Financial Rehabilitation and Insolvency Act (FRIA) of 2010 LIQUIDATION ORDER

The Liquidation Order shall:

“An act providing for the rehabilitation or liquidation of
financially distressed enterprises and individuals.” (a) Declare the debtor insolvent;
(b) Order the liquidation of the debtor and in the case of a
HISTORY
juridical debtor, declare it as dissolved;
Former Senator Juan Edgardo J. Angara
(c) Order the sheriff to take possession and control of all
- Sponsored the bill on the Senate floor in 2009
the property of the debtor, except those that may be
- 100th year anniversary of the Insolvency Act of 1909
exempt from execution;
- Before FRIA, claimant’s chance to recover his investments
(d) Order the publication of the Liquidation Order, together
is 4.4%
with the petition, or motion to convert the
- With FRIA’s passage, our recovery rate now stands at 21.2%
rehabilitation proceedings into liquidation proceedings,
- Ranked #50 in the Resolving Insolvency Index in a pool of
if any, in a newspaper of general circulation in the
189 countries
Philippines once a week for 2 consecutuve weeks;
SECTION 2 (e) Direct payments of any claims and conveyance of any
It is the policy of the State to encourage debotrs, both property due the debtor to the liquidator;
juridical and natural persons, and their creditos to (f) Prohibit payments and the transfer of any property by
collectively and realistically resolve adjust competing claims the debtor;
and property rights. (g) Direct all creditors to file their claims with the
liquidation not later than 5 days from the time the
The rehabilitation or liquidation shall be made with a view ti liquidator take his oath of office, furnishing a copy
ensure or maintain certainty and predictability in thereof to the court;
commercial affairs, preserve and maximize the value of the (h) Authorize the payment administrative expenses as they
assets of these debtors, recognize creditor rights and respect become due;
priority of claims, and ensure equitable treatment of (i) State that the debtor and creditors who are not
creditors who are similarly situated. peititioner/s may submit the names of other nominees
to the position of liquidator; and
When rehabilitation is not feasible, it is in the interest of the
(j) Set the case for hearing for the election and
State to facilitate a speedy and orderly liquidation of these
appointment of the liquidator, which date shall not be
debtor’s assets and the settlement of their obligations.
less than 30 days nor more than 45 days from the date
INSOLVENCY of last publication.
The liabilities are greater that its or his assets.
CONCLUSION OF CASE
A financial condition wherein the debtor is generally unable Rehabilitation Proceedings
to pay its or his liabilities as they fall due in the ordinary
It is formally concluded through a court order either
course of business.
declaring:
(Unlike the Insolvency Act of 1909, FRIA do not limit
a. Declaring a succesful implementation of rehabilitation
insolvency to a situation where debtor’s assets are less than
plan or
his liabilities. It now covers a situation where the debtor’s
b. failure of rehabilitation
unable to meet its obligations as they fall due even if his
assets are more than its liabilities) Liquidation Proceedings
REHABILITATION It is fomally concluded through a court order:
- To resuscitate the debtor or to help the debtor bounce back
its business. a. Determination that the liquidation has been completed
- In rehabilitation proceedings, the debtor maintain their according to the FRIA and other applicable laws and
assets to continue business operations. evidence showing that the juridical debtor has been
removed from the registry of legal entities in the
LIQUIDATION Philippine Securities and Exchange Commission
- The debtor preserve their assets in order to sell them.

KINDS OF DEBTORS
Natural Persons
- Individual debtor
- Citizen of the Philippines

