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CHARMAINE P.

MEJIA
SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010

NOTES FLOW CHART RULE
COURT- SUPERVISED REHABILITATION a) COURT- SUPERVISED REHABILITATION
INITIAL PROCEEDING
VOLUNTARY PROCEEDING INVOLUNTARY PROCEEDING Section 12
A. Voluntary Proceeding
(Debtor - Initiated) (Creditor - Initiated)
1. Petition to initiate voluntary proceedings filed by
debtor, approved by:
i. Sole Proprietorship – by the owner
ii. Partnership – by a majority of the
partners File verified Petition for
iii. Stock Corporation – by a majority vote Rehabilitation with the Court
of the board of directors and authorized (RTC)
by the vote of the stockholders
representing at least 2/3 of the
outstanding capital stock in a
stockholder’s meeting duly called for the IF PETITION IS DEFFICIENT
purpose Is the Court may, in its discretion give the
iv. Non-Stock Corporation – by a majority Petition NO petitioner/s a reasonable time
vote of the board of trustees authorized Sufficient in within which to amend/supplement
by the vote of at least 2/3 of the Substance or to submit documents
members, in a member’s meeting duly
called for the purpose.

Note: A group of debtors may jointly file a petition for Y
If Petitioner – Debtor
rehabilitation, when one or more of its members E
Direct the service by
foresee the impossibility of meeting debts when they
personal delivery of a copy IF PETITION IS SUFFICIENT
respectively fall due, and the financial distress would
of the petition on each Court shall issue within 5working
likely adversely affect the financial condition and/or
creditor within 5days days from the filing of the petition:
operations of other members of the group and/or the
COMMENCEMENT ORDER If Petitioner – Creditor
participation of the other members of the group is
essential under the terms and conditions of the Direct the service by
proposed Rehabilitation Plan. personal delivery of a copy
Displacement of COMMENCEMENT OF of the petition on the
Existing Management REHABILITATION PROCEEDINGS
2. Grounds: Insolvency of the debtor and viability of debtor within 5days
rehabilitation.

3. Content of Petition – The petition shall be verified
Appoint Direct BIR to file and Stay Direct all creditors Direct the Waiver of taxes Use, preservation and
to establish the insolvency of the debtor and the
Rehabilitation serve on the debtor its Order to file their claims publication of and fees due to disposal of assets and
viability of its rehabilitation, include, whether as comment on or with the court at the National treatment of assets
an attachment or as part of the body of the Receiver the
proposition to the least 5 days Commencement Government and claims after
petition, as a minimum the following: petition or its claim/s before the initial and to LGU commencement date
Order
a) Identification of the debtor, its principal against petitioner hearing
activities and its addresses;

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CHARMAINE P. MEJIA
SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010

b) Statement of the fact of and the cause of
the debtor’s insolvency or inability to pay
its obligations as they become due; Take oath and INITIAL HEARING
c) The specific relief sought file a bond
d) The grounds upon which the petition is
based
e) Other information that may be required, Report of the
Registry of Determine the
depending on the form of relief Opposition
Claims Hear and determine Rehabilitation Receiver creditors who filed
requested or any objection to the
w/in 20days w/in 40 days from initial their notice of
f) Schedule of the debtor’s debts and Challenge qualification of the
from hearing, the claims properly
liabilities including a list of creditor’s with of Claims
assumption appointment of the Rehabilitation Receiver
their addresses, amounts of claims and to office, the rehabilitation shall submit a report to
collaterals, or securities, if any; rehabilitation receiver the court
g) An inventory of all its assets including receiver shall
Appeal establish a Direct the creditors
receivables and claims against third decision of preliminary to comment on the
parties; Rehabilitation registry of petition and
h) A Rehabilitation Plan Receiver to claims Rehabiliation and
i) The names of at least 3 nominees to the the court
submit it to the court
position of rehabilitation receiver; and
and Rehabilitation
j) Other documents required to be filed
Receiver
with the petition pursuant to this Act and
Submit to the court
the rules of procedure as may be
the registry of claims
promulgated by the Supreme Court. w/in 10days from
including undisputed
receipt of report Convert
claims Dismiss the
B. Involuntary Proceeding Petition of the proceeding Section 13
1. Any creditor or group of creditors with a claim of, Rehabilitation to
or the aggregate of whose claims is, at least 1 Receiver, the liquidation
court may: of the
Million Pesos (Php1,000,000.00) or at least 25%
of the subscribed capital stock or partner’s Court may, in its
contributions, whichever is higher, may initiate discretion order
involuntary proceedings against the debtor by petitioner to pay
filing a petition for rehabilitation with the court. damages to any The court may refer
creditor or debtor, as GIVE DUE COURSE any dispute relating to
2. Circumstances Necessary to Initiate Proceedings the case may be. the Rehabilitation Plan
i. There is no genuine issue on law on the or rehabilitation
claim/s of the petitioner/s, and that the proceeding pending
due and demandable payments thereon The court shall direct the before it to arbitration
have not been made for at least 60days Rehabilitation Receiver to review, or other modes of
TERMINATE
or that the debtor has failed generally to revise, and/or recommend action dispute resolution
PROCEEDINGS
meet its liabilities as they fall due; or on the Rehabilitation Plan and
ii. A creditor, other than the petitioner/s, submit the same or new one
has initiated foreclosure proceedings within 90days
against the debtor that will prevent the

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CHARMAINE P. MEJIA
SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010

debtor from paying its debts as they
come due or will render it insolvent.
Consultation with Debtor and Creditors may organize a
3. Contents of Petition – The petition shall be Creditor committee among Section 14
verified to establish the substantial likelihood that The Rehabilitation receiver will themselves
the debtor may be rehabilitated, and include: consult with the debtor and all (Creditor’s Committee)
a) Identification of the debtor, its principal the classes of creditor
activities and its addresses;
b) The circumstances sufficient to support a
petition to initiate involuntary
rehabilitation proceedings
c) The specific relief sought
d) A Rehabilitation Plan Creditor
Approval of Rejection of
e) The names of at least 3 nominees to the
the Rehabilitation Plan
position of rehabilitation receiver;
f) Other information that may be required Rehabilitation
under this Act depending on the form of
relief requested; and Court may
g) Other documents required to be filed confirm the
with the petition pursuant to this Act and Rehabilitation
the rules of procedure as may be Plan
promulgated by the Supreme Court. Approve of the
Rehabilitation
ACTION ON THE PETITION AND COMMENCEMENT OF Plan
PROCEEDINGS
1. Action on the Proceeding – Within 5 working days Section 15
from filing of the petition, the court shall:
i. If the petition for rehabilitation is Period for Confirmation of Submission of the
sufficient in form and substance, the Rehabilitation Plan – If no Rehabilitation Plan to the
court shall issue a Commencement confirmation w/in 1 yr Court - File a Petition to
Order; or from date of filing petition
Confirmation of
ii. If the petition is deficient in form or for, the court may upon
Rehabilitation Plan
substance, the court may, in its motion or motu proprio,
be converted into
discretion, give the petitioner/s a
liquidation of debtor
reasonable period of time within which
to amend or supplement the petition, or Court shall notify
to submit such documents as may be creditors w/in
necessary or proper to put the petition in 5days from receipt
proper order. (Commencement Order of Rehabilitation
shall be reckoned from the date of the Plan
filing of the amended or supplemental
petition or the submission of such
documents).

