gestio
c. Solutio indebiti
d. Quasi-contract

83. A fault or act or omission of care which causes damage to another, there being no pre-existing
contractual relations between the parties
a. Quasi-delict
b. Negotiorum gestio
c. Solutio indebiti
d. Quasi-contract

84. Omission of the diligence which is required by the circumstances of person, place and time
a. Negligence
b. Impotence
c. Insanity
d. Ignorance

85. When one exercises a right recognized by law, knowing that he thereby causes an injustice to
another, the latter is entitled to recover damages. This is known as the principle of
a. Damnum absque injuria
b. Vicarious liability
c. Abuse of rights
d. Res ipsa loquitur

86. The source of obligations which is a rule of conduct, just and obligatory, promulgated by legitimate
authorities for common good, benefit and observance
a. Quasi-contracts
b. Delicts
c. Law
d. Contracts

87. A ordered B, a 10 year old boy to climb a high and slippery mango tree with a promise to give him
part of the fruits. B was seriously injured when he fell while climbing the tree. Is A liable?
I. No, because no person shall be responsible for fortuitous events.
II. Yes, because A was negligent in making the order without taking due care to avoid a reasonable
foreseeable injury to B.
a. True, True
b. True, False
c. False, True
d. False, False

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88. A borrowed P100,000 from B. The loan was secured by a mortgage of A’s land in favor of B.
Without the knowledge of A, C paid B the sum of P100,000 for A’s debt. As a result
a. The obligation of A to B was extinguished but A should reimburse C the amount of P100,000
because he was benefited by the payment
b. C can recover the amount from B in case A refuses to reimburse C
c. C cannot claim reimbursement from A inasmuch as the payment was made without the
knowledge of A
d. C may foreclose the mortgage on A’s land if A cannot pay

89. When the debtor of a debtor is ordered not to pay the latter so that preference would be given to
the latter’s creditor.
a. Injunction
b. Garnishment
c. Interpleader
d. Attachment

90. A sold a half –interest in his specific car to B. It was agreed that the price to be paid by B would be
used in installing a new engine on the car. Later, the car was destroyed by a fortuitous event. Is
B’s obligation to pay the price extinguished?
I. Yes, there is no more use of installing a new engine since the car has already been destroyed
by a fortuitous event.
II. No, B must still pay because his obligation to pay is generic.
a. True, True
b. False, True
c. True, False
d. False, False

91. I. A commits the crime of theft and is asked to return the car to its owner B. If, before the car is
delivered to B it is destroyed by a fortuitous event, Is A’s liability extinguished?
II. Using above statement, A had previously asked the owner to accept the car, but the
owner without any justifiable reason refuses to accept the car, and it is destroyed by a
fortuitous event. Is A’s liability extinguished?
a. No, No
b. Yes, No
c. No, Yes
d. Yes, Yes

92. A pays for B’s transportation fare without B’s knowledge and later discovers that B was entitled to
half-fare. Which is not correct?
a. A can recover the half-fare from B
b. A can recover the half-fare from the carrier
c. A can recover half-fare from B only
d. A can recover ½ from B and ½ from the carrier

93. A obtained a loan from B bank. The loan was embodied in several promissory notes. As security
the borrower executed a chattel mortgage on his standing crops. Said crops were however
subsequently destroyed by typhoon “Rosing”. Is A still liable for the loan despite the destruction
of the crops by a fortuitous event?
I. Yes, the obligation of A was to deliver a generic thing – money.
II. No, the obligation was to deliver determinate things – the standing crops.
a. True, True
b. False, True
c. False, False
d. True, False

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94. A borrower agreed that in case of non-payment of his debt, to render services as a servant. Which
of the following is not correct?
a. If the services will be rendered in satisfaction of the debt, the stipulation is valid.
b. If the services will not be gratuitous, specific performance of the service will be the proper
remedy in case of non-compliance
c. If the services will be “for free”, the stipulation is void for being contrary to law and morals.
d. Should there be a valid stipulation as regards the rendition of services, an action for damages
should be brought in case of non-compliance.

95. I. There is no delay in an obligation not to do something

II. Solutio indebiti and negotiorum gestio are implied contracts
a. True, True
b. True, False
c. False, False
d. False, True

96. I. Consent of the parties is required in quasi-contract.

II. The creditor acquires real rights over the thing from the time the obligation to deliver arises.
a. False, True
b. True, True
c. False, False
d. True, false

97. The creditor has a right to the fruits of the thing from the time
a. The obligation to deliver the thing arises
b. The fruits are delivered
c. The sale is perfected
d. The thing is delivered

98. The buyer has the right to the fruits of the thing from the time
a. The obligation to deliver the thing arises
b. The sale is perfected
c. The thing is delivered
d. The fruits are delivered

99. If A pays a debt that has prescribed:

I. Not knowing it has prescribed, A can recover on the ground of undue payment
II. Knowing it has prescribed, A cannot recover for this would be a case of natural obligation
a. Only 2 is true
b. Only 1 is true
c. Both 1 and 2 are true
d. Both 1 and 2 are false

100. A is obliged to give B his specific car on December 31, 2021. There was no delivery and on January
4, 2022 the garage of the car collapsed due to heavy rains and strong winds of Typhoon Pining,
and the car was totally destroyed. Is A still liable?
a. Yes, because the contract is perfected
b. No, even if A was in default, he could plead impossibility of performance
c. No, because there was no demand by B to deliver the car
d. Yes, the obligation to deliver the car is changed to pay the equivalent value because B is in
legal delay

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101. This obligation is demandable at once when it

a. Has a suspensive condition
b. Is with a term ex-die
c. Has a period
d. Has a resolutory condition

102. When the debtor binds himself to pay when his means permit him to do so, the obligation shall
be deemed to be with a
a. Resolutory period
b. Period
c. Potestative condition
d. Suspensive condition

103. A period with a suspensive effect

a. I will support you until January 1 of next year
b. I will support you if A marries B
c. I will support you beginning January 1 of next year
d. I will support you if A dies of TB

104. A period with a resolutory effect

a. I will support you beginning January 1 of next year
b. I will support you if A dies
c. I will support you until A dies
d. I will support you if A dies of TB

105. The obligation begins only from a day certain or upon the arrival of the period
a. With a period
b. Ex die
c. In diem
d. Conditional

106. The obligation remains valid up to a time certain but terminates upon the arrival of said period
a. In diem
b. With a period
c. Conditional
d. Ex die

107. A is obliged to give B, at A’s option either object No.1, Object No. 2, or Object No.3. If all objects
were lost thru A’s fault, which is correct?
a. The value of any of the things lost plus damages must be given to B
b. The value of the first thing lost plus damages must be given to B
c. The value of the last thing lost plus damages must be given to B
d. The obligation is extinguished

108. I. Using the preceding number, if objects nos. 1 and 2 were destroyed by a fortuitous
event and later object No. 3 is destroyed by A’s fault, A would still be liable.
II. Using the preceding number, if objects Nos. 1 and 2 were destroyed by A’s fault and later
object No. 3 is lost by a fortuitous event, A would still be liable.
a. True, True
b. False, True
c. True, False
d. False, False

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109. This is a valid obligation

a. A will give B P100,000 if B will kill C
b. A will give B P1,000,000 if B will agree to be the mistress of A
c. A will give B P10,000 if B can make C rise from the dead
d. A will give B P1,000 if B will pose nude in a painting session.

110. Where two or more prestations have been agreed upon but only one is due, the obligation is
a. Facultative
b. Conjoint
c. Alternative
d. Solidary

111. Using the preceding number, the right of choice, belongs

a. To the creditor
b. To the debtor
c. To both debtor and creditor
d. To third person

112. Anything paid or delivered before the arrival of the period, the obligor being unaware of the
period or believing that the obligation has become due and demandable.
a. May be recovered without interests
b. May not be recovered
c. May be recovered with interests
d. May be recovered with fruits and interests

113. Whenever in an obligation a period is designated, it is presumed to have been established for the
benefit
a. Of the debtor only
b. Of both the creditor and debtor
c. Of the creditor only
d. Of third persons

114. A is obliged to give B either objects No.1 or No. 2 or No. 3 at B’s option. Before B communicated
his choice to A, object No. 1 had been destroyed, thru A’s fault and object No. 2 had been
destroyed by a fortuitous event. B may
a. Demand the value of object No. 2 as the right of choice belongs to B
b. Demand either object No. 3 or the price of object No. 1 plus damages
c. Demand object No. 3 only as it is still available
d. Demand the price of object No. 1 only plus damages because it was destroyed by A’s fault

115. In Facultative obligations, if substitution has been made, which of the following is false?
a. The loss of the original prestation is immaterial
b. The obligation is converted into a simple obligation
c. The obligation is extinguished
d. The obligation ceases to be facultative

116. Using the preceding number, and the substitute is lost by a fortuitous event, which is true?
a. The debtor is liable for damages
b. The original prestation must be given
c. The debtor must give another object which is equally satisfactory
d. The obligation is extinguished

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117. Using the preceding number, but the substitute is lost due to debtor’s fault, which is true?
a. The debtor must give another object which is equally satisfactory
b. The obligation is extinguished
c. The debtor is liable for damages
d. The original prestation must be given

118. Any of the debtors is bound to render compliance of the entire obligation.
a. Facultative
b. Joint
c. Solidary
d. Alternative

119. In a joint obligation, joint means any of the following, except

a. Proportionate
b. Individually and collectively
c. Pro-rata
d. Mancomunada simple

120. Instances where the law imposes solidary liability, except

a. Obligations arising from tort
b. Liability of partners arising out of a contract
c. Liability of principals, accomplices and accessories of a felony
d. Obligations of bailees in commodatum

121. Where only one prestation has been agreed upon, but the obligor may render another in
substitution, the obligation is
a. Conjoint
b. Facultative
b. Solidary
c. Alternative

122. This will result to a solidary liability

a. Vitiated consent on the part of one of the debtors
b. Quasi-delict commited by one of the partners acting in the ordinary course of business
c. Insolvency of one of the debtors
d. Default on the part of one of the debtors

123. Where two or more prestations have been agreed upon, and all of them must be performed, the
obligation is
a. Alternative
b. Facultative
c. Conjoint
d. Solidary

124. A and B solidary debtors of C and D, joint creditors, to the amount of P1,000 – C can demand
a. P1,000 from A or P1,000 from B
b. P500 from A and P500 from B
c. P500 from A or P500 from B
d. P250 from A and P250 from B

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125. A and B are solidary debtors of C and D, solidary creditors, to the amount of P1,000. C can
demand
a. P1,000 from A or P1,000 from B
b. P500 from A or P500 from B
c. P1,000 from A and P1,000 from B
d. P500 from A and P500 from B

126. A and B are joint debtors of C and D, joint creditors, to the amount of P1,000. C can demand
a. P250 from A and P250 from B
b. P500 from A and P500 from B
c. P250 from A or P250 from B
d. P500 from A or P500 from B

127. A and B are joint debtors of C and D, solidary creditors, to the amount of P1,000. C can demand
a. P1,000 from A or P1,000 from B
b. P500 from A and P500 from B
c. P500 from A or P500 from B
d. P250 from A and P250 from B

128. This is synonymous to joint obligation

a. Joint and several
b. In solidum
c. Individually and collectively
d. Mancomunada simple

129. This is synonymous to solidary obligation

a. Pro-rata
b. Proportionate
c. Juntos o separadamente
d. Mancomunada

130. A, B and C are joint debtors of D for P3,000. If A is insolvent, how much should B pay D?
a. P1,500
b. P2,000
c. P3,000
d. P1,000

131. In 2021, A, B and C bound themselves in solidum to give D P9,000 subject to the following
conditions: A will pay in 2022, B, if D passes the 2023 CPA board exams and C will pay in 2024. In
2022, how much can D demand from C?
a. P9,000
b. P6,000
c. P0
d. P3,000

132. A, B and C are solidary debtors of D for P3,000. D remitted C’s share. A therefore paid later only
P2,000. A can recover reimbursement from B in the amount of
a. P1,500
b. P1,000
c. P500
d. P0

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133. Using the preceding number, if B is insolvent, A can recover from C the amount of
a. P1,000
b. P1,500
c. P500
d. P0

134. A, B, and C are solidary debtors of D in the amount of P1,000. D remitted the entire obligation
when A offered to pay. A can demand reimbursement from B in the amount of
a. P1,000
b. P333
c. P500
d. P0

135. A, B, and C are solidary debtors of D in the amount of P3,000 but A was incapacitated to give his
consent as he was a minor. If D sues B, how much will B be liable for?
a. P3,000
b. P1000
c. P2,000
d. P0

136. Using the preceding number, if D sues A, how much will A be liable for?
a. P0
b. P3,000
c. P2,000
d. P1000

137. A is indebted to solidary creditors B, C, and D, for P90,000. Without the knowledge of B and C, D
remitted the obligation of A. as a result,
a. The obligation is extinguished up to P60,000
b. The obligation is not extinguished because there is no consent from B and C
c. The obligation is extinguished only up to P30,000
d. The obligation of A to pay P90,000 is extinguished

138. A, B and C borrowed P6,000 from D and E, payable in 3 months with A giving in pledge her
diamond ring as security for the amount borrowed. How much can E collect from C?
a. P3,000
b. P1,000
c. P2,000
d. P6,000

139. A is obliged to give B her college ring. If she fails to do so, she must give P10,000. This is
a. Alternative obligation
b. Obligation with a penal clause
c. Facultative obligation
d. Conjoint obligation

140. Where the penalty takes the place of indemnity for the damages and for the payment of interest
a. Where there is stipulation to the effect that damages or interest may still be recovered,
despite the presence of the penalty clause
b. When the debtor is guilty of fraud or dolo in the fulfillment of the obligation
c. When there is breach of the obligations
d. When the debtor refuses to pay the penalty imposed in the obligation

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141. This is an obligation with a resolutory condition

a. I’ll give you P10,000 if you pass the 2016 CPA board examination
b. I’ll give you P10,000 if A dies of TB
c. I’ll give you P10,000 on December 31, 2016
d. I’ll give you my car now, but should you fail in any of your subjects, your ownership will cease
and it will be mine again

142. I. If the condition is potestative on the part of the debtor, the obligation is void.
II. If the condition is potestative on the part of the creditor, the obligation is valid.
a. True, true
b. False, True
c. True, false
d. False, False

143. A owns a house rented by B. A sold the house to C where C agreed to pay the balance of the
purchase price as soon as B leaves the premises. It was further agreed that C will take care of
seeing to it that B vacates the house. Which is correct?
a. The contract is void because it is potestative on the part of C
b. The contract is valid because the condition is mixed
c. The contract is void because the consent of B was not obtained
d. The contract is valid if B is willing to vacate the premises

144. I. The condition that some event happens at a determinate time shall extinguish the obligation
as soon as the time expires or it has become indubitable that the event will not take place.
II. The condition that some event will not happen at a determinable time shall render the
obligation effective from the moment the time indicated has elapsed, or it has become
evident the event cannot occur
a. True, False
b. True, True
c. False, True
d. False, False

145. I. A father promised to give his son a car if the son will marry B this year. If by the end of the
year, B is already dead or the son has not married B, the obligation to give a car is effective
and demandable.
II. A father promised to give his daughter a car if the daughter will not marry her boyfriend earlier
than December 31, 2010. If by December 31, 2010, the daughter has not yet married her
boyfriend, or if prior thereto, her boyfriend has died, the obligation is extinguished.
a. True, True
b. False, True
c. False, False
d. True, False

146. I. Obligations with a resolutory period take effect at once, but terminate upon arrival of the
day certain.
II. Obligations with a resolutory condition take effect at once, but terminate upon happening
of the condition.
a. True, False
b. True, True
c. False, True
d. False, False

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147. A borrowed money from B and pledged her ring as security. It was agreed that A was to pay the
money loaned with interest at the end of one year. Before the expiration of the one-year period
a. A may compel B to accept her payment
b. A may compel B to accept her payment because the period is deemed for the benefit of A
c. A may be allowed to pay B, if B consents
d. B may refuse A’s payment as the period is deemed for the benefit of B

148. The debtor shall lose every right to make use of the period, except
a. When he does not furnish to the creditor the guaranties or securities which he has promised
b. When after the obligation has been contracted, he becomes insolvent, unless he gives a
guaranty or security for the debt
c. When the debtor violates any undertaking in consideration of which the creditor agreed to
the period
d. When through fortuitous events or by his own acts the guaranties or securities have been
impaired, unless he immediately gives new ones equally satisfactory

149. I. “We promise to pay” when there are two or more-signatures = joint liability
II. “I promise to pay” when there are two or more signatures = solidary liability
a. True, false
b. True, true
c. False, true
d. False, false

150. A obliged himself to pay B P100,000 in 30 days plus a penalty of P10,000 if A fails to pay the
obligation in due time. A failed to pay the obligation in 30 days, B can demand from A
a. The principal of P100,000 plus legal interest, plus damages
b. The principal of P100,000 plus P10,000 penalty plus legal interest
c. The principal Of P100,000 plus P10,000 penalty, plus legal interest, plus damages
d. The principal of P100,000 plus P10,000 penalty

151. The creditor is entitled to recover damages and interest in addition to the penalty stipulated
I. When the debtor refuses to pay the penalty
II. When the debtor is guilty of fraud in the fulfillment of the obligation
a. True, False
b. True, True
c. False, True
d. False, False

152. Action where a person in possession of certain property may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves
a. Interpleader
b. Garnishment
c. Injunction
d. Attachment

153. A judicial process by virtue of which a person is generally ordered to refrain from doing something
a. Interpleader
b. Injunction
c. Garnishment
d. Attachment

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154. Where a property is alienated to the creditor in satisfaction of a debt in money

a. Dation in payment
b. Payment by cession
c. Application of payment
d. Consignation

155. Where a debtor transfers all his properties not subject to execution in favor of his creditors so
that the latter may sell them and thus apply the proceeds to their credits.
a. Application of payment
b. Consignation
c. Cession
d. Dation in payment

156. The act of offering the creditor what is due him together with a demand that the creditor accept
the same
a. Tender of payment
b. Application of payment
c. Datio in solutum
d. Cession

157. The act of depositing the thing due with the court or judicial authorities whenever the creditor
cannot accept or refuses to accept payment.
a. Consignation
b. Tender of payment
c. Application of payment
d. Datio in solutum

158. The meeting in one person of the qualities of creditor and debtor with respect to the same
obligation
a. Novation
b. Confusion
c. Compensation
d. Condonation

159. When two persons in their own right are creditors and debtors of each other
a. Compensation
b. Confusion
c. Novation
d. Condonation

160. This is not necessary in order that compensation may prosper

a. That the two debts be liquidated and demandable
b. That there be a retention or controversy commenced by third persons and communicated in
due time to the debtor
c. That the two debts are both due
d. Both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated

161. Compensation cannot take place, except

a. When one debt arises from the obligations of a bailee in commodatum
b. When one debt arises from the obligations of a depositary
c. When one debt arises from a bank deposit
d. When one debt arises because of a claim for support due to gratuitous title

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162. The substitution or change of an obligation by another, which extinguishes or modifies the first
a. Confusion
b. Novation
c. Compensation
d. Consignation

163. Novation which changes the object or the principal condition of the obligation
a. Personal
b. Mixed
c. Real
d. Partial

164. Novation which changes the parties to the obligation

a. Real
b. Mixed
c. Partial
d. Personal

165. Expromission, delegacion or subrogating a third person in the right of the creditor
a. Real
b. Personal
c. Mixed
d. Partial

166. Novation which changes the object and parties of the obligation
a. Personal
b. Real
c. Mixed
d. Partial

167. Substitution of debtor where the initiative comes from a third person
a. Delegacion
b. Subrogation
c. Expromission
d. Novation

168. Substitution of debtor where the initiative comes from the debtor
a. Delegacion
b. Subrogation
c. Expromission
d. Novation

169. The transfer to a third person of all the rights appertaining to the creditor
a. Expromission
b. Delegacion
c. Subrogation
d. Novation

170. Legal subrogation is presumed in the following. Which is not correct?

a. When a third person, not interested in the obligation, pays with the express or tacit approval
of the debtor
b. When a third person, not interested in the obligation, pays with the approval of the creditor
c. When a creditor pays another creditor who is preferred, even without the debtor’s
knowledge
d. When, even without the knowledge of the debtor, a person interested in the fulfillment of
the obligation pays, without prejudice to the effects of confusion as to the latter’s share.

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171. I. Proof of actual damages suffered by the creditor is not necessary in order that the penalty
previously agreed upon may be demanded.
II. Proof of actual damages suffered by the creditor is not necessary in an obligation with a
penal clause.
a. True, True
b. True, False
c. False, True
d. False, False

172. I. Whoever pays for another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor he cannot recover anything.
II. The debtor of a thing cannot compel the creditor to receive a different one, although the
latter may be of the same value as, or more valuable than that which is due.
a. True, True
b. True, False
c. False, True
d. False, False

173. A owes B two debts, both of which are already due. The first debt is secured by a mortgage, the
second is not. A tells B that the payment he is now making should be applied to the second debt
instead of the first, which is correct?
a. B may refuse such application on the ground that the first debt is more burdensome to the
debtor
b. B may refuse such application because the payment shall be applied proportionately
c. B cannot refuse the application because the preference of the debtor must be followed
d. B can not refuse the application if the first debt is “older” than the second

174. I. A has a P10,000 savings deposit with XYZ Bank. One day A borrowed P2,000 from the bank.
On maturity of the loan, without seeking permission from A, the bank subtracted the P2,000
from A’s account. Is the bank’s action proper?
II. A asked B to keep P10,000 for him. Later, A borrowed P4,000 from B. When A asked for the
return of his money, B gives him only P6,000 alleging partial compensation. Is B correct?
a. Yes, Yes
b. No, Yes
c. Yes, No
d. No, No

175. A owes B P10,000 with C as a guarantor. A paid P4,000 leaving P6,000 unpaid balance. D without
the knowledge of A, paid B the sum of P10,000. As a result of this payment.
a. The obligation is extinguished, but D cannot recover P10,000 but only P6,000 from A and if
A cannot pay, he cannot go after C.
b. The obligation is not extinguished as the payment is without the consent of A.
c. The obligation is extinguished but D cannot recover from A instead he should go after the
guarantor
d. The obligation is extinguished but D can recover only P6,000 from A and if A cannot pay, D

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176. A owes B P10,000 C in behalf of A, pays B P10,000 against the consent of A, although C had
previously told A that he (C) did not intend to be reimbursed. Nevertheless, B accepted the
payment by C in behalf of A.
I. A’s obligation towards B is extinguished.
II. C may still recover from A because A did not consent to what the law deems a donation on
the part of C in favor of A
a. True, false
b. False, true
c. False, false
d. True, true

177. A owes B two debts, both of which are already due. The first debt is secured by a mortgage while
the second is not. A tells B that the payment he is now making should be applied to the second
debt, instead of the first.

I. B may refuse to accept such application on the ground that the first debt is more
burdensome to the debtor.
II. B cannot refuse such application because the preference of the debtor must be followed.
a. True, true
b. False, true
c. True, false
d. False, false

178. I. A owes B P10,000, guaranteed by C. B assigns his credit to X. X assigns the credit to Y. Y
assigns the credit to A. A’s obligation is extinguished and C is released from his obligation
as guarantor.
II. A owes B P10,000 guaranteed by C. B assigns his credit to X. X assigns his credit to Y.
Y assigns his credit to C, the guarantor. A’s obligation is extinguished and C is released from
his obligation as guarantor.
a. True, True
b. False, True
c. True, False
d. False, False

179. A has two creditors, B and C. B is a mortgage creditor for P20,000, and C is an ordinary creditor
for P10,000. C paid A’s debt of P20,000 to B.
I. If C’s payment is with A’s knowledge, C will be subrogated in the rights of B.
II. If C’s payment is without A’s knowledge, C will not be subrogated in the rights of B.
a. True, False
b. True, True
c. False, True
d. False, False

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180. A and B are jointly liable to deliver a particular car valued at P200,000 to C on July 1, 2021 Which
is correct?
a. The liability of A and B is joint and that damages may be assessed only against the debtor
who violated the obligation
b. The prestation is indivisible making the liability of A and B solidary
c. If on July 1, 2021 A is willing to deliver the car but B is not, C may enforce the obligation
against A
d. A is liable for a proportionate part of the obligation and will be liable also for damages if B is
not ready to comply with his obligation, even if A is willing to deliver the car

181. A executes in favor of B a promissory note for P1,000,000 payable after two years, secured by a
mortgage on a building valued at P2,000,000. One year after the execution of the note, the
mortgaged building was totally burned. Can B demand from A the payment of the value of the
note?
a. Yes, if A is willing to pay B
b. Yes, unless A gives another security which is equally satisfactory
c. No, if A refuses to pay B
d. Yes, even if A gives another security which is equally satisfactory

182. A obliged himself to pay B P10,000 as soon as possible. Three months later, B demanded payment
from A but the latter refuses to pay. B can
a. File an action in court compelling A to pay the obligation
d. Ask for damages because three months is considered too long for “as soon as possible”
c. Go to court so that the court will fix the date of payment
b. Consider the obligation void because the phrase as soon as possible is indeterminable

183. A owes B P10,000 payable on June 30, 2021 and as a security A pledged his ring to B. Necessarily,
the ring was delivered to B. On due date, the ring is found in the possession of A when it should
be in the possession of B. As a result, one of the following is not correct.
a. A’s obligation to B is not extinguished
b. A’s obligation to B is extinguished
c. The contract of pledge is extinguished
d. The contract of pledge is extinguished but not the principal obligation

184. I. An example of an obligation with a period is when A promises to pay B P10,000 one month
from the death of C.
II. A person is obliged to deliver a determinate thing including its accessories and accessions
provided they have been mentioned in the agreement.
a. True, False
b. False, False
c. False, True
d. True, True

185. I. When the fulfillment of the suspensive or resolutory condition depends upon the sole will
of the debtor, the conditional obligation shall be void.
II. If the debt produces interest, payment of the interest shall not be deemed to have been
made until the principal have been covered or paid.
a. False, False
b. True, True
c. True, False
d. False, True

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186. I. Solidarity may exist although the debtors and the creditors may not be bound in the same
manner and the same periods and conditions
II. A solidary debtor is always entitled to reimbursement from his co-debtors if he pays for their
obligations.
a. True, True
b. False, True
c. True, False
d. False, False

187. I. In delagacion, the insolvency of the new debtor will not revive the original debtor’s
obligation.
II. In expromission, the insolvency of the new debtor may at times revive the original debtor’s
obligation
a. True, True
b. False, True
c. False, False
d. True, False

188. I. A solidary creditor cannot assign his rights without the consent of the other creditors.
II. Payment of the debtor’s obligation may be made by a third person even without the
knowledge and consent of the debtor.
a. True, False
b. False, True
c. False, False
d. True, True

189. Proof of pecuniary loss is necessary for the award of

a. Moral damages
b. Actual damages
c. Exemplary damages
d. Temperate damages

190. I. Payment made in good faith to any person in possession of the credit shall extinguish the
debtors obligation.
II. When the debtor is guilty of fraud in the fulfillment of an obligation, a creditor can demand
payment of damages and interest in addition to the penalty.
a. True, False
b. True, True
c. False, True
d. False, False

191. A obliges himself to give B a specific car on Jan. 7, 2015. On Jan 2, 2015, C burned the car which
A promised to deliver to B, which is correct?
a. A’s obligation to B is converted to monetary obligation
b. A should file an action against C for the value of the car plus damages
c. B can file an action against A for the value of the car plus damages
d. B can file an action against C for the value of the car plus damages

192. I. Condonation or remission is generally gratuitous

II. Proof of actual damages suffered by the creditor is not necessary in order that the penalty
in an obligation with a penal clause may be demanded.
a. True, True
b. False, True
c. True, False
d. False, False

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193. If the obligation is payable in foreign currency, which is correct?

a. The obligation is void
b. The creditor can compel the debtor to pay in foreign currency as per agreement
c. The stipulation and the obligation are void
d. The obligation is valid, but the stipulation is void

194. Who is liable for the loss of the subject matter by fortuitous event?
a. None of them
b. Creditor
c. Debtor
d. Both of them

195. I’ll give you my car one year after X dies. The obligation is
a. Valid, but the condition will be disregarded
b. Void, then time when death will occur is not certain
c. Void, killing a person is contrary to law
d. Valid, because death is sure to come.

196. Whoever pays for another without the knowledge or against the will of the debtor
a. May demand from the debtor what he has paid
b. May recover only insofar as the payment has been beneficial to the debtor
c. May not recover anything from the debtor
d. May recover from the debtor what he has paid plus damages

197. A owes B P10,000. Later A paid B P7,000 leaving a balance of P3,000. C, a suitor of A and
intending to surprise A, paid B the sum of P10,000 thinking that A still owed B that amount. C did
this without knowledge of A. Which is correct?
a. C cannot recover anything from A
b. C can recover P10,000 from B
c. C can recover P3,000 from A
d. C can recover P10,000 from A

198. The act of putting somebody onto the shoes of the creditor enabling him to exercise all the rights
and actions that could have been exercised by the latter.
a. Agency
b. Partnership
c. Novation
d. Subrogation

199. When is there no loss of the thing due?

a. When the object perishes
b. When it is in possession of another person
c. When it disappears in such a way that its existence is unknown or it cannot be recovered
d. When it goes out of commerce

200. A borrowed P10,000 from B. The loan was secured by a mortgage of A’s land in favor of B.
Without the knowledge of A, C paid the sum of P10,000 for A’s debt. A benefited to the amount
of P10,000. Which is not correct?
a. C can recover the whole amount of P10,000 from A
b. C may either demand recovery of P10,000 from A or to foreclose the mortgage
c. If A cannot pay, C cannot foreclose the mortgage inasmuch as C paid without the knowledge
of A
d. If C did not pay, the original creditor B has the right to foreclose in case of non-payment by
A
The End!!

RFBT - 91001
 CPA Review School of the Philippines
Manila
SALES DELA CRUZ

1. Dacion en pago as distinguished from a contract of sale

a. There is a greater freedom in fixing the price
b. Obligations are created
c. Ownership of the object is transferred to the other party
d. A pre-existing credit is extinguished

2. As a rule, this contract of sale involving a piece of land is void,

a. Between a minor and a deaf mute who does not know how to write
b. Between two insane persons who did not act during lucid interval
c. Between first degree cousins
d. Between husband and wife

3. One of the following is not correct

a. Things subject to a resolutory condition may be the object of the contract of sale
b. A thing is generic when it is particularly designated or physically segregated from all
others of the same class
c. Things having potential existence may be the object of the contract of sale
d. The sole owner of a thing may sell an undivided interest therein

4. A, needs a size 10 of model 101 of Delicious Shoes regularly available to the public for her boyfriend B,
but the same is out of stock so she placed an order for one. On the other hand, B placed an order for
size No. 8, colored violet, (something not ordinarily made by the company) to be given to A. Which is
correct?
a. Both are contracts of sale
b. Both are contracts for a piece of work
c. First is a contract of sale, second is a contract for a piece of work
d. First is a contract for a piece of work, second is a contract of sale

5. A offered to sell for P12,000,000 her house and lot to B who was interested in buying the same. In her
letter to B, A stated that she is giving B a period of one month within which to raise the amount and
that as soon as B is ready, they will sign the deed of sale. Five days before the expiration of the one
month period. A went to B and told her that she is no longer willing to sell the property unless the price
is increased to P15,000,000. Which is correct?
a. B may compel A to accept the P12,000,000 first offered
b. A may compel B to pay P15,000,000
c. A and B should shoulder the P3,000,000 difference
d. B cannot compel A to accept the P12,000,000 first offered

6. A, 17 years old, sold to B, of legal age, her necklace worth P20,000 for P15,000. Later, B sold the
necklace to C for P20,000. Which of the following statements is correct?
a. A has got a voidable title because at the time of sale, she is a minor
b. A can ask for rescission of the sale to C because she suffered a lesion of more than ¼ of the value of
the property
c. If C is in bad faith, C becomes the owner of the necklace upon delivery to him but his title is
voidable
d. A can ask for the annulment of the sale to C because at the time of sale she is a minor

BL 91– 03 1
7. Goods are deemed in transit
a. When the buyer accepts delivery of the goods upon arrival at destination
b. When the buyer intercepts and lawfully takes possession of the goods at any point before
destination
c. From the time they are delivered by the seller to a common carrier or other bailee for
transmission to the buyer, up to the time that the buyer or his agent takes delivery of the
goods from the carrier or bailee
d. When the carrier or bailee, upon arrival of the goods at destination acknowledges to the buyer
or his agent that he is holding the goods as bailee for the letter

8. Goods are deemed no longer in transit

a. If the goods are rejected by the buyer for a valid reason and the carrier or other bailee continues
in possession of them, even if the seller has refused to receive them back
b. From the time they are delivered to a carrier by land, water or air for the purpose of
transmission to the buyer
c. From the time they are delivered to a bailee for the purpose of transmission to the buyer until
the buyer or his agent in that behalf, takes delivery of them from such bailee.
d. If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent
in that behalf

9. A sold to B orally a parcel of land for P200,000. A effected the delivery of the land. The payment of the
price was to be made three months later. At the end of the three month period
a. B may refuse to pay claiming in his defense the Statute of Frauds
b. B may return the parcel of land to A
c. A can collect from B because the contract has already been executed
d. B may refuse to pay on the ground that there is no written contract to support the sale

10. On January 10, 2015, A sold for P2M her house and lot to B. It was agreed that delivery of the house
and lot, and the payment therefore, would be made on March 1, 2015. Unfortunately, C a stranger
negligently set the house on fire on February 25, 2015, and the house was completely destroyed.
Which is correct?
a. B is not required to pay the P2M since the contract had no subject matter
b. A must still deliver the lot but is excused from delivering the house, while B must still pay the
P2M
c. A must still deliver the lot while B should pay only the amount equivalent to the value of the lot
d. A need not deliver the lot while B need not pay the P2M

11. If immovable property should have been sold to different vendees, the ownership shall be transferred
to the person
a. Who have first taken possession in good faith
b. Who presents the oldest title in good faith
c. Who in good faith first recorded it in the Registry of Property
d. Who have paid in good faith the purchase price in full

12. Using the preceding number, if movable property, it shall belong to the person
a. Who have paid in good the purchase price in full
b. Who in good faith first recorded it in the Registry of Property
c. Who presents the oldest title in good faith
d. Who have first taken possession in good faith

13. Action by the vendee against the vendor to nullify the sale due to some vices or defects which render
the object of sale unfit for the use intended or knowledge of which, the vendee would not have bought
the thing
a. Accion quanti minoris b. Accion reinvidicatoria c. Accion pauliana d. Redhibilitory action

BL 91– 03 2
14. Action to seek a corresponding reduction in price by reason of some vices or defects in the thing
purchased
a. Accion quanti minoris b. Accion reinvidicatoria c. Accion pauliana d. Redhibilitory action

15. The redhibitory action based on the faults or defects of animals must be brought within
a. 30 days from delivery to the vendee c. 45 days from delivery to the vendee
b. 40 days from delivery to the vendee d. 6 months from delivery to the vendee

16. This serves as a proof of the perfection of the contract of sale

a. Dacion en pago b. Option money c. Delivery d. Arras

17. A contract of sale is not a(an)

a. Onerous contract b. Accessory contract c. Commutative contract d. Bilateral contract

18. Emptio spei as distinguished from emptio rei speratae

a. Sale of a future thing c. Its quantity and quality are unknown
b. Should come into existence d. Sale of a present thing

19. The sale of an expected thing

a. Dacion en pago b. Payment by c. Emptio spei d. Emptio rei-
cession speratae

20. The sale of the hope itself

a. Dacion en pago b. Payment by c. Emptio spei d. Emptio rei-
cession speratae

21. In contract of sale, if the price is absolutely simulated, the sale is

a. Unenforceable b. Voidable c. Void d. Rescissible

22. This is not an essential element of a contract of sale

a. Subject matter which should be determinate
b. Consent of the contracting parties
c. Warranty against eviction
d. Consideration which is certain in money or its equivalent

23. When a sale of a piece of land or any interest therein is through an agent, the authority of the agent
shall be in writing, otherwise the sale is
a. valid b. voidable c. unenforceable d. void

24. A contract of sale is not

a. A consensual contract c. A reciprocal contract
b. A real contract d. An onerous and commutative contract

25. Not an implied warranty in a contract of sale

a. Right to sell the thing at the time of perfection of the contract
b. Reasonably fit for the purpose they are acquired
c. Merchantable in quality
d. Free from charges or encumbrances not declared or known to the buyer

BL 91– 03 3
26. Which of the following cannot be an object of a contract of sale?
a. Sale of credit
b. Young of animal not yet conceived at the time of perfection
c. Land which the seller expects to buy
d. Future inheritance

27. Delivery by merely pointing to the object of sale if it cannot be delivered to the vendee at the time of
the sale is
a. Traditio longa manu c. Traditio constitutum possessorium
b. Traditio brevi manu d. Traditio symbolica

28. Effected when the object of sale is already in the possession of the vendee at the time of sale so that
delivery need no longer be made is
a. Traditio longa manu c. Traditio constitutum possessorium
b. Traditio brevi manu d. Traditio symbolica

29. When the owner of the thing sells it to vendee, but continues to have possession or occupation of the
thing not as owner but as tenant or lessee
a. Traditio longa manu c. Traditio constitutum possessorium
b. Traditio brevi manu d. Traditio symbolica

30. Quasi-traditio is equivalent to

a. Traditio longa-manu c. Traditio constitutum possessorium
b. Traditio brevi-manu d. Execution of a public instrument

For items 31 – 34

31. If the object of the contract is specially made or manufactured at the specific order of another, it is a
contract for a piece of work. This is
a. English rule
b. Massachusetts rule
c. New York rule
d. Chicago rule

32. If the article already exists and subsequently acquired by another, it is a contract of sale, and if the
article is still to be manufactured at the instance of another, it is a contract for a piece of work. This is
a. English rule
b. Massachusetts rule
c. New York rule
d.Chicago rule

33. If the material used in the manufacturer of the article is more valuable, it is a contract of sale, and if the
labor or skill is more valuable than the material used in the manufacture of the article, it is a contract
for a piece of work. This is
a. English rule
b. Massachusetts rule
c. New York rule
d.Chicago rule

BL 91– 03 4
34. The rule observed in the Philippines is
a. English rule
b. Massachusetts rule
c. New York rule
d. Chicago rule

35. Warranty against hidden defects is

a. An essential element b. A natural element c. An accidental element d. An artificial element

36. The Realty Installment Buyer Protection Act applies to all transactions involving the sale or financing of
real estate on installment but it excludes the following except:
a. Sale or financing of industrial lots c. Sale to tenants under the Land Reform
b. Sale or financing of commercial building Code
d. Sale of residential condominiums

37. In a contract of sale of personal property, the price of which is payable in installments, the vendor may
exercise any of the following remedies, except
a. Exact fulfillment of the obligation, should the vendee fail to pay any installment
b. Cancel the sale, should the vendee’s failure to pay cover two or more installments
c. Foreclose the chattel mortgage on the thing sold, if one has been constituted should the
vendee’s failure to pay cover two or more installments
d. Rescind the sale should the vendee fail to pay any installment.

38. The right of the seller to stop goods in transit, upon discovering that the buyer does not have the funds
to pay for the goods
a. Pre-emptive right b. Appraisal right c. Voting right d. Right of stoppage in transitu

39. A sold to B a parcel of land for P3.8M. The sale is evidenced by a memorandum of agreement of sale
written in the Bicolano dialect. One week later, A sold the same parcel of land to C for P4M. This is
evidenced by a formal deed of sale. Upon buying the property, C, who was aware of the first sale,
immediately took possession of the lot. When informed of the second sale, B subsequently registered
an adverse claim to the property. Later, C registered the deed of sale in her favor. The parcel of land
shall belong to
a. B because he has got an older title c. C because he is the first to take possession
b. C because he is the fist to register d. No one as both sales are void

40. Voluntary renunciation made by the buyer of his right to warranty against eviction where in case the
buyer is evicted, the seller is liable to the value of the thing at the time of eviction.
a.Waiver b. Waiver consciente c. Waiver cursunada d. Waiver inocente
intentionada

41. Using the preceding number, where the seller is no longer liable
a.Waiver b. Waiver consciente c. Waiver cursunada d. Waiver inocente
intentionada

42. A contract of sale whereby the seller acquires the right to redeem or repurchase the object of the sale
from the buyer within a certain period agreed upon
a. Equitable b. Absolute sale c. On sale or return d. Pacto de retro sale
mortgage

BL 91– 03 5
43. A sold to B his car and promised to deliver ten days later. The next day, after the sale to B, A sold the
same car to C and immediately effected delivery. On the day agreed upon, A did not deliver the car to
B. Which is correct?
a. B can cancel the contract between A and C, because the contract between A and B was
perfected ahead of the contract between A and C
b. B should make a demand to make A in default
c. A is liable to B for the value of the car plus damages after B makes a demand
d. A is liable to B for damages and is in default without need of any demand

44. A sold to B her Yamaha organ. It was agreed that A would fix the price a week later. At the agreed
time, A named the price P10,000. B agreed. Was the sale perfected?
a. No, because the price was left to the discretion of one of the contracting parties
b. No, because at the time of sale the price was not fixed
c. Yes, because the price fixed by one of the parties was accepted by the other
d. Yes, because there was agreement that A would fix the price

45. After the death of C, A, C’s son, sold his inheritance though its amount has not yet been determined to
B for a consideration of P1,000,000. Which is correct?
a. The contract is valid if the value of inheritance is at least equal to P1,000,000
b. The contract is valid even though the inheritance to be turned over to B is less than P1M
c. The contract is void as future inheritance cannot be the object of sale
d. The contract is unenforceable

46. A stole a fountain pen from P and sold it to B Merchandise, a “store for pens”, which paid for it in good
faith, not knowing it was stolen. The “store” then sold it to B, a reviewee. Which is correct?
a. C cannot be considered as the owner because the original seller (A) is not the real owner
b. P may recover the fountain pen from C without reimbursement because he is the legal
owner
c. C became the owner because he purchased the pen from a merchant store.
d. C became the owner regardless of whether the seller is a store for pens or not because C
bought it in good faith.

47. When goods are delivered to the buyer on “sale or return” for period of seven days, ownership of the
goods passes to the buyer
a. Upon perfection of the contract
b. Upon acceptance by the buyer of the offer of the seller
c. Upon expiration of seven days
d. Upon delivery of the goods

48. B imported radios from Taiwan and asked for 220 volts radios. The radios arrived clearly labeled 220
volts and B sold them to the public as such. Later the customer complained that the radios have been
mislabeled by the manufacturer and that they were good only for 110 volts. As a consequence
a. B is liable to the vendees for any hidden defects even though he is not aware
b. B is not liable because he is in good faith
c. B is not liable under the principle of “caveat emptor” or let the buyer beware
c. The vendees may hold the manufacturer liable but not B because B specifically asked for 220
volts

49. If redemption is to be made by the seller, one of the following need not be given to the buyer
a. Expenses of the contract c. Necessary expenses on the thing sold
b. Interest on the price of the sale d. Price of the sale

BL 91– 03 6
50. Not an element of the sellers right of stoppage in transit
a. The good must be in transit c. The seller must be in possession of the goods
b. The buyer must be insolvent d. The seller must be unpaid

51. A sold his only car to B for P300,000 to be paid as follows: P150,000 upon delivery of the car to B and
the balance at P10,000 per month until full payment of the purchase price. Later the car gets burned in
the possession of B through fortuitous event and without B’s fault, before full payment of the balance.
Is B obliged to pay the balance?
a. No, because the car was lost through fortuitous event and without B’s fault, hence B’s
obligation is extinguished
b. No, because the loss should be borne by the seller as this an installment sale so until the buyer
pays the full amount of the price of the sale, A remains to be the owner
c. Yes, but A must give another car to B because of the principle “genus nunquam peruit” or
generic thing never perishes
d. Yes, because of the principle “res perit domino” or the thing perishes with the owner

52. A, B and C are co-owners of an undivided parcel of land, A sold his 1/3 interest to B absolutely. Which is
correct?
a. C may exercise his right of redemption on the interest sold by A to B
b. C can not exercise the right of redemption because the sale was made in favor of a co-
owner
c. The sale made by A to B is void because it was not made in favor of a stranger
d. C may redeem only ½ of the interest sold by A to B

53. Using the preceding number, Suppose, instead of selling his interest to B, A sold it to D, who can
exercise the right of redemption?
a. Both B and C b. B but not C c. C but not B d. A, B and C

54. A offered for sale to B 20 cavans of wagwag rice and fixed the price per cavan at P10 over the price
offered at Y’s store in Quinta Market. The price is
a. Not certain because the price at Quinta Market is not stated
b. Certain because it has got reference to another thing which is certain
c. Certain because there is a price ceiling for price of rice
d. Not certain so the court may fix the price

55. A sold his motor vehicle to B who bought it for P200,000. It turned out however, that A has 2 motor
vehicles: Toyota valued at P230,000 and Lancer valued at P220,000. Which is correct?
a. There is no contract of sale between A and B
b. The parties may ask for interpretation or reformation
c. The parties can ask for annulment of the contract
d. B may choose between the Toyota or Lancer

56. A offers to B 100 electric fans for P80,000 payable in 60 days with 12% interest per annum. B accepted
the offer by telegram provided that interest is reduced to 6%. If there is a no further communication
between A and B relating to the terms
a. The contract is perfected because of the acceptance by B
b. There is no contract yet between A and B because B made a counter offer
c. The contract is perfected under the terms of A
d. There is no contract yet unless B gives earnest money

BL 91– 03 7
57. A owns 50 mango trees bearing fruits, ready for harvest. She sold all the fruits of all the trees to B who
paid P100,000. A told B that he can harvest her fruits anytime he likes and pointing at the mango trees.
For legal purposes, A has fulfilled her obligation to deliver the mango fruits to B by
a. Traditio brevi-manu c. Traditio longa-manu
b. Traditio symbolica d. Traditio constitutum possessorium

58. A sold her specific car to B for P200,000 payable in 5 equal installments. A delivered the car to B but a
mortgage was constituted on the car to answer for the unpaid installments B paid the first 2
installments but failed to pay the last 3 installments. A foreclosed the mortgaged property and sold it
at public auction for P100,000. Which is correct?
a. A can recover from B the balance of P20,000 even if there is no stipulation to that effect
b. A can recover from B the balance of P20,000 if there is stipulation to that effect
c. A cannot recover the deficiency except if there is stipulation to that effect
d. A cannot recover the deficiency even if there is stipulation to the contrary

59. Ownership of the thing sold is

a. Retained by the seller in ‘sale or return’
b. Transferred to the buyer upon constructive or actual delivery of the thing sold
c. Acquired by the buyer upon perfection of the contract
d. Transferred to the buyer upon acceptance of the price

60. Y sold his horse to Z for P50,000. No payment has yet been made and the sales document does not
provide the date of delivery. Before delivery and payment the horse gave birth to a baby horse, which
is correct?
a. Z is entitled to the baby horse which was born after the perfection of the contract
b. Y is entitled to the fruit (baby horse) as Z has not paid the price yet
c. Y is entitled to the (baby horse) because it was born before his obligation to deliver arises
d. Z should pay additional amount for the baby horse to be entitled to it

61. A contract of sale is in the stage of conception when

a. There is meeting of the minds c. The parties come to an agreement
b. Negotiations are in progress d. The contract is perfected

62. A seller sold to a buyer a piece of jewelry at a price of P20,000. The contract provides that the buyer
will pay the seller cash-P8,000 and for the balance, the buyer will give the seller a micro oven worth
P12,000. What is the nature of the contract?
a. Sale c. Barter
b. Partly sale and partly barter d. Commodatum

63. A, the guardian of B, sold B’s house and lot worth P480,000 for P240,000. Which is correct?
a. The contract can be rescinded because of inadequacy of price
b. The contract cannot be rescinded because there is no fraud, mistake or undue influence
c. The contract cannot be rescinded because all the elements of a contract are present
d. The contract can be rescinded by A.

BL 91– 03 8
64. A leased to B a 5 DOC generator for two years at a lease rental fee of P1,000 per month and signed an
option in favor of B to buy the generator at the end of the term of the lease at P60,000. All rental fees
paid are to be considered as partial payment of the sale. After 12 months B was able to pay the rental
fees for 9 months and was in arrears for three months. A terminated the lease contract and
repossessed the generator. The consequence of the transaction is
a. A can collect the rental fees for three months which are in arrears.
b. A can collect the rental fees for the unexpired 12 months of the lease contract.
c. When A took possession of the generator, he has no further action against B
d. A in terminating the lease and repossessing the generator is obliged to refund the 9 months
rental fee, paid by B even if there is a stipulation to the contrary

65. X sold his car to Y for P50,000. No date was fixed for the performance of the obligation of the seller and
the buyer. The obligation of X is
a. To deliver the car immediately because the sale is a perfected contract
b. To deliver the car only after Y writes to X demanding the delivery of the car
c. To deliver the car only after Y pays the P50,000
d. To rescind the contract because there is no time fixed for the delivery

For numbers 66 – 81
a. both are true c. only the first is true
b. both are false d. only the second is true

66. The vendor need not be the owner at the time the sale is perfected. It is sufficient that he is the
owner at the time the thing sold is delivered.
The sale of a vain hope or expectancy is voidable. -C

67. There may be a contract of sale of goods, whose acquisition by the seller depends upon a
contingency which may or may not happen.
If the consideration of the contract consists partly in money and partly in another thing, it shall
be considered a barter if the value of the thing given as a part of the consideration exceeds the
amount of the money or its equivalent - C

68. If the price is grossly inadequate, the sale is void.

Whenever option money is given in a contract of sale, it shall be considered as part of the price
and a proof of the perfection of the contract.-B

69. Earnest money and option money both apply to perfected sale.
In a contract of sale of personal property the price of which is payable in installment, the vendor
may cancel the sale should the vendee fail to pay.-B

70. Should the vendee’s failure to pay, cover two or more installments, the vendor may foreclose the
chattel mortgage on the thing sold but he shall have no further action against the purchaser to
recover any unpaid balance of the price, except if there is an agreement to the contrary.
Sale is a consensual contract, therefore delivery or payment is not essential for perfection.-D

71. The ownership of the thing sold shall be transferred to the vendee upon perfection of the
contract.
An unaccepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor. -B

72. The husband and the wife cannot sell property to each other, as a rule.
The sale of a piece of land or interest therein when made thru an agent is void unless the agent’s
authority is in writing even if the sale itself is in a public instrument and has been registered.-A

BL 91– 03 9
73. The expenses for the execution and registration of the sale shall be borne by the vendee, unless
there is a stipulation to the contrary.
If the same thing should have been sold to different vendees the ownership shall be transferred
to the person who may have taken possession thereof in good faith.-B

74. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void.
The vendor is responsible to the vendee for any hidden faults or defects in the thing sold only if
he was aware thereof.-B

75. If the animal sold should die within three (3) days after its purchase, the vendor shall be liable to
the vendee.
The fixing of the price can never be left to the discretion of one of the contracting parties.
However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.-D

76. Option money is considered as part of the purchase price while earnest money is not.
The Maceda Law refers to the sale of personal property by installments while the Recto Law
refers to the sale of real property by installments.-B

77. If two or more animals are sold together, whether for lump sum or for a separate price for each
of them, the redhibitory defect of one shall give rise to the redhibition of the others.
There is no warranty against hidden defects of animals sold at fairs or at public auctions or of
livestock sold as condemned.-D

78. The ownership in the thing shall not pass to the purchaser until he has fully paid the price.
If at the time the contract of sale is perfected, the thing which is the object of the contract has
been partially lost, the contract shall be without effect.-B

79. Where the seller of goods has a voidable title thereto, but his title has not been avoided at the
time of the sale, a buyer in good faith acquires a good title to the goods.
If the vendee has renounced the right to warranty in case of eviction, and eviction should take
place, the vendor shall only pay the value which the thing sold had at the time of sale. -C

80. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by
installment.
In case of doubt, a contract purporting to be an equitable mortgage shall be construed as a sale
with a right to repurchase.-C

81. The creditors of the vendor cannot make use of the right of redemption against the vendee, until
they have exhausted the property of the vendor.
Sale is a real contract because delivery is necessary to transfer ownership to the buyer-C

The End!!

