Professional Documents
Culture Documents
FRIA Liquidation and Rehabilitation
FRIA Liquidation and Rehabilitation
SEC 58
o UNDUE PREFERENCE OF CREDITORS
o IN FRAUD OF CREDITORS
o OTHER GROUNDS PROVIDED BY LEGISLATION
SEC 60 - IMPT
- SECURED CREDITOR
SEC 61:
- WHEN LACKS ADEQUATE PROTECTION
o PROPERTY SUSCEPTIBLE OF DEPRECIATION
REHAB PLAN
- AS A MINIMUM, ALL MUST BE INCULDED
- COMPARISONS BETWEEN WHAT CAN BE OBTAINED IN A REHAB
PLAN AND A LIQUIDATION PROCEEDING
SEC 64
- REHAB RECEIVER NOTIFY CREDITORS
- REJECTED UNLESS APPROVED BY ALL CLASSES OF CREDITORS
- MAJORITY RULES >50%
FAILURE OF REHABILITATION
• If the termination of proceedings is due to failure of rehabilitation or
dismissal of the petition for reasons other than technical grounds, the
proceedings shall be immediately converted to liquidation. [Sec. 75]
Pre-Negotiated Rehabilitation
• Endorsed or approved by creditors holding at least two-thirds 2/3 of the
total liabilities of the debtor, including 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. [Sec. 76]
General:
The FRIA now excludes banks, insurance companies, pre-need companies,
and national and local government agencies or units in the definition of
the term “debtor”. [Sec. 5]
The FRIA expressly provides for the concept of Commencement Date,
which occurs upon the issuance of the Commencement Order and
retroacts to the filing of the petition
Additional exceptions to stay or suspension order:
o Cases pending appeal in the Supreme Court;
o Cases pending before specialized bodies, subject to the discretion of
the rehab court;
o Capital-market-related exceptions, e.g., clearing of checks,
settlement of securities in the stock market;
o Criminal actions against individuals [Sec. 18]
Personal liability of directors, officers, etc. of debtor for pre/post-
commencement transactions [Sec. 10], e.g.,
o Disposition of property in fraud of creditors or grossly
disadvantages to the debtor;
o Concealment of debtor’s property [Sec. 10]
Rehabilitation Receiver
o Any qualified juridical person may serve as a rehabilitation
receiver. It must, however, designate a natural person/s who
possess/es all the qualifications and none of the disqualifications as
its representative. [Sec. 28]
o The rehabilitation receiver or the management committee may
employ specialized professionals and other experts. [Sec. 39]
Creditors’ Committee
o Creditors belonging to a class may formally organize a committee
among themselves.
o The creditors may also, as a group, form one committee composed
of (a) secured creditors; (b) unsecured creditors; (c) trade creditors
and suppliers; and (d) employees of the debtor.
o The committee shall assist the rehabilitation receiver in
communicating with the creditors and shall be the primary liaison
between the rehabilitation receiver and the creditors. [Secs. 42-43]
Confirmation of Contracts - The debtor, with the consent of the
rehabilitation receiver, shall notify each contractual counter-party of
whether it is confirming the particular contract. Contractual obligations of
the debtor arising or performed during this period, and afterwards for
confirmed contracts, shall be considered administrative expenses.
Contracts not confirmed within the required deadline shall be considered
terminated. [Sec. 57]
Protection of Secured Creditors’ Interest
The Commencement Order, the Suspension Order or Stay Order, and any
provision of the Act does not in any way diminish or impair the security
or lien of a secured creditor, or the value of his lien or security, except that
his right to enforce it suspended during the term of stay order. [Sec. 60]
Concurrence and Preference of Credits - The Rehabilitation Plan shall
ensure that the payments made follow the priority established under the
provisions of the Civil Code on concurrence and preference of credits and
other applicable laws. [Sec. 62]
Taxes
o The imposition of all taxes and fees including penalties, interests
and charges thereof due to the national government or to LGUs
shall be considered waived during the rehabilitation proceedings.
[Sec. 19]
o Any indebtedness or obligations reduced or forgiven in connection
with a Rehabilitation Plan’s approval shall not be subject to any tax.
[Sec. 71]
o Conversion into liquidation - If no Rehabilitation Plan is
confirmed within one (1) year from the date of the filing of the
petition, the proceedings may upon motion or motu propio, be
converted into one for the liquidation. [Sec. 72]
Post-commencement loans and obligations
o The FRIA expressly contains provisions on this to help rehabilitate
the debtor, the payment of which is considered administrative
expense [Secs. 4(a)(4) and 55]
Inclusion of third mode of rehabilitation
o FRIA includes out-of-court rehabilitation [Secs. 83-89].
LIQUIDATION