Post on 06-Apr-2018
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Finals, Private Corporation Law reviewer
1. Give the two most common kinds of dividends
a. Cash Dividend
b. Stock dividend
2. Please state if true or false
a. When cash dividends are declared, the assets
of the corporation diminish by exactly the
amount paid off and the property of the
stockholder increases. TRUE
b. A stock dividend converts surplus or profits of
a corporation into the permanent account and
is capitalized, placing it beyond the power of
the board of directors to withdraw from
corporate use and to distribute it to the
stockholders. TRUE
c. A stock dividend is taxable as income. FALSE
d. Both cash dividend and stock dividend may be
declared only by the Board of directors without
involving the stockholders. FALSE
3. State the difference between a stock split and stock
dividend.
- The essential distinction between astock
dividend and a stock splitis that in the former,
there is capitalization of earnings or profits,
together with a distribution of the added shares
which evidence the assets transferred to capital,while in the latter, there is a mere increase in the
number of shareswhich evidence ownership
without altering the amount of the capital, surplus,
or segregated earnings.
4. Please state if true or false
a. In a management contract, where a
stockholder of both the managed and
managing corporation own more than 1/3 of
the total outstanding capital stock entitled to
vote of the managing corporation, themanagement contract does not need the
approval of the stockholders. FALSE
b. No management contract shall be entered into
for a period longer than five years. TRUE
c. A management contract can delegate enti
supervision and control over the officers an
business of a corporation to another. FALS
5. Please give the legal effects of the following acts a
how the defects may be cure if any;
a. Ultra vires actVOIDABLE BY
RATIFICATION
b. Illegal actsVOID
NO MORE REMEDY
c. Acts done without complying with certain
conditions and formalitiesVOIDABLE
RATIFICATION
d. Acts involving inexistent contractsVOID
NO MORE REMEDY
6. Give the rule in the following cases of ultra vires ac
a. Those which are executory on both sides
cannot be enforced by either party, ther
b. Those fully performed on both sidesnei
party can maintain to set aside transact
or to recover what has been parted with
c. Those performed on one side and the othe
received benefits by reason of such
performance.recovery is permitted in
most courts on behalf of the former
7. State the general rule for liability for acts committe
by corporate officers, directors/ trustees:
a. Tortsdamages, corporation is liable fo
the acts of officers, directors/trustees d
within the scope of their authority
b. Crimesimprisonment
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1. Define by-laws.
- As the rules of action adopted by a corpora
for its internal government and for the
government of its stockholders or member
and those having the direction, managemen
and control of its affairs in their relation to
corporation and as among themselves,
including rules for routine matters such as
calling meetings and the like.
2. Please state if true or false:
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a. Even holders of non-voting shares or non-voting
members are entitled to vote on the adoption of
by-laws. TRUE
b. By-laws may be filed either prior to incorporation
with the articles of incorporation or after receipt
of official notice of the issuance of its certificate of
incorporation by the SEC. FALSE
c. Non-filing of the by-laws on time will result to
automatic dissolution of the corporation and shall
render the corporation liable to the revocation of
its registration. FALSE
d. The corporation, its directors or trustees and
officers are bound by and must comply with their
by-laws. TRUE
e. Third persons who have no knowledge of the by-
laws of a corporation are not bound by such by-
laws. TRUE
f. The place of meeting of the stockholders or
members may be held anywhere in or outside of
the Philippines. TRUE
g. The meeting of the directors must always be held
at the city or municipality where the principal officeof the corporation is located. TRUE
h. The by-laws can dispense with the minimum legal
requirement that the director must be the
registered owner of at least one (1) share of stock.