BL 91– 03 10
 CPA Review School of the Philippines
CREDIT TRANSACTIONS Manila DELA CRUZ

PLEDGE AND MORTGAGE

1. S, a minor, sold her bracelet to B for P8,000. Later, B, needing money to pay her daughter’s tuition fee,
borrowed P15,000 from C and as a security, pledged the bracelet to the latter. B failed to pay C resulting
into the auction sale of the bracelet in favor of D for P10,000 only. Which of the following statements is
correct?
a. The title of B over the bracelet is not valid, hence the pledge, as well as the sale of said bracelet is
likewise defective. The pledgor must be the owner of the thing pledged.
b. The deficiency of P5,000n may still be recovered by C from B if there is a stipulation to this effect
c. C can no longer recover the deficiency of P5,000 from B. The pledge, together with the sale is valid.
The voidable title of B is valid because it is not yet annulled.
d. If D was a purchaser in bad faith as he knew of the defective title of B over the bracelet from S,
ownership will not pass to him (D).

2. In the preceding number, assuming what was executed by B in favor of C was a valid chattel mortgage which
was eventually foreclosed and the bracelet was sold to D at the public auction for the same amount, which
statement is correct?
a. The title of B over the bracelet is not valid, hence the chattel mortgage, as well as the sale of said
bracelet is likewise defective. The mortgagor must be the owner of the thing mortgaged.
b. The deficiency of P5,000 may still be recovered by C from B
c. C can no longer recover the deficiency of P5,000 from B as the mortgage, together with the foreclosure
sale, was valid. The title of B was still valid
d. If D was a purchaser in bad faith as he knew of the defective title of B over the bracelet, ownership will
not pass to him (D).

3. S sold to B a specific car for P200,000 payable in four equal installments. S delivered the car to B but
required B to mortgage it back to S to answer for the unpaid installments. B paid the 1st and 2nd installments
but he failed to pay the balance. S foreclosed the mortgaged property and sold it at public auction for
P80,000. As a result,
a. S can recover from B the balance of P20,000
b. S can recover from B the balance of P20,000if there is stipulation to that effect
c. S cannot recover the deficiency any more even if there is stipulation to that effect
d. S cannot recover the deficiency except if there is stipulation.

4. Elements of contracts of pledge and mortgage, except

a. Pledgor or mortgagor must be the absolute owner
b. Pledgor or mortgagor must have the free disposal of the thing pledged
c. The thing pledged or mortgaged may be appropriated if the debtor cannot pay
d. Pledge and mortgage are accessory contracts

5. A borrowed P100,000 from B with A’s ring given to B by way of pledge. It was stipulated that in case of
non-payment on due date, the ring would belong to B. This forfeiture is
a. caveat emptor c. pactum commisorium
b. dacion en pago d. pacto de retro

6. A borrowed P100,000 from B, and as a security. A pledged his ring to B. After the obligation falls due, A
goes to B relinquishing ownership of the ring in favor of B. This is
a. caveat emptor c. pactum comisorio
b. dacion en pago d. pacto de retro

BL 91- 05 1
7. A borrowed P30,000 from B, and as security, he pledged his ring, pair of earrings and necklace. On due
date, A paid P20,000. As a result,
a. A can demand the return of one (1) of the things pledged
b. A can demand the return of any two (2) of the things pledged
c. A can demand the return of the ring.
d. A cannot demand the return of any of the things pledged

8. Which of the following is not correct as regards pledge and mortgage?

a. The creditors can foreclose the things pledged or mortgaged in case of non-payment of the obligation
b. The things pledged or mortgaged are delivered to the creditors to secure the fulfillment of the obligation
c. In case of default, the creditors cannot appropriate the things pledged or mortgaged even if stipulated
d. A pledge or mortgage cannot exist without a valid obligation

9. In real estate mortgage, the mortgagor can sell the property mortgaged
a. Only if with the oral consent of the mortgagee
b. Only if with the written consent of the mortgagee
c. If not prohibited to sell
d. Even without the consent of the mortgagee

10. Which of the following statements is true?

a. Any stipulation in a contract of pledge authorizing the pledgee to sell the thing pledged if the
pledgor cannot pay is void
b. In mortgage, the mortgagee is entitled to the entire proceeds of the sale of the thing mortgaged
c. In mortgage and in pacto de retro sale, the title to the property which is the subject matter of the
contract is transferred to the other party
d. Real estate mortgage is an accessory contract

11. A mortgaged his residential land to B as a guarantee for the payment of P400,000 obligations to B. They
agreed that A should not sell the land while the obligation exists. Before the maturity of the mortgage, C
offered to buy the land from A. Which is correct?
a. A cannot sell the land to C because of the agreement not to sell
b. A can sell the land to C only if B consents in writing’
c. A can sell the land to C despite the agreement not to sell
d. A cannot sell the land to C unless A pays the obligation

PLEDGE

For numbers 12 to 37 write

a. both are true b. both are false c. only the first is true d. only the second is true

12. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them,
except if there is a stipulation to the contrary.
The indivisibility of a pledge or mortgage is affected by the fact that the debtors are solidarily liable.
a. both are true b. both are false c. only the first is true d. only the second is true

13. A pledge or mortgage is indivisible, except if the debt may be divided among the successors in interest of
the debtor or of the creditor.
In case of pledge of animals, their offspring shall pertain to the pledgee of the animals.
a. both are true b. both are false c. only the first is true d. only the second is true

14. The creditor can use the thing pledged even without the authority of the pledgor.
If through the negligence or willful act of the pledgee, the thing pledged is in danger of being lost or
impaired, the pledgee may cause the same to be sold at a public auction.
a. both are true b. both are false c. only the first is true d. only the second is true

BL 91- 05 2
15. If the thing pledged is returned by the pledgee to the pledgor or owner, the pledge is extinguished, except
if there is a stipulation to the contrary.
If subsequent to the perfection of the pledge, the thing is in the possession of the pledgor or owner there
is a conclusive presumption that the same has been returned by the pledgee.
a. both are true b. both are false c. only the first is true d. only the second is true

16. A statement in writing by the pledgee that he renounces or abandons the pledge is sufficient to extinguish
the pledge only if accepted by the pledgor or owner and the thing pledged is returned.
At the public auction, the pledgee may also bid and his offer shall be valid even if he is the only bidder.
a. both are true b. both are false c. only the first is true d. only the second is true

17. The sale of the thing pledged shall extinguish the principal obligation provided the proceeds of the sale
are equal to the amount of the principal obligation.
If the price of the sale is more than the amount of the obligation, the debtor shall be entitled to the
excess, unless it is otherwise agreed.
a. both are true b. both are false c. only the first is true d. only the second is true

18. If the price of the sale is less than the amount of the obligation the creditor shall not be entitled to
recover the deficiency except if there is a stipulation to the contrary.
If two or more things are pledged, the pledgor may choose which he will cause to be sold, unless there is
a stipulation to the contrary.
a. both are true b. both are false c. only the first is true d. only the second is true

19. A pledge shall not take effect against third person if a description of the thing pledged and the date of the
pledge do not appear in a public instrument
If after the auction sale, the thing pledged is not sold, the pledgee can appropriate the thing pledged.
a. both are true b. both are false c. only the first is true d. only the second is true

20. A pledged his ring to B for P20,000. A failed to pay his obligation on time. B sold the ring at a public
auction for P16,000. B cannot recover P4,000 from A even if there is stipulation
Using the same facts, if the proceeds of sale is P24,000. A can recover the excess of P4,000 if
stipulated.
a. both are true b. both are false c. only the first is true d. only the second is true

21. In sale at public auction, the pledgor or owner may be a bidder and shall have a better right if he should
offer the same terms as the highest bidder.
Pledge is a real contract.
a. both are true b. both are false c. only the first is true d. only the second is true

MORTGAGE

22. A stipulation prohibiting the owner from alienating the immovable mortgaged shall be void.
The equity of redemption refers to the right of the mortgagor to redeem the mortgaged property within a
certain period of time after it was sold to a third person.
a. both are true b. both are false c. only the first is true d. only the second is true

23. The right of redemption refers to the right of the mortgagor to redeem the mortgaged property after his
default in payment but before the sale.
The registration in the Registry of Property is necessary for the validity of a contract of real estate
mortgage.
a. both are true b. both are false c. only the first is true d. only the second is true

BL 91- 05 3
24. Except in case of sale of personal property in installments, if the proceeds of the sale is less than the
principal obligation, the creditor-mortgagee can recover the deficiency.
A borrowed P100,000 from B payable in 10 equal monthly installments. To secure payment of the loan,
A executed a chattel mortgage on his Mercedes Benz car. If A violates the condition of the mortgage, and
the car was foreclosed and sold at a public auction but the proceeds is less than the collectible amount, B
cannot recover the deficiency.
a. both are true b. both are false c. only the first is true d. only the second is true

25. In real estate mortgage the mortgagor can sell the property mortgage even without the consent of the
mortgagee.
In chattel mortgage the mortgagor cannot sell the thing mortgage even with the written consent of the
mortgagee appearing at the back of the mortgage.
a. both are true b. both are false c. only the first is true d. only the second is true

26. Chattel mortgage like pledge is a real contract.

In chattel mortgage like pledge the possession of the thing mortgaged is vested in the creditor.
a. both are true b. both are false c. only the first is true d. only the second is true

LOAN

27. In mutuum or loan, one of the parties delivers to another something not consumable so that the latter
may use the same for a certain time and return it.
Mutuum is essentially gratuitous.
a. both are true b. both are false c. only the first is true d. only the second is true

28. In commodatum one of the parties delivers money or consumable thing upon the condition that the
same amount of the same kind and quality shall be paid.
In commodatum and mutuum ownership of the thing loan is transferred to the borrower.
a. both are true b. both are false c. only the first is true d. only the second is true

29. Commodatum and mutuum involve real and personal property.

The bailee in commodatum acquires the use of the thing loaned and its fruits.
a. both are true b. both are false c. only the first is true d. only the second is true

30. The bailee in commodatum can lend or lease the object of the contract to a third person.
When there are two or more bailees to whom a thing is loaned in the same contract, they are liable
jointly.
a. both are true b. both are false c. only the first is true d. only the second is true

31. A contract whereby one person transfers the ownership of non-fungible things to another with the
obligation on the part of the latter to give things of the same kind, quantity and quality shall be considered
a loan.
Precarium is a kind of mutuum where the bailor may demand the thing loaned at will.
a. both are true b. both are false c. only the first is true d. only the second is true

DEPOSIT
32. An agreement to constitute a deposit is binding and is perfected from the moment there is meeting of
minds.
Movable and immovable things may be the object of judicial deposit.
a. both are true b. both are false c. only the first is true d. only the second is true

33. A contract of deposit must be in writing.

The depositary can make use of the things deposited even without the express permission of the
depositor.
a. both are true b. both are false c. only the first is true d. only the second is true
BL 91- 05 4
34. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the
provisions concerning simple loan.
The depositary can demand that the depositor prove his ownership of the thing deposited.
a. both are true b. both are false c. only the first is true d. only the second is true

35. Unless there is a stipulation to the contrary, the depositary cannot deposit the thing with a third person.
When the depositary has permission to use the thing deposited, the contract loses the concept of a
deposit and becomes a loan or commodatum even where safekeeping is still the principal purpose of the
contract.
a. both are true b. both are false c. only the first is true d. only the second is true

36. The thing deposited shall be returned with all its products, accessories and accessions.
A contract of deposit is perfected from the moment there is meeting of minds.
a. both are true b. both are false c. only the first is true d. only the second is true

37. D deposits his money by way of a savings account with C Bank. The contract between D and C is
a. Deposit b. Agency c. Commodatum d. Mutuum

The End!!

BL 91- 05 5
 CPA Review School of the Philippines
Manila
BUSINESS LAW DO DELA CRUZ
LAW ON PARTNERSHIPS

1. Partnership as distinguished from corporation

a. Acquires juridical personality upon approval by the SEC and issuance of certificate
b. Has limited liability
c. Created by operation of law
d. No power of succession

2. Essential elements or feature of a partnership, except

a. Must have a lawful object or purpose
b. There must be a contribution of money, property or industry to a common fund
c. With intention to divide and contribute whatever profits they make to other people
d. Must be established for the common benefit or interest of the partners

3. One of the following is not a characteristic of contract of partnership

a. Real, in that the partners must deliver their contributions in order for the partnership contract to be
perfected
b. Principal, because it can stand by itself
c. Preparatory, because it is a means by which other contracts will be entered into
d. Onerous, because the parties contribute money, property or industry to the common fund

4. One of the following is not a requisite of a contract of partnership. Which is it?

a. There must be a valid contract
b. There must be a mutual contribution of money, property or industry to a common fund
c. It is established for the common benefit of the partners which is to obtain profits and divide the same
among themselves
d. The articles are kept secret among the members

5. The minimum capital in money or property except when immovable property or real rights thereto are
contributed, that will require the contract of partnership to be in a public instrument and be registered with
SEC
a. P5,000 b. P10,000 c. P3,000 d. P30,000

6. A and B put up a partnership to engage in distribution of books and school supplies. A contributed P1M
while B his services. A wants to put up a restaurant on the opposite side of the street. On the other hand, B
wants to have a bakery beside A’s restaurant. Which of the following is correct?
a. A may put up his restaurant without need of securing B’s consent
b. B may put up his bakery without need of securing A’s consent
c. Both A and B can put up their restaurant and bakery businesses without the need of securing each other’s
consent
d. Neither A nor B can put up another business.

7. A and B entered into a universal partnership of all present property. At the time of their agreement, A had a
four-door apartment which he inherited from his father 3 years earlier. B, on the other hand, had a fishpond
which he acquired by dacion en pago from C. During the first year of the partnership, rentals collected on the
four-door apartment amounted to P480,000; while fish harvested from the fishpond were sold for P300,000.
During the same period, B received by way of donation a vacant lot from an uncle. The partners had a
stipulation that future property shall belong to the partnership. Which of the following does not belong to the
common fund of the partnership?
a. Fishpond b. Rental of P480,000 c. Apartment d. Vacant land

BL 91 – 06 1
8. A and B entered into a universal partnership of profits. At the time of execution of the articles of partnership,
A had a two-door apartment which he inherited from his father 3 years earlier. B on the other hand, had a
fleet of taxis which he purchased two years before. In the first year of the partnership, A earned P500,000 as a
radio talent while B won P1,000,000 in the lotto. During the same period, rentals of P120,000 were collected
from the apartment, while fare revenues of P200,000 were realized from the operation of the fleet of taxis.
Which of the following belongs to the partnership?
a. Two-door apartment c. Salary of P500,000
b. Lotto winnings of P1,000,000 d. Fleet of taxis

9. A partnership formed for the exercise of a profession which is duly registered is an example of
a. Universal partnership of profits
b. Universal partnership of all present property
c. Particular partnership
d. Partnership by estoppel

10. A, B and C are partners in CAB Enterprises. Not having established yet their credit standing, the three
partners requested D, a well known businessman, to help them negotiate a loan from E, a money lender.
With the consent of A, B and C, D represented himself as a partner of CAB Enterprises. Thereafter, E
granted a loan of P150,000 to CAB Enterprises. What kind of partner is D?
a. Managing partner c. Ostensible partner
b. Liquidating partner d. Partner by estoppel

11. Using the preceding number, assuming that CAB Enterprises was unable to pay the loan on due date at which
time the assets of the partnership amounted only to P120,000. From whom may E collect the payment?
a. D only for the whole amount of P120,000
b. A, B and C who are liable jointly for P50,000 each
c. CAB Enterprises for its assets of P120,000; thereafter, A, B and C from their separate property at P10,000
each
d. CAB Enterprises for its assets of P120,000 thereafter, A, B, C and D from their separate assets at P7,500
each

12. A partner can engage in business for himself without the consent of his co-partners if he is
a. A capitalist partner whether or not the business he will engage in is of the same kind as or different from
the partnership business
b. An industrial partner whether or not the business he will engage in is of the same kind as or different from
the partnership business
c. A capitalist partner and the business he will engage in is of a kind different from the partnership business
d. An industrial partner and the business he will engage in is of a kind different from the partnership business

13. The partnership will bear the risk of loss of three of the following things, except
a. Things contributed to be sold
b. Fungible things or those that cannot be kept without deteriorating
c. Non-fungible things contributed so that only their use and fruits will be for the common benefit
d. Things brought and appraised in the inventory

14. A partner’s interest in the partnership is his share of the profits and surplus which he may assign to a third
person. Which of the following statements concerning such right is correct?
a. The conveyance of a partner’s interest will cause the dissolution of the partnership
b. The assignee becomes a partner
c. The assignee has a right to interfere in the management of the partnership business
d. The assignee has the right to receive the profits which the assigning partner would otherwise be
entitled thereto

BL 91 – 06 2
15. A partnership which comprises all the profits that the partners may acquire by their work or industry during
the existence of the partnership is called:
a. Universal partnership of all present property
b. Universal partnership of profits
c. Particular partnership
d. Partnership at will

16. A partnership whereby the partners contribute to a common fund all the property actually belonging to them
at the time of the constitution of the partnership, with the intention of dividing the same among themselves, as
well as the profits which they may acquire therewith is:
a. Universal partnership of all present property c. Particular partnership
b. Universal partnership of profits d. Partnership at will

17. A partnership without a definite period of existence and which can be dissolved at any time by any of the
partners is called:
a. Universal partnership of all present property c. Particular partnership
b. Universal partnership of profits d. Partnership at will

18. A, B and C, capitalist partners, each contributed P10,000 and D, the industrial partner contributed his
services. Suppose X, is the creditor of the firm amounting to P90,000. After getting the P30,000 capital assets
of the partnership, which is correct?
a. X can recover P20,000 each from A, B and C only
b. X can recover P60,000 from either A or B or C
c. X can recover P15,000 each from A, B, C and D
d. X can recover P15,000 each from A, B and C but D is exempt because he is an industrial partner.

19. A, B and C are partners. D is admitted as a new partner. Will D be liable for partnership obligations
contracted prior to his admission to the partnership?
a. No, only for those contracted after his admission
b. Yes, and his liability would extend to his own individual property
c. Yes, but his liability will extend only to his share in the partnership property and not to his own individual
property
d. Yes, as if he had been an original partner

20. A partner who has all the rights, powers and subject to all the restrictions of a general partner but whose
liability is, among themselves, limited to his capital contribution is:
a. General partner c. General-limited partner
b. Limited partner d. Dormant partner

21. Bears the risk of things contributed to the partnership:

a. General partner
b. Limited partner
c. Partner contributing usufructuary rights over fungible things
d. Partner contributing usufructuary rights over non-fungible things

22. A, B and C, are capitalist partners, each contributed P10,000. After exhausting the assets of the firm, the
firm’s indebtedness amounts to P90,000. It was stipulated that A would be exempted from liability. Which is
correct?
a. A may recover his original capital of P10,000
b. The creditors may collect P30,000 each from A, B, and C
c. A can recover P20,000 each from B and C should he be required to pay the creditors
d. The creditors can recover P45,000 each from B and C.

BL 91 – 06 3
23. Instances when a partnership is unlawful, except
a. A partnership formed to furnish apartment houses which would be used for prostitution
b. A partnership formed for the purpose of acquiring parcels of land
c. A partnership formed for gambling purposes
d. A partnership formed to create illegal monopolies or combinations in restraint of trade

24. A and B orally agreed to form a partnership two years from today, each one to contribute P1,000. If at the
arrival of the period, one refuses to go ahead with the agreement, can the other enforce the agreement?
a. Yes, because the partnership contract is not governed by the Statute of Frauds
b. Yes, because the prior agreement was voluntarily made
c. No, because the agreement was merely oral and executory
d. No, since the agreement is to be enforced after one year from the making thereof, the same should be in
a public instrument to be enforceable

25. Where at least one partner is a general partner and the rest are limited partners
a. General partnership c. Partnership de facto
b. Partnership by estoppel d. Limited partnership

26. Where all the partners are general partners

a. Partnership by estoppel c. Partnership de facto
b. Limited partnership d. General partnership

27. A, B, and C are partners each contributing P10,000. The firm’s indebtedness amounts to P90,000. It was
stipulated that A would be exempted from liability. Assuming that the capital of P30,000 is still in the firm,
which of the following is not correct?
a. The creditors may get the P30,000 and still collect each 20,000 from A, B and C.
b. A can recover P10,000 each from B and C should he (A) be required to pay the
creditors.
c. A cannot recover his original capital of P10,000.
d. The creditors can recover P45,000 each from B and C.

28. May be required to make additional contribution in case of imminent loss:

a. Capitalist partner b. Limited partner c. Industrial partner d. a, b, and c

29. May contribute money, property or industry to the common fund:

a. Limited partner c. Both limited and general partners
b. General partner d. Dormant partner

30. Partner who contributes money and / or property, except

a. General b. Capitalist c. Industrial d. Managing

31. Partner who contributes industry or labor

a. General b. Capitalist c. Industrial d. Managing

32. Partner who contributes both capital and industry

a. General b. Limited c. Managing d. Capitalist-industrial

33. Partner who is liable beyond the extent of his contribution

a. General b. Limited c. Industrial d. Silent

34. Partner who is liable only to the extent of his contribution

a. Limited b. General c. Industrial d. Managing

35. Partner who manages actively the firm’s affairs

a. Silent b. Liquidating c. Managing d. Dormant

BL 91 – 06 4
36. Partner who does not participate in the management though he shares in the profits or losses
a. Liquidating b. Nominal c. Ostensible d. Silent

37. Partner who winds up the affairs of the firm after it has been dissolved
a. Liquidating b. Managing c. Industrial d. Capitalist

38. Partner whose connection with the firm is known to the public
a. Ostensible b. Secret c. Silent d. Nominal

39. Partner whose connection with the firm is concealed or kept a secret
a. Ostensible b. Secret c. Silent d. Nominal

40. Partner who is both a secret and silent partner

a. Nominal b. Ostensible c. Limited d. Dormant

41. Partner who is not really a partner but who may become liable as such insofar as third persons are concerned
a. Nominal b. Ostensible c. Silent d. Secret
.
42. Which of the following losses will not cause the dissolution of a partnership?
a. Loss before delivery of a specific thing which a partner had promised to contribute to the partnership
b. Loss of a specific thing after its delivery to and acquisition of its ownership by the partnership from the
partner who contributed the same
c. Loss after delivery of a specific thing where the partner contributed only its use and enjoyment, where
such partner reserved the ownership thereof
d. Loss before delivery of a specific thing where the partner promised to contribute only its use and
enjoyment, reserving the ownership thereof

43. A newly admitted general partner is liable to creditors existing at the time of his admission and his liability is
a. Up to his capital contribution only if there is stipulation.
b. Up to his separate property even if there is no stipulation.
c. Up to his capital contribution even if there is stipulation.
d. Up to his separate property only if there is stipulation.

44. Using the preceding number, but the obligations were contracted after his admission, which of the following is
correct?
a. He is liable to the creditors before and after his admission up to his separate property
b. He is liable to the creditors before and after his admission only up his capital contribution
c. He is liable to the creditors before his admission up to his capital contribution and to the
creditors after his admission up to his separate property.
d. He is not liable to creditors existing before his admission

45. A and B are partners engaged in the real estate business. A learned that C was interested in buying a certain
parcel of land owned by the partnership, even for a higher price. Without informing B of C’s offer A was
able to convince B to sell to him (A) his (B’s) share in the partnership. Then A sold the land at a big profit.
Which of the following is correct?
a. A is liable to B for the latter’s share in the profit
b. C is liable to B for the latter’s share in the profit
c. A new partnership is formed between A and C
d. The sale of the land to C is void since it was without the knowledge of B.

BL 91 – 06 5
46. A and B are partners in a real estate business. A and B were approached by X who offered to buy a parcel of
land owned by the partnership. Thereafter B sold to A, B’s share in the partnership. Then A sold the land to
X at a big profit. Which is correct?
a. The sale of the land to X is void c. B may rescind the contract between A and X
b. A is liable to B for B’s share in the profits d. A is not liable to B for any share in the profits

47. The following persons are disqualified to form a universal partnership, except
a. Husband and Wife
b. Brother and sister
c. Those guilty of adultery and concubinage
d. Those guilty of the same criminal offense, if the partnership is entered into in consideration of the
same.

48. A, B and C are capitalist partners while D is an industrial partner. A, the managing partner engaged
personally in a business that is the same as the business of the partnership without the consent of the other
partners. As a result,
a. If there are losses, the partnership will bear the losses
b. If there are profits, the profits will be shared by A and the partnership
c. If there are profits, A will give the profits to the partnership
d. A will be excluded from the partnership and will pay damages

49. A, a managing partner is B’s creditor to the amount of P1,000 already demandable. B also owes the
partnership P1,000, also demandable. A collects P1,000 from B. One is not correct.
a. If A gives a receipt for the partnership it is the partnership’s credit that has been collected
b. If A gives a receipt for his own credit, it is A’s credit that has been collected
c. If A gives a receipt for his own credit, P500 will be given to him, P500 to the partnership
d. B may decide that he is paying only A’s credit if the personal credit of A is more onerous to B.

50. The remedy of capitalist partners against an industrial partner who engaged in a business for himself without
the expressed permission from the partnership is:
a. To compel him to sell his interest to the said capitalist partners.
b. To exclude him from sharing in the profits of the partnership.
c. To remove him as manager if he is appointed as manager of the partnership.
d. To expel him from the partnership and claim for damages.

51. A and B are equal partners in AB Partnership by contributing P50,000 each on June 1, 2010. On July 1,
2010, the partnership contracted an obligation to pay Z the amount of P180,000 on August 31, 2010. On
August 10, 2010, C was admitted as a new partner. C contributed P50,000. How will the obligation be paid?
a. A P60,000; B P60,000; C P60,000 c. A P180,000 or B P180,000 and C P50,000
b. A P90,000; B P90,000; C None d. A P65,000; B P65,000; C P50,000

52. A, B, and C are equal partners in ABC Partnership. On April 29, 2011, C died. Not knowing that C is dead,
on May 2, 2011, A contracted a liability to D who also did not know about the death of C. The liability is
P90,000. After D exhausted the net assets of the partnership in the amount of P60,000, he can collect.
a. P30,000 from A or P30,000 from B.
b. P15,000 from A and P15,000 from B.
c. P10,000 from the estate of C, P10,000 from A and P10,000 from B.
d. P30,000 from the estate of C or P30,000 from B or P30,000 from C.

53. A, B and C are partners. Their contributions are as follows: A, P60,000; B, P40,000 and C, services. The
partners agreed to divide profits and losses in the following proportions: A, 35%; B, 25% and C 40%. If there
is a loss of P10,000, how should the said loss be shared by the partners?
a. A, P6,000; B, P4,000; C, nothing c. A, P3,500; B, P3,500; C, P3,000
b. A, P3,000; B, P2,000; C , P5,000 d. A, P3,500; B, P2,500; C, 4,000

BL 91 – 06 6
54. Using the preceding no., but the partners did not agree on how to divide profits and losses. If there is a loss
of P10,000, how should the said loss be shared by the partners?
a. A, P6,000; B, P4,000; C, nothing c. A, P3,500; B, P3,500; C, P3,000
b. A, P3,000; B, P2,000; C, P5,000 d. A, P3,500, B, P2,500; C, P4,000

55. When the manner of management has not been agreed upon, who shall manage the affairs of the
partnership?
a. Capitalist partners c. Capitalist-industrialist partners
b. Industrial partners d. All of the partners

56. A, B, and C are partners in a partnership business. A contributed P10,000, B contributed P5,000 and C his
services only. After payment of partnership debts, what remains of the partnership assets is P6,000 only. In
the absence of stipulation to the contrary, the share of C will be equal to:
a. That of A b. P2,000 c. That of B d. Nothing

57. A, B and C are partners in ABC Co. D owes the partnership P4,500. A, a partner, received from D a share
of P1,500 ahead of partners B and C, giving D a receipt for his share only. When B and C were collecting
from D, the latter was already insolvent. Which of the following is correct?
a. Partner A can be required to share the P1,500 with B and C.
b. A cannot be required to share the P1,500 with B and C
c. B and C should automatically exhaust first all remedies to collect from D.
d. B and C can automatically deduct from the capital contribution of A in the partnership, their respective
share in the P1,500.

58. A partnership suffered losses in the first year of its operation. A, a capitalist partner, cannot contribute an
additional share to the capital because of insolvency. Can A be obliged to sell his interest to the other
partners on the ground of such refusal?
a. Yes, A’s refusal to contribute additional share reflects his lack of interest in the continuance of the
partnership.
b. No, because there is actually no imminent loss of the business.
c. Yes, provided that A is paid the value of his interest.
d. No, because his refusal is justifiable.

59. Which of the following is considered prima facie evidence of the existence of a partnership?
a. Where payment of interest on a loan depends on the profit of the business.
b. The receipt by a person of a share in the profits.
c. The sharing of gross returns of a business.
d. Where the parties are established as co-owners of a property.

60. A and B are partners, with A as the managing partner. D is indebted to A in the amount of P10,000 and to
the partnership in the amount of P5,000. Both debts are due and demandable. D paid A P3,000. A issued
to D a receipt in his own name. How should the amount of P3,000 be applied?
a. The P3,000 should be applied to the indebtedness of D to A.
b. The P3,000 should be applied to the indebtedness of D to the partnership.
c. P2,000 should be applied to the indebtedness of D to the partnership and P1,000 to the
indebtedness of D to A.
d. P1,000 should be applied to the indebtedness of D to the partnership and P2,000 to the indebtedness
of D to A.

61. Using the preceding no. but A issued to D a receipt in the name of the partnership. How should the
payment of P3,000 be applied?
a. The P3,000 should be applied to the indebtedness of D to A.
b. The P3,000 should be applied to the indebtedness of D to the partnership.
c. P2,000 should be applied to the indebtedness of D to the partnership and P1,000 to the indebtedness
of D to A.
d. P1,000 should be applied to the indebtedness of D to the partnership and P2,000 to the indebtedness
of D to A

BL 91 – 06 7
62. A, B, C and D are partners. Their contributions are as follows: A, P50,000; B, P30,000; C, P20,000; D,
services. The partnership incurred obligations to third persons which the firm was unable to pay. After
exhausting the assets of the partnership, there still is unpaid balance of P10,000 to E. Who are liable to E for
the payment of the unpaid balance of P10,000 and how much should each pay to E?
a. A, P5,000; B, P3,000; C, P2,000; D, nothing c. A, P4,000; B, 3,000; C, P2,000; D, P1,000
b. A, P2,500; B, P2,500; C, P2,500; D, P2,500 d. A, P4,000; B, P4,000; C, P2,000; D, nothing

63. One or more but less than all the partners have no authority to perform the following acts, except:
a. Do any act which would make it impossible to carry on the ordinary business of the partnership.
b. Submit a partnership claim or liability to arbitration.
c. Renounce a claim of the partnership.
d. Convey partnership property in the ordinary course of partnership business.

64. A, B, and C are equal partners in ABC Partnership. The partnership is indebted to D for P150,000. Partner
A is indebted to E for P20,000. D attached and took all the assets of the partnership amounting to P90,000.
B and C are solvent while A is insolvent and all that he owns is a land valued at P15,000. Which is correct?
a. E has priority to the land of A as a separate `creditor
b. D has priority to the land of A to cover A’s share of the P60,000 remaining liability of the
partnership.
c. B and C have priority to the land of A if they paid D the P60,000 remaining liability of the
partnership.
d. D and E shall both have priority to the land of A in proportion to their claims of P60,000 and
P20,000, respectively.

65. A, B and C are partners. A is an industrial partner. During the first year of operation, the firm realized a
profit of P60,000. During the second year, the firm sustained a loss of P30,000. So, the net profit for the two
years of operation was only P30,000. In the Articles of Partnership, it was agreed that A, the industrial
partner would get 1/3 of the profit but would not share in the losses. How much will A, the industrial partner
get?
a. A will get only P20,000 which is 1/3 of the profit of the 1st year of operation.
b. A will get only P10,000 which is 1/3 of the net profit.
c. A will get only P20,000 in the first year and none in the second year.
d. A will share in the loss in the second year.

66. Three (3) of the following are rights of a partner. Which one (1) is not?
a. Right to associate another person to his share.
b. Right to admit another partner
c. Right to inspect and copy partnership books
d. Right to ask dissolution of the firm at the proper time
For nos. 67 – 88, write:
a. both statements are true c. only the first is true
b. both statements are false d. only the second is true

67. A. Partnership with a capital of three thousand pesos or more, in money or property, shall appear in a
public instrument, and recorded at SEC. Failure shall not affect the liability of the partnership and members
thereof to third person.
B. Whenever immovable property is contributed, an inventory of said property is needed, signed by the
parties and attached to the public instrument, otherwise the contract of partnership is void

68. A. Co-ownership or co-possession does not in itself establish a partnership, except when such co-
owners or co-possessors share in the profits made by the use of the property.
B. The sharing of gross returns does not of itself establish a partnership, except when the persons
sharing them have a joint or common right or interest in any property from which the returns are derived.

BL 91 – 06 8
69. A. The receipt by a person of a share of the profits of a business is conclusive evidence that he is a
partner in the business.
B. A partnership of all present property is where the partners contribute all property which actually belong to
them to a common fund, with the intention of dividing the same among themselves, as well as all the profits
which they may acquire therewith.

70. A. In a universal partnership of all present property, the property which belong to each of the partners at the
time of constitution of the partnership becomes a common fund of all partners and all profits which they may
acquire therewith. A stipulation for the common enjoyment of any profits may also be made. But properties
which they may acquire through inheritance, legacy, or donation cannot be included in such stipulation,
except the fruits thereof.
B. The universal partnership of profits comprises all that the partners may acquire by industry or work
during the existence of the partnership. Movable or immovable property which each may possess at the time
of the celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the
partnership.

71. A. A partnership must have a lawful object or purpose, and must be established for the common
benefit or interest of the partners.
B. When an unlawful partnership is dissolved by a judicial decree, the profits and partners’ contributions
shall be confiscated in favor of the State.

72. A. A partnership may be constituted in any form, except where immovable property or real rights are
contributed thereto, in which case a written instrument shall be necessary.
C. Every contract of partnership having a capital of three thousand pesos or more in money or property shall
appear in, a public instrument which must be recorded in the office of the SEC., otherwise the partnership is
void.

73. A. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of
said property is not made, signed by the parties and attached to the public instrument.
B. A universal partnership of profits is that in which the partners contribute all the property which actually
belongs to them to a common fund with the intention of dividing the same among themselves, as well as
the profits which they may acquired therewith.

74. A. In a universal partnership of profits, the property which belong to each of the partners at the time of the
constitution of the partnership becomes the common property of all the partners, as well as all the profits
which they may acquire therewith.
B. A universal partnership of all present property comprises only all that the partners may acquire by their
industry or work during the existence of the partnership.

75. A. A universal partnership of profits comprises all movable or immovable property which each of the
partners may possess at the time of the celebration of the contract and all that the partners may acquire by
their industry or work during the existence of the partnership.
B. Future property by inheritance, legacy or donation, including the fruits thereof cannot be included in the
stipulation regarding the universal partnership of all present property.

76. A. A and B are partners in a universal partnership of profits. Subsequently, A won first prize in the
sweepstakes. The prize money will belong to the partnership.
B. A and B are partners in a universal partnership of profits. Later A purchased a parcel of land. The fruits
of said land belong to the partnership.

75. A. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal
or particular partnership.
B. A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated.

BL 91 – 06 9
76. A. If property has been promised by a partner as contribution to the partnership, the fruits arising from the
time the property should have been delivered should also be given provided prior demand was made.
B. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the
interest and damages from the time he should have complied with his obligation, without the need of any
demand.

77. A. The partners shall contribute equal shares to the capital of the partnership.
B. If there is no agreement to the contrary, in case of an imminent loss of the business of the partnership,
any partner who refuses to contribute an additional share to the capital, to save the venture, shall be obliged
to sell his interest to the other partners.

78. A. If a partner collects a demandable sum, which was owed to him in his own name, from a person who
owed the partnership another sum also demandable, the sum thus collected shall be applied to the two credits
in proportion to their amounts, even though he may have given a receipt for his own credit only, but should
he have given it for the account of the partnership credit, the amount shall be fully applied to the latter.
B. The risk of specific and determinate things contributed to the partnership so that only their use and fruits
may be for the common benefit, shall be borne by the partner who owns them.

79. A. In the absence of stipulation, the share of each partner in the profits and losses shall be equal to each
other.
B. A stipulation which excludes one or more partners from any share in the profits or losses is void, as a
general rule.

80. A. The partner who has been appointed manager may execute all acts of administration despite the
opposition of his partners, unless he should act in bad faith and his power is irrevocable without just or lawful
cause.
B. When the manner of management has not been agreed upon, none of the partners may, without the
consent of the others, make any important alterations in the property of the partnership, even if it may be
useful to the partnership.

81. A. Every partner may associate another person with him in his share, provided it is with the consent of all the
other partners.
B. The capitalist partners cannot engage for their own account in any operation which is of the kind of
business in which the partnership is engaged, unless there is stipulation to the contrary.

82. A. Every partnership shall operate under a firm name, which shall include the name of one or more of the
partners.
B. All partners, excluding industrial ones, shall be liable pro-rata with all their property and after all the
partnership assets have been exhausted, for the contracts which may be entered into in the name of and for
the account of the partnership, under its signature, and by a person authorized to act for the partnership.

83. A. Persons who are not partners as to each other are not partners as to third persons, except in
cases of estoppel.
B. An admission or representation made by any partner concerning partnership affairs is evidence against
the partnership.

84. A. A person admitted as a partner into an existing partnership is liable for all the obligations of the
partnership arising before his admission as though he had been a partner when incurred and that such
liability will extend to his own individual property.
B. B has worked for M and Co., as procurer of contracts for fertilizers to be manufactured by the firm, and
as supervisor of the mixing of the fertilizers. However, he had no voice in the management of the
business except in his task of supervising the mixing of said fertilizers. For his service, he is entitled to
35% of the profits in the fertilizer business. He is a partner in M and Co.

BL 91 – 06 10
85. A. F was a bookkeeper in a partnership named “GH”, with a yearly salary amounting to 5% of the net profits
for each year. F, however had no vote at all in the management of the business. He is a partner in GH.
B. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of the
partnership.

86. A. Every partner may associate another person with him in his share, but the associate shall not be admitted
in the partnership without the consent of all the other partners, even if the partner having an associate should
be a manager.
B. Articles of universal partnership, entered into without specification of its nature, only constitute universal
partnership of profits.

The End.

BL 91 – 06 11
 CPA REVIEW SCHOOL OF THE PHILIPPINES
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

COVERAGE: Banking Laws

Direction: Read and select the best answer for the following questions.

1. What is the government instrumentality created in 1963 by virtue of Republic Act 3591 to insure the deposits of all banks which are entitled
to the benefits of insurance and considered as an an attached agency of the Department of Finance?
a. Development Bank of the Philippines (DBP)
b. Landbank of the Philippines (LBP)
c. Philippine Deposit Insurance Corporation (PDIC)
d. Bangko Sentral ng Pilipinas (BSP)

2. Under the amendment to PDIC Charter, may PDIC pay the insured deposits of a depositor without netting out depositor’s loan obligation
with the closed bank?
a. No because it will violate of the right to due process of the bank.
b. No because it will violate the principles of legal compensation.
c. Yes but only using the closed bank’s records alone.
d. Yes even based on evidence of deposits and not on the closed bank’s records alone.

3. May PDIC proceed directly to liquidation of a closed bank even without undergoing 90-day receivership period?
a. No because it is violative of right to property of the owners of the bank.
b. No because it is violative of right to procedural due process of the owners of the bank.
c. Yes because it would enhance the recovery rate for creditors of closed bank.
d. Yes because it would result to further dissipation of assets of a closed bank.

4. Which of the following deposits is not insured by PDIC?

a. Savings Deposit
b. Special Savings
c. Negotiable Order of Withdrawal
d. Certificate of Time Deposits
e. Telegraphic notes or Telegram notes

5. Which of the following is insured by PDIC?

a. Demand or Checking account
b. Investment in bonds issued by government
c. Investment in stocks of a private corporation
d. Trust account
e. Money market placement

6. Which of the following is insured by PDIC?

a. Savings deposit
b. Demand draft
c. Telegraphic notes
d. Telegram notes

7. Which of the following deposits is not insured by PDIC?

a. Savings Deposit in Metrobank Manila Branch
b. Certificate of Time Deposit in Philippine National Bank Makati Branch
c. Bank Deposit in Japan Bank Tokyo Branch
d. Special Savings in Bank of Philippine Islands Taguig Branch

8. Which of the following deposits is insured by PDIC?

a. Deposit accounts that are funded
b. Deposit accounts that are fictitious or fraudulent
c. Deposit accounts constituting or emanating from unsafe or unsound business practices
d. Deposit accounts that are determined to be proceeds from an unlawful activity as defined in AMLA

9. What is the possible maximum deposit insurance coverage if a depositor has several valid single accounts in a closed bank?
a. P1,000,000
b. P500,000
c. P750,000
d. P1,500,000

10. What is the possible maximum deposit insurance coverage if a depositor has several valid single accounts and valid joint accounts in a closed
bank?
a. P1,000,000
b. P500,000
c. P750,000
d. P1,500,000

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 1 of 13

 11. Angel Locsin has the following four deposit accounts in a closed bank (BDO):
Angel Locsin, Savings Deposit BDO-Lipa City branch P200,000
Kim Domingo For the Account of Angel Locsin , Time Deposit BDO-Manila City branch 100,000
Andrea Torres In Trust For Angel Locsin, Savings Deposit – BDO-Taguig City branch 300,000
Angel Locsin’s Business (Sole Proprietorship) – Checking Account – BDO-Pasay City branch 600,000
What is the maximum deposit insurance coverage by PDIC in so far as Angel Locsin is concerned?
a. P1,000,000
b. P1,200,000
c. P500,000
d. P800,000

12. Ellen Adarna has the following deposit accounts in a closed bank (BDO):
Ellen Adarna and John Lloyd Cruz Savings Deposit BDO-Lipa City branch P600,000
Ellen Adarna and Tom Cruz Time Deposit BDO-Manila City branch 800,000
Ellen Adarna and Mark Cruz Checking Account – BDO-Pasay City branch 900,000
What is the maximum deposit insurance coverage by PDIC in so far as Ellen Adarna is concerned?
a. P1,000,000
b. P1,200,000
c. P500,000
d. P800,000

13. Kim Domingo has the following deposit accounts in a closed bank (BDO):
Kim Domingo’s Modeling Business (Sole Proprietorship) Checking Account – BDO-Pasay City branch P300,000
Kim Domingo Savings Deposit – BDO-Taguig City branch 400,000
Kim Domingo and John Santos Time Deposit BDO-Manila City branch 600,000
Kim Domingo and Rey Langit Savings Deposit BDO-Lipa City branch 800,000
What is the maximum deposit insurance coverage by PDIC in so far as Kim Domingo is concerned?
a. P1,000,000
b. P1,200,000
c. P500,000
d. P800,000

14. Colleen Garcia has the following deposit accounts in a closed bank (BDO):
Colleen Garcia’s Business (Sole Proprietorship) Checking Account – BDO-Pasay City branch P200,000
Colleen Garcia Savings Deposit BDO-Taguig City branch 100,000
Colleen Garcia and Billy Crawford Time Deposit BDO-Manila City branch 300,000
Colleen Garcia and John Pedro and Rex Juan and James Reid Savings Deposit BDO-Lipa City branch 600,000
What is the maximum deposit insurance coverage by PDIC in so far as Colleen Garcia is concerned?
a. P1,000,000
b. P1,200,000
c. P500,000
d. P575,000

15. Ana is a partner of ABC Partnership. She is also a stockholder of Ana Corporation Ana has the following deposit accounts in a closed bank
(BDO):
Ana’s Business (Sole Proprietorship) Checking Account – BDO-Pasig City branch P350,000
Ana Savings Deposit BDO-Taguig City branch 400,000
Ana and Bea and Carla and Dana Time Deposit BDO-Manila City branch 600,000
Ana and ABC Partnership Checking Account – BDO-Pasay City branch 500,000
Ana and Ana Corporation Checking Account – BDO-Makati City branch 200,000
Ana’s loan payable to BDO – Quezon City Branch (100,000)
What is the maximum deposit insurance coverage by PDIC in so far as Ana is concerned?
a. P525,000
b. P625,000
c. P800,000
d. P1,000,000

16. A maintained the following deposits at BPI Bank:

P600,000 – savings deposit in the name of A and/or B
P200,000 – time deposit in the name ABC Partnership
P300,000 – current account in the name of A
How much can A personally recover from PDIC if BPI Bank was liquidated by BSP?
a. P900,000
b. P600,000
c. P550,000
d. P300,000

17. In case of joint account between a juridical person and a natural person, who shall be entitled to the maximum insured deposit of P500,000 in
such joint account?
a. Juridical person
b. Natural person
c. Both juridical person and natural person equally
d. Neither juridical person nor natural person

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 2 of 13

 18. What is the prescriptive period for depositors to file their deposit insurance claims to PDIC from date of takeover by PDIC of a closed bank?
a. Within 2 years from PDIC’s takeover of the closed bank
b. Within 1 years from PDIC’s takeover of the closed bank
c. Within 3 years from PDIC’s takeover of the closed bank
d. Within 4 years from PDIC’s takeover of the closed bank

19. As a general rule, what is the threshold amount of the bank deposit to be required to file deposit insurance claims to PDIC?
a. Balance of more than P100,000
b. Balance of more than P10,000
c. Balance of more than P100
d. Balance of more than P1,000

20. The following are the depositors who are required to file deposit insurance claims to PDIC in order to recover their claims from a closed
bank, except
a. Depositors with valid deposit accounts with balances of more than Php100,000.
b. Depositors who have outstanding obligations with the closed bank regardless of amount of deposits.
c. Depositors with account balances of less than Php100,000 who have no updated addresses in the bank records or who have not
updated their addresses through the Mailing Address Update Form (MAUF) issued by the PDIC.
d. Depositors who maintain their accounts under the name of business entities, regardless of type of account and account balance.
e. Depositors with accounts not eligible for early payment, regardless of type of account and account balance per advice of PDIC.
f. Depositors with account balances of less than Php100,000 who have updated addresses in the bank records or who have updated
their addresses through the Mailing Address Update Form (MAUF) issued by the PDIC.

21. What is the mode of payment by PDIC of claims of depositors from a closed bank?
a. By cash
b. By making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such
depositor
c. By checks, promissory note or bill of exchange
d. Either A or B

22. What is the maximum period for payment by PDIC to depositors of their claims from a closed bank in order not to make PDIC’s officer
liable for failure to pay due to grave abuse of discretion, gross negligence, bad faith or malice?
a. Within 2 years from the date of filing of deposit insurance claim to PDIC
b. Within 1 year from the date of filing of deposit insurance claim to PDIC
c. Within 6 months from the date of filing of deposit insurance claim to PDIC
d. Within 3 months from the date of filing of deposit insurance claim to PDIC

23. What is the effect of payment by PDIC of insured deposits to depositors?

a. PDIC may recover from the assets of the closed in so far as the payment made by PDIC is beneficial to depositors.
b. PDIC shall be legally subrogated to all rights of depositor against the closed bank to the extent of such payment.
c. PDIC may not recover from the assets of the closed bank if the payment is without the knowledge or against the will of the closed
bank.
d. PDIC may only recover from the assets of the closed bank if the payment is with the consent of the closed bank.

24. Under Republic Act No. 1405, what is the nature of bank deposit and investment in government bonds?
a. As a general rule, they are absolutely confidential in nature.
b. As a general rule, they are generally subject to any type of inspection.
c. They are exempted from any type of inquiry.
d. None of the above.

