Republic Act 10142: Financial Rehabilitation and

Insolvency Act (FRIA) of 2010

Chapter 1: General Provisions
o + Section 2: For resolution of competing claims and
resolution of property rights
o Section 3: FR! " Proceedings in R#$
o Section %: &e'nition of (erms
1) &e*tor
+ ,%),-) &e*tor shall refer to. unless
speci'cally e/cluded *y a provision of this
!ct. a sole proprietorship duly registered
0ith the &epartment of (rade and ndustry
,&(). a partnership duly registered 0ith
the Securities and #/change Commission
,S#C). a corporation duly organi1ed and
e/isting under Philippine la0s. or an
individual de*tor 0ho has *ecome insolvent
as de'ned herein2
+ ,cf Section 111)
o Section 3: #/clusions
nsurance Companies
4an-s
Pre56eed Companies
6ational and 7G8
o Section 9: Supreme Court to designate courts
o Section :: Su*stantive and Procedural Consolidation
#ach ;uridical entity as a separate entity
!ssets of a de*tor may *e commingled or
aggregated
o Section <: Creditor decisions in compliance 0ith this
act and the Civil Code
o Section =: Creditors may have representatives
o Section 1>: 7ia*ilities of de*tors depend on 0hat type
of corporation ? entity
Single Proprietorship. ndividual and partnerships
" lia*le for 2/ value
Section :>2 7ia*ility of General Partners of
a Partnership for 8npaid 4alances 8nder an
!pproved Plan2 5 (he approval of the Plan
shall not a@ect the rights of creditors to
pursue actions against the general partners
of a partnership to the e/tent they are lia*le
under relevant legislation for the de*ts
thereof2
,cf2 Chapter A 5 nsolvency of ndividual
&e*tors)
o Section 11: !uthori1ation to e/change de*t for #Buity
Chapter 2: Court Supervised Reha*ilitation
o Chapter 2 ,!) nitiation Proceedings:
Aoluntary Proceedings under Section 12:
Cho may 'le: Group of &e*tors foreseeing
impossi*ility of meeting de*ts
Chen 'led:
1) approved *y maDority of 4E&
2) !uthori1ed *y 2?3 of ECS or
mem*ers
Petition shall include
a) denti'cation of &e*tor. addresses
*) Statement of na*ility to pay
c) Reliefs sought
d) Ether information that may *e
reBuired on the form of relief
reBuested
e) Schedule of de*ts and lia*ilities
f) nventory of !ssets including
receiva*les and Claims against third
parties
g) 6ames of at least 3 nominees as
Reha*ilitation Receiver
h) &ocuments reBuired *y SC
Chapter 2 ,4) nvoluntary Proceedings under
Section 13
Cho may 'le:
1) Creditors 0ith a claim of 1.>>>.>>>
either solo or aggregate
2) Creditors 0ith 23F su*scri*ed
capital or partnership contri*utions
Cause of !ction:
1) Chen theres a genuine issue of fact
on la0. due and demanda*le
payments no made for 9> days or
default
2) ! creditor. initiating foreclosure
proceedings against de*tor 0hich 0ill
prevent de*tor from paying other
de*ts
Section 1%: Petition to nitiate nvoluntary
Proceedings
a) denti'cation of de*tor. addresses
*) Summary of grounds for initiating
proceedings
c) Reliefs sought
d) State the legal e@ects of the
Commencement Erder
e) &eclare that the de*tor is under
reha*ilitiation
f) &irect pu*lication of
Commencement Erder 55+ start
pu*lication 0ithin : days from
issuance in a ne0spaper of general
circulation once a 0ee- for 2
consecutive 0ee-s2
g) f Petitioner is &e*tor: Personal
Service to Creditors holding at least
1>F of total lia*ilities 0ithin 3 days
h) f Petitioner is Creditor: direct
service to de*tor 0ithin 3 days *y
personal service
i) !ppoint a Reha*ilitation Receiver
D) Summari1e reBuirements for
creditors to esta*lish their claims
0ithin 3 days from hearing
-) !uthori1e payment of
administrative e/penses
l) Set the case for initial hearing.
0hich shall not *e more than %> days
from date of 'ling of the petition
m) ndicate locations 0hich
documents regarding the de*tor and
proceedings under !ct may *e
revie0ed and copied2
n) State that any creditor or de*tor
0ho is not the petitioner may su*mit
the name or nominate other persons
to the position of reha*ilitation
receiver
o) nclude a Stay or Suspension Erder
1) suspend all actions or
proceedings. in court or
other0ise. for the enforcement
of claims against the de*tor
2) suspend all actions to enforce
any Dudgment. attachment or
other provisional remedies
against the de*torG
3) prohi*it the de*tor from
selling. encum*ering.
transferring or disposing in any
manner any of its properties
e/cept in the ordinary course of
*usinessG and
%) prohi*it the de*tor from
ma-ing any payment of its
lia*ilities outstanding as of the
commencement date e/cept as
may *e provided herein2
Section 1:: #@ects of Commencement
Erder
a) Right to Revie0 and E*tain
Records. su*Dect to approval of
performance *ond
4an- !ccounts
*) !fter commencement &ate 5
Prohi*it e/traDudicial activity or
process to:
+ Sei1e property
+ Sell encum*ered property
+ !ttempt Collection or #nforce
Claim
Section 1<: #/ceptions to Stay or
Suspension Erder
a) Cases already pending in the SC
*) Su*Dect to the discretion of the
court to cases pending or 'led at a
speciali1ed court or Buasi5Dudicial
agency 0hich. upon determination *y
the court is capa*le of resolving the
claim more Buic-ly. fairly and
e@iciently than the court: Provided.
