FRIA PPT
FRIA PPT
FRIA PPT
AND
INSOLVENCY ACT OF 2010
Financial Rehabilitation and Insolvency Act
(FRIA):
Governs all petitions filed after it has taken effect.
Governs all further proceedings in insolvency, suspension of
payments and rehabilitation cases pending at the time it became
effective ( except if the application of FRIA would not be feasible or
would work injustice)
Policy of the State
Specifically:
1. Ensure a timely, fair, transparent, effective, and efficient
rehabilitation or liquidation of debtors;
2. Ensure or maintain certainty and predictability in commercial
affairs;
Policy of the State
*In determining whether the debtor’s liabilities are greater than his assets,
reference must be made to the fair valuation of his assets. The debtor’s
assets must not, at fair valuation, be sufficient to pay his debts.
Insolvency Law vs. Bankruptcy Law
Insolvency laws operated on the petition of an insolvent debtor to
discharge him from his debts.
Bankruptcy laws operated on petition of a debtor’s creditors for
the purpose of applying his property to the payment of his debts.
1. Banks
2. Insurance company
3. Pre-need companies
4. National and Local government agencies or units
5. Unincorporated company
6. Joint venture (not registered as partnership with the SEC)
7. Estate of deceased person
8. Trust
Claim
Refers to all claims or demands of whatever nature or
character against the debtor or its property, whether for
money or otherwise, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed,
including but not limited to:
• All claims of the government (whether national or local)
including taxes, tariffs and custom duties
• Claims against directors and officers of the debtor
arising from the acts done in the discharge of their
functions falling within the scope of their authority
The claim must be against the debtor or its property. Rehabilitation Court has no
jurisdiction over claims of a debtor against his own debtors or against third parties.
Remedies of Insolvent Debtor:
Rehabilitation Proceedings
The court acquires jurisdiction over all persons
affected by the proceedings upon publication of the
notice of the commencement of the proceedings and the
Commencement Order in any newspaper of
general circulation in the Philippines for two (2)
consecutive weeks.
Acquisition of Jurisdiction (FRIA)
1. Retention of Management
2. Non-withholding of Supply
3. Protection from certain actions and processes
4. Exemption from taxes
5. Compromise binding
6. Cram- down Power
7. Binding effect of Rehabilitation Plan
Suspension of Payment
*An individual debtor is a natural person who is a resident and a citizen of the
Philippines who has become insolvent.
Suspension of Payment
Who Can File: Only individual debtors can file a petition for
suspension of payment.
BASIC PROCEDURE:
Filing of Petition- the debtor files his verified petition for suspension of
payment and must attach the following:
GENERAL RULE:
From the time of filing the petition and for as long as proceedings
remain pending, no creditor can sue or institute proceedings to collect
his claim.
Venue
EXCEPTION:
BASIC PROCEDURE:
Action on Petition
If the court finds the petition sufficient in form and substance,
it will, within five (5) working days from the filing the petition,
issue the Suspension Order.
Venue
BASIC PROCEDURE:
The creditors will meet on the time, date and place designated by the court in the
Order.
*The presence of creditors holding claims at least 3/5 of the liabilities is necessary in holding
the meeting.
The creditors and the individual debtor will discuss the propositions in the proposed
agreement and put them to a vote.
BASIC PROCEDURE:
Objections to Proposal
If any creditor has dissented from and protested against the vote of
the majority ( proposal and amendments approved by majority of the
creditors during the creditor’s meeting), may file an objection with
the court within 10 days from the date of the last creditor’s meeting.
Objections to Proposal
GROUNDS:
• Defects in the call for the meeting, in the holding thereof and in
the deliberations has which prejudiced the rights of the
creditors;
• Fraudulent connivance between one or more creditors and the
individual debtor to vote in favor of the proposed agreement;
• Fraudulent conveyance of claims for the purpose of obtaining a
majority.
Venue
BASIC PROCEDURE:
Hearing and Issuance of Order
The court must hear and pass upon such objection within 30 days from the date
of filing and in a summary manner.
QUALIFICATIONS:
The following are prohibited upon the issuance of the Order and while the
so long as the proceedings relative to the suspension of payments are
pending:
TYPES:
Court- supervised : Voluntary
Court- supervised : Involuntary
Pre-negotiated
Out-of-court of Informal
REHABILITATION
PURPOSE:
1. To efficiently and equitably distribute the assets of the insolvent
debtor to its creditors
2. To provide the debtor with a fresh start
1. Debtor has assets that can generate more cash if used in its daily
operations than if sold
2. Liquidity issues can be addressed by a practicable business plan that
will generate enough cash to sustain daily operations
3. Debtor has a definite source of financing for the proper and full
implementation of the Rehabilitation Plan that is anchored on
realistic assumptions and goals.
