Financial Rehabilitation and Insolvency Act

State Policy
A. Declaration of Policy- Sec. 2:
1. To encourage debtors, both juridical and natural persons, and their
creditors to collectively and realistically resolve and adjust
competing claims and property rights.
2. To ensure a timely, fair, transparent, effective and efficient
rehabilitation or liquidation of debtors.
3. To ensure or maintain certainly predictability on commercial affairs,
preserve and maximize the value of the assets of these debtors,
recognize creditor rights and respect priority of claims, and ensure
equitable treatment of creditors who are similarly situated.
4. When rehabilitation is not feasible, to facilitate a speedy and orderly
liquidation of these debtors assets and the settlement of their
obligations.
FRIA FOR CORPORATE DEBTORS
A. Extrajudicial Debt-Relief
1. Pre-negotiated Rehabilitation
B. Judicial Debt-Relief
1. A.M. No. 12-12-11-SC 2013 Financial Rehabilitation Rules of Procedure
2. Concept of Rehabilitation v Concept of Liquidation
Rehabilitation- refers to the restoration of the debtor to a condition of
successful operation and solvency.
Liquidation- It is a proceeding where claims are filed, and the assets of the
insolvent debtor are disposed, and the proceeds are divided among
creditors.
3. Rehabilitation: Voluntary v. Involuntary
Voluntary Rehabilitation
- The following must be alleged and established:
1. Insolvency of the debtor
2. Viability of its rehabilitation
Involuntary Rehabilitation
-initiated by a creditor or group of creditors
Instances:
1. There is no genuine issue or fact or law on the claims of the petitioner and;
a. The due and demandable payments thereon have not been made for at
least 60 days or
b. The debtor has failed generally to meet its liabilities as they fail due
 2. A creditor, other than the petitioner/s, has initiated foreclose proceedings
against the debtor that will prevent the debtor from paying its debts as they
become due or will render it insolvent.
A. Minimum Requirements for Filling
B. Commencement Order
C. Stay or Suspension Order
- It is an order included in a commencement order which suspends all
actions for the enforcement of claims against the debtor, and
prohibits the debtor from disposing any of its properties except in
the ordinary course of business.
The stay or suspension order shall:
1. Suspend all actions or proceedings, in court or otherwise, for the
enforcement of claims against the debtor.
2. Suspend all actions to enforce any judgement, attachment or other
provisional remedies against the debtor.
3. Prohibit the debtor from selling, encumbering, transferring, or disposing in
any manner any of its properties except in the ordinary course of
business.
4. Prohibit the debtor from making any payment of its liabilities outstanding
as of the commencement date except as may be provided therein.
Effectivity:
- Unless lifted by the court the Commencement Order shall be
effective for the duration of the rehabilitation proceedings for as
long as there is a substantial likelihood that the debtor will be
successfully rehabilitated.
Who are covered by the stay or suspension order:
- All creditors, secured or unsecured.
Note: The preferred status over the secured creditors relative to
the mortgage lien is retained, but the enforcement of such
preference is suspended.
Exceptions to the stay or suspension order:
1. Cases already pending appeal in the SC
2. Cases pending or filed at a specialized court or quasi-judicial agency.
3. Enforcement of claims against sureties
4. 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 the ordinary course business.
5. Actions of a licensed broker or dealer to sell pledged securities of a debtor
6. The clearing and settlement of financial transactions
Any criminal action against individual debtor or owner, partner, director, or
officer of a debtor shall not be affected by any proceeding commenced under
the FRIA.
D.
Rehabilitation Receiver
E.
Management Committee
F.
Rehabilitation Plan
G.
Cram Down Effect
H.
Pari Passu Order
- A Stay Order is a recognition that all assets of a corporation under
rehabilitation are held in trust for the equal benefit of all creditors
under the doctrine of “equality is equity”. As all the creditors,
secured or unsecured, ought to stand on equal footing, not any one
of them should be paid ahead of others. No creditor should obtain
an advantage or preference over another by the expediency of
foreclosure, attachment, execution or otherwise.
- The stay order will enable the Rehabilitation Receiver to effectively
exercise its or his
C. Liquidation: Voluntary v. Involuntary

1. A.M. 12-12-11-SC 2013 Financial Rehabilitation Rules of Procedure

A. Petition for insolvency