25. Under Republic Act No. 1405, the following instruments are considered absolutely confidential in nature, except
a. Savings deposit
b. Time deposit
c. Current account or Demand account
d. Investment in government bonds
e. Money market placement or Telegraphic Notes or Telegram notes

26. They refer to money or funds placed with a bank that can be withdrawn on the depositor’s order or demand.
a. Deposits
b. Trust funds
c. Money market placements
d. Deposit substitutes

27. Under Republic Act No. 1405 a.k.a. Philippine Peso Deposit Secrecy Law, the bank deposits and investment in government bonds may be
inquired into in the following exceptional instances, except
a. Upon written permission or consent in writing by the depositor.
b. In cases of impeachment of the President, Vice President, members of the Supreme Court, members of the Constitutional
Commission (Commission on Elections, Civil Service Commission and Commission on Audit) and the Ombudsman for culpable
violation of the Constitution, treason, bribery, graft and corruption, other high crimes or betrayal of public trust. (Art. XI, Sec. 2,
1987 Philippine Constitution)
c. Upon order of a competent court in cases of bribery or dereliction of duty of public officials.
d. In cases where the money deposited or invested is the subject matter of the litigation.
e. In cases of tax evasion cases filed by BIR Commissioner against a taxpayer.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 3 of 13

 28. Which of the following inquiries will be considered a violation of Philippine Peso deposit secrecy law?
a. Periodic inquiry or special examination of bank deposits by BSP to ensure compliance with the Anti-Money Laundering Law.
b. Inquiry of bank deposits by BIR Commissioner in relation to an application for compromise of taxable liability or determination of
a decedent’s gross estate under National Internal Revenue Code.
c. Inquiry of bank deposits by PDIC when there is finding of unsafe or unsound banking practices.
d. Inquiry of bank deposits by DOJ Secretary for the purpose of persecution of the members of the opposing political party.

29. Which of the following disclosures will be considered a violation of Philippine peso deposit secrecy law?
a. Reporting of unclaimed balances of a bank deposit to the Treasurer of the Philippines or Bureau of Treasury by authorized bank
officials.
b. Using of insider information about the bank deposits by bank employees in order to determine the credit rating or credit standing
of their depositors for purposes of offering credit cards.
c. Turn-over by authorized bank officials to the BIR Commissioner of the amount in bank accounts as may be sufficient to satisfy the
writ of garnishment issued to collect delinquent taxes.
d. Disclosure by a bank officer or employee upon order of a competent court in connection with a deposit in a closed bank that was
used in the perpetration of anomalies.

30. A government employee, purchased DBP Bonds with a total value of P100,000 and receives annual interest income from his investment.
Under Bank Secrecy Law, the investment of the government employee may be inquired into even without need of a court order by the
a. Public prosecutor handling estafa case against the government employee
b. BIR officer auditing the VAT of the government employee
c. Credit investigator of a lending institution where the government employee applied for the loan
d. None of the foregoing

31. Which act is covered by Domestic Bank Deposit Secrecy Law a.k.a. R.A. No. 1405?
a. Disclosing the amount of deposit of a judgment debtor to the court sheriff who is executing a garnishment order against him.
b. Disclosing the name of the drawer of a check to the payee.
c. Disclosing the amount of deposit of a taxpayer to a duly authorized BIR examiner who is examining his income tax liability.
d. Disclosing the amount of deposit exceeding P500,000 in one banking day to Anti-Money Laundering Council.

32. The following are the exceptional cases when the BIR Commissioner may inspect bank deposits, except
a. When there is application of compromise liability by a taxpayer on the ground of financial incapacity
b. To determine the gross estate for computation of estate tax’s liability
c. When a request for tax information of specific18 taxpayers made by a foreign tax authority pursuant to a tax treaty under The
Exchange of Information on Tax Matters Act of 2009
d. To determine the taxable income of politicians

33. What is the penalty provided by law for violation of RA 1405 a.k.a. Philippine Peso deposit secrecy law?
a. Imprisonment of not more than five years or fine of not more than P20,000 or both imprisonment and fine.
b. Imprisonment of not more than ten years or fine of not more than P200,000 or both imprisonment and fine.
c. Imprisonment of not more than twenty years or fine of not more than P2,000,000 or both imprisonment and fine.
d. Imprisonment of not more than one year or fine of not more than P2,000 or both imprisonment and fine.

34. Under Foreign Currency Deposit Act of the Philippines or R.A. 6426, what is the only exception for the absolutely confidential nature of
Foreign Currency Bank Deposits?
a. Upon written permission or consent in writing by the depositor.
b. In cases of impeachment of the President, Vice President, members of the Supreme Court, members of the Constitutional
Commission (Commission on Elections, Civil Service Commission and Commission on Audit) and the Ombudsman for culpable
violation of the Constitution, treason, bribery, graft and corruption, other high crimes or betrayal of public trust. (Art. XI, Sec. 2,
1987 Philippine Constitution)
c. Upon order of a competent court in cases of bribery or dereliction of duty of public officials.
d. In cases where the money deposited or invested is the subject matter of the litigation.

35. Which is false about Foreign Currency Deposit Act also known as R.A. No. 6426?
a. The foreign currency deposits maintained abroad by Filipino citizens are not covered by the provisions of this act.
b. Depositary banks which have been qualified by the Monetary Board to function under expanded foreign currency deposit system
are exempt in maintain the fifteen percent (15%) foreign currency cover for their liabilities in the form of foreign currency deposit
with BSP.
c. Foreign currency deposits are of absolutely confidential nature, except upon the written permission of the depositor.
d. Foreign currency deposits are subject to attachment, garnishment, or any other order or process of the court.

36. A non-resident alien was convicted beyond reasonable doubt of raping a minor. Such non-resident alien does not have any property in the
Philippines except a foreign currency deposit with a domestic bank. May the court issue a writ of garnishment of the foreign currency deposit
of that convicted non-resident alien?
a. No because Foreign Currency Deposit Act of the Philippines provides that foreign currency deposits are exempted from
attachment or garnishment.
b. Yes but only if the non-resident alien will give his permission or consent in writing.
c. Yes because if that foreign currency deposit will be exempted from garnishment, injustice would result especially to a citizen
aggrieved by a foreign guest.
d. No because foreign currency deposits are absolutely confidential in nature and making an exception to the confidentially of foreign
currency deposits will discourage foreign investments.

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 37. What is the penalty provided by R.A. No. 6426 for violation of confidentiality of foreign currency deposit act of the Philippines?
a. Imprisonment of not less than 1 year nor more than 5 years or fine not less than P5,000 but not more than P25,000 or both
imprisonment and fine.
b. Imprisonment of not less than 2 years nor more than 10 years or fine not less than P10,000 but not more than P50,000 or both
imprisonment and fine.
c. Imprisonment of not less than 3 years nor more than 15 years or fine not less than P20,000 but not more than P100,000 or both
imprisonment and fine.
d. Imprisonment of not less than 4 year nor more than 20 years or fine not less than P50,000 but not more than P500,000 or both
imprisonment and fine.

38. Which type of bank deposit of impeachable officer may be examined by impeachment court without consent of the impeachable officer?
a. Philippine Peso Bank Deposit
b. Foreign Currency Bank Deposit
c. Both A and B
d. Neither A nor B

39. As a general rule, which type of bank deposit may not be subject to attachment, execution or garnishment?
a. Philippine Peso Bank Deposit
b. Foreign Currency Bank Deposit
c. Both A and B
d. Neither A nor B

40. They include credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and interest thereon with banks in
favor of any person known to be dead or who has not made further deposits or withdrawal during the preceding ten (10) years or more.
a. Dormant accounts
b. Unclaimed balances
c. Dead accounts
d. Closed deposits

41. Which of the following credits may is not covered by Unclaimed Balances Law?
a. Credits of money
b. Deposits of money
c. Security of indebtedness
d. Bond indenture or other evidence of indebtedness of any kind
e. Telegraphic note or Telegram note
f. Patent or copyright or trademark

42. Which of the following institutions is not covered by Act No. 3936 also known as unclaimed balances law?
a. Banks
b. Trust companies
c. Mutual building and loan association
d. Nonstock savings and loans association

43. Which government agency has the authority to reactivate an unclaimed balance account?
a. Bureau of Internal Revenue
b. Bureau of Customs
c. Bureau of Treasury
d. Bureau of Unclaimed Balance

44. What petition may be filed by the Office of Solicitor General in behalf of the Republic of the Philippines in order to forfeit unclaimed
balances of a person who, dying intestate and leaving no heir entitled to his estate?
a. Petition for escheat
b. Petition for quo warranto
c. Petition for mandamus
d. Petition for certiorari

45. Which of the following credits may not be escheated in favor of the state under Unclaimed Balances Law?
a. Telegraphic note
b. Money
c. Deposit
d. Demand draft

46. What is the objective of Anti-Money Laundering Law?

a. To protect and preserve the integrity and confidentiality of bank accounts
b. To ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity
c. Consistent with its foreign policy, to extend cooperation in transnational investigations and prosecutions of persons involved in
money laundering activities wherever committed
d. All of the above

47. It refers to a crime committed by any person who knowing that any monetary instrument or property represents, involves, or relates to the
proceeds of any unlawful activity, transacts, converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instruments or
proceeds of any unlawful activity.
a. Estafa
b. Forgery
c. Money laundering
d. Bribery

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 48. Which of the following is not considered offense punishable as money laundering?
a. Transacting known proceeds of any unlawful activity.
b. Converting, transferring, disposing of, acquiring, possessing, moving, or using known proceeds of any unlawful activity.
c. Concealing, disguising the true nature, source, location, movement, or ownership of known proceeds of any unlawful activity.
d. Mere knowledge of proceeds of any unlawful activity.

49. Which of the following is not considered offense punishable as money laundering?
a. Attempting or conspiring to commit money laundering offenses punishable by Anti-Money Laundering Law.
b. Aiding, abetting, assisting or counseling the commissions of money laundering offenses punishable by Anti-Money Laundering Law.
c. Performing or failing to perform any act as a result of which facilitates the commission of money laundering offenses punishable by
Anti-Money Laundering Law.
d. Failing to report suspicious or reportable transactions to Anti-Money Laundering Council by a covered institution of Anti-Money
Laundering Law.
e. Mere employment in a covered institution required to report suspicious or reportable transactions to Anti-Money Laundering
Council.

50. Which of the following is not a predicate crime of Money Laundering Offense?
a. Swindling
b. Adultery
c. Fencing
d. Illegal recruitment

51. Which of the following is not a predicate crime of Money Laundering Offense?
a. Voyeurism
b. Extortion
c. Smuggling
d. Homicide

52. Which of the following is a predicate crime of Money Laundering Offense?

a. Smuggling
b. Rape
c. Act of Lasciviousness
d. Sexual harassment

53. Which of the following is a predicate crime of Money Laundering Offense?

a. Jueteng and masiao
b. Sedition
c. Libel
d. Trespassing

54. Which of the following is a predicate crime of Money Laundering Offense?

a. Violation of BP 22 a.k.a. Bouncing Check Law
b. Violation of BP 68 a.k.a. Corporation Code of the Philippines
c. Violation of Electronic Commerce Act of 2000 a.k.a. RA No. 8792
d. Violation of Data Privacy Act

55. Which of the following is not a predicate crime of Money Laundering Offense?
a. Violations of Intellectual Property Code
b. Fraudulent practices and other violations of the Securities Regulation Code
c. Forgeries and Counterfeiting
d. Rebellion

56. What is the Republic Act No. of Terrorism Financing Prevention and Suppression Act (Law punishing Financing of Terrorim)?
a. R.A. No. 10168
b. R.A. No. 9372
c. R.A. No. 9160
d. R.A. No. 9194
e.

57. The following are predicate crimes that may authorize Anti-Money Laundering Council to inquire bank accounts even without court order
from Court of Appeals, except
a. Carnapping
b. Violation of Section 4, 5, 6, 9, 10, 11, 12, 13, 14, 15 and 16 of Comprehensive Dangerous Drugs Act
c. Hijacking
d. Kidnapping for Ranson

58. The following are predicate crimes that may authorize Anti-Money Laundering Council to inquire bank accounts even without court order
from Court of Appeals, except
a. Destructive arson
b. Murder
c. Financing of Terrorism, Terrorism and conspiracy to commit terrorism
d. Plunder

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 59. It refers to a type of transaction that shall be reported by a covered person to the Anti-Money Laundering Council because the transaction
breaches the quantitative threshold for reporting purposes.
a. Covered transaction
b. Suspicious transaction
c. Reportable transaction
d. Exempted transaction

60. As a general rule, what is the quantitative threshold for any transaction in cash or other equivalent of a covered person such as financial
institututions to be considered reportable transaction to Anti-Money Laundering Council?
a. A transaction with amount exceeding P1,000,000
b. A transaction with amount exceeding P100,000
c. A transaction with amount exceeding P500,000
d. A transaction with amount exceeding P5,000,000

61. What is the quantitative threshold for reportable transactions involving foreign currency dealers, money dealers or remittance company?
a. A transaction with amount exceeding P1,000,000
b. A transaction with amount exceeding P100,000
c. A transaction with amount exceeding P500,000
d. A transaction with amount exceeding P5,000,000

62. In case of jewelry dealers, dealers of precious metals or dealers of precious stones, what is the quantitative threshold for any transaction in
cash or other equivalent to be considered reportable transaction to Anti-Money Laundering Council?
a. A transaction with amount exceeding P1,000,000
b. A transaction with amount exceeding P100,000
c. A transaction with amount exceeding P500,000
d. A transaction with amount exceeding P5,000,000

63. In case of casino, what is the quantitative threshold for any transaction in cash or other equivalent to be considered reportable transaction to
Anti-Money Laundering Council?
a. A transaction with amount exceeding P1,000,000
b. A transaction with amount exceeding P100,000
c. A transaction with amount exceeding P500,000
d. A transaction with amount exceeding P5,000,000

64. In case of Land Registration Authority and all Registry of Deeds, what is the quantitative threshold for any real estate transactions to be
considered reportable transaction to Anti-Money Laundering Council?
a. A transaction with amount exceeding P1,000,000
b. A transaction with amount exceeding P100,000
c. A transaction with amount exceeding P500,000
d. A transaction with amount exceeding P5,000,000

65. It refers to a type of transaction that shall still be reported by a covered person to the Anti-Money Laundering Council even if the transaction
does not breach the quantitative threshold for reporting purposes by reason of the unusual nature of the transaction.
a. Covered transaction
b. Suspicious transaction
c. Reportable transaction
d. Exempted transaction

66. Which of the following is not a suspicious transaction and therefore shall not be reported to Anti-Money Laundering Council?
a. Transaction that has no underlying legal or trade obligation, purpose or economic justification.
b. Transaction in which the client is properly identified.
c. Transaction in which the amount involved is not commensurate with the business or financial capacity of the client.
d. Transaction that deviates from the profile of the client.

67. Which of the following is not a suspicious transaction and therefore that shall not be reported to Anti-Money Laundering Council?
a. Transaction that may be perceived that the client's transaction is structured in order to avoid being the subject of reporting
requirements under AMLA.
b. Transaction is any way related to an unlawful activity or any money laundering activity or offense that is about to be committed, is
being or has been committed.
c. Transaction that deviates from the client's transactions with the covered person.
d. Transaction entered into in the ordinary course of business of the client.

68. Under Implementing Rules and Regulations of AMLA issued by AMLC, the following are politically exposed persons (High Risk
Government Personnel), except
a. Municipal or Regional Trial Court Judge
b. AFP Official such as Colonel or General
c. Senators or Congressmen or Mayor or Governor
d. Chairman or Commissioners of COMELEC
e. President or Vice-President
f. Justice of CA, CTA, Sandiganbayan or Supreme Court

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 69. Which of the following is not a covered person and therefore is not required to report covered transaction or suspicious transaction to Anti-
Money Laundering Council?
a. Banks, quasi-banks, trust entities, or nonstock savings and loans associations
b. Foreign exchange dealers, electronic money issuers, or pawnshops
c. Money changers or remittance and transfer companies
d. Real estate companies, real estate brokers and real estate appraisers

70. Which of the following is not a covered person and therefore is not required to report covered transaction or suspicious transaction to Anti-
Money Laundering Council?
a. Insurance companies or pre-need companies
b. Insurance agents, brokers, or professional reinsurers
c. Holding company, holding company system or mutual benefit association
d. Convenience stores, grocery stores or supermarkets

71. Which of the following is not a covered person and therefore is not required to report covered transaction or suspicious transaction to Anti-
Money Laundering Council?
a. Securities dealers, brokers, salesmen, investment houses, and other similar persons managing securities or rendering services such
as investment agents
b. Mutual funds or open-end companies, close-end investment, investment companies or issuers and other similar
c. Other entities administering or otherwise dealing in commodities, or financial derivatives based thereon, valuable objects, cash
substitutes and other similar monetary instruments or properties supervised and regulated by the SEC.
d. Educational institutions or hospitals or restaurants

72. Which of the following is exempted from reporting covered transaction or suspicious transaction to Anti-Money Laundering Council?
a. Law firm or auditing firm if acting as independent legal professionals in relation to information concerning their clients or where
disclosure of information would compromise client confidences or the attorney-client relationship
b. Jewelry dealers, dealers of precious metals or dealers of precious stones
c. Casino
d. Land Registration Authority or Registry of Deeds

73. When is a Certified Public Accountant considered a covered person required to report covered transactions or suspicious transactions to
Anti-Money Laundering Council?
a. When he renders audit or review of historical financial statements or other assurance engagements.
b. When he provides management consultancy services.
c. When he acts as promoter rendering services for organization of contributions for the creation, operation and management of
companies.
d. When he provides tax advisory services.

74. When is a Certified Public Accountant exempted from reporting covered transactions or suspicious transactions to Anti-Money Laundering
Council?
a. When he renders tax compliance services to a client.
b. When he manages client's money, securities or other assets.
c. When he provides services for management of bank, savings or current accounts.
d. When he provides services for creation, operation or management of juridical persons or arrangements, and buying and selling
business entities.

75. Which of the following persons is not considered covered persons of Anti-Money Laundering Law?
a. Auditing Firm rendering audit services concerning their audit fee
b. Insurance company
c. Banking institution
d. Stock brokers

76. This principle means that No administrative, criminal or civil proceedings shall lie against any person for having made a covered transaction
report in the regular performance of his duties and in good faith, whether or not such reporting results in any criminal prosecution under the
AMLA or any other Philippine law.
a. Safe harbor provision
b. Immunity from suit
c. Tax exemption
d. Privity of interest

77. As a general rule, which court has original jurisdiction to try money laundering cases committed by private individuals?
a. Municipal trial court
b. Court of Tax Appeals
c. Regional Trial Court
d. Sandiganbayan

78. As an exception to the general rule, which court has original jurisdiction to try money laundering cases committed by public officers with
salary grade of at least 26 and private persons in conspiracy with such public officers?
a. Municipal trial court
b. Court of Tax Appeals
c. Regional Trial Court
d. Sandiganbayan

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 79. Which of the following statements about prosecution of money laundering offenses is true?
a. The prosecution of money laundering and the unlawful activity shall proceed independently such that any person may be charged
with and convicted of both money laundering and the unlawful activity.
b. The elements of money laundering are separate and distinct from the elements of the unlawful activity.
c. The elements of the unlawful activity, including the identity of the perpetrators and the details of the commission of the unlawful
activity, need not be established by proof beyond reasonable doubt in the case for money laundering.
d. The element of knowledge in money laundering offense may be established by direct or circumstantial evidence.
e. All of the above

80. It refers to the financial intelligence unit of the Republic of the Philippines which is entrusted with the implementation of Anti-Money
Laundering Law.
a. Anti-Money Laundering Council
b. Monetary Board of Bangko Sentral ng Pilipinas
c. Insurance Commission
d. Securities and Exchange Commission

81. Who among the following is not part of Anti-Money Laundering Council?
a. BSP Governor as chairperson of AMLC
b. Insurance Commissioner as member of AMLC
c. SEC Chairperson as member of AMLC
d. BIR Commissioner as member of AMLC

82. Who is the chairman of the Anti-Money Laundering Council?

a. BSP Governor
b. Insurance Commissioner
c. SEC Chairperson
d. BIR Commissioner

83. How shall the AMLC make decision in the discharge of its functions?
a. By majority vote of the three
b. By unanimous vote of the three
c. By 1/3 vote of the three
d. Any of the above

84. Which of the following statements about the preventive measures provided by Anti-Money Laundering Law is correct?
a. Covered persons shall establish and record the true identity of their clients based on official documents, as defined under Rule 3 of
RIRR of AMLA.
b. Covered persons shall conduct face-to-face contact at the commencement of the relationship, or as reasonably practicable so as not
to interrupt the normal conduct of business.
c. Both A and B
d. Neither A nor B

85. Which of the following is not a minimum customer identification to be required by a covered person from its client or customer?
a. Name of customer, date and place of birth and Present and permanent address
b. Nationality of customer
c. Nature of work and name of employer
d. Name of all relatives of customer

86. Which of the following is not a minimum customer identification to be required by a covered person from its client or customer?
a. Contact number of customer
b. Specimen signature or biometrics of the customer
c. TIN, SSS or GSIS number if employed or self-employed
d. Name of all girlfriends or boyfriends of customer

87. Which of the following is not a minimum customer information or documentation that must be obtained by covered persons of AMLA from
its customers?
a. Nationality
b. SSS, TIN or GSIS number
c. Name of customer
d. Facebook page of customer

88. Which of the following accounts is not prohibited by Anti-Money Laundering Law?
a. Numbered accounts
b. Non-checking numbered accounts
c. Anonymous accounts
d. Fictitious accounts

89. What is the minimum retention period of all records of customer identification and transaction documents of their customers by a covered
person under Anti-Money Laundering Law?
a. At least 1 year from the date of transaction or from date of closure of the account
b. At least 3 years from the date of transaction or from date of closure of the account
c. At least 5 years from the date of transaction or from date of closure of the account
d. At least 10 years from the date of transaction or from date of closure of the account

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 90. Unless changed by the Anti-Money Laundering Council, what is the period for reporting all covered transactions or suspicious transactions by
a covered person to Anti-Money Laundering Council?
a. Within a period of (5) five working days from the occurrence thereof
b. Within a period of (15) fifteen working days from the occurrence thereof
c. Within a period of (5) five calendar days from the occurrence thereof
d. Within a period of (15) fifteen calendar days from the occurrence thereof

91. In case the Anti-Money Laundering Council decides to change period for reporting all covered transactions or suspicious transactions by a
covered person to Anti-Money Laundering Council, what is the maximum period it may extend the period for reporting?
a. Within a period of (5) five working days from the occurrence thereof
b. Within a period of (15) fifteen working days from the occurrence thereof
c. Within a period of (5) five calendar days from the occurrence thereof
d. Within a period of (15) fifteen calendar days from the occurrence thereof

92. In case of suspicious transactions, the word "occurrence" refers to the date of determination of the suspicious nature of the transaction. What
is the maximum period for the determination of the suspicious nature of the transaction by a covered person?
a. Within a period of (10) ten calendar days from the date of transaction
b. Within a period of (10) ten working days from the date of transaction
c. Within a period of (5) five working days from the date of transaction
d. Within a period of (15) fifteen calendar days from the date of transaction

93. Which court has the jurisdiction to issue a freeze order on bank accounts upon verified ex parte petition by the AMLC and after
determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity?
a. Court of Appeals
b. Municipal Trial Court
c. Regional Trial Court
d. Court of Tax Appeals

94. What is the period allowed by AMLA to Court of Appeals to resolve the verified ex parte petition filed by the AMLC for the issuance of
freeze order on bank accounts related to proceeds of any unlawful activity?
a. Within 12 hours from the filing of the petition
b. Within 24 hours from the filing of the petition
c. Within 36 hours from the filing of the petition
d. Within 48 hours from the filing of the petition

95. What is the validity period of the initial freeze order immediately issued by the Court of Appeals upon verified ex parte petition by the
AMLC?
a. Period of 10 days
b. Period of 30 days
c. Period of 20 days
d. Period of 60 days

96. What is the maximum/total period of the freeze order that may be issued by Court of Appeals for bank accounts which is allegedly related to
proceeds of any unlawful activity?
a. It shall not exceeds (2) two months.
b. It shall not exceed (3) three months.
c. It shall not exceed (1) one months.
d. It shall not exceed (6) six months.

97. Which court has the jurisdiction to issue the asset preservation order concerning the proceeds related to any unlawful activity?
a. Court of Appeals
b. Municipal Trial Court
c. Regional Trial Court
d. Court of Tax Appeals

98. Which court has jurisdiction to issue an order authorizing the AMLC to inquire or examine any particular deposit or investment account
including related accounts with a banking institution or non-bank financial institution based on the ex parte application by AMLC in cases of
violation of AMLA?
a. Court of Appeals
b. Municipal Trial Court
c. Regional Trial Court
d. Court of Tax Appeals

99. What is the period allowed by AMLA to Court of Appeals to resolve the verified ex parte petition filed by the AMLC for the issuance of bank
inquiry order of bank accounts or investment accounts related to proceeds of any unlawful activity?
a. Within 12 hours from the filing of the petition
b. Within 24 hours from the filing of the petition
c. Within 36 hours from the filing of the petition
d. Within 48 hours from the filing of the petition

100. Which court has the jurisdiction to entertain a petition for civil forfeiture of any monetary instrument or property is in any way related to an
unlawful activity or a money laundering offense?
a. Court of Appeals
b. Municipal Trial Court
c. Regional Trial Court
d. Court of Appeals

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 101. What quantum of evidence must be presented to AMLC before it may file with the Regional Trial Court through Office of Solicitor General
a verified petition for civil forfeiture of any monetary instrument or property is in any way related to an unlawful activity or a money
laundering offense?
a. Probable cause
b. Preponderance of evidence
c. Proof beyond reasonable doubt
d. Clear and convincing evidence

102. What quantum of evidence is necessary for conviction of crime of Money Laundering?
a. Probable cause
b. Preponderance of evidence
c. Proof beyond reasonable doubt
d. Clear and convincing evidence

103. Which of the following is necessary or condition precedent before the commencement or resolution of petition for civil forfeiture of any
monetary instrument or property is in any way related to an unlawful activity or a money laundering offense?
a. Prior criminal charge of unlawful activity
b. Prior conviction of unlawful activity
c. Prior criminal charge of money laundering offense
d. Prior conviction of money laundering offense
e. None of the above

104. When there is conviction for money laundering, to whom shall the monetary instrument or property found to be proceeds of an unlawful
activity go to?
a. It shall be awarded by the regional trial court to the convicted person.
b. It shall be awarded by the regional trial court to the innocent contracting party.
c. It shall be forfeited by the regional trial court in favor of the Government of the Republic of the Philippines.
d. It shall be given to nonstock nonprofit charitable institutions.

105. What law punishes or penalizes issuance of worthless checks?

a. BP 22
b. BP 68
c. BP 45
d. BP 13

106. Which of the following is punishable act under BP 22 also known as Bouncing Checks Law?
a. Any person who (a) makes or draws and issues any check to apply on account or for value, (b) knowing at the time of issue that he
does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, (c)
which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for
the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.
b. Any person who, having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check, shall fail to
keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a period of ninety (90) days
from the date appearing thereon, for which reason it is dishonored by the drawee bank.
c. Either A or B
d. Both A and B

107. What is the minimum number of days for maintaining a balance in the checking account to cover the check he issued for the drawer to be
exempted from conviction for violation of BP 22?
a. A period of at least 90 days from the maturity date of check
b. A period of at least 120 days from maturity date of check
c. A period of at least 150 days from maturity date of check
d. A period of at least 180 days from maturity date of check

108. Which of the following is not an element of violation of BP 22 for issuance of worthless check or no sufficient fund (NSF) check?
a. There must be making, drawing, and issuance of any check to apply for account or for value.
b. There must be knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with
the drawee bank for the payment of the check in full upon its presentment.
c. There must be subsequent dishonor of the check by the drawee bank for insufficiency of funds or creditor dishonor for the same
reason had not the drawer, without any valid cause, ordered the bank to stop payment.
d. There must be criminal intent to defraud on the part of the drawer of the check.

109. What is the legal obligation on the part of the drawer of a funded check in order to exempt himself from criminal liability for bouncing
check?
a. He must keep sufficient fund or maintain credit to cover the full amount of the check within a period of 90 days from the maturity
date of the check.
b. He must keep sufficient fund or maintain credit to cover the full amount of the check within a period of 30 days from the maturity
date of the check.
c. He must keep sufficient fund or maintain credit to cover the full amount of the check within a period of 60 days from the maturity
date of the check.
d. He must keep sufficient fund or maintain credit to cover the full amount of the check within a period of 120 days from the maturity
date of the check.

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 110. What is the penalty for violation of BP 22 or Bouncing Checks Law?
a. Imprisonment of not less than 30 days but not more than (1) year or Fine of not less than but not more than double the amount of
the check which fine shall in no case exceed Two Hundred Thousand Pesos or both imprisonment and fine.
b. Imprisonment of not less than 60 days but not more than (2) years or Fine of not less than but not more than triple the amount of
the check which fine shall in no case exceed Three Hundred Thousand Pesos or both imprisonment and fine.
c. Imprisonment of not less than 90 days but not more than (3) years or Fine of not less than but not more than the amount of the
check which fine shall in no case exceed Four Hundred Thousand Pesos or both imprisonment and fine.
d. Imprisonment of not less than 120 days but not more than (4) years or Fine of not less than but not more than the amount of the
check which fine shall in no case exceed Five Hundred Thousand Pesos or both imprisonment and fine.

111. What is the prima facie evidence of the knowledge of insufficiency of funds or credit by the maker or drawer of a check?
a. The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit
with such bank, when presented within (120) days from the date of the check.
b. The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit
with such bank, when presented within (30) days from the date of the check.
c. The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit
with such bank, when presented within (60) days from the date of the check.
d. The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit
with such bank, when presented within (90) days from the date of the check.

112. What act may be presented by the maker or drawer of a check to destroy prima facie presumption of knowledge of insufficiency of funds or
credit as established by the preceding number?
a. The maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of
such check within (10) banking days after receiving notice that such check has not been paid by the drawee.
b. The maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of
such check within (15) banking days after receiving notice that such check has not been paid by the drawee.
c. The maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of
such check within (5) banking days after receiving notice that such check has not been paid by the drawee.
d. The maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of
such check within (20) banking days after receiving notice that such check has not been paid by the drawee.

113. Which of the following is not a duty of a drawee bank under BP 22?
a. When refusing to pay the check to the holder thereof upon presentment, to cause to be written, printed, or stamped in plain
language thereon, or attached thereto, the reason for drawee's dishonor or refusal to pay the same.
b. If there are no sufficient funds in or credit with such a drawee bank regarding such check, such fact shall always be explicitly stated
in the notice of dishonor or refusal to be given by the drawee bank.
c. Notwithstanding receipt of an order to stop payment from the drawer of check, the drawee bank shall state in the notice that there
were no sufficient funds in or credit with such bank for the payment in full of such check, if such be the fact.
d. The drawee bank report the act of issuance of worthless check to AMLC even if the amount does not exceed the quantitative
threshold to be considered covered transaction.

114. The introduction in evidence of any unpaid and dishonored check, having the drawee's refusal to pay stamped or written thereon or attached
thereto, with the reason therefor as aforesaid, shall be prima facie evidence of the following elements of crime of issuance of worthless checks,
except
a. The making or issuance of said check
b. The due presentment to the drawee bank of the check for payment and the dishonor thereof
c. The check same was properly dishonored for the reason written, stamped or attached by the drawee on such dishonored check.
d. The knowledge of the maker or drawer of the insufficiency of fund or credit of the check he issued.

115. Under BP 22, it shall be construed as an arrangement or understanding with the bank for the payment of such check.
a. Debit
b. Credit
c. Deposit
d. Account

116. What is the quantum of evidence required to sue or file a criminal case for criminal offense involving violation of BP 22 for issuance of
worthless checks?
a. Probable cause or prima facie evidence
b. Clear and convincing evidence
c. Preponderance of evidence
d. Proof beyond reasonable doubt

117. What is the quantum of evidence required for conviction of criminal offense involving violation of BP 22 for issuance of worthless checks?
a. Probable cause or prima facie evidence
b. Clear and convincing evidence
c. Preponderance of evidence
d. Proof beyond reasonable doubt

118. What is the quantum of evidence required for awarding of civil damages for issuance of worthless checks?
a. Probable cause or prima facie evidence
b. Clear and convincing evidence
c. Preponderance of evidence
d. Proof beyond reasonable doubt

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 119. In case of bouncing check issued in behalf of an artificial being or juridical person, who shall be criminally liable for imprisonment?
a. Juridical person
b. Corporate officer who signed the bouncing check
c. Both a and b
d. Neither A nor b

120. R.A. 3765 also known as Truth in Lending Act applies to:
a. Pawnshops
b. Small-loan money lenders
c. Both A and B
d. Neither A nor B

121. It refers to the affidavit that must be attached in the document evidencing the contract of chattel mortgage in order to bind or to prejudice
third persons. This affidavit in chattel mortgages states that the mortgagor and mortgagee do severally swear that the foregoing chattel
mortgage is made for the purpose of securing the obligation specified in the conditions thereof, and not for any other and that the same is a
just and valid obligation and not entered into for purposes of fraud.
a. Affidavit of Good Faith
b. Affidavit of Loss
c. Affidavit of Desistance
d. Affidavit of Recognition

-Nothing follows-

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 CPA REVIEW SCHOOL OF THE PHILIPPINES
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

COVERAGE: Cooperative Code

Direction: Read and select the best answer for the following questions.

1. What is the title of Republic Act No. 9520?

a. Philippine Cooperative Code of 2008
b. Cooperative Code of the Philippines of 2004
c. Cooperative Law of the Philippines of 2006
d. Philippine Cooperative Law of 2010

2. It is an autonomous and duly registered association of persons, with a common bond of interest, who have voluntarily
joined together to achieve their social, economic, and cultural needs and aspirations by making equitable
contributions to the capital required, patronizing their products and services and accepting a fair share of the risks
and benefits of the undertaking in accordance with universally accepted cooperative principles.
a. Corporation
b. Cooperative
c. Joint Venture
d. Association

3. Which of the following is not a cooperative principle?

a. Democratic Member Control
b. Autonomy and Independence
c. Involuntary and Close Membership
d. Concern for Community

4. Which of the following is not a cooperative principle?

a. Education, Training and Information
b. Cooperation among Cooperatives
c. Member Economic Participation
d. Taxability of Cooperatives

5. This cooperative principle means that Cooperatives are voluntary organizations, open to all persons able to use their
services and willing to accept the responsibilities of membership, without gender, social, racial, cultural, political or
religious discrimination.
a. Democratic Member Control
b. Voluntary and Open Membership
c. Autonomy and Independence
d. Concern for Community

6. It refers to the government agency created by Cooperative Code entrusted with the supervision and regulation of
cooperatives in the Philippines.
a. Securities and Exchange Commission (SEC)
b. Bangko Sentral ng Pilipinas (BSP)
c. Cooperative Development Authority (CDA)
d. Insurance Commission (IC)

7. It refers to a type of audit wherein the cooperative assesses its social impact and ethical performance vis-à-vis its
stated mission, vision, goals and code of social responsibility for cooperatives to be established by the CDA in
consultation with the cooperative sector.
a. Social Audit
b. Performance Audit
c. Financial Statements Audit
d. Compliance Audit

8. It refers to a type of audit on the efficiency and effectiveness of the cooperative as a whole; its management and
officers; and its various responsibility centers as basis for improving individual team or overall performance and for
objectively informing the general membership on such performance.
a. Social Audit
b. Performance Audit
c. Financial Statements Audit
d. Compliance Audit

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 9. It refers to a type of cooperative that is undertaking activities which are related to its main line of business or
purpose.
a. Single-Line or Single-Purpose Cooperative
b. Service Cooperative
c. Multi-Purpose Cooperative
d. Subsidiary Cooperative

10. It is a type of cooperative that promotes cooperativism among its members and the public through socially-oriented
projects, education and training, research and communication, and other similar activities to reach out to its intended
beneficiaries.
a. Education Cooperative
b. Advocacy Cooperative
c. Training Cooperative
d. Learning Cooperative

11. It is a type of cooperative that promotes and undertakes savings and lending services among its members. It
generates a common pool of funds in order to provide financial assistance to its members for productive and
provident purposes.
a. Insurance Cooperative
b. Credit Cooperative
c. Cooperative Bank
d. Financial service Cooperative

12. It is a type of cooperative that is organized for the primary purpose of engaging in savings and credit services and
other financial services.
a. Insurance Cooperative
b. Credit Cooperative
c. Cooperative Bank
d. Financial service Cooperative

13. It is a type of cooperative the primary purpose of which is to procure and distribute commodities to members and
non-members.
a. Marketing Cooperative
b. Producers Cooperative
c. Consumers Cooperative
d. Client Cooperative

14. It is a type of cooperative that combines two (2) or more of the business activities of these different types of
cooperatives.
a. Multi-purpose Cooperative
b. Single-line Cooperative
c. Dual-purpose Cooperative
d. No-purpose Cooperative

15. It is a type of cooperative the members of which are natural persons.

a. Primary Cooperative
b. Secondary Cooperative
c. Tertiary Cooperative
d. Intermediate Cooperative

16. It is a type of cooperative that engages in medical and dental care, hospitalization, transportation, insurance, housing,
labor, electric light and power, communication, professional and other services.
a. Consumers Cooperative
b. Producers Cooperative
c. Credit Cooperative
d. Service Cooperative

17. It is a type of cooperative organized for the primary purpose of undertaking power generations, utilizing renewable
energy sources, including hybrid systems, acquisition and operation of subtransmission or distribution to its
household members.
a. Electric Cooperative
b. Insurance Cooperative
c. Water Service Cooperative
d. Dairy Cooperative

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 18. It is a type of cooperative organized to assist or provide access to housing for the benefit of its regular members who
actively participate in the savings program for housing. It is co-owned and controlled by its members.
a. Transport Cooperative
b. Housing Cooperative
c. Workers Cooperative
d. Fishermen Cooperative

19. It is a type of cooperative organized by workers, including the self-employed, who are at same time the members and
owners of the enterprise. Its principal purpose is to provide employment and business opportunities to its members
and manage it in accordance with cooperative principles
a. Transport Cooperative
b. Housing Cooperative
c. Workers Cooperative
d. Fishermen Cooperative

20. It is a type of cooperative whose members are engaged in the production of fresh milk which may be processed
and/or marketed as dairy products.
a. Dairy Cooperative
b. Meat Cooperative
c. Vegetable Cooperative
d. Fruits Cooperative

21. The following are the purposes of a cooperative, except

a. To encourage thrift and savings mobilization among the members
b. To generate funds and extend credit to the members for productive and provident purposes
c. To encourage among members systematic production and marketing
d. To promote monopoly and restraint of trade

22. Which of the following is a purpose of a cooperative?

a. To promote and advance the economic, social and educational status of the members
b. To discriminate against non-members of a cooperative
c. To discourage self-help or self-employment as an engine for economic growth and poverty alleviation
d. To provide goods and services and other requirements to the non-members

23. Which of the following is the purpose of a cooperative?

a. To encourage thrift and savings mobilization among the members
b. To maximize the control of wealthy people of businesses
c. To acquire land for development as condominium projects for commercial purposes
d. To advocate strike, rally and boycott

24. Which of the following is not a purpose of a cooperative?

a. To promote and advance the economic, social and educational status of the members
b. To encourage and promote self-help or self-employment as an engine for economic growth and poverty
alleviation
c. To generate funds and extend credit to the members for productive and provident purposes;
d. To create monopoly or business considered as restraint of trade

25. Which of the following is an objective of a cooperative?

a. To provide goods and services to its members to enable them to attain increased income, savings,
investments, productivity, and purchasing power, and promote among themselves equitable distribution of
net surplus through maximum utilization of economies of scale, cost-sharing and risk-sharing
b. To teach members of inefficient ways of doing things in a cooperative manner
c. To allow the higher income and more privileged groups to increase their ownership in the wealth of the
nation
d. To provide minimal social and economic benefits to its members

26. The following are the functions of a Federation of Cooperatives, except

a. To carry on any cooperative enterprise that complements augments, or supplements but does not conflict,
complete with, nor supplant the business or economic activities of its member cooperatives.
b. To carry on, encourage, and assist educational and advisory work relating to its member cooperatives.
c. To render services designed to encourage simplicity, efficiency, and economy in the conduct of the business
of its member cooperatives and to facilitate the implementation of their bookkeeping, accounting, and other
systems and procedures.
d. To print, publish, and circulate any newspaper or other publication in the interest of its member cooperatives
and enterprises.
e. To coordinate and facilitate the activities of its member cooperatives.
f. To develop the cooperative movement in their respective jurisdictions.

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 27. The following are the purposes of Cooperative Unions, except
a. To represent its member organizations.
b. To acquire, analyze, and disseminate, economic, statistical, and other information relating to its members and
to all types of cooperatives within its area of operation.
c. To sponsor studies in the economic, legal, financial, social and other phases of cooperation, and publish the
results thereof.
d. To develop the cooperative movement in their respective jurisdictions.
e. To advise the appropriate authorities on all questions relating to cooperatives.
f. To raise funds through membership fees, dues and contributions, donations, and subsidies from local and
foreign sources whether private or government.
g. To enter into joint ventures with national or international cooperatives of other countries in the manufacture
and sale of products and/or services in the Philippines and abroad.

28. Which of the following statements is true if a cooperative complies with the provisions of Philippine Cooperative
Code of 2008?
a. Such cooperative shall be deemed a conspiracy or combination in restraint of trade.
b. Such cooperative shall be implied an illegal monopoly.
c. Such cooperative shall be considered an attempt to lessen competition or to fix price arbitrarily.
d. None of the above.

29. The following are the qualifications of organizers or cooperators of a prospective cooperative, except
a. They are 15 or more natural persons.
b. They are all Filipino citizens.
c. They are all actually residing or working in the intended area of operation.
d. They have a common bond of interest.
e. They must be incapacitated persons.

30. What is the number of cooperators or founders of a primary cooperative?

a. 15 or more natural persons
b. Not less than 5 but not more than 15 natural persons
c. 5 but not more than 10 natural persons
d. 10 or more natural persons

31. What is the maximum foreign investment or ownership in a cooperative?

a. 100%
b. 40%
c. 30%
d. 0%

32. It shall refer to a cooperative duly recognized by the Authority, formed and managed principally by minors and is
affiliated with another registered cooperative which is called the guardian cooperative.
a. Laboratory Cooperative
b. Guardian Cooperative
c. Student Cooperative
d. Youth Cooperative

33. The following are the purposes of laboratory cooperative, except

a. To serve as a training ground for its members to prepare them for membership in regular cooperatives
b. To teach the value of thrift and saving mobilization among its members
c. To instil cooperative values, principles, financial discipline and leadership skills among its members
d. To promote and advance Filipino social and cultural values, ecological awareness and sustainable
development.
e. To accumulate or to raise fund for the setting of guardian cooperative

34. It shall refer to duly registered cooperative to which a laboratory cooperative is affiliated with.
a. Laboratory Cooperative
b. Guardian Cooperative
c. Student Cooperative
d. Youth Cooperative

35. The following are the qualifications of organizers or founders of a laboratory cooperative, except
a. Fifteen (15) or more minors
b. They are all Filipino citizens.
c. They are actually residing in the community or enrolled in an educational institution within or near the area
of operation of the Guardian Cooperative or out of school minor actually residing in the community.
d. They are all gainfully employed.

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 36. What is the age of members of laboratory cooperative?
a. At least 7 years old but below 18 years of age
b. At least 12 years old but below 18 years of age
c. At least 15 years old but below 18 years of age
d. At least 10 years old but below 18 years of age

37. What is the minimum years of operation of a single-purpose cooperative in order to transform into a multi-purpose
cooperative or in order for a single-purpose cooperative to create a subsidiary cooperative?
a. At least one year of operations
b. At least two years of operations
c. At least three years of operations
d. At least four years of operations

38. It refers to the document signed and acknowledged before a notary public by the organizers of a cooperative that will
be filed to CDA in order for the prospective cooperative to be created.
a. Articles of Co-Partnership
b. Articles of Cooperation
c. Articles of Incorporation
d. Articles of Association

39. Each cooperative to be registered before CDA shall adopt by-laws not inconsistent with the provisions of Cooperative
Code. When shall the cooperative by-laws be filed to the CDA?
a. Within 30 days from the issuance of CDA of Certificate of Registration of the Cooperative
b. Within 20 days from the issuance of CDA of Certificate of Registration of the Cooperative
c. Within 10 days from the issuance of CDA of Certificate of Registration of the Cooperative
d. At the same time the Articles of Cooperation is submitted to the CDA.

40. What is the minimum prescriptive period to lapse from the filing of application for registration as a new cooperative
for the inaction of CDA to be considered an implied approval of the registration?
a. At least 30 days
b. At least 60 days
c. At least 90 days
d. At least 120 days

41. What is the minimum prescriptive period to lapse from the filing of application for amendment of articles of
cooperation or by laws for the inaction of CDA to be considered an implied approval of the amendment?
a. At least 30 days
b. At least 60 days
c. At least 90 days
d. At least 120 days

42. When shall the amendments of Articles of Cooperation and By-Laws of the Cooperative take effect?
a. Upon its approval by the CDA or
b. Upon the lapse of 30 days from law f the date of filing amendment of articles or cooperation or by-laws if not
acted upon by the CDA for a cause not attributable to the cooperative.
c. Either A or B
d. Neither A nor B

43. What is the minimum subscribed shares before a prospective cooperative be registered with CDA?
a. At least 25% of authorized share capital
b. At least 1/3 of authorized share capital
c. At least ¾ of authorized share capital
d. At least majority of authorized share capital

44. What is the minimum paid-up capital before a prospective cooperative be registered with CDA?
a. At least 25% of the actual total subscription or P5,000, whichever is higher.
b. At least 25% of the actual total subscription or P15,000, whichever is higher.
c. At least 50% of the actual total subscription or P5,000, whichever is higher.
d. At least 75% of the actual total subscription or P15,000, whichever is higher.

45. What is the voting requirement for registration or formation of an electric cooperative with Cooperative
Development Authority?
a. At least 20% of all members in good standing
b. At least 25% of all members in good standing
c. At least 5% of all members in good standing
d. At least 10% of all members in good standing

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 46. When does a cooperative formed and organized under Cooperative Code acquire juridical personality?
a. From the date of execution of Articles of Cooperation by the members.
b. From the date of submission of Articles of Cooperation to CDA.
c. From the date of issuance by CDA of Certificate of Registration under its official seal.
d. From the date of meeting of minds among the members.

47. What is a conclusive evidence of juridical personality of a cooperative and its due registration with CDA unless it is
proved that such registration has been cancelled?
a. Articles of Cooperation signed by the members
b. Cooperative By-laws signed by the members
c. Certificate of Registration issued by CDA under its official seal
d. Certificate of Registration issued by BIR under its official seal

48. What is the required vote for amendment of the provisions of Articles of Cooperation of a Cooperative?
a. At least 2/3 of all members with voting rights
b. At least 2/3 of all regular members and associate members
c. At least majority of all members with voting rights
d. At least ¾ of all members with voting rights

49. What is the required vote for amendment of the provisions of By-Laws of a Cooperative?
a. At least 2/3 of all members with voting rights
b. At least 2/3 of all regular members and associate members
c. At least majority of all members with voting rights
d. At least ¾ of all members with voting rights

50. What is the nature of liability of Cooperative duly registered under CDA?
a. Absolute liability
b. Unlimited liability
c. Limited liability
d. Supreme liability

51. What is the term of a cooperative?

a. A cooperative shall exist for a term no exceeding 20 years from the date of registration unless sooner
dissolve or unless said period is extended but the term is subject to unlimited renewals at a period not
exceeding 20 years in any single instance provided that no extension can be made earlier than 2 years prior
to the original or subsequent expiry date/dates unless there are justifiable reasons for an earlier extension as
may be determined by CDA.
b. A cooperative shall exist for a term not exceeding 30 years from the date of registration unless sooner
dissolve or unless said period is extended but the term is subject to unlimited renewals at a period not
exceeding 30 years in any single instance provided that no extension can be made earlier than 3 years prior
to the original or subsequent expiry date/dates unless there are justifiable reasons for an earlier extension as
may be determined by CDA.
c. A cooperative shall exist for a term not exceeding 40 years from the date of registration unless sooner
dissolve or unless said period is extended but the term is subject to unlimited renewals at a period not
exceeding 40 years in any single instance provided that no extension can be made earlier than 4 years prior
to the original or subsequent expiry date/dates unless there are justifiable reasons for an earlier extension as
may be determined by CDA.
d. A cooperative shall exist for a term not exceeding 50 years from the date of registration unless sooner
dissolve or unless said period is extended but the term is subject to unlimited renewals at a period not
exceeding 50 years in any single instance provided that no extension can be made earlier than 5 years prior
to the original or subsequent expiry date/dates unless there are justifiable reasons for an earlier extension as
may be determined by CDA.

52. He is a type of a cooperative member who has complied with all the membership requirements and entitled to all the
rights and privileges of membership. Common shares shall only be issued to this type of member. Therefore, this type
of member may invest in common shares and/or preferred shares.
a. Regular member
b. Common member
c. Ordinary member
d. Normal member

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 53. He is a type of a cooperative member who has no right to vote nor be voted upon and shall be entitled only to such
rights and privileges as the bylaws may provide. This type of member can only invest in preferred share.
a. Associate member
b. Probationary member
c. Preferred member
d. Extraordinary member

54. What is the required vote for the termination of a membership in a cooperative for any of the valid causes enumerated
by Cooperative Code?
a. At least 2/3 of all the members of the cooperative with right to vote
b. At least ¾ of all the members of the cooperative with right to vote
c. At least ¾ of all the members of the board of directors of the cooperative
d. At least majority of all the members of the board of directors of the cooperative

55. The following are the requirements before an associate member shall be considered a regular member, except
a. He has met the minimum requirements of regular membership.
b. He continues to patronize the cooperative for at least two years.
c. He signifies his intention to remain a member.
d. He has been elected a director of the cooperative.

56. What is the extent or nature of liability of a member of a cooperative for the latter’s debts to third persons?
a. He is liable prorata and subsidiarily up to the extent of his separate assets.
b. He is liable solidarily and subsidiaraly up to the extent of his separate assets.
c. He is liable up to the extent of his contribution to the share capital of the cooperative.
d. He is liable equally and subsidiarily up to the extent of his separate assets.

57. What is the minimum number of days of giving notice to the board of directors before a member may withdraw his
membership from the cooperative for any valid reason?
a. 60 days notice
b. 30 days notice
c. 90 days notice
d. 120 days notice

58. What is the right of a withdrawing member of a cooperative?

a. He shall be entitled to a refund of his share capital all other interests in the cooperative.
b. He shall be entitled to a refund of his share capital only.
c. He shall be entitled to a refund of the fair market value of his share capital.
d. He shall not be entitled to any refund.

