Republic of the Philippines CONGRESS OF THE PHILIPPINES Metro Manila Fourteenth Congress Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine. REPUBLIC ACT No. ! "# AN ACT PRO$I%ING FOR THE REHABILITATION OR LI&UI%ATION OF FINANCIALL' %ISTRESSE% ENTERPRISES AN% IN%I$I%UALS Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: CHAPTER I GENERAL PRO$ISIONS Se(tion . Title. - This Act shall be nown as the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010". Se(tion #. Declaration of Policy. - !t is the policy of the "tate to encourage debtors, both #uridical and natural persons, and their creditors to collectively and realistically resolve and ad#ust co$peting clai$s and property rights. !n furtherance thereof, the "tate shall ensure a ti$ely, fair, transparent, effective and efficient rehabilitation or li%uidation of debtors. The rehabilitation or li%uidation shall be $ade with a view to ensure or $aintain certainly and predictability in co$$ercial affairs, preserve and $a&i$i'e the value of the assets of these debtors, recogni'e creditor rights and respect priority of clai$s, and ensure e%uitable treat$ent of creditors who are si$ilarly situated. (hen rehabilitation is not feasible, it is in the interest of the "tate to facilities a speedy and orderly li%uidation of these debtor)s assets and the settle$ent of their obligations. Se(tion ). ature of Proceedings. - The proceedings under this Act shall be in re$. Jurisdiction over all persons affected by the proceedings shall be considered as ac%uired upon publication of the notice of the co$$ence$ent of the proceedings in any newspaper of general circulation in the Philippines in the $anner prescribed by the rules of procedure to be pro$ulgated by the "upre$e *ourt. The proceedings shall be conducted in a su$$ary and non-adversarial $anner consistent with the declared policies of this Act and in accordance with the rules of procedure that the "upre$e *ourt $ay pro$ulgate.

Se(tion ". Definition of Terms. - As used in this Act, the ter$+ ,a- !dministrative e"penses shall refer to those reasonable and necessary e&penses+ ,.- incurred or arising fro$ the filing of a petition under the provisions of this Act/ ,0- arising fro$, or in connection with, the conduct of the proceedings under this Act, including those incurred for the rehabilitation or li%uidation of the debtor/ ,1- incurred in the ordinary course of business of the debtor after the co$$ence$ent date/ ,2- for the pay$ent of new obligations obtained after the co$$ence$ent date to finance the rehabilitation of the debtor/ ,3- incurred for the fees of the rehabilitation receiver or li%uidator and of the professionals engaged by the$/ and ,4- that are otherwise authori'ed or $andated under this Act or such other e&penses as $ay be allowed by the "upre$e *ourt in its rules. ,b- !ffiliate shall refer to a corporation that directly or indirectly, through one or $ore inter$ediaries, is controlled by, or is under the co$$on control of another corporation. ,c- Claim shall refer to all clai$s or de$ands of whatever nature or character against the debtor or its property, whether for $oney or otherwise, li%uidated or unli%uidated, fi&ed or contingent, $atured or un$atured, disputed or undisputed, including, but not li$ited to/ ,.- all clai$s of the govern$ent, whether national or local, including ta&es, tariffs and custo$s duties/ and ,0- clai$s against directors and officers of the debtor arising fro$ acts done in the discharge of their functions falling within the scope of their authority+ Provided# That, this inclusion does not prohibit the creditors or third parties fro$ filing cases against the directors and officers acting in their personal capacities. ,d- Commencement date shall refer to the date on which the court issues the *o$$ence$ent 5rder, which shall be retroactive to the date of filing of the petition for voluntary or involuntary proceedings. ,e- Commencement $rder shall refer to the order issued by the court under "ection .4 of this Act. ,f- Control shall refer to the power of a parent corporation to direct or govern the financial and operating policies of an enterprise so as to obtain benefits fro$ its activities. *ontrol is presu$ed to e&ist when the parent owns, directly or indirectly through subsidiaries or affiliates, $ore than one-half ,.60- of the voting power of an enterprise unless, in e&ceptional circu$stances, it can clearly be de$onstrated that such ownership

does not constitute control. *ontrol also e&ists even when the parent owns one-half ,.60or less of the voting power of an enterprise when there is power+ ,.- over $ore than one-half ,.60- of the voting rights by virtue of an agree$ent with investors/ ,0- to direct or govern the financial and operating policies of the enterprise under a statute or an agree$ent/ ,1- to appoint or re$ove the $a#ority of the $e$bers of the board of directors or e%uivalent governing body/ or ,2- to cast the $a#ority votes at $eetings of the board of directors or e%uivalent governing body. ,g- Court shall refer to the court designated by the "upre$e *ourt to hear and deter$ine, at the first instance, the cases brought under this Act. ,h- Creditor shall refer to a natural or #uridical person which has a clai$ against the debtor that arose on or before the co$$ence$ent date. ,i- Date of li%uidation shall refer to the date on which the court issues the 7i%uidation 5rder. ,#- Days shall refer to calendar days unless otherwise specifically stated in this Act. , - Debtor shall refer to, unless specifically e&cluded by a provision of this Act, a sole proprietorship duly registered with the 8epart$ent of Trade and !ndustry ,8T!-, a partnership duly registered with the "ecurities and 9&change *o$$ission ,"9*-, a corporation duly organi'ed and e&isting under Philippine laws, or an individual debtor who has beco$e insolvent as defined herein. ,l- &ncumbered property shall refer to real or personal property of the debtor upon which a lien attaches. ,$- 'eneral unsecured creditor shall refer to a creditor whose clai$ or a portion thereof its neither secured, preferred nor subordinated under this Act. ,n- 'roup of debtors shall refer to and can cover only+ ,.- corporations that are financially related to one another as parent corporations, subsidiaries or affiliates/ ,0partnerships that are owned $ore than fifty percent ,3:;- by the sa$e person/ and ,1single proprietorships that are owned by the sa$e person. (hen the petition covers a group of debtors, all reference under these rules to debtor shall include and apply to the group of debtors.

,o- (ndividual debtor shall refer to a natural person who is a resident and citi'en of the Philippines that has beco$e insolvent as defined herein. ,p- (nsolvent 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 has liabilities that are greater than its or his assets. ,%- (nsolvent debtor)s estate shall refer to the estate of the insolvent debtor, which includes all the property and assets of the debtor as of co$$ence$ent date, plus the property and assets ac%uired by the rehabilitation receiver or li%uidator after that date, as well as all other property and assets in which the debtor has an ownership interest, whether or not these property and assets are in the debtor)s possession as of co$$ence$ent date+ Provided# That trust assets and bail$ent, and other property and assets of a third party that are in the possession of the debtor as of co$$ence$ent date, are e&cluded therefro$. ,r- (nvoluntary proceedings shall refer to proceedings initiated by creditors. ,s- *iabilities shall refer to $onetary clai$s against the debtor, including stoc holder)s advances that have been recorded in the debtor)s audited financial state$ents as advances for future subscriptions. ,t- *ien shall refer to a statutory or contractual clai$ or #udicial charge on real or personal property that legality entities a creditor to resort to said property for pay$ent of the clai$ or debt secured by such lien. ,u- *i%uidation shall refer to the proceedings under *hapter < of this Act. ,v- *i%uidation $rder shall refer to the 5rder issued by the court under "ection ..0 of this Act. ,w- *i%uidator shall refer to the natural person or #uridical entity appointed as such by the court and entrusted with such powers and duties as set forth in this Act+ Provided# That, if the li%uidator is a #uridical entity, it $ust designated a natural person who possesses all the %ualifications and none of the dis%ualifications as its representative, it being understood that the #uridical entity and the representative are solidarity liable for all obligations and responsibilities of the li%uidator. ,&- $fficer shall refer to a natural person holding a $anage$ent position described in or conte$plated by a #uridical entity)s articles of incorporation, bylaws or e%uivalent docu$ents, e&cept for the corporate secretary, the assistant corporate secretary and the e&ternal auditor. ,y- $rdinary course of business shall refer to transactions in the pursuit of the individual debtor)s or debtor)s business operations prior to rehabilitation or insolvency proceedings and on ordinary business ter$s.

,'- $+nership interest shall refer to the ownership interest of third parties in property held by the debtor, including those covered by trust receipts or assign$ents of receivables. ,aa- Parent shall refer to a corporation which has control over another corporation either directly or indirectly through one or $ore inter$ediaries. ,bb- Party to the proceedings shall refer to the debtor, a creditor, the unsecured creditors) co$$ittee, a sta eholder, a party with an ownership interest in property held by the debtor, a secured creditor, the rehabilitation receiver, li%uidator or any other #uridical or natural person who stands to be benefited or in#ured by the outco$e of the proceedings and whose notice of appearance is accepted by the court. ,cc- Possessory lien shall refer to a lien on property, the possession of which has been transferred to a creditor or a representative or agent thereof. ,dd- Proceedings shall refer to #udicial proceedings co$$enced by the court)s acceptance of a petition filed under this Act. ,ee- Property of others shall refer to property held by the debtor in which other persons have an ownership interest. ,ff- Publication notice shall refer to notice through publication in a newspaper of general circulation in the Philippines on a business day for two ,0- consecutive wee s. ,gg- Rehabilitation shall refer to the restoration of the debtor to a condition of successful operation and solvency, if it is shown that its continuance of operation is econo$ically feasible and its creditors can recover by way of the present value of pay$ents pro#ected in the plan, $ore if the debtor continues as a going concern than if it is i$$ediately li%uidated. ,hh- Rehabilitation receiver shall refer to the person or persons, natural or #uridical, appointed as such by the court pursuant to this Act and which shall be entrusted with such powers and duties as set forth herein. ,ii- Rehabilitation Plan shall refer to a plan by which the financial well-being and viability of an insolvent debtor can be restored using various $eans including, but not li$ited to, debt forgiveness, debt rescheduling, reorgani'ation or %uasi-reorgani'ation, dacion en pago, debt-e%uity conversion and sale of the business ,or parts of it- as a going concern, or setting-up of new business entity as prescribed in "ection 40 hereof, or other si$ilar arrange$ents as $ay be approved by the court or creditors. ,##- Secured claim shall refer to a clai$ that is secured by a lien. , - Secured creditor shall refer to a creditor with a secured clai$.

,ll- Secured party shall refer to a secured creditor or the agent or representative of such secured creditor. ,$$- Securities mar,et participant shall refer to a bro er dealer, underwriter, transfer agent or other #uridical persons transacting securities in the capital $ar et. ,nn- Sta,eholder shall refer, in addition to a holder of shares of a corporation, to a $e$ber of a nonstoc corporation or association or a partner in a partnership. ,oo- Subsidiary shall refer to a corporation $ore than fifty percent ,3:;- of the voting stoc of which is owned or controlled directly or indirectly through one or $ore inter$ediaries by another corporation, which thereby beco$es its parent corporation. ,pp- -nsecured claim shall refer to a clai$ that is not secured by a lien. ,%%- -nsecured creditor shall refer to a creditor with an unsecured clai$. ,rr- .oluntary proceedings shall refer to proceedings initiated by the debtor. ,ss- .oting creditor shall refer to a creditor that is a $e$ber of a class of creditors, the consent of which is necessary for the approval of a Rehabilitation Plan under this Act. Se(tion *. &"clusions. - The ter$ debtor does not include ban s, insurance co$panies, pre-need co$panies, and national and local govern$ent agencies or units. =or purposes of this section+ ,a- Ban shall refer to any duly licensed ban or %uasi-ban that is potentially or actually sub#ect to conservatorship, receivership or li%uidation proceedings under the >ew *entral Ban Act ,Republic Act >o. ?431- or successor legislation/ ,b- !nsurance co$pany shall refer to those co$panies that are potentially or actually sub#ect to insolvency proceedings under the !nsurance *ode ,Presidential 8ecree >o. .24:- or successor legislation/ and ,c- Pre-need co$pany shall refer to any corporation authori'ed6licensed to sell or offer to sell pre-need plans. Provided# That govern$ent financial institutions other than ban s and govern$ent-owned or controlled corporations shall be covered by this Act, unless their specific charter provides otherwise. Se(tion +. Designation of Courts and Promulgation of Procedural Rules. - The "upre$e *ourt shall designate the court or courts that will hear and resolve cases brought under this Act and shall pro$ulgate the rules of pleading, practice and procedure to govern the proceedings brought under this Act.

Se(tion ,. Substantive and Procedural Consolidation. - 9ach #uridical entity shall be considered as a separate entity under the proceedings in this Act. @nder these proceedings, the assets and liabilities of a debtor $ay not be co$$ingled or aggregated with those of another, unless the latter is a related enterprise that is owned or controlled directly or indirectly by the sa$e interests+ Provided# ho+ever# That the co$$ingling or aggregation of assets and liabilities of the debtor with those of a related enterprise $ay only be allowed where+ ,a- there was co$$ingling in fact of assets and liabilities of the debtor and the related enterprise prior to the co$$ence$ent of the proceedings/ ,b- the debtor and the related enterprise have co$$on creditors and it will be $ore convenient to treat the$ together rather than separately/ ,c- the related enterprise voluntarily accedes to #oin the debtor as party petitioner and to co$$ingle its assets and liabilities with the debtor)s/ and ,d- The consolidation of assets and liabilities of the debtor and the related enterprise is beneficial to all concerned and pro$otes the ob#ectives of rehabilitation. Provided# finally# That nothing in this section shall prevent the court fro$ #oining other entities affiliated with the debtor as parties pursuant to the rules of procedure as $ay be pro$ulgated by the "upre$e *ourt. Se(tion -. Decisions of Creditors. - 8ecisions of creditors shall be $ade according to the relevant provisions of the *orporation *ode in the case of stoc or nonstoc corporations or the *ivil *ode in the case of partnerships that are not inconsistent with this Act. Se(tion .. Creditors Representatives. - *reditors $ay designate representatives to vote or otherwise act on their behalf by filing notice of such representation with the court and serving a copy on the rehabilitation receiver or li%uidator. Se(tion !. *iability of (ndividual Debtor# $+ner of a Sole Proprietorship# Partners in a Partnership# or Directors and $fficers. - !ndividual debtor, owner of a sole proprietorship, partners in a partnership, or directors and officers of a debtor shall be liable for double the value of the property sold, e$be''led or disposed of or double the a$ount of the transaction involved, whichever is higher to be recovered for benefit of the debtor and the creditors, if they, having notice of the co$$ence$ent of the proceedings, or having reason to believe that proceedings are about to be co$$enced, or in conte$plation of the proceedings, willfully co$$it the following acts+ ,a- 8ispose or cause to be disposed of any property of the debtor other than in the ordinary course of business or authori'e or approve any transaction in fraud of creditors or in a $anner grossly disadvantageous to the debtor and6or creditors/ or ,b- *onceal or authori'e or approve the conceal$ent, fro$ the creditors, or e$be''les or $isappropriates, any property of the debtor.