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CHARMAINE P. MEJIA
SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010

2. Commencement of Proceeding and Issuance of a Section 16
Commencement Order – the rehabilitation
proceedings shall commence upon the issuance of
the Commencement Order, which shall:
a) Identify the debtor, its principal business OBJECTIO No
or activity/ies and its principal place of N OF
business; Objection
CREDITOR
b) Summarize the ground/s for initiating the
proceedings;
c) State the relief sought under this Act and
any requirement or procedure particular
to the relief sought;
d) State the legal effects of the Creditor Files
Commencement Order; Objection to
e) Declare that the debtor is under Rehabilitation
rehabilitation;
f) Direct the publication of the
Commencement Order in a newspaper of
general circulation in the Philippines
once a week for at least two (2) If court finds the
consecutive weeks, with the first debtor is in bad
Lack of Merit of Hearing
publication to be made within seven (7) faith or that it is not
Objection on the
days from the time of its issuance; feasible to cure
Objecti
g) If the petitioner is the debtor direct the defect
service by personal delivery of a copy of
the petition on each creditor holding at
least ten percent (10%) of the total
liabilities of the debtor as determined Court FINDS MERIT in the
from the schedule attached to the Convert
objection, it shall order the
petition within five (5) days; if the proceeding
Rehabilitation Receiver or
petitioner/s is/are creditor/s, direct the to
other party to cure the defect,
service by personal delivery of a copy of liquidation
whenever feasible
the petition on the debtor within five (5) of the
days;
h) Appoint a rehabilitation receiver who
may or not be from among the nominees Confirmation of
of the petitioner/s and who shall exercise Rehabilitation Plan
such powers and duties defined in this Court shall issue and
Act as well as the procedural rules that order confirming the
the Supreme Court will promulgate; Rehabilitation Plan
i) Summarize the requirements and
deadlines for creditors to establish their
claims against the debtor and direct all

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attachment or other provisional remedies against the debtor. Successful Execution m) Set the case for initial hearing. p) Include s Stay or Suspension Order 3. in court or otherwise. for the enforcement Section 16 (q) of claims against the debtor. accounting to the court k) Prohibit the debtor's suppliers of goods or services from withholding the supply Debtor fails to Enforce of goods and services in the ordinary perform the applicable course of business for as long as the obligation under provision of debtor makes payments for the services IMPLEMENTATION OF REHABILITATION PLAN the Rehabilitation the or goods supplied after the issuance of Plan (Breach of Rehabilitation the Commencement Order. may submit the name or nominate any other qualified person to the position of rehabilitation receiver at least five (5) days before the initial hearing. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 creditors to their claims with the court at least five (5) days before the initial hearing. Stay Order – includes: i. which Implementation shall not be more than forty (40) days from the date of filing of the petition for the purpose of determining whether there is substantial likelihood for the TERMINATE Convert debtor to be rehabilitated. CHARMAINE P. Suspend all actions to enforce any judgment. of the o) State that any creditor or debtor who is not the petitioner. ii. Suspend all actions or proceedings. REHABLITATION proceeding n) make available copies of the petition and PROCEEDINGS to rehabilitation plan for examination and liquidation copying by any interested party. iii. j) Direct Bureau of internal Revenue (BIR) Accounting Discharge of to file and serve on the debtor its Rehabilitation Receiver comment on or opposition to the The Rehabilitation petition or its claim/s against the debtor Receiver shall provide the under such procedures as the Supreme final report and Court provide. Rehabilitation Plan through l) Authorize the payment of administrative Plan) Writ of expenses as they become due. Page | 5 . prohibit the debtor from selling.

liquidation regulatory organization to pay or settle such of the claims or liabilities. and iv. Rehabilitation Plan 4. d) To any form of action of customers or clients of a securities market participant to recover or otherwise claim moneys and securities Court FINDS MERIT in the entrusted to the latter in the ordinary course objection. CHARMAINE P. Any creditor or interested party may submit to the c) To the enforcement of claims against sureties court a verified objection not later than 8 days from nd and other persons solidarily liable with the 2 publication of the Order debtor. shall be deemed form and substance b) Subject to the discretion of the court. and third party or accommodation mortgagors as well as issuers of letters of credit. upon Implementation of the Approval of determination by the court is capable of Rehabilitation Plan Rehabilitation Plan resolving the claim more quickly.The Stay or Suspension Order shall not apply: a) To cases already pending appeal in the If court fails to act on Issuance of Order Section 18 Supreme Court as of commencement the petition w/in w/in 5days and after date Provided. Exceptions to the Stay or Suspension Order . unless the property subject of the If court finds the third party or accommodation mortgage is debtor is in bad necessary for the rehabilitation of the debtor Hearing faith or that it is not as determined by the court upon Lack of Merit of Objection on the feasible to cure recommendation by the rehabilitation Objection defect receiver. to approved cases pending or filed at a specialized court or quasi-judicial agency which. the determination that the judgment arising from such appeal shall be Rehabilitation Plan petition is sufficient in referred to the court for appropriate action. transferring or disposing in b) PRE-NEGOTIATED REHABILITATION any manner any of its properties except in the ordinary course of business. Page | 6 . That any final and executory judgment of such court or agency shall be referred to the court and shall Objection to the Petition or Rehabilitation Plan be treated as a non-disputed claim. proceeding of such securities market participant or the whenever feasible to appropriate regulatory agency or self. fairly and efficiently than the court: Provided. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 encumbering. Prohibit the debtor from making any Insolvent Debtor or jointly with any of its payment of its liabilities outstanding as creditors may file a verified petition w/ the of the commencement date except as court for approval of a Pre-negotiated may be provided herein. it shall order the Convert of the latter's business as well as any action debtor to cure the defect. That any final and executory 120days .

director or officer of a Election of Liquidator / debtor shall not be affected by any Appointment of proceeding commend under this Act. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 e) To the actions of a licensed broker or dealer c) LIQUIDATION FOR JURIDICAL AND INDIVIDUAL DEBTOR to sell pledged securities of a debtor pursuant to a securities pledge or margin agreement for the settlement of securities transactions Conversion by court VOLUNTARY LIQUIDATION into Liquidation INVOLUNTARY LIQUIDATION in accordance with the provisions of the Insolvent debtor – initiated Proceeding Creditor . such as Liquidation is Complete Termination of Proceeding the right to review and obtain records to Court shall issue an order Court shall issue an order directing which the debtor's management and terminating the proceeding SEC to remove the debtor from the directors have access. liquidator by the Court 5. and g) Any criminal action against individual debtor or owner. partner. in Implementation of Section 17 addition to the effects of a Stay or Suspension Liquidation Plan Order described in Section 16 hereof: a) Vest the rehabilitation with all the powers and functions provided for this Act. Plan 6. f) The clearing and settlement of financial transactions through the facilities of a clearing agency or similar entities duly authorized. CHARMAINE P. the court's issuance of a Commencement Order shall. Application of Stay or Suspension Order to Government Financial Institutions . notwithstanding provisions in their charters or Submit Liquidation other laws to the contrary.The Section 20 provisions of this Act concerning the effects of the Registry of Claims (Same as in Commencement Order and the Stay or Court Supervised flowchart) Suspension Order on the suspension of rights to foreclose or otherwise pursue legal remedies shall apply to government financial institutions.Initiated Securities Regulation Code and its implementing rules and regulations. Effects of the Commencement Order – Unless otherwise provided for in this Act. registered and/or recognized by Petition for Liquidation the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and the SEC as well as any form of actions of such agencies or entities to reimburse themselves Liquidation Order for any transactions settled for the debtor. including bank accounts or whatever nature of the debtor registry of entities Page | 7 .

CHARMAINE P. b) Prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process to seize property. that the court may allow the continuation of cases on other courts where the debtor had initiated the suit. or otherwise attempt to collection or enforce a claim against the debtor after commencement date unless otherwise allowed in this Act. c) Serve as the legal basis for rendering null and void any set off after the commencement date of any debt owed to the debtor by any of the debtor's creditors. Effectivity and Duration of Commencement Order . and e) Consolidate the resolution of all legal proceedings by and against the debtor to the court provided however. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 subject to the approval by the court of the performance bond filed by the rehabilitation receiver. d) Serve as the legal basis for rendering null and void the perfection of any lien against the debtor's property after the commencement date. 8. sell encumbered property. the Commencement Order shall be for the effective Section 21 for the duration of the rehabilitation proceedings for as long as there is a substantial likelihood that the debtor will be successfully rehabilitated.Unless lifted by the court. 7. Minimum Requirements to Determine whether there is Substantial likelihood for the Debtor to be Rehabilitated: Section 21 a) The proposed Rehabilitation Plan submitted Page | 8 . Note: Attempts to seek legal of other resource against the debtor outside these proceedings shall be sufficient to support a finding of indirect contempt of court. subject to the provisions of Section 50 hereof.