(hat any 'nal and e/ecutory
Dudgment of such court or agency
shall *e referred to the court and
shall *e treated as a non5disputed
claimG
c) #nforcement of claims against
sureties and other persons solidarily
lia*le 0ith the de*tor. and third party
or accommodation mortgagors as 0ell
as issuers of letters of credit
8nless necessary for
reha*ilitation
d) to any form of action of customers
or clients of a securities mar-et
participant to recover or other0ise
claim moneys and securities entrusted
to the latter in the ordinary course of
the latterHs *usiness as 0ell as any
action of such securities mar-et
participant or the appropriate
regulatory agency or self5regulatory
organi1ation to pay or settle such
claims or lia*ilities
e) !ctions of a licensed *ro-er or
dealer to sell pledged securities of a
de*tor pursuant to a securities pledge
or margin agreement for the
settlement of securities transactions
in accordance 0ith the provisions of
the Securities Regulation Code and its
implementing rules and regulations
f) Clearing and settlement of 'nancial
transactions through the facilities of a
clearing agency or similar entities
duly authori1ed. registered and?or
recogni1ed *y the appropriate
regulatory agency li-e the 4ang-o
Sentral ng Pilipinas ,4SP) and the
S#C as 0ell as any form of actions of
such agencies or entities to reim*urse
themselves for any transactions
settled for the de*torG and
g) !ny criminal action against
individual de*tor or o0ner. partner.
director or o@icer of a de*tor shall not
*e a@ected *y any proceeding
commend under this !ct
o Section 2>: !pplication of Stay or Suspension Erder
Section 21: #@ectivity and &uration of
Commencement Erder 5 unless lifted *y the court.
its applica*le for the duration of the reha*ilitation
proceedings2 (he court shall ensure the follo0ing
minimum reBuirements are met:
a) (he proposed Reha*ilitation Plan
su*mitted complies 0ith the minimum
contents prescri*ed *y this !ct
*) (here is su@icient monitoring *y the
reha*ilitation receiver of the de*torHs
*usiness for the protection of creditorsG
c) (he de*tor has met 0ith its creditors to
the e/tent reasona*ly possi*le in attempts
to reach consensus on the proposed
Reha*ilitation Plan
d) (he reha*ilitation receiver su*mits a
report. *ased on preliminary evaluation.
stating that
,1) there are su@icient assets
0ith?0hich to reha*ilitate the de*torG
,2) there is su@icient cash Io0 to
maintain the operations of the de*torG
,3) the de*torHs. partners.
stoc-holders. directors and o@icers
have *een acting in good faith and
0hich due diligenceG
,%) the petition is not s sham 'ling
intended only to delay the
enforcement of the rights of the
creditorHs or of any group of creditorsG
and
,3) the de*tor 0ould li-ely *e a*le to
pursue a via*le Reha*ilitation Plan
e) (he petition. the Reha*ilitation Plan and
the attachments thereto do not contain any
materially false or misleading statementG
f) f the petitioner is the de*tor. that the
de*tor has met 0ith its creditor?s
representing at least three5fourths ,3?%) of
its total o*ligations to the e/tent reasona*ly
possi*le and made a good faith e@ort to
reach a consensus on the proposed
Reha*ilitation Plan
g) (he de*tor has not committed acts
misrepresentation or in fraud of its
creditor?s or a group of creditors2
o Section 22: !ction at the nitial Jearing 5 the court
shall determine 0ho 5
,a) determine the creditors 0ho have made timely
and proper 'ling of their notice of claimsG
Section 23: #@ect of Failure to File 6otice
of Claim 5 no participation in reha*ilitation
proceedingsG *ut shall *e entitled to receive
distri*utions
,*) hear and determine any o*Dection to the
Buali'cations of the appointment of the
reha*ilitation receiver
,c) direct the creditors to comment on the petition
and the Reha*ilitation Plan. and to su*mit the
same to the court and to the reha*ilitation
receiver 0ithin a period of not more than t0enty
,2>) daysG
,d) direct the reha*ilitation receiver to evaluate
the 'nancial condition of the de*tor and to
prepare and su*mit to the court 0ithin forty ,%>)
days from initial hearing the report provided in
Section 2% hereof
Section 2%: Report of the Reha*ilitation
Receiver 5 released 0ithin %> days from
initial hearing
a) CE6 de*tor is insolvent. irregular
or illegal acts in contemplation of the
insolvency of the de*tor
*) (he underlying assumptions for the
e@ectiveness of the Reha*ilitation
Plan
c) 7i-elihood of success
d) CE6 the petition should *e
dismissed
e) CE6 the de*tor should *e
dissolved or liBuidated
o Section 23: Giving &ue Course to &ismiss Petition or
Conversion of Proceedings ,&one 1> days after
receiving the Report on Section 2%)
a) Give due course ,cf2 Section 29: Court shall
direct reha*ilitation receiver to revie0. revise.
and?or recommend action on the reha*ilitation
plan 0ithin => days2 (he court may refer the
disputes regarding the plan to !&R . R! =2<3. for
Buic- resolution)
1) (he de*tor is insolvent
2) (here is su*stantial li-elihood for the
de*tor to *e successfully reha*ilitated
*) &ismiss the petition upon 'nding that: ,cf
Section 2:: (he court may order petitoner to pay
damages to any creditor 0ho may have *een
inDured *y this 'ling)
1) &e*tor is not insolvent
2) Petition is a sham. intended to delay
3) PetitionHs averments are materially false
or misleading
%) &e*tor has misrepresented or committed
fraud of creditors
c) Convert the proceedings into one for
7iBuidation of the &e*tor upon a 'nding that:
1) &e*tor is insolvent
2) (here is su*stantial li-elihood that the
de*tor may *e successfully reha*ilitated
Section 92: Contents of the Reha*ilitation Plan
,a) specify the underlying assumptions. the
'nancial goals and the procedures proposed to
accomplish such goalsG
,*) compare the amounts e/pected to *e received
*y the creditors under the Reha*ilitation Plan
0ith those that they 0ill receive if liBuidation
ensues 0ithin the ne/t one hundred t0enty ,12>)
daysG
,c) contain information su@icient to give the
various classes of creditors a reasona*le *asis for
determining 0hether supporting the Plan is in
their 'nancial interest 0hen compared to the
immediate liBuidation of the de*tor. including any
reduction of principal interest and penalties
paya*le to the creditorsG