The court shall deter$ine the e&tent of the liability of an owner, partner, director or officer under this section. !n this connection, in case of partnerships and corporations, the court shall consider the a$ount of the shareholding or partnership or e%uity interest of such partner, director or officer, the degree of control of such partner, director or officer over the debtor, and the e&tent of the involve$ent of such partner, director or debtor in the actual $anage$ent of the operations of the debtor. Se(tion . !uthori/ation to &"change Debt for &%uity. - >otwithstanding applicable ban ing legislation to the contrary, any ban , whether universal or not, $ay ac%uire and hold an e%uity interest or invest$ent in a debtor or its subsidiaries when conveyed to such ban in satisfaction of debts pursuant to a Rehabilitation or 7i%uidation Plan approved by the court+ Provided# That such ownership shall be sub#ect to the ownership li$its applicable to universal ban s for e%uity invest$ents and+ Provided# further# That any e%uity invest$ent or interest ac%uired or held pursuant to this section shall be disposed by the ban within a period of five ,3- years or as $ay be prescribed by the Monetary Board. CHAPTER II COURT/SUPER$ISE% REHABILITATION 0A1 Initiation Pro(eedings. 0 1 $oluntar2 Pro(eedings. Se(tion #. Petition to (nitiate .oluntary Proceedings by Debtor. - (hen approved by the owner in case of a sole proprietorship, or by a $a#ority of the partners in case of a partnership, or in case of a corporation, by a $a#ority vote of the board of directors or trustees and authori'ed by the vote of the stoc holders representing at least two-thirds ,061- of the outstanding capital stoc , or in case of nonstoc corporation, by the vote of at least two-thirds ,061- of the $e$bers, in a stoc holder)s or $e$ber)s $eeting duly called for the purpose, an insolvent debtor $ay initiate voluntary proceedings under this Act by filing a petition for rehabilitation with the court and on the grounds hereinafter specifically provided. The petition shall be verified to establish the insolvency of the debtor and the viability of its rehabilitation, and include, whether as an attach$ent or as part of the body of the petition, as a $ini$u$ the following+ ,a- !dentification of the debtor, its principal activities and its addresses/ ,b- "tate$ent of the fact of and the cause of the debtor)s insolvency or inability to pay its obligations as they beco$e due/ ,c- The specific relief sought pursuant to this Act/ ,d- The grounds upon which the petition is based/ ,e- 5ther infor$ation that $ay be re%uired under this Act depending on the for$ of relief re%uested/

,f- "chedule of the debtor)s debts and liabilities including a list of creditors with their addresses, a$ounts of clai$s and collaterals, or securities, if any/ ,g- An inventory of all its assets including receivables and clai$s against third parties/ ,h- A Rehabilitation Plan/ ,i- The na$es of at least three ,1- no$inees to the position of rehabilitation receiver/ and ,#- 5ther docu$ents re%uired to be filed with the petition pursuant to this Act and the rules of procedure as $ay be pro$ulgated by the "upre$e *ourt. A group of debtors $ay #ointly file a petition for rehabilitation under this Act when one or $ore of its $e$bers foresee the i$possibility of $eeting debts when they respectively fall due, and the financial distress would li ely adversely affect the financial condition and6or operations of the other $e$bers of the group and6or the participation of the other $e$bers of the group is essential under the ter$s and conditions of the proposed Rehabilitation Plan. 0#1 In3oluntar2 Pro(eedings. Se(tion ). Circumstances ecessary to (nitiate (nvoluntary Proceedings. - Any creditor or group of creditors with a clai$ of, or the aggregate of whose clai$s is, at least 5ne Million Pesos ,Php.,:::,:::.::- or at least twenty-five percent ,03;- of the subscribed capital stoc or partners) contributions, whichever is higher, $ay initiate involuntary proceedings against the debtor by filing a petition for rehabilitation with the court if+ ,a- there is no genuine issue of fact on law on the clai$6s of the petitioner6s, and that the due and de$andable pay$ents thereon have not been $ade for at least si&ty ,4:- days or that the debtor has failed generally to $eet its liabilities as they fall due/ or ,b- a creditor, other than the petitioner6s, has initiated foreclosure proceedings against the debtor that will prevent the debtor fro$ paying its debts as they beco$e due or will render it insolvent. Se(tion ". Petition to (nitiate (nvoluntary Proceedings. - The creditor6s) petition for rehabilitation shall be verified to establish the substantial li elihood that the debtor $ay be rehabilitated, and include+ ,a- identification of the debtor its principal activities and its address/ ,b- the circu$stances sufficient to support a petition to initiate involuntary rehabilitation proceedings under "ection .1 of this Act/ ,c- the specific relief sought under this Act/ ,d- a Rehabilitation Plan/

,e- the na$es of at least three ,1- no$inees to the position of rehabilitation receiver/ ,f- other infor$ation that $ay be re%uired under this Act depending on the for$ of relief re%uested/ and ,g- other docu$ents re%uired to be filed with the petition pursuant to this Act and the rules of procedure as $ay be pro$ulgated by the "upre$e *ourt. 0B1 A(tion on the Petition and Co44en(e4ent o5 Pro(eedings. Se(tion *. !ction on the Petition. - !f the court finds the petition for rehabilitation to be sufficient in for$ and substance, it shall, within five ,3- wor ing days fro$ the filing of the petition, issue a *o$$ence$ent 5rder. !f, within the sa$e period, the court finds the petition deficient in for$ or substance, the court $ay, in its discretion, give the petitioner6s a reasonable period of ti$e within which to a$end or supple$ent the petition, or to sub$it such docu$ents as $ay be necessary or proper to put the petition in proper order. !n such case, the five ,3- wor ing days provided above for the issuance of the *o$$ence$ent 5rder shall be rec oned fro$ the date of the filing of the a$ended or supple$ental petition or the sub$ission of such docu$ents. Se(tion +. Commencement of Proceedings and (ssuance of a Commencement $rder. - The rehabilitation proceedings shall co$$ence upon the issuance of the *o$$ence$ent 5rder, which shall+ ,a- identify the debtor, its principal business or activity6ies and its principal place of business/ ,b- su$$ari'e the ground6s for initiating the proceedings/ ,c- state the relief sought under this Act and any re%uire$ent or procedure particular to the relief sought/ ,d- state the legal effects of the *o$$ence$ent 5rder, including those $entioned in "ection .? hereof/ ,e- declare that the debtor is under rehabilitation/ ,f- direct the publication of the *o$$ence$ent 5rder in a newspaper of general circulation in the Philippines once a wee for at least two ,0- consecutive wee s, with the first publication to be $ade within seven ,?- days fro$ the ti$e of its issuance/ ,g- !f the petitioner is the debtor direct the service by personal delivery of a copy of the petition on each creditor holding at least ten percent ,.:;- of the total liabilities of the debtor as deter$ined fro$ the schedule attached to the petition within five ,3- days/ if the petitioner6s is6are creditor6s, direct the service by personal delivery of a copy of the petition on the debtor within five ,3- days/

,h- appoint a rehabilitation receiver who $ay or not be fro$ a$ong the no$inees of the petitioner6s and who shall e&ercise such powers and duties defined in this Act as well as the procedural rules that the "upre$e *ourt will pro$ulgate/ ,i- su$$ari'e the re%uire$ents and deadlines for creditors to establish their clai$s against the debtor and direct all creditors to their clai$s with the court at least five ,3days before the initial hearing/ ,#- direct Bureau of internal Revenue ,B!R- to file and serve on the debtor its co$$ent on or opposition to the petition or its clai$6s against the debtor under such procedures as the "upre$e *ourt provide/ , - prohibit the debtor)s suppliers of goods or services fro$ withholding the supply of goods and services in the ordinary course of business for as long as the debtor $a es pay$ents for the services or goods supplied after the issuance of the *o$$ence$ent 5rder/ ,l- authori'e the pay$ent of ad$inistrative e&penses as they beco$e due/ ,$- set the case for initial hearing, which shall not be $ore than forty ,2:- days fro$ the date of filing of the petition for the purpose of deter$ining whether there is substantial li elihood for the debtor to be rehabilitated/ ,n- $a e available copies of the petition and rehabilitation plan for e&a$ination and copying by any interested party/ ,o- indicate the location or locations at which docu$ents regarding the debtor and the proceedings under Act $ay be reviewed and copied/ ,p- state that any creditor or debtor who is not the petitioner, $ay sub$it the na$e or no$inate any other %ualified person to the position of rehabilitation receiver at least five ,3- days before the initial hearing/ ,%- include s "tay or "uspension 5rder which shall+ ,.- suspend all actions or proceedings, in court or otherwise, for the enforce$ent of clai$s against the debtor/ ,0- suspend all actions to enforce any #udg$ent, attach$ent or other provisional re$edies against the debtor/ ,1- prohibit the debtor fro$ selling, encu$bering, transferring or disposing in any $anner any of its properties e&cept in the ordinary course of business/ and ,2- prohibit the debtor fro$ $a ing any pay$ent of its liabilities outstanding as of the co$$ence$ent date e&cept as $ay be provided herein.

Se(tion ,. &ffects of the Commencement $rder. - @nless otherwise provided for in this Act, the court)s issuance of a *o$$ence$ent 5rder shall, in addition to the effects of a "tay or "uspension 5rder described in "ection .4 hereof+ ,a- vest the rehabilitation with all the powers and functions provided for this Act, such as the right to review and obtain records to which the debtor)s $anage$ent and directors have access, including ban accounts or whatever nature of the debtor sub#ect to the approval by the court of the perfor$ance bond filed by the rehabilitation receiver/ ,b- prohibit or otherwise serve as the legal basis rendering null and void the results of any e&tra#udicial activity or process to sei'e property, sell encu$bered property, or otherwise atte$pt to collection or enforce a clai$ against the debtor after co$$ence$ent date unless otherwise allowed in this Act, sub#ect to the provisions of "ection 3: hereof/ ,c- serve as the legal basis for rendering null and void any setoff after the co$$ence$ent date of any debt owed to the debtor by any of the debtor)s creditors/ ,d- serve as the legal basis for rendering null and void the perfection of any lien against the debtor)s property after the co$$ence$ent date/ and ,e- consolidate the resolution of all legal proceedings by and against the debtor to the court Provided. Aowever, That the court $ay allow the continuation of cases on other courts where the debtor had initiated the suit. Atte$pts to see legal of other resource against the debtor outside these proceedings shall be sufficient to support a finding of indirect conte$pt of court. Se(tion -. &"ceptions to the Stay or Suspension $rder. - The "tay or "uspension 5rder shall not apply+ ,a- to cases already pending appeal in the "upre$e *ourt as of co$$ence$ent date Provided# That any final and e&ecutory #udg$ent arising fro$ such appeal shall be referred to the court for appropriate action/ ,b- sub#ect to the discretion of the court, to cases pending or filed at a speciali'ed court or %uasi-#udicial agency which, upon deter$ination by the court is capable of resolving the clai$ $ore %uic ly, fairly and efficiently than the court+ Provided# That any final and e&ecutory #udg$ent of such court or agency shall be referred to the court and shall be treated as a non-disputed clai$/ ,c- to the enforce$ent of clai$s against sureties and other persons solidarily liable with the debtor, and third party or acco$$odation $ortgagors as well as issuers of letters of credit, unless the property sub#ect of the third party or acco$$odation $ortgage is necessary for the rehabilitation of the debtor as deter$ined by the court upon reco$$endation by the rehabilitation receiver/

,d- to any for$ of action of custo$ers or clients of a securities $ar et participant to recover or otherwise clai$ $oneys and securities entrusted to the latter in the ordinary course of the latter)s business as well as any action of such securities $ar et participant or the appropriate regulatory agency or self-regulatory organi'ation to pay or settle such clai$s or liabilities/ ,e- to the actions of a licensed bro er or dealer to sell pledged securities of a debtor pursuant to a securities pledge or $argin agree$ent for the settle$ent of securities transactions in accordance with the provisions of the "ecurities Regulation *ode and its i$ple$enting rules and regulations/ ,f- the clearing and settle$ent of financial transactions through the facilities of a clearing agency or si$ilar entities duly authori'ed, registered and6or recogni'ed by the appropriate regulatory agency li e the Bang o "entral ng Pilipinas ,B"P- and the "9* as well as any for$ of actions of such agencies or entities to rei$burse the$selves for any transactions settled for the debtor/ and ,g- any cri$inal action against individual debtor or owner, partner, director or officer of a debtor shall not be affected by any proceeding co$$end under this Act. Se(tion .. 0aiver of ta"es and 1ees Due to the ational 'overnment and to *ocal 'overnment -nits 2*'-s3. - @pon issuance of the *o$$ence$ent 5rder by the court, and until the approval of the Rehabilitation Plan or dis$issal of the petition, whichever is earlier, the i$position of all ta&es and fees including penalties, interests and charges thereof due to the national govern$ent or to 7B@s shall be considered waived, in furtherance of the ob#ectives of rehabilitation. Se(tion #!. !pplication of Stay or Suspension $rder to 'overnment 1inancial (nstitutions. - The provisions of this Act concerning the effects of the *o$$ence$ent 5rder and the "tay or "uspension 5rder on the suspension of rights to foreclose or otherwise pursue legal re$edies shall apply to govern$ent financial institutions, notwithstanding provisions in their charters or other laws to the contrary. Se(tion # . &ffectivity and Duration of Commencement $rder. - @nless lifted by the court, the *o$$ence$ent 5rder shall be for the effective for the duration of the rehabilitation proceedings for as long as there is a substantial li elihood that the debtor will be successfully rehabilitated. !n deter$ining whether there is substantial li elihood for the debtor to be successfully rehabilitated, the court shall ensure that the following $ini$u$ re%uire$ents are $et+ ,a- The proposed Rehabilitation Plan sub$itted co$plies with the $ini$u$ contents prescribed by this Act/ ,b- There is sufficient $onitoring by the rehabilitation receiver of the debtor)s business for the protection of creditors/ ,c- The debtor has $et with its creditors to the e&tent reasonably possible in atte$pts to reach consensus on the proposed Rehabilitation Plan/

,d- The rehabilitation receiver sub$its a report, based on preli$inary evaluation, stating that the underlying assu$ptions and the goals stated in the petitioner)s Rehabilitation Plan are realistic reasonable and reasonable or if not, there is, in any case, a substantial li elihood for the debtor to be successfully rehabilitated because, a$ong others+ ,.- there are sufficient assets with6which to rehabilitate the debtor/ ,0- there is sufficient cash flow to $aintain the operations of the debtor/ ,1- the debtor)s, partners, stoc holders, directors and officers have been acting in good faith and which due diligence/ ,2- the petition is not s sha$ filing intended only to delay the enforce$ent of the rights of the creditor)s or of any group of creditors/ and ,3- the debtor would li ely be able to pursue a viable Rehabilitation Plan/ ,e- The petition, the Rehabilitation Plan and the attach$ents thereto do not contain any $aterially false or $isleading state$ent/ ,f- !f the petitioner is the debtor, that the debtor has $et with its creditor6s representing at least three-fourths ,162- of its total obligations to the e&tent reasonably possible and $ade a good faith effort to reach a consensus on the proposed Rehabilitation Plan if the petitioner6s is6are a creditor or group of creditors, that6 the petitioner6s has6have $et with the debtor and $ade a good faith effort to reach a consensus on the proposed Rehabilitation Plan/ and ,g- The debtor has not co$$itted acts $isrepresentation or in fraud of its creditor6s or a group of creditors. Se(tion ##. !ction at the (nitial Hearing. - At the initial hearing, the court shall+ ,a- deter$ine the creditors who have $ade ti$ely and proper filing of their notice of clai$s/ ,b- hear and deter$ine any ob#ection to the %ualifications of the appoint$ent of the rehabilitation receiver and, if necessary appoint a new one in accordance with this Act/ ,c- direct the creditors to co$$ent on the petition and the Rehabilitation Plan, and to sub$it the sa$e to the court and to the rehabilitation receiver within a period of not $ore than twenty ,0:- days/ and ,d- direct the rehabilitation receiver to evaluate the financial condition of the debtor and to prepare and sub$it to the court within forty ,2:- days fro$ initial hearing the report provided in "ection 02 hereof.