TRUE
i. Amendment or repeal of by-laws may be done by
referendum. FALSE
j. The stockholders may delegate the power to
amend or repeal the by-laws to the board of
directors/trustees by a mere majority vote of the
outstanding capital stock or a majority of the
members of a non-stock corporation.
k. The power to revoke the power delegated to the
board of directors/trustee may be effected only by
2/3 of the outstanding capital stock or 2/3 of the
members in a non-stock corporation.
l. A board resolution shall prevail over the by-laws in
case of conflict.
m. The SEC shall not accept the by-laws or
amendments thereto of a special corporations
governed by special laws, unless accompanied by
a certificate of the appropriate government
agency.3. Give the two (2) kinds of meetings.
a. Meeting of Stockholders/Members
b. Meeting of directors/trustees
4. Please state if true or false:
a. Directors or trustees can only exercise their
powers as a board, not individually or separately.
b. The articles of incorporation of a corporation
states that the principal office of the corporatio
located at Makati, Metro Manila and the
stockholders may hold their meeting in any city
municipality located in Metro Manila, such as
Manila.
c. The date of the stockholders/members meeti
as fixed in the by-laws cannot as a general rule
be changed except for valid reasons.
d. The president shall preside over all meetings o
the stockholders/members as well as of the bo
of directors/members unless the by-laws provid
otherwise.
e. In case of pledged or mortgaged shares in sto
corporation, it is the pledgor or mortgagor who
the right to attend and vote at meetings of
stockholders, unless the pledgee or mortgagee
expressly given such right in writing which is
recorded in the proper books of the corporation
f. Holders of stock without voting rights may vote
cases provided in Sec. 6 (par. 6, nos. 1-8).
g. Preferred and redeemable shares may bedeprived of their voting rights.
5. Please indicate by no or yes if the holders of th
following shares have voting rights:
a. Delinquent shares
b. Treasury shares
c. Shares not fully paid which are not delinquent
6. Please state if true or false:
a. Stockholders or members may vote in person
by proxy in all meetings.
b. No proxy shall be valid and effective for a perio
longer than 10 years.
c. Voting by proxy is allowed in board meetings.
d. While proxies must be In writing, oral proxies a
allowed.
e. In case of a proxy where the name is blank, it
the corporation that is constituted as the proxy
f. For corporate members, a board resolution
authorizing the signatory to the proxy should b
submitted.
7. Give the two (2) kinds of proxies.
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1. Please state if true or false
a. A voting trust agreement shall have a perio
not exceeding five years at any one time.
TRUE
b. In the case of a voting trust specifically
required as condition in a loan agreement,
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said voting trust may be for a period
exceeding five years which shall automatically
expire upon full payment of the loan. TRUE
c. A voting trust agreement need not be in writing
or notarized FALSE
d. A certified copy of the voting trust agreement
shall be filed with the corporation and SEC to
be effective and enforceable. TRUE
e. A voting trust is a corporate device to secure
management control with little or no
investment. TRUE
f. A voting trust agreement transfers only the
voting or other rights pertaining to the share
and also the properties or assets of the
corporation. FALSE
g. The trustee holds the equitable or beneficial
ownership while the stockholder holds title to
the shares conveyed to the trustee under thevoting trust agreement. FALSE
h. The trustee issues to the stockholders in
exchange for the shares conveyed under the
voting trust agreement voting trust certificates.
TRUE
i. To assure continuity of policy and
management is a valid and sustainable
purpose of a voting trust agreement. TRUE
j. To secure employment and salaries for the
contracting parties is a valid and sustainable
purpose of a voting trust agreement. FALSE
k. The right of a trustee to act is limited to any
particular meeting. FALSE
2. Give the three ways by which a person may become a
shareholder. S P T
a. Bysubscriptioncontract with an existing
corporation for the acquisition of unissued
shares
b. Bypurchasefrom the corporation of treasury
shares
c. Bytransferfrom a previous stockholder of the
outstanding shares or existing subscription to
shares.
3. As to subject matter, give the 2 kinds of share that
may be subject of a subscription contract.
a. original issue of stock
b. increase of capital stock
4. Give the four kinds of subscription P.P.C.A
a. Pre-incorporation subscription
b. Post incorporation subscription
c. Conditional subscription
d. Absolute subscription
5. Define stock option.
- A stock option is a privilege granted to a party
subscribe to a certain portion of the unissued
capital stock of a corporation within a certain
period and under the terms and conditions of t
grand exercisable by the grantee at any timewithin the period granted.
