BULK

company assets, company assets,

- corpo including records including records
- Insurance
Receiver Receiver investigates,
- Nego
investigates and collects and converts
collects all all company assets
company assets into cash
1-2 ques

- lip Company pays A deadline for filing

- FRIA claims claims is established
by court order.
- Other laws
Guaranty
Associations, if
applicable, pay
TOPICS: FRIA
covered claims.
1. Define rehab -Rehabilitation shall refer to the Claims not covered by
restoration of the debtor to a condition of successful a Guaranty
operation and solvency, if it is shown that its
continuance of operation is economically feasible and
Association are
its creditors can recover by way of the present value processed by the
of payments projected in the plan, more if the debtor Receiver
continues as a going concern than if it is immediately
liquidated.
Payments based Payments based on
2. Explain nature rehab/liquid/suspension- Section 3. on court order statutory priority
Nature of Proceedings. - The proceedings under this scheme. A claims
Act shall be in rem. Jurisdiction over all persons
affected by the proceedings shall be considered as distribution is
acquired upon publication of the notice of the determined by the
commencement of the proceedings in any newspaper amount of available
of general circulation in the Philippines in the manner assets, if any, of the
prescribed by the rules of procedure to be
promulgated by the Supreme Court.
receivership estate.
Claims are paid by
3. 2 fold purpose corp rehab- class in order of the
4. Doctrine equality is equity - all creditors stand on priorities set out in
equal footing; no preference Section 631.271,
Florida Statute.
5. Distinguish liquid v rehab. Can you file rehab after
liquid? Vice versa?
Beginning with Class
1, all approved claims
in a class must be paid
Rehabilitation Liquidation
in full before any
payment is made to
Deputy Receiver Deputy Receiver in the next class. If there
in charge charge are insufficient funds
to pay a class in full,
Financial activity Financial activity all approved claims in
through through Receiver's that class are paid in
company office equal pro rata shares

Receiver takes Receiver takes Litigation against Litigation against the

possession of all possession of all the company is company is
stayed by statute permanently stayed by
 and court order. statute and court
Litigation against order. Insureds are (c) to the enforcement of claims against sureties and
the insureds is defended by the other persons solidarily liable with the debtor, and
third party or accommodation mortgagors as well as
not stayed by appropriate Guaranty issuers of letters of credit, unless the property subject
statute, but may Association. of the third party or accommodation mortgage is
be by court necessary for the rehabilitation of the debtor as
order. The determined by the court upon recommendation by the
company will rehabilitation receiver;
continue to
defend its
(d) to any form of action of customers or clients of a
insureds. securities market participant to recover or otherwise
claim moneys and securities entrusted to the latter in
The Receiver The Receiver will the ordinary course of the latter's business as well as
any action of such securities market participant or the
returns the evaluate all claims appropriate regulatory agency or self-regulatory
company to a filed in the organization to pay or settle such claims or liabilities;
sound financial receivership
condition and proceeding, issue
ends the checks, prepare a final (e) to the actions of a licensed broker or dealer to sell
rehabilitation or, accounting, and obtain pledged securities of a debtor pursuant to a securities
when it is not a court order pledge or margin agreement for the settlement of
securities transactions in accordance with the
possible to return discharging it from provisions of the Securities Regulation Code and its
the company to further responsibilities implementing rules and regulations;
the marketplace, and closing the
the Receiver receivership/liquidation
converts the proceeding (f) the clearing and settlement of financial transactions
receivership to a through the facilities of a clearing agency or similar
liquidation entities duly authorized, registered and/or recognized
by the appropriate regulatory agency like the Bangko
proceeding and Sentral ng Pilipinas (BSP) and the SEC as well as
concludes the any form of actions of such agencies or entities to
rehabilitation reimburse themselves for any transactions settled for
phase. the debtor; and

* American site ko nahanap not sure

6. Exc to stay order
Exceptions to the Stay or Suspension Order. - The
Stay or Suspension Order shall not apply:
(g) any criminal action against individual debtor or
owner, partner, director or officer of a debtor shall not
be affected by any proceeding commend under this
Act.