Se(tion #). &ffect of 1ailure to 1ile otice of Claim. - A creditor whose clai$ is not listed in the schedule of debts and liabilities and who fails to file a notice of clai$ in accordance with the *o$$ence$ent 5rder but subse%uently files a belated clai$ shall not be entitled to participate in the rehabilitation proceedings but shall be entitled to receive distributions arising therefro$. Se(tion #". Report of the Rehabilitation Receiver. - (ithin forty ,2:- days fro$ the initial hearing and with or without the co$$ents of the creditors or any of the$, the rehabilitation receiver shall sub$it a report to the court stating his preli$inary findings and reco$$endations on whether+ ,a- the debtor is insolvent and if so, the causes thereof and any unlawful or irregular act or acts co$$itted by the owner6s of a sole proprietorship partners of a partnership or directors or officers of a corporation in conte$plation of the insolvency of the debtor or which $ay have contributed to the insolvency of the debtor/ ,b- the underlying assu$ptions, the financial goals and the procedures to acco$plish such goals as stated in the petitioner)s Rehabilitation Plan are realistic, feasible and reasonable/ ,c- there is a substantial li elihood for the debtor to be successfully rehabilitated/ ,d- the petition should be dis$issed/ and ,e- the debtor should be dissolved and6or li%uidated. Se(tion #*. 'iving Due Course to or Dismissal of Petition# or Conversion of Proceedings. (ithin ten ,.:- days fro$ receipt of the report of the rehabilitation receiver $entioned in "ection 02 hereof the court $ay+ ,a- give due course to the petition upon a finding that+ ,.- the debtor is insolvent/ and ,0- there is a substantial li elihood for the debtor to be successfully rehabilitated/ ,b- dis$iss the petition upon a finding that+ ,.-debtor is not insolvent/ ,0- the petition iC a sha$ filing intended only to delay the enforce$ent of the rights of the creditor6s or of any group of creditors/ ,1-the petition, the Rehabilitation Plan and the attach$ents thereto contain any $aterially false or $isleading state$ents/ or ,2-the debtor has co$$itted acts of $isrepresentation or in fraud of its creditor6s or a group of creditors/

,c-convert the proceedings into one for the li%uidation of the debtor upon a finding that+ ,.-the debtor is insolvent/ and ,0-there is no substantial li elihood for the debtor to be successfully rehabilitated as deter$ined in accordance with the rules to be pro$ulgated by the "upre$e *ourt. Se(tion #+.Petition 'iven Due Course. - !f the petition is given due course, the court shall direct the rehabilitation receiver to review, revise and6or reco$$end action on the Rehabilitation Plan and sub$it the sa$e or a new one to the court within a period of not $ore than ninety ,D:- days. The court $ay refer any dispute relating to the Rehabilitation Plan or the rehabilitation proceedings pending before it to arbitration or other $odes of dispute resolution, as provided for under Republic Act >o. D0C3, 5r the Alternative 8ispute Resolution Act of 0::2, should it deter$ine that such $ode will resolve the dispute $ore %uic ly, fairly and efficiently than the court. Se(tion #,.Dismissal of Petition. - !f the petition is dis$issed pursuant to paragraph ,b- of "ection 03 hereof, then the court $ay, in its discretion, order the petitioner to pay da$ages to any creditor or to the debtor, as the case $ay be, who $ay have been in#ured by the filing of the petition, to the e&tent of any such in#ury. 0C1 The Reha6ilitation Re(ei3er7 8anage4ent Co44ittee and Creditors9 Co44ittee. Se(tion #-.0ho 4ay Serve as a Rehabilitation Receiver. - Any %ualified natural or #uridical person $ay serve as a rehabilitation receiver+ Provided# That if the rehabilitation receiver is a #uridical entity, it $ust designate a natural person6s who possess6es all the %ualifications and none of the dis%ualificationEs as its representative, it being understood that the #uridical entity and the representative6s are solidarily liable for all obligations and responsibilities of the rehabilitation receiver. Se(tion #..5ualifications of a Rehabilitation Receiver. - The rehabilitation receiver shall have the following $ini$u$ %ualifications+ ,a-A citi'en of the Philippines or a resident of the Philippines in the si& ,4- $onths i$$ediately preceding his no$ination/ ,b-5f good $oral character and with ac nowledged integrity, i$partiality and independence/ ,c-Aas the re%uisite nowledge of insolvency and other relevant co$$ercial laws, rules and procedures, as well as the relevant training and6or e&perience that $ay be necessary to enable hi$ to properly discharge the duties and obligations of a rehabilitation receiver/ and

,d-Aas no conflict of interest+ Provided, That such conflict of interest $ay be waived, e&pressly or i$pliedly, by a party who $ay be pre#udiced thereby. 5ther %ualifications and dis%ualificationEs of the rehabilitation receiver shall be set forth in procedural rules, ta ing into consideration the nature of the business of the debtor and the need to protect the interest of all sta eholders concerned. Se(tion )!.(nitial !ppointment of the Rehabilitation Receiver. - The court shall initially appoint the rehabilitation receiver, who $ayor $ay not be fro$ a$ong the no$inees of the petitioner, Aowever, at the initial hearing of the petition, the creditors and the debtor who are not petitioners $ay no$inate other persons to the position. The court $ay retain the rehabilitation receiver initially appointed or appoint another who $ayor $ay not be fro$ a$ong those no$inated. !n case the debtor is a securities $ar et participant, the court shall give priority to the no$inee of the appropriate securities or investor protection fund. !f a %ualified natural person or entity is no$inated by $ore than fifty percent ,3:;- of the secured creditors and the general unsecured creditors, and satisfactory evidence is sub$itted, the court shall appoint the creditors) no$inee as rehabilitation receiver. Se(tion ) .Po+ers# Duties and Responsibilities of the Rehabilitation Receiver. - The rehabilitation receiver shall be dee$ed an officer of the court with the principal duty of preserving and $a&i$i'ing the value of the assets of the debtor during the rehabilitation proceedings, deter$ining the viability of the rehabilitation of the debtor, preparing and reco$$ending a Rehabilitation Plan to the court, and i$ple$enting the approved Rehabilitation Plan, To this end, and without li$iting the generality of the foregoing, the rehabilitation receiver shall have the following powers, duties and responsibilities+ ,a-To verify the accuracy of the factual allegations in the petition and its anne&es/ ,b-To verify and correct, if necessary, the inventory of all of the assets of the debtor, and their valuation/ ,c-To verify and correct, if necessary, the schedule of debts and liabilities of the debtor/ ,d-To evaluate the validity, genuineness and true a$ount of all the clai$s against the debtor/ ,e-To ta e possession, custody and control, and to preserve the value of all the property of the debtor/ ,f-To sue and recover, with the approval of the court, all a$ounts owed to, and all properties pertaining to the debtor/ ,g-To have access to all infor$ation necessary, proper or relevant to the operations and business of the debtor and for its rehabilitation/

,h- To sue and recover, with the. approval of the court, all property or $oney of the debtor paid, transferred or disbursed in fraud of the debtor or its creditors, or which constitute undue preference of creditor6s/ ,i- To $onitor the operations and the business of the debtor to ensure that no pay$ents or transfers of property are $ade other than in the ordinary course of business/ ,#- (ith the court)s approval, to engage the services of or to e$ploy persons or entities to assist hi$ in the discharge of his functions/ , - To deter$ine the $anner by which the debtor $ay be best rehabilitated, to reviewrevise and6or reco$$end action on the Rehabilitation Plan and sub$it the sa$e or a new one to the court for approval/ ,.- To i$ple$ent the Rehabilitation Plan as approved by the court, if C: provided under the Rehabilitation Plan/ ,$- To assu$e and e&ercise the powers of $anage$ent of the debtor, if directed by the court pursuant to "ection 14 hereof/ ,n- To e&ercise such other powers as $ay, fro$ ti$e to ti$e, be conferred upon hi$ by the court/ and To sub$it a status report on the rehabilitation proceedings every %uarter or as $ay be re%uired by the court motu proprio. or upon $otion of any creditor. or as $ay be provided, in the Rehabilitation Plan. @nless appointed by the court, pursuant to "ection 14 hereof, the rehabilitation receiver shall not ta e over the $anage$ent and control of the debtor but $ay reco$$end the appoint$ent of a $anage$ent co$$ittee over the debtor in the cases provided by this Act. Se(tion )#.Removal of the Rehabilitation Receiver. F The rehabilitation receiver $ay be re$oved at any ti$e by the court either motu proprio or upon $otion by any creditor6s holding $ore than fifty percent ,3:;- of the total obligations of the debtor, on such grounds as the rules of procedure $ay provide which shall include, but are not li$ited to, the following+ ,a- !nco$petence, gross negligence, failure to perfor$ or failure to e&ercise the proper degree of care in the perfor$ance of his duties and powers/ ,b- 7ac of a particular or speciali'ed co$petency re%uired by the specific case/ ,c- !llegal acts or conduct in the perfor$ance of his duties and powers/ ,d- 7ac of %ualification or presence of any dis%ualification/

,e- *onflict of interest that arises after his appoint$ent/ and ,f- Manifest lac of independence that is detri$ental to the general body of the sta eholders. Se(tion )).Compensation and Terms of Service. The rehabilitation receiver and his direct e$ployees or independent contractors shall be entitled to co$pensation for reasonable fees and e&penses fro$ the debtor according to the ter$s approved by the court after notice and hearing. Prior to such hearing, the rehabilitation receiver and his direct e$ployees shall be entitled to reasonable co$pensation based on %uantum meruit. "uch costs shall be considered ad$inistrative e&penses. Se(tion )".$ath and Bond of the Rehabilitation Receiver. Prior to entering upon his powers, duties and responsibilities, the rehabilitation receiver shall ta e an oath and file a bond, in such a$ount to be fi&ed by the court, conditioned upon the faithful and proper discharge of his powers, duties and responsibilities. Se(tion )*..acancy. - !ncase the position of rehabilitation receiver is vacated for any reason whatsoever. the court shall direct the debtor and the creditors to sub$it the na$e6s of their no$inee6s to the position. The court $ay appoint any of the %ualified no$inees. or any other person %ualified for the position. Se(tion )+.Displacement of &"isting 4anagement by the Rehabilitation Receiver or 4anagement Committee. F @pon $otion of any interested party, the court $ay appoint and direct the rehabilitation receiver to assu$e the powers of $anage$ent of the debtor, or appoint a $anage$ent co$$ittee that will underta e the $anage$ent of the debtor. upon clear and convincing evidence of any of the following circu$stances+ ,a- Actual or i$$inent danger of dissipation, loss, wastage or destruction of the debtorEs assets or other properties/ ,b- Paraly'ation of the business operations of the debtor/ or ,c- Bross $is$anage$ent of the debtor. or fraud or other wrongful conduct on the part of, or gross or willful violation of this Act by. e&isting $anage$ent of the debtor 5r the owner, partner, director, officer or representative6s in $anage$ent of the debtor. !n case the court appoints the rehabilitation receiver to assu$e the powers of $anage$ent of the debtor. the court $ay+ ,.- re%uire the rehabilitation receiver to post an additional bond/ ,0- authori'e hi$ to engage the services or to e$ploy persona or entities to assist hi$ in the discharge of his $anagerial functions/ and ,1- authori'e a co$$ensurate increase in his co$pensation.

Se(tion ),.Role of the 4anagement Committee. F (hen appointed pursuant to the foregoing section, the $anage$ent co$$ittee shall ta e the place of the $anage$ent and the governing body of the debtor and assu$e their rights and responsibilities. The specific powers and duties of the $anage$ent co$$ittee, whose $e$bers shall be considered as officers of the court, shall be prescribed by the procedural rules. Se(tion )-.5ualifications of 4embers of the 4anagement Committee. - The %ualifications and dis%ualificationEs of the $e$bers of the $anage$ent co$$ittee shall be set forth in the procedural rules, ta ing into consideration the nature of the business of the debtor and the need to protect the interest of all sta eholders concerned. Se(tion )..&mployment of Professionals. - @pon approval of the court, and after notice and hearing, the rehabilitation receiver or the $anage$ent co$$ittee $ay e$ploy speciali'ed professionals and other e&perts to assist each in the perfor$ance of their duties. "uch professionals and other e&perts shall be considered either e$ployees or independent contractors of the rehabilitation receiver or the $anage$ent co$$ittee, as the case $ay be. The %ualifications and dis%ualificationEs of the professionals and e&perts $ay be set forth in procedural rules, ta ing into consideration the nature of the business of the debtor and the need to protect the interest of all sta eholders concerned. Se(tion "!.Conflict of (nterest. - >o person $ay be appointed as a rehabilitation receiver, $e$ber of aG $anage$ent co$$ittee, or be e$ployed by the rehabilitation receiver or the $anage$ent co$$ittee if he has a conflict of interest. An individual shall be dee$ed to have a conflict of interest if he is so situated as to be $aterially influenced in the e&ercise of his #udg$ent for or against any party to the proceedings. (ithout li$iting the generality of the foregoing, an individual shall be dee$ed to have a conflict of interest if+ ,a- he is a creditor, owner, partner or stoc holder of the debtor/ ,b- he is engaged in a line of business which co$petes with that of the debtor/ ,c- he is, or was, within five ,3- years fro$ the filing of the petition, a director, officer, owner, partner or e$ployee of the debtor or any of the creditors, or the auditor or accountant of the debtor/ ,d- he is, or was, within two ,0- years fro$ the filing of the petition, an underwriter of the outstanding securities of the debtor/ ,e- he is related by consanguinity or affinity within the fourth civil degree to any individual creditor, owners of a sale proprietorship-debtor, partners of a partnershipdebtor or to any stoc holder, director, officer, e$ployee or underwriter of a corporationdebtor/ or

,f- he has any other direct or indirect $aterial interest in the debtor or any of the creditors. Any rehabilitation receiver, $e$ber of the $anage$ent co$$ittee or persons e$ployed or contracted by the$ possessing any conflict of interest shall $a e the appropriate disclosure either to the court or to the creditors in case of out-of-court rehabilitation proceedings. Any party to the proceeding adversely affected by the appoint$ent of any person with a conflict of interest to any of the positions enu$erated above $ay however waive his right to ob#ect to such appoint$ent and, if the waiver is unreasonably withheld, the court $ay disregard the conflict of interest, ta ing into account the general interest of the sta eholders. Se(tion " .(mmunity. - The rehabilitation receiver and all persons e$ployed by hi$, and the $e$bers of the $anage$ent co$$ittee and all persons e$ployed by it, shall not be sub#ect to any action. clai$ or de$and in connection with any act done or o$itted to be done by the$ in good faith in connection with the e&ercise of their powers and functions under this Act or other actions duly approved by the court.6a+p77il Se(tion "#.Creditors) Committee. - After the creditors) $eeting called pursuant to "ection 41 hereof, the creditors belonging to a class $ay for$ally organi'e a co$$ittee a$ong the$selves. !n addition, the creditors $ay, as a body, agree to for$ a creditors) co$$ittee co$posed of a representative fro$ each class of creditors, such as the following+ ,a- "ecured creditors/ ,b- @nsecured creditors/ ,c- Trade creditors and suppliers/ and ,d- 9$ployees of the debtor. !n the . election of the creditors) representatives, the rehabilitation receiver or his representative shall attend such $eeting and e&tend the appropriate assistance as $ay be defined in the procedural rules. Se(tion ").Role of Creditors) Committee. - The creditors) co$$ittee when constituted pursuant to "ection 20 of this Act shall assist the rehabilitation receiver in co$$unicating with the creditors and shall be the pri$ary liaison between the rehabilitation receiver and the creditors. The creditors) co$$ittee cannot e&ercise or waive any right or give any consent on behalf of any creditor unless specifically authori'ed in writing by such creditor. The creditors) co$$ittee $ay be authori'ed by the court or by the rehabilitation receiver to perfor$ such other tas s and functions as $ay be defined by the procedural rules in order to facilitate the rehabilitation process. 0%1 %eter4ination o5 Clai4s.