59. What is the capital structure of a cooperative before a refund be given to a withdrawing member?
a. The value of the assets of the cooperative must be equal its liabilities before the refunding.
b. The value of the assets of the cooperative must be equal or exceed its liabilities after the refunding.
c. The value of the assets of the cooperative must be less than its liabilities before the refunding.
d. The value of the assets of the cooperative must be less than its liabilities after the refunding.

60. Which of the following may be considered ground for termination of membership of a member in a primary
cooperative?
a. Death of a member
b. Insanity of a member
c. Either A or B
d. Neither A nor B

61. Which of the following may be considered ground for termination of membership of a member in a secondary or
tertiary cooperative?
a. Insolvency of a cooperative member
b. Dissolution of a cooperative member
c. Either A or B
d. Neither A nor B

62. What is the required vote for termination of membership of a member of a cooperative?
a. At least majority vote of all members of board of directors
b. At least majority vote of all members of board of directors and ratification by at least 2/3 of cooperative
members with voting rights
c. At least majority vote of all members of board of directors and ratification by at least 3/4 of cooperative
members with voting rights
d. At least ¾ vote of all cooperative members with voting rights

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 63. The following are grounds for termination of membership of a member in a cooperative, except
a. When a member has not patronized any of the services of the cooperative for an unreasonable period of time
as may be previously determined by the board of directors.
b. When a member has continuously failed to comply with his obligations.
c. When a member has acted in violation of the bylaws and the rules of the cooperative.
d. For any act or omission injurious or prejudicial to the interest or the welfare of the cooperative.
e. When a member of a cooperative engages in another employment or business.

64. It shall be the highest policy-making body of the cooperative and shall exercise such powers as are stated in the
Cooperative Code, in the articles of cooperation and in the bylaws of the cooperative.
a. General Assembly
b. Board of Directors
c. Board of Trustees
d. Executive Committee

65. What is the composition of General Assembly of the cooperative?

a. The general assembly shall be composed of such members who are entitled to vote under the articles of
cooperation and bylaws of the cooperative.
b. The general assembly shall be composed of regular members and associate members.
c. The general assembly shall be composed of associate members.
d. The general assembly shall be composed all members whether with voting rights or without voting rights.

66. The General Assembly may delegate some cooperative powers to the Board of Directors. However, the following are
exclusive powers that cannot be delegated by General Assembly to the Board of Directors, except
a. To determine and approve amendments to the articles of cooperation and bylaws.
b. To elect or appoint the members of the board of directors, and to remove them for cause.
c. To approve developmental plans of the cooperative.
d. To determine the strategic planning, direction-setting and policy-formulation activities of the cooperatives.

67. What is the required vote for the valid delegation by the General Assembly of some of its delegable powers to a
smaller body of the cooperative for purposes of prompt and intelligent decision-making?
a. At least three-fourths (3/4) vote of all its members with voting rights, present and constituting a quorum.
b. At least three-fourths (3/4) vote of all its members, present and constituting a quorum.
c. At least three-fourths (2/3) vote of all its members with voting rights, present and constituting a quorum.
d. At least three-fourths (2/3) vote of all its members, present and constituting a quorum.

68. How often shall the regular meeting by the general assembly of a cooperative be held?
a. At least annually
b. At least monthly
c. At least quarterly
d. At least weekly

69. In the absence of a date fixed in the cooperative by-laws, when shall the regular meeting by the general assembly of
the cooperative be held?
a. Any date within 90 days after the close of each fiscal year
b. Any day of April
c. April 15
d. Any day of December

70. What is the quorum in the meeting of the general assembly of an ordinary cooperative?
a. At least majority of all the members entitled to vote
b. At least 25% of all the members entitled to vote
c. At least ¾ of all the members entitled to vote
d. At least 5% of all the members entitled to vote

71. What is the quorum in the meeting of the general assembly of an electric cooperative?
a. At least majority of all the members entitled to vote
b. At least 25% of all the members entitled to vote
c. At least ¾ of all the members entitled to vote
d. At least 5% of all the members entitled to vote

72. As a general rule, what is the quorum in the regular or special meeting of general assembly of a cooperative bank?
a. At least one half plus one of the number of voting shares of all the members in good standing
b. At least 25% of all members entitled to vote
c. At least 5% of all members entitled to vote
d. At least 3/4 of all members with voting rights present and constituting a quorum

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 73. As an exception to general rule of quorum in a cooperative bank, what is the quorum in the meeting of general
assembly of a cooperative bank for the amendment of its articles of cooperation or by-laws?
a. At least one half plus one of the number of voting shares of all the members in good standing
b. At least 25% of all members entitled to vote
c. At least 5% of all members entitled to vote
d. At least 3/4 of all members with voting rights present and constituting a quorum

74. What is the number of vote that a regular member of a primary cooperative has?
a. Only one vote
b. Based on the number of shares held
c. Number of shares held multiplied by sits in Board of Directors
d. None

75. What is the voting rights of the members of a cooperative bank?

a. Each individual member shall have only one vote.
b. The voting rights of the members shall be proportionate to the number of their paid-up shares.
c. Each individual member shall have one (1) basic vote and as many incentive votes as provided for in the
bylaws but not exceed five (5) votes.
d. Each individual member shall have five (5) basic votes.

76. What is the number of vote that member cooperatives of a secondary or tertiary cooperative have?
a. They shall have one (1) basic vote and as many incentive votes as provided for in the bylaws but not exceed
five (5) votes.
b. They shall have two (2) basic votes and as many incentive votes as provided for in the bylaws but not exceed
ten (10) votes.
c. They shall have three (3) basic votes and as many incentive votes as provided for in the bylaws but not
exceed fifteen (15) votes.
d. They shall have four (4) basic vote and as many incentive votes as provided for in the bylaws but not exceed
twenty (20) votes.

77. It shall be the body in a cooperative responsible for the strategic planning, direction-setting and policy-formulation
activities of the cooperatives.
a. General Assembly
b. Board of Directors
c. Board of Trustees
d. Executive Committee

78. What is the composition of board of directors of a cooperative?

a. not less than (5) nor more than (15) members
b. not less than (3) nor more than (12) members
c. not less than (4) nor more than (10) members
d. not less than (10) nor more than (25) members

79. What is the term of office of directors of a cooperative?

a. One year
b. Two years
c. Three years
d. Five years

80. What is the quorum necessary for validity of meeting of Board of Directors of ordinary cooperative?
a. At least majority of the members of the Board unless the bylaws provide otherwise
b. One-half plus one of all the members of the board of directors
c. At least 3/4 of the members of the Board unless the bylaws provide otherwise
d. At least 2/3 of the members of the Board unless the bylaws provide otherwise

81. What is the quorum necessary for validity of meeting of Board of Directors of cooperative bank?
a. At least majority of the members of the Board unless the bylaws provide otherwise
b. One-half plus one of all the members of the board of directors
c. At least 3/4 of the members of the Board unless the bylaws provide otherwise
d. At least 2/3 of the members of the Board unless the bylaws provide otherwise

82. The members of the board of directors of a cooperative shall not hold any other position directly involved in the day
to day operation and management of the cooperative. Which of the following positions in a cooperative may be held
concurrently of a director of a cooperative?
a. Chairman or Vice-chairman of the Board of Directors of the Cooperative
b. President of the Cooperative
c. Secretary of the Cooperative
d. Treasurer of the Cooperative

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 83. What reason of vacancy in the Board of Directors of a cooperative will disqualify the remaining directors despite
constituting quorum to fill-up the vacancy, thus, requiring the general assembly to fill-up such vacancy?
a. Expiration of term of a director
b. Death of a director
c. Disqualification of a director
d. Resignation or abandonment of office by a director

84. There are ten sits in the Board of Directors of a particular cooperative. Three sits are vacant due to death, resignation
and disqualification of a director. How may the three vacancies be filled-up?
a. By the vote of at least a majority of the remaining directors, if still constituting a quorum
b. By the general assembly in a regular or special meeting called for the purpose
c. Either A or B
d. Neither A nor B

85. There are nine sits in the Board of Directors of a particular cooperative. Five sits are vacant due to death, resignation,
abandonment, disqualification or removal of a director. How shall the five vacancies be filled-up?
a. By the vote of at least a majority of the remaining directors even not constituting quorum
b. By the general assembly in a regular or special meeting called for the purpose
c. Either A or B
d. Neither A nor B

86. There are five sits in the Board of Directors of a particular cooperative. One sit is vacant due to expiration of term of
such director. How shall the vacancy be filled-up?
a. By the vote of at least a majority of the remaining directors, if still constituting a quorum
b. By the general assembly in a regular or special meeting called for the purpose
c. Either A or B
d. Neither A nor B

87. How may an executive committee in a cooperative be created?

a. By provision in the by-laws
b. By mere resolution of board of directors despite no authorization in the by-laws
c. Either A or B
d. Neither A nor B

88. How may the powers of the executive committee in a cooperative be delegated to it?
a. By provision in the by-laws
b. By a majority vote of all the members of the board of directors
c. Either A or B
d. Neither A nor B
89. As a general rule, the directors, officers and committee members are not personally liable for the liabilities of the
cooperative. The following are the exceptional cases wherein directors, officers and committee members shall be
liable jointly and severally for all damages or profits resulting therefrom to the cooperative, members, and other
persons, except
a. They willfully and knowingly vote for or assent to patently unlawful acts.
b. They are guilty of gross negligence or bad faith in directing the affairs of the cooperative.
c. They acquire any personal or pecuniary interest in conflict with their duty as such directors, officers or
committee members.
d. They exercise business judgment bona fide to operate the cooperative.

90. In the absence of provision in the by-laws fixing their compensation, to what extent of benefits are directors of a
cooperative entitled to?
a. Reasonable per diems
b. Compensation
c. Salary
d. Employee benefits

91. What is the required vote in order for directors of a cooperative to be exceptionally entitled to compensation other
than reasonable per diems?
a. At least majority vote of the members with voting rights
b. At least 2/3 vote of the members with voting rights
c. At least 3/4 vote of the members with voting rights
d. Unanimous vote of the members with voting rights

92. In case there is a provision in the by-laws fixing compensation of directors, to what extent of benefits are directors of
a cooperative entitled to during the first year of existence of any cooperative?
a. Reasonable per diems
b. Compensation
c. Both A and B
d. Neither A nor B

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 93. In case there is a provision in the by-laws fixing compensation of directors, to what extent of benefits are directors of
a cooperative entitled in the current year when the cooperative reported net loss in the preceding year or when the
cooperative reported a dividend rate less than the official inflation rate for the same year?
a. Reasonable per diems
b. Compensation
c. Both A and B
d. Neither A nor B

94. When are the directors of a cooperative not entitled to any reasonable per diems and compensation?
a. When the cooperative reported net loss in the preceding year
b. When the cooperative reported a dividend rate less than the official inflation rate for the same year
c. Either A or B
d. Neither A nor B

95. How shall the compensation of officers of cooperatives as well as members of the committees be fixed?
a. It may be fixed in the bylaws.
b. It must be fixed by at least majority vote of the members with voting rights.
c. It must be fixed by at least majority vote of the members of board of directors.
d. It must be provided in the articles of cooperation.

96. How shall the compensation of other employees of cooperatives be fixed?

a. It may be fixed in the bylaws.
b. It must be fixed by at least majority vote of the members with voting rights.
c. It must be fixed by at least majority vote of the members with and without voting rights.
d. It may be fixed by at least majority vote of the members of board of directors present in a meeting with
quorum.

97. How often shall the regular meeting of the board of directors of a primary cooperative be held?
a. At least monthly
b. At least weekly
c. At least annually
d. At least quarterly

98. The following are considered valid grounds for removal of an officer of a cooperative, except
a. Mere loss of confidence
b. Loss of confidence in the honesty and integrity as evidenced by acts or omissions
c. Such officer has a relative within third civil degree of consanguinity or affinity who is also an officer of the
same cooperative.
d. Such officer has conflict of interest with employing cooperative.
e. Such officer is engaged in a business similar to that of his employing cooperative.

99. As a general rule, what is the status of contract entered into by the cooperative with one or more of its directors,
officers or committee members also known as contract with self-dealing directors or officers?
a. Voidable on the part of the cooperative
b. Unenforceable
c. Void
d. Rescissible

100. What is the required vote for ratification of voidable contract entered by a cooperative with a self-dealing director?
a. At least 2/3 of members with voting rights, present and constituting a quorum
b. At least 3/4 of members with voting rights, present and constituting a quorum
c. At least majority of members with voting rights, present and constituting a quorum
d. At least 25% of members with voting rights, present and constituting a quorum

101. The cooperative has 15 sits in the board of directors. A contract with a self-dealing director will be the subject
matter of the meeting of the board of directors. In which of the following scenarios will the contract with such self-
dealing directors be considered perfectly valid even without ratification by members?
Present directors including self-dealing director Approving present directors including self-dealing
director
a. 9 directors 5 directors
b. 8 directors 6 directors
c. 11 directors 6 directors
d. 9 directors 6 directors

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 102. What is the liability or obligation of a director of a cooperative who by virtue of his office, acquires for himself an
opportunity which should belong to the cooperative?
a. He shall be liable but only up to the extent of his capital contribution.
b. He shall be liable but only up to the extent of his compensation and reasonable per diems.
c. He shall be liable for damages and must account for double the profits that otherwise would have accrued to
the cooperative by refunding the same.
d. He shall be liable for damages and must account for the profits that otherwise would have accrued to the
cooperative by refunding the same.

103. What is the required vote for ratification of acquisition made by a director of a cooperative who by virtue of his
office, acquires for himself an opportunity which should belong to the cooperative?
a. At least 2/3 of members with voting rights, present and constituting a quorum
b. At least 3/4 of members with voting rights, present and constituting a quorum
c. At least majority of members with voting rights, present and constituting a quorum
d. At least 25% of members with voting rights, present and constituting a quorum

104. What is the liability of a director or officer, or an associate of a director or officer, who, for his benefit or advantage
or that of an associate, makes use of confidential information that, if generally known, might reasonably be expected
to adversely affect the operation and viability of the cooperative?
a. Such director or officer shall be liable to compensate the cooperative for the direct losses suffered by the
cooperative as a result of the illegal use of information.
b. Such director or officer shall be accountable to the cooperative for any direct benefit or advantage received or
yet to be received by him or his associate, as a result of the transaction.
c. Both A and B.
d. Neither A nor B.

105. What is the required vote for removal of an officer or a director of a cooperative?
a. At least 2/3 of members with voting rights, present and constituting a quorum
b. At least 3/4 of members with voting rights, present and constituting a quorum
c. At least majority of members with voting rights, present and constituting a quorum
d. At least 25% of members with voting rights, present and constituting a quorum

106. Which of the following are disqualified to be an appointed officer of a cooperative?

a. Two (2) or more persons with relationships up to the third civil degree of consanguinity or affinity
b. Any person engaged in a business similar to that of the cooperative nor who in any other manner has
interests in conflict with the cooperative
c. Either A or B
d. Neither A nor B

107. Up to what civil degree of consanguinity or affinity shall two or more persons be disqualified from being appointed
officers of a cooperative?
a. Up to third civil degree of consanguinity or affinity
b. Up to second civil degree of consanguinity or affinity
c. Up to first civil degree of consanguinity or affinity
d. Up to fourth civil degree of consanguinity or affinity

108. What type of cooperative is absolutely exempted from all taxes and fees imposed by national internal revenue taxes
and other tax laws even without qualification?
a. Duly registered cooperative with CDA that does not transact business with non-members or the general
public.
b. Duly registered cooperative with CDA that transacts business with members, non-members and the general
public.
c. Duly registered cooperative with CDA with accumulated reserves and undivided net savings of not more
than P10,000,000.
d. Duly registered cooperative with CDA with accumulated reserves and undivided net savings of more than
P10,000,000.

109. In what type of transaction will a cooperative transacting with both members and non-members be absolutely
exempted from national tax and local even without qualification?
a. Transaction of cooperative with the general public.
b. Transaction of cooperative with non-members.
c. Transaction of cooperative with their members.
d. All of the above.

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 110. What type of cooperative dealing with nonmembers shall enjoy the tax exemption from all national, city, provincial,
municipal or barangay taxes of whatever name and nature and customs duties, advance sales or compensating taxes
on their importation of machineries, equipment and spare parts used by them and which are not available locally a
certified by the department of trade and industry?
a. Duly registered cooperative with CDA with accumulated reserves and undivided net savings of not more
than P10,000,000.
b. Duly registered cooperative with CDA with accumulated reserves and undivided net savings of not more
than P20,000,000.
c. Duly registered cooperative with CDA with accumulated reserves and undivided net savings of not more
than P30,000,000.
d. Duly registered cooperative with CDA with accumulated reserves and undivided net savings of more than
P40,000,000.

111. The following are the types of taxes or custom duties will a cooperative dealing with nonmembers with accumulated
reserves and undivided net savings of not more than P10,000,000 be exempted, except
a. All national taxes
b. All provincial, city, municipal and barangay taxes
c. Customs duties, advance sales or compensating taxes on their importation of machineries, equipment and
spare parts used by them and which are not available locally a certified by the department of trade and
industry
d. All customs duties and tariffs

112. In which type of taxes will a cooperative dealing with nonmembers with accumulated reserves and undivided net
savings of more than P10,000,000 be exempted?
a. Income tax
b. Value added tax
c. Local tax and national tax on transaction with banks and insurance companies
d. All other tax unless otherwise exempted by Cooperative Code

113. The following statements concerning other privileges given by Cooperative Code to cooperatives duly registered
with CDA are correct, except
a. In areas where there are no available notaries public, the judge, exercising his ex officio capacity as notary
public, shall render service, free of charge, to any person or group of persons requiring the administration of
oath or the acknowledgment of articles of cooperation and instruments of loan from cooperatives not
exceeding Five Hundred Thousand Pesos (P500,000.000.
b. Any register of deeds shall accept for registration, free of charge, any instrument relative to a loan made
under this Code which does not exceed Two Hundred Fifty Thousand Pesos (P250,000.00) or the deeds of
title of any property acquired by the cooperative or any paper or document drawn in connection with any
action brought by the cooperative or with any court judgment rendered in its favor or any instrument
relative to a bond of any accountable officer of a cooperative for the faithful performance of his duties and
obligations.
c. Cooperatives shall be exempt from the payment of all court and sheriff’s fees payable to the Philippine
Government for and in connection with all actions brought under Cooperative Code, or where such actions is
brought by the CDA before the court, to enforce the payment of obligations contracted in favor of the
cooperative
d. All cooperatives shall be exempt from putting up a bond for bringing an appeal against the decision of an
inferior court or for seeking to set aside any third party claim: Provided, That a certification of the CDA
showing that the net assets of the cooperative are in excess of the amount of the bond required by the court
in similar cases shall be accepted by the court as a sufficient bond.
e. Any security issued by cooperatives shall be exempted from the provisions of the Securities Regulation Code
even those securities which are considered to be speculative.

114. If the dissolution of a cooperative does not prejudice the rights of any creditor having a claim against it, what is the
proper procedure for voluntary dissolution of a cooperative?
a. By submitting a resolution duly adopted by Board of Directors and members to CDA.
b. By filing a petition for dissolution with CDA.
c. By filing a petition for dissolution with RTC.
d. By filing a petition for dissolution with SEC.

115. If the dissolution of a cooperative prejudices or affects the rights of any creditor having a claim against it, what is
the proper procedure for voluntary dissolution of a cooperative?
a. By submitting a resolution duly adopted by Board of Directors and members to CDA.
b. By filing a petition for dissolution with CDA.
c. By filing a petition for dissolution with RTC.
d. By filing a petition for dissolution with SEC.

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 116. What is the required vote for the voluntary dissolution of a cooperative?
a. By at least majority vote of the board of directors and by a resolution duly adopted by the affirmative vote of
at least 2/3 of all members with voting rights, present and constituting a quorum
b. By at least majority vote of the board of directors and by a resolution duly adopted by the affirmative vote of
at least 3/4 of all members with voting rights, present and constituting a quorum
c. By at least majority vote of the board of directors and by a resolution duly adopted by the affirmative vote of
at least majority of all members with voting rights, present and constituting a quorum
d. By at least majority vote of the board of directors and by a resolution duly adopted by the affirmative vote of
at least 25% of all members with voting rights, present and constituting a quorum

117. The following are valid grounds for involuntary dissolution of a cooperative by order of a competent court after due
hearing, except
a. Violation of any law or rules and regulations
b. Violation of the cooperative's by laws
c. Insolvency of the cooperative
d. Incurring net loss in the cooperative's operation

118. The following are valid grounds for suspension or revocation, after due notice and hearing, of certificate of
registration of a cooperative by Cooperative Development Authority (CDA), except
a. The cooperative has obtained its certificate of registration by fraud.
b. The cooperative is existing for an illegal purpose.
c. The cooperative willfully violated any of the provisions of Cooperative Code or its by laws despite notice
given by CDA.
d. The cooperative willfully failed to operate on a cooperative basis.
e. The cooperative failed to meet the required number of members in the cooperative.
f. The cooperative created a subsidiary cooperative after two years of operation.

119. What are the modes of dissolution of a cooperative?

a. By the expiration of its charter or certificate of registration for failure to renew its term on the deadline
provided by law.
b. By termination of its existence through voluntary dissolution.
c. By termination of its existence through an appropriate judicial proceeding also known as involuntary
dissolution.
d. Any of the above.

120. After the dissolution of a cooperative through any of the modes provided by Cooperative Code, what is the
maximum period provided by Cooperative Code for the liquidation of the dissolved cooperative?
a. For three years from the time it is dissolved.
b. For two years from the time it is dissolved.
c. For one year from the time it is dissolved.
d. For four years from the time it is dissolved.

121. The following transactions may be done by a dissolved cooperative during the three-year liquidation period, except
a. Prosecuting and defending suits by or against it.
b. Continuing business for which it was established.
c. Settling and closing its affairs.
d. Disposing, conveying and distributing of its properties and assets to creditors and members.

122. In the winding up or liquidation of a cooperative, to whom shall any cooperative's asset distributable to any
creditor, shareholder or member who is unknown or cannot be found be given?
a. To the city or municipality where the asset is located
b. To the federation or union to which the cooperative is affiliated with
c. It will be escheated in favor of the Republic of the Philippines.
d. To the members of the cooperative

123. In the winding up or liquidation of a cooperative, what will happen to the subsidies, donations, legacies, grants, aids
and such other assistance from any local or foreign institution whether public or private given to such dissolved
cooperative?
a. It will be given to city or municipality where the asset is located.
b. It will be given to federation or union to which the cooperative is affiliated with.
c. It will be escheated in favor of the Republic of the Philippines.
d. It will be given to the members of the cooperative.

124. It refers to a union of two or more existing cooperatives belonging to the same category whereby the surviving
cooperative, retaining its identity, absorbs one or more constituent cooperatives.
a. Consolidation
b. Business combination
c. Merger
d. Quasi-reorganization

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 125. What is the required vote for the validity of merger of two or more cooperatives?
a. At least 2/3 of members with voting rights, present and constituting a quorum
b. At least 3/4 of members with voting rights, present and constituting a quorum
c. At least majority of members with voting rights, present and constituting a quorum
d. At least 25% of members with voting rights, present and constituting a quorum

126. What is the required vote for division of cooperative to two or more cooperatives?
a. At least 3/4 of all the members with voting rights, present and constituting a quorum
b. At least 1/3 of all the members with voting rights, present and constituting a quorum
c. At least 2/3 of all the members with voting rights, present and constituting a quorum
d. At least majority of all the members with voting rights, present and constituting a quorum

127. The following are the sources of capital, property and funds of a cooperative, except
a. Member's share capital consisting of common shares and/or preferred shares
b. Loans and borrowings including deposits
c. Revolving capital which consists of the deferred payment of patronage refunds, or interest on share capital
d. Subsidies, donations, legacies, grants, aids and such other assistance from any local or foreign institution
whether public or private
e. Investment or capital contribution by stockholder

128. What are the types of share capital in a cooperative?

a. Common shares
b. Preferred shares
c. Both a and b
d. Neither a nor b

129. To what type of members of cooperative may common shares be issued?

a. Regular members
b. Associate members
c. Either a or b
d. Neither a nor b

130. Which of the following statements about common shares in a cooperative is correct?
a. Its holders shall be entitled to vote and be voted under the principle of one-man, one vote principle.
b. Its holders shall receive interest, the rate which should not exceeded the normal rate on investment.
c. Either a or b
d. Neither a nor b

131. To what type of members of cooperative may preferred shares be issued?

a. Regular members
b. Associate members
c. Either a or b
d. Neither a nor b

132. Which of the following statements about preference share holders (associate members) in a cooperative is correct?
a. Issuance and limitation on Preferred Share Capital shall be prescribed in the By-laws of the cooperative
b. Associate Members shall not be eligible to vote nor be voted on account of such shareholdings but shall be
entitled to.
c. Holders of preference shares be entitled to, among others the following: (1) Preference in the payment of
interest as provided for in the Bylaws of the cooperative; and (2) In case of liquidation, priority in the
distribution on Preferred Share Capital shall be prescribed in the By-laws of the cooperative
d. All of the above.

133. What is the maximum limitation on share capital holdings of a member of a cooperative?
a. No more than 10% of the share capital of the cooperative
b. No more than 5% of the share capital of the cooperative
c. No more than 20% of the share capital of the cooperative
d. No more than 15% of the share capital of the cooperative

134. What is the maximum par value of a share of a cooperative?

a. No more than P5
b. No more than P1,000
c. No more than P10
d. No more than P1

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 135. To what types of annual audit shall a cooperative registered under CDA be subjected to?
a. Financial statements audit
b. Social audit
c. Performance audit
d. All of the above

136. Who shall perform the annual financial statements audit of a cooperative registered under CDA?
a. Independent CPA in good standing with PICPA and accredited by PRC-BoA and CDA.
b. Independent social auditor accredited by CDA.
c. Internal auditor of the Cooperative.
d. Any of the above.

137. The following are the qualifications of financial statement auditor of cooperative, except
a. He must be a member in good standing of PICPA.
b. He must be accredited by PRC-BoA as CPA practitioner.
c. He must be accredited by CDA.
d. He must be accredited by SEC.

138. Who shall perform the annual social audit of a cooperative registered under CDA?
a. Independent CPA in good standing with PICPA and accredited by PRC-BoA.
b. Independent social auditor accredited by CDA.
c. Internal auditor of the Cooperative.
d. Any of the above.

139. A member shall have the right to examine the records required to be kept by the cooperative under Article 52 of the
Cooperative Code during reasonable hours on business days and he may demand, in writing, for a copy of excerpts
from said records without charge except the cost of production. What are the legal implications of refusal by the
officer to allow a member to exercise this right?
a. Such officer shall be liable to such member for civil damages.
b. Such officer shall be guilty of offense or crime punishable by Cooperative Code.
c. Both A and B.
d. Neither A nor B.

140. Which of the following is a valid ground for refusing to furnish the requested records by a member?
a. The member has improperly used any information secured through any prior examination of the records of
such cooperative.
b. The member is not acting in good faith in making his demand.
c. The member will not be using the records for legitimate purpose.
d. Any of the above

141. It shall not be construed as profit but as an excess of payments made by the members for the loans borrowed, or the
goods and services availed by them from the cooperative or the difference of the rightful amount due to the members
for their products sold or services rendered to the cooperative including other inflows of assets resulting from its
other operating activities and which shall be deemed to have been returned to them if the same is distributed as
prescribed in Cooperative Code.
a. Retained earnings
b. Accumulated profits
c. Net surplus
d. Contributed capital

142. How shall the net surplus of a cooperative be determined or computed?

a. By the existing provisions of Corporation Code.
b. By the provisions of the by-laws of the Cooperative.
c. By the provisions of full PAS/PFRS.
d. By the provisions of PFRS for SMES.

143. What is the first priority in the distribution of the net surplus of a cooperative?
a. Reserve fund
b. Education and training fund
c. Community development fund
d. Optional fund
e. Interest on share capital of members and patronage refunds

144. This fund shall be used for the stability of the cooperative and to meet net losses in its operations but shall not be
utilized for investment, other than those allowed in the Cooperative Code.
a. Reserve fund
b. Education and training fund
c. Community development fund
d. Optional fund

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 145. What is the minimum amount of reserve fund in the first five years of operation of a cooperative?
a. At least 50% of net surplus
b. At least 10% of net surplus
c. At least 3% of net surplus
d. At least 7% of net surplus

146. After the first five years of operation of a cooperative, what is the minimum amount of reserve fund of a cooperative?
a. At least 50% of net surplus
b. At least 10% of net surplus
c. At least 3% of net surplus
d. At least 7% of net surplus

147. This fund shall provide for the training, development and similar other cooperative activities geared towards the
growth of the cooperative movement.
a. Reserve fund
b. Education and training fund
c. Community development fund
d. Optional fund

148. What is the maximum amount of education and training fund of a cooperative?
a. Not more than 50% of net surplus
b. Not more than 10% of net surplus
c. Not more than 3% of net surplus
d. Not more than 7% of net surplus

149. This fund shall be used for projects or activities that will benefit the community where the cooperative operates.
a. Reserve fund
b. Education and training fund
c. Community development fund
d. Optional fund

150. What is the minimum amount of community development fund of a cooperative?

a. At least 50% of net surplus
b. At least 10% of net surplus
c. At least 3% of net surplus
d. At least 7% of net surplus

151. What is the maximum amount of optional fund of a cooperative?

a. Not more than 50% of net surplus
b. Not more than 10% of net surplus
c. Not more than 3% of net surplus
d. Not more than 7% of net surplus

152. What is the maximum interest on share capital that may be distributed by a cooperative?
a. Not more than 5% of net surplus
b. Not more than 10% of net surplus
c. Not more than 3% of net surplus
d. Not more than the normal rate of return of investments

153. What is the required vote for allocation of interest on share capital?
a. Majority of all members of the board of directors present and constituting a quorum
b. Majority of all members of general assembly present and constituting a quorum
c. 3/4 of all members of general assembly present and constituting a quorum
d. Majority of all members of the board of directors present and constituting a quorum and 3/4 of all members
of general assembly present and constituting a quorum

154. What is the required vote for recommendation for the deferment of distribution or payment of interest on share
capital to cooperative members?
a. Majority of all members of the board of directors present and constituting a quorum
b. Majority of all members of general assembly present and constituting a quorum
c. 3/4 of all members of general assembly present and constituting a quorum
d. Majority of all members of the board of directors present and constituting a quorum and 3/4 of all members
of general assembly present and constituting a quorum

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 155. What is the required vote for approval of the deferment of distribution or payment of interest on share capital to
cooperative members?
a. Majority of all members of the board of directors present and constituting a quorum
b. Majority of all members of cooperatives with voting rights present and constituting a quorum
c. 3/4 of all members of general assembly present and constituting a quorum
d. 2/3 of all members of general assembly present and constituting a quorum

156. It refers to the portion of net surplus allocated to the amount returned to individual members who patronize the
goods and services of the cooperative in proportion to their individual patronage.
a. Patronage refund
b. Interest on share capital
c. Dividend
d. Return of investment

157. What is the minimum amount of net surplus allocated as patronage refund?
a. At least 30% of the net surplus after deducting the statutory reserves based on the principle of equity.
b. At least 20% of the net surplus after deducting the statutory reserves based on the principle of equity.
c. At least 10% of the net surplus after deducting the statutory reserves based on the principle of equity.
d. At least 5% of the net surplus after deducting the statutory reserves based on the principle of equity.

158. What is the maximum amount of net surplus allocated as patronage refund?
a. No more than twice the rate of interest on share capital.
b. No more than the rate of interest on share capital.
c. No more than thrice the rate of interest on share capital.
d. No more than half the rate of interest on share capital.

159. It is a principle of equity wherein an equal right of members to participate in the organization and to equitably share
in the benefits accruing is established.
a. Principle of Patronage Refund
b. Principle of Preference Shares
c. Principle of Cooperation
d. Principle of Control

160. In what fund shall the remaining net surplus be credited after the allowable interest and the patronage refund have
been deducted?
a. Reserve fund
b. Education and training fund
c. Community development fund
d. Optional fund

161. It refers to shall refer to the amount available out of the deferred payment of the patronage refund and interest on
share capital of the members or by authorized deduction of a percentage from the product sold or per unit of product
handled by the cooperative.
a. Revolving capital
b. Escrow capital
c. Deferred capital
d. Contributed capital

162. Which of the following is a fund in a cooperative?

a. Revolving fund
b. Deferred fund
c. Escrow fund
d. Endowment fund

163. What is the right available to a member of a cooperative who dissents to a cooperative acts provided by Cooperative
Code?
a. Preemptive right
b. Right of first refusal
c. Right to withdraw membership
d. Right to dissolve the cooperative

164. The following are the cooperative acts when a dissenting member of a cooperative exercise his right to withdraw his
membership and demand the refund of his share capital and interest a.k.a. appraisal right, except
a. Amendment of Articles of Cooperation or By-laws
b. Amendment of By-Laws
c. Merger or Consolidations of two or more cooperatives
d. Granting compensation to directors

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 18 of 20

 165. The following are cooperative acts that require ¾ vote of members with voting rights for validity, except
a. Amendment of articles of cooperation or amendment of corporate by-laws
b. Merger or consolidation of cooperatives
c. Dissolution of a cooperative
d. Removal of director of a cooperative

166. Which of the following statements is false about the privileges of a cooperative?
a. Cooperatives engaged in credit services and/or federations shall be entitled to loans credit lines,
rediscounting of their loan notes, and other eligible papers with the Bangko Sentral ng Pilipinas (BSP)
b. A public transport service cooperative may be entitled to financing support for the acquisition and/or
maintenance of land and sea transport equipment, facilities and parts through the program of the
government financial institutions. It shall have the preferential right to the management and operation of
public terminals and ports whether land or sea transport where the cooperative operates and on securing a
franchise for active or potential routes for the public transport.
c. Cooperatives organized by faculty members and employees of educational institutions shall have the
preferential right in the management of the canteen and other services related to the operation of the
educational institution where they are employed: Provided, That such services are operated within the
premises of the said educational institution
d. The appropriate housing agencies and government financial institutions shall create a special window for
financing housing projects undertaken by cooperatives, with interest rates and terms equal to, or better than
those given for socialized housing projects. This financing shall be in the form of blanket loans or long-term
wholesale loans to qualified cooperatives, without need for individual processing.

167. Which of the following statements is true?

a. Cooperative’s financial statements have to be in accordance with Philippine Financial Reporting Standards.
b. Auditors of cooperative shall comply in accordance with Philippine Standards on Auditing.
c. Auditors of cooperative have to be in good standing and have to be registered only with the Cooperative
Development Authority but not with PRC-Board of Accountancy.
d. None of the above.

168. The following are the incentives of electric cooperative registered before Cooperative Development Authority,
except
a. The electric cooperatives registered with the Authority with existing loans obtained from NEA after June 26,
2001 shall continue to observe the terms of such loans until full payment or settlement thereof
b. Except as provided in letter A, the NEA shall no longer exercise regulatory or supervisory powers on
electric cooperatives duly registered with the CDA
c. Electric cooperatives registered with the CDA are entitled to congressional allocations, grants, subsidiaries
and other financial assistance for rural electrification which can be coursed through the Department of
Energy, the CDA and/or local government units. The electric cooperatives registered under Cooperative
Code can avail of the financial services and technical assistance provided by the government financial
institutions and technical development agencies on terms respecting their independence as autonomous
cooperatives
d. All condoned loans, subsidies, grants and other assistance shall form part of the donated capital and funds of
the electric cooperatives and as such, it shall not be sold, traded nor be divided into shareholdings at any
time; these donated capital/fund shall be valuated for the sole purpose of determining the equity participation
of the members: Provided, That in the case of dissolution of the cooperative, said donated capital shall be
subject to escheat.
e. Electric cooperatives are not required to submit audited financial statements to CDA.

169. This cooperative principle means that cooperatives are democratic organizations that are controlled by their
members who actively participate in setting their policies and making decisions. Men and women serving as elected
representatives, directors or officers are accountable to the membership. In primary cooperatives, members have
equal voting rights of one-member, one-vote. Cooperatives at other levels are organized in the same democratic
manner.
a. Democratic member control
b. Member economic participation
c. Autonomy and independence
d. Concern for community

170. This cooperative principle means that members contribute equitably to, and democratically control, the capital of
their cooperatives. At least part of that capital is the common property of the cooperative. They shall receive limited
compensation or limited interest, if any, on capital subscribed and paid as a condition of membership. Members
allocate surpluses for any or all of the following purposes: developing the cooperative by setting up reserves, part of
which should at least be indivisible; benefitting members in proportion to their patronage of the cooperative's
business; and, supporting other activities approved by the membership.
a. Democratic member control
b. Member economic participation
c. Autonomy and independence
d. Concern for community

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 19 of 20

 171. This cooperative principle means that cooperatives are autonomous, self-help organizations controlled by their
members. If they enter into agreements with other organizations, including government, or raise capital from
external sources, they shall do so on terms that ensure democratic control of their members and maintain their
cooperative autonomy.
a. Democratic member control
b. Member economic participation
c. Autonomy and independence
d. Concern for community

172. This cooperative principle means that cooperatives work for the sustainable development of their communities
through policies approved by their members
a. Democratic member control
b. Member economic participation
c. Autonomy and independence
d. Concern for community

-End-

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 20 of 20

 CPA Review School of the Philippines
Manila
BUSINESS LAW DO DELA CRUZ
LAW ON PRIVATE CORPORATIONS

1. One incorporated under the laws of the Philippines

a. Domestic corporation b. Foreign corporation c. De facto corporation d. Close corporation

2. A corporation existing in fact and in law

a. De facto corporation b. De javu corporation c. De jure corporation d. De open corporation

3. A corporation existing in fact but not in law

a. De jure corporation b. De javu corporation c. De facto corporation d. De close corporation

4. One which is limited to selected persons or members of a family

a. Open corporation b. Close corporation c. Lay corporation d. Ecclesiastical corporation

5. One which is so related to another corporation that the majority of its directors can be elected by such other corporation.

a. Subsidiary corporation c. Quasi corporation

b. Parent or holding corporation d. Corporation by prescription

6. Under this theory, the nationality of the corporation is that of the country under whose law it was formed

a. Control test c. Domicile test

b. Incorporation test d. Grandfather rule

7. A corporation created in strict compliance with all the legal requirements and whose right to exist as a corporation cannot
be successfully attacked in a direct proceeding for that purpose by the State is?

a. De jure corporation c. Corporation by estoppel

b. De facto corporation. d. Corporation by prescription

8. Corporations begin to have corporate existence and juridical personality.

a. From the moment of the execution of the Articles of Incorporation

b. From the moment of the execution of the Constitution and by-laws
c. From the moment of the execution of the Treasurer’s Affidavit
d. From the date of the issuance of the certificate of incorporation by the SEC under its official seal

9. Corporations as distinguished from partnerships

a. the liability extends up to private properties.

b. created by agreement.
c. interest or ownership is transferable only if the other owner’s consent.
d. no dissolution in case of death, withdrawal or resignation of an owner.

10. The articles of incorporation differ from the by-laws in that the articles of incorporation are

a. The rules of action adopted by a corporation for its internal government

b. Adopted before or after incorporation
c. A condition precedent in the acquisition by a corporation of a juridical personality
d. Approved by the stockholders if adopted after the incorporation

11. This is a feature of a non-stock corporation as distinguished from a stock corporation

a. The owners are liable only up to the extent of their investment

b. The owners are not entitled to dividends unless declared by the board
c. Its income shall be used only for the furtherance of the purpose for which it was organized
d. Straight on cumulative voting may be used in choosing the members of the board

BL 91– 07 1
12. This is a characteristic of a stock corporation as distinguished from a non-stock corporation

a. The powers are vested in the Board

b. The owners can declare dividends
c. It is formed by at least 5 but not more than 15 persons
d. It is organized for profit

13. One established for charitable purposes

a. Ecclesiastical corporation c. Corporation sole

b. Lay corporation d. Eleemosynary corporation

14. A religious corporation which consists of one member only or his successors

a. Corporation aggregate c. Corporation sole

b. Lay corporation d. Eleemosynary corporation

15. One organized for a purpose other than for religion

a. Ecclesiastical corporation c. Corporation sole

b. Lay corporation d. Eleemosynary corporation

16. Corporators in a stock corporation

a. Members b. Stockholders c. Incorporators d. Promoters

17. Persons who have agreed to take and pay for original unissued shares of a corporation formed or to be formed

a. Promoters b. Subscribers c. Incorporation d. Corporators

18. Persons who bring about or cause to bring about the formation and organization of a corporation by bringing together
the persons interested in the enterprise

a. Subscribers b. Promoters c. Corporations d. Incorporators

19. Amount equal to the aggregate par value or issued value of the outstanding capital stock

a. Legal capital c. Outstanding capital stock

b. Unissued capital stock d. Authorized capital stock

20. Shares without par value may not be issued for a consideration

a. Less than P1 per share c. Outstanding capital stock

b. Less than P5 per share d. Less than P100 per share

21. Issued to those who in some way interested to the company, for incorporating the company, for services rendered in
launching the welfare of the company

a. Preferred share of stock c. Promotion stock

b. Common share of stock d. Share in escrow

22. When a corporation is used to defeat public convenience, justify wrong, protect fraud, or defend crime or made as a
shield to confuse the legitimate issues or where a corporation is a mere alter ago or business conduit of a person, this
doctrine applies

a. Doctrine of business opportunity c. De facto doctrine

b. Trust fund doctrine d. Doctrine of piercing the veil of corporate fiction

23. If the remaining directors constitute a quorum, they can fill up the vacancy

a. In case of removal of a director c. If there is an increase in the number of directors

b. In case of expiration of term of a director d. In case of resignation of a director

BL 91– 07 2
24. The following may be the consideration of the shares of stock of a corporation, except

a. Actual cash paid to the corporation

b. Previously incurred indebtedness of the corporation
c. Amounts transferred from unrestricted retained earnings
d. Services to be performed by a lawyer on the proposed increase in capital stock of the corporation

25. A certificate of stock is distinguished from share of stock in that a share of stock

a. Is the written evidence of a stockholder’s interest in the assets and management of a corporation
b. Is tangible personal property
c. Is one of the units into which the capital stock is divided
d. May not be issued if the subscription has not been duly paid

26. A, B, C, D, E, F and G are the duly elected directors for 2011 of Delicious Corporation whose article of incorporation
provide for 7 directors. On August 1, 2011, Directors A, B, C, D and E met to fill the two vacancies in the board
brought about by the valid removal of F for disloyalty to the corporation and the death of G. In the said meeting, the
remaining directors voted for X to replace F and Y, a son of G, to replace his father. Both X and Y are owners of at
least one share of stock of the corporation. The election of X and Y by the remaining directors

a. Valid for both X and Y

b. Not valid for both X and Y
c. Valid with respect to X, not valid with respect to Y
d. Not valid with respect to X, valid with respect to Y

27. In the meeting of the board of directors of Gold Corporation, a construction company held on March 31, 2011,
directors A, B, C, D and E were present among the 9 directors. The meeting had for its agenda the following:

I. The appointment of new treasurer

II. The approval of the contract for the purchase of cement worth P50,000 from X Supplies Co.

When the voting took place, directors A, B, C and D voted for the election of Y as the new treasurer, and directors A, B
and C voted for the approval of the contract with X Supplies

a. Both corporate acts are valid

b. Both corporate acts are not valid
c. The election of Y as a new treasurer is valid, the approval of the contract with X Supplies is not valid
d. The election of Y as a new treasurer is not valid, the approval of the contract with X Supplies is valid

28. Stock dividends differ from cash dividend in that stock dividends

a. Do not increase the legal capital

b. Involves the disbursement of corporate funds
c. Require the approval of both the board of directors and the stockholders
d. Once received by the stockholders, are beyond the reach of corporate creditors

Items 29 and 30 are based on the following:

If the authorized capital stock is P60,000, divided into 600 shares with par value of P100 per share

29. And P40,000 has been subscribed, the minimum paid-up should be

a. P40,000 b. P15,000 c. P10,000 d. P5,000

30. If P15,000 has been subscribed, the minimum paid-up should be

a. P15,000 b. P10,000 c. P5,000 d. P3,750

31. If 1,000 shares are outstanding and 5 members of the Board of Directors are to be elected, the least number of shares
needed by a candidate to be elected is

a. 501 shares b. 250 shares c. 200 shares d. 167 shares

32. Using the preceding number, the minimum number of votes needed by a candidate to be elected is

a. 2,501 votes b. 1,250 votes c. 1,000 votes d. 835 votes

BL 91– 07 3
33. The board of directors of a corporation consists of nine (9) members, where two (2) were removed and two (2) have
resigned, who fills up the vacancy?
First answer – the remaining members of the Board
Second answer – the stockholders

a. both answers are true c. only the first answer is true

b. both answers are false d. only the second answer is true

34. Using number 33, except that three (3) have resigned, who fills up the vacancy?
First answer – the remaining members of the Board
Second answer – the stockholders

a. both answers are true c. only the first answer is true

b. both answers are false d. only the second answer is true

35. May rightfully question an ultra-vires act of a corporation, except

a. stockholders b. state c. competitors d. creditors, if fraud is charged

36. The veil of corporate fiction may be pierced in the following cases, except.

a. when used as a cloak to cover fraud, illegality or it results in injustice.

b. to defeat public convenience, justify wrong, defend crime
c. where two factories are made to appear as one and used as a device to defeat the ends of law or as a shield to confuse
legitimate issues
d. where two corporations have the same president
.
37. Shares deposited by the seller or his agent with a bank or third party to be delivered to the buyer or subscriber only
upon the fulfillment of the stipulated suspensive condition

a. Promotion shares b. Founders shares c. Redeemable shares d. Escrow shares

38. Unless sooner dissolved or extended, the life of a corporation may be for a period not exceeding

a. Five years b. Ten years c. Fifty years d. Sixty years

39. As regards treasury shares, which is not correct?

a. They have no voting rights as long as they remain in the treasury

b. They are considered as part of earned or surplus profits and therefore distributable as dividends.
c. They are not entitled to dividends
d. They may be distributed as property dividend if there are retained earnings arising from the
business of the corporations.

40. Each of the incorporator of a stock corporation must own or be a subscriber to at least

a. One share of the capital stock of the corporation

b. Two shares of the capital stock of the corporation
c. Three shares of the capital stock of the corporation
d. Four shares of the capital stock of the corporation

41. The board of directors of a corporation consists of nine (9) members, where two (2) have died during their term of
office and one (1) is abroad, the quorum would be

a. Five (5) members b. Six (6) members c. Four (4) members d. Seven (7) members

42. In no case shall the total yearly compensation of directors, as such directors, exceed

a. 5% of the net income before income tax during the preceding year
b. 10% of the net income before income tax during the preceding year
c. 10% of the net income after income tax during the preceding year
d. 10% of the net income before income tax during the current year

BL 91– 07 4
43. A corporate officer or director cannot, take advantage for their personal benefit a business opportunity which the
corporation is financially able to undertake.

a. Doctrine of corporate fiction c. Doctrine of corporate opportunity

b. Trust fund doctrine d. Doctrine of limited capacity

44. A corporation has only such powers as are expressly granted and those that are necessarily implied from those
expressly granted or those which are incidental to its existence

a. Doctrine of corporate fiction c. Doctrine of corporate opportunity

b. Trust fund doctrine d. Doctrine of limited capacity

45. For purposes of interlocking directors, the stockholdings shall be considered substantial if

a. Exceeding 10% of the authorized capital stock c. Exceeding 20% of the authorized capital stock
b. Exceeding 10% of the outstanding capital stock d. Exceeding 20% of the outstanding capital stock

46. A shareholders’ option to subscribe to allotment of shares in proportion to his holding of outstanding shares, before new
shares are offered to others

a. Voting right b. Pre-emptive right c. Ultra vires act d. Appraisal right

47. The assets of the corporation as represented by its capital stock are to be maintained unimpaired that there can be no
distribution of such assets among the stockholders without provision being first made for the payment of corporate
debts.

a. Doctrine of corporate fiction c. Doctrine of corporate opportunity

b. Trust fund doctrine d. Doctrine of limited capacity

48. Dividend in the form of a promissory note and may be issued to bear interest

a. Optional dividend b. Composite dividend c. Preferred dividend d. Scrip dividend

49. Dividend which is partly in cash and partly in stocks

a. Optional dividend b. Composite dividend c. Cumulative dividend d. Liquidating dividend

50. Dividend which gives the stockholder an option to receive cash or stock dividend

a. Optional dividend b. Bond dividend c. Cumulative dividend d. Liquidating dividend

51. Dividend which are actually distributions of the assets of the corporation upon dissolution or winding up

a. Bond dividend b. Preferred dividend c. Cumulative dividend d. Liquidating dividend

52. Rules of action adopted by the corporation for its internal government and for the government of its officers and of its
stockholders are members

a. Contract b. Articles of incorporation c. Ultra vires act d. By-laws

53. The corporation shall be deemed dissolved and its corporate powers cease, if from the date of its incorporation, it does
not formally organize and commence the transaction of its business or the construction of its works within

a. 4 years b. 3 years c. 2 years d. 5 years

54. If the corporation has commenced the transaction of its business, the corporate franchise or certificate of incorporation
may be suspended or revoked, if it subsequently becomes continuously inoperative for a period of at least

a. 4 years b. 3 years c. 2 years d. 5 years

55. A representative action where a stockholder brings an action in the name and in behalf of the corporation and any relief
obtained belongs to the corporation and not to the stockholders individually or collectively

a. Individual suit b. Derivative suit c. Representative suit d. Corporate suit

BL 91– 07 5
56. An action brought by a stockholder against the corporation for direct violation of his contractual rights

a. Individual suit b. Derivative suit c. Representative suit d. Corporate suit

57. Where a stockholder may bring a suit in behalf of himself and all other stockholders who are similarly situated when a
wrong is committed against them

a. Individual suit b. Derivative suit c. Representative suit d. Corporate suit

58. Any profit which it may earn shall be used for the furtherance of the purpose for which the corporation was organized as
such profit is not distributable to its members

a. non stock corp. b. close corp. c. stock corp. d. private corp.

