Business Laws and Regulations Midterm: Solidarity Liability

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Questions and Answers

What constitutes solidarity liability for directors and officers?

Providing transparent and honest financial statements

Willfully and knowingly vote for lawful acts with due diligence

Willfully and knowingly vote for or assent to patently unlawful acts or gross negligence (correct)

Vote for reasonable actions aligned with cooperative interests

What is one action that can lead to liability for damages for directors and officers?

Ensuring compliance with cooperative regulations

Offering confidential information to internal members responsibly

Attempting to acquire any interest or equity adverse to the cooperative (correct)

Promoting cooperative interests over personal gain

Which of the following actions can make a director or officer liable under the illegal use of confidential information?

Discussing strategies with cooperative members

Using confidential information for personal benefit or advantage (correct)

Sharing information with relevant stakeholders

Implementing new cooperative policies transparently

Under solidarity liability, which scenario describes a conflict of interest for directors?

Acquiring any personal or pecuniary interest in conflict with their duty Signup and view all the answers

What makes a director or officer accountable for a benefit received through the use of confidential information?

Achieving personal gain via the confidential information used Signup and view all the answers

Which action by a committee member can be considered gross negligence?

Voting for or assenting to clearly unlawful acts Signup and view all the answers

What does reposing a matter in confidence to a director imply?

Confidentially entrusting a matter to a director Signup and view all the answers

When might a director be liable for damages?

When acquiring interest adverse to the cooperative Signup and view all the answers

What kind of vote by a director can lead to solidarity liability?

A vote for or assenting to patently unlawful acts Signup and view all the answers

What is the alternate name for Out-of-Court Rehabilitation?

Informal Restructuring Agreement Signup and view all the answers

Which percentage of creditor approval is required for the OCRA?

85% of total liabilities Signup and view all the answers

What is the duration of the stand-still period in Out-of-Court Rehabilitation?

120 days Signup and view all the answers

What is a required qualification for a Rehabilitation Receiver?

Resident and good moral character Signup and view all the answers

Which percentage of approval is required from unsecured creditors for OCRA?

75% Signup and view all the answers

What is the first step in the procedure for Out-of-Court Rehabilitation?

Petition for Court Assistance to Execute OCRA Signup and view all the answers

Which body recommends the Management Committee?

Rehabilitation Receiver Signup and view all the answers

What must the court order during the liquidation for an insolvent juridical debtor?

Filing of Comment Signup and view all the answers

What is the duty of the Rehabilitation Receiver?

Implementing the plan Signup and view all the answers

Study Notes

Business Laws and Regulations: Liabilities of Directors, Officers, and Committee Members

Solidarity Liability

Occurs when directors, officers, or committee members willfully and knowingly vote for or assent to patently unlawful acts
Also occurs when they are guilty of gross negligence or bad faith in directing the affairs of the cooperative
Applies when they acquire any personal or pecuniary interest in conflict with their duty

Liability for Damages

Applies when directors, officers, or committee members attempt to acquire or acquire any interest or equity adverse to the cooperative
Also occurs when they misuse confidential information reposed in them for personal benefit or advantage

Illegal Use of Confidential Information

Directors, officers, or their associates are liable for personal benefits or advantages gained from using confidential information
They must compensate the cooperative for the benefits received and are accountable for their actions

Out-of-Court Rehabilitation (OCRA)

Also known as Informal Restructuring Agreement, approved by creditors representing 85% of total liabilities (67% secured and 75% unsecured)
No petition filed in court for approval, but for implementation
Stand-still period of 120 days, approved by majority creditors, agreement published to invite

Procedure for OCRA

Petition for Court Assistance to Execute OCRA / Implement Standstill Agreement
Summons
Summary Hearing

Liquidation for Insolvent Juridical Debtor

Petition with schedule, inventory, and nominee or Motion during pendency of rehabilitation proceedings ("no likelihood of being rehabilitated")
Court orders publication
Court orders filing of Comment
Approval of Liquidation Order
Appointment of Liquidator
Registry of Claims
Liquidation Plan
Completion and Termination

Rehabilitation Receiver

Qualifications: Citizen/resident, good moral character, knowledgeable, and no conflict of interest (creditor, same business, officer, underwriter, related within 4th degree)
Duties: preserving assets, determining viability, preparing and implementing the plan

Management Committee

Recommended by the Rehabilitation Receiver
In charge of management and control of the debtor

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Description

This quiz covers the liability of directors, officers, and committee members in cooperatives, including solidarity liability and liability for damages. It is based on the Business Laws and Regulations midterm exam by Atty. Precious Swelan Santiago.