Se(tion "".Registry of Claims. - (ithin twenty ,0:- days fro$ his assu$ption into office, the rehabilitation receiver shall establish a preli$inary registry of clai$s. The rehabilitation receiver shall $a e the registry available for public inspection and provide publication notice to the debtor, creditors and sta eholders on where and when they $ay inspect it. All clai$s included in the registry of clai$s $ust be duly supported by sufficient evidence. Se(tion "*.$pposition or Challenge of Claims. F (ithin thirty ,1:- days fro$ the e&piration of the period stated in the i$$ediately preceding section, the debtor, creditors, sta eholders and other interested parties $ay sub$it a challenge to clai$6s to the court, serving a certified copy on the rehabilitation receiver and the creditor holding the challenged clai$6so @pon the e&piration of the thirty ,1:--day period, the rehabilitation receiver shall sub$it to the court the registry of clai$s which shall include undisputed clai$s that have not been sub#ect to challenge. Se(tion "+.!ppeal. - Any decision of the rehabilitation receiver regarding a clai$ $ay be appealed to the court. 0E1 Go3ernan(e. Se(tion ",.4anagement. - @nless otherwise provided herein, the $anage$ent of the #uridical debtor shall re$ain with the e&isting $anage$ent sub#ect to the applicable law6s and agree$ent6s, if any, on the election or appoint$ent of directors, $anagers 5r $anaging partner. Aowever, all disburse$ents, pay$ents or sale, disposal, assign$ent, transfer or encu$brance of property , or any other act affecting title or interest in property, shall be sub#ect to the approval of the rehabilitation receiver and6or the court, as provided in the following subchapter. 0F1 Use7 Preser3ation and %is:osal o5 Assets and Treat4ent o5 Assets and Clai4s a5ter Co44en(e4ent %ate. Se(tion "-.-se or Disposition of !ssets. - 9&cept as otherwise provided herein, no funds or property of the debtor shall he used or disposed of e&cept in the ordinary course of business of the debtor, or unless necessary to finance the ad$inistrative e&penses of the rehabilitation proceedings. Se(tion "..Sale of !ssets. - The court, upon application of the rehabilitation receiver, $ay authori'e the sale of unencu$bered property of the debtor outside the ordinary course of business upon a showing that the property, by its nature or because of other circu$stance, is perishable, costly to $aintain, susceptible to devaluation or otherwise in#eopardy. Se(tion *!.Sale or Disposal of &ncumbered Property of the Debtor and !ssets of Third Parties Held by Debtor. The court $ay authori'e the sale, transfer, conveyance or disposal of encu$bered property of the debtor, or property of others held by the debtor where there is a security interest pertaining to third parties under a financial, credit or other si$ilar transactions if, upon application of the rehabilitation receiver and with the consent of the affected owners of the property, or secured creditor6s in the case of encu$bered property of the debtor and, after notice and hearing, the court deter$ines that+

,a- such sale, transfer, conveyance or disposal is necessary for the continued operation of the debtor)s business/ and ,b- the debtor has $ade arrange$ents to provide a substitute lien or ownership right that provides an e%ual level of security for the counter-party)s clai$ or right. Provided# That properties held by the debtor where the debtor has authority to sell such as trust receipt or consign$ent arrange$ents $ay be sold or disposed of by the .debtor, if such sale or disposal is necessary for the operation of the debtor)s business, and the debtor has $ade arrange$ents to provide a substitute lien or ownership right that provides an e%ual level of security for the counter-party)s clai$ or right. "ale or disposal of property under this section shall not give rise to any cri$inal liability under applicable laws. Se(tion * .!ssets of Debtor Held by Third Parties. F !n the case of possessory pledges, $echanic)s liens or si$ilar clai$s, third parties who have in their possession or control property of the debtor shall not transfer, conveyor otherwise dispose of the sa$e to persons other than the debtor, unless upon prior approval of the rehabilitation receiver. The rehabilitation receiver $ay also+ ,a- de$and the surrender or the transfer of the possession or control of such property to the rehabilitation receiver or any other person, sub#ect to pay$ent of the clai$s secured by any possessory !ien6s thereon/ ,b- allow said third parties to retain possession or control, if such an arrange$ent would $ore li ely preserve or increase the value of the property in %uestion or the total value of the assets of the debtor/ or ,c- underta e any ot!.er disposition of the said property as $ay be beneficial for the rehabilitation of the debtor, after notice and hearing, and approval of the court. Se(tion *#.Rescission or ullity of Sale# Payment# Transfer or Conveyance of !ssets. - The court $ay rescind or declare as null and void any sale, pay$ent, transfer or conveyance of the debtor)s unencu$bered property or any encu$bering thereof by the debtor or its agents or representatives after the co$$ence$ent date which are not in the ordinary course of the business of the debtor+ Provided# ho+ever# That the unencu$bered property $ay be sold, encu$bered or otherwise disposed of upon order of the court after notice and hearing+ ,a- if such are in the interest of ad$inistering the debtor and facilitating the preparation and i$ple$entation of a Rehabilitation Plan/ ,b- in order to provide a substitute lien, $ortgage or pledge of property under this Act/ ,c- for pay$ents $ade to $eet ad$inistrative e&penses as they arise/

,d- for pay$ents to victi$s of %uasi delicts upon a showing that the clai$ is valid and the debtor has insurance to rei$burse the debtor for the pay$ents $ade/ ,e- for pay$ents $ade to repurchase property of the debtor that is auctioned off in a #udicial or e&tra#udicial sale under. This Act/ or ,f- for pay$ents $ade to reclai$ property of the debtor held pursuant to a possessory lien. Se(tion *).!ssets Sub8ect to Rapid $bsolescence# Depreciation and Diminution of .alue. - @pon the application of a secured creditor holding a lien against or holder of an ownership interest in property held by the debtor that is sub#ect to potentially rapid obsolescence, depreciation or di$inution in value, the court shall, after notice and hearing, order the debtor or rehabilitation receiver to ta e reasonable steps necessary to prevent the depreciation. !f depreciation cannot be avoided and such depreciation is #eopardi'ing the security or property interest of the secured creditor or owner, the court shall+ ,a- allow the encu$bered property to be foreclosed upon by the secured creditor according to the relevant agree$ent between the debtor and the secured creditor, applicable rules of procedure and relevant legislation+ Provided. That the proceeds of the sale will be distributed in accordance with the order prescribed under the rules of concurrence and preference of credits/ or ,b- upon $otion of, or with the consent of the affected secured creditor or interest owner. order the conveyance of a lien against or ownership interest in substitute property of the debtor to the secured creditor+ Provided. That other creditors holding liens on such property, if any, do not ob#ect thereto, or, if such property is not available/ ,c- order the conveyance to the secured creditor or holder . of an ownership interest of a lien on the residual funds fro$ the sale of encu$bered property during the proceedings/ or ,d- allow the sale or disposition of the property+ Provided. That the sale or disposition will $a&i$i'e the value of the property for the benefit of the secured creditor and the debtor, and the proceeds of the sale will be distributed in accordance with the order prescribed under the rules of concurrence and preference of credits. Se(tion *".Post9commencement (nterest. - The rate and ter$ of interest, if any, on secured and unsecured clai$s shall be deter$ined and provided for in the approved Rehabilitation Plan. Se(tion **.Post9commencement *oans and $bligations. - (ith the approval of the court upon the reco$$endation of the rehabilitation receiver, the debtor, in order to enhance its rehabilitation. $ay+ ,a- enter into credit arrange$ents/ or

,b- enter into credit arrange$ents, secured by $ortgages of its unencu$bered property or secondary $ortgages of encu$bered property with the approval of senior secured parties with regard to the encu$bered property/ or ,c- incur other obligations as $ay be essential for its rehabilitation. The pay$ent of the foregoing obligations shall be considered ad$inistrative e&penses under this Act. Se(tion *+.Treatment of &mployees# Claims. *o$pensation of e$ployees re%uired to carry on the business shall be considered an ad$inistrative e&pense. *lai$s of separation pay for $onths wor ed prior to the co$$ence$ent date shall be considered a pre- o$$ence$ent clai$. *lai$s for salary and separation pay for wor perfor$ed after the co$$ence$ent date shall be an ad$inistrative e&pense. Se(tion *,.Treatment of Contracts. - @nless cancelled by virtue of a final #udg$ent of a court of co$petent #urisdiction issued prior to the issuance of the *o$$ence$ent 5rder, or at anyti$e thereafter by the court before which the rehabilitation proceedings are pending, all valid and subbsisting contracts of the debtor with creditors and other third parties as at the co$$ence$ent date shall continue in force+ Provided# That +ithin ninety 2:;3 days following the co$$ence$ent of proceedings, the debtor, with the consent of the rehabilitation receiver, shall notify each contractual counter-party of whether it is confir$ing the particular contract. *ontractual obligations of the debtor arising or perfor$ed during this period, and afterwards for confir$ed contracts, shall be considered ad$inistrative e&penses. *ontracts not confir$ed within the re%uired deadline shall be considered ter$inated. *lai$s for actual da$ages, if any, arising as a result of the election to ter$inate a contract shall be considered a pre-co$$ence$ent clai$ against the debtor. >othing contained herein shall prevent the cancellation or ter$ination of any contract of the debtor for any ground provided by law. 0G1 A3oidan(e Pro(eedings. Se(tion *-.Rescission or ullity of Certain Pre-co$$ence$ent Transactions. Any transaction occurring prior to co$$ence$ent date entered into by the debtor or involving its funds or assets $ay be rescinded or declared null and void on the ground that the sa$e was e&ecuted with intent to defraud a creditor or creditors or which constitute undue preference of creditors. (ithout li$iting the generality of the foregoing, a disputable presu$ption of such design shall arise if the transaction+ ,a- provides unreasonably inade%uate consideration to the debtor and is e&ecuted within ninety ,D:- days prior to the co$$ence$ent date/ ,b- involves an accelerated pay$ent of a clai$ to a creditor within ninety ,D:- days prior to the co$$ence$ent date/ ,c- provides security or additional security e&ecuted within ninety ,D:- days prior to the co$$ence$ent date/

,d- involves creditors, where a creditor obtained, or received the benefit of, $ore than its pro rata share in the assets of the debtor, e&ecuted at a ti$e when the debtor was insolvent/ or ,e- is intended to defeat, delay or hinder the ability of the creditors to collect clai$s where the effect of the transaction is to put assets of the debtor beyond the reach of creditors or to otherwise pre#udice the interests of creditors. Provided# ho+ever# That nothing in this section shall prevent the court fro$ rescinding or declaring as null and void a transaction on other grounds provided by relevant legislation and #urisprudence+ Provided# further# That the provisions of the *ivil *ode on rescission shall in any case apply to these transactions. Se(tion *..!ctions for Rescission or ullity. - ,a- The rehabilitation receiver or, with his confor$ity, any creditor $ay initiate and prosecute any action to rescind, or declare null and void any transaction described in "ection 3C hereof. !f the rehabilitation receiver does not consent to the filing or prosecution of such action, ,b- !f leave of court is granted under subsection ,a-, the rehabilitation receiver shall assign and transfer to the creditor all rights, title and interest in the chose in action or sub#ect $atter of the proceeding, including any docu$ent in support thereof. ,c- Any benefit derived fro$ a proceeding ta en pursuant to subsection ,a-, to the e&tent of his clai$ and the costs, belongs e&clusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate. ,d- (here, before an order is $ade under subsection ,a-, the rehabilitation receiver ,or li%uidator- signifies to the court his readiness to institute the proceeding for the benefit of the creditors, the order shall fi& the ti$e within which he shall do so and, $ that case, the benefit derived fro$ the proceeding, if instituted within the ti$e li$its so fi&ed, belongs to the estate. 0H1 Treat4ent o5 Se(ured Creditors. Se(tion +!. o Diminution of Secured Creditor Rights. The issuance of the *o$$ence$ent 5rder and the "uspension or "tay 5rder, and any other provision of this Act, shall not be dee$ed in any way to di$inish or i$pair the security or lien of a secured creditor, or the value of his lien or security, e&cept that his right to enforce said security or lien $ay be suspended during the ter$ of the "tay 5rder. The court, upon $otion or reco$$endation of the rehabilitation receiver, $ay allow a secured creditor to enforce his security or lien, or foreclose upon property of the debtor securing his6its clai$, if the said property is not necessary for the rehabilitation of the debtor. The secured creditor and6or the other lien holders shall be ad$itted to the rehabilitation proceedings only for the balance of his clai$, if any.