59. All of this corporation’s issued stock of all classes exclusive of treasury shares shall be held of record by not more than
twenty (20) persons

a. Close corporation c. Private educational corporation

b. Stock corporation d. Non-stock corporation

60. Cash dividend as distinguished from stock dividend

a. needs stockholders approval c. not a taxable income

b. declared by the board of directors d. results to withdrawal of assets from the corporation.

61. A non-voting stock may vote in the following corporate acts, except in case of

a. Approval of the compensation of directors

b. Merger or consolidation
c. Increase or decrease in capital stock
d. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of corporate property

62. One of the following acts maybe performed by the executive committee of a corporation. Which is it?

a. Declaration of stock dividends

b. Filling of vacancies in the board of directors
c. Amendment or repeal of the by-laws or adoption of new by-laws
d. Approval of contracts in the ordinary course of business

63. A corporation may acquire its own shares for a legitimate purpose provided it has unrestricted retained earnings. In
which of the following acquisition is the requirement of unrestricted retained earnings not imposed?

a. When the acquisition is made to eliminate fractional shares

b. When delinquent shares are acquired in a delinquency sale
c. When redeemable shares are repurchased in accordance with the terms provided in the articles of incorporation
d. When shares are acquired from stockholders who exercise their appraisal right

64. A. When par value shares are issued above par, the premium or excess is to be considered as part of the legal capital.

B. In the case of no par value shares, the entire consideration received forms part of legal capital and shall be available
for distribution as dividends.

a. both are true b. both are false c. only the first is true d. only the second is true

65. A. There is merger when two or more corporations unite giving rise to a new corporate body and dissolving the
constituent corporations.

B. There is consolidation when two or more corporations unite, one corporation loses its corporate existence absorbing
in itself the other which disappears as a separate corporation.

a. both are true b. both are false c. only the first is true d. only the second is true

BL 91– 07 6
66. A. All incorporators are corporators and all corporators are incorporators.

B. Banks, trust companies, insurance companies, public utilities and building and loan associations may have a par value
or may have no par value as may be provided for in the articles of incorporation.

a. both are true b. both are false c. only the first is true d. only the second is true

67. A. Shares with par value may not be issued for a consideration less than the value of P5 per share

B. Preferred shares of stocks may be issued with or without a stated par value.

a. both are true b. both are false c. only the first is true d. only the second is true

68. A. Shares issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall
not be liable to the corporation or its creditors in respect thereto.

B. Statement above means that the holder is no longer liable for the shares even if they are not yet fully paid.

a. both are true b. both are false c. only the first is true d. only the second is true

69. A. Redeemable shares may be redeemed regardless of the existence of unrestricted retained earnings even if such
redemption would cause insolvency or inability of the corporation to meet its debts as they mature.

B. Treasury shares do not revert to the unissued shares of the corporation and are still issued shares but being in the
treasury they have the status of outstanding shares.

a. both are true b. both are false c. only the first is true d. only the second is true

70. A. In no case shall the paid-up capital be P5,000 or less.

B. Where the capital stock consists only of no par value shares, the 25% subscription requirement
shall be computed on the basis of the issued price of no par value shares

a. both are true b. both are false c. only the first is true d. only the second is true

71. A. A corporation has the power to do all acts not expressly or impliedly prohibited.

B. No person convicted by final judgment of violation of the Corporation Code, regardless of the punishment imposed
shall qualify as a director, trustee, or officer of any corporation.

a. both are true b. both are false c. only the first is true d. only the second is true

72. A. No person convicted by final judgment of an offense punishable by imprisonment shall qualify as a director,
trustee, or officer of any corporation.

B. Any vacancy occurring in the board of directors or trustee may be filled by the vote of at least majority of the
remaining directors of trustees, if still constituting a quorum.

a. both are true b. both are false c. only the first is true d. only the second is true

73. A. Where the capital stock is divided into par value shares and no par value shares, the 25% subscription requirement
shall be based on the amount of authorized capital stock in case of par value shares and for no par value shares it is
based on the entire number of authorized no par value shares.

B. All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general
partners for all debts, liabilities and damages incurred or arising as results thereof.

a. both are true b. both are false c. only the first is true d. only the second is true

74. A. A majority of the directors or trustees of all corporations organized in the Phil. must be citizens of the Phil.

B. The president of a corporation must be a resident citizen

a. both are true b. both are false c. only the first is true d. only the second is true

BL 91– 07 7
75. A. The by-laws of a corporation can not provide that a director should own at least two shares of stock

B. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as
president and secretary or as a secretary and treasurer at the same time.

a. both are true b. both are false c. only the first is true d. only the second is true

76. A. In the election of directors, owners of majority of the outstanding capital stock must be present to vote in person as
they cannot vote by proxy

B. Directors or trustees can attend and vote by proxy in board meetings

a. both are true b. both are false c. only the first is true d. only the second is true

77. A. The corporate secretary must be a director, and a resident and citizen of the Philippines.

B. The by-laws of a corporation may create an executive committee, composed of not less than three (3) members to be
appointed by the board of directors

a. both are true b. both are false c. only the first is true d. only the second is true

78. A. In case of extension of corporate term, and not if shortened may any dissenting stockholder
exercise his appraisal right.

B. No dividend shall be issued without the approval of stockholders representing not less than 2/3 of the outstanding
capital stock.

a. both are true b. both are false c. only the first is true d. only the second is true

79. A. The stockholders of a stock corporation have the power to declare dividends out of the unrestricted retained
earnings which shall be payable in cash, in property or in stock to all stockholders on the basis of the outstanding
shares held by them.

B. Cash dividend and stock dividend are declared by the board with the concurrence of the stockholders representing at
least 2/3 of the outstanding capital stock.

a. both are true b. both are false c. only the first is true d. only the second is true

80. A. An ultra vires act is one which is contrary to law, morals, good customs, public order or public policy.

B. Regular meeting of the board of directors shall be held annually on a date fixed in the by-laws, or if not so fixed, on
any date in April of every year as determined by the board of directors.

a. both are true b. both are false c. only the first is true d. only the second is true

81. A. Meetings of stockholders may be held anywhere in or outside of the Phil. unless the by-laws provide otherwise.

B. The President shall preside at all meetings of the directors or trustees as well as of the stockholders or members,
unless the by-laws provide otherwise.

a. both are true b. both are false c. only the first is true d. only the second is true

82. A. No management contract shall be entered into for a period longer than five years for any term.

B. The power to amend the articles of incorporation lies with the stockholders or members directly, or indirectly by
delegating said power to the board of directors or trustees.

a. both are true b. both are false c. only the first is true d. only the second is true

83. A. The power to amend by-laws lies with the board of directors or trustees, directly or indirectly by delegating said
power to the stockholders.

B. Treasury shares shall have no voting rights as long as they remain in the treasury.

a. both are true b. both are false c. only the first is true d. only the second is true

BL 91– 07 8
84. A. All unissued shares of stock shall not be issued for a consideration less than its par value.

B. No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest
and expenses, in case of delinquent shares, if any is due, has been paid.

a. both are true b. both are false c. only the first is true d. only the second is true

85. A. The highest bidder is the person offering to pay the full amount of the balance on the subscription together with
accrued interest, if any, cost of advertisement and expenses of sale for the highest number of shares.

B. Holders of subscribed shares not fully paid shall have all the rights of stockholder.

a. both are true b. both are false c. only the first is true d. only the second is true

86. A. The cost and expenses of appraisal shall be borne by the stockholders.

B. The board of directors may remove a member of the board for excessive absences.

a. both are true b. both are false c. only the first is true d. only the second is true

The End.

BL 91– 07 9
 CPA Review School of the Philippines
Manila
NEGOTIABLE INSTRUMENTS LAW DO DELA CRUZ

1. Which of the following is not negotiable under the negotiable instruments law?
a. Pay to E or order P20,000. (Sgd. M)
To: A – Accepted and payable 60 days from today.
b. Pay to the order of J P20,000 (Sgd. E)
To N – Accepted for P10,000.
c. Pay to P or order P20,000 (Sgd. J)
To C – Accepted if P tops the CPA board exams.
d. Pay to T P10,000 30 days after sight (Sgd. G)
To H – Accepted payable on Oct. 27, 2014

2. One is not negotiable

a. A promises to pay to the order of B P1,000 with 12% interest thereon where the period from which
interest is to be counted is not specified.
b. A promises to pay to the order of B P1,000 in four monthly installments beginning June 12, 2012 with a
provision that if A defaults in the payment of any installment, the entire balance including the unpaid
installment shall become due and demandable
c. A promises to pay to the order of B the sum of US$1,000 payable in pesos at the rate of exchange
prevailing on January 1, 2014
d. A promises to pay to the order of B P1,000 with an agreement to pay attorneys fees and costs of
collection.

3. The following are negotiable instruments, except

a. Pay to the order of A P1,000 on or before June 2, 2014 and reimburse yourself out of my deposit with
you. To B Sgd. C
b. Pay to the order of A P1,000 on or before June 12, 2014 and charge the same to my account.
To B Sgd. C
c. Pay to the order of A P1,000 on or before June 12, 2014 in payment of the purchase price of one cavan of
rice I bought from him. To B Sgd. C
d. Pay to the order of A P1,000 subject to the terms and conditions of the sales contract between him and the
undersigned. To B Sgd. C

4. The promise is conditional rendering the instrument non-negotiable

a. An indication of a particular fund out of which reimbursement is to be made
b. An indication of a particular account to be debited with the amount
c. A statement of the transaction which gives rise to the instrument
d. An order or promise to pay out of a particular fund

5. Which is not negotiable?

a. Pay to B or order P1,000 thirty days after sight. Sgd. A to C
b. I promise to pay B or order P1,000 on or before March 1, 2014. Sgd. A
c. I promise to pay B or order P1,000 within 20 days after the death of C. Sgd. A
d. Pay to B or order P1,000 within 10 days if he marries D on June 12, 2014. Sgd. A to C

6. The following instruments are negotiable, except

a. Pay to A or order P1,000 on or before Christmas. To B Sgd. C
b. Pay to A or order P1,000 or deliver a cow at the option of the holder. To B Sgd. C
c. Pay to A or order P1,000 on or before June 12, 2014 To B Sgd. C
d. Pa y to A or order P1,000, 30 days after the death of E. To B Sgd. C

BL 91 – 08 1
7. The following instruments were presented to you for evaluation:
I. “Pay to the order of A, P20,000”
II. “Pay to the order of A, P20,000 or deliver to him a piano of the same value, at his option.
III. “Pay to the order of A, P20,000 or deliver to him a TV of the same value
IV. “Pay to the order of A a piano worth P20,000
Assuming all the other requisites of negotiability are present, which of the foregoing instruments are not
negotiable?
a. Instruments I and II b. Instrument I and III c. Instruments II and III d. Instruments III and IV

8. A promissory note reads:

“I promise to pay B or order P100,000. Sgd. A”.
B negotiated the note to C. Later, Y stole the note from C. Y indorsed the note to D. Which of the following
statements is correct?
a. If A pays D in good faith, A’s obligation is extinguished
b. D can collect from B
c. D cannot collect from A
d. D can collect from C

9. A promissory note reads:

“I promise to pay B P100,000. Sgd. A”
B assigned the note to C. Later, Y stole the note from C. Which of the following statements is correct?
a. If A pays Y in good faith, A’s obligation is extinguished
b. C can collect from B
c. C can collect from either A or B
d. C can collect from A

10. Consider these two statements:

I. An instrument originally payable to order maybe converted into a bearer instrument
II. An instrument originally payable to bearer maybe converted into an order instrument
a. True, true b. False, false c. False, true d. True, false

11. Which of the following statements is correct?

a. If the maker is an infant, the promissory note is not negotiable
b. Love and affection can be a valid consideration
c. Indorsement of an infant transfers title to a negotiable instrument
d. Parties prior to the infant can escape liability by invoking such infancy

12. A promissory note as distinguished from a bill of exchange.

a. It contains an unconditional order to pay
b. The one who issues it is primarily liable
c. The one who issues it is secondarily liable
d. There are three (3) parties, the drawer, payee and drawee

13. Payable to the order of the drawee.

a. Pay to the order of myself P8,000
b. Pay to yourself or order P8,000
c. I promise to pay myself or order P8,000
d. I promise to pay yourself or order P8,000

BL 91 – 08 2
14. Which one of the following instruments is negotiable?
a. “I promise to pay B or order P20,000 if he will pass the CPA board exam on Oct. 2014. (Sgd. A)
b. “I promise to pay B or order P20,000 in four (4) installments “. (Sgd. A)
c. “I promise to pay B or order P20,000, 30 days after the death of his father”. (Sgd. A)
d. “I promise to pay B P20,000”. (Sgd. A)

15. Which of the following instruments is negotiable?

a. “Good to B or order, P20,000” (Sgd. A)
b. “I hereby authorize you to pay B or order “P20,000” (Sgd. A)
c. “I promise to pay B or order P20,000 worth in sugar” (Sgd. A)
d. “I promise to pay B or order P20,000 on May 25” (Sgd. A)

16. An instrument is still negotiable even if

I. The maker is liable to pay interest
II. The instrument is secured by a collateral
III. There is a stipulation on confession of judgment
IV. The maker will pay in 4 monthly installments with acceleration clause
a. II and IV are correct b. II and III are correct c. All are correct d. I, II and III are correct

17. Which of the following is not a feature of a negotiable instrument?

a. As substitute for money c. It increases credit circulation
b. Accumulation of secondary contracts d. Represents title to goods

18. Which of the following does not apply to a non-negotiable instrument?

a. The instrument can be assigned
b. The transfer of the instrument does not give the transferee the right to collect
c. The transferee becomes a holder
d. The transferee becomes an assignee

19. The negotiable character of an instrument otherwise negotiable is affected by this provision which
a. Authorizes the sale of collateral securities in case the instrument be not paid at maturity
b. Authorizes a confession of judgment if the instrument be not paid at maturity
c. Gives the maker an election to require something to be done in lieu of payment of money
d. Waives the benefit of any law intended for the advantage or protection of the obligor

20. The instrument is rendered non-negotiable if it

a. Is in writing and signed by the maker or drawer
b. Contains an unconditional promise or order to pay a certain sum of money
c. Is payable to order or bearer
d. Is payable on demand or at fixed or determinable future time

21. An instrument is payable at a determinable future time, which is expressed to be payable, except
a. At a fixed period after date or sight
b. On or before a fixed or determinable future time specified therein
c. On or at a fixed period after the occurrence of a specified event, which is certain to happen, though the
time of happening be uncertain
d. Upon a contingency and the contingency actually happens

BL 91 – 08 3
22. The instrument is payable to order when
a. The name of the payee does not purport to be the name of any person
b. The only or last indorsement is an indorsement in blank
c. Drawn payable to the order of a specified person or to him or his order
d. Payable to the order of fictitious or non-existing person, and such fact was known to the person making it
so payable

23. The following rules of construction apply where the language of the instrument is ambiguous or there are
omissions therein, except:
a. Where the instrument is not dated, it will be considered to be dated as of the time it was issued
b. Where there is a conflict between the written and printed provisions of the instrument, the written
provisions prevail.
c. Where the instrument provides for the payment of interest without specifying the date from which interest
is to run, the interest runs from the date of the instrument, and if the instrument is undated, from the issue
thereof
d. Where the sum payable is expressed in words and also in figures and there is discrepancy between the
two, the sum denoted by the figures is the sum payable; but if the figures are ambiguous or uncertain,
reference may be had to the words to fix the amount

24. Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty. This requirement is applicable to
a. Promissory notes, if negotiable c. Bills of exchange and promissory notes
b. Promissory notes, if not negotiable d. Bills of exchange but not promissory notes

25. Statement No. 1: Where it cannot be determined in what capacity a person signed a promissory note,
he is to be deemed a maker.
Statement No. 2: If a note for P80,000 payable to the order of B is indorsed by B in favor of C or D, such
indorsement is not valid because it is an indorsement in favor of two or more indorsees
severally.
a. True, true b. False, false c. True, false d. False, true

26. A separate paper where indorsements may be made

a. Sponge b. Ilonge c. Lounge d. Allonge

27. One who has signed the instrument as maker, drawer, acceptor, or indorser without receiving value thereof,
and for the purpose of lending his name to some other person is a (an)
a. Creditor b. Accommodation party c. Guarantor d. Debtor

28. A forged signature may transfer title if

a. Procured by force or duress
b. A mere simulation or counterfeit
c. Unnecessary to one’s title as when a bearer instrument contains a forged indorsement
d. Obtained by fraudulent use of carbon paper, or was given for other purpose but was used in converting the
paper into a negotiable instrument

29. A executes a check drawn against XYZ bank and payable to the order of B. Later C, stole the check and
forged the endorsement of B. C deposited the check in ABC bank by way of savings deposits. When the
check was cleared, C withdrew the money from ABC bank. Who shall bear the loss?
a. A, because the check was complete when delivered to B
b. XYZ, because the indorsement of the payee was forged
c. ABC, because it is bound to investigate the genuineness of the indorsement
d. A, B, C, XYZ, and ABC pro-rata

BL 91 – 08 4
30. The indorsement “Pay to C, Sgd. B is a
a. Blank indorsement b. Special indorsement c. Restrictive indorsement d. Qualified indorsement

31. An indorsement payable to the order of A is indorsed by A by merely affixing his signature without specifying
the indorsee is a
a. Qualified indorsement c. Blank indorsement
b. Restrictive indorsement d. Special indorsement

32. An indorsement “Pay to A only” Sgd. B is a

a. Restrictive indorsement c. Special indorsement
b. Facultative indorsement d. Qualified indorsement

33. An indorsement “Pay to A at his own risk”. Sgd. B is a

a. Special indorsement c. Qualified indorsement
b. Facultative indorsement d. Restrictive indorsement

34. An indorsement “Pay to A for collection only”. Sgd. B is a

a. Qualified indorsement c. Special indorsement
b Restrictive indorsement d. Facultative indorsement

35. An indorsement “Pay to A without recourse”. Sgd. B is a

a. Facultative indorsement c. Qualified indorsement
b. Restrictive indorsement d. Special indorsement

36. An indorsement “Pay to A in trust for B”. Sgd. C is a

a. Conditional indorsement c. Qualified indorsement
b. Restrictive indorsement d Facultative indorsement

37. An indorsement “Pay to A if he tops the CPA board exams. Sgd. B is a

a. Conditional indorsement
b. Restrictive indorsement
c. Qualified indorsement
d. Facultative indorsement

38. One of the following is not a restrictive indorsement

a. Constitutes the indorsee the agent of the indorser
b. Vests the title in the indorsee in trust for or for the use of some other person
c. Prohibits the further negotiation of the instrument
d. Payable to the indorsee where the indorser is not liable

39. An indorsement “Pay to A, notice of dishonor waived”. Sgd. B is a

a. Conditional indorsement
b Restrictive indorsement
c. Qualified indorsement
d. Facultative indorsement

40. A real defense

a. Fraud in inducement
b. Absence or failure of consideration
c. Want of delivery of a complete instrument
d. Minority

BL 91 – 08 5
41. A personal defense
a. Want of delivery of an incomplete instrument
b. Fraud in factum or fraud in esse contractus
c. Forgery
d. Filling of blanks contrary to authority given or not within a reasonable time

42. A personal defense may be used against

a. Holder in due course b. Holder for value c. Both A and B d. Neither A or B

43. A real defense may be used against

a. Holder in due course b. Holder for value c. Both A and B d. Neither A or B

44. - If an authorized agent signs for and on behalf of his principal, the latter will be liable, as a rule
- A person who signs a trade or assumed name will be liable to the same extent as if he had signed in
his own name
a. True; True b. False; True c. True; False d. False; False

45. Three of the following are warranties of a qualified indorser; which is not?
a. Capacity of prior parties
b. Instrument is valid and subsisting
c. He has good title
d. Instrument is genuine and in all respect that it purports to be

46. An instrument which is originally negotiable ceases to be negotiable when

a. Restrictively indorsed
b. Qualified indorsement
c. The last indorsement is in blank
d. The only indorsement is in blank

47. A promissory note reads:

“I promise to pay to the order of B P10,000, 30 days after date”. Sgd. A
A issued the promissory note to B who indorsed it to C. Then X stole the note from C, forged the signature of
C and negotiated it to D and D to E and E to F, the holder.
Questions:
1. Can F collect from A on maturity?
2. If after giving the proper notice of dishonor to all the parties secondarily liable, can F collect from B?
Answers:
1. Yes, because the signature of A is genuine and the instrument, as regards A was complete and delivered
2. Yes, as an indorser B warrants that the instrument is genuine and that it is valid and subsisting
a. Both answers are correct c. First is correct, second is wrong
b. Both answers are wrong d. First is wrong, second is correct

48. Using the preceding no.

Questions:
1. Can F collect from C? 2. Against whom can F collect?
Answers:
1. No, because C’s signature or indorsement was forged therefore it is wholly inoperative
2. F can collect from either D or E because their signatures are genuine and the instrument becomes
operative against them
a. Both answers are correct c. First is correct, second is wrong
b. Both answers are wrong d. First is wrong, second is correct

BL 91 – 08 6
49. A issues a bill payable to the order of B. Later B, without indorsing the bill transfers for a consideration said
bill to C. As a result, one of the following is not correct.
a. The bill is merely assigned and not negotiated
b. The transferee acquired such title as the transferor had therein
c. Transferee acquired the right to have the indorsement of the transferor
d. C is an assignee with the rights of a holder in due course

50. Statement No.1: Where to show displeasure over a bill of exchange addressed to him, the drawee
destroys the same, under the law he is deemed to have accepted it.
Statement No.2: Where the drawer and drawee are the same person, the bill of exchange can be
regarded as a promissory note.
a. True, true b. False, false c. True, false d. False, true

51. A delivers to B a promissory note payable to the order of B without specifying the amount but A authorized B
to place the amount of P500 in the promissory note which was signed by A. B, in violation of the instruction
of A placed P5,000 as the amount payable. Later B indorsed the note to C, the holder C
a. Can recover from either A or B
b. Cannot recover from either A or B, if he knows the defect
c. Cannot recover from A but can recover from B if he knows the defect
d. Cannot recover from A but can recover from B if he does not know the defect

52. A made a promissory note payable to the order of B. A delivered it to B who negotiated it to C. C indorsed
the note to D who is 16 years old. D indorsed it to E who later indorsed it to F, the holder. F presented the
note to A who dishonored the instrument. Which is correct?
a. F can hold B and C liable but not D and E
b. F can hold D and E liable but not B and C
c. D’s indorsement passes title to E and F making D liable as indorser
d. F can hold all indorsers liable except D

53. - A buys a diamond for P50,000 for which A issued a check. The diamond turned out to be an ordinary glass.
- B obtained the signature of C for autograph purpose. B wrote a promissory note above the signature, then
indorsed the note to E, a holder in due course
a. Both are real defenses c. Personal defense, real defense
b. Both are personal defenses d. Real defense, personal defense

54. One is not a condition to be a holder in due course

a. That it is complete and regular upon its face
b. That he became the holder of it before it was overdue and without notice that it had been previously
dishonored if such was the fact
c. That at the time it was negotiated to him it has no infirmity or defect in the title of the person negotiating it
d. That he took it in good faith and for value

55. A issued a negotiable promissory note to B. There was a total failure of consideration. B indorsed the note to
C, a holder in due course. C indorsed the note to D who knew of the failure of consideration. Which is
correct?
a. D may collect from A c. D may collect only from B
b. D may collect only from C d. D may collect from either B or C but not from A

BL 91 – 08 7
56. A promissory note is indorsed to C who has knowledge of the illegal consideration between A, maker and B,
payee. Later C negotiates the note to D under circumstances which would make D a holder in due course. D
in turn indorses it to E and E back to C. Which is correct?
a. C can be considered a holder in due course because he derived his title from E
b. C cannot be considered a holder in due course
c. D, E and C are all holders in due course
d. C can collect either from A or B but not from D and E

57. Which of the following is not correct in so far as the rights of a holder not in due course are concerned?
a. He may sue on the instrument in his own right
b. He may receive payment and if the payment is in due course, the instrument is discharged
c. He can not recover on the instrument
d. He is entitled to the instrument but holds it subject to the same defenses as if it were non-negotiable

58. A is induced through simple fraud (fraud in inducement) committed by B to issue a promissory note in favor
of B. B indorsed the note to C. C has notice of fraud but did not take part in it. C indorsed the note to D, a
holder in due course, D indorsed the note to E who knows how the note was obtained but without being a
party to the fraud. Which is correct?
a. E is not a holder in due course and the defense of fraud in inducement can be set-up against him
b. E is a holder in due course having derived his title from D, a holder in due course
c. E is a holder in due course but he cannot recover from A because he knows how the note was obtained
d. E is not holder in due course but has all rights of such holder in respect of A, B and C having derived his
title from D

59. The note reads as follows:

I promise to pay B or order P200,000, 30 days after date. Sgd. A The above promissory note was issued
by A to B on Feb. 8, 2013 for the Lancer car sold by B to A. A few days later, Feb. 15, 2013, A was deprived
of the car because it turned out to be a stolen car and the true owner was able to recover it from A. On Feb.
25, 2013, B negotiated the promissory note to C. Terms – 50% payable on Feb. 25, 2013 and the balance of
P100,000 payable on Feb.28, 2013, C paid the P100,000 on Feb. 25, 2013 as agreed upon. On Feb. 27, 2013,
C learned of the unlawful consideration between A and B. Despite such knowledge, C paid the P100,000
balance on Feb. 28, 2013. On maturity of the instrument,

a. C can collect the P200,000 because he became a holder in due course prior to his knowledge of the
unlawful consideration
b. C can not collect because he is only a holder for valued and A has a personal defense
c. C is not holder in due course but he can still collect P200,000 from A because the note was negotiated to
him prior to his knowledge of the unlawful consideration
d. C can collect only the first P100,000

60. Maker makes a note payable to the order of payee. It is indorsed successively as follows:
1. Pay to A Sgd. Payee 3. Pay to C Sgd. B 5. Pay to B Sgd. D
2. Pay to B Sgd. A 4. Pay to D Sgd. C 6. Pay to E Sgd. B
Which of the following is not correct?
a. B can hold the maker, payee and A liable
b. B may strike out his indorsement to C and this will release C and D from liability
c. The re-issue and further negotiation to E is not allowed because there is confusion when the instrument
was negotiated back to B
d. B can re-negotiate the note to new parties or even to parties prior to him but not to parties subsequent to
him

BL 91 – 08 8
61. On Feb. 28, 2013, A issues a bill payable to the order of B. On March 7, 2013, B without indorsing the bill
transfers for a consideration said bill to C. On March 15, 2013, B indorses the bill to C. C becomes a holder
on
a. March 7, 2013 and it is at that time that the law will determine whether or not he is a holder in due course
b. March 7, 2013 but the law will determine on March 15, 2013 whether or not he is a holder in due course
c. March 15, 2013 but the law will determine on March 7, 2013 whether or not he is a holder in due course
d. March 15, 2013 and it is at that time that the law will determine whether or not he is a holder in due
course

62. A certificate of stock is not a negotiable instrument under the “Negotiable Instruments Law” because it lacks
the requirements of
a. The instrument must be in writing and signed by the maker or drawer
b. It must be payable on demand, or at fixed or determinable future time
c. It must be payable to order or bearer
d. It must contain an unconditional promise or order to pay a sum certain in money

63. B executed a bill of exchange in favor of B or order for P10,000. and writes the name of A as a drawer. Later
B negotiates the bill to C who presented the bill to D, the drawee who accepted the bill. Thereafter the bill
was negotiated by C to E. Which is correct?
a. The drawer is liable because of D’s acceptance
b. The drawee is not liable because of the forgery
c. The drawer is liable only if C is a holder in due course.
d. The drawee by accepting the bill is liable according to the tenor of his acceptance.

64. -- If a bill of exchange is accepted at the instance of the holder, the drawers and indorsers are
discharged.
-- If a check is accepted at the instance of the holder, the drawers and indorsers are discharged.
a. True; True b. False; True c. True; False d. False; False

65. In case of a qualified indorsement, which is not correct?

a. Constitutes the indorser a mere assignor of the title to the instrument
b. It does not impair the negotiable character of the instrument
c. The qualified indorser is not liable if the maker is insolvent
d. At the time of his indorsement, the instrument is valid and subsisting

66. One of the following indorsements is a valid negotiation

a. Pay to A P6,000 (amount of the instrument is P10,000)
b. Pay to A P7,000 and to B, the balance (amount of the note is P10,000)
c. Pay to A P8,000 out of the amount of P10,000 of this note
d. Pay to A and B P10,000

67. Not primarily liable on the instrument

a. Maker of a promissory note c. Drawer of a bill
b. Acceptor of a bill of exchange d. Certifier of a check

BL 91 – 08 9
68. Which is not correct? The acceptor by accepting the instrument
a. Admits the existence of the drawer, the genuineness of his signature and his capacity and authority to draw
the instrument
b. Admits the existence of the indorser, the genuineness of his signature and his capacity and authority to
indorse the instrument
c. Admits the existence of the payee and his then capacity to indorse
d. Engages that he will pay it according to the tenor of his acceptance

69. A delivers a promissory note to B for P3,000. B increases the amount to P8,000 and indorses the note to C
and by C to D. The alteration was not known to C and D. D took the note for value and satisfied the
requirements of the holder in due course. Which is correct?
a. D can recover P8,000 from either A, B or C
b. D can recover P3,000 from A and P5,000 from C
c. D can not recover from A because of the alteration but he may recover from either B or C
d. D can recover P8,000 from A not from C
** Items 70 to 72:
Where the person not otherwise a party to the instrument places thereon his signature in blank before delivery
he is liable as indorser, and

70. If the instrument is payable to the order of a third person,

a. He is liable to the payee and to all subsequent parties
b. He is liable to all parties subsequent to the maker or drawer
c. He is liable to all parties subsequent to the payee
d. He is not liable to any party

71. If the instrument is payable to the order of the maker or drawer, or its payable to bearer
a. He is liable to the payee and to all subsequent parties
b. He is liable to all parties subsequent to the maker or drawer
c. He is liable to all parties subsequent to the payee
d. He is not liable to any party

72. If he signs for accommodation of the payee

a. He is liable to the payee and to all subsequent parties
b. He is liable to all parties subsequent to the maker or drawer
c. He is liable to all parties subsequent to the payee
d. He is not liable to any party

73. A makes a note payable to the order of B. B indorses it to C. X obtains possession of the note fraudulently
and indorses it to D and D to E. Which of the following is not correct?
a. C can recover from A and B because his rights against them were not affected by the forgery
b. E can not enforce the note against C because C’s signature is wholly inoperative
c. E cannot enforce the note against A and B because E’s rights against them are cut-off by the forged
signature of C which is inoperative
d. E cannot enforce the note against D who derived his title through the forged signature of C which is wholly
inoperative

74. An instrument payable to the order of A bears the following indorsement at the back thereof:
A, B, C and D. The present holder is E. Which is correct?
a. E may recover payment from A, B, C and D only in the order in which they indorse
b. If E sues B, B can allege that he and A have agreed that A should be liable first
c. If B is made to pay E, B can go against A, C and D
d. E may recover payment from any of said indorsers

BL 91 – 08 10
75. A makes a note payable to the order of B. The note is indorsed successively by B to C, C to D, D to E, and E
to F, the present holder. Suppose the note is dishonored in the hands of F, which of the following is correct?
a. If F gives notice only to D, the notice operates also a notice to E, a party subsequent to D
b. If D after having been given notice by F, gives notice to E, the effect would make E still liable to the
instrument
c. If F gives notice to E, E may notify B, C and D
d. If F gives notice to D, the notice operates as a notice to B and C

76. A makes a note payable to B or order. The following are the indorsers of the note in the order of their
indorsements: B- C- D- E- F- (holder) - G (subsequent holder). The note is dishonored in the hands of F, who
notifies B, C, D and E. Which is not correct?
a. The notice given by F to B, inures to the benefit of C, D, E and G
b. The notice to C inures to the benefit of D, E and G
c. The notice to D inures to the benefit of E and G
d. The notice to E inures to the benefit of B, C, D and G

77. A makes a note payable to bearer and delivers it to B. In turn, B negotiated it by mere delivery to C, who
indorses it specially to D. D negotiates it by special indorsement to E, who negotiates it to F by mere delivery.
A did not pay. One is not correct?
a. F may go after E, his immediate transferor
b. F cannot hold D liable because F did not acquire title through the indorsement of D
c. D can hold C liable as C is not only his immediate transferor but he got his title through C’s special
indorsement
d. F can hold B and C liable because they are parties prior to F

78. When a negotiable instrument which has been materially altered is in the hands of a holder in due course who
is not a party to the alteration
a. He may enforce payment thereof because material alteration is a personal defense
b. He cannot enforce payment thereof because material alteration is a real defense
c. He may enforce payment thereof according to its original tenor
d. He cannot enforce payment because the instrument is void

79. A makes a promissory note, payable to B or bearer, A delivered the note to B. B indorsed the note to C. C
placed the note in his wallet which was stolen by X, who finding the note, indorsed it to D by forging C’s
signature. D indorsed the note to E, who in turn delivered the note to F, a holder in due course. Which is not
correct?
a. A is liable to F, who is a holder in due course
b. A cannot raise the defense of forgery because his signature is genuine
c. F may go against either D or E because as against D, D’s signature is genuine and as against E, he is F’s
immediate transferor
d. F can not go against either B or C because as against B, F did not derived title through B’s indorsement
and as against C, C’s signature is forged and transfers no title

80. A issues a promissory note payable to the order of B. B indorsed it to C, then by C to D, By D to E, and by E
to F. In the hands of F, the note was dishonored by A. Which is not correct?
a. F can give notice to B, C, D and E
b. If F notifies E, E may notify D, D may notify C and C may notify B
c. Should F notify only D, the latter may notify B and C but not E
d. Should F notify only D, the latter may notify B, C or E

BL 91 – 08 11
81. Using the preceding no. assume F gave notice of dishonor to E, D, C and B and then negotiated the note to
G, one of the following is not correct
a. The notice given to E, D, C and B will inure to the benefit of G
b. The notice by F to D inures to the benefit of E so that if E is held liable by G, E can go against D
c. The notice by F to C inures to the benefit of B, so that if B is held liable by G, B can go against C
d. G can hold any one among B, C, D and E liable

82. When a bill of exchange is payable on demand, presentment must be made

a. On the day it falls due c. Within a reasonable time after its issue
b. Before the maturity date d. Within a reasonable time after the last indorsement thereof

83. A issued a negotiable promissory note to B or order P100,000. B altered it to P400,000 and indorsed it to C.
If C is a holder in due course, he
a. Can collect P400,000 from A or P400,000 from B
b. Can not collect from A but can collect P400,000 from B
c. Can collect P100,000 from A and P300,000 from B
d. Can collect P100,000 from A and P400,000 from B

84. A issued a negotiable promissory note to B with the amount in blank, but with authority given to B to fill up
the blank for P100,000. B filled it up for P400,000 and negotiated it to C. If C is a holder in due course, he
a. Can collect P100,000 from A and P300,000 from B c. Can collect P400,000 from A or P400,000 from B
b. Can collect P200,000 from A and P200,000 from B d. Can collect P100,000 from A or P400,000 from B

85. When the instrument is not payable on demand, presentment must be made
a. On the day it falls due c. Within a reasonable time after its issue
b. Before the maturity date d. Within a reasonable time after its last indorsement thereof

86. Which of the following is not allowed

a. 2 payees as A and B b. 2 payees as A or B c. 2 drawees as C and D d. 2 drawees as C or D

87. After presentment, the drawee should decide whether or not he will accept the bill within
a. 12 hours b. 24 hours c. 36 hours d. 48 hours

88. Using the preceding no., if acceptance is given, the instrument is deemed accepted
a. Upon acceptance c. Upon the knowledge of the drawer
b. The day following the acceptance d. Upon the presentation

89. There is a need of presentment for acceptance, if the bill is

a. Payable on demand or sight
b. Payable at definite date
c. Payable in a number of days after a fixed event
d. Payable elsewhere than at the residence or place of business of the drawee

90. This is not allowed

a. Pay to the order of A and B P10,000 c. Pay to the order of A and B P10,000
To C and D Sgd. E To C or D Sgd. E
b. Pay to the order of A or B P10,000 d. Pay to the order of A or B P10,000
To C and D Sgd. E To C Sgd. E

91. A bill which is, or on its face purports to be both drawn and payable within the Philippines is a (an)
a. Foreign bill b. International bill c. Inland bill d. Universal bill

BL 91 – 08 12
92. The party named by the drawer in his bill or by an indorser in his indorsement against whom the holder may
collect in case the bill is dishonored by non-acceptance or non-payment is
a. Accommodation party b. Guarantor c. Surety d. Referee in case of need

93. Which of the following is not a characteristic of a bill of exchange?

a. Original parties are the drawer, drawee, payee and acceptor c. Drawer is primarily liable
b. Acceptance is generally required d. Contains an unconditional order

94. Maturity of an undated negotiable instrument issued payable 60 days after sight is computed from
a. Date of first indorsement c. Date of issue
b. Date of last indorsement d. Date of first presentation for acceptance

95. Check as distinguished from bill of exchange

a. Need not be drawn against a deposit
b. Need not be presented for acceptance
c. Maybe payable on demand or at a fixed or determinable future time.
d. May or may not be drawn against the bank

96. Where the drawee to whom a bill is delivered for acceptance destroys the same, or refuses within 24 hours
after such delivery, or within such other period as the holder may allow, to return the bill accepted or not
accepted to the holder, he will be deemed to have
a. Dishonored the bill b. Vetoed the bill c. Snubbed the bill d. Accepted the bill

97. The holder of the bill presenting the same for acceptance may require that the acceptance be written on the
bill and if such request is refused may treat the bill as
a. Accepted b. Approved c. Paid d. Dishonored

98. An acceptance which reads- Accepted, payable at the Philippines National Bank is a
a. Partial acceptance b. Qualified acceptance c. Conditional acceptance d. General acceptance

99. Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an
acceptance for the honor of the
a. Maker b. Drawer c. Drawee d. Indorser

100. Where a bill payable after sight is accepted for honor, its maturity is calculated from the date of the
a. Presentation for acceptance c. Acceptance for honor
b. Presentment for acceptance d. Noting for non-acceptance

101. A bill of exchange drawn on a bank and payable on demand

a. Bond b. Due bill c. Check d. Certificate of deposit

102. A draws a bill payable to B or order with C as the drawee and D, E, F and G as successive indorsers and H
as holder. If C does not pay and H has duly protested for non-payment and X offers to pay supra protest for
the honor of F while Y for D, who shall be given preference
a. None, as H, the holder may choose c. Y as his payment will discharge most parties
b. X if he is the first to offer to pay d. Both, but it shall be pro-rata

103. Using the preceding no., if H refuses to receive payment supra protest from Y for the honor of D, H loses
his right of recourse against, except
a. D b. E c. F d. G

BL 91 – 08 13
104. Where in a bill the drawer and the drawee are the same person or where the drawee is a fictitious person, or
a person not having capacity to contract, the holder at his option may treat the instrument as
a. Dishonored c. Promissory note
b. Bill of exchange d. Either a bill of exchange or a Promissory note

105. -- Instruments falling due or becoming payable on Saturday are to be presented for payment, at the option
of the holder, on the next succeeding business day or before 12:00 noon on Saturday when the entire day is
not a holiday
-- A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument is
deemed to be a waiver only of a formal protest and not of presentment and notice of dishonor
a. True; True b. False; True c. True; False d. False; False

106. - Where the parties to be notified are partners, notice of dishonor to any party is notice to the firm provided
there has been no dissolution
- Where notice of dishonor is given by or on behalf of a party entitled to give notice, it inures to the benefit of
the holder and all parties prior to the party to whom notice is given
a. True; True b. False; True c. True; False d. False; False

107. Upon request of A, B makes a note to accommodate A. Then A indorses the note to C, when C presented
the note to B, the latter dishonor it, which is correct?
a. Notice of dishonor should be given to A to make him liable as an indorser
b. As a party secondarily liable, without the notice of dishonor, A will be discharged
c. As an accommodated party, A will be liable even if notice of dishonor is not given to him
d. As an indorser, A will be liable provided notice of dishonor is given

108. Except where the contrary appears, every indorsement is prima facie to have been made at the place where
the instrument is issued
When the instrument is materially altered, the holder who is not a party to the alteration may enforce it
according to its original tenor
a. True; True b. False; True c. True; False d. False; False

109. A bill of lading is beyond the scope of the negotiable instruments law because
a. It is without an unconditional promise or order to pay a sum certain in money
b. It is in favor of a specified person and not to order.
c. It is an order to pay out of a particular fund
d. It is not payable on demand, or at fixed or determinable future time.

110. A letter of credit lacks of negotiability because

a. It is without an unconditional promise or order to pay a sum certain in money
b. It is in favor of a specified person and not to order.
c. It is an order to pay out of a particular fund
d. It is not payable on demand, or at fixed or determinable future time.

111. Payment for honor as distinguished from acceptance for honor

a. The protest is for dishonor by non-payment c. The bill is not overdue
b. Consent of the holder is required d. Must not be a party already liable on the bill

112. Which is not the effect of certification of a check?

a. It is equivalent to acceptance
b. It discharges person secondarily liable regardless of who procured the certification
c. It operates as an assignment of the funds of the drawer in the hands of the drawee bank
d. The holder can compel the drawee bank to encash it

BL 91 – 08 14
113. Accepted, if Dave tops the CPA board examination is
a. Conditional indorsement b. Facultative indorsement c. Qualified acceptance d. General acceptance
114. A negotiable promissory note is given by A to B; B indorsed it to C; C to D and D to E. E negotiated back
the note to A. A re-negotiate the note to F. As a result.
a. The re-negotiation is not allowed because of confusion or merger which extinguished the obligation
b. If A later on pays the instrument, he cannot go after B, D, C, E and F
c. If A later on pays the instrument, he cannot go after F, but he can go after B, C, D, and E
d. If A later on pays the instrument, he can go after F, B, D, C and E

115. A bill reads:

Pay to the order of B P200,000, 30 days after sight. To X Sgd. A
Subsequent indorsements: B to C; C to D; D to E and E to F then F made the first presentment for
acceptance on Feb. 28, 2011, X refused to accept so that a notice of dishonor by non-acceptance to A, B, C,
D and E were given. Before the maturity however, at the request of the drawer, F made a second presentment
for acceptance to X on March 5, 2011 and this time X accepted the bill. On maturity date, the drawee
acceptor refused to pay. Which is correct?
a. The notice of dishonor by non-acceptance is sufficient to hold A, B, C, D and E liable
b. The maturity date of the instrument is counted from March 5, 2011 when the instrument was accepted
c. F may immediately proceed against the parties secondarily liable
d. F must give a notice of dishonor by non-payment to all the parties secondarily liable to make them liable

116. A made a promissory note payable to the order of B. Subsequent indorsements are as follows: B to C; C to
D; D to E; and E to F, F decided to strike out the indorsement of D and later negotiated the instrument to G,
a holder in due course. Which is correct?
a. G can go after A, B and C but not D, E and F
b. D, E and F are discharged from their obligations to the instrument
c. G can go after A, B, C, D, E and F as it was F who struck-out the indorsement of D
d. G can only go after A, B, C and F

The End.

BL 91 – 08 15
 CPA REVIEW SCHOOL OF THE PHILIPPINES
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

COVERAGE: Republic Act No. 11232: Revised Corporation Code of the Philippines for One Person Corporation
Direction: Read and select the best answer for the following questions.

1. It refers to a corporation with a single stockholder.

a. One person corporation (OPC)
b. Corporation Aggregate
c. Partnership
d. Joint Venture

2. The following can be the single stockholder of a one person corporation (OPC), except
a. Natural person who must be of legal age
b. Trust who does not refer to a trust entity (company or corporation) but the subject being managed by a
trustee
c. Estate
d. Partnership or corporation or cooperative or association

3. If the single stockholder of a one person corporation (OPC) is a trustee, administrator, executor, guardian,
conservator, custodian, or other person exercising fiduciary duties, what must be submitted by these persons to
SEC?
a. Proof of authority to act on behalf of the trust or estate
b. Tax Identification Number of trust or estate
c. PSA Birth Certificate
d. PRC Identification Number

4. As a general rule, what is the term of existence of one person corporation (OPC)?
a. 50 years renewable for another term
b. Perpetual existence
c. 50 years subject to unlimited times of renewal
d. 20 years renewable for another term

5. As an exception to the general rule of perpetual existence, what is the term of one person corporation (OPC)
under the name of trust or estate, what is its term of existence?
a. 50 years renewable for another term
b. Perpetual existence
c. 50 years subject to unlimited times of renewal
d. It shall be co-terminus with the existence of the trust or estate.

6. How may a one person corporation (OPC) under the name of estate or trust be dissolved?
a. By submission of Partition, such as Order of Partition issued by the Court in case of Judicial Settlement
and Deed of Extrajudicial Settlement in case of summary settlement of the estate.
b. By submission of proof of termination of the trust.
c. Either A or B
d. Neither A nor B

7. Where shall the suffix “OPC” be indicated by the one person corporation in its corporate name?
a. Below its corporate name
b. At the end of its corporate name
c. Either A or B
d. Neither A nor B

8. Who shall be the director of the one person corporation (OPC)?

a. The single stockholder of the one person corporation
b. The SEC Chairperson
c. The BIR Commissioner
d. The BoA Chairman

9. Who shall be the president of the one person corporation (OPC)?

a. The single stockholder of the one person corporation
b. The SEC Chairperson
c. The BIR Commissioner
d. The BoA Chairman

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 1 of 5

 10. Who must be designated by the single stockholder of the one person corporation (OPC) in its Articles of
Incorporation?
a. Nominee
b. Alternate Nominee
c. Both A and B
d. Neither A nor B

11. What document must be attached in the application for incorporation by single stockholder of the one person
corporation (OPC)?
a. The written consent of both the nominee and alternate nominee to the designation.
b. The PRC ID of both the nominee and alternate nominee.
c. The PSA CENOMAR of both the nominee and alternate nominee.
d. None of the above.

12. Who will replace the single stockholder of the one person corporation (OPC) in case of his death and/or
incapacity?
a. Nominee designated in the Articles of Incorporation
b. Alternate Nominee designated in the Articles of Incorporation
c. Either A or B
d. Neither A nor B

13. The following must be set forth in the Articles of Incorporation to be filed by the single stockholder of the one
person corporation (OPC) to SEC for application for incorporation, except
a. Primary purpose
b. Principal office address
c. Term of existence
d. Name and details of the single stockholder
e. Name of nominee and alternate nominee
f. Authorized, subscribed and paid up capital
g. Such other matters consistent with law and which may be deemed necessary and convenient
h. By-laws

14. Which corporation is not required to submit and file its by-laws to SEC?
a. Corporation aggregate
b. One Person Corporation (OPC)
c. Both A and B
d. Neither A nor B

15. Unless provided by special law, what is the minimum authorized capital stock of one person corporation (OPC)?
a. P5,000
b. P25,000
c. P5
d. No minimum authorized capital stock

16. Unless provided by special law, what is the minimum subscribed capital of the authorized capital of one person
corporation (OPC)?
a. At least 25% of authorized capital stock
b. At least 10% of authorized capital stock
c. At least 20% of authorized capital stock
d. No minimum subscribed capital stock

17. Unless provided by special law, what is the minimum paid-up capital of the authorized capital of one person
corporation (OPC)?
a. At least 25% of actually subscribed capital stock
b. At least 25% of minimum subscribed capital stock
c. At least 25% of actually subscribed capital stock or P5,000, whichever is higher
d. No minimum paid up capital of the authorized capital stock

18. How many days from the issuance of its Certification of Incorporation by SEC shall the OPC appoint a
treasurer, corporate secretary and other officers?
a. Within 15 days
b. Within 10 days
c. Within 5 days
d. Within 3 days

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 2 of 5

 19. How many days from the appointment of treasurer, corporate secretary and other officers shall the OPC notice
the SEC of such appointment?
a. Within 15 days
b. Within 10 days
c. Within 5 days
d. Within 3 days

20. Which corporate position may not be assumed by the single stockholder of the one person corporation (OPC)?
a. Corporate Secretary
b. Corporate Treasurer
c. Both A and B
d. Neither A nor B

21. In which corporation is the Corporate President not allowed to assume the role of a Corporate Treasurer?
a. One person corporation (OPC)
b. Corporation aggregate
c. Both A and B
d. Neither A nor B

22. What is the requirement of Revised Corporation Code if the single stockholder of the one person corporation
(OPC) assumes the position of Corporate Treasurer?
a. The single stockholder of the one person corporation (OPC) shall post a surety bond to be computed
based on the authorized capital stock (ACS) of the one person corporation (OPC).
b. The single stockholder of the one person corporation (OPC) shall post an intangible property bond to
be computed based on the authorized capital stock (ACS) of the one person corporation (OPC).
c. The single stockholder of the one person corporation (OPC) shall post a goodwill bond to be computed
based on the authorized capital stock (ACS) of the one person corporation (OPC).
d. The single stockholder of the one person corporation (OPC) shall post a mighty bond to be computed
based on the authorized capital stock (ACS) of the one person corporation (OPC).

23. When may a single stockholder of the one person corporation (OPC) change its nominee and alternative
nominee?
a. After 3 years from Incorporation
b. After 5 years from Incorporation
c. After 10 years from Incorporation
d. At any time

24. How may a single stockholder of the one person corporation (OPC) change its nominee and alternative
nominee?
a. Through submission to SEC of the names of the new nominees and their corresponding written consent.
b. Through amendment of articles of incorporation.
c. Both A and B must concur.
d. Neither A nor B.

25. In case the single stockholder of the one person corporation (OPC) becomes incapacitated, who can take over
the management of the OPC as its director and president?
a. Nominee
b. SEC Chairperson
c. BoA Chairman
d. BIR Commissioner

26. In case the incapacity of the single stockholder of the one person corporation (OPC) ends, what is the effect?
a. The single stockholder of the one person corporation (OPC) can resume the management of the one
person corporation (OPC).
b. The one person corporation (OPC) is automatically dissolved by operation of law.
c. The one person corporation (OPC) becomes a de facto corporation.
d. That is a ground for dissolution through court proceedings.

