FINANCIAL REHABILITATION Anp Insotvency Act (FRIA) 1. GENERAL PROVISIONS 4. FRIA's Declared Policies’ (@) To encourage debtors and their creditors to collectively and realistically resolve and adjust competing claims and proparty Fights: (b) To ensure a timely, fair, transparent, effective and efficent rehabilitation ‘of debtors, in order to: Ensurefmaintaln certainty and_predictabi affairs; preserve and maximize the value of debtors! assets; + recognize creditor rights; anc + respect pretty of claims, and ensure equitable troatment of creditors simiany situated, (6) To facilitate speedy and ordety li settlement of abigations, when rehabilitation is no longer feasible. ‘The rationale of rehat “effect a feasible and viable rehabittaton” by preserving @ floundering business ao a going concern, because the assets of a business are often more valuable when so ‘maintained than they would be when liquidated. Wonder Book Corp. v Phillppine Bank of Communications, 876 SCRA 489 n of debtors’ assets, and 2. Procesoincs Coveneo By FRIA & Suspension oF Pavntents Paocesocs FoR Inowouat Detons & Counr-Surenuiseo Conronsre ReHAsUITATION Voluntary or Debtor-Initiatod Proceedings Involuntary or Creditor initiated Proceedings 282 FINANGIALRESABILITATION AND INSOLVENCY ACT(FRIA) 1268 & Pae-Neconareo Renasairarion 4% Our-or-Courr ReHAsi.rAsion om IFORNAL RESTRUCTURNG Acaeenents 4 Lrouoanow oF Insouvenr Jumica. DesroRs tary Liquidation Involuntary Liquidation 4 Insowencr oF owouAL Destors Voluntary Insolvency Involuntary Insolvency '® Crose-Bonoer Insouvency Procesowas RIA governs all peilions fled after it has taken effect proceedings in insolvency, suspension of payments, and rehat the extent that in opinion of the cour, ddobtors, both jurdical and natural persons. Majority Stockholders of Ruby Industrial Corp. v. Lim, 650 SCRA 461 (2011). 3. NaTuRe oF Proceeowos uNoer FRIA* ~ FRIA proceedings’ have been characterized as: ‘a. "in Rem’ — Jurisdiction overall persons affactad by the procoodings: shall be considered as acquired upon publication of the notioa ofthe ‘commencement of the proceedings in any newspaper of general Pilippines. pursuant to the FR Rules. Consistent nature of is proceedings, FRIA provides for the n of “Party 10 the Proceedings” —1264 (COMMERCIAL LAW REVIEW ‘utoome ofthe proceedings and whose notice of appearance is accepted by the court™ b. “Summary and Non-Adversarial” ‘Advent Capital and Finance Corp. v. Alcantara, 664 SCRA 224 (2012) Rohabiltaton proceedings aro summary and non-acversaria in plan after is approval ‘Steel Corp. ofthe Philippines v. Mapfre insular Insurance TOT SCRA 602 (2013) fn the insurance claim FR Rules Affirm the “In Rem, Summary and Non-Adversarial” Nature of FRIA Proceedings: “The proceedings under these Rules shall bain rem. Jurisdiction over all persons affected by the proceedings is acquired upon publication ‘Sn a) FR FINANCIAL REHABILITATION AND INSOLVENCY ACT FRIA) 1286 (of the notice of the commencement of the proceedings and the ‘commencement order or any similar order ofthe proceedings in one (1) newspaper of general circulation in the Philipines for two (2) line with the summary and non-adverserial nat ings, the following pleadings are prohibited: The court may decide matters on tho basis of affidavits, counter- affidavits and other documentary evidence, conducting carficatory hearings when necessary.* ‘Any order issued by the court is immodiatoly executory.* 4. The Rationale for Rehabilitation Under the Interim Rules Still Relevant under FRIA Mwss v, Daway 432 SCRA 559 (2004) ‘Sec. 1, Rule 3 of Interim Rules which provided “hat juriscition court's jurisdiction to secure the same forthe benefit of eceditors, Reference to ‘all those affected by the proceedings" covers1208 COMMERCIAL LAW REVIEW ‘wore encted to provide for a summary and tation proceedings, in consonance with the tion case aimed to be resolves North Bulacan Corp. v. PBCommunications. 1625 SCRA 260 (2010) 19 for summary and non-adversaral_reha le corporation Is consistent spproved rehabilitation pian Express Investments Ill v. Bayan Telecommunications, 1687 SCRA 50 (2012) Unlike adversarial proceedings, the cout in rehabilitation proceed Ings appoints a receiver o study the best means to revive the debtor and ‘lie ofthe debtor’ property Is easonably maintained the debtor to 2 postion of successful operation and solvency. 4. Desrors Covereo By FRIA, a. “Debtors” Covered:” (1) DTLzogistered Sole Proprietorship; THis Se Foy Een, ev Bano, 659 SCRA Poe «5H FRA FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) 1267 (2) SEC-roq)storod Partnership; @) jon duly organized and o» ing GOCCs and non-bank (4) Insolvent Individual Debior as defined by FRIA Under Phiippine laws b. Debtors Not Covered” (1). Banks and QuaséBanks that are potentially or actualy subject to conservatorship, receivership or liquidation proceedings under the New Central Bank Act; 2) Insurance companies; 1864 companies; and, (4). National and local government agencies or uns Exceer:Non-bank GFls and GOCCs shall be covered by FRIA, ‘unless thelr specific chartar provides otherwise. Honeves: Public funds for ret shal bo released jons ftom funds jed by the National Treasurer, in ‘accordance with the rules promulgated by DOF and DBM.» (NOTA BENE: Provision of Assistance ~ Courts shall issue orders, adjudicate claims and provide other reisfs necessary in the Iquidati habitation receivership estab- oces tana toch bnaisfomiociee, Coors prosimes oct