Se(tion + .*ac, of !de%uate Protection. - The court, on $otion or motu proprio# $ay ter$inate, $odify or set conditions for the continuance of suspension of pay$ent, or relieve a clai$ fro$ the coverage thereof, upon showing that+ ,a- a creditor does not have ade%uate protection over property securing its clai$/ or ,b- the value of a clai$ secured by a lien on property which is not necessary for rehabilitation of the debtor e&ceeds the fair $ar et value of the said property. =or purposes of this section, a creditor shall be dee$ed to lac ade%uate protection if it can be shown that+ ,a- the debtor fails or refuses to honor a pre-e&isting agree$ent with the creditor to eep the property insured/ ,b- the debtor fails or refuses to ta e co$$ercially reasonable steps to $aintain the property/ or ,c- the property has depreciated to an e&tent that the creditor is under secured. @pon showing of a lac of protection, the court shall order the debtor or the rehabilitation receiver to $a e arrange$ents to provide for the insurance or $aintenance of the property/ or to $a e pay$ents or otherwise provide additional or replace$ent security such that the obligation is fully secured. !f such arrange$ents are not feasible, the court $ay $odify the "tay 5rder to allow the secured creditor lac ing ade%uate protection to enforce its security clai$ against the debtor+ Provided# ho+ever# That the court $ay deny the creditor the re$edies in this paragraph if the property sub#ect of the enforce$ent is re%uired for the rehabilitation of the debtor. 0i1 Ad4inistration o5 Pro(eedings. Se(tion +#.Contents of a Rehabilitation Plan. F The Rehabilitation Plan shall, as a $ini$u$+ ,a- specify the underlying assu$ptions, the financial goals and the procedures proposed to acco$plish such goals/ ,b- co$pare the a$ounts e&pected to be received by the creditors under the Rehabilitation Plan with those that they will receive if li%uidation ensues within the ne&t one hundred twenty ,.0:- days/ ,c- contain infor$ation sufficient to give the various classes of creditors a reasonable basis for deter$ining whether supporting the Plan is in their financial interest when co$pared to the i$$ediate li%uidation of the debtor, including any reduction of principal interest and penalties payable to the creditors/ ,d- establish classes of voting creditors/ ,e- establish subclasses of voting creditors if prior approval has been granted by the court/

,f- indicate how the insolvent debtor will be rehabilitated including, but not li$ited to, debt forgiveness, debt rescheduling, reorgani'ation or %uasi-reorgani'ation. dacion en pago# debt-e%uity conversion and sale of the business ,or parts of it- as a going concern, or setting-up of a new business entity or other si$ilar arrange$ents as $ay be necessary to restore the financial well-being and visibility of the insolvent debtor/ ,g- specify the treat$ent of each class or subclass described in subsections ,d- and ,e-/ ,h- provide for e%ual treat$ent of all clai$s within the sa$e class or subclass, unless a particular creditor voluntarily agrees to less favorable treat$ent/ ,i- ensure that the pay$ents $ade under the plan follow the priority established under the provisions of the *ivil *ode on concurrence and preference of credits and other applicable laws/ ,#- $aintain the security interest of secured creditors and preserve the li%uidation value of the security unless such has been waived or $odified voluntarily/ , - disclose all pay$ents to creditors for pre-co$$ence$ent debts $ade during the proceedings and the #ustifications thereof/ ,.- describe the disputed clai$s and the provisioning of funds to account for appropriate pay$ents should the clai$ be ruled valid or its a$ount ad#usted/ ,$- identify the debtor)s role in the i$ple$entation of the Plan/ ,n- state any rehabilitation covenants of the debtor, the breach of which shall be considered a $aterial breach of the Plan/ ,o- identify those responsible for the future $anage$ent of the debtor and the supervision and i$ple$entation of the Plan, their affiliation with the debtor and their re$uneration/ ,p- address the treat$ent of clai$s arising after the confir$ation of the Rehabilitation Plan/ ,%- re%uire the debtor and its counter-parties to adhere to the ter$s of all contracts that the debtor has chosen to confir$/ ,r- arrange for the pay$ent of all outstanding ad$inistrative e&penses as a condition to the Plan)s approval unless such condition has been waived in writing by the creditors concerned/ ,s- arrange for the pay$entH of all outstanding ta&es and assess$ents, or an ad#usted a$ount pursuant to a co$pro$ise settle$ent with the BlR 5r other applicable ta& authorities/

,t- include a certified copy of a certificate of ta& clearance or evidence of a co$pro$ise settle$ent with the B!R/ ,u- include a valid and binding r,,solution of a $eeting of the debtor)s stoc holders to increase the shares by the re%uired a$ount in cases where the Plan conte$plates an additional issuance of shares by the debtor/ ,v- state the co$pensation and status, if any, of the rehabilitation receiver after the approval of the Plan/ and ,w- contain provisions for conciliation and6or $ediation as a prere%uisite to court assistance or intervention in the event of any disagree$ent in the interpretation or i$ple$entation of the Rehabilitation Plan. Se(tion +).Consultation +ith Debtor and Creditors. F if the court gives due course to the petition, the rehabilitation receiver shall confer with the debtor and all the classes of creditors, and $ay consider their views and proposals ill the review, revision or preparation of a new Rehabilitation Plan. Se(tion +".Creditor !pproval of Rehabilitation Plan. F The rehabilitation receiver shall notify the creditors and sta eholders that the Plan is ready for their e&a$ination. (ithin twenty ,0Idays fro$ the said notification, the rehabilitation receiver shall convene the creditors, either as a whole or per class, for purposes of voting on the approval of the Plan. The Plan shall be dee$ed re#ected unless approved by all classes of creditors w hose rights are adversely $odified or affected by the Plan. =or purposes of this section, the Plan is dee$ed to have been approved by a class of creditors if $e$bers of the said class holding $ore than fifty percent ,3:;- of the total clai$s of the said class vote in favor of the Plan. The votes of the creditors shall be based solely on the a$ount of their respective clai$s based on the registry of clai$s sub$itted by the rehabilitation receiver pursuant to "ection 22 hereof. >otwithstanding the re#ection of the Rehabilitation Plan, the court $ay confir$ the Rehabilitation Plan if all of the following circu$stances are present+ ,a-The Rehabilitation Plan co$plies with the re%uire$ents specified in this Act. ,b- The rehabilitation receiver reco$$ends the confir$ation of the Rehabilitation Plan/ ,c- The shareholders, owners or partners of the #uridical debtor lose at least their controlling interest as a result of the Rehabilitation Plan/ and ,d- The Rehabilitation Plan would li ely provide the ob#ecting class of creditors with co$pensation which has a net present value greater than that which they would have received if the debtor were under li%uidation. Se(tion +*.Submission of Rehabilitation Plan to the Court. - .fthe Rehabilitation Plan is approved, the rehabilitation receiver shall sub$it the sa$e to the court for confir$ation. (ithin

five ,3- days fro$ receipt of the Rehabilitation Plan, the court shall notify the creditors that the Rehabilitation Plan has been sub$itted for confir$ation, that any creditor $ay obtain copies of the Rehabilitation Plan and that any creditor $ay file an ob#ection thereto. Se(tion ++.1iling of $b8ections to Rehabilitation Plan. F A creditor $ay file an ob#ection to the Rehabilitation Plan within twenty ,0:- days fro$ receipt of notice fro$ the court that the Rehabilitation Plan has been sub$itted for confir$ation. 5b#ections to a Rehabilitation Plan shall be li$ited to the following+ ,a- The creditors) support was induced by fraud/ ,b-The docu$ents or data relied upon in the Rehabilitation Plan are $aterially false or $isleading/ or ,c-The Rehabilitation Plan is in fact not supported by the voting creditors. Se(tion +,.Hearing on the $b8ections. - !f ob#ections have been sub$itted during the relevant period, the court shall issue an order setting the ti$e and date for the hearing or hearings on the ob#ections. !f the court finds $erit in the ob#ection, it shall order the rehabilitation receiver or other party to cure the defect, whenever feasible. !f the court deter$ines that the debtor acted in bad faith, or that it is not feasible to cure the defect, the court shall convert the proceedings into one for the li%uidation of the debtor under *hapter < of this Act. Se(tion +-.Confirmation of the Rehabilitation Plan. F !f no ob#ections are filed within the relevant period or, if ob#ections are filed, the court finds the$ lac ing in $erit, or deter$ines that the basis for the ob#ection has been cured, or deter$ines that the debtor has co$plied with an order to cure the ob#ection, the court shall issue an order confir$ing the Rehabilitation Plan. The court $ay confir$ the Rehabilitation Plan notwithstanding unresolved disputes over clai$s if the Rehabilitation Plan has $ade ade%uate provisions for paying such clai$s. =or the avoidance of doubt, the provisions of other laws to the contrary notwithstanding, the court shall have the power to approve or i$ple$ent the Rehabilitation Plan despite the lac of approval, or ob#ection fro$ the owners, partners or stoc holders of the insolvent debtor+ Provided# That the ter$s thereof are necessary to restore the financial well-being and viability of the insolvent debtor. Se(tion +..&ffect of Confirmation of the Rehabilitation Plan# - The confir$ation of the Rehabilitation Plan by the court shall result in the following+ ,a- The Rehabilitation Plan and its provisions shall be binding upon the debtor and all persons who $ay be affected by . it, including the creditors, whether or not such persons have participated in the proceedings or opposed the Rehabilitation Plan or whether or not their clai$s have been scheduled/

,b- The debtor shall co$ply with the provisions of the Rehabilitation Plan and shall ta e all actions necessary to carry out the Plan/ ,c- Pay$ents shall be $ade to the creditors in accordance with the provisions of the Rehabilitation Plan/ ,d- *ontracts and other arrange$ents between the debtor and its creditors shall be interpreted as continuing to apply to the e&tent that they do not conflict with the provisions of the Rehabilitation Plan/ ,e- Any co$pro$ises on a$ounts or rescheduling of ti$ing of pay$ents by the debtor shall be binding on creditors regardless of whether or not the Plan is successfully i$ple$ent/ and ,f- *lai$s arising after approval of the Plan that are otherwise not treated by the Plan are not sub#ect to any "uspension 5rder. The 5rder confir$ing the Plan shall co$ply with Rules 14 of the Rules of *ourt+ Provided# ho+ever# That the court $ay $aintain #urisdiction over the case in order to resolve clai$s against the debtor that re$ain contested and allegations that the debtor has breached the Plan. Se(tion ,!. *iability of 'eneral Partners of a Partnership for -npaid Balances -nder an !pproved Plan. - The approval of the Plan shall not affect the rights of creditors to pursue actions against the general partners of a partnership to the e&tent they are liable under relevant legislation for the debts thereof. Se(tion , . Treatment of !mounts of (ndebtedness or $bligations 1orgiven or Reduced. A$ounts of any indebtedness or obligations reduced or forgiven in connection with a Plan)s approval shall not be sub#ect to any ta& in furtherance of the purposes of this Act. Se(tion ,#. Period for Confirmation of the Rehabilitation Plan. - The court shall have a $a&i$u$ period of one ,.- year fro$ the date of the filing of the petition to confir$ a Rehabilitation Plan. !f no Rehabilitation Plan is confir$ed within the said period, the proceedings $ay upon $otion or motu propio, be converted into one for the li%uidation of the debtor . Se(tion ,). !ccounting Discharge of Rehabilitation Receiver. - @pon the confir$ation of the Rehabilitation Plan, the rehabilitation receiver shall provide a final report and accounting to the court. @nless the Rehabilitation Plan specifically re%uires and describes the role of the rehabilitation receiver after the approval of the Rehabilitation Plan, the court shall discharge the rehabilitation receiver of his duties. ,#- Ter$ination of Proceedings

Se(tion ,". Termination of Proceedings. - The rehabilitation proceedings under *hapter !! shall, upon $otion by any sta eholder or the rehabilitation receiver be ter$inated by order of the court either declaring a successful i$ple$entation of the Rehabilitation Plan or a failure of rehabilitation. There is failure of rehabilitation in the following cases+ ,a- 8is$issal of the petition by the court/ ,b- The debtor fails to sub$it a Rehabilitation Plan/ ,c- @nder the Rehabilitation Plan sub$itted by the debtor, there is no substantial li elihood that the debtor can be rehabilitated within a reasonable period/ ,d- The Rehabilitation Plan or its a$end$ent is approved by the court but in the i$ple$entation thereof, the debtor fails to perfor$ its obligations thereunder or there is a failure to reali'e the ob#ectives, targets or goals set forth therein, including the ti$elines and conditions for the settle$ent of the obligations due to the creditors and other clai$ants/ ,e- The co$$ission of fraud in securing the approval of the Rehabilitation Plan or its a$end$ent/ and ,f- 5ther analogous circu$stances as $ay be defined by the rules of procedure. @pon a breach of, or upon a failure of the Rehabilitation Plan the court, upon $otion by an affected party $ay+ ,.- !ssue an order directing that the breach be cured within a specified period of ti$e, falling which the proceedings $ay be converted to a li%uidation/ ,0- !ssue an order converting the proceedings to a li%uidation/ ,1- Allow the debtor or rehabilitation receiver to sub$it a$end$ents to the Rehabilitation Plan, the approval of which shall be governed by the sa$e re%uire$ents for the approval of a Rehabilitation Plan under this subchapter/ ,2- !ssue any other order to re$edy the breach consistent with the present regulation, other applicable law and the best interests of the creditors/ or ,3- 9nforce the applicable provisions of the Rehabilitation Plan through a writ of e&ecution. Se(tion ,*. &ffects of Termination. - Ter$ination of the proceedings shall result in the following+

,a- The discharge of the rehabilitation receiver sub#ect to his sub$ission of a final accounting/ and ,b- The lifting of the "tay 5rder and any other court order holding in abeyance any action for the enforce$ent of a clai$ against the debtor. Provided# ho+ever# That if the ter$ination of proceedings is due to failure of rehabilitation or dis$issal of the petition for reasons other than technical grounds, the proceedings shall be i$$ediately converted to li%uidation as provided in "ection D0 of this Act. CHAPTER III PRE/NEGOTIATE% REHABILITATION Se(tion ,+. Petition by Debtor. - An insolvent debtor, by itself or #ointly with any of its creditors, $ay file a verified petition with the court for the approval of a pre-negotiated Rehabilitation Plan which has been endorsed or approved by creditors holding at least two-thirds ,061- of the total liabilities of the debtor, including secured creditors holding $ore than fifty percent ,3:;- of the total secured clai$s of the debtor and unsecured creditors holding $ore than fifty percent ,3:;- of the total unsecured clai$s of the debtor. The petition shall include as a $ini$u$+ ,a- a schedule of the debtor)s debts and liabilities/ ,b- an inventory of the debtor)s assets/ ,c- the pre-negotiated Rehabilitation Plan, including the na$es of at least three ,1%ualified no$inees for rehabilitation receiver/ and ,d- a su$$ary of disputed clai$s against the debtor and a report on the provisioning of funds to account for appropriate pay$ents should any such clai$s be ruled valid or their a$ounts ad#usted. Se(tion ,,. (ssuance of $rder. - (ithin five ,3- wor ing days, and after deter$ination that the petition is sufficient in for$ and substance, the court shall issue an 5rder which shall/ ,a- identify the debtor, its principal business of activity6ies and its principal place of business/ ,b- declare that the debtor is under rehabilitation/ ,c- su$$ari'e the ground.6s for the filling of the petition/ ,d- direct the publication of the 5rder in a newspaper of general circulation in the Philippines once a wee for at least two ,0- consecutive wee s, with the first publication to be $ade within seven ,?- days fro$ the ti$e of its issuance/