7. How to convert rehab proceedings to liquid

(a) to cases already pending appeal in the Supreme
Court as of commencement date Provided, That any
final and executory judgment arising from such appeal
shall be referred to the court for appropriate action;
(c)convert the proceedings into one for the
liquidation of the debtor upon a finding that:
(1)the debtor is insolvent; and

(2)there is no substantial likelihood for the debtor

(b) subject to the discretion of the court, to cases
pending or filed at a specialized court or quasi-judicial
agency which, upon determination by the court is
capable of resolving the claim more quickly, fairly and
efficiently than the court: Provided, That any final and
executory judgment of such court or agency shall be
referred to the court and shall be treated as a non-
disputed claim;
to be successfully rehabilitated as determined in
accordance with the rules to be promulgated by
the Supreme Court.
8. Court supervised rehab voting req
Section 12. Petition to Initiate Voluntary
Proceedings by Debtor. - When approved by the
owner in case of a sole proprietorship, or by a
majority of the partners in case of a partnership,
or in case of a corporation, by a majority vote of
the board of directors or trustees and authorized
by the vote of the stockholders representing at
least two-thirds (2/3) of the outstanding capital
stock, or in case of nonstock corporation, by the
vote of at least two-thirds (2/3) of the members, in
a stockholder's or member's meeting duly called
for the purpose, an insolvent debtor may initiate
voluntary proceedings under this Act by filing a
petition for rehabilitation with the court and on the
grounds hereinafter specifically provided. The
petition shall be verified to establish the
insolvency of the debtor and the viability of its
rehabilitation, and include, whether as an
attachment or as part of the body of the petition,
as a minimum the following:
(a) Identification of the debtor, its principal
activities and its addresses;
(b) Statement of the fact of and the cause of the
debtor's insolvency or inability to pay its
obligations as they become due;
(c) The specific relief sought pursuant to this Act;
(d) The grounds upon which the petition is based;
(e) Other information that may be required under
this Act depending on the form of relief
requested;
(f) Schedule of the debtor's debts and liabilities
including a list of creditors with their addresses,
amounts of claims and collaterals, or securities, if
any;
(g) An inventory of all its assets including
receivables and claims against third parties;
(h) A Rehabilitation Plan;
(i) The names of at least three (3) nominees to the
position of rehabilitation receiver; and
(j) Other documents required to be filed with the
petition pursuant to this Act and the rules of
procedure as may be promulgated by the
Supreme Court.
A group of debtors may jointly file a petition for
rehabilitation under this Act when one or more of
its members foresee the impossibility of meeting
debts when they respectively fall due, and the
financial distress would likely adversely affect the
financial condition and/or operations of the other
members of the group and/or the participation of
the other members of the group is essential under
the terms and conditions of the proposed
Rehabilitation Plan.
9. Pre negotiated rehab voting req
ection 76. Petition by Debtor. - An insolvent
debtor, by itself or jointly with any of its creditors,
may file a verified petition with the court for the
approval of a pre-negotiated Rehabilitation Plan
which has been endorsed or approved by
creditors holding at least two-thirds (2/3) of the
total liabilities of the debtor, including secured
creditors holding more than fifty percent (50%) of
the total secured claims of the debtor and
unsecured creditors holding more than fifty
percent (50%) of the total unsecured claims of the
debtor. The petition shall include as a minimum:
(a) a schedule of the debtor's debts and liabilities;
(b) an inventory of the debtor's assets;
(c) the pre-negotiated Rehabilitation Plan,
including the names of at least three (3) qualified
nominees for rehabilitation receiver; and
(d) a summary of disputed claims against the
debtor and a report on the provisioning of funds
to account for appropriate payments should any
such claims be ruled valid or their amounts
adjusted.
10. Out of court rehab voting req
Section 83. Out-of-Court or Informal Restructuring
Agreements and Rehabilitation Plans. - An out-of-
curt or informal restructuring agreement or
Rehabilitation Plan that meets the minimum
requirements prescribed in this chapter is hereby
recognized as consistent with the objectives of
this Act.
Section 84. Minimum Requirements of Out-of-
Court or Informal Restructuring Agreements and
Rehabilitation Plans. - For an out-of-court or
informal restructuring/workout agreement or
Rehabilitation Plan to qualify under this chapter, it
must meet the following minimum requirements:
(a) The debtor must agree to the out-of-court or
informal restructuring/workout agreement or
Rehabilitation Plan;
(b) It must be approved by creditors representing
at least sixty-seven (67%) of the secured
obligations of the debtor;
(c) It must be approved by creditors representing
at least seventy-five percent (75%) of the
unsecured obligations of the debtor; and
(d) It must be approved by creditors holding at
least eighty-five percent (85%) of the total
liabilities, secured and unsecured, of the debtor.
CORPO
1. Narra nickel case
It is the intention of the framers of the
Constitution to apply the Grandfather Rule in
cases where corporate layering is present.
First, as a rule in statutory construction, when
there is conflict between the Constitution and a
statute, the Constitution will prevail. In this
instance, specifically pertaining to the provisions
under Art. XII of the Constitution on National
Economy and Patrimony, Sec. 3 of the FIA will
have no place of application. Corporate layering
is admittedly allowed by the FIA, but if it is used
to circumvent the Constitution and other pertinent
laws, then it becomes illegal.
Second, under the SEC Rule1 and DOJ Opinion2 ,
the Grandfather Rule must be applied when the
60-40 Filipino-foreign equity ownership is in
