FRIA

Question 1

Under R.A. 10142 otherwise known as Financial Rehabilitation and Insolvency Act (FRIA) of 2010, the term “debtor” includes:
a. Banks
b. Government-owned-and-controlled corporations
c. Both A and B
d. Neither A nor B

Answer 1

b. Government-owned-and-controlled corporations

Question 2

Under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, which of the following statements relative to a court-supervised rehabilitation is false?
a. The insolvent debtor may file the verified petition for rehabilitation provided it is approved by the owner in case of sole proprietorship, 2/3 of the partners in case of partnerships, or majority vote of the board of directors or trustees and authorized by at least 2/3 of outstanding capital stock or members in the case of corporations.
b. Any creditor or group of creditors may file a verified petition for rehabilitation of the debtor provided his or their claim/s amount to at least ₱1,000,000 or at least 25% of the subscribed capital stock or partners’ contributions, whichever is higher
c. Both A and B
d. Neither A nor B

Answer 2

b. Any creditor or group of creditors may file a verified petition for rehabilitation of the debtor provided his or their claim/s amount to at least ₱1,000,000 or at least 25% of the subscribed capital stock or partners’ contributions, whichever is higher

Question 3

Which of the following acts is within the ambit of a Stay or Suspension Order under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010?a. Cases pending appeal before the Supreme Court as of commencement date of the Stay or Suspension Order.
b. Claims against issuers of letter of credit where the property is not necessary to the rehabilitation of the debtor
c. Both A and B
d. Neither A nor B

Answer 3

d. Neither A nor B

Question 4

Under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, a person may be appointed as a Rehabilitation Receiver if:
a. He is a creditor, owner, partner or stockholder of the debtor.
b. He is, or was, within five (5) years from the filing of the petition, an owner, partner, director, officer or employee of the debtor or any of the creditors, or the auditor or accountant of the debtor.
c. He is related by consanguinity or affinity within the fourth civil degree to any individual creditor, owner of a sole proprietorship-debtor, partners of a partnershipdebtor or to any stockholder, director, officer, employee or underwriter of a corporation-debtor.
d. None of the foregoing.

Answer 4

d. None of the foregoing.

Question 5

The Financial Rehabilitation and Insolvency Act (FRIA) of 2010 provides that a transaction occurring prior to the commencement date of the rehabilitation proceedings entered into by the debtor or involving its funds or assets may be rescinded or declared null and void by the rehabilitation court on the ground that the same was executed with intent to defraud a creditor/s or which constituted undue preference of creditors. A disputable presumption of such design shall arise where:
a. The transaction involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the commencement date.
b. The transaction provides security or additional security executed within ninety (90) days after the commencement date.
c. Both A and B
d. Neither A nor B

Answer 5

a. The transaction involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the commencement date.

Question 6

Under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, a creditor has adequate protection over the property securing its claim where:
a. The debtor fails or refuses to honor a pre-existing agreement with the creditor to keep the property insured.
b. The debtor fails or refuses to take commercially reasonable steps to maintain the property.
c. The property has depreciated to an extent that the creditor is undersecured.
d. None of the foregoing.

Answer 6

d. None of the foregoing.

Question 7

The verified petition filed with the court for a Pre-Negotiated Rehabilitation Plan must be endorsed or approved by:
a. Creditors holding at least 2/3 of the total liabilities of the debtor.
b. Secured creditors holding more than 50% of the total secured claims of the debtor and unsecured creditors holding more than 50% of the total unsecured claims of the debtor.
c. Both A and B
d. Neither A nor B

Answer 7

c. Both A and B

Question 8

An Out-of-Court Informal Restructuring Agreement or Rehabilitation Plan under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 requires the agreement of the debtor and the approval of creditors representing at least:
a. 75% of secured claims, 75% of unsecured claims, and 80% of total secured and unsecured claims
b. 67% of secured claims, 75% of unsecured claims, and 85% of total secured and unsecured claims
c. 70% of secured claims, 70% of unsecured claims, and 75% of total secured and unsecured claims
d. 50% of secured claims, 50% of unsecured claims, and 75% of total secured and unsecured claims