partners. b) There is sufficient monitoring by the rehabilitation receiver of the debtor's business for the protection of creditors. in any case. iv. The petition is not s sham filing intended only to delay the enforcement of the rights of the creditor's or of any group of creditors. The debtor would likely be able to pursue a viable Rehabilitation Plan. and v. c) The debtor has met with its creditors to the extent reasonably possible in attempts to reach consensus on the proposed Rehabilitation Plan. There are sufficient assets with/which to rehabilitate the debtor. a substantial likelihood for the debtor to be successfully rehabilitated because. directors and officers have been acting in good faith and which due diligence. f) If the petitioner is the debtor. based on preliminary evaluation. stockholders. ii. e) The petition. that the debtor has met with its creditor/s representing at least three-fourths (3/4) of its total obligations to the extent reasonably possible and made a good faith effort to reach a consensus on the proposed Rehabilitation Page | 9 . MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 complies with the minimum contents prescribed by this Act. CHARMAINE P. stating that the underlying assumptions and the goals stated in the petitioner's Rehabilitation Plan are realistic reasonable and reasonable or if not. among others: i. the Rehabilitation Plan and the attachments thereto do not contain any materially false or misleading statement. iii. there is. There is sufficient cash flow to maintain the operations of the debtor. The debtor's. d) The rehabilitation receiver submits a report.

whichever is earlier. 9. and 4. in furtherance of the objectives of rehabilitation. that/ the petitioner/s has/have met with the debtor and made a good faith effort to reach a consensus on the proposed Rehabilitation Plan. CHARMAINE P. the imposition of all taxes and fees including penalties. and until the approval of the Rehabilitation Plan or dismissal of the petition. Determine the creditors who have made timely and proper filing of their notice of claims. Direct the rehabilitation receiver to evaluate the financial condition of the debtor and to prepare and submit to the court within forty (40) days from initial Page | 10 . Section 22  Effect of Failure to File Notice of Claim – A creditor whose claim is not listed in the schedule of debts and liabilities and who fails to file a Section 23 notice of claim in accordance with the Commencement Order but subsequently files a belated claim shall not be entitled to participate in the rehabilitation proceedings but shall be entitled to receive distributions arising there from. Hear and determine any objection to the qualifications of the appointment of the rehabilitation receiver and. ACTION AT THE INITIAL HEARING 1. Waiver of taxes and Fees Due to the National Government and to Local Government Units (LGUs) . if necessary appoint a new one in accordance with this Act.Upon issuance of the Commencement Section 19 Order by the court. 3. 2. and to submit the same to the court and to the rehabilitation receiver within a period of not more than twenty (20) days. interests and charges thereof due to the national government or to LGUs shall be considered waived. and g) The debtor has not committed acts misrepresentation or in fraud of its creditor/s or a group of creditors. Direct the creditors to comment on the petition and the Rehabilitation Plan. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 Plan if the petitioner/s is/are a creditor or group of creditors.

Petition Given Due Course .If the petition is given due course. d) The petition should be dismissed. and Section 25(a) b) There is a substantial likelihood for the debtor to be successfully rehabilitated. revise and/or recommend action on the Rehabilitation Plan and submit the same or a new one to the court within a period of not more than ninety (90) days. Note: The court may refer any dispute relating to the Page | 11 . the rehabilitation receiver shall submit a report to the court stating his preliminary findings and recommendations on whether: a) The debtor is insolvent and if so. c) There is a substantial likelihood for the debtor to be successfully rehabilitated.  Report of the Rehabilitation Receiver – Within forty (40) days from the initial hearing and with or Section 24 without the comments of the creditors or any of them. feasible and reasonable. b) The underlying assumptions. the causes thereof and any unlawful or irregular act or acts committed by the owner/s of a sole proprietorship partners of a partnership or directors or officers of a corporation in contemplation of the insolvency of the debtor or which may have contributed to the insolvency of the debtor. OR CONVERSION OF PROCEEDINGS Within ten (10) days from receipt of the report of the Section 25 rehabilitation receiver mentioned in Section 24 hereof the court may: A. Give due course to the petition upon a finding that: a) The debtor is insolvent. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 hearing the report. the financial goals and the procedures to accomplish such goals as stated in the petitioner's Rehabilitation Plan are realistic. and e) The debtor should be dissolved and/or liquidated GIVING DUE COURSE TO OR DISMISSAL OF PETITION. the court shall direct the rehabilitation receiver to Section 26 review. CHARMAINE P.

order the petitioner to pay damages to any creditor or to the debtor. MANAGEMENT COMMITTEE AND CREDITOR’S COMMITTEE A. Dismiss the petition upon a finding that: a) Debtor is not insolvent. and Section 25 (c) b) There is no substantial likelihood for the debtor to be successfully rehabilitated as determined in accordance with the rules to be promulgated by the Supreme Court. Or the Alternative Dispute Resolution Act of 2004. then the court may. as provided for under Republic Act No. it must designate a natural person/s who possess/es all the qualifications and none of the disqualification’s as its representative. who may have been injured by the filing of the petition. fairly and efficiently than the court. 9285. it being understood that the juridical entity and the Page | 12 . B. Convert the proceedings into one for the liquidation of the debtor upon a finding that: a) The debtor is insolvent. in its discretion. C. CHARMAINE P. Dismissal of Petition – If the petition is dismissed. Rehabilitation Receiver . b) The petition is a sham filing intended only to Section 25 (b) delay the enforcement of the rights of the creditor/s or of any group of creditors. That if the rehabilitation receiver is a Section 28 juridical entity. or d) The debtor has committed acts of misrepresentation or in fraud of its creditor/s or a group of creditors. REHABILIATATION RECEIVER.Any qualified natural or juridical person may serve as a rehabilitation receiver: Provided. c) The petition. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 Rehabilitation Plan or the rehabilitation proceedings pending before it to arbitration or other modes of dispute resolution. should it determine that such mode will resolve the dispute more quickly. as the case may Section 27 be. the Rehabilitation Plan and the attachments thereto contain any materially false or misleading statements. to the extent of any such injury.

and d) Has no conflict of interest: Provided. The court may retain the rehabilitation receiver initially appointed or appoint another who may or may not be from among those nominated. e) Other qualifications and disqualifications of the rehabilitation receiver shall be set forth in procedural rules. That such conflict of interest may be waived. as well as the relevant training and/or experience that may be necessary to enable him to properly discharge the duties and obligations of a rehabilitation receiver. by a party who may be prejudiced thereby. 2. However. rules and procedures. 1. the creditors and the debtor who are not petitioners may nominate other persons to the position. Initial Appointment – The court shall initially appoint the rehabilitation receiver. expressly or impliedly. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 representative/s are solidarily liable for all obligations and responsibilities of the rehabilitation receiver. c) Has the requisite knowledge of insolvency and other relevant commercial laws. Qualifications . who may or may not be from among the nominees of the Section 30 petitioner. b) Of good moral character and with acknowledged integrity. taking into consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned. CHARMAINE P.The rehabilitation receiver shall have the following minimum qualifications: Section 29 a) A citizen of the Philippines or a resident of the Philippines in the six (6) months immediately preceding his nomination. Note: In case the debtor is a securities market participant. impartiality and independence. the court shall give priority to the Page | 13 . at the initial hearing of the petition.

approval of the court. 3. with the. and their valuation. and to preserve the value of all the property of the debtor. the inventory of all of the assets of the debtor. CHARMAINE P. and all properties pertaining to the debtor. the schedule of debts and liabilities of the debtor. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 nominee of the appropriate securities or investor Section 30 par. and satisfactory evidence is submitted. b) To verify and correct. genuineness and true amount of all the claims against the debtor. if necessary. proper or relevant to the operations and business of the debtor and for its rehabilitation. and implementing the approved Rehabilitation Plan The rehabilitation receiver shall have the following Section 31 powers. duties and responsibilities: a) To verify the accuracy of the factual allegations in the petition and its annexes. c) To verify and correct. determining the viability of the rehabilitation of the debtor. Powers. all amounts owed to. Note: If a qualified natural person or entity is nominated by more than fifty percent (50%) of Section 30 par. h) To sue and recover. with the approval of the court. all property or money of the debtor paid.The rehabilitation receiver shall be deemed an officer Section 31 of the court with the principal duty of preserving and maximizing the value of the assets of the debtor during the rehabilitation proceedings. Duties and Responsibilities . if necessary. the court shall appoint the creditors' nominee as rehabilitation receiver. 3 the secured creditors and the general unsecured creditors. 2 protection fund. e) To take possession. preparing and recommending a Rehabilitation Plan to the court. f) To sue and recover. transferred or disbursed in fraud of the debtor or Page | 14 . d) To evaluate the validity. custody and control. g) To have access to all information necessary.