Infeasible Rehabilitation Plan:
Sole Proprietorship
- The petition must be filed in the RTC which has jurisdiction over the
principal office of the debtor
*If the petition involves a group of debtors, the same must be filed in the RTC which has
jurisdiction over the principal office of any of the debtors alleged to be insolvent.
Requirements and Contents
By the debtor/s:
1. Petition must be verified
2. Must set forth with sufficient particularity all of the following
materials facts:
a. Name, business, and principal address and other addresses of the
debtor;
b. Nature of the business and principal activities of the debtor, and the
addresses where these activities are conducted;
Requirements and Contents
By the debtor/s:
c. History of the debtor
d. Fact and cause of debtor’s insolvency
e. Specific relief sought
f. Grounds upon which the petition is based
g. All pending actions or proceedings by or against the debtor
and the courts or tribunal where such are pending;
Requirements and Contents
By the debtor/s:
h. Threats or demands to enforce claims or liens against the
debtor
i. Manner by which the debtor may be rehabilitated
j. Exact address at which documents regarding the debtor and
the proceedings may be reviewed and copied.
Requirements and Contents
By the Creditor/s:
a. Name, business, and principal address and other addresses of the
debtor;
b. Nature of the business and principal activities of the debtor;
c. Circumstances sufficient to support the petition to initiate
involuntary rehabilitation proceedings;
d. Specific relief sought;
e. Rehabilitation Plan;
Requirements and Contents
By the Creditor/s:
f. Names of at least three (3) nominees to the position of
rehabilitation receiver (with qualifications, office and email
addresses);
g. Exact address at which documents regarding the debtor and the
proceedings may be reviewed and copied
h. Documents showing that there is substantial likelihood that the
debtor may be rehabilitated
Basic Procedures:
Filing of Petition
If the court finds the petition for rehabilitation sufficient in form and in
substance, it will, within five (5) working days from filing the petition,
issue a Commencement Order.
If the court finds the petition deficient in substance and in form, it may,
in its discretion, give the petitioner/s a reasonable period of time within
which to:
*In this case, the five (5) working days shall be reckoned from the date
of the filing of the amended or supplemental petition or the submission
of such documents.
*The period of inspection cannot exceed 15 days from the last publication.
Filing of Creditor’s Claim
• The creditors must file their claim at least five (5) days before
the initial hearing .
*If a creditor fails to file their claim in accordance with the Commencement
Order and such is not listed in the schedule of debts and liabilities will not
be entitled to participate in the rehabilitation proceedings. However, if he
files a belated claims, he will be entitled to receive distributions arising
from the proceedings although he is not entitled to participate.
Challenge of Claims
*The aggrieved party may seek the review of the decision of the rehabilitation
receiver by filing a motion with the rehabilitation court within five (5) days
from receipt of rehabilitation receiver’s decision.
Initial Hearing and Subsequent Hearings
*The court may hold additional hearing as may be necessary to continue the initial hearing
process but these hearing must be concluded no later than 90 days from the first hearing
date fixed in the Commencement Order.
*The court may hold additional hearing as may be necessary to continue the initial
hearing process but these hearing must be concluded no later than 90 days from
the first hearing date fixed in the Commencement Order.
If the petition is given due course, the court will issue an order
directing the rehabilitation receiver to call a meeting with the
debtor and all classes of creditors.
*The meeting will take place in not less than 2 weeks nor more
thank 4 weeks from the date of the order to consider the
organization of a creditor’s committee.
Formation of Creditor’s Committee
The creditors may file their objection within 20 days form receipt
of notice from the court.
Objections to the Rehabilitation Plan are limited to the following
grounds:
• Creditors’ support was induced by fraud
• Documents or data relied upon in the Rehabilitation Plan are
materially false and misleading
• Rehabilitation Plan is in fact not supported by the voting
creditors
Hearing on Objections
The court will issue an order setting the time and date for the
hearing/s on the objections.
If it finds merit in the objection, it will order the rehabilitation
receiver or other party to cure the defect, whenever feasible.
If its finds that the debtor acted in bad faith or that it is not
feasible to cure the defect, it will convert the proceedings into
one for the liquidation of the debtor.
Court Action
*The court has a maximum period of one (1) year from the date
of filing of the petition to confirm a Rehabilitation Plan.
Amendments to the Approved Rehabilitation
Plan
After the confirmation of the Rehabilitation Plan, the debtor,
rehabilitation receiver or any creditor may file a verified motion for
leave to amend the Plan.
*The motion must state the reasons warranting the amendment of the Plan
and the proposed amendments, with a copy given to the rehabilitation
receiver.
Termination of Proceedings