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RFBT > FRIA > Flashcards

FRIA Flashcards

1
Q

Proceedings covered by FRIA

A
  1. suspension of payments
  2. rehabilitation
    a. voluntary or involuntary
    b. pre-negotiated
  3. liquidation
    a. voluntary
    b. involuntary
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2
Q

nature of proceedings

A
  1. in rem
  2. non adversarial and summary
  3. jurisdiction overall persons affected is acquired upon publication of the notice of commencement in a newspaper of general circulation in the Philippines
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3
Q

Debtors

A
  1. Sole Prop DTI registered
  2. SEC registered partnership
  3. Domestic corporations
  4. Individual debtors - natural and RC
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4
Q

Group of debtors

A
  1. financially related (P/S or affiliates)
  2. Partnerships - more than 50% is owned by persons
  3. Single proprietorship - owned by the same individual
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5
Q

Insolvent

A
  1. unable to pay obligations as they fall due
  2. L > A
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6
Q

Creditors

A

natural or juridical who has a claim against the debtor

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7
Q

Claim of debtor must be incurred _____

A

on or before commencement date

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8
Q

suspension of payments is available only to individuals (not part/ not sole prop)

A

True

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9
Q

Features of suspension of Payments

A
  1. sufficient properties, only cash flow problems
  2. suspend payments
  3. liabilities are not affected
  4. number of creditors are ignored
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10
Q

a motion filed by the debtor to suspend any pending execution against the the individual debtor

A

Suspension order

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11
Q

excluded debtor under FRIA

A

banks, pre need companies, insurance companies and government agencies

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12
Q

suspension of Payment Rule

A

GR: all payments are suspended
Exc: if incurred 60 days before filing - *personal labor
*maintenance
*expense of last illness of wife or children

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13
Q

Validity of suspension order

A

3 months without proposed agreement

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14
Q

Required meeting in Suspension of payment

A

Creditor’s meeting

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15
Q

A petition must be approved in this meeting

A

creditor’s meeting

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16
Q

Creditor’s meeting
Quorum: (clue: ABC is 123)
Approval: (clue- double majority)

A

Quorum: at least 3/5
Approval: Double majority
2/3 of creditors voting and
claims of majority vote amount to at least 3/5 of total liabilities

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17
Q

creditors entitled to vote in creditor’s meeting

A

GR: all
Exc: those incurred within 90 days prior to filing of petition

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18
Q

unaffected creditors of suspension order may refrain from attending the meeting and shall not be bound by the agreement

A

True

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19
Q

If proposal is denied in the creditor’s meeting, what will happen

A

proceeding is terminated and creditors may enforce their rights

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20
Q

Restoration of the debtor to a condition of successful operation and solvency

A

Rehabilitation

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21
Q

Three types of rehabilitation
(VIP)

A

Voluntary
Involuntary
Pre- negotiated

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22
Q

Requisites for Voluntary Rehabilitation

A
  1. Insolvent
  2. viability of rehabilitation
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23
Q

Requisites for Involuntary REHABILITATION

A
  1. no issue of fact on claims
  2. no payment on liabilities for at least 60 days from its due date
  3. failure to meet obligations as they fall due
  4. creditors other than petitioners initiated foreclosure that will lead to insolvency
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24
Q

Who files for
Voluntary
Involuntary
Pre-negotiated

A

debtor
creditor
n/a (out of court kasi)

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25
Q

Who files for rehabilitation
1. Voluntary

A
  1. sole - owner
  2. part- majority partnership
  3. corporation - maj BOD/ BOt + 2/3 outstanding SH
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26
Q

Who files for rehabilitation
1. Involuntary

A

at least 1M or 25% of subscribed capital stock or partner’s contribution
(HIGHER)

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27
Q

Who files for rehabilitation
an out of court/ informal restructuring agreement

A

N/A
agreed upon by the debtor and approved by the creditor

creditor’s approval:
at least 67% Secured
at least 75% Unsecured -AND-
holding at least 85% of total liabilities, secured and unsecured

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28
Q

Order issued by the court in a voluntary/ involuntary rehabilitation

A

Commencement/ Stay order

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29
Q

date when the court issues commencement order

A

commencement date

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30
Q

effect of commencement date

A

retroacts to the date of filing of the petition for voluntary or involuntary proceedings

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31
Q

when is commencement order issued?