6. True or false
a. A corporation does not need the approval
the SEC before it can grant or issue any st
option. FALSE
b. Exercise of the stock option must be done
within 3 years from approval thereof by the
commission. TRUE
c. Stock subscriptions are in the nature of tru
fund in the sense that they are to be
maintained unimpaired for the protection o
corporate creditors. TRUE
d. The liability of a stockholder for unpaid
subscription can be compensated or set-of
with the value of his shares and stock
dividends. FALSE
e. A stock corporation may release an origina
subscriber from paying his shares without
valuable consideration. FALSE
f. A subscription for share of stock of a
corporation still to be formed shall be
irrevocable for 12 months from date of
subscription. FALSE
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7. Please state the rule, at what point in time will a
subscriber become a stockholder even though he has
not paid for his shares.
- A subscriber becomes a stockholder immediately
upon acceptance of his subscription even before
full payment and may not legally be released by
the corporation from the obligation to pay for his
shares.
===================================
1. Please state if true or false:
a. Stocks may be issued for a consideration less
than the par or issued price thereof. FALSE
b. Property received as consideration for stocks need
not be necessary or convenient for the use of the
corporation. FALSE
c. Valuation of the consideration other than actual
cash or consisting of intangible property after
valuation there does not need the approval of the
SEC. FALSE
d. Shares of stock may be issued in exchange for
promissory notes or future services. FALSE
e. The consideration for treasury shares may be less
than par value thereof as long as the price is
reasonable. TRUE
f. Stocks issued for a consideration less than their
par or issued price are watered stocks. TRUE
g. Real property may be accepted as payment on
subscription to the capital stock only when the
same can be used in the business of the
corporation, as one engaged in real estate
development, subdivision, agro-industrialbusiness. TRUE
h. The consideration of stocks by way of services
should be for services actually performed, not
future services, otherwise an agreement to issue
stock before the same is rendered is void. TRUE
i. The consideration of no par shares should not be
less than the value of P5/share. TRUE
2. Give three (3) sources of corporate capital.
a. Funds furnished by share holders
b. Borrowings
c. Profits and stock dividends
3. Give the four (4) modes by which shares may be
issued.
a. by subscription before and after incorporation
b. by sale of treasury stock after incorporation for
money, property or service
c. by subscription to new issues of stock
d. by making a stock dividend
4. As a general rule, under the Securities Regul
Code, all securities which are offered for sale
be registered with the SEC. Please give the two
instances when such registration is not required.
a. Any security issued or guaranteed by
government of the Philippines, or by
political subdivision or agency thereof, o
any person controlled or supervised by,
acting as an instrumentality of
government.
b. Any security issued or guaranteed by
government of any country with which
Philippines maintains diplomatic relations.
5. Please identify if the following securities/transact
should be registered with the SEC by yes or no:
a. Any security issued or guaranteed by
Government of the Philippines or any pol
subdivision thereof. NO
b. Any security issued or guaranteed by
Government of any country with which Philippines maintains diplomatic relations o
any state on the basis of reciprocity. NO
c. At any judicial sale or sale by an exec
administrator, guardian or receiver or truste
insolvency or bankruptcy proceedings. NO
d. An isolated transaction by which any securi
sold, offered for sale, subscription by the ow
thereof or his representative. NO
6. Please state if true or false:
a. The stock certificate is not stock in the corpora
but is merely evidence of the holders interes
ownership of the share represented ther
TRUE
b. The stock certificate is a negotiable instrum
FALSE
c. The corporation needs the consent of the SEC
the issuance of stock certificates. FALSE
d. Delivery, actual or constructive is essential to
issuance of a certificate of stock. TRUE
e. Transfer of shares represented by the certifica
effected by its indorsement by the owner o
agent and delivery thereof, so indorsed to
transferee. TRUEf. The assignee in an assignment of shares
enjoy the status of a stockholder and the assi
can be deprived of his rights as a stockho
FALSE
g. In order to be valid against third persons and
corporation, the transfer of shares must
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entered and noted upon the books of the
corporation. TRUE
h. A bona fide transfer of shares of a corporation not
registered in the corporate books is invalid as
against a subsequent lawful attachment or
execution of said shares regardless of whether or
not the attaching creditor had actual notice of said
transfer. TRUE
i. Shares of stock against which the corporation
holds any unpaid claim arising from any unpaid
subscription shall not be transferable in the books
of the corporation. TRUE
j. The stock certificate may be issued to a subscriber
even if the subscription has not yet been fully paid.