but are not limited to. 3 take over the management and control of the debtor but may recommend the appointment of a management committee over the debtor in the cases provided by this Act. m) To assume and exercise the powers of management of the debtor. from time to time. to review) revise and/or recommend action on the Rehabilitation Plan and submit the same or a new one to the court for approval. or which constitute undue preference of creditor/s. n) To exercise such other powers as may. l) To implement the Rehabilitation Plan as approved by the court. j) With the court's approval. if 80 provided under the Rehabilitation Plan. on such grounds as the rules of procedure may provide which shall include. the following: Page | 15 . 4. the rehabilitation receiver shall not Section 31 par. in the Rehabilitation Plan. be conferred upon him by the court. or upon motion of any creditor or as may be provided. to engage the services of or to employ persons or entities to assist him in the discharge of his functions. k) To determine the manner by which the debtor may be best rehabilitated. if directed by the court pursuant to Section 36 hereof. pursuant to Section 36 hereof. i) To monitor the operations and the business of the debtor to ensure that no payments or transfers of property are made other than in the ordinary course of business. CHARMAINE P. and o) To submit a status report on the rehabilitation proceedings every quarter or as may be required by the court motu proprio. Note: Unless appointed by the court. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 its creditors. Removal of the Rehabilitation Receiver – The rehabilitation receiver may be removed at any time by the court either motu proprio or upon Section 32 motion by any creditor/s holding more than fifty percent (50%) of the total obligations of the debtor.

The court may appoint any of the qualified nominees or any other person qualified for the position. b) Lack of a particular or specialized competency required by the specific case. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 a) Incompetence. d) Lack of qualification or presence of any disqualification. 6. duties and responsibilities. duties and responsibilities. c) Illegal acts or conduct in the performance of his duties and powers. gross negligence. Compensation and Terms of Service – The Section 33 rehabilitation receiver and his direct employees or independent contractors shall be entitled to compensation for reasonable fees and expenses from the debtor according to the terms approved by the court after notice and hearing. Such costs shall be considered administrative expenses. 5. Prior to such hearing. and f) Manifest lack of independence that is detrimental to the general body of the stakeholders. e) Conflict of interest that arises after his appointment. failure to perform or failure to exercise the proper degree of care in the performance of his duties and powers. conditioned upon the faithful and proper discharge of his powers. Oath and Bond of the Rehabilitation Receiver - Prior to entering upon his powers. 7. Vacancy – In case the position of rehabilitation receiver is vacated for any reason whatsoever. CHARMAINE P. in such amount to be fixed by the court. the rehabilitation receiver and his direct employees shall be entitled to reasonable compensation based on quantum meruit. Page | 16 . the Section 35 court shall direct the debtor and the creditors to submit the name/s of their nominee/s to the position. the rehabilitation receiver shall Section 34 take an oath and file a bond.

2 receiver to assume the powers of management of the debtor. or gross or willful violation of this Act by. director. existing management of the debtor Or the owner. Gross mismanagement of the debtor or fraud Page | 17 .Upon motion of any Section 36 interested party. wastage or destruction of the debtor’s assets or other properties. loss. ii. the court may appoint a Section 36 management committee that will undertake the management of the debtor upon clear and convincing evidence of any of the following circumstances: i. ii. Paralyzation of the business operations of the debtor. Actual or imminent danger of dissipation. the court may appoint and direct the rehabilitation receiver to assume the powers of management of the debtor. the court may: i. Actual or imminent danger of dissipation. authorize a commensurate increase in his compensation. authorize him to engage the services or to employ persona or entities to assist him in the discharge of his managerial functions. Paralyzation of the business operations of the debtor. B. ii. loss. Note: In case the court appoints the rehabilitation Section 36 par.Upon motion of any interested party. officer or representative/s in management of the debtor. Gross mismanagement of the debtor or fraud or other wrongful conduct on the part of. require the rehabilitation receiver to post an additional bond. wastage or destruction of the debtor’s assets or other properties. and iii. Displacement of Existing Management by the Rehabilitation Receiver . or iii. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 8. or iii. upon clear and convincing evidence of any of the following circumstances: i. MANAGEMENT COMMITTEE . CHARMAINE P. partner.

CHARMAINE P. as the case may be. Qualifications of Members of the Management Committee – The qualifications and Section 38 disqualifications of the members of the management committee shall be set forth in the procedural rules. or gross or willful violation of this Act by existing management of the debtor Or the owner. Conflict of Interest – No person may be appointed as a Page | 18 . whose members shall Section 37 par. the rehabilitation receiver or the management committee may employ Section 39 specialized professionals and other experts to assist each in the performance of their duties. Such professionals and other experts shall be considered either employees or independent contractors of the rehabilitation receiver or the management committee. partner. Note: The specific powers and duties of the management committee.Upon approval of the court. 1. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 or other wrongful conduct on the part of. the management committee shall take the place of the management and the governing body of the debtor and assume their rights and responsibilities. shall be prescribed by the procedural rules. The qualifications and disqualifications of the professionals and experts may be set forth in procedural rules. Employment of Professionals . 2 be considered as officers of the court. officer or representative/s in management of the debtor. director. taking into consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned. taking into consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned. 2. C. Role of the Management Committee – When Section 37 appointed pursuant to the foregoing section. D. and after notice and hearing.

3 shall make the appropriate disclosure either to the court or to the creditors in case of out-of-court rehabilitation proceedings. within two (2) years from the filing of the petition. or was. or was. c) he is. taking into account the general Page | 19 . officer. director. an individual shall be deemed to have a conflict of interest if: a) he is a creditor. partners of a partnership. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 rehabilitation receiver. e) he is related by consanguinity or affinity within the fourth civil degree to any individual creditor. a director. member of a_ management Section 40 committee. Without limiting the generality of the foregoing. or f) he has any other direct or indirect material interest in the debtor or any of the creditors Note: Any rehabilitation receiver. d) he is. CHARMAINE P. 2 against any party to the proceedings. member of the management committee or persons employed or contracted by them possessing any conflict of interest Section 40 par. the court may disregard the conflict of interest. within five (5) years from the filing of the petition. or the auditor or accountant of the debtor. b) he is engaged in a line of business which competes with that of the debtor. Any party to the proceeding adversely affected by the appointment of any person with a conflict of interest to any of the positions enumerated above may however waive his right to object to such appointment and. if the waiver is unreasonably withheld. or be employed by the rehabilitation receiver or the management committee if he has a conflict of interest. an underwriter of the outstanding securities of the debtor. owner. owner. owners of a sale proprietorship-debtor.debtor or to any stockholder. partner or stockholder of the debtor. employee or underwriter of a corporation-debtor. officer. Note: An individual shall be deemed to have a conflict of interest if he is so situated as to be materially influenced in the exercise of his judgment for or Section 40 par. partner or employee of the debtor or any of the creditors.