Answer 8

b. 67% of secured claims, 75% of unsecured claims, and 85% of total secured and unsecured claims

Question 9

A standstill period may be agreed upon by the parties pending negotiation and finalization of the Out-of-Court Informal Restructuring Agreement or Rehabilitation Plan, provides:
a. The agreement is approved by the creditors representing more than 50% of the total liabilities of the debtor.
b. Notice thereof is published in a newspaper of general circulation once a week for three (3) consecutive weeks and the standstill period does not exceed 180 days from the date of effectivity.
c. Both A and B
d. Neither A nor B

Answer 9

a. The agreement is approved by the creditors representing more than 50% of the total liabilities of the debtor.

Question 10

An insolvent juridical debtor, such as partnerships and corporations, may be liquidated by way of voluntary liquidation whereby the insolvent debtor shall file a verified petition for its liquidation with the court containing:
a. Schedule of the debtor’s debts and liabilities and inventory of all its assets.
b. Name of one (1) nominee to the position of liquidator
c. Both A and B
d. Neither A nor B

Answer 10

a. Schedule of the debtor’s debts and liabilities and inventory of all its assets.

Question 11

In the involuntary liquidation of a debtor under the Financial Rehabilitation and Insolvency Act (FRIA), the initiating three (3) or more creditors must have claims against the debtor in the aggregate amount of:
a. At least ₱500,000 or at least 50% of the subscribed capital stock or partners’ contributions whichever is lower
b. At least ₱500,000 or at least 50% of the subscribed capital stock or partners’ contributions whichever is higher
c. At least ₱1,000,000 or at least 25% of the subscribed capital stock or partners’ contributions whichever is lower
d. At least ₱1,000,000 or at least 25% of the subscribed capital stock or partners’ contributions whichever is higher

Answer 11

d. At least ₱1,000,000 or at least 25% of the subscribed capital stock or partners’ contributions whichever is higher

Question 12

Under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, what remedy is available to an individual debtor who, possessing sufficient property to cover all his debts, foresees the impossibility of meeting them when they respectively fall due?
a. Voluntary liquidation
b. Involuntary insolvency
c. Suspension of payments
d. None of the foregoing

Answer 12

c. Suspension of payments

Question 13

To form a majority vote on any proposed agreement during the creditor’s meeting in suspension of payments, it is necessary:
a. That three-fourths (3/4) of the creditors voting unite upon the same proposition.
b. That the claim represented by said majority vote amount to at least four-fifths (4/5) of the total liabilities of the debtor.
c. Both A and B
d. Neither A nor B

Answer 13

d. Neither A nor B

Question 14

What are the grounds for which an objection may be made to the decision of the majority in the creditors’ meeting?
a. Defects in the call of the meeting, in the holding thereof, and in the deliberations had thereat which prejudice the rights of the creditors.
b. Fraudulent connivance between one or more creditors and the individual debtor to vote in favor of the proposed agreement.
c. Fraudulent conveyance of claims for the purpose of obtaining a majority.
d. All of the foregoing.

Answer 14

d. All of the foregoing.

Question 15

X filed a petition for suspension of payments in court. During the pendency of the proceedings, a writ of execution was issued by another court in favor of C, an unsecured creditor, against X. M, a creditor-mortgagee, also initiated the foreclosure of the mortgaged property of X. which of the following statements relative to Suspension of Payments under the FRIA is correct?
a. Both the execution in favor of C and the foreclosure on the mortgage in favor of M shall be suspended.
b. Both the execution in favor of C and the foreclosure on the mortgage in favor of M shall proceed.
c. The execution in favor of C shall proceed but the foreclosure on the mortgage in favor of M shall be suspended.
d. The execution in favor of C shall be suspended but the foreclosure on the mortgage in favor of M shall proceed.

Answer 15

d. The execution in favor of C shall be suspended but the foreclosure on the mortgage in favor of M shall proceed.