FALSE
k. The stockholder by reason of his stock is a
creditor of the corporation. FALSE
7. Give the three (3) modes of stock transfer.
a. Indorsement and delivery of stock certificate
b. Transfer made in separate instrument
c. Judicial or extra-judicial settlement of the
estate8. Give the legal effect of an unregistered transfer of
shares:
a. As between the transferor and the transferee
valid and binding
b. As to the corporation - invalid and
ineffective
c. Right of the transferor to vote - valid
d. Right of the transferor to dividendsvalid
e. As against corporate creditors - invalid
9. Give two (2) rights of the dissenting minority.
a. Minority stockholders objecting to certain
corporate action may demand appraisal and
payment of their stock and thus terminate their
relation with the corporation
b. May bring actions at law in their names to
preserve and protect their interests or in the
name of the corporation to redress wrongs
committed solely against the corporation.
10. Give the three (3) actions by stockholder or members.
a. Derivative actions
b. Individual actions
c. Representative actions
11. Give the distinctions between the above actions by
stockholders as to a) who will bring the action b) in
whose name and in whose behalf c) nature of cause of
action
Who will bring the act
Derivative Stockholders/members
Individual Share holder
Representative Stockholder
12. Please state if true or false:
a. The SEC has jurisdiction to decide cases invo
intra-corporate disputes. FALSE
b. The prohibition to issue watered stocks r
only to the original issue of stocks, but not
subsequent transfer of stocks by the corpora
for then it would no longer be an issue, but a
thereof. TRUEc. Treasury shares may be sold for less than
par value or issued value for they have alre
been issued and paid for, provided the pric
reasonable. TRUE
d. The liability of a director or officer of a corpora
consenting to the issuance of a watered stoc
joint. FALSE
e. A stock delinquent for unpaid subscription ma
voted upon or be entitled to vote at
stockholders meeting as well as have the righ
dividends. FALSEf. Notice to the stockholder is a condition prece
to recovery by the corporation for un
subscriptions. TRUE
g. The highest bidder is the person offering at
sale to pay the full amount of balance of
subscription together with accrued interest, if
cost of advertisement and expenses of the sal
the highest number of shares or fraction
share. FALSE
h. Title to all the share purchased by the corpor
of delinquent stocks shall be considered
treasury shares and may be disposed of byboard of directors for a reasonable price. TRU
13. Give the two (2) actions that may be brought by
state against a corporation.
a. Quo warranto
b. Injunction
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14. Give the three (3) remedies of a corporation to enforce
payment of stock subscription.
a. Extra judicial sale at public auction
b. Judicial auction
c. Collection form cash dividends and
withholding of stock dividends
15. Give the two (2) cases when call for payment of
unpaid subscriptions is not necessary.
a. Insolvency supervenes upon a corporation;
the payment of stock subscription may be
enforced.
b. Subscriber becomes insolvent
1. Please state if true or false
a. A sale of delinquent stocks may be
questioned on the ground of irregularity or
defect in the notice of sale or the sale itself
upon payment or tender by the party to
the holder of the stock such sum as
required under section 69. TRUE
b. Delinquent stock is included in
determining the presence of quorum.
FALSE
c. Delinquent members of a non-stock
corporation may be allowed to vote if
allowed by the by-laws. TRUE
d. Holders of subscribed shares not fully paid
for which are not delinquent shall similarly
be deprived of the right to vote. FALSEe. Full payment of subscription is not
required to make one a stockholder.
TRUE
f. In case of a lost stock certificate, a new
one may be issued before expiration of
the one year period after publication of the
loss upon filing of a bond for by the
registered owner thereof. TRUE
g. Publication of the loss maybe dispensed
with when no certificate has been issued,
because the corporation lost it itself.
TRUEh. Trade secrets may also be subject to
inspection. FALSE
2.
a. What are the four rights which the holders
of delinquent stock will be deprived of?
Deprived the stockholder the right
to be voted
Be voted
Be represented at any
stockholders meeting
Stockholder loses rights perta
to a stock holder the moment
unpaid subscription becomes
delinquent.
b. What right can he not be deprived of?