,d) esta*lish classes of voting creditorsG
,e) esta*lish su*classes of voting creditors if prior
approval has *een granted *y the courtG
,f) indicate ho0 the insolvent de*tor 0ill *e
reha*ilitated including. *ut not limited to. de*t
forgiveness. de*t rescheduling. reorgani1ation or
Buasi5reorgani1ation2 dacion en pago. de*t5eBuity
conversion and sale of the *usiness ,or parts of it)
as a going concern. or setting5up of a ne0
*usiness entity or other similar arrangements as
may *e necessary to restore the 'nancial 0ell5
*eing and visi*ility of the insolvent de*torG
,g) specify the treatment of each class or su*class
descri*ed in su*sections ,d) and ,e)G
,h) provide for eBual treatment of all claims
0ithin the same class or su*class. unless a
particular creditor voluntarily agrees to less
favora*le treatmentG
,i) ensure that the payments made under the plan
follo0 the priority esta*lished under the
provisions of the Civil Code on concurrence and
preference of credits and other applica*le la0sG
,D) maintain the security interest of secured
creditors and preserve the liBuidation value of the
security unless such has *een 0aived or modi'ed
voluntarilyG
,-) disclose all payments to creditors for pre5
commencement de*ts made during the
proceedings and the Dusti'cations thereofG
,1) descri*e the disputed claims and the
provisioning of funds to account for
appropriate payments should the claim *e
ruled valid or its amount adDustedG
,m) identify the de*torHs role in the
implementation of the PlanG
,n) state any reha*ilitation covenants of the
de*tor. the *reach of 0hich shall *e considered a
material *reach of the PlanG
,o) identify those responsi*le for the future
management of the de*tor and the supervision
and implementation of the Plan. their a@iliation
0ith the de*tor and their remunerationG
,p) address the treatment of claims arising after
the con'rmation of the Reha*ilitation PlanG
,B) reBuire the de*tor and its counter5parties to
adhere to the terms of all contracts that the
de*tor has chosen to con'rmG
,r) arrange for the payment of all outstanding
administrative e/penses as a condition to the
PlanHs approval unless such condition has *een
0aived in 0riting *y the creditors concernedG
,s) arrange for the paymentK of all outstanding
ta/es and assessments. or an adDusted amount
pursuant to a compromise settlement 0ith the
4lR Er other applica*le ta/ authoritiesG
,t) include a certi'ed copy of a certi'cate of ta/
clearance or evidence of a compromise settlement
0ith the 4RG
,u) include a valid and *inding r,.solution of a
meeting of the de*torHs stoc-holders to increase
the shares *y the reBuired amount in cases 0here
the Plan contemplates an additional issuance of
shares *y the de*torG
,v) state the compensation and status. if any. of
the reha*ilitation receiver after the approval of
the PlanG and
,0) contain provisions for conciliation and?or
mediation as a prereBuisite to court assistance or
intervention in the event of any disagreement in
the interpretation or implementation of the
Reha*ilitation Plan2
Section 9%: Creditor !pproval of Reha*ilitation Plans 5
Receiver shall notify creditors of the plan. and in 2>
days from such notice. convene the creditors as a 0hole
or per class2 t shall *e approved *y a vote of 3>F *y
the holders of the total claims2
+ 6ot0ithstanding reDection. it may *e approved
if:
,a)(he Reha*ilitation Plan complies 0ith
the reBuirements speci'ed in this !ct2
,*) (he reha*ilitation receiver recommends
the con'rmation of the Reha*ilitation PlanG

,c) (he shareholders. o0ners or partners of
the Duridical de*tor lose at least their
controlling interest as a result of the
Reha*ilitation PlanG and
,d) (he Reha*ilitation Plan 0ould li-ely
provide the o*Decting class of creditors 0ith
compensation 0hich has a net present value
greater than that 0hich they 0ould have
received if the de*tor 0ere under
liBuidation
Section 93: Su*mission of Reha*ilitation plan to Court
+ 8pon approval. it shall *e su*mitted to the
court. and 0ithin 3 days. court shall notify
creditors that it may 'le o*Dections thereto
+ Grounds for E*Dections ,Section 99)
,a) (he creditorsH support 0as induced *y
fraudG
,*)(he documents or data relied upon in the
Reha*ilitation Plan are materially false or
misleadingG or
,c)(he Reha*ilitation Plan is in fact not
supported *y the voting creditors
+ #@ects of Con'rmation ,Section 9=)
,a) (he Reha*ilitation Plan and its
provisions shall *e *inding upon the de*tor
and all persons 0ho may *e a@ected *y 2 it.
including the creditors. 0hether or not such
persons have participated in the
proceedings or opposed the Reha*ilitation
Plan or 0hether or not their claims have
*een scheduledG
,*) (he de*tor shall comply 0ith the
provisions of the Reha*ilitation Plan and
shall ta-e all actions necessary to carry out
the PlanG
,c) Payments shall *e made to the creditors
in accordance 0ith the provisions of the
Reha*ilitation PlanG
,d) Contracts and other arrangements
*et0een the de*tor and its creditors shall
*e interpreted as continuing to apply to the
e/tent that they do not conIict 0ith the
provisions of the Reha*ilitation PlanG
,e) !ny compromises on amounts or
rescheduling of timing of payments *y the
de*tor shall *e *inding on creditors
regardless of 0hether or not the Plan is
successfully implementG and
,f) Claims arising after approval of the Plan
that are other0ise not treated *y the Plan
are not su*Dect to any Suspension Erder2
Section :22 Period for Con'rmation of the
Reha*ilitation Plan2 5 (he court shall have a ma/imum
period of one ,1) year from the date of the 'ling of the
petition to con'rm a Reha*ilitation Plan2 f no
Reha*ilitation Plan is con'rmed 0ithin the said period.
the proceedings may upon motion or motu propio. *e
converted into one for the liBuidation of the de*tor
Section :32 !ccounting &ischarge of Receiver
Chapter 2 ,C)2 (he Reha*ilitation Receiver. $anagement
Committee and CreditorHs Committee
o a) Section 2<: Cho may serve as reha*ilitation receiver
5 !ny Buali'ed natural or Duridical person
1) if Duridical. must designate a natural person as
representative
*) Section 2=: Luali'cations of Reha*ilitation Receiver
1) Filipino Citi1en or Resident of the Philippines 9
mos *efore proceedings
2) Good $oral Character. 0? ntegrity.