,e- direct the service by personal delivery of a copy of the petition on each creditor who is not a petitioner holding at least ten percent ,.:;- of the total liabilities of the debtor, as deter$ined in the schedule attached to the petition, within three ,1- days/ ,f- state that copies of the petition and the Rehabilitation Plan are available for e&a$ination and copying by any interested party/ ,g- state that creditors and other interested parties opposing the petition or Rehabilitation Plan $ay file their ob#ections or co$$ents thereto within a period of not later than twenty ,0:- days fro$ the second publication of the 5rder/ ,h- appoint a rehabilitation receiver, if provided for in the Plan/ and ,i- include a "uspension or "tay 5rder as described in this Act. Se(tion ,-. !pproval of the Plan. - (ithin ten ,.:- days fro$ the date of the second publication of the 5rder, the court shall approve the Rehabilitation Plan unless a creditor or other interested party sub$its an ob#ection to it in accordance with the ne&t succeeding section. Se(tion ,.. $b8ection to the Petition or Rehabilitation Plan. - Any creditor or other interested party $ay sub$it to the court a verified ob#ection to the petition or the Rehabilitation Plan not later than eight ,C- days fro$ the date of the second publication of the 5rder $entioned in "ection ?? hereof. The ob#ections shall be li$ited to the following+ ,a- The allegations in the petition or the Rehabilitation Plan or the attach$ents thereto are $aterially false or $isleading/ ,b- The $a#ority of any class of creditors do not in fact support the Rehabilitation Plan/ ,c- The Rehabilitation Plan fails to accurately account for a clai$ against the debtor and the clai$ in not categorically declared as a contested clai$/ or ,d- The support of the creditors, or any of the$ was induced by fraud. *opies of any ob#ection to the petition of the Rehabilitation Plan shall be served on the debtor, the rehabilitation receiver ,if applicable-, the secured creditor with the largest clai$ and who supports the Rehabilitation Plan, and the unsecured creditor with the largest clai$ and who supports the Rehabilitation Plan. Se(tion -!. Hearing on the $b8ections. - After receipt of an ob#ection, the court shall set the sa$e for hearing. The date of the hearing shall be no earlier than twenty ,0:- days and no later than thirty ,1:- days fro$ the date of the second publication of the 5rder $entioned in "ection ?? hereof. !f the court finds $erit in the ob#ection, it shall direct the debtor, when feasible to cure the detect within a reasonable period. !f the court deter$ines that the debtor or creditors supporting the Rehabilitation Plan acted in bad faith, or that the ob#ection is non-curable, the court $ay order the conversion of the proceedings into li%uidation. A finding by the court that

the ob#ection has no substantial $erit, or that the sa$e has been cured shall be dee$ed an approval of the Rehabilitation Plan. Se(tion - . Period for !pproval of Rehabilitation Plan. - The court shall have a $a&i$u$ period of one hundred twenty ,.0:- days fro$ the date of the filing of the petition to approve the Rehabilitation Plan. !f the court fails to act within the said period, the Rehabilitation Plan shall be dee$ed approved. Se(tion -#. &ffect of !pproval. - Approval of a Plan under this chapter shall have the sa$e legal effect as confir$ation of a Plan under *hapter !! of this Act. CHAPTER I$ OUT/OF/COURT OR INFOR8AL RESTRUCTURING AGREE8ENTS OR REHABILITATION PLANS Se(tion -). $ut9of9Court or (nformal Restructuring !greements and Rehabilitation Plans. - An out-of-curt or infor$al restructuring agree$ent or Rehabilitation Plan that $eets the $ini$u$ re%uire$ents prescribed in this chapter is hereby recogni'ed as consistent with the ob#ectives of this Act. Se(tion -". 4inimum Re%uirements of $ut9of9Court or (nformal Restructuring !greements and Rehabilitation Plans. - =or an out-of-court or infor$al restructuring6wor out agree$ent or Rehabilitation Plan to %ualify under this chapter, it $ust $eet the following $ini$u$ re%uire$ents+ ,a- The debtor $ust agree to the out-of-court or infor$al restructuring6wor out agree$ent or Rehabilitation Plan/ ,b- !t $ust be approved by creditors representing at least si&ty-seven ,4?;- of the secured obligations of the debtor/ ,c- !t $ust be approved by creditors representing at least seventy-five percent ,?3;- of the unsecured obligations of the debtor/ and ,d- !t $ust be approved by creditors holding at least eighty-five percent ,C3;- of the total liabilities, secured and unsecured, of the debtor. Se(tion -*. Standstill Period. - A standstill period that $ay be agreed upon by the parties pending negotiation and finali'ation of the out-of-court or infor$al restructuring6wor out agree$ent or Rehabilitation Plan conte$plated herein shall be effective and enforceable not only against the contracting parties but also against the other creditors+ Provided# That ,a- such agree$ent is approved by creditors representing $ore than fifty percent ,3:;- of the total liabilities of the debtor/ ,b- notice thereof is publishing in a newspaper of general circulation in the Philippines once a wee for two ,0- consecutive wee s/ and ,c- the standstill period does not e&ceed one hundred twenty ,.0:- days fro$ the date of effectivity. The notice $ust invite creditors to participate in the negotiation for out-of-court rehabilitation or restructuring

agree$ent and notify the$ that said agree$ent will be binding on all creditors if the re%uired $a#ority votes prescribed in "ection C2 of this Act are $et. Se(tion -+. Cram Do+n &ffect. - A restructuring6wor out agree$ent or Rehabilitation Plan that is approved pursuant to an infor$al wor out fra$ewor referred to in this chapter shall have the sa$e legal effect as confir$ation of a Plan under "ection 4D hereof. The notice of the Rehabilitation Plan or restructuring agree$ent or Plan shall be published once a wee for at least three ,1- consecutive wee s in a newspaper of general circulation in the Philippines. The Rehabilitation Plan or restructuring agree$ent shall ta e effect upon the lapse of fifteen ,.3days fro$ the date of the last publication of the notice thereof. Se(tion -,. !mendment or 4odification. - Any a$end$ent of an out-of-court restructuring6wor out agree$ent or Rehabilitation Plan $ust be $ade in accordance with the ter$s of the agree$ent and with due notice on all creditors. Se(tion --. &ffect of Court !ction or $ther Proceedings. - Any court action or other proceedings arising fro$, or relating to, the out-of-court or infor$al restructuring6wor out agree$ent or Rehabilitation Plan shall not stay its i$ple$entation, unless the relevant party is able to secure a te$porary restraining order or in#unctive relief fro$ the *ourt of Appeals. Se(tion -.. Court !ssistance. - The insolvent debtor and6or creditor $ay see court assistance for the e&ecution or i$ple$entation of a Rehabilitation Plan under this *hapter, under such rules of procedure as $ay be pro$ulgated by the "upre$e *ourt. CHAPTER $ LI&UI%ATION OF INSOL$ENT ;URI%ICAL %EBTORS Se(tion .!. .oluntary *i%uidation. - An insolvent debtor $ay apply for li%uidation by filing a petition for li%uidation with the court. The petition shall be verified, shall establish the insolvency of the debtor and shall contain, whether as an attach$ent or as part of the body of the petition/ ,a- a schedule of the debtor)s debts and liabilities including a list of creditors with their addresses, a$ounts of clai$s and collaterals, or securities, if any/ ,b- an inventory of all its assets including receivables and clai$s against third parties/ and ,c- the na$es of at least three ,1- no$inees to the position of li%uidator. At any ti$e during the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the debtor $ay also initiate li%uidation proceedings by filing a $otion in the sa$e court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into li%uidation proceedings. The $otion shall be verified, shall contain or set forth the sa$e $atters re%uired in the preceding paragraph, and state that the debtor is see ing i$$ediate dissolution and ter$ination of its corporate e&istence.

!f the petition or the $otion, as the case $ay be, is sufficient in for$ and substance, the court shall issue a 7i%uidation 5rder $entioned in "ection ..0 hereof. Se(tion . . (nvoluntary *i%uidation. - Three ,1- or $ore creditors the aggregate of whose clai$s is at least either 5ne $illion pesos ,Php.,:::,:::,::- or at least twenty-five percent ,03;: of the subscribed capital stoc or partner)s contributions of the debtor, whichever is higher, $ay apply for and see the li%uidation of an insolvent debtor by filing a petition for li%uidation of the debtor with the court. The petition shall show that+ ,a- there is no genuine issue of fact or law on the clai$s6s of the petitioner6s, and that the due and de$andable pay$ents thereon have not been $ade for at least one hundred eighty ,.C:- days or that the debtor has failed generally to $eet its liabilities as they fall due/ and ,b- there is no substantial li elihood that the debtor $ay be rehabilitated. At any ti$e during the pendency of or after a rehabilitation court-supervised or pre-negotiated rehabilitation proceedings, three ,1- or $ore creditors whose clai$s is at least either 5ne $illion pesos ,Php.,:::,:::.::- or at least twenty-five percent ,03;- of the subscribed capital or partner)s contributions of the debtor, whichever is higher, $ay also initiate li%uidation proceedings by filing a $otion in the sa$e court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into li%uidation proceedings. The $otion shall be verified, shall contain or set forth the sa$e $atters re%uired in the preceding paragraph, and state that the $ovants are see ing the i$$ediate li%uidation of the debtor. !f the petition or $otion is sufficient in for$ and substance, the court shall issue an 5rder+ ,.- directing the publication of the petition or $otion in a newspaper of general circulation once a wee for two ,0- consecutive wee s/ and ,0- directing the debtor and all creditors who are not the petitioners to file their co$$ent on the petition or $otion within fifteen ,.3- days fro$ the date of last publication. !f, after considering the co$$ents filed, the court deter$ines that the petition or $otion is $eritorious, it shall issue the 7i%uidation 5rder $entioned in "ection ..0 hereof. Se(tion .#. Conversion by the Court into *i%uidation Proceedings. - 8uring the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the court $ay order the conversion of rehabilitation proceedings to li%uidation proceedings pursuant to ,a- "ection 03,c- of this Act/ or ,b- "ection ?0 of this Act/ or ,c- "ection ?3 of this Act/ or ,d- "ection D: of this Act/ or at any other ti$e upon the reco$$endation of the rehabilitation receiver that the rehabilitation of the debtor is not feasible. Thereupon, the court shall issue the 7i%uidation 5rder $entioned in "ection ..0 hereof. Se(tion .). Po+ers of the Securities and &"change Commission 2S&C3. - The provisions of this chapter shall not affect the regulatory powers of the "9* under "ection 4 of Presidential 8ecree

>o. D:0-A, as a$ended, with respect to any dissolution and li%uidation proceeding initiated and heard before it. CHAPTER $I INSOL$ENC' OF IN%I$I%UAL %EBTORS 0A1 Sus:ension o5 Pa24ents. Se(tion .". Petition. - An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the i$possibility of $eeting the$ when they respectively fall due, $ay file a verified petition that he be declared in the state of suspension of pay$ents by the court of the province or city in which he has resides for si& ,4- $onths prior to the filing of his petition. Ae shall attach to his petition, as a $ini$u$+ ,a- a schedule of debts and liabilities/ ,b- an inventory of assess/ and ,c- a proposed agree$ent with his creditors. Se(tion .*. !ction on the Petition. - !f the court finds the petition sufficient in for$ and substance, it shall, within five ,3- wor ing days fro$ the filing of the petition, issue an 5rder+ ,a- calling a $eeting of all the creditors na$ed in the schedule of debts and liabilities at such ti$e not less than fifteen ,.3- days nor $ore than forty ,2:- days fro$ the date of such 5rder and designating the date, ti$e and place of the $eeting/ ,b- directing such creditors to prepare and present written evidence of their clai$s before the scheduled creditors) $eeting/ ,c- directing the publication of the said order in a newspaper of general circulation published in the province or city in which the petition is filed once a wee for two ,0consecutive wee s, with the first publication to be $ade within seven ,?- days fro$ the ti$e of the issuance of the 5rder/ ,d- directing the cler of court to cause the sending of a copy of the 5rder by registered $ail, postage prepaid, to all creditors na$ed in the schedule of debts and liabilities/ ,e- forbidding the individual debtor fro$ selling, transferring, encu$bering or disposing in any $anner of his property, e&cept those used in the ordinary operations of co$$erce or of industry in which the petitioning individual debtor is engaged so long as the proceedings relative to the suspension of pay$ents are pending/ ,f- prohibiting the individual debtor fro$ $a ing any pay$ent outside of the necessary or legiti$ate e&penses of his business or industry, so long as the proceedings relative to the suspension of pay$ents are pending/ and ,g- appointing a co$$issioner to preside over the creditors) $eeting. Se(tion .+. !ctions Suspended. - @pon $otion filed by the individual debtor, the court $ay issue an order suspending any pending e&ecution against the individual debtor. Provide, That

properties held as security by secured creditors shall not be the sub#ect of such suspension order. The suspension order shall lapse when three ,1- $onths shall have passed without the proposed agree$ent being accepted by the creditors or as soon as such agree$ent is denied. >o creditor shall sue or institute proceedings to collect his clai$ fro$ the debtor fro$ the ti$e of the filing of the petition for suspension of pay$ents and for as long as proceedings re$ain pending e&cept+ ,a- those creditors having clai$s for personal labor, $aintenance, e&pense of last illness and funeral of the wife or children of the debtor incurred in the si&ty ,4:- days i$$ediately prior to the filing of the petition/ and ,b- secured creditors. Se(tion .,. Creditors) 4eeting. - The presence of creditors holding clai$s a$ounting to at least three-fifths ,163- of the liabilities shall be necessary for holding a $eeting. The co$$issioner appointed by the court shall preside over the $eeting and the cler of court shall act as the secretary thereof, sub#ect to the following rules+ ,a- The cler shall record the creditors present and a$ount of their respective clai$s/ ,b- The co$$issioner shall e&a$ine the written evidence of the clai$s. !f the creditors present hold at least three-fifths ,163- of the liabilities of the individual debtor, the co$$issioner shall declare the $eeting open for business/ ,c- The creditors and individual debtor shall discuss the propositions in the proposed agree$ent and put the$ to a vote/ ,d- To for$ a $a#ority, it is necessary+ ,.- that two-thirds ,061- of the creditors voting unite upon the sa$e proposition/ and ,0- that the clai$s represented by said $a#ority vote a$ount to at least three-fifths ,163- of the total liabilities of the debtor $entioned in the petition/ and ,e- After the result of the voting has been announced, all protests $ade against the $a#ority vote shall be drawn up, and the co$$issioner and the individual debtor together with all creditors ta ing part in the voting shall sign the affir$ed propositions. >o creditor who incurred his credit within ninety ,D:- days prior to the filing of the petition shall be entitled to vote. Se(tion .-. Persons 0ho 4ay Refrain 1rom .oting. - *reditors who are unaffected by the "uspension 5rder $ay refrain fro$ attending the $eeting and fro$ voting therein. "uch persons

shall not be bound by any agree$ent deter$ined upon at such $eeting, but if they should #oin in the voting they shall be bound in the sa$e $anner as are the other creditors. Se(tion ... Re8ection of the Proposed !greement. - The proposed agree$ent shall be dee$ed re#ected if the nu$ber of creditors re%uired for holding a $eeting do not attend thereat, or if the two ,0- $a#orities $entioned in "ection D? hereof are not in favor thereof. !n such instances, the proceeding shall be ter$inated without recourse and the parties concerned shall be at liberty to enforce the rights which $ay correspond to the$. Se(tion !!. $b8ections. - !f the proposal of the individual debtor, or any a$end$ent thereof $ade during the creditors) $eeting, is approved by the $a#ority of creditors in accordance with "ection D? hereof, any creditor who attended the $eeting and who dissented fro$ and protested against the vote of the $a#ority $ay file an ob#ection with the court within ten ,.:- days fro$ the date of the last creditors) $eeting. The causes for which ob#ection $ay be $ade to the decision $ade by the $a#ority during the $eeting shall be+ ,a- defects in the call for the $eeting, in the holding thereof and in the deliberations had thereat which pre#udice the rights of the creditors/ ,b- fraudulent connivance between one or $ore creditors and the individual debtor to vote in favor of the proposed agree$ent/ or ,c- fraudulent conveyance of clai$s for the purpose of obtaining a $a#ority. The court shall hear and pass upon such ob#ection as soon as possible and in a su$$ary $anner. !n case the decision of the $a#ority of creditors to approve the individual debtor)s proposal or any a$end$ent thereof $ade during the creditors) $eeting is annulled by the court, the court shall declare the proceedings ter$inated and the creditors shall be at liberty to e&ercise the rights which $ay correspond to the$. Se(tion ! . &ffects of !pproval of Proposed !greement. - !f the decision of the $a#ority of the creditors to approve the proposed agree$ent or any a$end$ent thereof $ade during the creditors) $eeting is uphold by the court, or when no opposition or ob#ection to said decision has been presented, the court shall order that the agree$ent be carried out and all parties bound thereby to co$ply with its ter$s. The court $ay also issue all orders which $ay be necessary or proper to enforce the agree$ent on $otion of any affected party. The 5rder confir$ing the approval of the proposed agree$ent or any a$end$ent thereof $ade during the creditors) $eeting shall be binding upon all creditors whose clai$s are included in the schedule of debts and liabilities sub$itted by the individual debtor and who were properly su$$oned, but not upon+ ,a- those creditors having clai$s for personal labor, $aintenance, e&penses of last illness and funeral of the wife or children of the debtor incurred in the si&ty ,4:- days i$$ediately prior to the filing of the petition/ and ,bsecured creditors who failed to attend the $eeting or refrained fro$ voting therein. Se(tion !#. 1ailure of (ndividual Debtor to Perform !greement. - !f the individual debtor fails, wholly or in part, to perfor$ the agree$ent decided upon at the $eeting of the creditors, all the rights which the creditors had against the individual debtor before the agree$ent shall revest in the$. !n such case the individual debtor $ay be $ade sub#ect to the insolvency proceedings in the $anner established by this Act.