He cannot be deprived of his
rights to dividends.
3. What are the 4 kinds of books corporations are
required to keep?
a. Minutes of all meetings of directors or
trustees
b. Record of all business transactions
c. Stock and transfer book
d. Minutes of all meetings of stockholder
members.
4. Give the 4 parties who can inspect the corpora
books?
a. Any director, trustee, or stockholder omember
b. Voting trust certificate holder
c. Stockholder of a sequestered compan
d. Beneficial owner of shares
5. Identify the parties of the following
a. Merger
i. Absorbed corporation
ii. Acquired corporation
b. Consolidation
i. Constituent
ii. Consolidated
6. A, Inc. and B, Inc, are existing corporations. A
Inc. transfers all of its assets to B, Inc. B, Inc.
absorbs and acquires all the property, rights an
liabilities of A, Inc. which is dissolved. B, Inc.
continues its corporate existence.
a. What is the corporate combination cal
MERGER
b. What is A. Inc called?
ABSORBED CORPORATION
c. What is B, Inc. called? ABSORBING CORPORATION
d. Identify the surviving corporation
B, Inc.
e. The stockholders of A, Inc. become th
stockholders of what corporation?
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B, Inc.
7. A, Inc. and B, Inc. are existing corporations. They
unite to form C, Inc. to which they will transfer all
their assets. A, Inc. and B, Inc. are dissolved by
the consolidation. The title to their property passes
to C, Inc. and all their rights and liabilities are
assumed by C, Inc.
a. What are A, Inc. and B, Inc. called?
Constituent corporation
b. What is C, Inc. called?
Consolidated corporation
c. Who become stockholders of C, Inc.
Stockholders of A, Inc and B, Inc.
become stockholders of C, Inc.
8. State if true or false
a. There is still winding up of affairs in
merger and consolidation. FALSE
b. There is automatic assumption of liabilitiesof the absorbed or constituents
corporations in merger and consolidation.
TRUE
c. The consent of creditors of a corporation
is not necessary in merger, consolidation,
it being authorized by law. TRUE
d. The absorbed or constituent corporations
are ipso facto dissolved. TRUE
9. Give the 3 instances when the appraisal right may
be exercised.
a. In case any, amendment to the articles of
incorporation has the effect of changing or
restricting the rights of any stockholder or
clash of shares, or of authorizing
preferences is any respect superior to
those of outstanding shares of any clash,
or of extending or shortening the term of
corporate existence.
b. In case of sale, lease, exchange, transfer,
mortgage pledge or other disposition of all
or substantially all of the corporate
property and assets are provided in thiscode.
c. In case of merger or consolidation.
10. Who shall bear the cost of appraisal of the shares:
a. When the fair valuation ascertained by the
appraiser is approximately the same as
the price which the corporation may be
offered.by the dissenting stockholder
b. When the fair valuation offered by the
corporation is lower than the fair value
the appraiser. by the corporation
c. Where an action is filed by the dissent
stockholder to recover fair value, and t
refusal of the stockholder is found by t
court to be justified. by the corpora
11. State the distinction between a non-stock and
stock corporation on the following:
Non-stock stoc
profit Non-profit Prof
Distribution of
dividends
No
distribution
Distribu
of divide
allow
Number of member of
the BOD/BOT
More than
15
15
Term of the BOD/BOT 3 years 1 yea
Qualifications ofdirector/trustee
Member Directoshar
Election of officers if
done directly by
shareholders/members
member BOD
Place of meeting of the
BOD/BOT
At any
place even
outside the
principal
office of the
corporation
p. 68
Manner of voting Only one
vote
1 shar
vote
Right to vote of holders
of delinquent stock
Can vote Cannot
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1. Give the 3 features which the articles of
incorporation of a close corporation shall provi
for.a. All of the corporations issued stock of
classes exclusive of treasury shares s
be held of record by not more than a
specified number of persons, not
exceeding twenty.
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b. All of the issued stock of all classes shall
be subject to one or more specified
instruction or transfer
c. The corporation shall not be enlisted in
any stock exchange of any class.