mpartiality and ndependence
3) Possesses reBuisite -no0ledge
%) Jas no conIict of interest. unless 0aived *y
the party preDudiced
c) Section 3>: nitial !ppointment
1) $ay or may not *e among the nominees
2) n case de*tor is a securities mar-et
participant. the court shall prefer a nominee 0ith
securities or investor protection fund
3) f nominated *y more than 3>F of the
creditors. he shall *e appointed
d) Section 31: Po0ers of the Reha*ilitation Receiver
,cf2 Section %12 mmunity of the reha*ilitation
receiver and all persons employed *y him)
e) Section 32: Removal of the Reha*ilitation Receiver
1) ncompetence or gross negligence
2) 7ac- of speciali1ed competence
3) Performance of illegal acts in the performance
of duty and po0ers
%) 7ac- of Buali'cation or presence of any
disBuali'cation
3) ConIict of nterest
,cf2 Section %>2 ConIict of nterest de'ned)
9) 7ac- of ndependence
f) Section 33: Compensation 5 Luantum $eruit
g) Section 3%: Eath and 4ond of the Reha*ilitation
Receiver: Filed prior to entering upon the o@ice2
h) Section 33: n case of any vacancy that may arise.
court may appoint another2
i) &isplacement of #/isting $anagement *y
Reha*ilitation Receiver
1) !ctual or imminent danger of dissipation. loss.
0astage or destruction of de*tors assets or other
properties
2) Paraly1ation of *usiness operations
3) Gross mismanagement of the de*tor or fraud
%) n case court appoints the reha*ilitation
receiver to assume po0ers of management:
a) Court shall reBuire additional *ond
*) !uthori1e him to engage persons to
assist the discharge of his functions ,cf
Section 3:2 Role of $anagement
Committees)
c) ncrease compensation
D) Section %2: CreditorHs Committees 5 to serve as
primary liason *et0een reha*ilitation receiver and
creditors according to Section %32 ,cf2 Section 93
Calling for creditorHs meeting)
1) Secured creditors
2) 8nsecured creditors
3) (rade creditors and suppliers
%) #mployees of the de*tor
Chapter 2 ,&)2 &etermination of Claims
o Section %%2 Registry of Claims 5 esta*lished 0ithin 2>
days upon assumption of o@ice2
Section %32 Epposition or Challenge of claims 5 done
0ithin 3> days of the e/piration of the period from
section %%2
Section %92 !ppeal 5 done in court
Chapter 2 ,#)2 Governance
o Section %:2 $anagement 5 unless other0ise provided.
management of the Duridical de*tor shall remain 0ith
the e/isting management
Chapter 2 ,F)2 8se. Preservation and &isposal of !ssets and
(reatment of !ssets and Claims after Commencement &ate
o Section 3>2
a) Such sale. transfer. conveyance. or disposal is
necessary for the continued operation of de*torHs
*usiness
*) !rrangements made to provide a su*stitute
lien or o0nership right
o Section 312 !ssets held *y 3rd Parties 5 n the case of
possessory pledges. mechanicHs liens or similar claims.
third parties 0ho have in their possession or control
property of the de*tor shall not transfer. conveyor
other0ise dispose of the same to persons other than the
de*tor. unless upon prior approval of the reha*ilitation
receiver2
o Section 322Rescission or 6ullity of Sale. Payment.
(ransfer or Conveyance of !ssets2 5 (he court may
rescind or declare as null and void any sale. payment.
transfer or conveyance of the de*torHs unencum*ered
property or any encum*ering thereof *y the de*tor or
its agents or representatives after the commencement
date 0hich are not in the ordinary course of the
*usiness
o Section 332!ssets Su*Dect to Rapid E*solescence.
&epreciation and &iminution of Aalue2 5 8pon the
application of a secured creditor holding a lien against
or holder of an o0nership interest in property held *y
the de*tor that is su*Dect to potentially rapid
o*solescence. depreciation or diminution in value. the
court shall. after notice and hearing. order the de*tor
or reha*ilitation receiver to ta-e reasona*le steps
necessary to prevent the depreciation2
o Section 392(reatment of #mployees. Claims2
Compensation of employees reBuired to carry on the
*usiness shall *e considered an administrative e/pense2
o Section 3:2(reatment of Contracts2 5 8nless cancelled
*y virtue of a 'nal Dudgment of a court. shall continue
in force: Provided. (hat 0ithin ninety ,=>) days
follo0ing the commencement of proceedings. the
de*tor. 0ith the consent of the reha*ilitation receiver.
shall notify each contractual counter5party of 0hether it
is con'rming the particular contract2
Chapter 2 ,G) !voidance Proceedings
o Section 3=2 !ction for Rescission or 6ullity
,a) (he reha*ilitation receiver or. 0ith his
conformity. any creditor may initiate and
prosecute any action to rescind. or declare null
and void any transaction descri*ed in Section 3<
1) provides unreasona*ly inadeBuate
consideration to the de*tor and is e/ecuted
0ithin ninety ,=>) days prior to the
commencement dateG
2) involves an accelerated payment of a
claim to a creditor 0ithin ninety ,=>) days
prior to the commencement dateG
3) provides security or additional security
e/ecuted 0ithin ninety ,=>) days prior to
the commencement dateG
%) involves creditors. 0here a creditor
o*tained. or received the *ene't of. more
than its pro rata share in the assets of the
de*tor. e/ecuted at a time 0hen the de*tor
0as insolventG or
3) is intended to defeat. delay or hinder the
a*ility of the creditors to collect claims
0here the e@ect of the transaction is to put
assets of the de*tor *eyond the reach of
creditors or to other0ise preDudice the
interests of creditors2
*) f leave of court is granted. the reha*ilitation
receiver shall assign and transfer to the creditor
all rights and title to the interest in the chose in
action or su*Dect matter of the proceeding
c) !ny *ene't derived from a proceeding *elongs
e/clusively to the creditor instituting the
proceedings
Chapter 2 ,J) (reatment of Secured Creditors
o Section 9>2 6ot deemed in any 0ay to impair the
security of a secured creditor2
o Section 912 (hereHs a lac- of adeBuate protection if it
can *e sho0n that
a) de*tor refuses to honor pre5e/isting agreement
*) the de*tor fails or refuses to ta-e commercially
reasona*le steps to maintain the property
c) the property has depreciated to an e/tent that
the creditor is under secured2
Chapter 2 ,;) (ermination of Proceedings
o a) Failure of Reha*ilitation ,Section :%)
,a) &ismissal of the petition *y the courtG
,*) (he de*tor fails to su*mit a Reha*ilitation
PlanG
,c) 8nder the Reha*ilitation Plan su*mitted *y
the de*tor. there is no su*stantial li-elihood that
the de*tor can *e reha*ilitated 0ithin a
reasona*le periodG
,d) (he Reha*ilitation Plan or its amendment is
approved *y the court *ut in the implementation
thereof. the de*tor fails to perform its o*ligations
thereunder or there is a failure to reali1e the
o*Dectives. targets or goals set forth therein.