0B1 $oluntar2 Li<uidation. Se(tion !). !pplication. - An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts e&ceeding =ive hundred thousand pesos ,Php3::,:::.::-, $ay apply to be discharged fro$ his debts and liabilities by filing a verified petition with the court of the province or city in which he has resided for si& ,4- $onths prior to the filing of such petition. Ae shall attach to his petition a schedule of debts and liabilities and an inventory of assets. The filing of such petition shall be an act of insolvency. Se(tion !". *i%uidation $rder. - !f the court finds the petition sufficient in for$ and substance it shall, within five ,3- wor ing days issue the 7i%uidation 5rder $entioned in "ection ..0 hereof. 0C1 In 3oluntar2 Li<uidation. Se(tion !*. Petition< !cts of (nsolvency. - Any creditor or group of creditors with a clai$ of, or with clai$s aggregating at least =ive hundred thousand pesos ,Php3::, :::.::- $ay file a verified petition for li%uidation with the court of the province or city in which the individual debtor resides. The following shall be considered acts of insolvency, and the petition for li%uidation shall set forth or allege at least one of such acts+ ,a- That such person is about to depart or has departed fro$ the Republic of the Philippines, with intent to defraud his creditors/ ,b- That being absent fro$ the Republic of the Philippines, with intent to defraud his creditors, he re$ains absent/ ,c- That he conceals hi$self to avoid the service of legal process for the purpose of hindering or delaying the li%uidation or of defrauding his creditors/ ,d- That he conceals, or is re$oving, any of his property to avoid its being attached or ta en on legal process/ ,e- That he has suffered his property to re$ain under attach$ent or legal process for three ,1- days for the purpose of hindering or delaying the li%uidation or of defrauding his creditors/ ,f- That he has confessed or offered to allow #udg$ent in favor of any creditor or clai$ant for the purpose of hindering or delaying the li%uidation or of defrauding any creditors or clai$ant/ ,g- That he has willfully suffered #udg$ent to be ta en against hi$ by default for the purpose of hindering or delaying the li%uidation or of defrauding his creditors/

,h- That he has suffered or procured his property to be ta en on legal process with intent to give a preference to one or $ore of his creditors and thereby hinder or delay the li%uidation or defraud any one of his creditors/ ,i- That he has $ade any assign$ent, gift, sale, conveyance or transfer of his estate, property, rights or credits with intent to hinder or delay the li%uidation or defraud his creditors/ ,#- That he has, in conte$plation of insolvency, $ade any pay$ent, gift, grant, sale, conveyance or transfer of his estate, property, rights or credits/ , - That being a $erchant or trades$an, he has generally defaulted in the pay$ent of his current obligations for a period of thirty ,1:- days/ ,l- That for a period of thirty ,1:- days, he has failed, after de$and, to pay any $oneys deposited with hi$ or received by hi$ in a fiduciary/ and ,$- That an e&ecution having been issued against hi$ on final #udg$ent for $oney, he shall have been found to be without sufficient property sub#ect to e&ecution to satisfy the #udg$ent. The petitioning creditor6s shall post a bond in such as the court shall direct, conditioned that if the petition for li%uidation is dis$issed by the court, or withdrawn by the petitioner, or if the debtor shall not be declared an insolvent the petitioners will pay to the debtor all costs, e&penses, da$ages occasioned by the proceedings and attorney)s fees. Se(tion !+. $rder to (ndividual Debtor to Sho+ Cause. - @pon the filing of such creditors) petition, the court shall issue an 5rder re%uiring the individual debtor to show cause, at a ti$e and place to be fi&ed by the said court, why he should not be ad#udged an insolvent. @pon good cause shown, the court $ay issue an 5rder forbidding the individual debtor fro$ $a ing pay$ents of any of his debts, and transferring any property belonging to hi$. Aowever, nothing contained herein shall affect or i$pair the rights of a secured creditor to enforce his lien in accordance with its ter$s. Se(tion !,. Default. - !f the individual debtor shall default or if, after trial, the issues are found in favor of the petitioning creditors the court shall issue the 7i%uidation 5rder $entioned in "ection ..0 hereof. Se(tion !-. !bsent (ndividual Debtor. - !n all cases where the individual debtor resides out of the Republic of the Philippines/ or has departed therefro$/ or cannot, after due diligence, be found therein/ or conceals hi$self to avoid service of the 5rder to show cause, or any other preli$inary process or orders in the $atter, then the petitioning creditors, upon sub$itting the affidavits re%uisite to procedure an 5rder of publication, and presenting a bond in double the a$ount of the aggregate su$ of their clai$s against the individual debtor, shall be entitled to an 5rder of the court directing the sheriff of the province or city in which the $atter is pending to ta e into his custody a sufficient a$ount of property of the individual debtor to satisfy the

de$ands of the petitioning creditors and the costs of the proceedings. @pon receiving such 5rder of the court to ta e into custody of the property of the individual debtor, it shall be the duty of the sheriff to ta e possession of the property and effects of the individual debtor, not e&e$pt fro$ e&ecution, to an e&tent sufficient to cover the a$ount provided for and to prepare within three ,1- days fro$ the ti$e of ta ing such possession, a co$plete inventory of all the property so ta en, and to return it to the court as soon as co$pleted. The ti$e for ta ing the inventory and $a ing return thereof $ay be e&tended for good cause shown to the court. The sheriff shall also prepare a schedule of the na$es and residences of the creditors, and the a$ount due each, fro$ the boo s of the debtor, or fro$ such other papers or data of the individual debtor available as $ay co$e to his possession, and shall file such schedule or list of creditors and inventory with the cler of court. Se(tion !.. !ll Property Ta,en to be Held for !ll Creditors< !ppeal Bonds< &"emptions to Sureties. - !n all cases where property is ta en into custody by the sheriff, if it does not e$brace all the property and effects of the debtor not e&e$pt fro$ e&ecution, any other creditor or creditors of the individual debtor, upon giving bond to be approved by the court in double the a$ount of their clai$s, singly or #ointly, shall be entitled to si$ilar orders and to li e action, by the sheriff/ until all clai$s be provided for, if there be sufficient property or effects. All property ta en into custody by the sheriff by virtue of the giving of any such bonds shall be held by hi$ for the benefit of all creditors of the individual debtor whose clai$s shall be duly proved as provided in this Act. The bonds provided for in this section and the preceding section to procure the order for custody of the property and effects of the individual debtor shall be conditioned that if, upon final hearing of the petition in insolvency, the court shall find in favor of the petitioners, such bonds and all of the$ shall be void/ if the decision be in favor of the individual debtor, the proceedings shall be dis$issed, and the individual debtor, his heirs, ad$inistrators, e&ecutors or assigns shall be entitled to recover such su$ of $oney as shall be sufficient to cover the da$ages sustained by hi$, not to e&ceed the a$ount of the respective bonds. "uch da$ages shall be fi&ed and allowed by the court. !f either the petitioners or the debtor shall appeal fro$ the decision of the court, upon final hearing of the petition, the appellant shall be re%uired to give bond to the successful party in a su$ double the a$ount of the value of the property in controversy, and for the costs of the proceedings. Any person interested in the estate $ay ta e e&ception to the sufficiency of the sureties on such bond or bonds. (hen e&cepted to the petitioner)s sureties, upon notice to the person e&cepting of not less than two ,0- nor $ore than five ,3- days, $ust #ustify as to their sufficiency/ and upon failure to #ustify, or of others in their place fail to #ustify at the ti$e and place appointed the #udge shall issue an 5rder vacating the order to ta e the property of the individual debtor into the custody of the sheriff, or denying the appeal, as the case $ay be. Se(tion !. Sale -nder &"ecution. - !f, in any case, proper affidavits and bonds are presented to the court or a #udge thereof, as ing for and obtaining an 5rder of publication and an 5rder for the custody of the property of the individual debtor and thereafter the petitioners shall $a e it appear satisfactorily to the court or a #udge thereof that the interest of the parties to the proceedings will be subserved by a sale thereof, the court $ay order such property to be sold in the sa$e $anner as property is sold under e&ecution, the proceeds to de deposited in the court to abide by the result of the proceedings.

CHAPTER $II PRO$ISIONS CO88ON TO LI&UI%ATION IN INSOL$ENC' OF IN%I$I%UAL AN% ;URI%ICAL %EBTORS Se(tion . -se of Term Debtor. - =or purposes of this chapter, the ter$ debtor shall include both individual debtor as defined in "ection 2,o- and debtor as defined in "ection 2, - of this Act. 0A1 The Li<uidation Order. Se(tion #. *i%uidation $rder. - The 7i%uidation 5rder shall+

,a- declare the debtor insolvent/ ,b- order the li%uidation of the debtor and, in the case of a #uridical debtor, declare it as dissolved/ ,c- order the sheriff to ta e possession and control of all the property of the debtor, e&cept those that $ay be e&e$pt fro$ e&ecution/ ,d- order the publication of the petition or $otion in a newspaper of general circulation once a wee for two ,0- consecutive wee s/ ,e- direct pay$ents of any clai$s and conveyance of any property due the debtor to the li%uidator/ ,f- prohibit pay$ents by the debtor and the transfer of any property by the debtor/ ,g- direct all creditors to file their clai$s with the li%uidator within the period set by the rules of procedure/ ,h- authori'e the pay$ent of ad$inistrative e&penses as they beco$e due/ ,i- state that the debtor and creditors who are not petitioner6s $ay sub$it the na$es of other no$inees to the position of li%uidator/ and ,#- set the case for hearing for the election and appoint$ent of the li%uidator, which date shall not be less than thirty ,1:- days nor $ore than forty-five ,23- days fro$ the date of the last publication. Se(tion ). &ffects of the *i%uidation $rder. - @pon the issuance of the 7i%uidation 5rder+

,a- the #uridical debtor shall be dee$ed dissolved and its corporate or #uridical e&istence ter$inated/

,b- legal title to and control of all the assets of the debtor, e&cept those that $ay be e&e$pt fro$ e&ecution, shall be dee$ed vested in the li%uidator or, pending his election or appoint$ent, with the court/ ,c- all contracts of the debtor shall be dee$ed ter$inated and6or breached, unless the li%uidator, within ninety ,D:- days fro$ the date of his assu$ption of office, declares otherwise and the contracting party agrees/ ,d- no separate action for the collection of an unsecured clai$ shall be allowed. "uch actions already pending will be transferred to the 7i%uidator for hi$ to accept and settle or contest. !f the li%uidator contests or disputes the clai$, the court shall allow, hear and resolve such contest e&cept when the case is already on appeal. !n such a case, the suit $ay proceed to #udg$ent, and any final and e&ecutor #udg$ent therein for a clai$ against the debtor shall be filed and allowed in court/ and ,e- no foreclosure proceeding shall be allowed for a period of one hundred eighty ,.C:days. Se(tion ". Rights of Secured Creditors. - The 7i%uidation 5rder shall not affect the right of a secured creditor to enforce his lien in accordance with the applicable contract or law. A secured creditor $ay+ ,a- waive his right under the security or lien, prove his clai$ in the li%uidation proceedings and share in the distribution of the assets of the debtor/ or ,b- $aintain his rights under the security or lien+ !f the secured creditor $aintains his rights under the security or lien+ ,.- the value of the property $ay be fi&ed in a $anner agreed upon by the creditor and the li%uidator. (hen the value of the property is less than the clai$ it secures, the li%uidator $ay convey the property to the secured creditor and the latter will be ad$itted in the li%uidation proceedings as a creditor for the balance. !f its value e&ceeds the clai$ secured, the li%uidator $ay convey the property to the creditor and waive the debtor)s right of rede$ption upon receiving the e&cess fro$ the creditor/ ,0- the li%uidator $ay sell the property and satisfy the secured creditor)s entire clai$ fro$ the proceeds of the sale/ or ,1- the secure creditor $ay enforce the lien or foreclose on the property pursuant to applicable laws. 0B1 The Li<uidator. Se(tion *. &lection of *i%uidator. - 5nly creditors who have filed their clai$s within the period set by the court, and whose clai$s are not barred by the statute of li$itations, will be

allowed to vote in the election of the li%uidator. A secured creditor will not be allowed to vote, unless+ ,a- he waives his security or lien/ or ,b- has the value of the property sub#ect of his security or lien fi&ed by agree$ent with the li%uidator, and is ad$itted for the balance of his clai$. The creditors entitled to vote will elect the li%uidator in open court. The no$inee receiving the highest nu$ber of votes cast in ter$s of a$ount of clai$s, ad who is %ualified pursuant to "ection ..C hereof, shall be appointed as the li%uidator. Se(tion +. Court9!ppointed *i%uidator. - The court $ay appoint the li%uidator if+

,a- on the date set for the election of the li%uidator, the creditors do not attend/ ,b- the creditors who attend, fail or refuse to elect a li%uidator/ ,c- after being elected, the li%uidator fails to %ualify/ or ,d- a vacancy occurs for any reason whatsoever, !n any of the cases provided herein, the court $ay instead set another hearing of the election of the li%uidator. Provided further# That nothing in this section shall be construed to prevent a rehabilitation receiver, who was ad$inistering the debtor prior to the co$$ence$ent of the li%uidation, fro$ being appointed as a li%uidator. Se(tion ,. $ath and Bond of the *i%uidator. -Prior to entering upon his powers, duties and responsibilities, the li%uidator shall ta e an oath and file a bond, !n such a$ount to be fi&ed by the court, conditioned upon the proper and faithful discharge of his powers, duties and responsibilities. Se(tion -. 5ualifications of the *i%uidator. - The li%uidator shall have the %ualifications enu$erated in "ection 0D hereof. Ae $ay be re$oved at any ti$e by the court for cause, either motu propio or upon $otion of any creditor entitled to vote for the election of the li%uidator. Se(tion .. Po+ers# Duties and Responsibilities of the *i%uidator. - The li%uidator shall be dee$ed an officer of the court with the principal duly of preserving and $a&i$i'ing the value and recovering the assets of the debtor, with the end of li%uidating the$ and discharging to the e&tent possible all the clai$s against the debtor. The powers, duties and responsibilities of the li%uidator shall include, but not li$ited to+ ,a- to sue and recover all the assets, debts and clai$s, belonging or due to the debtor/ ,b- to ta e possession of all the property of the debtor e&cept property e&e$pt by law fro$ e&ecution/ ,c- to sell, with the approval of the court, any property of the debtor which has co$e into his possession or control/