doubt. Doubt is present in the Filipino equity
ownership of Narra, Tesoro, and MacArthur since
their common investor, the 100% Canadian-owned
corporation MBMI, funded them.
Under the Grandfather Rule, it is not enough that
the corporation does have the required 60%
Filipino stockholdings at face value. To
determine the percentage of the ultimate Filipino
ownership, it must first be traced to the level of
the investing corporation and added to the shares
directly owned in the investee corporation.
Applying this rule, it turns out that the Canadian
corporation owns more than 60% of the equity
interests of Narra, Tesoro and MacArthur. Hence,
the latter are disqualified to participate in the
exploration, development and utilization of the
Philippines natural resources.
2. Liability of dir/off/trustees
Section 31. Liability of directors, trustees or
officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross
negligence or bad faith in directing the affairs of
the corporation or acquire any personal or
pecuniary interest in conflict with their duty as
such directors or trustees shall be liable jointly
and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or
members and other persons.
When a director, trustee or officer attempts to
acquire or acquire, in violation of his duty, any
interest adverse to the corporation in respect of
any matter which has been reposed in him in
confidence, as to which equity imposes a
disability upon him to deal in his own behalf, he
shall be liable as a trustee for the corporation and
must account for the profits which otherwise
would have accrued to the corporation. (n)
3. Apparent authority; business j rule; corp opportunity
Under the rule, the principal is bound by the
acts of his agent with the apparent authority
which he knowingly permits the agent to
assume, or which he holds to the agent out to
the public as possessing. The question in every
case is whether the principal has by his
voluntary act placed the agent with business
usages and the nature of the particular
business, is justified in presuming that such
agent has authority to perform the particular
act in question
The business judgment rule is a presumption
that in making a business decision, the
directors of a corporation acted on an
informed basis, in good faith and in the honest
belief that the action taken was in the best
interests of the company. Thus, the party
attacking a board decision as uninformed must
rebut the presumption that its business
judgment was an informed one
The corporate opportunity doctrine is the
legal principle providing that directors,
officers, and controlling shareholders of a
corporation must not take for themselves
any business opportunity that could benefit
the corporation
4. Ultra vires requisites for ratification
There is a distinction between an act utterly beyond
the jurisdiction of a municipal corporation and the
irregular exercise of a basic power under the
legislative grant in matters not in themselves
jurisdictional. The former are ultra vires in the primary
sense and void; the latter, ultra vires only in a
secondary sense which does not preclude ratification
or the application of the doctrine of estoppel in the
interest of equity and essential justice. (Emphasis and
underscoring supplied)
In other words, an act which is outside of the
municipalitys jurisdiction is considered as a void ultra
vires act, while an act attended only by an irregularity
but remains within the municipalitys power is
considered as an ultra vires act subject to ratification
and/or validation. To the former belongs municipal
contracts which (a) are entered into beyond the
express, implied or inherent powers of the local
government unit; and (b) do not comply with the
substantive requirements of law e.g., when
expenditure of public funds is to be made, there must
be an actual appropriation and certificate of
availability of funds; while to the latter belongs those
which (a) are entered into by the improper
department, board, officer of agent; and (b)do not
comply with the formal requirements of a written
contract e.g., the Statute of Frauds
5. Trust fund doctrine
trust fund doctrine is a principle of judicial
invention which says that corporate assets
are held as a trust fund for the benefit of
shareholders and creditors and that the
corporate officers have a fiduciary duty to
deal with them properly.
6. Merger
Section 76. Plan or merger of consolidation. Two or
more corporations may merge into a single
corporation which shall be one of the constituent
corporations or may consolidate into a new single
corporation which shall be the consolidated
corporation.
The board of directors or trustees of each corporation,
party to the merger or consolidation, shall approve a
plan of merger or consolidation setting forth the
following:
1. The names of the corporations proposing to merge
or consolidate, hereinafter referred to as the
constituent corporations;
2. The terms of the merger or consolidation and the
mode of carrying the same into effect;
3. A statement of the changes, if any, in the articles of
incorporation of the surviving corporation in case of
merger; and, with respect to the consolidated
corporation in case of consolidation, all the
statements required to be set forth in the articles of
incorporation for corporations organized under this
Code; and
4. Such other provisions with respect to the proposed
merger or consolidation as are deemed necessary or
desirable. (n)
7. Moral damages corp
As a rule, moral damages are not awarded to a
corporation unless it enjoyed good reputation that the
offender debased and besmirched by his actuations
8. Piercing veil
While a corporation may exist for any lawful purpose,
the law will regard it as an association of persons or,
in case of two corporations, merge them into one,
when its corporate legal entity is used as a cloak for
fraud or illegality. This is the doctrine of piercing the
veil of corporate fiction
9. Voting requirements
Sec. 24. Election of directors or trustees. - At all
elections of directors or trustees, there must be
present, either in person or by representative
authorized to act by written proxy, the owners of a
majority of the outstanding capital stock, or if there be
no capital stock, a majority of the members entitled to
