Financial Rehabilitation and Insolvency Act of 2010 Notes

Set of flashcards based on the key contents of the Financial Rehabilitation and Insolvency Act (FRIA) of 2010.

What is the title of Republic Act No. 10142?

Financial Rehabilitation and Insolvency Act (FRIA) of 2010.

What is the policy of the State regarding debtors and creditors?

To encourage debtors and creditors to collectively and realistically resolve competing claims and property rights.

What are the two main outcomes of the rehabilitation or liquidation of debtors as per the Act?

To either ensure or maintain certainty and predictability in commercial affairs, and to facilitate a speedy and orderly liquidation if rehabilitation is not feasible.

What does 'in rem' refer to in the context of FRIA?

Jurisdiction over all persons affected by the proceedings acquired upon publication of the notice of commencement.

What is included in 'administrative expenses' under the Act?

Reasonable and necessary expenses incurred in connection with the proceedings, including fees for rehabilitation receivers or liquidators.

Define 'affiliate' as per the FRIA.

A corporation that is controlled by or under common control with another corporation.

What is the meaning of 'claim' in the context of FRIA?

All claims or demands against the debtor or its property, whether for money or otherwise, liquidated or unliquidated.

What is the 'commencement date' as defined by the FRIA?

The date on which the court issues the Commencement Order, retroactive to the filing of the petition.

What role does the 'court' play in rehabilitation proceedings?

Designated by the Supreme Court to hear and determine cases brought under the FRIA.

What is a 'creditor' according to the Act?

A natural or juridical person with a claim against the debtor that arose before the commencement date.

What does 'involuntary proceedings' refer to in the Act?

Proceedings initiated by creditors.

How is the term 'encumbered property' defined?

Property of the debtor upon which a lien attaches.

What is meant by 'general unsecured creditor'?

A creditor whose claim is neither secured, preferred, nor subordinated.

Describe the 'group of debtors' as mentioned in the FRIA.

Corporations or partnerships financially related, or sole proprietorships owned by the same person.

What constitutes an individual debtor?

A natural person who is a resident and citizen of the Philippines that has become insolvent.

Define 'insolvency' according to the FRIA.

The condition of a debtor that is unable to pay liabilities as they fall due or has liabilities greater than assets.

What is the definition of 'rehabilitation'?

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

What is a 'rehabilitation receiver'?

A person or persons appointed by the court to administer the rehabilitation process.

What does a 'rehabilitation plan' involve?

A plan by which the financial well-being of an insolvent debtor can be restored.

What is a 'secured creditor'?

A creditor with a secured claim.

What encompasses a 'liquidation order'?

An instrument issued by the court directing the liquidation of a debtor's assets.

What are the consequences of the issuance of a Commencement Order?

It grants powers to the rehabilitation receiver and suspends actions to enforce claims against the debtor.

In what case can a creditor initiate involuntary proceedings?

When they have a claim of at least one million pesos or 25% of the subscribed capital stock.

What factors does the court consider in granting relief under cross-border insolvency proceedings?

Protection of creditors, just treatment of all creditors, recognition by other jurisdictions, and the rights of creditors.

What is a 'liquidation plan'?

A plan that enumerates all the assets of the debtor and schedules the liquidation of assets and payment of claims.

What must a debtor do to apply for voluntary liquidation?

File a verified petition showing insolvency along with a schedule of debts, liabilities, and inventory of assets.

Define 'standstill period'.

A period agreed upon by parties pending negotiation and finalization of an out-of-court or informal restructuring agreement.

What is required for an out-of-court restructuring agreement to be valid?

Approval by creditors representing at least 67% of the secured obligations.

Which penalties may be applied for concealment of property by an individual debtor?

Fines of not more than one million pesos and imprisonment for 3 to 5 years.

How is a creditor's claim verified in the FRIA?

Through submission of sufficient evidence to support the claim.

What happens if the Liquidation Order identifies a debtor?

The debtor shall be deemed dissolved, and its property vested in the liquidator.

What is the maximum period the court has to confirm a Rehabilitation Plan?

One year from the date of filing of the petition.

What must occur if a rehabilitation plan is rejected?

The court may convert proceedings into liquidation if specified conditions are met.

What must a liquidator do after assuming office?

Prepare a preliminary registry of claims and make it available for public inspection.

What does a confirmed rehabilitation plan bind?

It binds the debtor and all persons affected by it, regardless of whether they participated or opposed the plan.

What is one effect of the issuance of a Liquidation Order?

The debtor's corporate existence is terminated.

What must a liquidator submit at the end of liquidation proceedings?

A final report and accounting of the liquidator's activities.

When is the Liquidation Order issued by the court?

Upon finding the debtor to be insolvent.

What distinguishes voluntary liquidation from involuntary liquidation?

Voluntary is initiated by the debtor, while involuntary is initiated by creditors.

What does 'Cram Down Effect' indicate in informal restructuring agreements?

Such agreements have the same legal effect as confirmation of a Plan under the Act.

What majority is needed for approval of a rehabilitation plan?

Approval by all classes of creditors whose rights are adversely modified.