27. In case of death or permanent incapacity of the single stockholder of the one person corporation (OPC), who can
take over the management of the OPC as its director and president?
a. Nominee
b. SEC Chairperson
c. BoA Chairman
d. BIR Commissioner

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 3 of 5

 28. In case of death or permanent incapacity of the single stockholder of the one person corporation (OPC), up to
what period or time may the nominee take over the management of the OPC?
a. Until the legal heirs of the single stockholder have been lawfully determined and the heirs have agreed
among themselves who will take the place of the deceased.
b. For a period of 10 years
c. In perpetuity
d. For a period of 20 years

29. The following are the reports that must be submitted by OPC to SEC within the period required by SEC, except
a. Annual audited financial statements or if total assets and total liabilities are less than P600,000, the
financial statements shall be certified under oath by the corporation’s treasurer
b. A report on all explanations or comments by the president on the qualification, reservation or adverse
remarks made by the auditor in the financial statements
c. A disclosure of all self-dealings and related transactions entered into between the OPC and the single
stockholder
d. Corporate by-laws

30. What is the period for submission of annual audited financial statements to SEC by OPC?
a. Within 90 days from the end of fiscal year as indicated in its Articles of Incorporation
b. Within 60 days from the end of fiscal year as indicated in its Articles of Incorporation
c. Within 120 days from the end of fiscal year as indicated in its Articles of Incorporation
d. Within 30 days from the end of fiscal year as indicated in its Articles of Incorporation

31. The following entities are not allowed to form OPCs, except
a. Banks
b. Non-bank financial institutions
c. Quasi-banks
d. Pre-need
e. Trust entity/company
f. Insurance
g. Public entities
h. Publicly listed entities
i. Non-charted government-owned and controlled corporations (GOCCs)
j. A natural person who is licensed to exercise a profession (CPA or Lawyers) for the purpose of exercising
such profession except as otherwise provided under special laws
k. Foreign natural person, but subject to the applicable capital requirement and constitutional and
statutory restrictions on foreign participation in certain investment areas or activities

32. Under Revised Corporation Code, when may an ordinary corporation be allowed to convert to a one person
corporation?
a. When a single stockholder acquires all the stocks of an ordinary stock corporation
b. When a single stockholder becomes the majority stockholders of an ordinary stock corporation
c. When a single stockholder becomes the controlling stockholders of an ordinary stock corporation
d. Any of the above

33. Under Revised Corporation Code, how may an ordinary corporation convert into a one person corporation?
a. By dissolving the ordinary corporation and forming a new one person corporation
b. By filing an application before SEC subject to the submissions of such documents as the SEC may require
c. By liquidating the ordinary corporation
d. By creating a general partnership

34. Under Revised Corporation Code, when may a one person corporation convert into an ordinary corporation?
a. After giving notice to SEC of facts and circumstances leading to conversion
b. When the stockholders of ordinary corporation die
c. When majority of the stockholders of ordinary corporation sell their shares to third persons
d. It is not allowed.

35. Under Revised Corporation Code, how may a one person corporation convert to an ordinary corporation?
a. By dissolving the one person corporation and forming a new ordinary corporation
b. By filing an application and giving notice SEC subject to the submissions of such documents as the SEC may
require
c. By liquidating the ordinary corporation
d. By creating a general partnership

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 4 of 5

 36. Under Revised Corporation Code, which is false about a one person corporation?
a. A sole shareholder claiming limited liability has the burden of affirmatively showing that the corporation was
adequately financed.
b. Where the single stockholder cannot prove that the property of the One Person Corporation is independent
of the stockholder's personal property, the stockholder shall be jointly and severally liable for the debts and
other liabilities of the One Person Corporation.
c. The principles of piercing the corporate veil apply with equal force to One Person Corporations as with other
corporations.
d. The single stockholder is always liable only up to the extent of his capital contribution under the concept of
limited liability rule.

The End.

CPAR – Regulatory Framework for Business Transactions (RFBT 9110) Page 5 of 5

 CPA REVIEW SCHOOL OF THE PHILIPPINES
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
COVERAGE: Special Laws
A. Securities Regulation Code
B. Code of Corporate Governance
C. Intellectual Property Code
D. Data Privacy Act
E. Electronic Commerce Act
F. Ease of Doing Business and Efficient Delivery of Government Services Law
Direction: Read and select the best answer for the following questions.

1. Which of the following is not an objective of Securities Regulation Code a.k.a. R.A. No. 8799?
a. To establish a socially conscious, free market that regulates itself
b. To encourage the widest participation of ownership in enterprises
c. To enhance the democratization of wealth
d. To promote monopoly and oligopoly

2. Which of the following is not an objective of Securities Regulation Code a.k.a. R.A. No. 8799?
a. To promote the development of the capital market
b. To protect investors
c. To ensure full and fair disclosure about securities
d. To encourage insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market

3. Upon winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown and cannot be
found shall be escheated and forfeited in favor of the
Old Corporation Code Revised Corporation Code
a. Barangay where such property is located Province where such property is located
b. Province where such property is located City where such property is located
c. City or municipality where such property is located National government
d. National government City of municipality where such property is located

4. Under Securities Regulation Code, they are defined as shares, participation or interests in a corporation or in a commercial enterprise or
profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character.
a. Securities
b. Instruments
c. Documents
d. Papers

5. Which of the following is considered a security under Securities Regulation Code?

a. Inventory
b. Options and warrants
c. Investment property
d. Prepaid asset

6. Which of the following is not considered a security under Securities Regulation Code?
a. Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities
b. Investment contracts, certificates of interest or participation in a profit sharing agreement, certifies of deposit for a future subscription
c. Fractional undivided interests in oil, gas or other mineral rights
d. Deed of Lease or Deed of Sale

7. Which of the following is not considered a security under Securities Regulation Code?
a. Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments
b. Derivatives like option and warrants
c. Deed of Loan with Real Estate Mortgage
d. Proprietary or nonproprietary membership certificates in corporations

8. They are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying security at a predetermined price, called
the exercise or strike price, on or before a predetermined date, called the expiry date, which can only be extended by SEC upon
stockholders' approval
a. Option contract
b. Subscription contract
c. Contract of sale
d. Bond indenture

9. He refers to the originator, maker, obligor or creator of the security.

a. Issuer
b. Broker
c. Dealer
d. Associated person of a broker or dealer

10. He refers to the person engaged in the business of buying and selling securities for the account of others.
a. Issuer
b. Broker
c. Dealer
d. Associated person

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11. He refers to person who buys sells securities for his/her own account in the ordinary course of business.
a. Issuer
b. Broker
c. Dealer
d. Associated person of a broker or dealer

12. He refers to an employee therefor whom, directly exercises control of supervisory authority, but does not include a salesman, or an agent or a
person whose functions are solely clerical or ministerial.
a. Issuer
b. Broker
c. Dealer
d. Associated person of a broker or dealer

13. He refers to a natural person, employed as such as an agent, by a dealer, issuer or broker to buy and sell securities
a. Issuer
b. Broker
c. Salesman
d. Associated person of a broker or dealer

14. He refers to any person who acts as intermediary in making deliveries upon payment effect settlement in securities transactions.
a. Exchange
b. Clearing agency
c. Market
d. Auction

15. It refers to an organized market place or facility that brings together buyers and sellers and executes trade of securities and/or commodities.
a. Exchange
b. Auction
c. Mall
d. Store

16. They refer to contracts which provide for the performance of future services of or the payment of future monetary considerations at the time
actual need, for which plan holders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes
life, pension, education, interment, and other plans which the Commission may from time to time approve
a. Insurance policies
b. Investment schemes
c. Pre-need plans
d. Money market placements

17. He refers to a person who, acting alone or with others, takes initiative in founding and organizing the business or enterprise of the issuer and
receives consideration therefor.
a. Promoter
b. Underwriter
c. Incorporator
d. Founder

18. He refers to a person who guarantees on a firm commitment and/or declared best effort basis the distribution and sale of securities of any kind
by another company.
a. Promoter
b. Underwriter
c. Incorporator
d. Founder

19. Which government agency is entrusted with the administration of the Securities Regulation Code?
a. Board of Accountancy
b. Securities and Exchange Commission
c. Bangko Sentral ng Pilipinas
d. Insurance Commission

20. Which of the following is a function of Securities and Exchange Commission?

a. To approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications
b. To convict a person of criminal violation of Securities Regulation Code
c. To entertain intra-corporate disputes and election contests
d. To reverse the decision of board of directors in matters of corporate management

21. Which of the following is not a function of Securities and Exchange Commission?
a. To prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance
with such rules, regulation and orders in relation to Securities Regulation Code
b. To compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its
supervision
c. To suspend or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or
associations, upon any of the grounds provided by law
d. To enact law amending the Securities Regulation Code and the Corporation Code of the Philippines

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22. What is the condition precedent before securities will be allowed to be sold or offered for sale or distribution within the Philippines?
a. It must be guaranteed by the Government of the Republic of the Philippines.
b. The securities must be risk-free.
c. The securities must be registered first before the Securities and Exchange Commission.
d. The securities must be profitable in all cases.

23. It refers to the application for the registration of securities required to be filed with the Securities and Exchange Commission before these
securities be allowed to be sold or offered for sale or distributed within the Philippines.
a. Certificate of registration
b. Application form
c. Registration statement
d. Articles of registration

24. It refers to the document made by or an behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through
registration statement filed with the Securities and Exchange Commission.
a. Prospectus
b. Brochure
c. Table of specification
d. Syllabus

25. Which of the following may not be done by Securities and Exchange Commission regarding the application for registration of securities by
issuer?
a. The SEC may specify the terms and conditions under which any written communication, including any summary prospectus, shall be
deemed not to constitute an offer for sale.
b. The SEC may audit the financial statements, assets and other information of firm applying for registration of its securities whenever it
deems the same necessary to insure full disclosure or to protect the interest of the investors and the public in general.
c. The SEC shall deny any application for registration of securities if the applicant is a not a Filipino citizen.
d. The SEC shall keep Register Securities which shall record the registration of securities and such register and all documents or
information with the respect to the securities registered therein shall be open to public inspection at reasonable hours on business days.

26. Which of the following securities is required to be registered before the Securities and Exchange Commission?
a. Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof, or by any
person controlled or supervised by, and acting as an instrumentality of said Government
b. Shares of stocks issued by a banking institution
c. Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body
d. Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic relations, or by
any state, province or political subdivision thereof on the basis of reciprocity

27. Which of the following securities is required to be registered before the Securities and Exchange Commission?
a. Bank's own shares of stocks
b. Insurance policy
c. Preneed policy
d. Certificate of time deposit

28. Which of the following securities is exempted from registration before Securities and Exchange Commission?
a. Insurance policy
b. Bond indenture
c. Share warrants and share options
d. Fractional undivided interest in oil or mineral rights

29. Which of the following securities is exempted from registration before Securities and Exchange Commission?
a. Participation in profit sharing agreement in a partnership
b. Investment contracts issued by a networking company
c. Trust certificates and voting trust certificates in a mining company
d. Certificate of time deposit or money market placement issued by a bank

30. Which of the following sale of securities is subject to registration with Securities and Exchange Commission?
a. At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy
b. The distribution by a corporation actively engaged in the business authorized by its articles of incorporation, of securities to its
stockholders or other security holders as a stock dividend or other distribution out of surplus
c. The sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or
given directly or indirectly in connection with the sale of such capital stock
d. The sale of securities by an issuer to more than twenty (20) persons in the Philippines during any twelve-month period

31. Which of the following sale of securities is subject to registration with Securities and Exchange Commission?
a. The issuance of bonds or notes secured by mortgage upon real estate or tangible personal property, when the entire mortgage together
with all the bonds or notes secured thereby are sold to a single purchaser at a single sale
b. Broker’s transaction, executed upon customer’s orders, on any registered Exchange or other trading market
c. The exchange of securities by the issuer with the new security holders where commission or other remuneration is paid or given directly
or indirectly for soliciting such exchange
d. An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner therefore, or by his
representative for the owner’s account, such sale or offer for sale or offer for sale, subscription or delivery not being made in the
course of repeated and successive transaction of a like character by such owner, or on his account by such representative and
such owner or representative not being the underwriter of such security

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32. Which of the following sale of securities is exempted from registration with Securities and Exchange Commission?
a. By or for the account of a pledge holder, or mortgagee or any of a pledge lien holder selling of offering for sale or delivery in the ordinary
course of business and not for the purpose of avoiding the provision of this Code, to liquidate a bonafide debt, a security pledged
in good faith as security for such debt
b. Sale of investment contracts to numerous investors by a networking company
c. Sale of subscription contracts by a prospective corporation to the public
d. Subscriptions for shares of the capitals stocks of a corporation prior to the incorporation thereof or in pursuance of an increase in its
authorized capital stocks under the Corporation Code, when expense is incurred, or commission, compensation or remuneration
is paid or given in connection with the sale or disposition of such securities, and when the purpose for soliciting, giving or
taking of such subscription is other than to comply with the requirements of such law as to the percentage of the capital stock
of a corporation which should be subscribed before it can be registered and duly incorporated, or its authorized, capital increase

33. In which of the following buyers of securities is sale of securities still required to be registered with Securities and Exchange Commission?
a. Bank
b. Registered investment house or investment company
c. Insurance company
d. Professionals

34. In which of the following buyers of securities is sale of securities exempted from registration with Securities and Exchange Commission?
a. Pension fund or retirement plan of Government of the Philippines or any of its political subdivision
b. Real estate company
c. Educational institution
d. Farmers

35. Which of the following is not a ground for the rejection of the registration statement and refuse registration of the securities of the issuer by
the Securities and Exchange Commission?
a. The issuer has been judicially declared solvent.
b. The issuer has violated any of the provision of Securities Regulation Code.
c. The issuer has been or is engaged or about to engage in fraudulent transactions.
d. The issuer has failed to comply with the conditions imposed by SEC for registration of security.

36. Which of the following is a ground for the rejection of the registration statement and refuse registration of the securities of the issuer by the
Securities and Exchange Commission?
a. The issuer has been profitable during the year.
b. The issuer has abided with the lawful order of SEC.
c. The issuer has made any false or misleading representation of material facts in any prospectus concerning the issuer or its securities
d. The issuer is a non-resident and non-Philippine national juridical person.

37. It means a publicly announced intention by a person acting alone or in concert with other persons to acquire outstanding equity securities of
a public company, or outstanding equity securities of an associate or related company of such public company which controls the said public
company.
a. Tender offer
b. Insider trading
c. Fraudulent practices
d. Issuer tender offer

38. It means a publicly announced intention by an Issuer to reacquire any of its own class of equity securities, or by an associate of such Issuer to
acquire such securities.
a. Tender offer
b. Insider trading
c. Fraudulent practices
d. Issuer tender offer

39. In which of the following instances is tender offer mandatory?

a. Any person or group of persons acting in concert, who intends to acquire (15 %) of equity securities in a public company in one or more
transactions within a period of twelve (12) months.
b. Any person or group of persons acting in concert, who intends to acquire (5%) of the outstanding voting shares or such outstanding
voting shares that are sufficient to gain control of the board in a public company in one or more transactions within a period of twelve
(12) months.
c. Any person or group of persons acting in concert, who intends to acquire (5%) of the outstanding voting shares or such outstanding
voting shares that are sufficient to gain control of the board in a public company directly from one or more stockholders.
d. Any acquisition that would result in ownership of over (10%) of the total outstanding equity securities of a public company

40. In which of the following instances is tender offer not mandatory?

a. Any person or group of persons acting in concert, who intends to acquire (15 %) of equity securities in a public company in one or more
transactions within a period of twelve (12) months.
b. Any person or group of persons acting in concert, who intends to acquire (35%) of the outstanding voting shares or such outstanding
voting shares that are sufficient to gain control of the board in a public company in one or more transactions within a period of twelve
(12) months.
c. Any person or group of persons acting in concert, who intends to acquire (35%) of the outstanding voting shares or such outstanding
voting shares that are sufficient to gain control of the board in a public company directly from one or more stockholders.
d. Any acquisition that would result in ownership of over (50%) of the total outstanding equity securities of a public company
e. Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%) of the outstanding voting shares or
such outstanding voting shares that are sufficient to gain control of the board in a public company through the Exchange trading system
if such person or group of persons acting in concert acquire the remainder through a block sale but after acquisition through the
Exchange trading system, they fail to acquire their target of thirty five percent (35%) or such outstanding voting shares that is sufficient
to gain control of the board.

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41. Which of the following transactions is subject to mandatory tender offer?
a. Any acquisition that would result in ownership of over (50%) of the total outstanding equity securities of a public company
b. Any purchase of securities from an increase in authorized capital stock
c. Purchase in connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition
is made by the debtor or creditor
d. Purchases in connection with corporate rehabilitation under court supervision
e. Purchases in the open market at the prevailing market price

42. Which of the following transactions is exempted from mandatory tender offer?
a. Any purchase of securities from the unissued capital stock even if the acquisition will result to a fifty percent (50%) or more ownership of
securities by the purchaser or such percentage that is sufficient to gain control of the board
b. Merger or consolidation
c. Any purchase from a publicly listed company
d. Purchase from the biggest company

43. Which of the following transactions is exempted from mandatory tender offer?
a. Purchases in connection with a privatization undertaken by the government of the Philippines
b. Purchases in connection with a banking institutions
c. Purchases that will result to control of a publicly listed company
d. Purchases that will result to parent-subsidiary relationship

44. What is the condition precedent in the tender offer by an Issuer or buyback or reacquisition or repurchase by an Issuer of its own securities?
a. Presence of unrestricted retained earnings in its books
b. Presence of contributed capital in its books
c. Solvency of the issuer
d. Liquidity of the issuer

45. Which of the following is not a purpose of tender offer by an Issuer or buyback or reacquisition or repurchase by an Issuer of its own
securities?
a. To implement a stock option or stock purchase plan
b. To meet short-term obligations which can be settled by the re-issuance of the repurchased shares
c. To pay dissenting or withdrawing stockholders entitled to payment for their securities under the Corporation Code
d. To dissolve the corporation

46. Where and when shall the terms and conditions of the tender offer be published by the offeror or issuer in a tender offer?
a. An Offeror or Issuer shall publish the terms and conditions of the tender offering in (2) national newspapers of general circulation in the
Philippines on the date of commencement of the tender offer and for (2) consecutive days
b. An Offeror or Issuer shall publish the terms and conditions of the tender offering in (1) national newspaper of general circulation in the
Philippines on the date of commencement of the tender offer and for (1) day
c. An Offeror or Issuer shall publish the terms and conditions of the tender offering in (3) national newspapers of general circulation in the
Philippines on the date of commencement of the tender offer and for (3) consecutive days
d. An Offeror or Issuer shall publish the terms and conditions of the tender offering in (4) national newspapers of general circulation in the
Philippines on the date of commencement of the tender offer and for (4) consecutive days

47. Unless withdrawn earlier, what is the validity or expiration period of tender offer?
a. At least twenty (20) business days from its commencement; Provided, that an offer should as much as possible be completed within sixty
(60) business days from the date the intention to make such offer is publicly announced
b. At least ten (10) business days from the date the notice of a change in the percentage of the class of securities being sought or in the
consideration offered is first published, sent or given to security holders
c. Either A or B
d. Neither A nor B

48. In a mandatory tender offer, what price of shares of stocks shall the Offeror shall be compelled to offer?
a. The highest price paid by him for such securities during the preceding six (6) months
b. The lowest price paid by him for such securities during the preceding six (6) months
c. The average price paid by him for such securities during the preceding six (6) months
d. The lowest price paid by him for such securities during the preceding three (3) months

49. What are the requirements of tender offer?

a. Tender offer shall be open to all security holders of the class of securities subject to the tender offer.
b. The consideration paid to any security holder pursuant to the tender offer shall be the highest consideration paid to any other security
holder during such tender offer.
c. Both A and B.
d. Neither A nor B.

50. It refers to the company subject of the tender offer.

a. Target company
b. Desired company
c. Prospective company
d. Forecasted company

51. In case of a tender offer other than by an Issuer, the subject of the tender offer ("the target company") shall not engage in any of the following
transactions during the course of a tender offer, or before its commencement if its board has reason to believe that an offer might be
imminent, except
a. Issue any authorized but unissued shares
b. Issue or grant options in respect to any unissued shares
c. Create or issue, or permit the creation or issuance of, any securities carrying rights of conversion into, or subscription to shares
d. Sell, dispose of or acquire, or agree to acquire, any asset whose value amounts to five percent (5 %) or more of the total value of the assets
prior to acquisition
e. Enter into contracts that are in the ordinary course of business

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52. It refers to the act of an insider or selling or buying a security of the issuer, while in possession of material information with respect to the
issuer or the security that is not generally available to the public.
a. Tender offer
b. Manipulation of price
c. Fraudulent practice
d. Insider trading

53. It refers to (a) the issuer; (b) a director or officer (or any person performing similar functions) of, or a person controlling the issuer; gives or
gave him access to material information about the issuer or the security that is not generally available to the public; (c) A government
employee, director, or officer of an exchange, clearing agency and/or self-regulatory organization who has access to material information
about an issuer or a security that is not generally available to the public; or (d) a person who learns such information by a communication
from any forgoing insiders.
a. Insider
b. Outsider
c. Independent person
d. Suitably qualified external person

54. Which of the following is not considered an insider?

a. Issuer of the securities
b. A director or officer (or any person performing similar functions) of, or a person controlling the issuer
c. A person who has access to material information about the issuer or the security that is not generally available to the public
d. A government employee, director, or officer of an exchange, clearing agency and/or self-regulatory organization who has access to
material information about an issuer or a security that is not generally available to the public
e. Any person who made investment decision on the basis of published audited financial statements

55. Which of the following is not considered an insider?

a. Internal auditor of the issuer
b. External auditor of the issuer
c. Creditor of the issuer
d. Board of directors of the issuer

56. When is information considered "material nonpublic" for purposes of insider trading?
a. When the information has not been generally disclosed to the public and would likely affect the market price of the security after being
disseminated to the public and the lapse of a reasonable time for the market to absorb the information
b. When the information would be considered by a reasonable person important under the circumstances in determining his course of action
whether to buy, sell or hold a security
c. Either A or B
d. Neither A nor B

57. Which of the following acts considered insider trading is unlawful?

a. To communicate material nonpublic information about the issuer or the security to any person who, by virtue of the communication,
becomes an insider, where the insider communicating the information knows or has reason to believe that such person will likely buy or
sell a security of the issuer whole in possession of such information
b. To become an insider
c. To possess material nonpublic information for being an insider
d. All of the above

58. Which of the following acts is not considered unlawful under Securities Regulation Code?
a. To employ any device, scheme or artifice to defraud
b. To invest in bonds and stocks of competing corporations
c. To obtain money or property by means of any untrue statement of a material fact of any omission to state a material fact necessary in
order to make the statements made, in the light of the circumstances under which they were made, not misleading
d. To engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person

59. Which of the following acts is not considered unlawful manipulation of security prices under Securities Regulation Code?
a. To create a false or misleading appearance of active trading in any listed security traded in an Exchange of any other trading market
b. To affect, alone or with others, a securities or transactions in securities that: (I) Raises their price to induce the purchase of a security,
whether of the same or a different class of the same issuer or of controlling, controlled, or commonly controlled company by others; or
(iii) Creates active trading to induce such a purchase or sale through manipulative devices such as marking the close, painting the tape,
squeezing the float, hype and dump, boiler room operations and such other similar devicesTo obtain money or property by means of any
untrue statement of a material fact of any omission to state a material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading
c. To circulate or disseminate information that the price of any security listed in an Exchange will or is likely to rise or fall because of
manipulative market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security
for the purpose of inducing the purpose of sale of such security
d. To participate in trading of stocks and bonds if the investor is not stock broker

60. Which of the following acts is not considered unlawful manipulation of security prices under Securities Regulation Code?
a. To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to believe was so
false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in an Exchange
b. To effect, either alone or others, any series of transactions for the purchase and/or sale of any security traded in an Exchange for the
purpose of pegging, fixing or stabilizing the price of such security
c. To use or employ, in connection with the purchase or sale of any security any manipulative or deceptive device or contrivance
d. To sell securities in order to obtain gain on changes in fair value of the stocks

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61. It means any sale of security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for
the account of the seller with the commitment of the seller or securities borrower to return or deliver said securities or their equivalent to the
lender on a determined or determinable future time.
a. Short sale
b. Long sale
c. Middle sale
d. Narrow sale

62. It includes making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into
any agreement for or with a view to acquiring, disposing of, subscribing for securities.
a. Dealing in securities
b. Promoting securities
c. Advertising securities
d. Investing in securities

63. It refers to the act of seeking or asking for business or information which includes the act of providing information about a security or
investment product being offered for sale with the view of making another person a client or closing or bringing in a sale or purchase of
security or investment product.
a. Solicitation
b. Advertising
c. Marketing
d. Dealing

64. It means a contract, transaction or scheme (collectively "contract") whereby a person invests his money in a common enterprise and is led to
expect profits primarily from the efforts of others. It is presumed to exist whenever a person seeks to use the money or property of others
on the promise of profits.
a. Investment contract
b. Share options
c. Warrants
d. Debentures

65. It refers to the governing body elected by the stockholders in a stock corporation that exercises the corporate powers of a corporation,
conducts all its business and controls its properties.
a. General assembly
b. Board of directors
c. Board of trustees
d. Executive committee

66. It refers to the framework of rules, systems and processes in the corporation that governs the performance by the Board of Directors and
Management of their respective duties and responsibilities to the stockholders.
a. Corporate governance
b. Corporate by-laws
c. Articles of incorporation
d. Corporate regulation

67. Which of the following companies is covered by the Revised Code of Corporate Governance?
a. Corporation whose equity securities are listed on an Exchange Market
b. Barangay Micro Business Enterprise
c. Close corporation
d. Closely held corporation

68. Which of the following companies is not covered by the Revised Code of Corporate Governance?
a. Corporation that is a grantee of secondary licenses from SEC
b. Small and Medium Enterprise
c. Corporation that sells equity and/or debt securities to the public that are required to be registered with the SEC
d. Corporation that has assets in excess of Fifty Million Pesos and at least two hundred (200) stockholders who own at least one hundred
(100) shares each of equity securities

69. How many independent directors must be present in a corporation covered by Revised Code of Corporate Governance?
a. One independent director
b. Two independent directors
c. Three independent directors
d. Four independent directors

70. In addition to the qualifications provided by the Corporate Code of the Philippines, what qualifications of a member of the Board of Directors
may be provided by the Corporation in accordance to Revised Code of Corporate Governance?
a. College education or equivalent academic degree
b. Practical understanding of the business of the corporation
c. Membership in good standing in relevant industry, business or professional organizations
d. Previous business experience
e. All of the above

71. Which of the following is a ground for permanent disqualification of a director under the Revised Code of Corporate Governance?
a. Conviction by final judgment of an offense punishable by imprisonment for more than six (6) years
b. Any director accused of violation of the Corporation Code
c. Any director charged of crimes involving violation of Securities Regulation Code
d. Attainment of doctorate degree in a university

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72. Which of the following is a ground for permanent disqualification of a director under the Revised Code of Corporate Governance?
a. Any person earlier elected as independent director who becomes an officer, employee or consultant of the same corporation
b. Refusal to comply with the disclosure requirements of the Securities Regulation Code and its Implementing Rules and Regulations
c. Absence in more than fifty (50) percent of all regular and special meetings of the Board during his incumbency
d. Any director charged of crimes involving violation of Securities Regulation Code

73. Which of the following is a ground for temporary disqualification of a director under the Revised Code of Corporate Governance?
a. Absence for any twelve (12) month period during his incumbency
b. Any person judicially declared as insolvent
c. Any person convicted by final judgment or order by a court or competent administrative body of an offense involving moral turpitude,
fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other
fraudulent acts
d. Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of fraudulent acts

74. What is the nature of the office of a director?

a. It is one of trust and confidence.
b. It is one of independence.
c. It is one for public interest.
d. It is one for creditor's interest.

75. Which of the following is a responsibility of a director of a corporation?

a. He should act in the best interest of the corporation in a manner characterized by transparency, accountability and fairness.
b. He should also exercise leadership, prudence and integrity in directing the corporation towards sustained progress.
c. Both A and B
d. Neither A nor B

76. Which of the following is not a responsibility of a director of a corporation?

a. He must conduct unfair business transactions with the corporation, and ensure that his personal interest does conflict with the interests of
the corporation.
b. He must devote the time and attention necessary to properly and effectively perform his duties and responsibilities.
c. He must act judiciously and exercise independent judgment.
d. He must have a working knowledge of the statutory and regulatory requirements that affect the corporation, including its articles of
incorporation and by-laws, the rules and regulations of the SEC and, where applicable, the requirements of relevant regulatory agencies.
e. He must observe confidentiality.

77. It refers to an executive committee with the responsibility to assist the Board of Directors in the performance of its oversight responsibility
for the financial reporting process, system of internal control, audit process, and monitoring of compliance with applicable laws, rules and
regulations.
a. Finance committee
b. Operation committee
c. Audit committee
d. External committee

78. What is the minimum composition of audit committee of a corporation?

a. At least three directors who shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and
another with audit experience
b. At least five directors who shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and
another with audit experience
c. At least four directors who shall preferably have accounting and finance backgrounds, one of whom shall be an independent director and
another with audit experience
d. At least seven directors who shall preferably have accounting and finance backgrounds, one of whom shall be an independent director
and another with audit experience

79. Who shall be the chairman of the audit committee of a corporation?

a. Chairman of the Board of Directors
b. Independent director
c. President of the Corporation
d. Secretary of the Corporation

80. He refers to a corporate officer who must monitor compliance by the corporation with Revised Code of Corporate Governance and the rules
and regulations of regulatory agencies and, if any violations are found, report the matter to the Board of Directors and recommend the
imposition of appropriate disciplinary action on the responsible parties and the adoption of measures to prevent a repetition of the
violation.
a. Independent director
b. Compliance officer
c. Controller
d. Treasurer

81. To whom shall the compliance officer report directly?

a. President of the corporation
b. Chairman of the board of directors
c. Independent director
d. Chairman of the audit committee

82. What is the period for submission or filing to SEC of audited financial statements of a corporation whose fiscal year ends on a date other than
December 31?
a. Within 120 calendar days from the end of fiscal year
b. Within 120 working days from the end of fiscal year
c. Within 90 calendar days from the end of fiscal year
d. Within 90 working days from the end of fiscal year

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83. When shall the General Information Sheet of a corporation be filed to SEC?
a. Within 30 calendar days from the date of actual meeting of stockholders or members
b. Within 30 working days from the date of actual meeting of stockholders or members
c. Within 30 calendar days from the end of fiscal year
d. Within 30 working days from December 31

84. What rules and regulations issued by Securities and Exchange Commission govern the financial reporting requirements by covered entities?
a. Securities Regulation Code Rule 68
b. Securities Regulation Code Rule 69
c. Securities Regulation Code Rule 65
d. Securities Regulation Code Rule 66

85. Which of the following is a covered entity by Securities Regulation Code Rule 68?
a. Stock Corporations with paid up capital of P50 or more
b. Stock Corporations with paid up capital of P500 or more
c. Stock Corporations with paid up capital of P5,000 or more
d. Stock Corporations with paid up capital of P50,000 or more

86. Which of the following is not a covered by Securities Regulation Code Rule 68?
a. Non-stock corporations with total assets of P500,000 or more, or gross annual receipts of P100,000 or more
b. Branch offices of stock foreign corporations with assigned capital in the equivalent amount of P1,000,000 or more
c. Branch offices of nonstock corporations with total assets in the equivalent amount of P1,000,000 or more
d. Regional operating headquarters of foreign corporations with total revenues in the equivalent amount of P1,000,000 or more
e. Cooperatives with paid up capital of P50,000 or more

87. Which of the following is a large and/or publicly accountable entity under SRC Rule 68?
a. Those with total assets of more than P35M or total liabilities of more than P25M
b. Those with total assets of more than P3.5M or total liabilities of more than P2.5M
c. Those with total assets of more than P350M or total liabilities of more than P250M
d. Those with total assets of more than P350,000 or total liabilities of more than P250,000

88. Which of the following is a not large and/or publicly accountable entity under SRC Rule 68?
a. Those which are required to file financial statements under Part II of SRC Rule 68.
b. Those in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market.
c. Those which are holders of secondary licenses issued by regulatory agencies.
d. Those which are considered as close corporations with paid up capital of at least P50,000.

89. What is the applicable financial reporting framework for the preparation and presentation of financial statements of a large and/or publicly
accountable entity under SRC Rule 68?
a. Full Philippine Financial Reporting Standards
b. Philippine Financial Reporting Standards for Medium Entities
c. Philippine Financial Reporting Standards for Small Entities
d. Philippine Financial Reporting Standards for Micro Entities

90. What is the quantitative threshold to be considered a medium sized entity under SRC Rule 68?
a. Those with total assets between P100M to P350M or total liabilities of between P100M to P250M.
b. Those with total assets of more than P350M or total liabilities of more than P250M
c. Those with total assets between P3M to P100M or total liabilities of between P3M to P100M.
d. Those with total assets below P3M and total liabilities of below P3M.

91. What is the applicable financial reporting framework for the preparation and presentation of financial statements of a medium-sized entity
under SRC Rule 68?
a. Full Philippine Financial Reporting Standards
b. Philippine Financial Reporting Standards for Medium Entities
c. Philippine Financial Reporting Standards for Small Entities
d. International Financial Reporting Standards for Micro Entities

92. What is the quantitative threshold to be considered a small entity under SRC Rule 68?
a. Those with total assets between P100M to P350M or total liabilities of between P100M to P250M.
b. Those with total assets of more than P350M or total liabilities of more than P250M
c. Those with total assets between P3M to P100M or total liabilities of between P3M to P100M.
d. Those with total assets below P3M and total liabilities of below P3M.

93. What is the applicable financial reporting framework for the preparation and presentation of financial statements of a small entity under SRC
Rule 68?
a. Full Philippine Financial Reporting Standards
b. Philippine Financial Reporting Standards for Medium Entities
c. Philippine Financial Reporting Standards for Small Entities
d. International Financial Reporting Standards for Micro Entities

94. What is the quantitative threshold to be considered a micro entity under SRC Rule 68?
a. Those with total assets between P100M to P350M or total liabilities of between P100M to P250M.
b. Those with total assets of more than P350M or total liabilities of more than P250M
c. Those with total assets between P3M to P100M or total liabilities of between P3M to P100M.
d. Those with total assets below P3M and total liabilities of below P3M.

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95. What is the applicable financial reporting framework for the preparation and presentation of financial statements of a micro entity under SRC
Rule 68?
a. Full Philippine Financial Reporting Standards
b. Philippine Financial Reporting Standards for Medium Entities
c. Philippine Financial Reporting Standards for Small Entities
d. International Financial Reporting Standards for Micro Entities
e. Tax Basis or Cash Basis or Any acceptable financial reporting framework
f. Any of the above

96. What is the state's policy under Foreign Investment Act of 1991 a.k.a. R.A. No. 7042?
a. To attract, promote and welcome productive investments from foreign individuals, partnerships, corporations, and governments,
including their political subdivisions, in activities which significantly contribute to national industrialization and socio-economic
development to the extent that foreign investment is allowed in such activity by the Constitution and relevant laws
b. To discriminate against foreigners in so far as investment in the Philippines is concerned.
c. To reserve all industries to Filipinos.
d. To discourage globalization.

97. Under the 1987 Constitution, which of the following industry must be fully owned and controlled by Filipinos?
a. Educational institution
b. Mass media
c. Advertising
d. Public utility
e. Exploration, development and utilization of natural resources

98. Under the 1987 Constitution, what is the maximum foreign investment in an advertising company?
a. 100%
b. 30%
c. 40%
d. 60%

99. Under the 1987 Constitution, what is the minimum Filipino ownership in an educational institution?
a. 70%
b. 30%
c. 40%
d. 60%

100. Under the 1987 Constitution, what is the maximum foreign investment in a public utility?
a. 100%
b. 30%
c. 40%
d. 60%

101. Under the 1987 Constitution, what is the minimum Filipino ownership in an entity engaged in exploration development and utilization of
natural resources?
a. 70%
b. 30%
c. 40%
d. 60%

102. Under the 1987 Constitution, what is the minimum Filipino ownership in a corporation before such corporation may own private land in the
Philippines?
a. 70%
b. 30%
c. 40%
d. 60%

103. Twenty professional doctors are intending to establish an entity for the rendition of medical services. What is the maximum foreign
investment in such entity?
a. 0%
b. 60%
c. 40%
d. 30%

104. Ten scientists are intending to establish a corporation for the manufacturing and disposition of medical equipments. What the maximum
foreign investment in such entity?
a. 100%
b. 30%
c. 40%
d. 0%

105. Under Special Laws, in which of the following companies may a foreigner make investment in the Philippines?
a. Cooperatives
b. Retail trade enterprises with paid up capital less than USA $2,500,000
c. Recording company
d. Small-scale mining

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106. It means an equity investment made by non-Philippine national in the form of foreign exchange and/or other assets actually transferred to
the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign
exchange.
a. Foreign investment
b. Nonresident investment
c. Filipino investment
d. Offshore investment

107. Which of the following is considered Non-Philippine national under Foreign Investment Act?
a. Citizen of the Philippines
b. Domestic Partnership or Association wholly owned by citizens of the Philippines
c. A Corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the Philippines
d. A Corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred
percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Foreigners

108. What is the requirement before a non-Philippine national be allowed to engage in business in the Philippines?
a. Such person must first apply naturalization process to become a Filipino national.
b. Such person must first register and obtain a license from appropriate agency such as SEC or DTI.
c. Such person must invest first in the Philippines.
d. Such person must set up first a corporation in the Philippines.

109. Which of the following acts is considered doing business?

a. Any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of
the purpose and object of the business organization.
b. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business
c. Having a nominee director or officer to represent its interests in such corporation
d. Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account

110. Which of the following acts is not considered doing business?

a. Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines
b. Mere exercise of rights as an investor or stockholder in a Filipino corporation
c. Soliciting orders, service contracts, opening offices, whether called “liaison” offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods of one hundred eighty
[180] days or more
d. Any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of the
purpose and object of the business organization

111. This test of nationality of corporation means that corporation is a national of the country under whose laws it has been organized and
registered.
a. Place of incorporation test
b. Control test
c. Dominancy test
d. Grandfather rule test

112. This test of nationality of corporation means that the nationality of a corporation is determined by the nationality of the majority of the
stockholders on whom equity control is vested and it is normally used as war-time test or to determine the compliance with
minimum requirement of Filipino ownership in industry reserved for Filipinos.
a. Place of incorporation test
b. Control test
c. Dominancy test
d. Grandfather rule test

113. This test of nationality of corporation is a a three-level relationship test by which the percentage of Filipino equity is computed in a
corporation engaged in fully or partly nationalized areas of activities provided in the Constitution and other nationalization laws, in
cases where corporate shareholders are present in the situation, by attributing the nationality of the second or even subsequent tier
of ownership to determine the nationality of the corporate shareholder.
a. Place of incorporation test
b. Control test
c. Dominancy test
d. Grandfather rule test

114. What is the effect if there is non-compliance or violation of minimum Filipino ownership in an existing corporation?
a. The corporation is ip so facto dissolved by operation of law.
b. The corporate remains to be de jure corporation.
c. The noncompliance is merely a non-automatic ground for dissolution making a corporation a de facto corporation subject to direct attack
by the State through the Office of Solicitor General via Quo Warranto Proceedings.
d. The corporation becomes an ostensible corporation.

115. Ayala Corporation is 60% owned by Filipinos and 40% owned by Japanese. Globe Corporation is owned 55% by Ayala Corporation, 10% by
other Filipino Citizens and the remaining interest by Americans. Does Globe Corporation, a public utility, comply with the
minimum Filipino ownership?
a. It cannot be determined.
b. Yes under grandfather rule test.
c. No under grandfather rule test.
d. No under incorporation test.

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 116. MPIC Corporation is 50% owned by Filipinos and 50% owned by Indonesians. Smart Corporation is owned 60% by MPIC Corporation, 25%
by other Filipino Citizens and the remaining interest by Koreans. Does Smart Corporation, a public utility, comply with the minimum
Filipino ownership?
a. It cannot be determined.
b. Yes under grandfather rule test.
c. No under grandfather rule test.
d. No under incorporation test.

117. MPIC Corporation is 55% owned by Filipinos and 45% owned by Indonesians. Meralco is owned 60% by MPIC Corporation, 30% by other
Filipino Citizens and the remaining interest by Koreans. Does Meralco, a public utility, comply with the minimum Filipino ownership?
a. It cannot be determined.
b. Yes under grandfather rule test.
c. No under grandfather rule test.
d. No under incorporation test.

118. It refers to an intellectual property which gives an exclusive right to the inventor over his new, inventive and useful product, process or an
improvement of a product or process.
a. Copyright
b. Trademark
c. Franchise
d. Patent

119. How is a patent as an intellectual property or right created or protected by law?

a. By invention by the inventor
b. By registration with Intellectual Property Office
c. By notarization of the invention
d. By experimenting over the invention

120. What is the legal term of a patent that gives its owner the exclusive right to use the covered invention?
a. 20 years
b. 10 years
c. 15 years
d. 25 years

121. It refers to a protection option, which is designed to protect innovations that are not sufficiently inventive to meet the inventive threshold
required for standard patents application. It may be any useful machine, implement, tools, product, composition, process, improvement or
part of the same, that is of practical utility, novelty and industrial applicability.
a. Utility model
b. Patent
c. Industrial design
d. Trademark

122. What is the legal term of the registered owner of utility model?
a. 20 years
b. 7 years
c. 10 years
d. 50 years

123. It refers to any composition of lines or colors or any three-dimensional form, whether or not associated with lines or colors; provided that
such composition or form gives a special appearance to and can serve as pattern for an industrial product or handicraft. Simply put, it is
that aspect of a useful article which is ornamental or aesthetic.
a. Utility model
b. Patent
c. Industrial design
d. Trademark

124. What is the legal term of the registration of an industrial design?

a. The registration of the Industrial Design shall be valid for (5) years from the filing date of the application. It may be renewed for not
more than two (2) consecutive periods of five (5) years each, by paying the renewal fee.
b. The registration of the Industrial Design shall be valid for (10) years from the filing date of the application. It may be renewed for not
more than two (2) consecutive periods of (10) years each, by paying the renewal fee.
c. The registration of the Industrial Design shall be valid for (8) years from the filing date of the application. It may be renewed for not
more than two (2) consecutive periods of (8) years each, by paying the renewal fee.
d. The registration of the Industrial Design shall be valid for 20 (20) years from the filing date of the application. It may be renewed for not
more than two (2) consecutive periods of (20) years each, by paying the renewal fee.

125. Which of the following is not a requisite of a patentable invention?

a. It must involve a technical solution to a problem in any field of human activity.
b. It must be new or novel.
c. It must involve inventive step.
d. It must be industrially applicable.
e. It must be made by a scientist.

126. When is an invention considered new or novel?

a. When it forms part of prior art.
b. When it does not form part of prior art.
c. Either A or B.
d. Neither A nor B.

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127. What consist prior art?
a. Everything which has been made available to the public anywhere in the world, before the filing date or the priority date of the
application claiming the invention.
b. The whole contents of an application for a patent, utility model, or industrial design registration, published in accordance with
Intellectual Property Code, filed or effective in the Philippines, with a filing or priority date that is earlier than the filing or priority
date of the application.
c. Both A and B.
d. Neither A nor B.

128. When does an invention involve inventive step?

a. When it is part of prior art.
b. When it is not obvious to a person skilled in the art at the time of the filing date or priority date of the application claiming the invention.
c. Either A or B.
d. Neither A nor B.

129. Which of the following may become the subject matter of patent application?
a. Discoveries, scientific theories and mathematical methods
b. Schemes, rules and methods of performing mental acts, playing games or doing business, and programs for computers
c. Methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal
body
d. Microorganisms, non-biological process and microbiological process
e. Plant varieties and animal breeds

130. Which of the following is non-patentable?

a. Aesthetic creations
b. Salt lamp technology
c. Car driven by water-engine
d. Microorganisms

131. Which of the following is non-patentable?

a. Scientific discovery
b. Solar-panel
c. Soft-touch technology
d. Laser that can remove scars

132. If two or more persons have made an invention separately and independently of each other, who shall own the right to the patent?
a. The first person who invented the technology.
b. The person who filed an application for registration for such invention.
c. The first person who mass produced the technology.
d. The first person who presented the technology to a convention.

133. If two or more persons have made an invention separately and independently of each other, who shall own the right to the patent where two
or more applications for registration are filed for the same invention?
a. The applicant who has the earliest filing date or, the earliest priority date.
b. The applicant who has the latest filing date or, the latest priority date.
c. The first person who invented the technology.
d. The first person who presented the technology to a convention.

134. On January 1, 2001, Mang Tomas invented the technology of Bamboo Lamp and was using it already for three years. On January 1, 2004,
Mang Pedro invented the same technology of Bamboo Lamp. Mang Pedro made an application for registration with Intellectual
Property Office. Who has better right over the patent of the technology?
a. Mang Pedro
b. Mang Tomas
c. Both Pedro and Tomas equally
d. None of them

135. On January 1, 2001, Steve Jobs invented the technology of Soft Touch which he registered in the Intellectual Property Office of USA on
January 1, 2001. On April 1, 2001, Juan Gaya also invented the same technology of Soft Touch which he registered in the Intellectual
Property Office of the Philippines on April 1, 2001. A certified copy of Steve Job's application in USA was filed on June 1, 2001 to
Intellectual Property Office of the Philippines. Who has better right over the patent of the Soft Touch in so far as the Philippine jurisdiction
is concerned?
a. Steve Job
b. Juan Gaya
c. Both Steve and Juan equally
d. None of them

136. Cherry Mobile Co. commissioned Engineer Reyes to develop a new phone. Engineer Reyes was able to develop the commissioned phone. Who
owns the patent over the new phone?
a. Always Cherry Mobile Co.
b. Always Engineer Reyes
c. Generally Cherry Mobile Co. unless otherwise provided in the contract
d. Generally Engineer Reyes unless otherwise provided in the contract

137. Samsung Co. employs Engineer Cruz to develop a new phone. Engineer Cruz was able to develop the phone in the course of performance of
his regular duties. Who owns the patent over the new phone?
a. Always Samsung Co.
b. Always Engineer Cruz
c. Generally Samsung Co. unless otherwise provided in the contract
d. Generally Engineer Cruz unless otherwise provided in the contract

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138. Sony Co. employs Engineer Santos to develop a new phone. Engineer Santos was able to develop the phone during his breaktime using the
resources of Sony Co. Who owns the patent over the new phone?
a. Always Sony Co.
b. Always Engineer Santos
c. Generally Sony Co. unless otherwise provided in the contract
d. Generally Engineer Santos unless otherwise provided in the contract

139. It means the unauthorized, replication or use of patented invention or process.

a. Patent laundering
b. Patent infringement
c. Patent misappropriation
d. Patent destruction

140. This test of patent infringement means that a resort must be had, in the first instance, to the words of the claim.
a. Literal infringement test
b. Doctrine of equivalents infringement test
c. Dominancy test
d. Holistic test

141. This test of patent infringement means that infringement also takes place when a device appropriates a prior invention by incorporating its
innovative concept and, although with some modification and change, performs substantially the same function in substantially the same
way to achieve substantially the same result.
a. Literal infringement test
b. Doctrine of equivalents infringement test
c. Dominancy test
d. Holistic test

142. Which of the following is not a valid defense by the defendant in an action for patent infringement?
a. The covered invention or technical solution is non-patentable.
b. The covered invention or technical solution is part of prior art.
c. The respondent is the true owner of the patent and has right of priority in registration.
d. The respondent has right of prior use.
e. The respondent acted in good faith.

143. This defense may be set up by a respondent in an action for patent infringement when the respondent is any prior user, who, in good faith was
using the invention or has undertaken serious preparations to use the invention in his enterprise or business, before the filing date
or priority date of the application on which a patent is granted.
a. Doctrine of fair use
b. Doctrine of prior use
c. Doctrine of good faith
d. Doctrine of bad faith

144. It is an intellectual property that refers to any visible sign capable of distinguishing the goods of an enterprise and shall include a stamped or
marked container of goods.
a. Distinguishing mark
b. Trademark
c. Patent
d. Copyright

145. It is an intellectual property that refers to any visible sign capable of distinguishing services of an enterprise and shall include a stamped or
marked container of services.
a. Distinguishing mark
b. Service mark
c. Patent
d. Copyright

146. It is an intellectual property that refers to any visible sign designated as such in the application for registration and capable of distinguishing
the origin or any other common characteristic, including the quality of goods or services of different enterprises which use the sign under
the control of the registered owner of the collective mark.
a. Distinguishing mark
b. Collective mark
c. Patent
d. Copyright

147. It is an intellectual property that refers to the name or designation identifying or distinguishing an enterprise.
a. Distinguishing name
b. Tradename
c. Patent
d. Copyright

148. How is the right over a trademark, service mark or collective mark created or protected by law?
a. By its usage of owner
b. By its registration with Intellectual Property Office
c. By its publication in a newspaper of general circulation
d. By notarization of the mark

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149. How is the right over a tradename created or protected by law?
a. By its usage of owner
b. By its registration with Intellectual Property Office
c. By its publication in a newspaper of general circulation
d. By its registration with DTI or SEC

150. What is the term and life of a trademark?

a. It has a term of 10 years which is subject to unlimited times of renewal, thus, it has indefinite life.
b. It has a term of 5 years which is subject to unlimited times of renewal, thus, it has definite life.
c. It has a term of 20 years which is subject to unlimited times of renewal, thus, it has indefinite life.
d. It has a term of 15 years which is subject to unlimited times of renewal, thus, it has definite life.