A

5 days from filing of petition

32
Q

Effect of stay order

A

retain creditor’s preference; only suspended

33
Q

Exceptions to stay order

A
  1. pending SC appeal as of commencement date
  2. securities transaction
  3. criminal action against individual debtor
    clearing and settlement of financial transaction through facilities of clearing agency
34
Q

court action over filed rehabilitation

A
  1. grant
  2. deny
  3. convert it into liquidation
35
Q

During rehabilitation, who manages the business

A
  1. existing BOD/ management
  2. upon motion of court
    a. rehabilitation receiver
    b. management committee
36
Q

Why does the court appoint rehabilitation receiver / management committee?

A
  1. actual or eminent danger….
  2. business paralyzation
  3. gross mismanagement/ fraud/ other wrongful conduct of the management
37
Q

duties of rehabilitation receiver

A
  1. preserve the asset value
  2. determine viability of the rehabilitation
  3. prepare and recommend rehabilitation plan
  4. implement the rehab plan
38
Q

qualifications of a rehabilitation receiver
(CHR0

A
  1. citizen of the PH
  2. resident for 6 months immediately preceding the nomination
  3. Knowledge of insolvency and commercial laws
  4. no conflict of interest; if there is, the party affected may expressly or impliedly waive the same
39
Q

Management committee vs. creditor committee

A
  1. takes the place of management
  2. creditors belonging to any class may formally organize a committee, or as a body create committee for COMMUNICATION
40
Q

Prohibited act of the director/ officer in rehabilitaion

A
  1. disposal of property
  2. concealment from creditors
41
Q

Liability in case of prohibited acts done

A
  1. 2x value of sold properties
  2. 2x of transaction involved
42
Q

Rehabilitation Plan
Approval required

A

Option 1:
more than 50% of total claims + Court confirmation

Option 2: without creditor’s approval or despite objection (ALL)
a. FRIA compliant
b. rehab receiver recommendation
c. s/h or owner lose their controlling interest as a result of rehab plan
d. rehab plan will give objecting creditors a NPV > NPV under liquidation

43
Q

Rehab plan is submitted to court for _____

A

confirmation

44
Q

Notification by the court to creditors regarding the rehabilitation plan

Period to object

A

within 5 days from receipt of rehab plan

to allow creditors to obtain copies and object 20 days from notification made by the court

45
Q

Grounds for creditor’s objection in rehabilitation plan

A
  1. creditor’s support was induced by fraud
  2. documents relied upon were misleading
  3. plan is in fact not supported by the voting creditor
46
Q

Period of court confirmation for rehabilitation

A

1 year from filing of petition

47
Q

Cram down effect in rehabilitation

A

the rehabilitation plan approved by court shall be binding upon
a. the debtor
b. all persons who may be affected affected, WHETHER OR NOT,
- they participated in the proceedings
- opposed the plan
- payments are scheduled

48
Q

If no plan is confirmed for rehabilitaion

A

the proceedings, may upon motion, or motu propio, be converted into one for liquidation of the debtor

49
Q

for a standstill period to be effective and enforceable in a pre negotiated rehabilitation

A
  1. approved by creditors: more than 50% liabilities
  2. notice in general circulation 1: 2 AND
  3. standstill period does not exceed 120 days from effectivity
50
Q

to effect an approved Notice of Rehabilitation or workout agreement

A
  1. Publish in general circulation: once a week for at least three consecutive weeks (1:3)
  2. effective upon the lapse of 15 days from the date of the last publication
51
Q

Determination of claims:
Registry of claims in Liquidation
preparation period

A

within 20 days from liquidator’s assumption into office.