Juridical Person
- Non-human legal entity
- Corporation/Organization
- Authorized by law with duties and rights
 FINANCIAL REHABILITATION AND INSOLVENCY ACT OF reorganization, dacion en pago, debt-equity conversion and
2010 sale of the business (or parts of it) as a going concern, or
setting-up of a new business entity, or other similar
Refers to the restoration of the debtor to a
arrangements as may be approved by the court or creditors.
condition of successful operation and solvency. When
rehabilitation is not feasible, it is in the interest of the State Pag nag file ng debtor ng RP di na pwede mag govern ang
to facilitate a speedy and orderly liquidation of these BOD if isa tong company they will remove the right because
debtors’ assets and the settlement of their obligation. malapit na malugi then iaappoint na ang rehabilitation
receiver ng court para pagandahin ang financial standing ng
Financial rehabilitation – inaayos when it comes to
isang company
diposition of assets and acquisition of cash inflows
Involuntary Proceedings – any creditor or group of creditors
(Now if it cannot save via rehabilitation magkakaroon na ng
with a claim of, or the aggregate of whose claims is at least
insolvency proceedings. Dissolve and liquidate.)
One Million Pesos (Php 1,000,000.00) or at least twenty-five
Debtor covers: percent (25%) of the subscribed capital stock or partners’
a. Sole proprietorship duly registered with the DTI contributions, whichever is higher, may initiate involuntary
b. Partnership duly registered with SEC proceedings againts the debtor by filing a petition for
c. Corporation duly organized and existing under Philippine rehibilitation with court if:
laws
(a) there is no genuine issue of fact on law on the claim/s of
d. Individual debtor who has become insolvent
the petitioner/s and that the due and demandable
Does not include: banks, insurance companies, pre-need payments thereon have not been made for at least sixty
companies and national and local government agenices or (60) days or that the debtor has failed generally to meet
units. its liabilties as they fall due; or
(b) a creditor, other than the petitioner/s has initiated
Because banks has its own rehabilitation proceedings against the debtor that will prevent the debtor from
paying its debts as they become due or will render it
Where to file? Regional Trial Court Acting as a Special
insolvent.
Commercial Court
A rehabilitation receiver shall refer to the person or persons,
TYPES OF REHABILITATION
natural or juridical, appointed as such by the court and which
1. Court-Supervised Rehabilitation – may be initiated shall be entrusted with such powers and duties.
through voluntary proceedings or involuntary
Qualifications:
proceedings
(a) a citizen of the Philippines or a resident of the
Voluntary proceedings – may be initiated by an insolvent
Philippines in the (6) six months immediately
debtor through filing a petition for rehabilitation with the
preceeding his nomination;
court and on the grounds provided under the FRIA.
(b) of good moral character and with acknowledge
The filing of the petition for rehabilitation must be approved integrity, impartiality and independece;
by the owner in case of SP, or by a majority of the partners (c) has the requisite knowledge of insolvency and other
in case of P, or in case of Corp. by a majority vote of BOD or relevant commercial laws, rules and procedures, as
trustees and authorized by the vote of the stockholders wells as the relevant training and/or experience that
representing at least 2/3 of the outstanding capital stock, or may be necessary to enable him to properly discharge
in case of nonstock corp, by the vote of at least 2/3 of the the duties and obligations of a rehabilitation receiver
members, in a stockholder’s or member’s meeting duly and
called for the purpose. (d) has no conflict of interest: Provided that such conlfict of
interest may be waived, expressly or implied, by a party
A group of debtors may jointly file a petition for who may bye prejudiced thereby,
rehabilitation when one or more of its members foresee the
possibility of meeting debts when they respectively fall due, Nature of Proceedings: in rem: means it binds the whole
and the financial distress would likely adversely affect the world
financial condition and/or operations of the members of the
Scenario: Pagnagfile ng case sa court, padadalhan ng
group and/or the participation of the other members of the
summons yung kalaban/defendant. Pag nareceive na nila
group is essential under the terms and conditions of the
meron ng power yung husgado sa kanya – jurisdiction. Now,
proposed Rehabilitation Plan.
dito sa RP you don’t need to padalhan ng subpina yung mga
Rehabilitation Plan – refers to a plan by which the financial creditors kasi ginagawa kasi sa RP nagoorder yung husgado
well-being and viability of an insolvent debtor can be na idyaryo na meron ng RP yung company na toh. Nakalagay
restored using various means including, but not limited to, dun sa publication is lahat ng merong credit, lahat ng
debt forgiveness, debt rescheduling, reorganization or quasi inutangan ng debtor ay pwede magfile ng claim sa court. Pag
di nag file ng claim pwede mawala yung bisa yung securities transactions in accordance with the
pagkakautang sayo. provisions of the Securities Regulation Code and its
implementing rules and regulations;
If the court finds the petition for rehabilitation to be
(F) The clearing and settlement of financial transactions
sufficient in form and substance, it shall, within 5 working
through the facilities of a clearing agency or similar
days from the filing of the petition, issue a Commencement
entities duly authorized, registered and/or recognized
Order.
by the appropriate regulatory agency like BSP and the
The Commencement Order shall include a Stay or SEC as well as any form of actions of such agencies or
Suspension Order which shall: entities to reimburse themselves for any transactions
settled for the debtor; and
(a) suspend all actions or proceedings, in court or (G) Any criminal actions against the individual debtor or
otherwise, for the enforcement of claims against the owner, partner, director or officer of a debtor shall not
debtor; be affected by any proceeding commenced under R.A
(b) suspend all actions to enforce any judgement, 10142
attachment or other provisional remedies against the
debtor;
(c) prohibits the debtor from selling, encumbering,
transferring or disposing in any manner any of its
properties except in the ordinary course of business and
(d) prohibit the debtor from making any payment of its
liabilties outstanding as of the commencement date
except as may be provided herein.

(Lahat ng utang ni debtor ay hindi na pwede bayaran ni

debtor ang magbabayad na ay ang rehabilitation receiver
that has been appointed by the rehabilitation court kasi nga
yung managament has been transferred from the BOD to the
rehabilitation receiver)

EXCEPTIONS TO THE STAY OR SUSPENSION ORDER

(A) To cases already pending appeal in the Supreme Court

as of commencement date. Any final and executory
judgment arising from such appeal shall be referred to
the court for appropriate action;
(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 efficienrly
than the court. 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;
(C) To the enforcement of claims against sureties and other
persons solidarily liable with the debtor, and third party
or accommodation mortgages as well as issuers of
letters of credit, unless the property subject of the third
party or accommodation mortgage is necessary for the
rehabilitation of the debtor as determined by the court
upon recommendation by the rehabilitation receiver;
(D) To any form of action of customers or clients of a
securities market participant to recover or otherwise
claim moneys and securities entrusted to the latter in
ther ordinary course of the latter’s business as well as
any action of such securities market participant or the
appropriate regulatory agency or self-regulatory
organization to pay or settle such claims or liabilities;
(E) To the actions of a licensed broker or dealer to sell
pledged securities of a debtor pursuant to a securities
pledge or margin agreement for the settlement of