vote. The election must be by ballot if requested by
any voting stockholder or member. In stock
corporations, every stockholder entitled to vote shall
have the right to vote in person or by proxy the
number of shares of stock standing, at the time fixed
in the by-laws, in his own name on the stock books of
the corporation, or where the by-laws are silent, at the
time of the election; and said stockholder may vote
such number of shares for as many persons as there
are directors to be elected or he may cumulate said
shares and give one candidate as many votes as the
number of directors to be elected multiplied by the
number of his shares shall equal, or he may distribute
them on the same principle among as many
candidates as he shall see fit: Provided, That the total
number of votes cast by him shall not exceed the
number of shares owned by him as shown in the
books of the corporation multiplied by the whole
number of directors to be elected: Provided, however,
That no delinquent stock shall be voted. Unless
otherwise provided in the articles of incorporation or in
the by-laws, members of corporations which have no
capital stock may cast as many votes as there are
trustees to be elected but may not cast more than one
vote for one candidate. Candidates receiving the
highest number of votes shall be declared elected.
Any meeting of the stockholders or members called
for an election may adjourn from day to day or from
time to time but not sine die or indefinitely if, for any
reason, no election is held, or if there not present or
represented by proxy, at the meeting, the owners of a
majority of the outstanding capital stock, or if there be
no capital stock, a majority of the member entitled to
vote.
10. Pre emptive right instances
Section 39. Power to deny pre-emptive right. All
stockholders of a stock corporation shall enjoy pre-
emptive right to subscribe to all issues or disposition
of shares of any class, in proportion to their respective
shareholdings, unless such right is denied by the
articles of incorporation or an amendment thereto:
Provided, That such pre-emptive right shall not extend
to shares to be issued in compliance with laws
requiring stock offerings or minimum stock ownership
by the public; or to shares to be issued in good faith
with the approval of the stockholders representing
two-thirds (2/3) of the outstanding capital stock, in
exchange for property needed for corporate purposes
or in payment of a previously contracted debt.
Section 102. Pre-emptive right in close corporations.
The pre-emptive right of stockholders in close
corporations shall extend to all stock to be issued,
including reissuance of treasury shares, whether for
money, property or personal services, or in payment
of corporate debts, unless the articles of incorporation
provide otherwise.
11. Derivative suit
Derivative suits are actions filed in court by a
stockholder or group of stockholders irrespective of
number of shares held in cases where directors are
guilty of breach of trust, not of mere error of judgment
or abuse of discretion and intra-corporate remedy is
futile or useless, done for the benefit of the
corporation, to bring about redress of the wrong
inflicted directly upon the corporation and indirectly
upon the stockholders. There is no express provision
in the Corporation Code on derivative suits but the
right of a stockholder to initiate it has long been
recognized by courts of common law, founded on
equity
12. Close corp/going private corp
A close corporation, within the meaning of this Code,
is one whose articles of incorporation provide that: (1)
All the corporations issued stock of all classes,
exclusive of treasury shares, shall be held of record
by not more than a specified number of persons, not
exceeding twenty (20); (2) all the issued stock of all
classes shall be subject to one or more specified
restrictions on transfer permitted by this Title; and (3)
The corporation shall not list in any stock exchange or
make any public offering of any of its stock of any
class. Notwithstanding the foregoing, a corporation
shall not be deemed a close corporation when at least
two-thirds (2/3) of its voting stock or voting rights is
owned or controlled by another corporation which is
not a close corporation within the meaning of this
Code.
Any corporation may be incorporated as a close
corporation, except mining or oil companies, stock
exchanges, banks, insurance companies, public
utilities, educational institutions and corporations
declared to be vested with public interest in
accordance with the provisions of this Code.
The provisions of this Title shall primarily govern close
corporations: Provided, That the provisions of other
Titles of this Code shall apply suppletorily except
insofar as this Title otherwise provides
13. Modes of corp dissolution - involuntary/voluntary
Section 118. Voluntary dissolution where no creditors
are affected. If dissolution of a corporation does not
prejudice the rights of any creditor having a claim
against it, the dissolution may be effected by majority
vote of the board of directors or trustees, and by a
resolution duly adopted by the affirmative vote of the
stockholders owning at least two-thirds (2/3) of the
outstanding capital stock or of at least two-thirds (2/3)
of the members of a meeting to be held upon call of
the directors or trustees after publication of the notice
of time, place and object of the meeting for three (3)
consecutive weeks in a newspaper published in the
place where the principal office of said corporation is
located; and if no newspaper is published in such
place, then in a newspaper of general circulation in
the Philippines, after sending such notice to each
stockholder or member either by registered mail or by
personal delivery at least thirty (30) days prior to said
meeting. A copy of the resolution authorizing the
dissolution shall be certified by a majority of the board
of directors or trustees and countersigned by the
secretary of the corporation. The Securities and
Exchange Commission shall thereupon issue the be, the corporation shall be deemed dissolved without
certificate of dissolution. (62a) any further proceedings, subject to the provisions of
this Code on liquidation. (n)