including the timelines and conditions for the
settlement of the o*ligations due to the creditors
and other claimantsG
,e) (he commission of fraud in securing the
approval of the Reha*ilitation Plan or its
amendmentG and
,f) Ether analogous circumstances as may *e
de'ned *y the rules of procedure2
o *) !ctions of the Court
,1) ssue an order directing that the *reach *e
cured 0ithin a speci'ed period of time. falling
0hich the proceedings may *e converted to a
liBuidationG
,2) ssue an order converting the proceedings to a
liBuidationG
,3) !llo0 the de*tor or reha*ilitation receiver to
su*mit amendments to the Reha*ilitation Plan.
the approval of 0hich shall *e governed *y the
same reBuirements for the approval of a
Reha*ilitation Plan under this su*chapterG
,%) ssue any other order to remedy the *reach
consistent 0ith the present regulation. other
applica*le la0 and the *est interests of the
creditorsG or
,3) #nforce the applica*le provisions of the
Reha*ilitation Plan through a 0rit of e/ecution
o c) #@ects ,Section :3)
,a) (he discharge of the reha*ilitation receiver
su*Dect to his su*mission of a 'nal accountingG
and
,*) (he lifting of the Stay Erder and any other
court order holding in a*eyance any action for the
enforcement of a claim against the de*tor2
Chapter 3 5 Prenegotiated Reha*ilitation
o a) Cho 'les the petitionM ,Section :9)
1) nsolvent &e*tor
2) ;ointly 0ith Creditors
o *) Chat is 'ledM ! veri'ed petition containing:
,1) a schedule of the de*torHs de*ts and lia*ilitiesG

,2) an inventory of the de*torHs assetsG
,3) the pre5negotiated Reha*ilitation Plan.
including the names of at least three ,3) Buali'ed
nominees for reha*ilitation receiverG and
,%) a summary of disputed claims against the
de*tor and a report on the provisioning of funds
to account for appropriate payments should any
such claims *e ruled valid or their amounts
adDusted2
o c) Jo0 !pprovedM
+ Creditors holding at least t0o5thirds ,2?3) of the
total lia*ilities of the de*tor. including secured
creditors holding more than 'fty percent ,3>F) of
the total secured claims of the de*tor and
unsecured creditors holding more than 'fty
percent ,3>F) of the total unsecured claims of the
de*tor2
o d) ssuance of order *y the court ,Section ::)
+ Cithin 've ,3) 0or-ing days. and after
determination that the petition is su@icient in
form and su*stance. the court shall issue an
Erder 0hich shallG
,1) identify the de*tor. its principal *usiness of
activity?ies and its principal place of *usinessG
,2) declare that the de*tor is under reha*ilitationG

,3) summari1e the ground2?s for the 'lling of the
petitionG
,%) direct the pu*lication of the Erder in a
ne0spaper of general circulation in the
Philippines once a 0ee- for at least t0o ,2)
consecutive 0ee-s. 0ith the 'rst pu*lication to *e
made 0ithin seven ,:) days from the time of its
issuanceG
,3) direct the service *y personal delivery of a
copy of the petition on each creditor 0ho is not a
petitioner holding at least ten percent ,1>F) of
the total lia*ilities of the de*tor. as determined in
the schedule attached to the petition. 0ithin three
,3) daysG
,9) state that copies of the petition and the
Reha*ilitation Plan are availa*le for e/amination
and copying *y any interested partyG
,:) state that creditors and other interested
parties opposing the petition or Reha*ilitation
Plan may 'le their o*Dections or comments
thereto 0ithin a period of not later than t0enty
,2>) days from the second pu*lication of the
ErderG
,<) appoint a reha*ilitation receiver. if provided
for in the PlanG and
,=) include a Suspension or Stay Erder as
descri*ed in this !ct2 ,cf Section 2<)
o e) !pproval of the Plan ,Section :<) 5 &one 0ithin 1>
days
o f) E*Dections ,Section :=) 5 Su*mitted not later than <
days from Erder
+ (he o*Dections shall *e limited to the follo0ing:

,a) (he allegations in the petition or the
Reha*ilitation Plan or the attachments thereto
are materially false or misleadingG
,*) (he maDority of any class of creditors do not in
fact support the Reha*ilitation PlanG
,c) (he Reha*ilitation Plan fails to accurately
account for a claim against the de*tor and the
claim in not categorically declared as a contested
claimG or
,d) (he support of the creditors. or any of them
0as induced *y fraud2
+ Section <>: Jearing on the E*Dections 5 set not
later than 2> days from Erder in Section ::2
o g) !pproval
+ Section <1: Period 5 not later than 12> days
from 'ling of petition
+ Section <2: #@ect of !pproval: Same as
con'rmation
Chapter %: Eut of Court or nformal Restructuring !greement
o a) $inimum ReBuirements ,Section <%)
,1) (he de*tor must agree to the out5of5court or
informal restructuring?0or-out agreement or
Reha*ilitation PlanG
,2) t must *e approved *y creditors representing
at least si/ty5seven ,9:F) of the secured
o*ligations of the de*torG
,3) t must *e approved *y creditors representing
at least seventy5've percent ,:3F) of the
unsecured o*ligations of the de*torG and
,%) t must *e approved *y creditors holding at
least eighty5've percent ,<3F) of the total
lia*ilities. secured and unsecured. of the de*tor2
*) Section <3: Standstill Period 5 as agreed upon *y the
parties depending upon the negotiation
,1) such agreement is approved *y creditors
representing more than 'fty percent ,3>F) of the
total lia*ilities of the de*torG
,2) notice thereof is pu*lishing in a ne0spaper of
general circulation in the Philippines once a 0ee-
for t0o ,2) consecutive 0ee-sG and
,3) the standstill period does not e/ceed one
hundred t0enty ,12>) days from the date of
e@ectivity2 (he notice must invite creditors to
participate in the negotiation for out5of5court
reha*ilitation or restructuring agreement and
notify them that said agreement 0ill *e *inding
on all creditors if the reBuired maDority votes
prescri*ed in Section <% of this !ct are met2
c) Section <9: Cram &o0n #@ect 5 !