Question 16

Under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, which of the following petitions amounts to an act of insolvency?
a. Voluntary liquidation
b. Suspension of Payments
c. Rehabilitation
d. Involuntary insolvency

Answer 16

a. Voluntary liquidation

Question 17

Which of the following statements relative to the Liquidation Order is false?
a. The juridical debtor shall be deemed dissolved and its corporate or juridical existence terminated upon issuance of the Liquidation Order.
b. Separate actions for collection of an unsecured claim shall be allowed.
c. The legal title and control of all assets of the debtor, except those that may be exempt from execution, shall be deemed vested in the Liquidator or, pending his election or appointment, with the court.
d. All contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within ninety (90) days from the date of his assumption of office, declares otherwise and the contracting party agrees.

Answer 17

b. Separate actions for collection of an unsecured claim shall be allowed.

Question 18

When an action that is still pending upon the issuance of the Liquidation Order is transferred to the Liquidator, he may:
a. Settle the case.
b. Contest the case which is already on appeal
c. Either A or B
d. Neither A nor B

Answer 18

a. Settle the case.

Question 19

The Liquidation Order shall not affect the right of a secured creditor to enforce his lien in accordance with the applicable contract or law. A secured creditor may:
a. Waive his right under the security or lien, prove his claim in the liquidation proceedings and share in the distribution of assets of the debtor.
b. Maintain his rights under the security or lien.
c. Either A or B
d. Neither A nor B

Answer 19

c. Either A or B

Question 20

Which of the following statements relative to the appointment of the Liquidator is false?
a. The Liquidator shall be elected by the creditors who have filed their claims within the period set by the court and whose claims are not barred by the Statute of Limitations.
b. The Liquidator may be appointed by the court if the creditors did not attend the ondate set for the election of the Liquidator.
c. The Rehabilitation Receiver who was administering the debtor prior to the commencement of the liquidation may be appointed as the Liquidator.
d. None of the foregoing.

Answer 20

d. None of the foregoing.

Question 21

Which of the following statements is true regarding proceedings under the Financial Rehabilitation and Insolvency Act?
a. It is a proceeding in rem, which means it binds the whole world.
b. The proceedings are adversarial in nature, which means it requires an opposing party and is heavily litigated.
c. It is a proceeding in personam, which means that it attaches to the person
d. Jurisdiction over all persons affected is acquired by service of summons.

Answer 21

a. It is a proceeding in rem, which means it binds the whole world.

Question 22

An insolvent person is one who is generally:
I. Unable to pay its or his liabilities as they fall due
II. Has liabilities greater than its or his assets

a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

Answer 22

c. Both I and II.

Question 23

Statement 1: In order to be considered as a creditor under the FRIA, the credit must have security.
Statement 2: In order to be considered as a creditor under the FRIA, the claim of the creditor must have arisen on or before commencement date.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both statements are true.
d. Both statements are not true.

Answer 23

b. Only Statement 2 is true.

Question 24

Which of the following proceedings is covered by the FRIA?
I. Voluntary rehabilitation
II. Voluntary liquidation
III. Involuntary liquidation

a. I and II only.
b. I and III only.
c. II and III only.
d. I, II, and III.

Answer 24

d. I, II, and III.

Question 25

This involves calling the creditors to a meeting to propose and agree on a schedule of payments and to prevent the debtor from making any payment outside the necessary or legitimate expenses of the business, and the issuance of a suspension order to prevent pending executions against the debtor. a. Amicable settlement b. Suspension of payments c. Pre-negotiated rehabilitation d. Voluntary rehabilitation

Answer 25

b. Suspension of payments

Question 26

Suspension of payments cover: a. Individual debtors. b. Partnerships only. c. Partnerships and corporations. d. Individual debtors, partnerships, and corporations.

Answer 26

a. Individual debtors.

Question 27

In suspension of payments: a. The amount of indebtedness is reduced b. The amount of indebtedness is not affected c. The number of creditors is reduced d. The number of creditors shall not exceed five (5)

Answer 27

b. The amount of indebtedness is not affected

Question 28

How much is the minimum requirement for the amount of claims in suspension of payments? a. P500,000 b. P1,000,000 c. P5,000,000 d. None

Answer 28

d. None

Question 29

Statement 1: Under suspension of payments, the debtor is required to be insolvent. Statement 2: Suspension of payments is initiated by the debtor. a. Only Statement 1 is true. b. Only Statement 2 is true. c. Both statements are true. d. Both statements are not true.

