ALBANO BAR REVIEW CENTER

MOCK BAR QUESTIONS

IN
MERCANTILE LAW
Prepared by: Atty. Ma. Lulu Reyes

Instructions: This mock bar examination consists of ten (10) questions. Please eighty minutes to
answer this exam (equating to 8 minutes per question; which is your usual time allotment per
question in the bar exams).
Answer in a similar word document and re-send to the same email link you received it with.
You may choose to be graded or merely given feedback to improve your answering capability.
Good luck!

1. Is the following waiver sufficiently valid to break the confidentiality of bank deposits?
2. Chet is a junior partner in the law firm Calida and Aguirre, Inc. Tiny is his friend and
long-time neighbor in Damarinas Village, Makati City. In February 2015, Chet was assigned to
head the team of lawyers that would handle the proposed merger of the firm’s client China Silk
Road, Inc. with Russian Doll, Inc., with the former as the surviving corporation. The latter was
represented by a different law firm. By June 2015, the plan of merger between the two
companies was in its final stages of completion and the regulatory filings with the SEC were
being accomplished. Within the same month, Chet met Tiny several times to inform Tiny of the
impending merger. Both Chet and Tiny, through their stock brokers, started purchasing China
Silk Road, Inc. shares of stocks, then trading at P5.00. In the next few weeks, the two continued
to buy China Silk Road shares of stocks in advance of a public announcement of the merger. On
July 1, 2016, China Silk Road, Inc. and Russian Doll, Inc. both announced their formal merger to
newspapers, TV and other media. The announcement drove China Silk Road stock up to P15.00.
On the same day, Chet and Tiny sold their stocks, with Chet and Tiny making a profit of P40
million and P30 million, respectively. Are Chet and Tiny insiders? If yes, should Chet and Tiny
be held liable for insider trading? If not, why not?

3. Union Cement Corp. (UCC) is a publicly listed firm owned largely by two stockholders:
Union Cement Holdings Corp. (UCHC) and Cemco, at 60.51 percent and 17.03 percent,
respectively. UCHC’s stocks are, in turn, held by Bacnotan Consolidated Industries (21.31
percent), Atlas Cement (29.69 percent) and Cemco (9 percent). In July 2004, Bacnotan and Atlas
declared their intention to sell their UCHC shares to Cemco. Upon learning this, National Life, a
minority stockholder of Union Cement, demanded from Cemco that it offer to buy its Union
Cement shares pursuant to the tender offer rules. Cemco refused. It proceeded to purchase the
UCHC shares of Bacnotan and Atlas. National Life filed a complaint with the Securities and
Exchange Commission to nullify Cemco’s purchase and asked that the latter be required to
comply with the tender offer rules.

3.1 With the acquisition by CEMCO of the UCHC shares of Bacnotan and Atlas, how much
control would CEMCO now hold in UCC?

3.2 Would the acquisition by CEMCO of the UCHC shares of Bacnotan and Atlas trigger a
mandatory tender offer to minority shareholders of UCC, such as National Life?

4. Pido is the owner of 10,000 inactive securities. To create a semblance of active trading
for the securities, Pido entered into an agreement with Pida by which the securities shall be
successively sold and bought between them at an escalating price of P5.00 per transaction. It is
their understanding however that Pido shall always retain the beneficial ownership of the
securities. If the arrangement between the two materializes, for what violation(s) of the law are
they liable?

5. Bayantel, Inc. is a telecommunications corporation duly organized under Philippine law.

Unable to meet its obligations, Bayantel, Inc. filed a petition for corporate rehabilitation with the
Special Commercial Court. After a series of hearings, the court approved, per findings and
recommendations of the rehabilitation receiver, the Rehabilitation Plan that provided a debt
payment scheme with pari passu provision that all other creditors shall be mandated to: a)
suffer a 50% haircut of all principal obligations; b) condone all accrued penalties and interests;
c) repay the above over a period of ten (10) years at interest of 2%/ annum until fully paid and
only upon availability of cash flow to service the debts, and d) discharge of all existing
securities in the form of mortgages over assets of Bayantel, Inc, with a cramdown effect. Is the
pari passu with cramdown order valid?

6. What are the forms of corporate rescue under the R.A.10142? Briefly state the
requirements for each.

7. Ching Bee Trading Corporation (CBTC) formally asked the SEC to extend its corporate
term by submitting the required documents a day before the expiration, or on Jan. 22, 2010. The
SEC, through its Company Registration and Monitoring Department (CRMD), refused to accept
the application because the required directors’ certificate was defective. CBTC did not state that
stockholders, representing at least two-thirds of the outstanding capital stock, approved the
amendment of the articles extending the corporate term. Instead of telling CBTC to cure the
defect within the remaining one-day period, the CRMD advised the company to request for an
extension to submit the requirement. The written request was filed on the last day of CBTC’s
corporate term, or on Jan. 23, 2010. A month later, the proper certificates as to the stockholders’
approval was submitted to the CRMD. On Jan. 6, 2011, the SEC en banc dismissed the request,
citing that the application to extend a company’s term of existence was filed after the expiration
of the original term. Is the SEC en banc correct?

8. Eddie owns and controls 80% of the outstanding capital stock of Heavens, Inc. Eddie
and JC entered into a memorandum of agreement (MOA) whereby Eddie sold all his shares to JC
with the stipulation that the full purchase price of P8 million shall be paid by JC to Eddie on or
before the lapse of two (2) years, in 4 installments. During the 2-year period of payment, JC
shall be allowed to vote the shares and temporarily manage Heavens. Inc. The corresponding
certificates were then indorsed by Eddie to JC but to be delivered only to JC upon full payment.
Immediately after the payment of the first installment, JC took over the management of the
corporation and exercised the right to vote the shares by proxy from Eddie. Despite full payment
by JC, Eddie refused to deliver the certificates of stock to JC as earlier stipulated. If JC files an
action for specific performance against Eddie to deliver the certificates of stock, will it prosper?
Is it an intra-corporate controversy?

9. What do you understand by:

9.1 A “clawback” provision on director’s or corporate officers’ compensation?

9.2 The principle that registration of transfer of shares is a novation?

9.3 A geographical indication in intellectual property and how is it different from a

trademark?