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Financial

Rehabilitation

and Insolvency

Act (FRIA) 2010 (Sec1)

-became law in July 18 2 110; repeals the old insolvency law; provides framework for insolvency and rehabilitation
entities; establishes proc ,dures for court-supervised, pre-negotiated, informal (out of court) rehabilitation
Declaration

Policy (see ) Objectives

-ensure timely, fair,transp

of financially distressed

of the law:

rent, effective, and efficient rehabilitation

-ensure or maintain certai Iy and predictability


creditor rights and respec priority of claims

or liquidation of debtor

in commercial affairs, preserve and maximize the value of the assets of these debtors, recognize

-ensure equitable treatm nt of creditors who are similarly situated.


When rehabilitation is not feasible, it is in the interest of the State to facilities a speedy and orderly liquidation of these debtor's assets and the

settlement of their obligations


Section 3. Nature of Pro eedings:
Summary/Non adversari
Section

1. IN REM! (conclusive against all the world); Jurisdiction acquired upon publication of notice 2.

4: Definitions:

(k) Debtor - a sole proprietorship duly registered with the Department of Trade and Industry (DTI), a partnership duly registered with the
Securities and Exchange Commission (SEe), a corporation duly organized and existing under Philippine laws, or an individual debtor who has
become insolvent as defi ed herein.
(p) Insolvent shall refer to the financial condition of a debtor that is generally unable to pay its or his liabilities as they fall due in the ordinary
course of business or ha liabilities that are greater than its or his assets.
(gg) Rehabilitation shall r fer to the restoration of the debtor to a condition of successful operation and solvency, if it is shown that its
continuance of operation Is economically feasible and its creditors can recover by way of the present value of payments projected in the plan,
more if the debtor continues as a going concern than if it is immediately liquidated.
Section

5 - Exclusions:

Section

6 - De~gnatioD

Section

7 - Substantive

ESTOR does not include banks, insuranc


of cour::ts~S_upreme Court will designate
nd Procedural

companies, pre need companies and National and local gov. agencies

court

and prolugate rules'

Consolidation:

-Each juridical entity shall be considered as a separate entity.


General rule: the assets
enterprise that is owned
Exception:
where:

That the com

(a) there was comminglin

nd liabilities of a debtor may not be commingled or aggregated with those of another, unless the latter is a related
r controlled directly or indirectly by the same interests
ingling or aggregation of assets and liabilities of the debtor with those of a related enterprise may only be allowed

in fact of assets and liabilities of the debtor and the related enterprise prior to the commencement

of the proceedings;

(b) the debtor and the rei' ted enterprise have common creditors and it will be more convenient to treat them together rather than separately;
(c) the related enterprise

oluntarily accedes to join the debtor as party petitioner and to commingle its assets and liabilities with the debtor's;

and
(d) The consolidation
of rehabilitation.

of 1ssets and liabilities of the debtor and the related enterprise is beneficial to all concerned and promotes the objectives

Section 10. Liability of In~ividual Debtor, Owner of a Sale Proprietorship, Partners in a Partnership, or Directors and
owner of a sole propriet01ship, partners in a partnership, or directors and officers of a debtor shall be liable for double
SOld, embezzled or dispo ed of or double the amount of the transaction involved, whichever is higher to be recovered
and the creditors, if they, having notice of the commencement
of the proceedings, or having reason to believe
about to be commence
,or in contemplation
of the proceedings, willfully commit the following acts:

Officers. - Individual debtor,


the value of the property
for benefit of the debtor
that proceedings are

(a) Dispose or cause to b disposed of any property of the debtor other than in the ordinary course of business or authorize or approve any
transaction in fraud of cr ditors or in a manner grossly disadvantageous to the debtor and/or creditors; or
(b) Conceal or authorize

r approve the concealment,

from the creditors, or embezzles or misappropriates,

any property of the debtor.

~.