Answer 29

b. Only Statement 2 is true.

Question 30

As a rule, no creditor shall sue or institute to collect his claim from the debtor form the time of the filing of the petition for suspension of payments and for as long as the proceedings remain pending. Which of the following creditors are excepted from this prohibition? a. Creditors having claims for personal labor. b. Creditors with accounts that are overdue for at least 365 days. c. Creditors with loan contracts embodied in a public instrument. d. Unsecured creditors.

Answer 30

a. Creditors having claims for personal labor.

Question 31

As a rule, no creditor shall sue or institute to collect his claim from the debtor from the time of the filing of the petition for suspension of payments and for as long as the proceedings remain pending. Which of the following creditors are not excepted from this prohibition? a. Creditors having claims for maintenance b. Creditors having claims pertaining to last illness of the wife of the debtor c. Creditors having claims pertaining to the funeral expenses of the children of the debtor d. Creditors having claims pertaining to the construction of the last legal residence of the debtor

Answer 31

d. Creditors having claims pertaining to the construction of the last legal residence of the debtor

Question 32

In relation to suspension of payments, in order to constitute a quorum, how many creditors should attend the creditor’s meeting? a. Creditors holding at least 1/2 of the liabilities of the debtor b. Creditors holding at least 2/3 of the liabilities of the debtor c. Creditors holding at least 3/5 of the liabilities of the debtor d. Creditors holding at least 3/4 of the liabilities of the debtor

Answer 32

c. Creditors holding at least 3/5 of the liabilities of the debtor

Question 33

n order to approve a proposed agreement with creditors, a double majority is required. A double majority constitutes: I. 1/2 of the creditors voting II. 2/3 of the creditors voting III. Claims of the majority vote amount to at least 3/5 of the total liabilities IV. Claims of the majority vote amount to at least 2/3 of the total liabilities a. I and III. b. II and III. c. I and IV. d. II and IV.

Answer 33

b. II and III.

Question 34

It is the restoration of the debtor to a condition of successful operation and solvency. a. Solvency b. Recovery c. Restoration d. Rehabilitation

Answer 34

d. Rehabilitation

Question 35

If a corporation is the debtor, who initiates an involuntary rehabilitation? a. The corporation’s creditor b. Majority of the directors or trustees c. Stockholders representing 2/3 of the outstanding capital/members of non-stock corporation d. Stockholders representing 1/2 of the outstanding capital/members of non-stock corporation

Answer 35

a. The corporation’s creditor

Question 36

If a corporation is the debtor, who initiates a voluntary rehabilitation? I. The corporation’s creditor II. Majority of the directors or trusteesCompiled by Vhin III. Stockholders representing 2/3 of the outstanding capital/members of non-stock corporation IV. Stockholders representing 1/2 of the outstanding capital/members of non-stock corporation a. I only. b. II and III only. c. II and IV only. d. I, II, and III only.

Answer 36

b. II and III only.

Question 37

Involuntary rehabilitation may be initiated by creditors with claims or aggregate of whose claim is: a. at least P1,000,000 or 25% of the subscribed capital stock or partners’ contributions, whichever is higher b. at least P1,000,000 or 25% of the subscribed capital stock or partners’ contributions, whichever is lower c. at least P1,000,000 and 25% of the subscribed capital stock or partners’ contributions d. at least P1,000,000

Answer 37

a. at least P1,000,000 or 25% of the subscribed capital stock or partners’ contributions, whichever is higher

Question 38

In rehabilitation proceedings under FRIA, the commencement order includes: a. A cease and desist order b. A hold order c. A stay order d. An injunction order

Answer 38

c. A stay order

Question 39

The Commencement Order has the effect of: I. Suspension of all actions or proceedings, in court or otherwise for the enforcement of claims against the debtor II. Suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor a. I only. b. II only. c. Both I and II. d. Neither I nor II.

Answer 39

c. Both I and II.

Question 40

The Commencement Order is issued withing: a. Five days from the filing of the petition. b. Ten days from the filing of the petition. c. Fifteen days from the filing of the petition. d. Thirty days from the filing of the petition.

