1. A, B, C, D, and E are all duly elected members of the Board of Directors of JKL Corporation.
F, the general manager, entered into a supply contract with an American firm. The contract was
duly approved by the Board of Directors. However, with the knowledge and consent of F, no
deliveries were made to the American firm. As a result of the non-delivery of the promised
supplies, the American firm incurred damages. The American firm would like to file a suit for
damages. Can the American firm sue: (3 points)
a. The members of the Board individually, because they approved the transaction?
b. The corporation?
c. F, the general manager, personally, because the non-delivery was with his knowledge and
consent?
2. C is a board director in Y Corporation. For being the “fiscalizer” in the Board, the majority of
the board of directors want him removed and his shares sold at auction, so he can no longer
participate even in the stockholders’ meetings. C approaches you for advice on whether he can
be removed as a board director and stockholder even without cause. What is your
advice? (3 points)
3. The stockholders of W, Inc. approved the following two resolutions in a special stockholders’
meeting: (i) Resolution increasing the authorized capital stock of W, Inc. which was similarly
approved by the majority of the Board of Directors, and (ii) Resolution authorizing the Board of
Directors to issue for cash payment the new shares from the proposed capital stock increase in
favor of outside investors who are non-stockholders. The foregoing resolutions were approved
by stockholders representing 99% of the total outstanding capital stock. The sole dissenter was N
who owned the rest 1% of the stock. (3 points)
a. Are the resolutions binding on the corporations and its stockholders, including N, the
dissenting stockholder?
b. What remedies, if any, are available to N?
4. Suppose that the bylaws of Z Corporation, a mining firm, provides that “The directors shall be
relieved from all liability for any contract entered into by the corporation with any firm in which
the directors may be interested.” Thus, director B acquired claims which overlapped with Z
Corporation’s claims and where necessary for the development and operation of Z Corporation’s
mining properties.
What happens if director B is able to consummate his mining claims over and above that of the
corporation’s claims? (3 points)
5. E subscribed to 1,000,000 shares of stock of WXY Corporation with par value of P1.00 per
share. The subscription amount is P1,000,000. He paid P250,000. (6 points)
a. When should E pay the balance of the subscription?
b. Assume that the due date is June 15, 2020 and E failed to pay the balance of subscription on
such date. The corporation called a regular stockholders’ meeting on June 30, 2020 to elect the
board of directors. Can E vote his shares in the corporation? If yes, how many shares can he
vote?
c. Is E qualified to be elected as a director of the corporation?
d. Assume further that on July 10, 2020, the corporation declared cash dividends of P1.00 per
share, is E entitled to receive the dividends? If yes, how many shares are entitled to dividends?
e. Can the corporation apply the cash dividends against the unpaid subscription?
f. May stock dividends be used to pay the balance of the unpaid subscription?
6. May a corporation be dissolved upon mere resolution of the Board of Directors? (2 points)
