Financial Rehabilitation and Insolvency Act (FRIA) Review

These vocabulary flashcards cover the essential terms, legal thresholds, and procedural steps of the Financial Rehabilitation and Insolvency Act (FRIA) as detailed in the lecture transcript.

In rem

The nature of proceedings under the FRIA where jurisdiction over all persons affected is acquired upon publication of the notice of commencement.

FINANCIAL REHABILITATION AND INSOLVENCY ACT

The law (FRIA) intended to encourage debtors and creditors to collectively and realistically resolve competing claims through rehabilitation or facilitate speedy liquidation if not feasible.

Excluded Debtors

Specific entities not covered by the FRIA, including Banks, Pre-need companies, Insurance companies, and Government agencies or units.

Suspension of Payments

A remedy for an individual debtor who has sufficient properties to cover all debts but finds it impossible to meet them when they fall due.

Double Majority

The approval requirement for a suspension of payments agreement, requiring a vote of $2/3$ of the creditors and that the majority vote amounts to at least $3/5$ of the liabilities.

Rehabilitation

The restoration of the debtor to a condition of successful operation and solvency.

Voluntary Rehabilitation

A proceeding initiated by the debtor (Sole Proprietorship, Partnership, or Corporation) upon showing insolvency and viability of rehabilitation.

Involuntary Rehabilitation

A proceeding initiated by creditors representing at least $P1,000,000$ or $25\%$ of the subscribed capital stock or partners' contributions, whichever is higher.

Stay Order

An order issued within $5$ days of filing a rehabilitation petition that suspends all actions for enforcement of claims and prohibits the disposal of property outside the ordinary course of business.

Rehabilitation Receiver

A person appointed by the court to preserve assets, determine rehabilitation viability, and prepare/implement the Rehabilitation Plan.

Management Committee

A body appointed by the court in cases of gross mismanagement, fraud, or actual danger of dissipation of assets to manage the business of the debtor.

Cram Down Effect

The principle that a court-confirmed Rehabilitation Plan is binding upon the debtor and all creditors, whether or not they participated in or opposed the plan.

Pre-negotiated Rehabilitation

An insolvency proceeding where the debtor files a plan already endorsed by creditors holding at least $2/3$ of total liabilities, including at least $50\%$ of secured and $50\%$ of unsecured claims.

Standstill Period

A period not exceeding $120$ days during out-of-court rehabilitation efforts, effective against all creditors if approved by those representing more than $50\%$ of total liabilities.

Out-of-Court Rehabilitation Plan Approval

A plan agreed upon by creditors representing at least $67\%$ of secured obligations, $75\%$ of unsecured obligations, and $85\%$ of total liabilities.

Liquidation

The process initiated when a debtor is insolvent and rehabilitation is not feasible, involving the disposal of assets and settlement of obligations.

Qualifying Amount for Liquidation

The debt threshold of at least $P500,000$ for involuntary liquidation or more than $P500,000$ for voluntary liquidation of an individual debtor.

Liquidation Order

A court order that declares the debtor insolvent, dissolves juridical debtors, directs the sheriff to seize property, and prohibits further payments by the debtor.

Registry of Claims

A list of secured and unsecured creditors prepared by the liquidator within $20$ days of assuming office.

Liquidation Plan

A document submitted by the liquidator within $3$ months of assumption of office, detailing assets, a schedule of liquidation, and payment of claims.