Section 119. Voluntary dissolution where creditors are

affected. Where the dissolution of a corporation may Section 121. Involuntary dissolution. A corporation
prejudice the rights of any creditor, the petition for may be dissolved by the Securities and Exchange
dissolution shall be filed with the Securities and Commission upon filing of a verified complaint and
Exchange Commission. The petition shall be signed after proper notice and hearing on the grounds
by a majority of its board of directors or trustees or provided by existing laws, rules and regulations. (n)
other officers having the management of its affairs,
verified by its president or secretary or one of its 14. Doing business
directors or trustees, and shall set forth all claims and
Any foreign corporation lawfully doing business in the
demands against it, and that its dissolution was
Philippines shall be bound by all laws, rules and
resolved upon by the affirmative vote of the
regulations applicable to domestic corporations of the
stockholders representing at least two-thirds (2/3) of
same class, except such only as provide for the
the outstanding capital stock or by at least two-thirds
creation, formation, organization or dissolution of
(2/3) of the members at a meeting of its stockholders
corporations or those which fix the relations, liabilities,
or members called for that purpose.
responsibilities, or duties of stockholders, members,
or officers of corporations to each other or to the
corporation.
If the petition is sufficient in form and substance, the
Commission shall, by an order reciting the purpose of doing business
the petition, fix a date on or before which objections
v. carrying on the normal activities of a corporation on
thereto may be filed by any person, which date shall
a regular basis or with substantial contacts--not just
not be less than thirty (30) days nor more than sixty
an occasional shipment. This is important to
(60) days after the entry of the order. Before such
determine if an out-of-state corporation is "doing
date, a copy of the order shall be published at least
business" in a state so that it can be served with a
once a week for three (3) consecutive weeks in a
complaint, is subject to certain state taxes, and/or
newspaper of general circulation published in the
must register as a "foreign" (out-of-state) corporation
municipality or city where the principal office of the
operating within the state.
corporation is situated, or if there be no such
newspaper, then in a newspaper of general circulation
in the Philippines, and a similar copy shall be posted
for three (3) consecutive weeks in three (3) public
places in such municipality or city.

Upon five (5) days notice, given after the date on

which the right to file objections as fixed in the order
has expired, the Commission shall proceed to hear
the petition and try any issue made by the objections
filed; and if no such objection is sufficient, and the
material allegations of the petition are true, it shall
render judgment dissolving the corporation and
directing such disposition of its assets as justice
requires, and may appoint a receiver to collect such
assets and pay the debts of the corporation. (Rule
104, RCa)

Section 120. Dissolution by shortening corporate

term. A voluntary dissolution may be effected by
amending the articles of incorporation to shorten the
corporate term pursuant to the provisions of this
Code. A copy of the amended articles of incorporation
shall be submitted to the Securities and Exchange
Commission in accordance with this Code. Upon
approval of the amended articles of incorporation of
the expiration of the shortened term, as the case may