Proceedings are in rem - once published everyone is deemed impleaded

Proceedings are summary or non-adversarial

Take note of definition of insolvent
o Unable to meet liabilities when they fall due OR not necessarily negartive on the
balance sheet but may simply be illiquid
o Liabilities greater than assets
Take not of difference between voluntary/involuntary rehab, suspension of payment. Who does it
apply to, requirements etc. Consolidated rehabilitation is now allowed (sec 7).
Important: Sec 10- fraudulent conveyances
First proceeding: court supervised rehabilitation
o Voluntary
o Involuntary creditors whose claim is atleast 1.5 million or 25% subscribed capital
stocks/partners contribution, whichever is higher
Can actually be just 1 creditor!!
o Rehabilitation plan settlement
o Commencement order prohibits the debtor suppliers from withholding goods as long as
debtor makes payment
Whole point of rehabilitation is to make the business continue
Included in the commencement order is the stay/suspension order
Note that there are exceptions to the stay order!!
o De Barreto case: insolvency proceeding needed to determine concurrence and preference
of credits
RECEIVER
o General rule: they do not take control of the company.
o Assists the court in determining w/n a company can still be rehabilitated or not. -> report
shall be given in 40 days
o For the company to be rehabilitated -> sufficient assets, sufficient cash flow, debtor in
good faith etc.
o Who can serve as a receiver?
o In case there is proof that the debtors management is acting in bad faith, UPON
MOTION, creditors can request for the receiver to assume management/ appoint
management community.
o Receiver is immune from suits.
When you are undergoing rehabilitation, what happens to the contracts entered into by debtor ->
still in form but the court must CONFRIM or else it we be deemed terminated.
Fraudulent preference entering into a transaction where you unduly prefer one creditor to
another. (selling the property to one)
What happens to a secured creditor? You do not lose preference, it is merely suspended.
Once the rehabilitation is approved by receiver, it will be shown to creditors for approval. It needs
to be approved by all classes of creditors (50% of each class should agree secured, unsecured
etc.)
o If rejected, judge can approve it whether you like it or not.

Pre-negotiated rehabilitation
Insolvent debtor, with its creditors, files a rehab in court. This requires a DOUBLE MAJORTY.
2/3 of all creditors, with majority of secured and majority of unsecured.
Out of court/ informal restructuring agreement

Debtor must agree and it must be approved by 67% of secured obligations, 75% of unsecured.

If there is no way to salvage the company -> LIQUIDATION (voluntary/involuntary)

When it comes to individual debtors, they may request for suspension of payments.
o Secured crediotors not affected payment is merely suspended
Involuntary liquidation
o Creditors have to show that you committed acts of insolvency
Lerma final notes: different proceedings, requisites, who can file them, what needs to exists, whose
approval is needed, what happens to secured/unsecured creditors.