Immunity – The rehabilitation receiver and all persons employed by him. claim or demand in connection with any act done or omitted to be done by them in good faith in connection with the exercise of their powers and functions under this Act or other actions duly approved by the court. the rehabilitation receiver or his representative shall Section 42 par. shall not be subject to any action.The creditors' committee when constituted pursuant to Section 42 of Section 43 this Act shall assist the rehabilitation receiver in communicating with the creditors and shall be the primary liaison between the rehabilitation receiver and the creditors. In addition. F. Note: In the election of the creditors' representatives. the creditors Section 42 belonging to a class may formally organize a committee among themselves. CHARMAINE P. and the members of the Section 41 management committee and all persons employed by it. The creditors' committee may be authorized by the court or by the rehabilitation receiver to perform such other tasks and functions as may be defined by the procedural rules in order to facilitate the rehabilitation process. DETERMINATION OF CLAIMS Page | 20 . The creditors' committee cannot exercise or waive any right or give any consent on behalf of any creditor unless specifically authorized in writing by such creditor. 2 attend such meeting and extend the appropriate assistance as may be defined in the procedural rules. E. such as the following: a) Secured creditors. Creditors' Committee – After the creditors' meeting called pursuant to Section 63 hereof. and d) Employees of the debtor. the creditors may. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 interest of the stakeholders. agree to form a creditors' committee composed of a representative from each class of creditors. as a body. Role of Creditors' Committee . b) Unsecured creditors. c) Trade creditors and suppliers.

creditors. CHARMAINE P. liquidated or unliquidated. 2. tariffs and customs duties.Claim shall refer to all claims or demands of whatever nature or Section 4 (c) character against the debtor or its property. Provided that. creditors and stakeholders on where and when they may inspect it. Registry of Claims – Within twenty (20) days from his assumption into office. Definition of Claims . fixed or contingent. this inclusion does not prohibit the creditors or third parties from filing cases against the directors and officers acting in their personal capacities. the rehabilitation receiver shall submit to the court the registry of claims which shall include undisputed claims that Page | 21 . stakeholders and other interested parties may submit a challenge to claim/s to the court. including taxes. disputed or undisputed. The rehabilitation receiver shall make the registry available for public inspection and provide publication notice to the debtor. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 1. matured or unmatured. 3. All claims included in the registry of claims must be duly supported by sufficient evidence. including. the rehabilitation Section 44 receiver shall establish a preliminary registry of claims. whether for money or otherwise. the debtor. serving a certified copy on the rehabilitation receiver and the creditor holding the challenged claim/so Upon the expiration of the thirty (30)-day period. but not limited to: (1) all claims of the government. Opposition or Challenge of Claims – Within thirty (30) days from the expiration of the period stated Section 45 in the immediately preceding section. whether national or local. and (2) claims against directors and officers of the debtor arising from acts done in the discharge of their functions falling within the scope of their authority.

MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 have not been subject to challenge. Section 50 transfer. Use or Disposition of Assets – Except as otherwise provided herein. disposal. 3. shall be subject to the approval of the rehabilitation receiver and/or the court. PRESERVATION AND DISPOSAL OF ASSETS AND TREATMENT OF ASSETS AND CLAIMS AFTER COMMENCEMENT DATE 1. transfer or encumbrance of property . upon application of Section 49 the rehabilitation receiver. or unless necessary to finance the administrative expenses of the rehabilitation proceedings. assignment. no funds or property Section 48 of the debtor shall he used or disposed of except in the ordinary course of business of the debtor. by its nature or because of other circumstance. or property of others held by the debtor where there is a security interest pertaining to third parties under a financial. costly to maintain. MANAGEMENT . 2. Appeal – Any decision of the rehabilitation receiver regarding a claim may be appealed to Section 46 the court. Page | 22 . the management of the juridical debtor shall remain with the Section 47 existing management subject to the applicable law/s and agreement/s. or any other act affecting title or interest in property. on the election or appointment of directors. all disbursements. may authorize the sale of unencumbered property of the debtor outside the ordinary course of business upon a showing that the property.Unless otherwise provided herein. is perishable. CHARMAINE P. Sale of Assets – The court. payments or sale. 4. USE. managers or managing partner. conveyance or disposal of encumbered property of the debtor. if any. Sale or Disposal of Encumbered Property of the Debtor and Assets of Third Parties Held by Debtor – The court may authorize the sale. susceptible to devaluation or otherwise in jeopardy. However.

The debtor has made arrangements to provide a substitute lien or ownership right that provides an equal level of security for the counter-party's claim or right. upon application of the rehabilitation receiver and with the consent of the affected owners of the property. subject to payment of the claims secured by any possessory Iien/s thereon. conveyance or disposal is necessary for the continued operation of the debtor's business. Assets of Debtor Held by Third Parties – In the case of possessory pledges. transfer. conveyor otherwise dispose of the same to persons other than the debtor. 3 shall not give rise to any criminal liability under applicable laws 4. Note: That properties held by the debtor where the debtor has authority to sell such as trust Section 50 par. 2 receipt or consignment arrangements may be sold or disposed of by the . if such sale or disposal is necessary for the operation of the debtor's business. Demand the surrender or the transfer of the possession or control of such property to the rehabilitation receiver or any other person. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 credit or other similar transactions if. unless upon prior approval of the rehabilitation receiver. The rehabilitation receiver may also: i. and ii. mechanic's liens or Section 51 similar claims. or secured creditor/s in the case of encumbered property of the debtor and. Allow said third parties to retain possession Page | 23 .debtor. CHARMAINE P. and the debtor has made arrangements to provide a substitute lien or ownership right that provides an equal level of security for the counter-party's claim or right.  Sale or disposal of property under this section Section 50 par. Such sale. after notice and hearing. third parties who have in their possession or control property of the debtor shall not transfer. the court determines that: i. ii.

Undertake any otI1er disposition of the said property as may be beneficial for the rehabilitation of the debtor. or f) for payments made to reclaim property of the debtor held pursuant to a possessory lien. d) for payments to victims of quasi delicts upon a showing that the claim is valid and the debtor has insurance to reimburse the debtor for the payments made. CHARMAINE P. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 or control. e) for payments made to repurchase property of the debtor that is auctioned off in a judicial or extrajudicial sale under. 6. Claims of separation pay for months worked prior to the commencement date shall be considered a pre- Page | 24 . c) for payments made to meet administrative expenses as they arise. Payment. payment. however. This Act. transfer or conveyance of the debtor's unencumbered property or any encumbering thereof by the debtor or its agents or representatives after the commencement date which are not in the ordinary course of the business of the debtor: Provided. after notice and hearing. Claims – Compensation of Section 56 employees required to carry on the business shall be considered an administrative expense. Treatment of Employees. That the unencumbered property may be sold. and approval of the court. or iii. mortgage or pledge of property under this Act. b) in order to provide a substitute lien. if such an arrangement would more likely preserve or increase the value of the property in question or the total value of the assets of the debtor. Rescission or Nullity of Sale. encumbered or otherwise disposed of upon order of the court after notice and hearing: a) if such are in the interest of administering the debtor and facilitating the preparation and implementation of a Rehabilitation Plan. Transfer or Conveyance of Assets – The court may Section 52 rescind or declare as null and void any sale. 5.

CHARMAINE P. a disputable presumption of such design shall arise if the transaction: a) provides unreasonably inadequate consideration to the debtor and is executed within ninety (90) days prior to the Page | 25 . arising as a result of the election to terminate a contract shall be considered a pre-commencement claim against the debtor. Nothing contained herein shall prevent the cancellation or termination of any contract of the debtor for any ground provided by law. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 commencement claim. if any. Rescission or Nullity of Certain Pre- commencement Transactions – Any transaction occurring prior to commencement date entered into by the debtor or involving its funds or assets may be Section 58 rescinded or declared null and void on the ground that the same was executed with intent to defraud a creditor or creditors or which constitute undue preference of creditors. the debtor. 7. Claims for actual damages. shall be considered administrative expenses. AVOIDANCE PROCEEDINGS 1. That within ninety (90)days following the commencement of proceedings. Contractual obligations of the debtor arising or performed during this period. shall notify each contractual counter-party of whether it is confirming the particular contract. all valid and subbsisting contracts of the debtor with creditors and other third parties as at the commencement date shall continue in force: Provided. Without limiting the generality of the foregoing. Treatment of Contracts – Unless cancelled by virtue of a final judgment of a court of competent jurisdiction issued prior to the issuance of the Commencement Section 57 Order. and afterwards for confirmed contracts. with the consent of the rehabilitation receiver. or at anytime thereafter by the court before which the rehabilitation proceedings are pending. Claims for salary and separation pay for work performed after the commencement date shall be an administrative expense. Contracts not confirmed within the required deadline shall be considered terminated.