2. True or false
a. The articles of incorporation of a close
corporation may provide for the
classification of shares or restrictions on
the transfer of shares. TRUE
b. The articles of incorporation of a close
corporation may not provide for the
classification of directors into one or more
classes, each of which may be voted upon
solely by a particular class of stock.
FALSE
c. A greater quorum or voting requirement
may not be provided for in meetings of
stockholders or directors in close
corporations. FALSE
d. The articles of incorporation of a close
corporation may provide that the businessof the corporation shall be managed by
the stockholders rather than by a board of
directors. TRUE
e. The objective of imposing restrictions on
the transfer of shares in a close
corporation is to prevent change of control
of the corporation which might otherwise
result from the transfer of voting shares.
TRUE
3. Name the 2 kinds of valid agreements by
stockholders allowed for close corporations.
a. Stockholders agreement in general
b. Voting or pooling agreement in particular
4. True or false
a. In close corporations, any action by the
board of directors without a meeting shall
be deemed valid under certain conditions
under Sec. 101 of the Corporation Code.
TRUE
b. The pre-emptive right of stockholders in a
close corporation extends only to new
issues of shares out of an increase of thecapital stock and not to all stocks to be
issued. FALSE
c. Where the directors or stockholders in a
close corporation are so divided in the
management of the corporations business
and affairs, so that there is a paralyzation
of corporate operations, this is called a
deadlock. TRUE
d. In case of deadlock, it is the RTC that
jurisdiction to conduct the arbitration.
FALSE
5. Give the 2 kinds of special corporations
a. Educational corporation
b. Religious corporation
6. Give the 2 kinds of religious corporations
a. Corporation sole
b. Religious societies
7. True or false
a. A corporation sole may mortgage and
real property without need of obtaining
court order.
b. A corporation sole may be dissolved u
submission of a declaration of dissolut
to the SEC which needs no SE approv
c. A corporation sole consists of two or mincorporators.
d. The approval of the SEC of the articles
incorporation is necessary before it ca
considered a corporation sole.
e. The title to the properties of a corporat
sole shall be in the name of the
archbishop, etc. in trust for the use,
purpose and benefit of the religious
denomination.
8. Give the 2 kinds of dissolution under the
Corporation Code
a. Voluntary dissolution
b. Involuntary dissolution
9. Give the 3 kinds of voluntary dissolution
a. By the vote of the board of directors a
the stockholders where no creditors ar
affected.
b. By judgment of the SEC after hearing
petition for voluntary dissolution where
creditors are affected
c. By amending the articles of incorporat
to shorten the corporate terms.
10. Give 3 kinds of involuntary dissolution
a. By the expiration of the term provided
in the articles of incorporation
b. By legislative enactment
c. by failure to formerly organize and
commence the transaction of its busin
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within two years from date of
incorporation.
11. Give the legal effect of non-use of the corporate
charter and non-continuous inoperation of a
corporation on a) whether it is deemed dissolved
under sec. 22, or b) is there automatic dissolution,
or c) when will it be lawfully considered d) what is
the effectivity of such dissolution.
a. Shall be deemed dissolved
b. There is no automatic dissolution
c. The corporation shall be lawfully be
dissolved upon issuance of the SEC
certificate of dissolution after notice and
hearing
d. Retroact
12. True or false
a. The dissolution of a corporation results in
the vesting of legal title to the corporate
property in the stockholders who become
co-owners thereof. TRUE
b. Upon dissolution, the corporation ceases
as a body corporate to continue thebusiness for which it was established.
TRUE
c. The dissolved corporation continues as a
body corporate for 5 years for purposes of
winding up or liquidation. FALSE
13. Give the 3 purposes of winding up of the affairs of
a dissolved corporation
a. For the purpose of prosecuting and
defending suits by or against it
b. Enabling it to settle and close its affairs
c. To dispose of and convey its properties
and to distribute to assets; but not for the
purpose of continuing the business for
which it was established.
14. Give the 3 methods by which a dissolved
corporation may wind up its affairs.
a. Liquidation by the corporation itself
b. Liquidation by a duly appointed receiver
c. Liquidation by a trustee to when the
corporation had conveyed the corporate
assets.