Business Laws: Financial Rehabilitation and Insolvency Act
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Questions and Answers

Which of the following is NOT included as a debtor under the Financial Rehabilitation and Insolvency Act?

  • Corporation
  • Partnership
  • Banks (correct)
  • Sole Proprietorship
  • What majority vote is needed to approve a proposed agreement for the suspension of payment for an individual debtor?

  • Three-fourths vote
  • Unanimous vote
  • Two-thirds vote
  • Majority vote (correct)
  • What is the minimum liability amount that necessitates liquidation for an individual debtor?

  • ₱1,000,000
  • ₱250,000
  • ₱500,000 (correct)
  • ₱100,000
  • Which order is part of individual liquidation proceedings?

    <p>Custody Order</p> Signup and view all the answers

    Which type of rehabilitation begins extrajudicially before becoming judicial?

    <p>Pre-Negotiated Rehabilitation</p> Signup and view all the answers

    What is an essential requirement for a creditor to initiate an involuntary court-supervised rehabilitation?

    <p>60 days past due obligations</p> Signup and view all the answers

    What follows a petition in the procedure for court-supervised rehabilitation?

    <p>Publisher's Affidavit</p> Signup and view all the answers

    Which item is NOT excluded by a Suspension Order for an individual debtor?

    <p>Proposed agreement</p> Signup and view all the answers

    What percentage of liabilities must creditors representing approve to submit a rehabilitation plan in pre-negotiated rehabilitation?

    <p>50% of both secured and unsecured liabilities</p> Signup and view all the answers

    Which type of debtor includes both Sole Proprietorships and Corporations?

    <p>Juridical Debtor</p> Signup and view all the answers

    Study Notes

    Financial Rehabilitation and Insolvency Act (RA 10142)

    • Provides for the rehabilitation or liquidation of financially distressed enterprises and individuals

    Rehabilitation

    • Suspends payment to creditors to allow debtor to restructure debts
    • Involves negotiation with creditors to agree on a rehabilitation plan
    • Has a "cram down effect" where a plan is imposed on dissenting creditors if approved by the required majority

    Debtor

    • Includes sole proprietorships, partnerships, corporations, and individuals
    • Excludes banks, insurance and pre-need companies, and national and local government agencies

    Individual Debtor

    • Can file for suspension of payment to obtain debt moratorium without reducing debt
    • Must file petition with schedule of debts and liabilities, inventory of assets, and proposed agreement
    • Suspension order excludes compensation, illness and funeral expenses, and secured creditors
    • Requires approval of proposed agreement by majority vote
    • Can file for voluntary liquidation (petition to be declared insolvent)
    • Can be petitioned for involuntary liquidation by creditors
    • Requires liabilities exceeding P500,000 for liquidation

    Individual Liquidation Proceeding

    • Involves filing a petition and show cause order
    • Leads to a liquidation order, custody order, and execution order

    Juridical Debtor (Corporation/Partnership)

    • Can undergo court-supervised rehabilitation, pre-negotiated rehabilitation, or liquidation

    Court-Supervised Rehabilitation

    • Initiated by debtor (voluntary) or creditor (involuntary) petition
    • Requires establishing insolvency and viability of rehabilitation
    • Involves a procedure of petition, commencement order, publisher's affidavit, registry of claims, initial hearing, report of rehab receiver, and dismissal or proceeding to liquidation

    Pre-Negotiated Rehabilitation

    • Involves an extrajudicial agreement between debtor and creditors, then judicial approval
    • Requires a rehabilitation plan approved by creditors representing 2/3 of liabilities (at least 50% both of secured and unsecured)
    • Involves a procedure of petition, commencement order, objections, hearing, and approval

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    Description

    This quiz covers Module 4 of Business Laws, focusing on the Financial Rehabilitation and Insolvency Act (RA 10142) and its provisions on rehabilitation, insolvency, and proceedings. It's perfect for Atty Precious Swelan Santiago's midterm exam.

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