and the surplus. however. further. Section 59 any creditor may initiate and prosecute any action to rescind. more than its pro rata share in the assets of the debtor. CHARMAINE P. with his conformity. Page | 26 . 2 legislation and jurisprudence: Provided. or received the benefit of. the rehabilitation receiver shall assign and transfer to the creditor all rights. executed at a time when the debtor was insolvent. if any. If the rehabilitation receiver does not consent to the filing or prosecution of such action. to the extent of his claim and the costs. That nothing in this section shall prevent the court from rescinding or declaring as null and void a transaction on other grounds provided by relevant Section 58 par. belongs to the estate. That the provisions of the Civil Code on rescission shall in any case apply to these transactions. d) involves creditors. c) Any benefit derived from a proceeding taken pursuant to subsection (a). or declare null and void any transaction described in Section 58 hereof. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 commencement date. title and interest in the chose in action or subject matter of the proceeding. where a creditor obtained. c) provides security or additional security executed within ninety (90) days prior to the commencement date. or e) is intended to defeat. 2. delay or hinder the ability of the creditors to collect claims where the effect of the transaction is to put assets of the debtor beyond the reach of creditors or to otherwise prejudice the interests of creditors. including any document in support thereof. b) If leave of court is granted under subsection (a). Actions for Rescission or Nullity a) The rehabilitation receiver or. belongs exclusively to the creditor instituting the proceeding. b) involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the commencement date. Note: Provided.

g) specify the treatment of each class or subclass described in subsections (d) and (e). the financial goals and the procedures proposed to accomplish such goals. ADMINISTRATION OF PROCEEDINGS 1. m that case. reorganization or quasi- reorganization. dacion en pago. c) contain information sufficient to give the various classes of creditors a reasonable basis for determining whether supporting the Plan is in their financial interest when compared to the immediate liquidation of the debtor. Contents of a Rehabilitation Plan – The Rehabilitation Section 62 Plan shall. debt forgiveness. b) compare the amounts expected to be received by the creditors under the Rehabilitation Plan with those that they will receive if liquidation ensues within the next one hundred twenty (120) days. Page | 27 . belongs to the estate. f) indicate how the insolvent debtor will be rehabilitated including. e) establish subclasses of voting creditors if prior approval has been granted by the court. or setting-up of a new business entity or other similar arrangements as may be necessary to restore the financial well-being and visibility of the insolvent debtor. if instituted within the time limits so fixed. CHARMAINE P. as a minimum: a) specify the underlying assumptions. d) establish classes of voting creditors. debt-equity conversion and sale of the business (or parts of it) as a going concern. debt rescheduling. including any reduction of principal interest and penalties payable to the creditors. the order shall fix the time within which he shall do so and. before an order is made under subsection (a). MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 d) Where. but not limited to. the rehabilitation receiver (or liquidator) signifies to the court his readiness to institute the proceeding for the benefit of the creditors. the benefit derived from the proceeding.

MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 h) provide for equal treatment of all claims within the same class or subclass. q) require the debtor and its counter-parties to adhere to the terms of all contracts that the debtor has chosen to confirm. p) address the treatment of claims arising after the confirmation of the Rehabilitation Plan. CHARMAINE P. k) disclose all payments to creditors for pre- commencement debts made during the proceedings and the justifications thereof. o) identify those responsible for the future management of the debtor and the supervision and implementation of the Plan. r) arrange for the payment of all outstanding administrative expenses as a condition to the Plan's approval unless such condition has been waived in writing by the creditors concerned. the breach of which shall be considered a material breach of the Plan. their affiliation with the debtor and their remuneration. l) describe the disputed claims and the provisioning of funds to account for appropriate payments should the claim be ruled valid or its amount adjusted. m) identify the debtor's role in the implementation of the Plan. n) state any rehabilitation covenants of the debtor. s) arrange for the payment" of all outstanding taxes and assessments. i) ensure that the payments made under the plan follow the priority established under the provisions of the Civil Code on concurrence and preference of credits and other applicable laws. or an adjusted amount pursuant to a compromise Page | 28 . unless a particular creditor voluntarily agrees to less favorable treatment. j) maintain the security interest of secured creditors and preserve the liquidation value of the security unless such has been waived or modified voluntarily.

MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 settlement with the BlR or other applicable tax authorities. Creditor Approval of Rehabilitation Plan – The rehabilitation receiver shall notify the creditors and Section 64 stakeholders that the Plan is ready for their examination. Consultation with Debtor and Creditors – if the court gives due course to the petition. u) include a valid and binding r(. either as a whole or per class. The Plan shall be deemed rejected unless approved by all classes of creditors w hose rights are adversely modified or affected by the Plan. Within twenty (20) days from the said notification. the rehabilitation receiver shall convene the creditors. the Plan is deemed to have been approved by a class of creditors if members of the said class holding more than fifty percent (50%) of the total claims of the said class vote in favor of the Plan. the rehabilitation Section 63 receiver shall confer with the debtor and all the classes of creditors. of the rehabilitation receiver after the approval of the Plan. CHARMAINE P. For purposes of this section. 3. and w) contain provisions for conciliation and/or mediation as a prerequisite to court assistance or intervention in the event of any disagreement in the interpretation or implementation of the Rehabilitation Plan. v) state the compensation and status. t) include a certified copy of a certificate of tax clearance or evidence of a compromise settlement with the BIR. revision or preparation of a new Rehabilitation Plan. 2. and may consider their views and proposals ill the review. for purposes of voting on the approval of the Plan. if any.solution of a meeting of the debtor's stockholders to increase the shares by the required amount in cases where the Plan contemplates an additional issuance of shares by the debtor. The votes of the Page | 29 .

the court may confirm the Rehabilitation Plan if all of the following circumstances are present: i. the rehabilitation receiver shall submit the same to the court for confirmation. 5. the court shall notify the creditors that the Rehabilitation Plan has been submitted for confirmation. ii. owners or partners of the juridical debtor lose at least their controlling interest as a result of the Rehabilitation Plan. CHARMAINE P. The Rehabilitation Plan complies with the requirements specified in this Act. Objections to a Rehabilitation Plan shall be limited to the following: i. iii. The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan. ii. (c)The Rehabilitation Plan is in fact not Page | 30 . Filing of Objections to Rehabilitation Plan – A creditor may file an objection to the Rehabilitation Plan within Section 66 twenty (20) days from receipt of notice from the court that the Rehabilitation Plan has been submitted for confirmation. Submission of Rehabilitation Plan to the Court – If the Rehabilitation Plan is approved. (b)The documents or data relied upon in the Rehabilitation Plan are materially false or misleading. or iii. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 creditors shall be based solely on the amount of their respective claims based on the registry of claims submitted by the rehabilitation receiver pursuant to Section 44 hereof. Note: Notwithstanding the rejection of the Rehabilitation Plan. The Rehabilitation Plan would likely provide the objecting class of creditors with compensation which has a net present value greater than that which they would have received if the debtor were under liquidation. Within five (5) days from receipt of the Rehabilitation Plan. The shareholders. Section 65 4. that any creditor may obtain copies of the Rehabilitation Plan and that any creditor may file an objection thereto. and iv. (a) The creditors' support was induced by fraud.

partners or stockholders of the insolvent debtor. or determines that the basis for the objection has been cured. Confirmation of the Rehabilitation Plan – If no objections are filed within the relevant period or. if Section 68 objections are filed. or objection from the owners. the provisions of other laws to the contrary notwithstanding. the court shall convert the proceedings into one for the liquidation of the debtor under Chapter V of this Act.: Provided. 7. CHARMAINE P. the court shall issue an order confirming the Rehabilitation Plan. whenever feasible.  Note: If the court finds merit in the objection. Effect of Confirmation of the Rehabilitation Plan – Section 69 The confirmation of the Rehabilitation Plan by the Page | 31 . the court finds them lacking in merit. it shall order the rehabilitation receiver or other party to cure the defect. That the terms thereof are necessary to restore the financial well-being and viability of the insolvent debtor. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 supported by the voting creditors. the court shall issue an order setting the time and date for the hearing or hearings on the objections. If the court determines that the debtor acted in bad faith. or determines that the debtor has complied with an order to cure the objection. 8. Hearing on the Objections – If objections have been Section 67 submitted during the relevant period. or that it is not feasible to cure the defect. the court shall have the power to approve or implement the Rehabilitation Plan despite the lack of approval. 6. Note: The court may confirm the Rehabilitation Plan notwithstanding unresolved disputes over claims if the Rehabilitation Plan has made adequate provisions for paying such claims.  For the avoidance of doubt.