restructuring?0or-out agreement or Reha*ilitation Plan
that is approved pursuant to an informal 0or-out
frame0or- referred to in this chapter shall have the
same legal e@ect as con'rmation of a Plan under
Section 9= hereof2 (he notice of the Reha*ilitation Plan
or restructuring agreement or Plan shall *e pu*lished
once a 0ee- for at least three ,3) consecutive 0ee-s in
a ne0spaper of general circulation in the Philippines2
(he Reha*ilitation Plan or restructuring agreement
shall ta-e e@ect upon the lapse of 'fteen ,13) days from
the date of the last pu*lication of the notice thereof2
d) Section <<: #@ects 5 !ny court action or other
proceedings arising from. or relating to. the out5of5
court or informal restructuring?0or-out agreement or
Reha*ilitation Plan shall not stay its implementation.
unless the relevant party is a*le to secure a temporary
restraining order or inDunctive relief from the Court of
!ppeals2
Chapter %: nvoluntary 7iBuidation
o a) Chen does it occurM ,Section =1) 5 5 (hree ,3) or
more creditors the aggregate of 0hose claims is at least
either Ene million pesos ,Php1.>>>.>>>.>>) or at least
t0enty5've percent ,23F> of the su*scri*ed capital
stoc- or partnerHs contri*utions of the de*tor.
0hichever is higher. may apply for and see- the
liBuidation of an insolvent de*tor *y 'ling a petition for
liBuidation of the de*tor 0ith the court2
*) Chat does the petition containM
,1) there is no genuine issue of fact or la0 on the
claims?s of the petitioner?s. and that the due and
demanda*le payments thereon have not *een
made for at least one hundred eighty ,1<>) days
or that the de*tor has failed generally to meet its
lia*ilities as they fall dueG and
,2) there is no su*stantial li-elihood that the
de*tor may *e reha*ilitated2
c) f the petition or motion is su@icient in form and
su*stance. the court shall issue an Erder
,1) directing the pu*lication of the petition or
motion in a ne0spaper of general circulation once
a 0ee- for t0o ,2) consecutive 0ee-sG and
,2) directing the de*tor and all creditors 0ho are
not the petitioners to 'le their comment on the
petition or motion 0ithin 'fteen ,13) days from
the date of last pu*lication2
d) Conversion into 7iBuidation Proceedings
1) Section 23,c) of this !ct ,Pendency of
!pproval)G or
2) Section :2 of this !ct ,0ithin the Period for
Con'rmation of the Reha*ilitation Plan)G or
3) Section :3 of this !ct ,Petition *y &e*tor)G or
%) Section => of this !ct ,Aoluntary 7iBuidation)G
or
3) at any other time upon the recommendation of
the reha*ilitation receiver that the reha*ilitation
of the de*tor is not feasi*le
Section 1122 7iBuidation Erder2 5 (he 7iBuidation
Erder shall:
,a) declare the de*tor insolventG
,*) order the liBuidation of the de*tor and. in the
case of a Duridical de*tor. declare it as dissolvedG
,c) order the sheri@ to ta-e possession and
control of all the property of the de*tor. e/cept
those that may *e e/empt from e/ecutionG
,d) order the pu*lication of the petition or motion
in a ne0spaper of general circulation once a 0ee-
for t0o ,2) consecutive 0ee-sG
,e) direct payments of any claims and conveyance
of any property due the de*tor to the liBuidatorG

,f) prohi*it payments *y the de*tor and the
transfer of any property *y the de*torG
,g) direct all creditors to 'le their claims 0ith the
liBuidator 0ithin the period set *y the rules of
procedureG
,h) authori1e the payment of administrative
e/penses as they *ecome dueG
,i) state that the de*tor and creditors 0ho are not
petitioner?s may su*mit the names of other
nominees to the position of liBuidatorG and
,D) set the case for hearing for the election and
appointment of the liBuidator. 0hich date shall
not *e less than thirty ,3>) days nor more than
forty5've ,%3) days from the date of the last
pu*lication2
Section 1132 #@ects of the 7iBuidation Erder2 5
8pon the issuance of the 7iBuidation Erder:
,a) the Duridical de*tor shall *e deemed dissolved
and its corporate or Duridical e/istence
terminatedG
,*) legal title to and control of all the assets of the
de*tor. e/cept those that may *e e/empt from
e/ecution. shall *e deemed vested in the
liBuidator or. pending his election or
appointment. 0ith the courtG
,c) all contracts of the de*tor shall *e deemed
terminated and?or *reached. unless the liBuidator.
0ithin ninety ,=>) days from the date of his
assumption of o@ice. declares other0ise and the
contracting party agreesG
,d) no separate action for the collection of an
unsecured claim shall *e allo0ed2 Such actions
already pending 0ill *e transferred to the
7iBuidator for him to accept and settle or contest2
f the liBuidator contests or disputes the claim.
