FRIA NOTES INSOLVENT: refers to a person who is unable to pay its debts as they fall due, in the ordinary course of business; or whose debts are more than its assets. SUSPENSION OF PAYMENT: FRIA recognizing only suspension of payment proceedings for individual debtors. An individual debtor possessing sufficient property to cover its debts but foreseeing the impossibility of meeting them when they fall due may file a verified petition to be declared in the state of suspension of payment in the RTC of the play of residence within 6 months prior to the filing of petition. (attaching thereto, schedule of debts and liabilities, inventory of assets and proposed agreement with creditors) ORDER: court shall declare an order calling for a creditors’ meeting (creditors holding 3/5 of liabilities shall constitute quorum; 2/3 of creditors voting shall unite provided that at least 3/5 of the liabilities of the debtors are represented by such creditors ; forbidding the debtor so long as the suspension proceeding is pending, from selling, transferring and encumbering its properties (except those made in the ordinary course of business) and making payments outside the necessary or legitimate expenses. o Upon motion filed by the debtor, the court may issue an order suspending any pending execution against it; except: properties held as securities by the creditor shall not be the subject of suspension order. During the effectivity of suspension order, the creditors cannot institute proceeding to collect his claim from the time of filing of petition and for as long as the proceeding is pending. Except, secured creditors and claim for personal labour, maintenance and expenses. COURT SUPERVISED REHABILITATION Rehabilitation: refers to the restoration of the debtor to a condition of successful operation and solvency , if it is shown that its continuance of operation is economically feasible and its creditors can recover by present value of payments projected in the plan. VOLUNTARY PROCEEDING INVOLUNTARY PROCEEDING An insolvent debtor may initiate voluntary rehabilitation proceedings by filing a petition for voluntary rehabilitation: Sole proprietorship – by the owner Partnership – majority of partners Corporation – majority of BOD and SHS holding 2/3 of OCS Any creditor or group of creditors with a claim of, or aggregate of whose claim is, whichever is higher: At least 1 million; or At least 25% of subscribed capital stocks or partner’s contribution May initiate an involuntary proceedings against the debtor by filing a petition for involuntary rehabilitation with the court when: 1. there is no genuine issue of fact or law in their claim; 2. payments in their claim have not been made for at least 60 days; 3. debtor generally fails to pay its debts as they fall due; 4. That creditors other than the petitioner has
initiated foreclosure proceeding against the debtor that will prevent the debtors to pay its debts as they fall due.
- Fall '17