SECTION68
Confirmation of the Rehab Plan IF:
No objections filed in time or
Filed objections lack merit or
Basisfor objection was cured or
Debtor complied with an order to cure
the objection
Q: If there are still unresolved disputes over
claims, may the court confirm the Rehab Plan
anyway?
A: YES,provided the Rehab Plan has made
adequate provisions for paying for such claims.
Q: May the court implement the Rehab Plan
despite the lack of approval or objection of the
insolvent debtor?
A: YES,provided the terms of the Plan are

Claims arising after the ~,pproval of the


Plan which are not treat d by the plan
are NOT SUBJECTTO AN SUSPENSION
ORDER
Q: After the court confirms the ~Ian, does it
lose jurisdiction ofthe case?
A: NO. Even after the order is re~r.eased
by court,
it may still resolve claims of bre ch of the Plan
as well as the claims left unresol ed at the time
of the Plan's Confirmation (Remember, the
court may confirm the Plan eve~if there are
still unresolved disputes over claims. Sec 68)
SEalON 70
Liabilit . of General Partners of a Partnershio
Un aid Balances Under an A r ved Plan

fOI-

necessary to restore the financial well-being of

The approval of the Plan shall not affect

the insolvent debtor.

the rights of creditors to pursue actions

SECTION69
Effect of Confirmation of the Rehab Plan
BINDSthe (1) the debtor and
(2) all persons affected by it
(even ifthey did not participate in the
proceedings or opposed the same and
regardless if their claims were
scheduled or not)
Debtor must COMPLYwith the Plan and
take all actions necessary to CARRYIT
OUT

against the general partlers of a


partnership to the exten they are liable
under relevant legislatio for the debts
thereof.
SEalON 71
I
Treatment of Amounts of Indebtl=dness or
Obligations Forgiven or Reduced

Debts or Obligations redfced under the


Plan shall be free from taxes
SECTION72
Period for Confirmation of the Rehab Plan
Court has max period of
yr from
date of filing to Confirm a Rehab Plan

(1)

Make PAYMENTSto the creditors in


accordance with the Plan

Q: What if no Rehab Plan is confihned within


the period?
A: The proceedings may, motu p~oprio, be

Contracts/Agreements between the


debtor and creditor are deemed to
CONTINUEAND APPLYso long as they
are not in conflict with the Plan

SEalON 73
Accounting Discharge of Rehab R~ciever

COMPROMISESon amounts or

Q: When is the Rehab Receiver


discharged/relieved of his duty?

rescheduling of payments are BINDiNG


regardiess of whether or not the Pian is
successfully implemented

converted into a liquidation proceeding.

A: Upon the Confirmation of the ~ehab Plan.


The Receiver shall provide the cohrt a final
report and accounting.

;...

Lifts the Stay Order ana any other court


order holding in abeyahce actions of
claims against the deb{or

EXCEPTION:If the Rehab Plan requires and


describes the role the Rehab Receiver will play,
the Receiver shall not be discharged even if the
court already approved of the Plan.

(J) TERMINATION OF PROCEEDINGS

SECfION 74
Termination of Proceedings
Q: Who may file for Termination?
A: Any Stakeholder or the Rehab Receiver. The
court shall either declare the plan successful or

CHAPTERIII: PRE-NEGOTIl'\TEDREHAB

SECTION76
Petition by Debtor - How filed
By insolvent Debtor
Pre-negotiated Rehabilan
endorsed/approved b creditors
holding (2/3) of the to al liabilities,

a failure.

includinz

11 .
1115

There is Failure where:


Petition is dismissed by the court
Debtor fails to submit a Rehab Plan
Under the debtor's Rehab Plan, there is
no substantial likelihood for him to be
rehabilitated within a reasonable period
Failure in implementation: either (1) the
debtor fails to perform his obligations
or (2) there is a failure to realize the
objectives, timelines, or conditions.
Commission of Fraud in securing the
approval of the Plan
Other analogous circumstances

So'-Ilro~
rrorl~-tr'lrc
........
I
'.J

holdinz

...........'b

more that (50%) of tot~.I secured claims,


including unsecured cr ditors holding
more than (50%) of un! ecured claims
Petition shall include:
Schedule of Debtor's debts and
liabilities
Inventory of Debtor's assents
The Pre-Negotiated piAn
o Including the (~) qualified
nominees for fehab Receiver
Summary of disputed ~Iaims and a
report on the provisio~ing of funds

Upon breach of or failure of the Rehab Plan, the


court may:
Order that the breach be cured within a
specified period
Convert the proceedings into a
liquidation
Allow amendments to the Rehab Plan
Issue any other order to remedy the
breach
Enforce the Plan thru a Writ of
Execution
SECTION75
Effects of Termination
Discharges the Rehab Receiver, subject
to his submission of a final accounting

Ili,if~l~

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