the court shall allo0. hear and resolve such
contest e/cept 0hen the case is already on
appeal2 n such a case. the suit may proceed to
Dudgment. and any 'nal and e/ecutor Dudgment
therein for a claim against the de*tor shall *e
'led and allo0ed in courtG and
,e) no foreclosure proceeding shall *e allo0ed for
a period of one hundred eighty ,1<>) days
Chapter 3: 7iBuidation of nsolvent ;uridical &e*tors
o a) Aoluntary 7iBuidation ,Section =>)
1) Filed *y 0hoM nsolvent &e*tor
2) Chat should the veri'ed petition containM
,a) a schedule of the de*torHs de*ts and
lia*ilities including a list of creditors 0ith
their addresses. amounts of claims and
collaterals. or securities. if anyG
,*) an inventory of all its assets including
receiva*les and claims against third partiesG
and
,c) the names of at least three ,3) nominees
to the position of liBuidator2
o *) nvoluntary 7iBuidation ,Section =1)
1) Filed *y 0hoM (hree ,3) or more creditors the
aggregate of 0hose claims is at least either Ene
million pesos ,Php1.>>>.>>>.>>) or at least
t0enty5've percent ,23F> of the su*scri*ed
capital stoc- or partnerHs contri*utions of the
de*tor. 0hichever is higher. may apply for and
see- the liBuidation of an insolvent de*tor *y
'ling a petition for liBuidation of the de*tor 0ith
the court2
2) Chat should the petition containM
,a) there is no genuine issue of fact or la0
on the claims?s of the petitioner?s. and that
the due and demanda*le payments thereon
have not *een made for at least one
hundred eighty ,1<>) days or that the
de*tor has failed generally to meet its
lia*ilities as they fall dueG and
,*) there is no su*stantial li-elihood that
the de*tor may *e reha*ilitated2
3) Chat is contained *y the court ErderM
,a) nstructions directing the pu*lication of
the petition or motion in a ne0spaper of
general circulation once a 0ee- for t0o ,2)
consecutive 0ee-sG and
,*) directing the de*tor and all creditors
0ho are not the petitioners to 'le their
comment on the petition or motion 0ithin
'fteen ,13) days from the date of last
pu*lication2
Chapter 9: nsolvency of ndividual &e*tors
o a) Cho 'les , Section =%) 5 !n individual de*tor 0ho.
possessing su@icient property to cover all his de*ts *ut
foreseeing the impossi*ility of meeting them 0hen they
respectively fall due
*) Chat does the veri'ed petition containM
1) ! prayer that he *e declared in the state of
suspension of payments *y the court of the
province or city in 0hich he has resides for si/ ,9)
months prior to the 'ling of his petition2
2) Je shall attach to his petition. as a minimum:
,a) a schedule of de*ts and lia*ilitiesG
,*) an inventory of assessG and
,c) a proposed agreement 0ith his creditors2
c) Chat are the actions ta-en *y the court done 0ithin
3 days ,Section =3)
1) f su@icient in form:
,a) calling a meeting of all the creditors
named in the schedule of de*ts and
lia*ilities at such time not less than 'fteen
,13) days nor more than forty ,%>) days
from the date of such Erder and
designating the date. time and place of the
meetingG
,*) directing such creditors to prepare and
present 0ritten evidence of their claims
*efore the scheduled creditorsH meetingG
,c) directing the pu*lication of the said
order in a ne0spaper of general circulation
pu*lished in the province or city in 0hich
the petition is 'led once a 0ee- for t0o ,2)
consecutive 0ee-s. 0ith the 'rst
pu*lication to *e made 0ithin seven ,:)
days from the time of the issuance of the
ErderG
,d) directing the cler- of court to cause the
sending of a copy of the Erder *y registered
mail. postage prepaid. to all creditors
named in the schedule of de*ts and
lia*ilitiesG
,e) for*idding the individual de*tor from
selling. transferring. encum*ering or
disposing in any manner of his property.
e/cept those used in the ordinary
operations of commerce or of industry in
0hich the petitioning individual de*tor is
engaged so long as the proceedings relative
to the suspension of payments are pendingG
,f) prohi*iting the individual de*tor from
ma-ing any payment outside of the
necessary or legitimate e/penses of his
*usiness or industry. so long as the
proceedings relative to the suspension of
payments are pendingG and
,g) appointing a commissioner to preside
over the creditorsH meeting2
2) f court 'nds reason to suspend:
a) 8pon motion 'led *y the individual
de*tor. the court may issue an order
suspending any pending e/ecution against
the individual de*tor2 Provided. properties
held as security *y secured creditors shall
not *e the su*Dect of such suspension order
*) Section =<: Creditors 0ho are una@ected
*y the Suspension Erder may refrain from
attending the meeting and from voting
therein2 Such persons shall not *e *ound *y
any agreement determined upon at such
meeting. *ut if they should Doin in the voting
they shall *e *ound in the same manner as
are the other creditors2
3) Jolding of a CreditorHs $eeting ,Section =:)
a) Jo0 approvedM
(he presence of creditors holding
claims amounting to at least three5
'fths ,3?3) of the lia*ilities shall *e
necessary for holding a meeting2 (he
commissioner appointed *y the court
shall preside over the meeting and the
cler- of court shall act as the
secretary thereof. su*Dect to the
follo0ing rules:
,a) (he cler- shall record the
creditors present and amount of their
respective claimsG
,*) (he commissioner shall e/amine
the 0ritten evidence of the claims2 f
the creditors present hold at least
three5'fths ,3?3) of the lia*ilities of
the individual de*tor. the
commissioner shall declare the
meeting open for *usinessG
,c) (he creditors and individual
de*tor shall discuss the propositions
in the proposed agreement and put
them to a voteG
,d) (o form a maDority. it is necessary:

,1) that t0o5thirds ,2?3) of the
creditors voting unite upon the same
propositionG and
,2) that the claims represented *y
said maDority vote amount to at least
three5'fths ,3?3) of the total lia*ilities
of the de*tor mentioned in the
petitionG and
,e) !fter the result of the voting has
*een announced. all protests made
against the maDority vote shall *e
dra0n up. and the commissioner and
the individual de*tor together 0ith all
creditors ta-ing part in the voting
shall sign the a@irmed propositions2
*) Eutcomes
1) Section ==: 5 (he proposed
agreement shall *e deemed reDected if
the num*er of creditors reBuired for
holding a meeting do not attend
thereat. or if the t0o ,2) maDorities
mentioned in Section =: hereof are
not in favor thereof2 n such instances.