whether or not such persons have participated in the proceedings or opposed the Rehabilitation Plan or whether or not their claims have been scheduled. d) Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the extent that they do not conflict with the provisions of the Rehabilitation Plan. the Section 73 rehabilitation receiver shall provide a final report and accounting to the court. be converted into one for the liquidation of the debtor. it. and f) Claims arising after approval of the Plan that are otherwise not treated by the Plan are not subject to any Suspension Order 9. 10. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 court shall result in the following: a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and all persons who may be affected by . the proceedings may upon motion or motu propio. Accounting Discharge of Rehabilitation Receiver – Upon the confirmation of the Rehabilitation Plan. c) Payments shall be made to the creditors in accordance with the provisions of the Rehabilitation Plan. b) The debtor shall comply with the provisions of the Rehabilitation Plan and shall take all actions necessary to carry out the Plan. Unless the Rehabilitation Plan specifically requires and describes the role of the Page | 32 . e) Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors regardless of whether or not the Plan is successfully implement. CHARMAINE P. including the creditors. Period for Confirmation of the Rehabilitation Plan – Section 72 The court shall have a maximum period of one (1) year from the date of the filing of the petition to confirm a Rehabilitation Plan. Note: If no Rehabilitation Plan is confirmed within the said period.

including the timelines and conditions for the settlement of the obligations due to the creditors and other claimants. falling which the proceedings may be converted to a liquidation. There is failure of rehabilitation in the following cases: a) Dismissal of the petition by the court. or upon a failure of the Rehabilitation Plan the court. 2. upon motion by an affected party may: a) Issue an order directing that the breach be cured within a specified period of time. The rehabilitation proceedings under Chapter II shall. Page | 33 . b) Under the Rehabilitation Plan submitted by the debtor. targets or goals set forth therein. TERMINATION OF PROCEEDING Section 74 1. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 rehabilitation receiver after the approval of the Rehabilitation Plan. Upon a breach of. the court shall discharge the rehabilitation receiver of his duties. c) The Rehabilitation Plan or its amendment is approved by the court but in the implementation thereof. b) Issue an order converting the proceedings to a liquidation. and e) Other analogous circumstances as may be defined by the rules of procedure. the debtor fails to perform its obligations thereunder or there is a failure to realize the objectives. d) The commission of fraud in securing the approval of the Rehabilitation Plan or its amendment. CHARMAINE P. there is no substantial likelihood that the debtor can be rehabilitated within a reasonable period. The debtor fails to submit a Rehabilitation Plan. 3. upon motion by any stakeholder or the rehabilitation receiver be terminated by order of the court either declaring a successful implementation of the Rehabilitation Plan or a failure of rehabilitation.

the approval of which shall be governed by the same requirements for the approval of a Rehabilitation Plan under this subchapter. 2. by itself or jointly with any of its creditors. 4. PRE-NEGOTIATED REHABILITATION PLAN 1. other applicable law and the best interests of the creditors. The discharge of the rehabilitation receiver subject to his submission of a final accounting. including secured creditors holding more than fifty percent (50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured claims of the debtor. Petition by Debtor . The lifting of the Stay Order and any other court order holding in abeyance any action for the enforcement of a claim against the debtor. or e) Enforce the applicable provisions of the Rehabilitation Plan through a writ of execution. may file a verified Section 76 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 (2/3) of the total liabilities of the debtor. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 c) Allow the debtor or rehabilitation receiver to submit amendments to the Rehabilitation Plan. Content of Petition . CHARMAINE P. Note: If the termination of proceedings is due to failure of rehabilitation or dismissal of the petition for reasons other than technical grounds. and ii. the proceedings shall be immediately converted to liquidation as provided in Section 92 of this Act. d) Issue any other order to remedy the breach consistent with the present regulation.The petition shall include as a Section 76 Page | 34 . Effects of Termination – Termination of the Section 75 proceedings shall result in the following: i.An insolvent debtor.

a summary of disputed claims against the debtor and a report on the provisioning of funds to account for appropriate payments should any such claims be ruled valid or their amounts adjusted. as determined in the schedule attached to the petition.Within five (5) working days. iii. its principal business of activity/ies and its principal place of business./s for the filling of the petition. d) direct the publication of the Order in a newspaper of general circulation in the Philippines once a week for at least two (2) consecutive weeks. within three (3) days. an inventory of the debtor's assets. and after determination that the petition is sufficient in form and substance. the pre-negotiated Rehabilitation Plan. b) declare that the debtor is under rehabilitation. f) state that copies of the petition and the Rehabilitation Plan are available for examination and copying by any interested party. 3. g) state that creditors and other interested parties opposing the petition or Rehabilitation Plan may file their objections Page | 35 . with the first publication to be made within seven (7) days from the time of its issuance. CHARMAINE P. a schedule of the debtor's debts and liabilities. the court shall issue an Order Section 77 which shall: a) identify the debtor. c) summarize the ground. including the names of at least three (3) qualified nominees for rehabilitation receiver. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 minimum: i. and iv. ii. Issuance of Order . 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 (10%) of the total liabilities of the debtor.

c) (c) The Rehabilitation Plan fails to accurately account for a claim against the debtor and the claim in not categorically declared as a contested claim. Hearing on the Objections .After receipt of an Section 80 objection. The date of the hearing shall be no earlier than twenty (20) Page | 36 . CHARMAINE P. Approval of the Plan . the secured creditor with the largest claim and who supports the Rehabilitation Plan. the court shall approve the Rehabilitation Plan unless a creditor or other interested party submits an objection to it in accordance with the next succeeding section. 4. h) appoint a rehabilitation receiver. and i) include a Suspension or Stay Order as described in this Act. 6. the court shall set the same for hearing. and the unsecured creditor with the largest claim and who supports the Rehabilitation Plan. the rehabilitation receiver (if applicable). if provided for in the Plan. 5. or any of them was induced by fraud. b) (b) The majority of any class of creditors do not in fact support the Rehabilitation Plan.Any creditor or other interested party may submit to the Section 79 court a verified objection to the petition or the Rehabilitation Plan not later than eight (8) days from the date of the second publication of the Order mentioned in Section 77 hereof.Within ten (10) days from the Section 78 date of the second publication of the Order. or d) (d) The support of the creditors. The objections shall be limited to the following: a) (a) The allegations in the petition or the Rehabilitation Plan or the attachments thereto are materially false or misleading. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 or comments thereto within a period of not later than twenty (20) days from the second publication of the Order. Objection to the Petition or Rehabilitation Plan . Note: Copies of any objection to the petition of the Rehabilitation Plan shall be served on the debtor.

or that the same has been cured shall be deemed an approval of the Rehabilitation Plan 7. A finding by the court that the objection has no substantial merit. If the court determines that the debtor or creditors supporting the Rehabilitation Plan acted in bad faith. LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS A. The petition shall be verified. Voluntary Liquidation 1. Petition for Liquidation . or that the objection is non-curable. 8. CHARMAINE P. it shall direct the debtor. If the court fails to act within the said period. Period for Approval of Rehabilitation Plan .The court shall have a maximum period of one hundred twenty (120) days from the date of the filing of the petition to Section 81 approve the Rehabilitation Plan. whether as an attachment 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. the Rehabilitation Plan shall be deemed approved. shall establish the insolvency of the debtor and shall contain. the court may order the conversion of the proceedings into liquidation. If the court finds merit in the objection. amounts of claims and collaterals.Approval of a Plan under this chapter shall have the same legal effect as Section 82 confirmation of a Plan under Chapter II of this Act. if any. and (c) the names of at least three (3) nominees to the Page | 37 . when feasible to cure the detect within a reasonable period. or securities.An insolvent debtor may apply for liquidation by filing a petition for liquidation with the court. (b) an inventory of all its assets including receivables and claims against third parties. Effect of Approval . MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 days and no later than thirty (30) days from the date of the second publication of the Order mentioned in Section 77 hereof.

