FRIA Flashcards
Nature of Proceedings
- in rem (binding to the whole world)
- summary and non adversarial
Yes
Debtors, for FRIA, are insolvent
- natural persons
- juridical persons (sole, partnership, corporation)
Group of Debtors
- financially related corp (parent, subsidiary)
- partnerships (more than 50% owned by same person)
- single proprietorships (owned by same person)
Yes
Insolvency refers to
- technical insolvency (not liquid enough)
- bankruptcy insolvency (liabilities greater than assets)
Yes
Not Debtors, for FRIA
- banks
- insurance
- pre-need
- government agencies
Creditors, for FRIA
- natural or juridical person
- has a claim against debtor
- before commencement date
- can be secured or unsecured
Yes
Claim
- whether for money or not
- whether liquidated or not
- whether matured or not
- whether disputed or not
- whether fixed or contingent
Yes
Features of Suspension of Payments
- can be availed by juridical persons. True or False?
- can be voluntary or involuntary. True or False?
- only if technical insolvency. True or False?
- liabilities will be affected. True or False?
- number of creditors is immaterial. True or False?
- False → only by individual debtors
- False → only voluntary (filed by debtor)
- True
- False → suspend lang, hindi marereduce or mawawala yung liabilities
- True
Lapsing Period of Suspension of Payment
3 months or time it is denied
Within the time frame of suspension order, creditors cannot do anything.
Exceptions (these creditors are not affected by suspension order)
- creditors having claim for personal labor, maintenance, expense of last illness and funeral of wife or children of debtor (incurred within how many days before filing?)
- secured creditors
within 60 days before filing
- these creditors may not attend creditor’s meeting → not bound by the agreement
- however, if they join → bound by the agreement
Creditor’s Meeting
- debtor shall attach to his petition, an agreement with the creditors (approved in a creditor’s meeting)
- creditor whose claim is incurred within how many days before filing is not entitled to vote
- what is the quorum?
- approval (double majority rule)
- within 90 days before filing
- Quorum → creditors holding at least 3/5 of total liabiltiies
- Approval → 2/3 of voting creditor, majority vote holds at least 3/5 of total liabilities
Prohibited Acts of Debtor (During Pendency)
- sell, transfer, dispose his property
XPN : those used in ordinary course of business
- make payment
XPN : necessary or legitimate expenses of business
Yes
Features of Rehabilitation
- can be availed by juridical persons. True or False?
- can be voluntary or involuntary. True or False?
- only if technical insolvency. True or False?
- False → only availed by juridical persons
- True
- False → can be technical insolvency or bankruptcy insolvency
Voluntary Rehabilitation
- initiated by debtor upon showing 2 things
- debtor is insolvent
- rehabilitation is viable
Voluntary Rehabilitation
- who will file? (sole proprietorship, partnership, corporation)
- Sole - owner / proprietor
- Partnership - majority of partners
- Corporation - majority of BOD + 2/3 Outstanding Capital Shareholder (OCS)
Involuntary Rehabilitation
- initiated by creditors if there is no genuine issue of fact/law on claims
- no payments for at least 60 days (or generally, debtor cannot pay in due date)
- creditor has foreclosure proceeding → debtor cannot pay in due date
- who will file?
at least 1M or 25% (SSC or Partner’s Contribution) HIGHER
The course shall issue a commencement order (which includes a stay order)
Effects of Stay Order
- creditor cannot collect
- secured creditors → preference is retained (but suspended)
- debtor cannot be compelled to pay
- debtor → cannot sell, transfer properties (same in suspension)
Yes
Commencement Order
- shall be issued within ? from filing
- retroacts to the day of filing
- duration → entire duration of the proceedings
within 5 days
Exceptions to the Stay or Suspension Order
- to cases already pending appeal in the SC
- to cases pending or filed at specialized court or quasi-judicial agency
- to claims against sureties and other persons solidarily liable with the debtor
- to any form of action of customers or clients of a securities market participant
- to the actions of a licensed broker or dealer to sell pledged securities of a debtor
- the clearing and settlement of financial
transactions
- any criminal action against the individual debtor or owner
Yes
Upon filing of rehabilitation, the court may
- approve
- deny
- convert to liquidation
What are the requisites for each?
Approve
- debtor is insolvent
- rehabilitation is viable
Deny
- debtor is not insolvent
- sham filing, misrepresentation, in fraud
Convert to Liquidation
- rehabilitation is not viable
During rehabilitation proceeding, the management of the business shall be done by the
1. Existing management
2. Court will appoint either Rehabilitation Receiver or Management Commitee
Yes
Qualification of Rehabilitation Receiver
- citizen
- resident of PH in the 6 months before nomination
- has knowledge of insolvency and commercial laws
- no conflict of interest
Yes
A rehabilitation receiver will be assisted by a creditors’ commitee (liaison only, cannot give consent on behalf of creditors)
Duties of Rehabilitation Receiver
- preserve value of assets of debtor
- prepare, recommend, implement a rehabilitation plan
Yes
Rehabilitation Plan
- 2 ways of approval
- court + creditors (50% of total liabilities)
- court only (without approval of creditors)
A rehabilitation plan must be confirmed…
within 1 year from date of filing
- if not → convert to liquidation
