FRIA

1. Define Rehabilitation
Rehabilitation is the restoration of the debtor to a condition of successful operation and solvency if it is
shown that
a. Its continance of operation is economically feasible; and
b. Its creditors can recover by way of present value of payments projected in the plan more if the
debtor continues as a growing concern than if it is immediately liquidated

2. Explain the Nature of Rehab/Liquidation/Suspension

The proceedings under this Act shall be in rem. Jurisdiction over all persons affected by the proceedings
shall be considered as acquired upon publication of the notice of the commencement of the proceedings
in any newspaper of general circulation in the Philippines in the manner prescribed by the rules of
procedure to be promulgated by the Supreme Court.

3. 2-fold Purpose of Corporate Rehabilitation

1) Enables the insolvent debtor to have a new lease on life
2) Allows creditors to be paid from the debtor’s earning

4. Define the term “equality is equity”

All creditors should stand on equal footing; During rehabilitation the assets of the debtor are held in trust
for the equal benefit of all creditrs to preclude one from obtaining an advantage or preference

5. Liquidation v Rehabilitation. Can you file rehabilitation after liquidation? Vice Cersa?
Liquidation is the settling of debtors with creditors so that the debtor’s assets may be distributed to those
entitled to receive them. While Rehabilitation involves the restoration of the debtor to a condition of
successful operation and solvency.

You cannot file rehabilitation after liquidation because in liquidation, the assets are reduced to cash, and
liabilities are discharged, which results in the winding up and settling with debtors.

You can file liquidation after rehabilitation if the rehabilitation of the debtor is not feasible

6. Exception to Stay order

Does not apply to ourdinary course of business/day-to-day operations the debtor is engaged in.

7. How to conver rehab proceedings to liquidation

During the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the court may
order the conversion of rehabilitation proceedings to liquidation upon the recommendation of the
rehabilitation receiver that the rehabilitation of the debtor is not feasible.

8. Pre negotiated rehabilitiation voting requirements

1. Approval of creditors holding at least 2/3 of the total liabilities
2. Secured creditors holding more than 50% of the total secured claims of the debtor
3. Unsecured creditors holding more than 50% of the total unsecured claims of the debtor

9. Out of court rehabilitation voting requirements

1. Approved by the debtor
2. Approved by secured creditors representing at least 67% of the secured obligations of the debtor
3. Approved by unsecured creditors representing at least 75% of the unsecured obligations
4. Approved by creditors holding at least 85% of total liabilities, secured and unsecured