000. 3. the court shall issue a Liquidation Order mentioned in Section 112 hereof. The motion shall be verified. Involuntary Liquidation 1.000. may apply for and seek the liquidation of an insolvent debtor by filing a petition for liquidation of the debtor with the court.Three (3) or more creditors the aggregate of whose claims is at least either One million pesos (Php1. and state that the debtor is seeking immediate dissolution and termination of its corporate existence. 2. is sufficient in form and substance. a) there is no genuine issue of fact or law on the claims/s of the petitioner/s. as the case may be. CHARMAINE P. B. shall contain or set forth the same matters required in the preceding paragraph. whichever is higher. Petition for Liquidation . the debtor may also initiate liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. Motion for Liquidation .At any time during the pendency of court-supervised or pre-negotiated rehabilitation proceedings. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 position of liquidator.00) or at least twenty-five percent (25%0 of the subscribed capital stock or partner's contributions of the debtor. Action on Petition or Motion . and that the due and demandable payments thereon have not been made for at least Page | 38 .If the petition or the motion.

At any time during the pendency of or after a rehabilitation court-supervised or pre-negotiated rehabilitation proceedings. and state that the debtor is seeking immediate dissolution and termination of its corporate existence. CHARMAINE P.At any time during the pendency of court-supervised or pre-negotiated rehabilitation proceedings. 2. shall contain or set forth the same matters required in the preceding paragraph.000. may also initiate liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. The motion shall be verified. whichever is higher. Page | 39 .00) or at least twenty-five percent (25%) of the subscribed capital or partner's contributions of the debtor.000. 3. The motion shall be verified. the debtor may also initiate liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 one hundred eighty (180) days or that the debtor has failed generally to meet its liabilities as they fall due. shall contain or set forth the same matters required in the preceding paragraph. Motion for Liquidation . Action on Petition or Motion . and b) there is no substantial likelihood that the debtor may be rehabilitated. three (3) or more creditors whose claims is at least either One million pesos (Php1. and state that the movants are seeking the immediate liquidation of the debtor.

and (2) directing the debtor and all creditors who are not the petitioners to file their comment on the petition or motion within fifteen (15) days from the date of last publication If. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 Note: If the petition or motion is sufficient in form and substance. or at any other time upon the recommendation of the rehabilitation receiver that the rehabilitation of the debtor is not feasible. the court shall issue an Order: (1) directing the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive weeks. or (b) Section 72 of this Act. the court determines that the petition or motion is meritorious. after considering the comments filed. Voluntary Proceeding . or (d) Section 90 of this Act. it shall issue the Liquidation Order mentioned in Section 112 hereof.An individual debtor whose properties are not sufficient to cover his liabilities.000. and owing debts exceeding Five hundred thousand pesos (Php500. LIQUIDATION OF INDIVIDUAL DEBTOR A. C. may apply to be discharged from his debts and liabilities by filing a verified petition with the court of the province or city in which he has resided for six (6) months prior to the filing of such petition.During the pendency of court- supervised or pre-negotiated rehabilitation proceedings. the court shall issue the Liquidation Order mentioned in Section 112 hereof. CHARMAINE P. or (c) Section 75 of this Act. the court may order the conversion of rehabilitation proceedings to liquidation proceedings pursuant to (a) Section 25(c) of this Act.00). He shall attach to his petition a schedule of debts and liabilities and an inventory of Page | 40 . Thereupon. Conversion by the Court into Liquidation Proceedings .

Involuntary Proceeding 1. (d) That he conceals. he remains absent. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 assets. B.00) may file a verified petition for liquidation with the court of the province or city in which the individual debtor resides. The following shall be considered acts of insolvency. (e) That he has suffered his property to remain under attachment or legal process for three (3) days for the purpose of hindering or delaying the liquidation or of defrauding his creditors. (b) That being absent from the Republic of the Philippines. with intent to defraud his creditors. CHARMAINE P. any of his property to avoid its being attached or taken on legal process.If the court finds the petition sufficient in form and substance it shall. within five (5) working days issue the Liquidation Order mentioned in Section 112 hereof. 1. with intent to defraud his creditors. The filing of such petition shall be an act of insolvency. (f) That he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of hindering or delaying the liquidation or of defrauding any creditors or claimant. (g) That he has willfully suffered judgment to be taken against him by default for the purpose of Page | 41 . 2. and the petition for liquidation shall set forth or allege at least one of such acts: (a) That such person is about to depart or has departed from the Republic of the Philippines. (c) That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation or of defrauding his creditors. Liquidation Order . 000. Any creditor or group of creditors with a claim of. or with claims aggregating at least Five hundred thousand pesos (Php500. or is removing.

Upon the filing of such creditors' petition. to pay any moneys deposited with him or received by him in a fiduciary. conditioned that if the petition for liquidation is dismissed by the court. why he should not be adjudged an insolvent. he has generally defaulted in the payment of his current obligations for a period of thirty (30) days. he shall have been found to be without sufficient property subject to execution to satisfy the judgment. made any payment. property. property. However. sale. CHARMAINE P. at a time and place to be fixed by the said court. (h) That he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors. gift. and (m) That an execution having been issued against him on final judgment for money. expenses. Order to Individual Debtor to Show Cause. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 hindering or delaying the liquidation or of defrauding his creditors. or if the debtor shall not be declared an insolvent the petitioners will pay to the debtor all costs. rights or credits. (i) That he has made any assignment. gift. nothing contained herein shall affect or Page | 42 . the court may issue an Order forbidding the individual debtor from making payments of any of his debts. the court shall issue an Order requiring the individual debtor to show cause. sale. rights or credits with intent to hinder or delay the liquidation or defraud his creditors. in contemplation of insolvency. damages occasioned by the proceedings and attorney's fees. Upon good cause shown. Note: The petitioning creditor/s shall post a bond in such as the court shall direct. 3. he has failed. . grant. conveyance or transfer of his estate. or withdrawn by the petitioner. conveyance or transfer of his estate. and transferring any property belonging to him. (l) That for a period of thirty (30) days. after demand. (j) That he has. (k) That being a merchant or tradesman.

MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 impair the rights of a secured creditor to enforce his lien in accordance with its terms. or cannot. a complete inventory of all the property so taken. or from such other papers or Page | 43 . it shall be the duty of the sheriff to take possession of the property and effects of the individual debtor. Default. and the amount due each. CHARMAINE P. Upon receiving such Order of the court to take into custody of the property of the individual debtor. from the books of the debtor. to an extent sufficient to cover the amount provided for and to prepare within three (3) days from the time of taking such possession. The time for taking the inventory and making return thereof may be extended for good cause shown to the court. after due diligence. after trial. or conceals himself to avoid service of the Order to show cause. shall be entitled to an Order of the court directing the sheriff of the province or city in which the matter is pending to take into his custody a sufficient amount of property of the individual debtor to satisfy the demands of the petitioning creditors and the costs of the proceedings. Absent Individual Debtor. 4. The sheriff shall also prepare a schedule of the names and residences of the creditors. or any other preliminary process or orders in the matter.If the individual debtor shall default or if. then the petitioning creditors. and to return it to the court as soon as completed. be found therein. and presenting a bond in double the amount of the aggregate sum of their claims against the individual debtor. . .In all cases where the individual debtor resides out of the Republic of the Philippines. the issues are found in favor of the petitioning creditors the court shall issue the Liquidation Order mentioned in Section 112 hereof. or has departed therefrom. upon submitting the affidavits requisite to procedure an Order of publication. 5. not exempt from execution.

LIQUIDATION PROCEEDING 1. MEJIA SPECIAL PROCEEDING | FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 data of the individual debtor available as may come to his possession.Section 119 6. CHARMAINE P. Duties and Responsibility of Liquidator . and shall file such schedule or list of creditors and inventory with the clerk of court. Powers. Determination of Claims a) Registry of Claims – Section 123 b) Right of Set-off – Section 124 c) Opposition or Challenge of Claims – Section125 d) Submission of Disputed Claims to the Court – Section 126 8. Qualification of Liquidator – Section 118 5.Section 114 2. Manner of Implementing of Liquidation Plan . Termination of Proceedings – Section 136 Page | 44 . Election of Liquidator . Oath and Bond of Liquidator – Section 117 4.Appointed Liquidator – Section116 3.Section 132 10. Discharge of Liquidator – Section 122 7. Liquidation Plan – Section 129 9. Court.