151. Which of following marks may be registered before Intellectual Property Office for protection?
a. Marks consisting exclusively of signs that are generic for the goods or services that they seek to identify
b. Marks consisting of color along
c. Marks consisting of shapes only
d. Marks consisting of combination of color, shapes and drawing

152. Which of the following marks may be registered before Intellectual Property Office for protection?
a. Marks consisting exclusively of signs or of indications that have become customary or usual to designate the goods or services in
everyday language or in bona fide and established trade practice
b. Marks identical or confusingly similar to a well-known mark
c. Marks consisting of a name, portrait or signature identifying a particular living individual with consent of such individual
d. Marks consisting of portrait of a deceased President of the Philippines, during the life of his widow, if any without by written consent of
the widow

153. Which of the following marks may be registered before Intellectual Property Office for protection?

a. Marks consisting of immoral, deceptive or scandalous matter, or matter which may disparage or falsely suggest a connection with
persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute
b. Marks which are unlikely to mislead the public, particularly as to the nature, quality, characteristics or geographical origin of the goods
or service
c. Marks consisting of the flag or coat of arms or other insignia of the Philippines or any of its political subdivisions, or of any foreign
nation, or any simulation thereof
d. Marks identical to a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date

154. This test of trademark infringement focuses on the similarity of the main, prevalent or essential features of the competing trademarks that
might cause confusion.
a. Literal infringement test
b. Doctrine of equivalents test
c. Dominancy test
d. Holistic test

155. This test of trademark infringement focuses not only on the predominant words but also on the other features appearing on the labels.
a. Literal infringement test
b. Doctrine of equivalents test
c. Dominancy test
d. Holistic test

156. It refers to the unauthorized usage by any person of a mark without the consent of the registrant of mark. It also pertains to any reproduction,
counterfeiting, copying or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or
advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive
purchasers or others as to the source or origin of such goods or services, or identity of such business.
a. Trademark infringement
b. Unfair competition
c. Trademark misappropriation
d. Unfair theft

157. It refers to the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or
business of another with the end and probable effect of deceiving the public.
a. Trademark infringement
b. Unfair competition
c. Trademark misappropriation
d. Unfair theft

158. Which of the following is not a valid defense by the defendant in an action for trademark infringement?
a. The mark is nonregistrable.
b. The respondent is the true owner of the mark.
c. The respondent has right of priority in registration.
d. The respondent acted in good faith.

159. It is an intellectual property that refers to the legal protection extended to the owner of the rights in an original work.
a. Trademark
b. Copyright
c. Tradename
d. Patent

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160. It refers to every production in the literary, scientific and artistic domain such as books and other writings, musical works, films, paintings
and other works, and computer programs.
a. Original work
b. Imitated work
c. Counterfeited work
d. Copied work

161. How is a copyright over original work created or protected by law?

a. It is created and protected from the moment of creation.
b. It is created and protected from the moment of registration with Intellectual Property Office.
c. It is created and protected from the moment of notarization.
d. It is created and protected from the moment of publication.

162. As a general rule, what is the term of copyright?

a. The term of protection of copyright for original and derivative works is the life of the author plus (50) years after his death.
b. The term of protection of copyright for original and derivative works is the life of the author plus (20) years after his death.
c. The term of protection of copyright for original and derivative works is the life of the author plus (10) years after his death.
d. The term of protection of copyright for original and derivative works is the life of the author plus (30) years after his death.

163. It refers to a type of right provided by a copyright which enables the creator to obtain remuneration from the exploitation of his works by
third parties.
a. Economic rights
b. Moral rights
c. Material rights
d. Intellectual rights

164. It refers to a type of right provided by a copyright which makes it possible for the creator to undertake measures to maintain and protect the
personal connection between himself and the work.
a. Economic rights
b. Moral rights
c. Material rights
d. Intellectual rights

165. Which of the following is not an example of moral rights granted by a copyright to the creator or original work?
a. Right of attribution
b. Right of alteration
c. Right of integrity by objecting to any prejudicial distortion
d. Right to restrain the use of his name
e. Right to rental income

166. Rose commissioned Jack to paint her nude body. Who owns the painting of nude body of Rose?
a. Jack
b. Rose
c. Both Jack and Rose
d. Neither Jack nor Rose

167. Rose commissioned Jack to paint her nude body. Who owns the copyright over the painting of nude body of Rose?
a. Jack
b. Rose
c. Both Jack and Rose
d. Neither Jack nor Rose

168. Jane Santos is an employed scriptwriter of ABS CBN Co. As part of her regularly assigned duties, she was able to write the script of the movie
One More Chance. Who owns the copyright over the script?
a. Generally Jane Santos in the absence of express or implied agreement to the contrary
b. Generally ABS CBN in the absence of express or implied agreement to the contrary
c. Always Jane Santos
d. Always ABS CBN

169. Cris Reyes is an employed reporter of GMA7. During his breaktime, Cris was able to write a novel titled True Love using the laptop and
printer of GMA7. Who owns the copyright over the novel?
a. Generally Cris Reyes in the absence of express or implied agreement to the contrary
b. Generally GMA7 in the absence of express or implied agreement to the contrary
c. Always Cris Reyes
d. Always GMA7

170. Which of the following works is not copyrightable?

a. any official text of a legislative, administrative or legal nature, as well as any official translation thereof
b. computer programs
c. drawings or plastic works of a scientific or technical character
d. lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not reduced in writing or other material form

171. Which of the following works is copyrightable?

a. news of the day and other miscellaneous facts having the character of mere items of press information
b. any idea, procedure, system, method or operation
c. concept, principle, discovery or mere data as such
d. musical compositions, with or without words

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172. Which of the following works is copyrightable?
a. Speech of a senator
b. Jurisprudence involving decision of Supreme Court
c. Philippine Financial Reporting Standards and Philippine Standards on Auditing
d. Republic Act No. 10963 a.k.a. TRAIN Law

173. It consists of unauthorized use of original work without proper consent and attribution to the owner of the original work.
a. Plagiarism
b. Infringement of copyright
c. Misappropriation of copyright
d. Protection of copyright

174. It refers to the defense in a suit in copyright infringement which pertains to a privilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather than their expression. It is an exception to the
copyright owner's monopoly of the use of the work to avoid stifling the very creativity which that law is designed to foster.
a. Doctrine of Fair use
b. Doctrine of Unfair use
c. Doctrine of Inappropriate use
d. Doctrine of Authorized use

175. It refers to a government agency which is considered an independent body entrusted to administer and implement the provisions of Data
Privacy Act, and to monitor and ensure compliance of the country with international standards set for data protection.
a. National Telecommunication Commission
b. National Privacy Commission
c. National Economic Commission
d. National Power Corporation

176. It refers to any freely given, specific, informed indication of will, whereby the data subject agrees to the collection and processing of personal
information about and/or relating to him or her.
a. Consent of the data subject
b. Acceptance of the data subject
c. Offer of the data subject
d. Objection of the data subject

177. How shall consent of the data subject be evidenced?

a. By written means only
b. By electronic means only
c. By recorded means only
d. Any of the above

178. How shall consent of the data subject be given?

a. Only personally by the data subject only
b. Only through an agent specifically authorized by the data subject to do so
c. Either A or B
d. Neither A nor B

179. He refers to an individual whose personal information is processed.

a. Data subject
b. Subject matter
c. Subject matter information
d. Humanity

180. It refers to communication by whatever means of any advertising or marketing material which is directed to particular individuals.
a. Solicitation
b. Direct marketing
c. Incidental advertisement
d. Business proposing

181. It refers to any act of information relating to natural or juridical persons to the extent that, although the information is not processed by
equipment operating automatically in response to instructions given for that purpose, the set is structured, either by reference to individuals
or by reference to criteria relating to individuals, in such a way that specific information relating to a particular person is readily accessible.
a. Structuring system
b. Organizing system
c. Controlling system
d. Filing system

182. It refers to a system for generating, sending, receiving, storing or otherwise processing electronic data messages or electronic documents and
includes the computer system or other similar device by or which data is recorded, transmitted or stored and any procedure related to the
recording, transmission or storage of electronic data, electronic message, or electronic document.
a. Information and communication system
b. Database system
c. Transportation system
d. Connectivity system

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183. It refers to any information whether recorded in a material form or not, from which the identity of an individual is apparent or can be
reasonably and directly ascertained by the entity holding the information, or when put together with other information would directly and
certainly identify an individual.
a. Confidential information
b. Sensitive information
c. Personal information
d. Privileged information

184. He or it refers to a person or organization who controls the collection, holding, processing or use of personal information, including a person
or organization who instructs another person or organization to collect, hold, process, use, transfer or disclose personal information on his or
her behalf.
a. Personal information processor
b. Personal information controller
c. Personal information holder
d. Personal information collector

185. Which of the following are considered personal information controller?

a. A person or organization who performs such functions as instructed by another person or organization
b. An individual who collects, holds, processes or uses personal information in connection with the individual’s personal, family or
household affairs
c. Both A and B
d. Neither A nor B

186. He or it refers to any natural or juridical person qualified to act as such under Data Privacy Act to whom a personal information controller
may outsource the processing of personal data pertaining to a data subject.
a. Personal information processor
b. Personal information collector
c. Personal information holder
d. Personal information custodian

187. It refers to any operation or any set of operations performed upon personal information including, but not limited to, the collection, recording,
organization, storage, updating or modification, retrieval, consultation, use, consolidation, blocking, erasure or destruction of data.
a. Processing
b. Collecting
c. Auditing
d. Examining

188. It refers to any and all forms of data which under the Rules of Court and other pertinent laws constitute privileged communication.
a. Confidential information
b. Sensitive information
c. Personal information
d. Privileged information

189. Which of the following is considered a sensitive personal information?

a. Information about an individual’s race, ethnic origin, marital status, age, color, and religious, philosophical or political affiliations
b. Information about an individual’s business, company, business venture and profitable transactions
c. Information about an individual’s facebook public profile picture and display photo
d. Information about an individual’s instagram public account and public twitter account

190. Which of the following is not considered a sensitive personal information?

a. Information about an individual’s health, education, genetic or sexual life of a person, or to any proceeding for any offense committed or
alleged to have been committed by such person, the disposal of such proceedings, or the sentence of any court in such proceedings
b. Information issued by government agencies peculiar to an individual which includes, but not limited to, social security numbers, previous
or current health records, licenses or its denials, suspension or revocation, and tax returns
c. Information specifically established by an executive order or an act of Congress to be kept classified
d. Information about the platform of a candidate for national elective position that is discussed in a public debate televised in national
television network

191. Which of the following is not covered by Data Privacy Act?

a. Processing of all types of personal information by natural persons
b. Processing of all types of personal information by juridical persons
c. Processing of all types of personal information by personal information controllers
d. Processing of all types of personal information by personal information processors
e. Requiring the publishers, editors or duly accredited reporters of any newspaper, magazine or periodical of general circulation to reveal
the source of any news report or information appearing in said publication which was related in any confidence to such publisher,
editor, or reporter

192. Which of the following information is covered by the protection of Data Privacy Act?
a. Information about any individual who is or was an officer or employee of a government institution that relates to the position or
functions of the individual
b. Information about an individual who is or was performing service under contract for a government institution that relates to the services
performed, including the terms of the contract, and the name of the individual given in the course of the performance of those services
c. Information about students enrolled in the College of Law or Graduate School
d. Information relating to any discretionary benefit of a financial nature such as the granting of a license or permit given by the government
to an individual, including the name of the individual and the exact nature of the benefit

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193. Which of the following information is covered by the protection of Data Privacy Act?
a. Personal information processed for journalistic, artistic, literary or research purposes
b. Information necessary in order to carry out the functions of public authority which includes the processing of personal data for the
performance by the independent, central monetary authority and law enforcement and regulatory agencies of their constitutionally and
statutorily mandated functions
c. Information necessary for banks and other financial institutions under the jurisdiction of the independent, central monetary authority or
Bangko Sentral ng Pilipinas to comply with Republic Act No. 9510, and Republic Act No. 9160, as amended, otherwise known as the
Anti-Money Laundering Act and other applicable laws
d. Information about employees of a nonstock nonprofit charitable institutions
e. Personal information originally collected from residents of foreign jurisdictions in accordance with the laws of those foreign jurisdictions,
including any applicable data privacy laws, which is being processed in the Philippines

194. What is the obligation of National Privacy Commission regarding any personal information that comes to its knowledge and possession?
a. It shall at all times ensure the confidentiality of such personal information.
b. It shall disclose such personal information without the consent of data subject.
c. It shall sell such personal information for commercial purposes.
d. It shall use such personal information for public persecution.

195. Who is National Privacy Commission’s head that shall also act as the National Privacy Commission Chairman?
a. Privacy Chairperson
b. Privacy Commissioner
c. Privacy Director
d. Privacy Administrator

196. Who shall assist the Privacy Commissioner of National Privacy Commission?
a. Two Deputy Privacy Commissioner, one to be responsible for Data Processing Systems and to be responsible for Policies and Planning
b. Two Assistant Privacy Commissioner, one to be responsible for Data Processing Systems and to be responsible for Policies and Planning
c. Two Vice Privacy Commissioner, one to be responsible for Data Processing Systems and to be responsible for Policies and Planning
d. Two Under Privacy Commissioner, one to be responsible for Data Processing Systems and to be responsible for Policies and Planning

197. Who has the authority to appoint the Privacy Commissioner and the two Deputy Privacy Commissioners?
a. Department of Information and Communication Technology (DICT) Secretary
b. Department of Justice Secretary
c. President of the Republic of the Philippines
d. Commission of Human Rights (CHR) Chairman

198. What is the term of office of Privacy Commissioner and the two Deputy Privacy Commissioner?
a. Term of three (3) years and may be reappointed for another term of three (3) years
b. Term of six (6) years but ineligible for reappointment
c. Term of seven (7) years but ineligible for reappointment
d. Term of four (4) years and may be reappointed for another term of four (4) years

199. Which of the following is not a qualification of Privacy Commissioner?

a. He must be at least 35 years of age.
b. He must be of good moral character, unquestionable integrity and known probity.
c. He must be a recognized expert in the field of information technology and data privacy.
d. He must be a holder of Doctor of Philosophy (PhD) in the field of information technology and data privacy.

200. Which of the following is the qualification of two Deputy Privacy Commisioners?
a. He must be at least 35 years of age.
b. He must be a holder of Masteral Degree in the field of information technology and data privacy.
c. He must be a recognized expert in the field of information and communication technology and data privacy.
d. He must be a holder of Doctor of Philosophy (PhD) in the field of information technology and data privacy.

201. When will the Privacy Commissioner and two Deputy Privacy Commissioners become civilly liable for their acts?
a. When they acted in good faith in the performance of their duties.
b. When they wilfully and negligently acted in such a manner that is contrary to law, morals, public policy and good customs even if they
acted under orders or instructions of superiors.
c. Either A or B
d. Neither A nor B

202. Which of the following is not a general data privacy principle?

a. Transparency
b. Legitimate purpose
c. Proportionality
d. Immorality

203. Which of the following is not a general data privacy principle?

a. Personal information must be collected for specified and legitimate purposes determined and declared before, or as soon as reasonably
practicable after collection, and later processed in a way compatible with such declared, specified and legitimate purposes only
b. Personal information must be processed fairly and lawfully
c. Personal information must be accurate, relevant and, where necessary for purposes for which it is to be used the processing of personal
information, kept up to date; inaccurate or incomplete data must be rectified, supplemented, destroyed or their further processing
restricted
d. Personal information must be disclosed for commercial purposes even without the consent of data subject

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204. Which of the following is not a general data privacy principle?
a. Personal information must be adequate and not excessive in relation to the purposes for which they are collected and processed
b. Personal information must be retained only for as long as necessary for the fulfillment of the purposes for which the data was obtained
or for the establishment, exercise or defense of legal claims, or for legitimate business purposes, or as provided by law
c. Personal information must be kept in a form which permits identification of data subjects for no longer than is necessary for the
purposes for which the data were collected and processed
d. Personal information must be processed surreptitiously to achieve the objective of the company

205. Which of the following is not a criterion for lawful processing of personal information?
a. The data subject has given his or her consent
b. The processing of personal information is necessary and is related to the fulfillment of a contract with the data subject or in order to take
steps at the request of the data subject prior to entering into a contract
c. The processing is necessary for compliance with a legal obligation to which the personal information controller is subject
d. The processing is necessary in order to take undue advantage on the personal information of the data subject

206. Which of the following is not a criterion for lawful processing of personal information?
a. The processing is necessary to protect vitally important interests of the data subject, including life and health
b. The processing is necessary in order to respond to national emergency, to comply with the requirements of public order and safety, or to
fulfill functions of public authority which necessarily includes the processing of personal data for the fulfillment of its mandate
c. The processing is necessary for the purposes of the legitimate interests pursued by the personal information controller or by a third party
or parties to whom the data is disclosed, except where such interests are overridden by fundamental rights and freedoms of the data
subject which require protection under the Philippine Constitution
d. The processing pertains to sensitive personal information of the data subject without the consent of the data subject

207. What is the principle about the processing of sensitive personal information and privileged information or communication?
a. As a general rule, the processing of sensitive personal information and privileged information shall be prohibited except to those allowed
by Data Privacy Act.
b. As a general rule, the processing of sensitive personal information and privileged information shall be allowed except to those prohibited
by Data Privacy Act.
c. The processing of sensitive personal information and privileged information shall be absolutely prohibited.
d. The processing of sensitive personal information and privileged information shall be absolutely allowed.

208. Which is not a lawful processing of sensitive personal information and privileged information or communication?
a. The data subject has given his or her consent, specific to the purpose prior to the processing, or in the case of privileged information, all
parties to the exchange have given their consent prior to processing.
b. The processing of the same is provided for by existing laws and regulations: Provided, That such regulatory enactments guarantee the
protection of the sensitive personal information and the privileged information: Provided, further, That the consent of the data
subjects are not required by law or regulation permitting the processing of the sensitive personal information or the privileged
information.
c. The processing is necessary to protect the life and health of the data subject or another person, and the data subject is not legally or
physically able to express his or her consent prior to the processing.
d. The processing is necessary for making economic decision on the part of data controller.

209. Which is not a lawful processing of sensitive personal information and privileged information or communication?
a. The processing is necessary to achieve the lawful and noncommercial objectives of public organizations and their
associations: Provided, That such processing is only confined and related to the bona fide members of these organizations or their
associations: Provided, further, That the sensitive personal information are not transferred to third parties: Provided, finally, That
consent of the data subject was obtained prior to processing.
b. The processing is necessary for purposes of medical treatment, is carried out by a medical practitioner or a medical treatment
institution, and an adequate level of protection of personal information is ensured.
c. The processing concerns such personal information as is necessary for the protection of lawful rights and interests of natural or legal
persons in court proceedings, or the establishment, exercise or defense of legal claims, or when provided to government or public
authority.
d. The processing is necessary for discriminating against the employees who are members of labor union.

210. Which of the following is not a right of Data Subject under Data Privacy Act?
a. Right to be informed whether personal information pertaining to him or her shall be, are being or have been processed
b. Right to be furnished the information indicated hereunder before the entry of his or her personal information into the processing
system of the personal information controller, or at the next practical opportunity
c. Right to have reasonable access to, upon demand, the information being processed by the data controller
d. Right to question the decision made by the data controller regarding act of management or act of administration of the corporation

211. Which of the following is not a right of Data Subject under Data Privacy Act?
a. Right to dispute the inaccuracy or error in the personal information and have the personal information controller correct it immediately
and accordingly, unless the request is vexatious or otherwise unreasonable.
b. Right to suspend, withdraw or order the blocking, removal or destruction of his or her personal information from the personal
information controller’s filing system upon discovery and substantial proof that the personal information are incomplete, outdated, false,
unlawfully obtained, used for unauthorized purposes or are no longer necessary for the purposes for which they were collected.
c. Right to be indemnified for any damages sustained due to such inaccurate, incomplete, outdated, false, unlawfully obtained or
unauthorized use of personal information.
d. Right to inspect or access the personal information of other data subject.

212. What is the difference between the data privacy and data protection?
a. Data privacy refers to the rights of the data subject while data protection refers to the means employed to protects the rights of the data
subject.
b. Data privacy refers to a person while data protection refers to the technology.
c. Data privacy refers to the technical rules and regulations while data protection refers to substantive laws.
d. Data privacy refers to technology while data protection refers to legal principles.

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213. Under the principle of transmissibility of rights of data subject, when may the lawful heirs or assignees invoke the rights of the data
subject?
a. After the death of data subject
b. When the data subject is incapacitated or incapable of exercising the said rights
c. Either A or B
d. Neither A nor B

214. This principle means that the data subject shall have the right, where personal information is processed by electronic means and in a
structured and commonly used format, to obtain from the personal information controller a copy of data undergoing processing in an
electronic or structured format, which is commonly used and allows for further use by the data subject.
a. Transmissibility of rights
b. Right to data portability
c. Extraterritorial application of Data Privacy Act
d. Confidentiality of personal information

215. Which of the following is not an internal control measure to be implemented by the personal information controller to secure personal
information?
a. The personal information controller must implement reasonable and appropriate organizational, physical and technical measures
intended for the protection of personal information against any accidental or unlawful destruction, alteration and disclosure, as well as
against any other unlawful processing.
b. The personal information controller shall implement reasonable and appropriate measures to protect personal information against
natural dangers such as accidental loss or destruction, and human dangers such as unlawful access, fraudulent misuse, unlawful
destruction, alteration and contamination.
c. The determination of the appropriate level of security under this section must take into account the nature of the personal information
to be protected, the risks represented by the processing, the size of the organization and complexity of its operations, current data
privacy best practices and the cost of security implementation.
d. The personal information controller may outsource the processing of personal information to a third party personal information
processor in order to avoid the liability under Data Privacy Act.

216. Which of the following is not an internal control measure to be implemented by the personal information controller to secure personal
information?
a. The personal information controller must further ensure that third parties processing personal information on its behalf shall
implement the security measures required by this provision.
b. The employees, agents or representatives of a personal information controller who are involved in the processing of personal
information shall operate and hold personal information under strict confidentiality if the personal information are not intended for
public disclosure.
c. The personal information controller shall promptly notify the Commission and affected data subjects when sensitive personal
information or other information that may, under the circumstances, be used to enable identity fraud are reasonably believed to have
been acquired by an unauthorized person, and the personal information controller or the Commission believes that such unauthorized
acquisition is likely to give rise to a real risk of serious harm to any affected data subject.
d. The employees, agents or representatives of a personal information controller who are involved in the processing of personal
information are no longer required to observe strict confidentiality after leaving the public service, transfer to another position or
upon termination of employment or contractual relations.

217. Which is not an accountability of Personal Information Controller for transfer of Personal Information?
a. Each personal information controller is responsible for personal information under its control or custody, including information that
have been transferred to a third party for processing, whether domestically or internationally, subject to cross-border arrangement and
cooperation.
b. The personal information controller is accountable for complying with the requirements of Data Privacy Act and shall use contractual
or other reasonable means to provide a comparable level of protection while the information are being processed by a third party.
c. The personal information controller shall designate an individual or individuals who are accountable for the organization’s compliance
with Data Privacy Act. The identity of the individual(s) so designated shall be made known to any data subject upon request.
d. The personal information controller is responsible for the processing done by the data subject concerning his own personal
information.

218. He refers to the person who is intended by the originator to receive the electronic data message or electronic document.
a. Addressee
b. Recipient
c. Drawee
d. Offeree

219. It refers to information generated, sent, received or stored by electronic, optical or similar means.
a. Mechanical data message
b. Electronic data message
c. Computerized data message
d. Binary data message

220. It refers to a system intended for and capable of generating, sending, receiving, storing, or otherwise processing electronic data messages or
electronic documents and includes the computer system or other similar device by or in which data is recorded or stored and any procedures
related to the recording or storage of electronic data message or electronic document.
a. Accounting information system
b. Database system
c. Information and communication system
d. Internal control system

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221. It refers to any distinctive mark, characteristic and/or sound in electronic form, representing the identity of a person and attached to or
logically associated with the electronic data message or electronic document or any methodology or procedures employed or adopted by a
person and executed or adopted by such person with the intention of authenticating or approving an electronic data message or electronic
document.
a. Benchmark
b. Trademark
c. Electronic signature
d. Identification mark

222. It refers to information or the representation of information, data, figures, symbols or other modes of written expression, described or
however represented, by which a right is established or an obligation extinguished, or by which a fact may be prove and affirmed, which is
receive, recorded, transmitted, stored, processed, retrieved or produced electronically.
a. Electronic document
b. Paper document
c. Manual document
d. Computerized document

223. It refers to a secret code which secures and defends sensitive information that cross over public channels into a form decipherable only with a
matching electronic key.
a. Digital signature
b. Electronic key
c. Password
d. Manual key

224. He refers to a person by whom, or on whose behalf, the electronic document purports to have been created, generated and/or sent.
a. Offeror
b. Sender
c. Originator
d. Creator

225. The following statements concerning Electronic Commerce Act are correct, except
a. Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the data message purporting to
give rise to such legal effect, or that it is merely referred to in that electronic data message.
b. Electronic documents shall have the legal effect, validity or enforceability as any other document or legal writing.
c. For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under existing laws.
d. An electronic signature on the electronic document shall be equivalent to the signature of a person on a written document if that
signature is proved by showing that a prescribed procedure, not alterable by the parties interested in the electronic document.
e. Electronic data message and electronic document may not become admissible as evidence in any proceedings on the sole ground that it
is in electronic form or on the sole ground that it is not in the standard written form.

226. Which of the following is not covered by Ease of Doing Business and Efficient Government Service Delivery Act of 2018?
a. Local government units (LGUs)
b. Government owned and controlled corporations (GOCCs)
c. Government instrumentalities located abroad
d. National government offices and agencies
e. None of the above

227. What government services are covered by Ease of Doing Business and Efficient Government Service Delivery Act of 2018?
a. Government services covering business transactions
b. Government services covering nonbusiness transactions
c. Both A and B
d. Neither A nor B

228. Which is false regarding Anti-Red Tape Act/ Ease of doing Business Law?
a. All government agencies including departments, bureaus, offices, instrumentalities, or government-owned and/or -controlled
corporations, or local LGUs shall set up their respective most current and updated service standards to be known as the Citizen's Charter
in the form of information billboards which shall be posted at the main entrance of offices or at the most conspicuous place, in their
respective websites and in the form of published materials written either in English, Filipino, or in the local dialect.
b. Except during the preliminary assessment of the request and evaluation of sufficiency of submitted requirements, no government officer
or employee shall have any contact, in any manner, unless strictly necessary with any requesting party concerning an application or
request. This principle is known as zero-contract policy.
c. If the granting authority in the government fails to approve or disapprove an application for a license, clearance, permit, certification or
authorization within the prescribed processing time under Ease of Doing Business Law, said application shall be deemed approved.
d. To eliminate bureaucratic red tape, avert graft and corrupt practices and to promote transparency and sustain ease of doing business, the
DOST shall be primarily responsible in establishing, operating and maintaining a Central Business Portal or other similar technology, as
the DOST may prescribe.

229. It refers to the written approval or disapproval made by a government office or agency on the application or request submitted by an
applicant or requesting party for processing.
a. Denial
b. Approval
c. Action
d. Inaction

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230. It refers to single common site or location, or a single online website or portal designated for the Business Permits and Licensing System
(BPLS) of an LGU to receive and process applications, receive payments, and issue approved licenses, clearances, permits, or
authorizations.
a. Business One Stop Shop (BOSS)
b. Business Only Scope Store (BOSS)
c. Business On Site Scheme (BOSS)
d. Business Own Set Style (BOSS)

231. They refer to sets of regulatory requirements that a business entity must comply with to engage, operate or continue to operate a business,
such as, but not limited to, collection or preparation of a number of documents, submission to national and local government authorities,
approval of application submitted, and receipt of a formal certificate or certificates, permits, licenses which include primary and secondary,
clearances and such similar authorization or documents which confer eligibility to operate or continue to operate as a legitimate business.
a. Related party transactions
b. Business-related transactions
c. Arms length transactions
d. Unrelated party transactions

232. They refer to applications or requests submitted by applicants or requesting parties of a government office which necessitate evaluation in
the resolution of complicated issues by an officer or employee of said government office, such transactions to be determined by the office
concerned.
a. Simple transactions
b. Compound transactions
c. Complex transactions
d. Composite transactions

233. It refers to any individual whether or not officially involved in the operation of a government office or agency who has access to people
working therein, and whether or not in collusion with them, facilitates speedy completion of transactions for pecuniary gain or any other
advantage or consideration.
a. Fixer
b. Arranger
c. Backer
d. Contact

234. It refers to the process or transaction between applicants or requesting parties and government offices or agencies involving applications for
any privilege, right, reward, license, clearance, permit or authorization, concession, or for any modification, renewal or extension of the
enumerated applications or requests which are acted upon in the ordinary course of business of the agency or office concerned.
a. Social service
b. Government service
c. Public service
d. Private service

235. It refers to an application which requires the use of technical knowledge, specialized skills and/or training in the processing and/or
evaluation thereof.
a. Simple application
b. Compound application
c. Highly technical application
d. Common application

236. It refers to time consumed by an LGU or national government agency (NGA) from the receipt of an application or request with complete
requirements, accompanying documents and payment of fees to the issuance of certification or such similar documents approving or
disapproving an application or request.
a. Lead time
b. Set-up time
c. Waiting time
d. Processing time

237. It refers to any regulation, rule, or administrative procedure or system that is ineffective or detrimental in achieving its intended objectives
and, as a result, produces slow, suboptimal, and undesirable social outcomes.
a. Red tape
b. Green tape
c. Blue tape
d. White tape

238. It refers to any legal instrument that gives effect to a government policy intervention and includes licensing, imposing information
obligation, compliance to standards or payment of any form of fee, levy, charge or any other statutory and regulatory requirements
necessary to carry out activity.
a. Control
b. System
c. Regulation
d. Process

239. They refers to applications or requests submitted by applicants or requesting parties of a government office or agency which only require
ministerial actions on the part of the public officer or employee, or that which present only inconsequential issues for the resolution by an
officer or employee of said government office.
a. Simple transactions
b. Common transactions
c. Ordinary transactions
d. Normal transactions

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240. It refers to the government agency, attached to the Office of the President, entrusted with the implementation of Ease of Doing Business and
Efficient Government Service Delivery Act of 2018.
a. Anti-Fixer Authority
b. Anti-Bureaucracy Authority
c. Anti-Red Tape Authority
d. Anti-Influencer Authority

241. It refers to respective most current and updated service standards of any government agency in the form of information billboards which
shall be posted at the main entrance of offices or at the most conspicuous place, in their respective websites and in the form of published
materials written either in English, Filipino, or in the local dialect, that detail the processing of business transactions in a specific
government agency.
a. Citizen’s Charter
b. Citizen’s Bill of Rights
c. Citizen’s Check and Balance
d. Citizen’s Protection

242. This is a policy that prohibits government officer or employee to have any contact with an application except (1) during the preliminary
assessment of the request and evaluation of sufficiency of submitted requirements and (2) necessary with any requesting party concerning
an application or request.
a. Zero-Contact Policy
b. Online Policy
c. Invisible Policy
d. Intangible Policy

243. It shall serve as a central system to receive applications and capture application data involving business-related transactions, including
primary and secondary licenses, and business clearances, permits, certifications or authorizations issued by the local government units
(LGUs): Provided, That the such system may also provide links to the online registration or application systems established by National
Government Agencies (NGAs).
a. Central Business Portal (CBP)
b. Center Binding Program (CBP)
c. Cost Benefit Plan (CBP)
d. Control Brand Premium (CBP)

244. What is the maximum period for issuance of Fire Safety Evaluation Clearance (FSEC), Fire Safety Inspection Certificate (FSIC) by Bureau of
Fire and Protection (BFP) for business permit?
a. No longer than three (3) working days
b. No longer than five (5) working days
c. No longer than seven (7) working days
d. No longer than ten (10) working

245. What is the maximum period for issuance of certification of fire incident for fire insurance purposes by Bureau of Fire and Protection (BFP)
a. No longer than twenty (20) working days, and may be extended only once for another twenty (20) working days
b. No longer than ten (10) working days, and may be extended only once for another ten (10) working days
c. No longer than thirty (30) working days, and may be extended only once for another thirty (30) working days
d. No longer than forty (40) working days, and may be extended only once for another forty (40) working days

246. What is the maximum period for the processing and approval of licenses, clearances, permits, certifications or authorizations for the
installation and operation of telecommunication, broadcast towers, facilities, equipment and services in so far as those issued by barangays?
a. a total of seven (7) working days
b. a total of five (5) working days
c. a total of three (3) working days
d. a total of ten (10) working days

247. What is the maximum period for the processing and approval of licenses, clearances, permits, certifications or authorizations for the
installation and operation of telecommunication, broadcast towers, facilities, equipment and services in so far as those issued by Local
Government Units (LGUs)?
a. a total of seven (7) working days
b. a total of five (5) working days
c. a total of three (3) working days
d. a total of ten (10) working days

248. What is the maximum period for the processing and approval of licenses, clearances, permits, certifications or authorizations for the
installation and operation of telecommunication, broadcast towers, facilities, equipment and services in so far as those issued by National
Government Agencies (NGAs)?
a. a total of seven (7) working days
b. a total of five (5) working days
c. a total of three (3) working days
d. a total of ten (10) working days

249. What is the effect if the approving government agency fails to approve or disapprove an application for a license, clearance, permit,
certification or authorization within the prescribed processing time of a total of seven (7) working days?
a. Said application shall be deemed approved.
b. Said application shall be deemed denied.
c. The applicant shall file another application.
d. The applicant shall go to the proper court of law to file an action for mandamus.

CPAR – Regulatory Framework for Business Transactions (RFBT 9117) Page 24 of 24

250. What if the licenses, clearances, permits, certifications or authorizations for the installation and operation of telecommunication, broadcast
towers, facilities, equipment and services require approval by appropriate local legislative body such as the Sanggunian, what is the
prescribed period for the approval of the said application?
a. a nonextendible period of twenty (20) working days
b. a nonextendible period of ten (10) working days
c. a nonextendible period of thirty (30) working days
d. a nonextendible period of forty (40) working days

251. For homeowners and other community clearances, what is the period granted to the officers of homeowner’s association to refer the
application to the members of the association?
a. twenty (20) working days
b. ten (10) working days
c. thirty (30) working days
d. forty (40) working days

252. What is the maximum period granted to homeowner’s association to give consent or disapproval for the application for homeowners and
other community clearances?
a. a nonextendible period of twenty (20) working days
b. a nonextendible period of ten (10) working days
c. a nonextendible period of thirty (30) working days
d. a nonextendible period of forty (40) working days

-Nothing follows-

CPAR – Regulatory Framework for Business Transactions (RFBT 9117) Page 25 of 24

 CPA REVIEW SCHOOL OF THE PHILIPPINES
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
COVERAGE: Comparison of Corporation Code of the Philippines (BP 68) and Revised Corporation Code of the
Philippines (RA 11232) and Provisions on One Person Corporation (OPC)
Direction: Read and study the following concepts.

Title of the Code Corporation Code of the Philippines Revised Corporation Code of the Philippines
Number of the Code Batas Pambansa Bilang 68 (BP 68) Republic Act No. 11232 (R.A. 11232)
Corporations Prohibited (BLTBPI) Buildings and Loan Association, Trust (BLTBPIPO) Buildings and Loan Association,
to Issue No-Par Value Company, Banks, Insurance Company, Public Trust Company, Banks, Insurance Company, Public
Common Stocks Utility Utility, Preneed Company, Other corporations
authorized to obtain or access money from the
public (whether publicly listed or not)
Founder’s Shares No similar provision Exclusive right of founder’s shares to be elected in
Restriction as to the BoD shall not be allowed if its exercise will
exclusive right to be violate Anti-Dummy Law, Foreign Investments Act
elected in the BoD and other pertinent laws.
Regulation on No similar provision The terms and conditions stated in the AoI and
Redeemable Shares stock certificate regarding redeemable shares shall
be subject to rules and regulations issued by SEC.
Incorporators of Private Only natural persons not less than five (5) but not Any person, partnership, association or corporation,
Corporation more than fifteen (15) may become incorporators. singly or jointly but not more than fifteen (15) in
number may become incorporators.
Corporate Term of Maximum term of 50 years although unlimited Perpetual existence unless its articles of
existence times of renewal incorporation provides for specific term.
Renewal of Corporate It is mandatory because failure to renew within the It is not mandatory for corporation with perpetual
Term deadline for renewal is an automatic ground for existence because there is no term to renew. As
corporate dissolution. regards to corporation with specific term, a
corporation whose term has expired may apply with
SEC for the revival of its certificate of incorporation
and subject to all of its duties, debts, and liabilities
existing prior to its revival. Upon approval by SEC,
the corporation shall be deemed revived and a
certificate of revival of corporate existence shall be
issued, giving it perpetual existence, unless its
application for revival provides otherwise.
Effect of failure to renew It is an automatic ground for corporate dissolution. The corporation is not automatically dissolved by
corporate term within the The corporation is ip so facto dissolved by operation of law because it is now allowed to file
deadline for renewal operation of law. for the revival of corporate existence with SEC.
Period of renewal of Within five(5)-year period prior the original or Within three(3)-year period prior the original or
corporate term subsequent expiry date(s) of the corporate term subsequent expiry date(s) of the corporate term
Application for revival of No similar provision No application for revival of certificate of
certificate of incorporation of banks, banking and quasi-banking
incorporation institutions, preneed, insurance and trust companies,
nonstock savings and loan associations, pawnshops,
corporations engaged in money service business,
and other financial intermediaries shall be approved
by SEC unless accompanied by a favorable
recommendation of the appropriate government
agency such as BSP or Insurance Commission.
Minimum subscribed 25% of the authorized capital stock No similar provision
capital stock
Minimum paid up capital 25% of actually subscribed shares of stocks or No similar provision
P5,000, whichever is higher
Form of Articles of Duly signed and acknowledged by all the Duly signed and acknowledged or authenticated by
Incorporation to be filed incorporators all incorporators
to SEC
Provision in Arbitration No similar provision An arbitration agreement may be provided in the
Agreement in Articles of articles of incorporation
Incorporation
Sworn statement of Required No longer required
Treasurer elected as to
minimum 25%
subscription and as to
25% minimum paid up
capital or P5,000,
whichever is higher
Certificate of Bank Required No longer required
Deposit for paid up
capital

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 1 of 22

Filing of articles of Not allowed Allowed
incorporation and
applications for
amendments thereto with
SEC in the form of
electronic document
(Electronic Filing)
Undertaking to change No similar provision New undertaking in the articles of incorporation
the name of corporation
immediately upon receipt
of notice from SEC that
another corporation,
partnership or person has
acquired a prior right to
the use of such name
Power of SEC to No similar provision The SEC has the power to summarily enjoin the
summarily order the corporation from using name that is not
corporation to distinguishable; already reserved or registered for
immediately cease and the use of another corporation; or if such name is
desist from using name already protected by law, or when its use is contrary
that (1) is not to existing laws, rules and regulations. If the
distinguishable, (2) is corporation fails to comply with the order of SEC,
already protected by law, the SEC may hold the corporation and its
or (3) contrary to law, responsible directors or officers in contempt and/or
rules and regulations. or hold them administratively, civilly and/or
criminally liable under RCC and other applicable
laws and/or revoke the registration of the
corporation.
Provision on No similar provision A name is not distinguishable even if it contains one
determination of name or more of the following:
that is not distinguishable a. The word “corporation”, “company”,
“incorporated”, “limited”, or an
abbreviation of one of such words; and
b. Punctuations, articles, conjunctions,
contractions, prepositions, abbreviations,
different tenses, spacing, or number of the
same word or phrase.
Verification of intended No similar provision A person or group or group of persons desiring to
corporate by SEC name incorporate shall submit the intended corporate
prior to submission of name to the SEC for verification. If the SEC finds
Articles of Incorporation that the name is distinguishable from a name
and By-laws and already reserved or registered for the use of another
reservation of corporate corporation, not protected by law and is not contrary
name to law, rules and regulations, the name shall be
reserved in favor of the incorporators. The
incorporators shall then submit their articles of
incorporation and bylaws to the SEC.
Period of Submission of Either (1) at the time of submission of articles of Only at the time of submission of Articles of
By-laws or Adoption of incorporation or (2) within 30 days from the Incorporation
By-laws issuance by SEC of Certificate of Registration or
Incorporation
Mandatory period to Within two (2) years from the date of Within five (5) years from the date of incorporation
formally organize and to incorporation (Issuance by SEC of certificate of (Issuance by SEC of certificate of registration or
commence business registration or incorporation) incorporation)
transaction to prevent
automatic dissolution of
the corporation
Provision on revocation The continuous inoperation of a corporation for a The SEC may, after due notice and hearing, place a
of certificate of period of at least five (5) years shall be a ground corporation which subsequently becomes
registration of delinquent for the suspension or revocation of its corporate inoperative for a period of at least five (5) years
corporation (Inoperative franchise or certificate of incorporation. under delinquent status. A delinquent corporation
corporation for a period shall have a period of two (2) years to resume
of at least five (5) operations and comply with all requirements that
consecutive years) SEC shall prescribe. Upon compliance by the
corporation, the SEC shall issue an order lifting the
delinquent status. Failure to comply with the
requirements and resume operations within the
period given by the SEC shall cause the revocation
of the corporation’s certification of incorporation.
The SEC shall give reasonable notice to, and
coordinate with the appropriate regulatory agency
prior to the suspension, revocation of the certificate
of incorporation of companies under their special
regulatory jurisdiction.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 2 of 22

Period to resume No similar provision. A delinquent corporation shall have a period of two
operation of a delinquent (2) years to resume operations and comply with all
corporation (Inoperative requirements that SEC shall prescribe.
corporation for a period
of at least five (5)
consecutive years)
Number of members of The number of directors or trustees, which shall The number of directors, which shall not be more
Board of Directors or not be less than five (5) nor more than fifteen (15) than fifteen (15) or the number of trustees which
Board of Trustees as may be more than fifteen (15)
provided in original
articles of incorporation
Term of Trustees of The original term is staggered term of one, two or Term not exceeding three (3) years
Nonstock Corporation three years.
Mandatory Presence of No Similar Provision The board of the following corporations vested with
independent directors in public interest shall have independent directors
the BoD constituting at constituting at least twenty percent (20%) of such
least 20% of such BoD board:
a. Corporations covered by Section 17.2 of
“Securities Regulation Code” namely those
whose securities are registered with SEC,
corporations listed with an exchange (PSE)
or with assets of at least P50,000,000 and
having 200 or more shareholders, each
holding at least 100 shares of a class of its
equity shares.
b. Banks and quasi-banks, nonstock savings
and loan associations, pawnshops,
corporations engaged in money service
business, preneed, trust and insurance
companies, and other financial
intermediaries; and
c. Other corporations engaged in business
vested with public interest similar to the
above, as may be determined by the SEC,
after taking into account relevant factors
which are germane to the objective and
purpose of requiring the election of an
independent director, such as the extent of
minority ownership, type of financial
products, or securities issued or offered to
investors, public interest involved in the
nature of business operations, and other
analogous factors.

An independent director 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.

Independent directors must be elected by the

shareholders present or entitled to vote in absentia
during the election of directors. Independent
directors shall be subject to rules and regulations
governing their qualifications, disqualifications,
voting requirements, duration of term and their
limit, maximum number of board memberships and
other requirements that the SEC will prescribe to
strengthen their independence and align with
international business practices.
Election of directors or Not expressly stipulated Except when the exclusive right is reserved for
trustees holders of founders’ shares under Section 7 of RCC,
each stockholder or member shall have right to
nominate any director or trustee who possesses all
of the qualifications and none of the
disqualifications set forth in RCC.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 3 of 22

Voting through remote No similar provision. When so authorized in the by-laws or by a majority
communication or in vote of the board of directors/trustees, the
absentia by stockholders stockholders or members may also vote through
or members in the remote communication or in absentia. Provided, that
election of directors or the right to vote through such modes may be
trustees (Manner of exercised in corporations vested with public
voting by stockholders or interest, notwithstanding the absence of a provision
members in their in the bylaws of such corporations. A stockholder or
meeting) member who participates through remote
communication or in absentia shall be deemed
present for purposes of quorum.
Provision on duties of No similar provision. The directors or trustees elected shall perform their
directors or trustees duties as prescribed by law, rules of good
governance, and by-laws of the corporation.
Required vote on Unless the articles of incorporation or the by-laws No similar provision.
transaction of corporate provide for a greater majority, a majority of the
business or act of number of directors or trustees as fixed in the
management and articles of incorporation shall constitute a quorum
required vote for election for the transaction of corporate business, and every
of corporate officers decision of at least a majority of the directors or
trustees present at a meeting at which there is a
quorum shall be valid as to corporate act, except
for the election of officers which shall require a
vote of a majority of all the members of the board.
Residency Requirement Not required The treasurer is required to be a resident.
of Treasurer
Election of Compliance Not required If the corporation is vested with public interest, the
Officer board shall elect a compliance officer.
Matter to be reported to Not required Shareholdings of elected directors, trustees and
SEC after the election of officers must be reported to SEC.
directors, trustees and
officers
Nonholding of Election No similar provision. The non-holding of elections and the reasons
of Directors, Trustees therefor shall be reported to SEC within 30 days
and Officers from the date of the scheduled election. The report
shall specify a new date for the election, which shall
not be later than sixty (60) days from the scheduled
date. If no new date has been designated, or if the
rescheduled election is likewise not held, the SEC,
may upon the application of a stockholder, member,
director or trustee, and after verification of the
unjustified non-holding of the election, summarily
order that an election be held. The SEC shall have
the power to issue such orders as may be
appropriate, including orders directing the issuance
of a notice stating the time and place of the election,
designated presiding officer, and the record date or
dates for the determination of stockholders or
members entitled to vote.
Conviction by final Permanent or lifetime disqualification Temporary disqualification for a period of five (5)
judgment of an offense years from conviction by final judgment
punishable by
imprisonment for a
period exceeding six (6)
years
Grounds for temporary Conviction of violation of Corporation Code of the a. Convicted by final judgment (1) Of an
disqualification or Philippines offense punishable by imprisonment for a
disqualification for a period exceeding six (6) years, (2) For
period of five (5) years violating this Code; and (3) For violating
“The Securities Regulation Code”; or
b. Found administratively liable for any
offense involving fraudulent acts; or
c. By a foreign court or equivalent foreign
regulatory for acts, violations or
misconduct similar to those enumerate in
letter (a) and (b) above.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 4 of 22

Power of SEC to remove No similar provision The SEC shall, moto proprio or upon verified
a disqualified director or complaint, and after notice and hearing, order the
trustee removal of a director or trustee elected despite the
disqualification, or whose disqualification arose or
is discovered subsequent to an election. 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.
Period for filling up of No similar provision When the vacancy is due to term expiration, the
vacancy in the Board of election shall be held no later than the day of such
Directors or Trustees expiration at a meeting called for that purpose.
When the vacancy arises as a result of removal by
the stockholders or members, the election may be
held on the same day of the meeting authorizing the
removal and this fact must be so stated in the
agenda and notice of said meeting. In all other
cases, the election must be held no later than forty
five (45) days from the time the vacancy arose. A
director or trustee elected to fill a vacancy shall be
referred to as replacement director or trustee and
shall serve only for the unexpired term of the
predecessor in office.
Emergency Board of No similar provision When the vacancy prevents the remaining directors
Directors or Trustees 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. The action by the
designated director or trustee shall be limited to the
emergency action necessary, and the term shall
cease within a reasonable time from the termination
of the emergency or upon election of the
replacement director or trustee, whichever comes
earlier. The corporation must notify the SEC within
three (3) days from the creation of the emergency
board, stating therein the reason for its creation.
Prohibition against No similar provision Directors or trustees shall not participate in the
directors or trustees’ determination of their own per diems or
participation in compensation.
determination of their
own per diems or
compensation
Submission of annual No similar provision Corporations vested with public interest shall
report of compensation submit to their shareholders and SEC, an annual
of BOD/BOT to report of the total compensation of each of their
stockholders and SEC directors or trustees.
Scope of restriction on It covers self-dealing directors, trustees or officers It covers not only self-dealing directors, trustees or
self-dealing directors, only. officers but also their spouses and relatives within
trustees or officers fourth (4th) civil degree of consanguinity or affinity.
Additional requirement Not required In case of corporations vested with public interest,
for validity of contract material contracts are approved by at least two-
with self-dealing thirds (2/3) of the entire membership of the board,
directors, trustees or with at least a majority of the independent directors
officers voting to approve the material contract.
Allowing the ratification If the requirement or condition that the contract is If the requirement or condition that the contract is
of at least 2/3 of fair and reasonable is not complied with, the fair and reasonable is not complied with, the
stockholders/members in contract is voidable at the option of corporation contract is voidable at the option of corporation but
contract with self-dealing and this defect may not be cleansed by ratification this defect may be ratified by at least 2/3 of
directors, trustees or of at least 2/3 of stockholders of members. stockholders of members.
officers in case a
condition is not complied
with.
Appointment of To be appointed by the Board of Directors No similar provision
Members of Executive
Committee of the BoD
Creation of Special No similar provision The board of directors may create special
Committees by BoD committees of temporary or permanent nature and
determine the members’ term, composition,
compensation, powers and responsibilities.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 5 of 22

Corporate power to Power of succession by its corporate name for the To have perpetual existence unless the certificate of
perpetual existence period of time stated in the articles of incorporation provides otherwise
incorporation and the certificate of incorporation
Power to enter into No similar provision To enter into a partnership, joint venture, merger,
partnership or joint consolidation, or any other commercial agreement
venture with natural and juridical persons
Prohibition on political No corporation, domestic or foreign, shall give No foreign corporation shall give donations in aid of
donation donations in aid of any political party or candidate any political party or candidate or for purposes of
or for purposes of partisan political activity. partisan political activity.
Giving notice to No similar provision When allowed in the bylaws or done with the
stockholders/members in consent of the stockholders/members, written notice
extension or shortening to stockholders/members on proposed corporate
of corporate term action may be sent electronically in accordance with
the rules and regulations of the SEC on the use of
electronic data messages.
Sale or disposition of No similar provision Subject to the provisions of R.A. No. 10667 a.k.a.
corporate assets “Philippine Competition Act” and other related
laws, a corporation may, by a majority vote of its
board of directors or trustees, sell, lease, exchange,
mortgage, pledge or otherwise dispose of its
property and assets, upon such terms and conditions
and for such considerations, which may be money,
stocks, bonds, or other instruments for the payment
of money or other property or consideration, as its
board of directors or trustees may deem expedient.
Criteria for sale of A sale or other disposition shall be deemed to The determination of whether or not the same
substantially all the cover substantially all the corporate property and involves all or substantially all of the corporation’s
corporate property assets if thereby the corporation would be rendered properties and assets must be computed based on its
incapable of continuing the business or net asset value, as shown in its latest financial
accomplishing the purpose for which it was statements. A sale or other disposition shall be
incorporated. deemed to cover substantially all the corporate
property and assets if thereby the corporation would
be rendered incapable of continuing the business or
accomplishing the purpose for which it was
incorporated.
Date of Regular Regular meetings of stockholders or members Regular meetings of stockholders or members shall
Meetings of shall be held annually on a date fixed in the by- be held annually on a date fixed in the by-laws, or if
Stockholders or laws, or if not so fixed, on any date of April as not so fixed, on any date after April 15 as
Members determined by BoD or BoT. determined by BoD or BoT.
Minimum days of giving Written notice of regular meetings shall be sent to Written notice of regular meetings shall be sent to
notice to Stockholders or all stockholders or members at least two (2) weeks all stockholders or members at least twenty-one (21)
Members in Regular prior to the meeting, unless a different period is days prior to the meeting, unless a different period
Meeting required by the by-laws. is required by the by-laws.
Electronic mail or other No similar provision Written notice of regular meeting may be sent to all
manner of sending notice stockholders or members of record through
electronic mail or such other manner as the SEC
shall allow under its guidelines.
Presentation of No similar provision The law enumerated the matters that the BoD or
recommended matters in BoT shall endeavor to present during the regular
regular meeting of meeting of stockholders or members.
stockholders or members
by BoD or BoT
Waiver of notice of any Notice of any meeting may be waived, expressly Notice of any meeting may be waived, expressly or
meeting by any or impliedly, by any stockholder or member. impliedly, by any stockholder or member. Provided,
Stockholder or Member that general waivers of notice in the articles of
incorporation or the by-laws shall not be allowed.
Provided, further, that attendance at a meeting shall
constitute a waiver of notice of such meeting,
except when the person attends a meeting for the
express purpose of objecting to the transaction of
any business because the meeting is not lawfully
called or convened.
Closing of stock and No similar provision Unless the bylaws provide for a longer period, the
transfer book or stock and transfer book or membership shall be
membership book for closed at least twenty (20) days for regular meetings
regular meeting and and seven (7) days for special meetings before the
special meeting of scheduled date of the meeting.
stockholders or members

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 6 of 22

Minimum days of giving No similar provision In case of postponement of stockholders’ or
notice to Stockholders or members’ regular meetings, written notice thereof
Members in case of and the reason therefor shall be sent to all
postponement of regular stockholders or members of record at least two (2)
meeting of stockholders weeks prior to the date of the meeting, unless a
or members different period is required under the bylaws, law or
regulation.
Place of meeting of Only Metro Manila shall be considered as city or Metro Manila, Metro Cebu, Metro Davao and other
stockholders or members municipality in the application of city or Metropolitan Areas shall be considered as city or
municipality where the principal office of the municipality in the application of city or
corporation is located. municipality where the principal office of the
corporation is located.
Attachments of Notice of No similar provision Each notice of meeting shall be accompanied by the
Meeting sent to following:
Stockholders or 1. Agenda for the meeting
Members 2. A proxy form which shall be submitted to
the corporate secretary within a reasonable
time prior to the meeting
3. When attendance, participation, and voting
are allowed by remote communication or
in absentia, the requirements and
procedures to be followed when a
stockholder or member elects either option
4. When the meeting is for the election of
directors or trustees, the requirements and
procedure for nomination and election.
Requisites for Validity of All proceedings had and any businesses transacted All proceedings had and any businesses transacted
stockholders’ or at any meeting of the stockholders or members, if at any meeting of the stockholders or members, if
members’ meeting within the powers or authority of the corporation, within the powers or authority of the corporation,
despite impropriety in its shall be valid even if the meeting be improperly shall be valid even if the meeting be improperly
holding or calling held or called, provided all the stockholders or held or called, provided all the stockholders or
members of the corporation are present or duly members of the corporation are present or duly
represented at the meeting. represented at the meeting and none of them
expressly states at the beginning of the meeting that
the purpose of their attendance is to object to the
transaction of any business because the meeting is
not lawfully called or convened.