52
Q

Threshold for insolvent debtor
Voluntary vs. Involuntary

A

Involuntary - At least 500k
Voluntary - more than 500k

53
Q

Voluntary vs. Involuntary Liquidation
(who initiates)

A

Debtor vs. creditor

54
Q

Involuntary Liquidation

A

must be 3 or more creditor whose claim = at least 1M or at least 25% of the …. HIGHER
- no genuine issue of fact/ law + no payments made for at least 180 days on demandable oblgigations or failed to meet them + no substantial likelihood of rehabilitation

also posting of bond is required

55
Q

conversion of rehabilitation to liquidation

A
  1. rehab plan is filed, insolvent debtor, insubstantial likelihood for successful rehabilitation
  2. non confirmation within 1 year from filing
  3. failure of rehab / dismissal of such
  4. filing of verified motion
56
Q

effect of liquidation order to the secured creditors

A

not affect his rights

57
Q

Election of liquidator

A

only those who have claim filed on time and not barred can elect liquidator

58
Q

Qualifications of liquidator

A

same as that of receiver

59
Q

Is right of set off allowed in liquidation?

A

Yes

60
Q

Right to challenge the claims in liquidation

A

Yes, 30 days from expiration of filing period

61
Q

Liquidation Plan submission

A

3 months from assumption into office

62
Q

Items included in the liquidation plan

A
  1. all assets
  2. schedule of liquidation
  3. payment of claims
63
Q

if liquidator is juridical entity, what is the liability of the appointed natural person and juridical person

A

juridical entity and liquidator are solidarily liable for all obligations and responsibilities of the liquidator.

64
Q

GOCCs and government financial institutions are covered by FRIA

A

GR: True
Exc: When special laws provide therwise

65
Q

Effect of failure to file a claim a notice of claim by the creditor in accordance with commencement order but subsequently files

A

shall not be allowed to participate in the rehabilitation
still entitled to receive distributions arising thereon

66
Q

what constitutes conflict of interest in the appointment of rehabilitation receiver or member of a management committee?

A

GR: materially influenced in the exercise of his judgment

67
Q

instances of conflict of interest in the appointment of rehabilitation receiver or member of a management committee

A

creditor, owner, partner, s/h of the debtor

68
Q

instances of conflict of interest in the appointment of rehabilitation receiver or member of a management committee

A

within 5 years from filing of petition, he is an owner/partner/ director/ officer/ employee of debtor OR creditor

within 2 years from filing, UNDERWRITER of outstanding securities

related by consanguinity/ affinity within 4th civil degree

current creditor, owner, partner, s/h of the debtor

competitor business

he has direct/ indirect MATERIAL interest in the debtor/ creditor

69
Q

transactions prior to commence date of rehab proceeding may be rescinded or declared null or void if ______

A

Rule: intent to defraud creditors

Specific:
90 days prior to commencement date
-unreasonable inadequate consideration to the debtor
- accelerated payment to creditor
- provides security or additional security

70
Q

Remedies to a creditor upon showing of lack of adequate protection during stay or suspension order

A

court may order
1. make the debtor insure or maintain the property
2. pay or provide additional security

if not feasible, court may modify Stay or Suspension order so the creditor may enforce claim
EXCEPT if the property is required for rehabilitation

71
Q

mechanics of pre-negotiated paln

A
  1. insolvent debtor alone or with other creditors files verified petition
  • creditors: at least 2/3 of the total claims
  • secured creditor: more than 50% of total SECURED
  • unsecured creditor: more than 50% of total SECURED
72
Q

court order in a pre negotiated plan

A

issued within 5 working days after determination on the ff:

  1. publication order 1: 2
    1st publication to be made within 7 days from the time of its issuance
  2. persoanl service of a copy on each creditor who is not a petitioner holding at least 10% o the total liabilities of the debotr within 3 days
  3. appointment of receiver, if in the plan
  4. stay or suspension order.
73
Q

period to file an objection in pre negotiated plan

A

within 8 days from the 2nd publication of the order

74
Q

liquidation order:

no foreclosure proceedings for a period of _______

all contracts of the debtor shall be deemed terminated/ or breached, unless the liquidator wthin _______ days from the dte of his assumption, declares otherwise and contracting parties agree

A

180 days

90 days

75
Q

actions pending upon issuance of liquidation order will be ____

A

transferred to the liquidator to accept, settle, contest

RFBT (20 decks)

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