Answer 40

a. Five days from the filing of the petition.

Question 41

A case for estafa has been filed against Mr. X by Ms. Y. Ms. Y alleged that Mr. X misappropriated P1,000,000 which she handed in trust to Mr. X. Subsequently, the other creditors of Mr. X filed a petition for involuntary rehabilitation of Mr. X. A commencement order was issued by the court. What happens to the case for estafa filed against Mr. X? a. The criminal case for estafa is dismissed. b. The criminal case for estafa is suspended or held in abeyance until the commencement order has been lifted. c. The criminal case for estafa is deemed submitted for decision of the court. d. The criminal case for estafa shall not be affected by the issuance of the commencement order.

Answer 41

d. The criminal case for estafa shall not be affected by the issuance of the commencement order.

Question 42

Which of the following is not a responsibility of the rehabilitation receiver? a. Preserving the value of the assets of the debtor b. Preparation of a rehabilitation plan c. Approval of the rehabilitation plan d. Implementation of the rehabilitation plan

Answer 42

c. Approval of the rehabilitation plan

Question 43

When appointed by the court, it shall take the place of the management and the governing body of the debtor and assume their rights and responsibilities. a. Substitute Board b. Court-Appointed Administrator c. Management Committee d. Creditors’ Committee

Answer 43

c. Management Committee

Question 44

The rehabilitation plan may include: I. Debt forgiveness II. Dacion en pago III. Debt-equity conversion a. I and II only. b. I and III only. c. II and III only. d. I, II, and III.

Answer 44

d. I, II, and III.

Question 45

Statement 1: The debtor needs to agree with the out-of-court rehabilitation plan. Statement 2: Creditors representing at least 75% of the secured obligation must agree with the out-of-court rehabilitation plan. a. Only Statement 1 is true. b. Only Statement 2 is true. c. Both statements are true. d. Both statements are not true.

Answer 45

a. Only Statement 1 is true.

Question 46

The standstill period shall not exceed a. Sixty (60) days from the date of effectivity b. Ninety (90) days from the date of effectivity c. One hundred twenty (120) days from the date of effectivity d. One hundred fifty (150) days from the date of effectivity

Answer 46

c. One hundred twenty (120) days from the date of effectivity

Question 47

In both voluntary and involuntary liquidation, the amount of debt must be at least: a. P500,000 b. P1,000,000 c. P5,000,000 d. P10,000,000

Answer 47

a. P500,000

Question 48

In involuntary liquidation, what must the creditors prove? a. That the debtor is insolvent b. That the debtor committed acts of insolvency c. That the debtor has no more assets d. That the debtor has outstanding balances amounting to P5,000,000

Answer 48

b. That the debtor committed acts of insolvency

Question 49

Which of the following is not an act of insolvency by the debtor? a. That being absent from the Republic of the Philippines, with intent to defraud his creditors, he remains absent b. That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation or of defrauding his creditors c. That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for a period of fifteen (15) days d. That an execution having been issued against him on final judgment for money, he shall have been found to be without sufficient property subject to execution to satisfy the judgment

Answer 49

c. That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for a period of fifteen (15) days

Question 50

During the pendency of court-supervised or pre-negotiated rehabilitation proceedings, may the court order the conversion of rehabilitation proceedings to liquidation proceedings? a. Yes, when a petition for rehabilitation is filed and it is established that the debtor is indeed insolvent but there is no substantial likelihood for the debtor to be successfully rehabilitated. b. Yes, when a petition for rehabilitation is filed and it is established that the debtor is not insolvent and has substantial assets which may be liquidated. c. Yes, when a petition for rehabilitation is filed and it is established that the debtor is indeed insolvent and there is substantial likelihood that the sale of the assets is the more expedient way of satisfying creditor’s claims. d. No, in no case may a court-supervised or pre-negotiated rehabilitation proceeding be converted to a liquidation proceeding.

Answer 50

a. Yes, when a petition for rehabilitation is filed and it is established that the debtor is indeed insolvent but there is no substantial likelihood for the debtor to be successfully rehabilitated.