Minimum days of giving Notice of regular or special meetings stating the Notice of regular or special meetings stating the
notice to Directors or date, time and place of the meeting must be sent to date, time and place of the meeting must be sent to
Trustees in Regular or every director or trustee at least one (1) day prior every director or trustee at least two (2) days prior
Special Meeting of to the scheduled meeting, unless otherwise to the scheduled meeting, unless otherwise provided
BoD/BoT provided by the by-laws. by the by-laws.
Manner of Attendance of They must physically attend or vote at the meeting Directors or trustees who cannot physically attend
Directors or Trustees in of BoD/BoT. or vote at board meetings can participate and vote
Regular or Special through remote communication such as
Meeting of BoD/BoT videoconferencing, teleconferencing, or other
alternative modes of communication that allow
them reasonable opportunities to participate.
Restriction on related No similar provision A director or trustee who has a potential interest in
party transaction any related party transaction must refuse from
voting on the approval of the related party
transaction without prejudice to compliance with the
requirements on self-dealing director.
Presiding Officer in The president shall preside at all meetings of the The chairman of BoD/BoT or, in his absence, the
BoD/BoT or directors or trustees as well as of the stockholders president shall preside at all meetings of the
Stockholders’/Members’ or members, unless the by-laws provide otherwise. directors or trustees as well as of the stockholders or
Meeting members, unless the by-laws provide otherwise.
Period of filing of proxy Proxy shall be filed before the scheduled meeting Proxy shall be filed to the corporate secretary within
to corporate secretary with the corporate secretary. reasonable time before the schedule meeting.
Restriction on voting No voting trust agreement shall be entered into for No voting trust agreement shall be entered into for
trust agreement the purpose of circumventing the law against purposes of circumventing the laws against anti-
monopolies and illegal combinations in restraint of competitive agreements, abuse of dominant
trade or used for purposes of fraud. position, anti-competitive mergers and acquisitions,
violation of nationality and capital requirements, or
for the perpetuation of fraud.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 7 of 22

New valid consideration 1. Actual cash paid to the corporation; a. Actual cash paid to the corporation;
for issuances of shares of 2. Property, tangible or intangible, actually b. Property, tangible or intangible, actually
stocks received by the corporation and necessary or received by the corporation and necessary
convenient for its use and lawful purposes at a fair or convenient for its use and lawful
valuation equal to the par or issued value of the purposes at a fair valuation equal to the par
stock issued; or issued value of the stock issued;
3. Labor performed for or services actually c. Labor performed for or services actually
rendered to the corporation; rendered to the corporation;
4. Previously incurred indebtedness of the d. Previously incurred indebtedness of the
corporation; corporation;
5. Amounts transferred from unrestricted retained e. Amounts transferred from unrestricted
earnings to stated capital; and retained earnings to stated capital;
6. Outstanding shares exchanged for stocks in the f. Outstanding shares exchanged for stocks in
event of reclassification or conversion. the event of reclassification or conversion;
g. Shares of stock in another corporation;
and/or
h. Other generally accepted form of
consideration.

Uncertified or Scripless No similar provision. The SEC may require corporations whose securities
Form of Shares of Stocks are traded in trading markers and which can
reasonably demonstrate their capability to do so to
issue their securities or shares of stocks in
uncertified or scripless form in accordance with the
rules of SEC.
Interest rate on unpaid 1. Rate of interest fixed in the by-laws 1. Rate of interest fixed in the subscription
subscription 2. Legal rate contract
2. Legal rate
Additional Manner or Notice of delinquency sale shall be sent to every Notice of delinquency sale shall be sent to every
Mode/ of sending notice delinquent stockholder either personally or by delinquent stockholder either personally or by
of public sale to registered mail. registered mail or through other means provided in
delinquent stockholder the by-laws.
Books to be Kept; Stock Every corporation shall keep and carefully Every corporation shall keep and carefully preserve
Transfer Agent preserve at its principal office a record of all at its principal office all information relating to the
business transactions and minutes of all meetings corporation including, but not limited to:
of stockholders or members, or of the board of
directors or trustees, in which shall be set forth in (a) The articles of incorporation and
detail the time and place of holding the meeting, bylaws of the corporation and all their
how authorized, the notice given, whether the amendments;
meeting was regular or special, if special its object,
those present and absent, and every act done or
(b) The current ownership structure and
ordered done at the meeting. Upon the demand of voting rights of the corporation, including
any director, trustee, stockholder or member, the lists of stockholders or members group
time when any director, trustee, stockholder or
structures, intra-group relations, ownership
member entered or left the meeting must be noted
data, and beneficial ownership.
in the minutes; and on a similar demand, the yeas
and nays must be taken on any motion or
proposition, and a record thereof carefully made. (c) The names and addresses of all the
The protest of any director, trustee, stockholder or members of the board of directors or
member on any action or proposed action must be trustees and the executive officers;
recorded in full on his demand.
(d) A record of all business transactions;
The records of all business transactions of the
corporation and the minutes of any meetings shall (e) A record of the resolutions of the board
be open to inspection by any director, trustee, of directors or trustees and of the
stockholder or member of the corporation at stockholders or members;
reasonable hours on business days and he may
demand, in writing, for a copy of excerpts from (f) Copies of the latest reportorial
said records or minutes, at his expense. requirements submitted to the
Commission; and
Any officer or agent of the corporation who shall
refuse to allow any director, trustees, stockholder (g) The minutes of all meetings of
or member of the corporation to examine and copy stockholders or members, or of the board
excerpts from its records or minutes, in accordance of directors or trsutees. Such minutes shall
with the provisions of this Code, shall be liable to set forth in detail among others; the time
such director, trustee, stockholder or member for and the place of the meeting held, how it
damages, and in addition, shall be guilty of an was authorized, the notice given, the
offense which shall be punishable under Section agenda therefor, whether the meeting was
144 of this Code: Provided, That if such refusal is regular or special, its object if special,
made pursuant to a resolution or order of the board those present and absent, and every act

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 8 of 22

 of directors or trustees, the liability under this done or ordered done at the meeting. Upon
section for such action shall be imposed upon the the demand of a director trustee,
directors or trustees who voted for such refusal: stockholder or member, the time when any
and Provided, further, That it shall be a defense to director, trustee, stockholder or member
any action under this section that the person entered or left the meeting must be noted in
demanding to examine and copy excerpts from the the minutes; and on a similar demand, the
corporation’s records and minutes has improperly yeas and nays must be taken on any motion
used any information secured through any prior or proposition, and a record thereof
examination of the records or minutes of such carefully made. The protest of a director,
corporation or of any other corporation, or was not trustee, stock holder or member on any
acting in good faith or for a legitimate purpose in action or proposed action must be recorded
making his demand. in full upon their demand.

Stock corporations must also keep a book to be Corporate records, regardless of the form in which
known as the "stock and transfer book", in which they are stored, shall be open to inspection by any
must be kept a record of all stocks in the names of director, trustee, stockholder or member of the
the stockholders alphabetically arranged; the corporation in person or by a representative at
installments paid and unpaid on all stock for which reasonable hours on business days, and a demand in
subscription has been made, and the date of writing may be made by such director, trustee or
payment of any installment; a statement of every stockholder at their expense, for copies of such
alienation, sale or transfer of stock made, the date records or excerpts from said records. The
thereof, and by and to whom made; and such other inspecting or reproducing party shall remain bound
entries as the by-laws may prescribe. The stock by confidentiality rules under prevailing laws, such
and transfer book shall be kept in the principal as the rules on trade secrets or processes under
office of the corporation or in the office of its Republic Act No. 8293, otherwise known as the
stock transfer agent and shall be open for "Intellectual Property Code of the Philippines", as
inspection by any director or stockholder of the amended, Republic Act No. 10173, otherwise
corporation at reasonable hours on business days. known as the "Data Privacy Act of 2012" Republic
Act No. 8799, otherwise known as "The Securities
No stock transfer agent or one engaged principally Regulation Code", and the Rules of Court.
in the business of registering transfers of stocks in
behalf of a stock corporation shall be allowed to A requesting party who is not a stockholder or
operate in the Philippines unless he secures a member of record, or is a competitor, director,
license from the Securities and Exchange officer, controlling stockholder or otherwise
Commission and pays a fee as may be fixed by the represents the interests of a competitor shall have no
Commission, which shall be renewable annually: right to inspect or demand reproduction of corporate
Provided, That a stock corporation is not precluded records.
from performing or making transfer of its own
stocks, in which case all the rules and regulations Any stockholder who shall abuse the rights granted
imposed on stock transfer agents, except the under this section shall be penalized under Section
payment of a license fee herein provided, shall be 158 of this Code, without prejudice to the
applicable. provisions of Republic Act No. 8293, otherwise
known as the "Intellectual Property Code of the
Philippines", as amended, and Republic Act No.
10173, otherwise known as the "Data Privacy Act of
2012".

Any officer or agent of the corporation who shall

refuse to allow the inspection and/or reproduction of
records in accordance with the provisions of this
Code shall be liable to such director, trustee,
stockholder or member for damages, and in
addition, shall be guilty of an offense which shall be
punishable under Section 161 of this Code:
Provided, That if such refusal is made pursuant to a
resolution or order of the board of directors or
trustees, the liability under this section for such
action shall be imposed upon the directors or
trustees who voted for such refusal: Provided,
further,That it shall be a defense to any action under
this section that the person demanding to examine
and copy excerpts from the corporation's record or
minutes of such corporation or of any other
corporation, or was not acting in good faith or of
any other corporation or was not acting in good
faith or for a legitimate purpose in making the
demand to examine or reproduce corporate records
or is a competitor, director, officer, controlling
stockholder or otherwise represents the interest of a
competitor.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 9 of 22

 If the corporation denies or does not act on a
demand for inspection and/or reproduction, the
aggrieved party may report such denial or inaction
to the Commission Within five (5) days from receipt
of such report, the Commission shall conduct a
summary investigation and issue an order directing
the inspection or reproduction of the requested
records.

Stock corporations must also keep a stock and

transfer book, which shall contain a record of all
stocks in the names of the stockholders
alphabetically arranged; the installments paid and
unpaid on all stocks for which subscription has been
made, and the date of payment of any installment; a
statement of every alienation, sale or transfer of
stock made, the date thereof, by and to whom made;
and such other entries as the bylaws may prescribed,
The stock and transfer book shall be kept in the
principal office of the corporation or in the office of
its stock transfer agent and shall be open or
inspection by any director or stockholder of the
corporation at reasonable hours on business days.

A stock transfer agent or one engaged principally in

the business of registering transfers of stocks in
behalf of a stock corporation shall be allowed to
operate in the Philippines upon securing a license
from the Commission and the payment of a fee to be
fixed by the Commission, which shall be renewable
annually: Provided, That a stock corporation is not
precluded from performing or making transfer of its
own stocks, in which case all the rules and
regulations imposed on stock transfer agents, except
the payment of a license fee herein provided, shall
be applicable: Provided, further, That the
Commission may require stock corporations which
transfer and/or trade stocks in secondary markets to
have an independent transfer agent.

Threshold when Audit If the paid-up capital of corporation is at least If the total assets or total liabilities of corporation
Report of CPA is P50,000. are at least P600,000 or such other amount as may
required be determined by the DoF Secretary.
Certification Necessary The financial statements may be certified under The financial statements may be certified under oath
if below the Threshold oath by the treasurer or any responsible officer by by the treasurer and the president.
the corporation.
Contents of Articles of 1. Plan or merger or consolidation 1. Plan or merger or consolidation
Merger or Consolidation 2. Number of shares outstanding or number 2. Number of shares outstanding or number
of members of members
3. Number of shares or members voting for 3. Number of shares or members voting for
and against the plan and against the plan
4. Carrying amount and fair value of assets
and liabilities of merging or consolidating
corporation as of the agreed cut-off date
5. The method to be used in the merger or
consolidation of accounts of the companies
6. The provisional or proforma values, as
merged or consolidated, using the
accounting method
7. Such other information as may be
prescribed by SEC
Manner or Method of Voting by mail or other similar means by members The bylaws may likewise authorize voting through
voting by Members in of nonstock corporation may be authorized by the remote communication and/or absentia.
Nonstock Corporation by-laws of nonstock corporations with the
approval of, and under such conditions which may
be prescribed by SEC
Term of Trustees Original staggered term of 3 years (3 batches The maximum term of trustees is not more than
expiration of trustees) three (3) years. Original staggered term of 3 years is
deleted.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 10 of 22

List of Members and the No similar provision The corporation shall, at all times, keep a list of its
period of its submission members and their proxies in the form the SEC may
to SEC require. The list shall be updated to reflect the
members and proxies of record twenty (20) prior to
any scheduled election.
Prerequisite to Except upon favorable recommendation of the No similar provision.
incorporation of any Ministry of Education and Culture, the SEC shall
educational institution not accept or approve the articles of incorporation
and by-laws of any educational institution.
Required vote for The dissolution may be effected by majority vote The dissolution may be effected by majority vote of
voluntary dissolution of the board of directors or trustees, and by a the board of directors or trustees, and by a
where no creditors are resolution duly adopted by the affirmative vote of resolution duly adopted by the affirmative vote of
affected (Dissolution the stockholders owning at least 2/3 of the the stockholders owning at least majority of the
does not prejudice rights outstanding capital stock or of at least 2/3 of the outstanding capital stock or of at least majority of
of any creditor having a members. the members.
claim against it.)
Minimum number of At least thirty (30) days prior to the meeting for At least twenty (20) days prior to the meeting for
days of giving notice to the voting of voluntary dissolution where no the voting of voluntary dissolution where no
stockholders or members creditors are affected. creditors are affected.
prior to vote for
voluntary dissolution
Frequency of publication Publication of the notice of time, place and object Publication of the notice of time, place and object of
of notice of meeting for of the meeting for three (3) consecutive weeks in a the meeting shall be made once in a newspaper of
voluntary dissolution newspaper of general circulation prior to the date general circulation prior to the date of meeting.
of meeting.

Procedure for voluntary No similar provision A verified request for dissolution shall be filed with
dissolution where no the Commission stating: (a) the reason for the
creditors are affected dissolution; (b) the form, manner, and time when
the notices were given; (c) names of the
stockholders and directors or members and trustees
who approved the dissolution; (d) the date, place,
and time of the meeting in which the vote was
made; and (e) details of publication. The
corporation shall submit the following to the
Commission: (1) a copy of the resolution
authorizing the dissolution, certified by a majority
of the board of directors or trustees and
countersigned by the secretary of the corporation;
(2) proof of publication; and (3) favorable
recommendation form the appropriate regulatory
agency, when necessary. Within fifteen (15) days
from receipt of the verified request for dissolution,
and in the absence of any withdrawal within said
period, the Commission shall approved the request
and issue the certificate of dissolution. The
dissolution shall take effect only upon the issuance
by the Commission of certificate of dissolution. No
application for dissolution of banks, banking and
quasi-banking institutions, preneed, insurance and
trust companies, NSSLAs, pawnshops, and other
financial intermediaries shall be approved by the
Commission unless accompanied by a favorable
recommendation of the appropriate government
agency.

Withdrawal of Request No similar provision A withdrawal of the request for dissolution shall be
and Petition for made in writing, duly verified by any incorporator,
Dissolution director, trustees, shareholder, or member and
signed by the same number of incorporators,
directors, trustees, shareholder, or member and
signed by the same number of incorporators,
directors, trustees, shareholders, or members
necessary to request for dissolution as set forth in
the foregoing sections. The withdrawal shall be
submitted no later than fifteen (15) days from
receipt by the Commission of the request for
dissolution, the Commission shall withhold action
on the request for dissolution and shall, after
investigation: (a) make a pronouncement that the
request for dissolution is deemed withdrawn; (b)
direct joint meeting of the board of directors or
trustees and the stockholders or members for the
purpose of ascertaining whether to proceed with

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 11 of 22

 dissolution; or (c) issue such other orders as it may
deem appropriate.
A withdrawal of the petition for dissolution shall be
in the form of a motion and similar in substance to a
withdrawal of request for dissolution but shall be
verified and filed prior to publication of the order
setting the deadline for filing objections to the
petition.

Enumeration of Grounds A corporation may be dissolved by the Securities A corporation may be dissolve by the Commission
for Involuntary and Exchange Commission upon filing of a motu propio or upon filing of a verified complaint
Dissolution of a verified complaint and after proper notice and by any interested party. The following may be
corporation by SEC hearing on the grounds provided by existing laws, grounds for dissolution of the corporation:
rules and regulations. (a) None-use of corporate charter as provided under
Section 21 of his Code;
(b) Continuous inoperation of a corporation as
provided under Section 21 of this Code;
(c) Upon receipt of a lawful court order dissolving
the corporation;
(d) Upon finding by the final judgment that the
corporation procured its incorporation through
fraud;
(e) Upon finding by final judgment that the
corporation:
(1) Was created for the purpose of committing,
concealing or aiding the commission of securities
violation, smuggling, tax evasion, money
laundering, or graft and corrupt practices;
(2) Committed or aided in the commission of
securities violations, smuggling, tax evasion, money
laundering, or graft and corrupt practices, and its
stockholders knew of the same; and
(3) Repeatedly and knowingly tolerated the
commission of graft and corrupt practices or other
fraudulent or illegal acts by its directors, trustees,
officers, or employees.
If the corporation is ordered dissolved by final
judgment pursuant to the grounds set forth in
subparagraph (e) hereof, its assets, after payment of
its liabilities, shall upon petition of the Commission
with the appropriate court, be forfeited in favor of
the national government. Such forfeiture shall be
without prejudice to the rights of innocent
stockholders and employees for services rendered,
and to the application for other penalty or sanction
under this Code or other laws.
The Commission shall give reasonable notice to,
and coordinate with, the appropriate regulatory
agency prior to the involuntary dissolution of
companies under their special regulatory
jurisdiction.

Beneficiary of corporate Upon the winding up of the corporate affairs, any Except as otherwise provided for in Section 93 and
property escheated asset distributable to any creditor or stockholder or 94 of this Code, upon the winding up of corporate
member who is unknown or cannot be found shall affairs, any asset distributable to any creditor or
be escheated to the city or municipality where such stockholder or member who is unknown or cannot
assets are located. be found shall be escheated in favor of the national
government.
Bond of Foreign Bond equivalent to least one hundred thousand Bond equivalent to at least Five hundred thousand
Corporation for its (P100,000.) pesos; Provided, however, That within pesos (₱500,000.00) or such other amount that may
License to engage in six (6) months after each fiscal year of the be set by the SEC: Provided, however, That within
business licensee, the SEC shall require the licensee to six (6) months after each fiscal year of the licensee,
deposit additional securities equivalent in actual the Commission shall require the licensee to deposit
market value to two (2%) percent of the amount by additional securities or financial instruments
which the licensee’s gross income for that fiscal equivalent in actual market value to two percent
year exceeds five million (P5,000,000.00) pesos. (2%) of the amount by which the licensee's gross
income for that fiscal year exceeds Ten million
pesos (₱10,000,000.00).
Additional qualification Not required In case of a domestic corporation who will act as a
of a domestic corporation resident agent, it must be likewise be of sound
acting as resident agent financial standing and must show proof that it is in
of a foreign corporation good standing as certified by SEC.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 12 of 22

Violation of the Code Violations of any of the provisions of this Code or Refer to discussion below for the new penalties for
its amendments not otherwise specifically violation of Revised Corporation Code
penalized therein shall be punished by a fine of not
less than one thousand (P1,000.00) pesos but not
more than ten thousand (P10,000.00) pesos or by
imprisonment for not less than thirty (30) days but
not more than five (5) years, or both, in the
discretion of the court. If the violation is
committed by a corporation, the same may, after
notice and hearing, be dissolved in appropriate
proceedings before the Securities and Exchange
Commission: Provided, That such dissolution shall
not preclude the institution of appropriate action
against the director, trustee or officer of the
corporation responsible for said violation:
Provided, further, That nothing in this section shall
be construed to repeal the other causes for
dissolution of a corporation provided in this Code.

Investigation and No similar provision The Commission may investigate an alleged

Prosecution of Offenses violation of this Code, or of a rule, regulation, or
order of the Commission.
The Commission may publish its findings, orders,
opinions, advisories, or information concerning any
such violation, as may be relevant to the general
public or to the parties concerned, subject to the
provisions of Republic Act No. 10173, otherwise
known as the "Data Privacy Act of 2012", and other
pertinent laws.
The Commission shall give reasonable notice to and
coordinate with the appropriate regulatory agency
prior to any such publication involving companies
under their regulatory jurisdiction.

Administration of Oaths, No similar provision The Commission, through its designated officer,
Subpoena of Witnesses may administer oaths and affirmations, issue
and Documents subpoena and subpoena duces tecum, take
testimony in any inquiry or investigation, and may
perform other acts necessary to the proceedings or
to the investigation.
Cease and Desist Orders No similar provision Whenever the Commission has reasonable basis to
believe that a person has violated, or is about to
violate this Code, a rule, regulation, or order of the
Commission, it may direct such person to desist
from committing the act constituting the violation.

The Commission may issue a cease and desist order

ex parte to enjoin an act or practice which is
fraudulent or can be reasonably expected to cause
significant, imminent, and irreparable danger or
injury to public safety or welfare. The ex parte order
shall be valid for a maximum period of twenty (20)
says, without prejudice to the order being made
permanent after due notice and hearing.

Thereafter the Commission may proceed

administratively against such person in accordance
with Section 158 of this Code, and/or transmit
evidence to the Department of Justice for
preliminary investigation or criminal prosecution
and/or initiate criminal prosecution for any violation
of this Code, rule, or regulation.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 13 of 22

Contempt No similar provision Any person who, without justifiable cause, fails or
refuses to comply with any lawful order, decision,
or subpoena issued by the Commission shall, after
due notice and hearing, be held in contempt and
fined in an amount not exceeding Thirty thousand
pesos (₱30,000.00). When the refusal amounts to
clear and open defiance of the Commission's order,
decision, or subpoena, the Commission may impose
a daily fine of One thousand pesos (₱1,000.00) until
the order, decision, or subpoena is complied with.
Administrative Sanctions No similar provision If, after due notice and hearing, the Commission
finds that any provision of this Code, rules or
regulations, or any of the Commission's orders has
been violated, the Commission may impose any or
all of the following sanctions, taking into
consideration the extent of participation, nature,
effects, frequency and seriousness of the violation:

(a) Imposition of a fine ranging from Five

thousand pesos (₱5,000.00) to Two million
pesos (₱2,000,000.00), and not more that
One thousand pesos (₱1,000.00) for each
day of continuing violation but in no case
to exceed Two million pesos
(₱2,000,000.00);

(b) Issuance of the permanent cease and

desist order;

(c) Suspension or revocation of the

certificate of incorporation; and

(d) Dissolution of the corporation and

forfeiture of its assets under the conditions
in Title XIV of this Code.

Unauthorized Use of No similar provision The unauthorized use of corporate name shall be
Corporate Name; punished with a fine ranging from Ten thousand
Penalties pesos (₱10,000.00) to Two hundred thousand pesos
(₱200,000.00).
Violation of No similar provision When, despite the knwoledge of the existence of a
Disqualification ground for disqualification as provided in Section
Provision; Penalties 26 of this Code, a director, trustee or officer
willfully holds office, or willfully conceals such
disqualification, such director, trustee or officer
shall be punished with a fine ranging from Ten
thousand pesos (₱10,000.00) to Two hundred
thousand pesos (₱200,000.00) at the discretion of
the court, and shall be permanently disqualified
from being a director, trustee or officer of any
corporation. When the violation of this provision is
injurious or detrimental to the public, the penalty
shall be a fine ranging from Twenty thousand pesos
(₱20,000.00) to Four hundred thousand pesos
(₱400,000.00)
Violation of Duty to No similar provision The unjustified failure or refusal by the corporation,
Maintain Records, to or by those responsible for keeping and maintaining
Allow their Inspection or corporate records, to comply with Section s 45, 73,
Reproduction; Penalties 92, 128, 177 and other pertinent rules and
provisions of this Code on inspection and
reproduction of records shall be punished with a
fine ranging from Ten thousand pesos (₱10,000.00)
to Two hundred thousand pesos (₱200,000.00), at
the discretion of the court, taking into consideration
the seriousness of the violation and its implications.
When the violation of this provision is injurious or
detrimental to the public, the penalty is a fine
ranging from Twenty thousand pesos (₱20,000.00)
to Four hundred thousand pesos (₱400,000.00).
The penalties impose under this section shall be
without prejudice to the Commission's exercise of
its contempt powers under Section 157 hereof.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 14 of 22

Willful Certification of No similar provision Any person who willfully certifies a report required
Incomplete, Inaccurate, under this Code, knowing that the same contains
False; or Misleading incomplete, inaccurate, false, or misleading
Statements or Reports; information or statements, shall be punished with a
Penalties fine ranging from Twenty thousand pesos
(₱20,000.00) to Two hundred thousand pesos
(₱200,000.00). When the wrongful certification is
injurious or detrimental to the public, the auditor or
the responsible person may also be punished with a
fine ranging from Forty thousand pesos
(₱40,000.00) to Four hundred thousand pesos
(₱400,000.00).
Independent Auditor No similar provision An independent auditor who, in collusion with the
Collusion; Penalties corporation's directors or representatives, certifies
the corporation's financial statements despite its
incompleteness or inaccuracy, its failure to give a
fair and accurate presentation of the corporation's
condition, or despite containing false or misleading
statements, shall be punished with a fine ranging
from Eighty thousand pesos (₱80,000.00) to Five
hundred thousand pesos (₱500,000.00). When the
statement or report certified is fraudulent, or has the
effect of causing injury to the general public, the
auditor or responsible officer may be punished with
a fine ranging from One hundred thousand pesos
(₱100,000.00) to Six hundred thousand pesos
(₱600,000.00).

Obtaining Corporate No similar provision Those responsible for the formation of a corporation
Registration Through through fraud, or who assisted directly or indirectly
Fraud; Penalties therein, shall be punished with a fine ranging from
Two hundred thousand pesos (₱200,000.00) to Two
million pesos (₱2,000,000.00). When the violation
of this provision is injurious or detrimental to the
public, the penalty is a fine ranging from Four
hundred thousand pesos (₱400,000.00) to Five
million pesos, (₱5,000,000.00).
Fraudulent Conduct of No similar provision A corporation that conduct its business through
Business; Penalties fraud shall be punished with a fine ranging from
Two hundred thousand pesos (₱200,000.00) to Two
million pesos (₱2,000,000.00). When the violation
of this provision is injurious or detrimental to the
public, the penalty is a fine ranging from Four
hundred thousand pesos (₱400,000.00) to Five
million pesos (₱5,000,000.00).
Acting as Intermediaries No similar provision A corporation used for fraud, or for committing or
for Graft and Corrupt concealing graft and corrupt practices as defined
Practices; Penalties under pertinent statutes, shall be liable for a fine
ranging from One hundred thousand pesos
(₱100,000.00) to Five million pesos
(₱5,000,000.00).

When there is a finding that any of its directors,

officers, employees, agents, or representatives are
engaged in graft and corrupt practices, the
corporation's failure to install:

(a) safeguards for the transparent and

lawful delivery of services; and (b)
policies, code of ethics, and procedures
against graft and corruption shall be prima
facie evidence of corporate liability under
this section.

Engaging Intermediaries No similar provision A corruption that appoints an intermediary who

for Graft and Corrupt engages in graft and corrupt practices for the
Practices; Penalties corporation's benefit or interest shall be punished
with a fine ranging from One hundred thousand
pesos (₱100,000.00) to One million pesos
(₱1,000,000.00).

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 15 of 22

Tolerating Graft and No similar provision A director, trustee, or officer who knowingly fails to
Corrupt Practices; sanction, report, or file the appropriate action with
Penalties proper agencies, allows or tolerates the graft and
corrupt practices or fraudulent acts committed by a
corporation's directors, trustees, officers, or
employees shall be punished with a fine ranging
from Five hundred thousand pesos (₱500,000.00) to
One million pesos (₱1,000,000.00).
Retaliation Against No similar provision A whistleblower refers to any person who provides
Whistleblowers truthful information relating to the commission or
possible commission of any offense or violation
under this Code. Any person who, knowingly and
with intent to retaliate, commits acts detrimental to
a whistleblower such as interfering with the lawful
employment or livelihood of the whistleblower,
shall, at the discretion of the court, be punished with
a fine ranging from One hundred thousand
(₱100,000.00) to One million (₱1,000,000.00).
Other Violations of the No similar provision Violation of any of the other provisions of this Code
Code; Separate Liability or its amendments not otherwise specifically
penalized therein shall be punished by a fine of not
less than Ten thousand pesos (₱10,000.00) but not
more than One million pesos (₱1,000,000.00). If the
violation is committed by a corporation, the same
may, after notice and hearing, be dissolved in
appropriate proceedings before the Commission;
Provided, That such dissolution shall not preclude
the institution of appropriate action against the
director, trustee, or officer of the corporation
responsible for said violation: Provided, further,
That nothing in this section shall be construed to
repeal the other causes for dissolution of
corporation provided in this Code. Liability for any
of the foregoing offenses shall be separate from any
other administrative, civil, or criminal liability
under this Code and other laws.
Liability of Directors, No similar provision If the offender is a corporation, the penalty may, at
Trustees, Officers, or the discretion of the court, be imposed upon such
Other Employees corporation and/or upon its directors, trustees,
stockholders. members, officers, or employees
responsible for the violation or indispensable to its
commission.
Liability of Aiders and No similar provision Anyone who shall aid, abet, counsel, command,
Abettors and Other induce, or cause any violation of this Code, or any
Secondary Liability rule regulation or order of the Commission shall be
punished with a fine not exceeding that imposed on
the principal offenders, at the discretion of the court,
after taking into account their participation in the
offense.
Incorporation and other The Securities and Exchange Commission is For a more implementation of this Code, the
fees hereby authorized to collect and receive fees as Commission is hereby authorized to collect, retain
authorized by law or by rules and regulations and use fees, fines, and other charges pursuant to
promulgated by the Commission this Code and its rules and regulations. The amount
collected shall be deposited and maintained in a
separate account which shall form a fund for its
modernization and to augment its operational
expenses such as, but not limited to, capital outlay,
increase in compensation and benefits comparable
with prevailing rates in the private sector,
reasonable employee allowance, employee health
care services, and other insurance, employee career
advancement and professionalization, legal
assistance, seminars, and other professional fees.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 16 of 22

Reportorial Every corporation, domestic or foreign, lawfully Except as otherwise provided in this Code or in the
Requirements of a doing business in the Philippines shall submit to rules issued by the Commission, every corporation,
corporation the Securities and Exchange Commission an domestic or foreign, doing business in the
annual report of its operations, together with a Philippines shall submit to the Commission: (a)
financial statement of its assets and liabilities, Annual financial statements audited by an
certified by any independent certified public independent certified public accountant: Provided,
accountant in appropriate cases, covering the That if the total assets or total liabilities of the
preceding fiscal year and such other requirements corporation are less than Six hundred thousand
as the Securities and Exchange Commission may pesos (₱600,000.00), the financial statements shall
require. Such report shall be submitted within such be certified under oath by the corporation’s
period as may be prescribed by the Securities and treasurer or chief financial officer; and (b) A general
Exchange Commission information sheet.

Corporations vested with public interest must also

submit the following: (1) A director or trustee
compensation report; and (2) A director or trustee
appraisal or performance report and the standards or
criteria used to assess each, director or trustee.

The reportorial requirements shall be submitted

annually and within such period as may be
prescribed by the Commission.

The Commission may place the corporation under

delinquent status in case of failure to submit the
reportorial requirements three (3) times,
consecutively or intermittently, within a period of
five (5) years. The Commission shall give
reasonable notice to and coordinate with the
appropriate regulatory agency prior to placing on
delinquent status companies under their special
regulatory jurisdiction.

Any person required to file a report with the

Commission may redact confidential information
from such required report: Provided, That such
confidential information shall be filed in a
supplemental report prominently labelled
"confidential", together with a request for
confidential treatment of the report and the specific
grounds for the grant thereof.
Visitorial Power and All interrogatories propounded by the Securities The Commission shall exercise visitorial powers
Confidential Nature of and Exchange Commission and the answers over all corporations, which powers shall include
Examination Results thereto, as well as the results of any examination the examination and inspection of records,
made by the Commission or by any other official regulation and supervision of activities, enforcement
authorized by law to make an examination of the of compliance, and imposition of sanctions in
operations, books and records of any corporation, accordance with this Code.
shall be kept strictly confidential, except insofar as
the law may require the same to be made public or Should the corporation, without justifiable cause,
where such interrogatories, answers or results are refuse or obstruct the Commission’s exercise of its
necessary to be presented as evidence before any visitorial powers, the Commission may revoke its
court. certificate of incorporation, without prejudice to the
imposition of other penalties and sanctions under
this Code.

All interrogatories propounded by the Commission

and the answers thereto, as well as the results of any
examination made by the Commission or by any
other official authorized by law to make an
examination of the operations, books, and records of
any corporation, shall be kept strictly confidential,
except when the law requires the same to be made
public, when necessary for the Commission to take
action to protect the public or to issue orders in the
exercise of its powers under this Code, or where
such interrogatories, answers or results are
necessary to be presented as evidence before any
court.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 17 of 22

Powers of SEC under The Securities and Exchange Commission shall The Commission shall have the power and authority
Corporation Code have the power and authority to implement the to:
provisions of this Code, and to promulgate rules
and regulations reasonably necessary to enable it (a) Exercise supervision and jurisdiction
to perform its duties hereunder, particularly in the over all corporations and persons acting on
prevention of fraud and abuses on the part of the their behalf, except as otherwise provided
controlling stockholders, members, directors, under this Code;
trustees or officers.
(b) Pursuant to Presidential Decree No.
902-A, retain jurisdiction over pending
cases involving intra-corporate disputes
submitted for final resolution. The
Commission shall retain jurisdiction over
pending suspension of
payment/rehabilitation cases filed as of 30
June 2000 until finally disposed;

(c) Impose sanctions for the violation of

this Code, its implementing rules and
orders of the Commission;

(d) Promote corporate governance and the

protection of minority investors, through,
among others, the issuance of rules and
regulations consistent with international
best practices;

(e) Issue opinions to clarify the application

of laws, rules and regulations;

(f) Issue cease and desist orders ex parte to

prevent imminent fraud or injury to the
public;

(g) Hold corporations in direct and indirect

contempt;

(h) Issue subpoena duces tecum and

summon witnesses to appear in
proceedings before the Commission;

(i) In appropriate cases, order the

examination, search and seizure of
documents, papers, files and records, and
books of accounts of any entity or person
under investigation as may be necessary
for the proper disposition of the cases,
subject to the provisions of existing laws;

(j) Suspend or revoke the certificate of

incorporation after proper notice and
hearing;

(k) Dissolve or impose sanctions on

corporations, upon final court order, for
committing, aiding in the commission of,
or in any manner furthering securities
violations, smuggling, tax evasion, money
laundering, graft and corrupt practices, or
other fraudulent or illegal acts;

(l) Issue writs of execution and attachment

to enforce payment of fees, administrative
fines, and other dues collectible under this
Code;

(m) Prescribe the number of independent

directors and the minimum criteria in
determining the independence of a
director;

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 18 of 22

 (n) Impose or recommend new modes by
which a stockholder, member, director, or
trustee may attend meetings or cast their
votes, as technology may allow, taking into
account the company’s scale, number of
shareholders or members, structure, and
other factors consistent with the basic right
of corporate suffrage;

(o) Formulate and enforce standards,

guidelines, policies, rules and regulations
to carry out the provisions of this Code;
and

(p) Exercise such other powers provided by

law or those which may be necessary or
incidental to carrying out the powers
expressly granted to the Commission.

In imposing penalties and additional monitoring and

supervision requirements, the Commission shall
take into consideration the size, nature of the
business, and capacity of the corporation.

No court below the Court of Appeals shall have

jurisdiction to issue a restraining order, preliminary
injunction, or preliminary mandatory injunction in
any case, dispute, or controversy that directly or
indirectly interferes with the exercise of the powers,
duties and responsibilities of the Commission that
falls exclusively within its jurisdiction.

Development and No similar provision The Commission shall develop and implement an
Implementation of electronic filing and monitoring system. The
Electronic Filing and Commission shall promulgate rules to facilitate and
Monitoring System expedite, among others, corporate name reservation
and registration, incorporation, submission of
reports, notices, and documents required under this
Code, and sharing of pertinent information with
other government agencies.
Arbitration for No similar provision An arbitration agreement may be provided in the
Corporations articles of incorporation or bylaws of a corporation.
When such an agreement is in place, disputes
between the corporation, its stockholders or
members, which arise from the implementation of
the articles of incorporation or bylaws, or from
intra-corporate relations, shall be referred to
arbitration. A dispute shall be nonarbitrable when it
involves criminal offenses and interests of third
parties. The arbitration agreement shall be binding
on the corporation, its directors, trustees, officers,
and executives or managers.

To be enforceable, the arbitration agreement should

indicate the number of arbitrators and the procedure
for their appointment. The power to appoint the
arbitrators forming the arbitral tribunal shall be
granted to a designated independent third party.
Should the third party fail to appoint the arbitrators
in the manner and within the period specified in the
arbitration agreement, the parties may request the
Commission to appoint the arbitrators. In any case,
arbitrators must be accredited or must belong to
organizations accredited for the purpose of
arbitration.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 19 of 22

 The arbitral tribunal shall have the power to rule on
its own jurisdiction and on questions relating to the
validity of the arbitration agreement. When an intra-
corporate dispute is filed with a Regional Trial
Court, the court shall dismiss the case before the
termination of the pretrial conference, if it
determines that an arbitration agreement is written
in the corporation’s articles of incorporation,
bylaws, or in a separate agreement.

The arbitral tribunal shall have the power to grant

interim measures necessary to ensure enforcement
of the award, prevent a miscarriage of justice, or
otherwise protect the rights of the parties.

A final arbitral award under this section shall be

executory after the lapse of fifteen (15) days from
receipt thereof by the parties and shall be stayed
only by the filing of a bond or the issuance by the
appellate court of an injunctive writ.

The Commission shall formulate the rules and

regulations, which shall govern arbitration under
this section, subject to existing laws on arbitration.

Jurisdiction over Party- No similar provision The powers, authorities, and responsibilities of the
List Organizations Commission involving party-list organizations are
transferred to the Commission on Elections
(COMELEC).

Within six (6) months after the effectivity of this

Act, the monitoring, supervision, and regulation of
such corporations shall be deemed automatically
transferred to the COMELEC.

For this purpose, the COMELEC, in coordination

with the Commission, shall promulgate the
corresponding implementing rules for the transfer of
jurisdiction over the abovementioned corporations.

Applicability of the No similar provision Nothing in this Act shall be construed as amending
Corporate Code existing provisions of special laws governing the
registration, regulation, monitoring and supervision
of special corporations such as banks, nonbank
financial institutions and insurance companies.

Notwithstanding any provision to the contrary,

regulators such as the Bangko Sentral ng Pilipinas
and the Insurance Commission shall exercise
primary authority over special corporations such as
banks, nonbank financial institutions, and insurance
companies under their supervision and regulation.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 20 of 22

 One Person Corporation
A. Definition of One Person Corporation. - A One Person Corporation is a corporation with a single
stockholder: Provided, That only a natural person, trust, or an estate may form a One Person Corporation.

B. Entities not allowed to form One Person Corporation

a. Banks
b. Non-bank financial institutions
c. Quasi-banks
d. Pre-need
e. Trust entity/company
f. Insurance
g. Public entities
h. Publicly listed entities
i. Non-charted government-owned and controlled corporations (GOCCs)
j. A natural person who is licensed to exercise a profession (CPA or Lawyers) for the purpose of exercising such
profession except as otherwise provided under special laws

C. Minimum Capital Stock Not Required for One Person Corporation. - A One Person Corporation shall not be required to
have a minimum authorized capital stock except as otherwise provided by special law.

D. Articles of Incorporation. A One Person Corporation shall file articles of incorporation in accordance with the requirements
under Section 14 of this Code. It shall likewise substantially contain the following:
i. If the single stockholder is a trust or an estate, the name, nationality, and residence of the trustee,
administrator, executor, guardian, conservator, custodian, or other person exercising fiduciary duties
together with the proof of such authority to act on behalf of the trust or estate; and
ii. Name, nationality, residence of the nominee and alternate nominee, and the extent, coverage and limitation
of the authority.

E. Bylaws. - The One Person Corporation is not required to submit and file corporate bylaws.

F. Display of Corporate Name. - A One Person Corporation shall indicate the letters "OPC" either below or at the end of its
corporate name.

G. Single Stockholder as Director, President. - The single stockholder shall be the sole director and president of the One
Person Corporation.

H. Treasurer, Corporate Secretary, and Other Officers. - Within fifteen (15) days from the issuance of its certificate or
incorporation, the One Person Corporation shall appoint a treasurer, corporate secretary, and other officers as it may deem
necessary, and notify the Commission thereof within five (5) days from appointment.

The single stockholder may not be appointed as the corporate secretary.

A single stockholder who is likewise the self-appointed treasurer of the corporation shall give a bond to the Commission in
such a sum as may be required: Provided, That the said stockholder/treasurer shall undertake in writing to faithfully
administer the One person Corporation's funds to be received as treasurer, and to disburse and invest the same according to
the articles of incorporation as approved by the Commission. The bond shall be renewed every two (2) years or as often as
may be required.

I. Special Functions of the Corporate Secretary. - In addition to the functions designated by the One Person Corporation, the
corporate secretary shall:
i. Be responsible for maintaining the minutes book and/or records of the corporation;
ii. Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which notice
shall be given no later than five (5) days from such occurrence;
iii. Notify the Commission of the death of the single stockholder within five (5) days from such occurrence and
stating in such notice he names, residence addresses, and contact details of all known legal heirs; and
iv. Call the nominee or alternate nominee and the known legal heir to meeting and advise the legal heirs with
regard to, among others, the election of a new director, amendment of the articles of incorporation, and
other ancillary and/or consequential matters.

J. Nominee and Alternate Nominee. - The single stockholder shall designate a nominee and an alternate nominee who shall, in
the event of the single stockholder's death or incapacity, take the place of the single stockholder as director and shall manage
the corporation's affairs.

The articles of incorporation shall state the names, residence addresses and contact details of the nominee and alternate
nominee, as well as the extent and limitations of their authority in managing the affairs of the One Person Corporation until
the stockholder, by self determination, regains the capacity to assume such duties.
In case of death or permanent incapacity of the single stockholder, the nominee shall sot as director and manage the affairs of
the One Person Corporation until the legal heirs of the single stockholder have been lawfully determined, and the heirs have
designated one of them or have agreed that the estate shall be the single stockholder of the One Person Corporation.

The alternate nominee shall sit as director and manage the One Person Corporation in case of the nominee's inability,
incapacity, death, or refusal to discharge the functions as director and manager of the corporation, and only for the same term
and under the same conditions applicable to the nominee.

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 21 of 22

 K. Change of Nominee or Alternate Nominee. - The singe stockholder may, at any time, change its nominee and alternate
nominee by submitting to the Commission the names of the new nominees and their corresponding written consent. For this
purpose, the articles of incorporation need not be amended.

L. Minute Book. - A One Person Corporation shall maintain a minutes book which shall contain all actions, decisions, and
resolutions taken by the One Person Corporation.

M. Records in Lieu of Meetings. - When action is needed on any matter, it shall be sufficient to prepare a written resolution,
signed and dated by the single stockholder; and recorded in the minutes book of the One Person Corporation. The date of
recording in the minutes for all purposes under this Code.

N. Reportorial Requirements. - The One Person Corporation shall submit the following within such period as the Commission
may prescribe:
i. Annual financial statements audited by an independent certified public accountant: Provided, That if the
total assets or total liabilities of the corporation are less than Six hundred thousand pesos (₱600,000.00), the
financial statements shall be certified under oath by the corporation's treasurer and president;
ii. A report containing explanations or comments by the president on every qualification, reservation, or
adverse remark or disclaimer made by the auditor in the latter's report;
iii. A disclosure of all self-dealings and related party transactions entered into between the One Person
Corporation and the single stockholder; and
iv. Other reports as the Commission may require.
For the purpose of this provision, the fiscal year of a One Person Corporation shall be that set forth in its articles of
incorporation or, in the absence thereof, the calendar year.
The Commission may place the corporation fail to submit the reportorial requirements three (3) times, consecutively or
intermittently, within a period of five (5) years.

O. Liability of Single Shareholder. - A sole shareholder claiming limited liability has the burden of affirmatively showing that
the corporation was adequately financed.
Where the single stockholder cannot prove that the property of the One Person Corporation is independent of the
stockholder's personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the
One Person Corporation.
The principles of piercing the corporate veil applies with equal force to One Person Corporations as with other corporations.

P. Conversion from an Ordinary Corporation to a One Person Corporation. When a single stockholder acquires all the
stocks of an ordinary stock corporation, the later may apply for conversion into a One Person Corporation, subject to the
submission of such documents as the Commission may require. If the application for conversion is approved, the
Commission shall issue a certificate of filing of amended articles of incorporation reflecting the conversion. The One Person
Corporation converted from an ordinary stock corporation shall succeed the later and be legally responsible for all the latter's
outstanding liabilities as of the date of conversion.

Q. Conversion from One Person Corporation to an Ordinary Stock Corporation. - A One Person Corporation may be
converted into an ordinary stock corporation after due notice to the Commission of such fact and of the circumstances leading
to the conversion, and after compliance with all other requirements for stock corporations under this Code and applicable
rules. Such notice shall be filed with the Commission within sixty (60) days from the occurrence of the circumstances leading
to the conversion into an ordinary stock corporation. If all requirement a have been complied with, the Commission shall
issue a certificate of filing or amended articles of incorporation reflecting the conversion.

In case of death if the single stockholder, the nominee or alternate nominee shall transfer the shares to the duly designated
legal heir or estate within seven (7) days from receipt of either an affidavit of heirship or self-adjudication executed by a sole
heir, or any other legal document declaring the legal heirs of the single stockholder and notify the Commission of the
transfer. Within sixty (60) days from the transfer of the shares, the legal heirs shall notify the Commission of their decision to
either wind up and dissolve the One Person Corporation or convert it into an ordinary stock corporation.
The ordinary stock corporation converted from One Person Corporation shall succeed the latter and be legally responsible for
all the latter's outstanding liabilities as of the date of conversion.

-END-

CPAR – Regulatory Framework for Business Transactions (RFBT 9109) Page 22 of 22