FRIA

Question 1

Rehabilitation

Answer 1

refer to the restoration of the debtor to a condition of successful operation and solvency

Question 2

Sec. 4(p) Insolvent

Answer 2

refer to the financial condition of a debtor that is generally unable to pay its or his liabilities as they fall due in the ordinary course of business or has liabilities that are greater than its or his assets

Question 3

Actual insolvency

Answer 3

debtor’s assets are not enough to cover its liabilities

Question 4

Technical insolvency

Answer 4

the debtor has enough assets but foresees its inability to pay its obligations for more than one year

Question 5

Who may initiate involuntary proceedings

Answer 5

any creditor or group of creditors with a claim of, or the aggregate of whose claims is at leas P 1M or at least 25% of the subscribed capital stock or partner’s contribution, whichever is higher

Question 6

Stay or Suspension order

Answer 6

refer to an order issued in conjunction with the commencement order that shall suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor

Question 7

Stay or Suspension Order : Actions suspended

Answer 7

The actions that are suspended cover all claims against the corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature

Question 8

Exceptions to the Stay or Suspension Order

Answer 8

1. cases already pending appeal in the SC
2. cases pending or filed with a specialized court or quasi-judicial agency - discretion of the court
3. enforcement of claims against sureties an other persons solidarily liable with the debtor, and third party accommodation mortgagors
   4.securities market participant - in the ordinary course of business
4. licensed broker or dealer to sell pledged securities of a debtor - pursuant to a securities pledge
5. clearing and settlement of financial transactions
6. any criminal action - civil liability arising from the offense is covered by the stay order

Question 9

Rehabilitation Receiver

Answer 9

• refer to the person or persons, natural or juridical, appointed as such by the court pursuant to the Act and which shall be entrusted with such powers, duties and responsibilities as set forth herein
• officers of the court, tasked to study the best way to rehabilitate the company and to implement the rehabilitation plan after its approval

Question 10

Grounds for displacement of management

Answer 10

1. Actual or imminent danger of dissipation, loss, wastage or destruction of the debtor’s assets or other properties; or
2. Paralyzation of the business operations of the debtors; or
3. Gross mismanagement of the debtor, fraud or other wrongful conduct, or gross or willful violation of the ACT (FRIA)

Question 11

Rehabilitation Plan

Answer 11

refer to a plan by which the financial-well being and viability of an insolvent debtor can be restored using various means

Question 12

Cram Down Rule

Answer 12

that a rehabilitation plan may be approved even over the opposition of the creditors holding a majority of the corporation’s total liabilities if there is a showing that rehabilitation is feasible and the opposition of the creditors is manifestly unreasonable

Question 13

Standstill Period

Answer 13

the period agreed upon by the debtor and its creditors to enable them to negotiate and enter into an out-of-court or informal restructuring/workout agreement or Rehabilitation Plan - shall not exceed 120 days from the date of its effectivity

Question 14

Individual Debtors (SEC. 94)

Answer 14

Verified petition - state of suspension of payment - court of the province or city in which he has resided for 6 months
Attach: 1. schedule of debts
2. inventory of assets
3. a proposed agreement with his creditors