the proceeding shall *e terminated
0ithout recourse and the parties
concerned shall *e at li*erty to
enforce the rights 0hich may
correspond to them2
2) Section 1>> 5 Eption of those 0ho
did not 0in the maDority position *ut
0ishes to o*Dect 5 'le an o*Dection
0ithin 1> days a petition containing
the follo0ing
,a) defects in the call for the
meeting. in the holding thereof
and in the deli*erations had
thereat 0hich preDudice the
rights of the creditorsG
,*) fraudulent connivance
*et0een one or more creditors
and the individual de*tor to
vote in favor of the proposed
agreementG or
,c) fraudulent conveyance of
claims for the purpose of
o*taining a maDority2 (he court
shall hear and pass upon such
o*Dection as soon as possi*le
and in a summary manner2
3) f the court annuls the decision of
the maDority due to Section 1>>
,Buoted a*ove). court proceedings are
terminated
c) #@ects of !pproval of Proposed
!greement , Section 1>1)
1) (hat the agreement *e carried out
and all parties *ound there*y to
comply 0ith its terms2
2) (he Erder con'rming the approval
of the proposed agreement or any
amendment thereof made during the
creditorsH meeting shall *e *inding
upon all creditors 0hose claims are
included in the schedule of de*ts and
lia*ilities su*mitted *y the individual
de*tor and 0ho 0ere properly
summoned. *ut not upon:
,a) those creditors having claims for
personal la*or. maintenance.
e/penses of last illness and funeral of
the 0ife or children of the de*tor
incurred in the si/ty ,9>) days
immediately prior to the 'ling of the
petitionG and
,*) secured creditors 0ho failed to
attend the meeting or refrained from
voting therein2
3) Failure to perform an agreement
, Section 1>2) 5 . all the rights 0hich
the creditors had against the
individual de*tor *efore the
agreement shall revest in them2 n
such case the individual de*tor may
*e made su*Dect to the insolvency
proceedings in the manner
esta*lished *y this !ct2
Chapter 9 ,4): Aoluntary 7iBuidation
o a) Section 1>3: !pplication 5 !n individual de*tor
0hose properties are not su@icient to cover his
lia*ilities. and o0ing de*ts e/ceeding Five hundred
thousand pesos ,Php3>>.>>>2>>). may apply to *e
discharged from his de*ts and lia*ilities *y 'ling a
veri'ed petition 0ith the court of the province or city in
0hich he has resided for si/ ,9) months prior to the
'ling of such petition2 Je shall attach to his petition a
schedule of de*ts and lia*ilities and an inventory of
assets2 (he 'ling of such petition shall *e an act of
insolvency
*) Section 1>%2 7iBuidation Erder2 5 f the court 'nds
the petition su@icient in form and su*stance it shall.
0ithin 've ,3) 0or-ing days issue the 7iBuidation Erder
mentioned in Section 112 hereof2
Chapter 9 ,C): nvoluntary 7iBuidation
o a) Cho may 'leM
Section 1>32 PetitionG !cts of nsolvency2 5 !ny
creditor or group of creditors 0ith a claim of. or
0ith claims aggregating at least Five hundred
thousand pesos ,Php3>>. >>>2>>) may 'le a
veri'ed petition for liBuidation 0ith the court of
the province or city in 0hich the individual de*tor
resides
o *) Chat are acts of insolvencyM
,1) (hat such person is a*out to depart or has
departed from the Repu*lic of the Philippines.
0ith intent to defraud his creditorsG
,2) (hat *eing a*sent from the Repu*lic of the
Philippines. 0ith intent to defraud his creditors.
he remains a*sentG
,3) (hat he conceals himself to avoid the service
of legal process for the purpose of hindering or
delaying the liBuidation or of defrauding his
creditorsG
,%) (hat he conceals. or is removing. any of his
property to avoid its *eing attached or ta-en on
legal processG
,3) (hat he has su@ered his property to remain
under attachment or legal process for three ,3)
days for the purpose of hindering or delaying the
liBuidation or of defrauding his creditorsG
,9) (hat he has confessed or o@ered to allo0
Dudgment in favor of any creditor or claimant for
the purpose of hindering or delaying the
liBuidation or of defrauding any creditors or
claimantG
,:) (hat he has 0illfully su@ered Dudgment to *e
ta-en against him *y default for the purpose of
hindering or delaying the liBuidation or of
defrauding his creditorsG ,h) (hat he has su@ered
or procured his property to *e ta-en on legal
process 0ith intent to give a preference to one or
more of his creditors and there*y hinder or delay
the liBuidation or defraud any one of his
creditorsG
,<) (hat he has made any assignment. gift. sale.
conveyance or transfer of his estate. property.
rights or credits 0ith intent to hinder or delay the
liBuidation or defraud his creditorsG
,=) (hat he has. in contemplation of insolvency.
made any payment. gift. grant. sale. conveyance
or transfer of his estate. property. rights or
creditsG
,1>) (hat *eing a merchant or tradesman. he has
generally defaulted in the payment of his current
o*ligations for a period of thirty ,3>) daysG
,11) (hat for a period of thirty ,3>) days. he has
failed. after demand. to pay any moneys
deposited 0ith him or received *y him in a
'duciaryG and
,12) (hat an e/ecution having *een issued against
him on 'nal Dudgment for money. he shall have
*een found to *e 0ithout su@icient property
su*Dect to e/ecution to satisfy the Dudgment2
o c) Chat are the possi*le acts of the CourtM
1) Erder the individual to sho0 cause ,Section
1>9)
2) Place the party in default ,Section 1>:)
3) &eclare the ndividual &e*tor !*sent , Section
1><)
%) ReBuire posting of *onds , Section 1>=)
3) Jave the properties sold under e/ecution
,Section 11>)
Chapter <: Proceedings !ncillary to Ether nsolvency or
Reha*ilitation Proceedings
o a) 4an-s and Ether Financial nstitutions
o *) Cross 5 4order nsolvency Proceedings
Chapter =: Funds for Reha*ilitation of Government E0ned
and Controlled Corporations
o Section 1%32 Funds for Reha*ilitation of Government
5o0ned and Controlled Corporations2 5 Pu*lic funds for
the reha*ilitation of government5o0ned and controlled
corporations shall *e released only pursuant to an
appropriation *y Congress and shall *e supported *y
funds actually availa*le as certi'ed *y the 6ational
(reasurer2
Chapter 1>: $iscellaneous Provisions 5 !pplica*ility
o !) Section 1%3 5 Penalties
4) Section 1%9: !pplication to Pending nsolvency.
Suspenstion of Payments and Reha*ilation Cases 5 Shall
ta-e e@ect on all petitions 'led after its passage
C) Section 1%:: !pplication to pending contracts:
!pplies to all regardless of date of perfection
&) Section 1%<: nsolvency 7a0 or !ct 1=39 is here*y
repealed