,d- to redee$ all $ortgages and pledges, and so satisfy any #udge$ent which $ay be an encu$brance on any property sold by hi$/ ,e- to settle all accounts between the debtor and his creditors, sub#ect to the approval of the court/ ,f- to recover any property or its value, fraudulently conveyed by the debtor/ ,g- to reco$$end to the court the creation of a creditors) co$$ittee which will assist hi$ in the discharge of the functions and which shall have powers as the court dee$s #ust, reasonable and necessary/ and ,h- upon approval of the court, to engage such professional as $ay be necessary and reasonable to assist hi$ in the discharge of his duties. !n addition to the rights and duties of a rehabilitation receiver, the li%uidator, shall have the right and duty to ta e all reasonable steps to $anage and dispose of the debtor)s assets with a view towards $a&i$i'ing the proceedings therefro$, to pay creditors and stoc holders, and to ter$inate the debtor)s legal e&istence. 5ther duties of the li%uidator in accordance with this section $ay be established by procedural rules. A li%uidator shall be sub#ect to re$oval pursuant to procedures for re$oving a rehabilitation receiver. Se(tion #!. Compensation of the *i%uidator. - The li%uidator and the persons and entities engaged or e$ployed by hi$ to assist in the discharge of his powers and duties shall be entitled to such reasonable co$pensation as $ay deter$ined by the li%uidation court, which shall not e&ceed the $a&i$u$ a$ount as $ay be prescribed by the "upre$e *ourt. Se(tion # . Reporting Re%uiremen=ts. - The li%uidator shall $a e and eep a record of all $oneys received and all disburse$ents $ad by hi$ or under his authority as li%uidator. Ae shall render a %uarterly report thereof to the court , which report shall be $ade available to all interested parties. The li%uidator shall also sub$it such reports as $ay be re%uired by the court fro$ ti$e to ti$e as well as a final report at the end of the li%uidation proceedings. Se(tion ##. Discharge of *i%uidator. - !n preparation for the final settle$ent of all the clai$s against the debtor , the li%uidator will notify all the creditors, either by publication in a newspaper of general circulation or such other $ode as the court $ay direct or allow, that will apply with the court for the settle$ent of his account and his discharge fro$ liability as li%uidator. The li%uidator will file a final accounting with the court, with proof of notice to all creditors. The accounting will be set for hearing. !f the court finds the sa$e in order, the court will discharge the li%uidator. 0C1 %eter4ination o5 Clai4s

Se(tion #). Registry of Claims. - (ithin twenty ,0:- days fro$ his assu$ption into office the li%uidator shall prepare a preli$inary registry of clai$s of secured and unsecured creditors. "ecured creditors who have waived their security or lien, or have fi&ed the value of the property sub#ect of their security or lien by agree$ent with the li%uidator and is ad$itted as a creditor for the balance , shall be considered as unsecured creditors. The li%uidator shall $a e the registry available for public inspection and provide publication notice to creditors, individual debtors owner6s of the sole proprietorship-debtor, the partners of the partnership-debtor and shareholders or $e$bers of the corporation-debtor, on where and when they $ay inspect it. All clai$s $ust be duly proven before being paid. Se(tion #". Right of Set9off. - !f the debtor and creditor are $utually debtor and creditor of each other one debt shall be set off against the other, and only the balance, if any shall be allowed in the li%uidation proceedings. Se(tion #*. 9 $pposition or Challenge to Claims. - (ithin thirty ,1: - days fro$ the e&piration of the period for filing of applications for recognition of clai$s, creditors, individual debtors, owner6s of the sole proprietorship-debtor, partners of the partnership-debtor and shareholders or $e$bers of the corporation -debtor and other interested parties $ay sub$it a challenge to clai$ or clai$s to the court, serving a certified copy on the li%uidator and the creditor holding the challenged clai$. @pon the e&piration of the ,1:- day period, the rehabilitation receiver shall sub$it to the court the registry of clai$s containing the undisputed clai$s that have not been sub#ect to challenge. "uch clai$s shall beco$e final upon the filling of the register and $ay be subse%uently set aside only on grounds or fraud, accident, $ista e or ine&cusable neglect. Se(tion #+. Submission of Disputed to the Court. - The li%uidator shall resolve disputed clai$s and sub$it his findings thereon to the court for final approval. The li%uidator $ay disallow clai$s. 0%1 A3oidan(e Pro(eedings. Se(tion #,. Rescission or ullity of Certain Transactions. - Any transaction occurring prior to the issuance of the 7i%uidation 5rder or, in case of the conversion of the rehabilitation proceedings prior to the co$$ence$ent date, entered into by the debtor or involving its assets, $ay be rescinded or declared null and void on the ground that the sa$e was e&ecuted with intent to defraud a creditor or creditors or which constitute undue preference of creditors. The presu$ptions set forth in "ection 3C hereof shall apply. Se(tion #-. !ctions for Rescission or ullity. - ,a- The li%uidator or, with his confor$ity, a creditor $ay initiate and prosecute any action to rescind, or declare null and void any transaction described in the i$$ediately preceding paragraph. !f the li%uidator does not consent to the filling or prosecution of such action, any creditor $ay see leave of the court to co$$ence said action. ,b- if leave of court is granted under subsection ,a- hereof, the li%uidator shall assign and transfer to the creditor all rights, title and interest in the chose in action or sub#ect $atter of the proceeding, including any docu$ent in support thereof.

,c- Any benefit derived fro$ a proceeding ta en pursuant to subsection ,a- hereof, to the e&tent of his clai$ and the costs, belongs e&clusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate. ,d- (here, before an orders is $ade under subsection ,a- hereof, the li%uidator signifies to the court his readiness to the institute the proceeding for the benefit of the creditors, the order shall fi& the ti$e within which he shall do so and, in that case the benefit derived fro$ the proceedings, if instituted within the ti$e li$its so fi&ed, belongs to the estate. 0E1 The Li<uidation Plan. Se(tion #.. The *i%uidation Plan. - (ithin three ,1- $onths fro$ his assu$ption into office, the 7i%uidator shall sub$it a 7i%uidation Plan to the court. The 7i%uidation Plan shall, as a $ini$u$ enu$erate all the assets of the debtor and a schedule of li%uidation of the assets and pay$ent of the clai$s. Se(tion )!. &"empt Property to be Set !part. - !t shall be the duty of the court, upon petition and after hearing, to e&e$pt and set apart, for the use and benefit of the said insolvent, such real and personal property as is by law e&e$pt fro$ e&ecution, and also a ho$estead/ but no such petition shall be heard as aforesaid until it is first proved that notice of the hearing of the application therefor has been duly given by the cler , by causing such notice to be posted it at least three ,1- public places in the province or city at least ten ,.:- days prior to the ti$e of such hearing, which notice shall set forth the na$e of the said insolvent debtor, and the ti$e and place appointed for the hearing of such application, and shall briefly indicate the ho$estead sought to be e&e$pted or the property sought to be set aside/ and the decree $ust show that such proof was $ade to the satisfaction of the court, and shall be conclusive evidence of that fact. Se(tion ) . Sale of !ssets in *i%uidation. - The li%uidator $ay sell the unencu$bered assets of the debtor and convert the sa$e into $oney. The sale shall be $ade at public auction. Aowever, a private sale $ay be allowed with the approval of the court if/ ,a- the goods to be sold are of a perishable nature, or are liable to %uic ly deteriorate in value, or are disproportionately e&pensive to eep or $aintain/ or ,b- the private sale is for the best interest of the debtor and his creditors. (ith the approval of the court, unencu$bered property of the debtor $ay also be conveyed to a creditor in satisfaction of his clai$ or part thereof. Se(tion )#. manner of (mplementing the *i%uidation Plan. - The 7i%uidator shall i$ple$ent the 7i%uidation Plan as approved by the court. Pay$ents shall be $ade to the creditors only in accordance with the provisions of the Plan. Se(tion )). Concurrence and Preference of Credits. - The 7i%uidation Plan and its !$ple$entation shall ensure that the concurrence and preference of credits as enu$erated in the *ivil *ode of the Philippines and other relevant laws shall be observed, unless a preferred creditor voluntarily waives his preferred right. =or purposes of this chapter, credits for services

rendered by e$ployees or laborers to the debtor shall en#oy first preference under Article 0022 of the *ivil *ode, unless the clai$s constitute legal liens under Article 002. and 0020 thereof. Se(tion )". $rder Removing the Debtor from the *ist of Registered &ntitles at the Securities and &"change Commission. - @pon deter$ining that the li%uidation has been co$pleted according to this Act and applicable law, the court shall issue an 5rder approving the report and ordering the "9* to re$ove the debtor fro$ the registry of legal entities. Se(tion )*. Termination of Proceedings. - @pon receipt of evidence showing that the debtor has been re$oved fro$ the registry of legal entities at the "9*. The court shall issue an 5rder ter$inating the proceedings. 0F1 Li<uidation o5 a Se(urities 8ar=et Parti(i:ant. Se(tion )+. *i%uidation of a Securities 4ar,et Participant. - The foregoing provisions of this chapter shall be without pre#udice to the power of a regulatory agency or self- regulatory organi'ation to li%uidate trade-related clai$s of clients or custo$ers of a securities $ar et participant which, for purposes of investor protection, are hereby dee$ed to have absolute priority over other clai$s of whatever nature or ind insofar as trade-related assets are concerned. =or purposes of this section, trade -related assets include cash, securities, trading right and other owned and used by the securities $ar et participant in the ordinary course of this business. CHAPTER $III PROCEE%INGS ANCILLAR' TO OTHER INSOL$ENC' OR REHABILITAION PROCEE%INGS 0A1 Ban=s and Other Finan(ial Institutions Under Reha6ilitation Re(ei3ershi: Pursuant to a State/5unded or State/4andated Insuran(e S2ste4. Se(tion ),. Provision of !ssistance. - The court shall issue orders, ad#udicate clai$s and provide other relief necessary to assist in the li%uidation of a financial under rehabilitation receivership established by a state-funded or state-$andated insurance syste$. Se(tion )-. !pplication of Relevant *egislation. - The li%uidation of ban , financial institutions, insurance co$panies and pre-need co$panies shall be deter$ined by relevant legislation. The provisions in this Act shall apply in a suppletory $anner. 0B1 Cross/Border Insol3en(2 Pro(eedings. Se(tion ).. !doption of -ncitral 4odel *a+ on Cross9Border (nsolvency. - "ub#ect to the provision of "ection .14 hereof and the rules of procedure that $ay be adopted by the "upre$e *ourt, the Model 7aw on *ross-Border !nsolvency of the @nited >ations *enter for !nternational Trade and 8evelop$ent is hereby adopted as part of this Act.

Se(tion "!. (nitiation of Proceedings. - The court shall set a hearing in connection with an insolvency or rehabilitation proceeding ta ing place in a foreign #urisdiction, upon the sub$ission of a petition by the representative of the foreign entity that is the sub#ect of the foreign proceeding. Se(tion " . Provision of Relief. - The court $ay issue orders+ ,a- suspending any action to enforce clai$s against the entity or otherwise sei'e or foreclose on property of the foreign entity located in the Philippines/ ,b- re%uiring the surrender property of the foreign entity to the foreign representative/ or ,c- providing other necessary relief. Se(tion "#. 1actors in 'ranting Relief. - !n deter$ining whether to grant relief under this subchapter, the court shall consider/ ,a- the protection of creditors in the Philippines and the inconvenience in pursuing their clai$ in a foreign proceeding/ ,b- the #ust treat$ent of all creditors through resort to a unified insolvency or rehabilitation proceedings/ ,c- whether other #urisdictions have given recognition to the foreign proceeding/ ,d- the e&tent that the foreign proceeding recogni'es the rights of creditors and other interested parties in a $anner substantially in accordance with the $anner prescribed in this Act/ and ,e- the e&tent that the foreign proceeding has recogni'ed and shown deference to proceedings under this Act and previous legislation. CHAPTER I> FUN%S FOR REHABILITATION OF GO$ERN8ENT/O?NE% AN% CONTROLLE% CORPORATIONS Se(tion "). 1unds for Rehabilitation of 'overnment 9o+ned and Controlled Corporations. Public funds for the rehabilitation of govern$ent-owned and controlled corporations shall be released only pursuant to an appropriation by *ongress and shall be supported by funds actually available as certified by the >ational Treasurer. The 8epart$ent of =inance, in collaboration with the 8epart$ent of Budget and Manage$ent, shall pro$ulgate the rules for the use and release of said funds. CHAPTER > 8ISCELLANEOUS PRO$ISIOS

Se(tion "". !pplicability of Provisions. - The provisions in *hapter !!, insofar as they are applicable, shall li ewise apply to proceedings in *hapters !! and !<. Se(tion "*. Penalties. - An owner, partner, director, officer or other e$ployee of the debtor who co$$its any one of the following acts shall, upon conviction thereof, be punished by a fine of not $ore than 5ne $illion pesos ,Php ., :::,:::.::- and i$prison$ent for not less than three,1- $onths nor $ore than five ,3- years for each offense/ ,a- if he shall, having notice of the co$$ence$ent of the proceedings, or having reason to believe that proceedings are about to be co$$ented, or in conte$plation of the proceedings hide or conceal, or destroy or cause to be destroyed or hidden any property belonging to the debtor or if he shall hide, destroy, after $utilate or falsify, or cause to be hidden, destroyed, altered, $utilated or falsified, any boo , deed, docu$ent or writing relating thereto/ if he shall, with intent to defraud the creditors of the debtor, $a e any pay$ent sale, assign$ent, transfer or conveyance of any property belongings to the debtor ,b- if he shall, having nowledge belief of any person having proved a false or fictitious clai$ against the debtor, fail to disclose the sa$e to the rehabilitation receiver of li%uidator within one ,.- $onth after co$ing to said nowledge or belief/ or if he shall atte$pt to account for any of the debtors property by fictitious losses or e&pense/ or ,c- if he shall nowingly violate a prohibition or nowingly fail to underta e an obligation established by this Act. Se(tion "+. !pplication to Pending (nsolvency# Suspension of Payments and Rehabilitation Cases. - This Act shall govern all petitions filed after it has ta en effect. All further proceedings in insolvency, suspension of pay$ents and rehabilitation cases then pending, e&cept to the e&tent that in opinion of the court their application would not be feasible or would wor in#ustice, in which event the procedures set forth in prior laws and regulations shall apply. Se(tion ",. !pplication to Pending Contracts. - This Act shall apply to all contracts of the debtor regardless of the date of perfection. Se(tion "-. Repeating Clause. - The !nsolvency 7aw ,Act >o. .D34-. As a$ended is hereby repealed. All other laws, orders, rules and regulations or parts thereof inconsistent with any provision of this Act are hereby repealed or $odified accordingly. Se(tion ".. Separability Clause. - !f any provision of this Act shall be held invalid, the re$ainder of this Act not otherwise affected shall re$ain in full force effect Se(tion *!. &ffectivity Clause. - This Act shall ta e effect fifteen ,.3- days after its co$plete publication in the 5fficial Ba'ette or in at least two ,0- national newspaper of general circulation. Approved,

,"gd.- ;UAN PONCE ENRILE President of the "enate

,"gd.- PROSPERO C. NOGRALES "pea er of the Aouse of Representatives

This Act which is a consolidation of Aouse Bill >o. ?:D: and "enate Bill >o. 4. was finally passed by the Aouse of Representatives and the "enate on =ebruary .. 0:.: and =ebruary 0, 0:.:, respectively.

,"gd.- E88A LIRIO/RE'ES "ecretary of "enate

,"gd.- 8ARIL'N B. BARUA/'AP "ecretary Beneral Aouse of Representatives

,"gd.- GLORIA 8ACAPAGAL/ARRO'O President of the Philippines