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SECTION 2
• ) TO ENCOURAGE DEBTORS, BOTH JURIDICAL AND NATURAL PERSONS, AND
THEIR CREDITORS TO COLLECTIVELY AND REALISTICALLY RESOLVE
AND ADJUST COMPETING CLAIMS AND PROPERTY RIGHTS.
• 2) TO ENSURE A TIMELY, FAIR, TRANSPARENT, EFFECTIVE AND EFFICIENT
REHABILITATION OR LIQUIDATION OF DEBTORS.
• 3) TO ENSURE OR MAINTAIN CERTAINLY AND PREDICTABILITY IN
COMMERCIAL AFFAIRS, PRESERVE AND MAXIMIZE THE VALUE OF THE
ASSETS OF THESE DEBTORS, RECOGNIZE CREDITOR RIGHTS AND
RESPECT PRIORITY OF CLAIMS, AND ENSURE EQUITABLE TREATMENT OF
CREDITORS WHO ARE SIMILARLY SITUATED.
• 4) WHEN REHABILITATION IS NOT FEASIBLE, TO FACILITATE A SPEEDY AND
ORDERLY LIQUIDATION OF THESE DEBTOR'S ASSETS AND THE
SETTLEMENT OF THEIR OBLIGATION
1) INSOLVENCY (SECTION 4)
• ✓ GROUNDS:
1. LACK OF QUORUM SUCH AS WHEN REQUIRED NUMBER OF
CREDITORS ARE NOT PRESENT;
2. DOUBLE MAJORITY RULE IS NOT MET TO APPROVE THE
AGREEMENT
✓ EFFECT:
• PROCEEDINGS SHALL BE TERMINATED
• PARTIES CONCERNED AT LIBERTY TO ENFORCE RIGHTS
CORRESPONDING TO THEIR CLAIM
2) REHABILITATION
1) COURT-SUPERVISED REHABILITATION:
a. VOLUNTARY
b. INVOLUNTARY
2) PRE-NEGOTIATED REHABILITATION
3) OUT-OF-COURT OR INFORMAL RESTRUCTURING
1) COURT SUPERVISED REHABILITATION
REQUISITES:
(a) THE STANDSTILL PERIOD AGREEMENT IS APPROVED BY MORE THAN 50% OF
THE TOTAL LIABILITIES
(b) NOTICE PUBLISHED 1 X 2 GENERAL CIRCULATION IN THE PHILIPPINES
(c) FOR A PERIOD NOT EXCEEDING 120 DAYS
MINIMUM REQUIREMENTS OF NOTICE OF STANDSTILL
AGREEMENTS:
• THE DEBTOR MUST AGREE TO THE OUT-OF-COURT OR INFORMAL
RESTRUCTURING/WORKOUT AGREEMENT OR REHABILITATION PLAN;
• IT MUST BE APPROVED BY CREDITORS REPRESENTING AT LEAST SIXTY-SEVEN
(67%) OF THE SECURED OBLIGATIONS OF THE DEBTOR;
• IT MUST BE APPROVED BY CREDITORS REPRESENTING AT LEAST SEVENTY-
FIVE PERCENT (75%) OF THE UNSECURED OBLIGATIONS OF THE DEBTOR; AND
• IT MUST BE APPROVED BY CREDITORS HOLDING AT LEAST EIGHTY-FIVE
PERCENT (85%) OF THE TOTAL LIABILITIES, SECURED AND UNSECURED, OF
THE DEBTOR.
• EFFECT OF APPROVAL: IF APPROVED PURSUANT TO AN INFORMAL WORKOUT
FRAMEWORK
➢ SHALL HAVE THE SAME EFFECT AS A CONFIRMATION OF A PLAN
➢ PUBLISHED 1 X 3 GENERAL CIRCULATION IN THE PHILIPPINES
➢ TAKES EFFECT 15 DAYS FROM THE DATE OF THE LAST PUBLICATION OF
NOTICE
II. COMMENCEMENT ORDER (ISSUANCE OF A
COMMENCEMENT ORDER, SECTION 16)
EFFECTS OF A COMMENCEMENT ORDER
(SECTION 17)
• 1. VESTS REHABILITATION RECEIVER THE POWER, INCLUDING THE POWER TO OBTAIN
RECORDS, BANK ACCOUNTS
• 2. PROHIBIT OR SERVE AS LEGAL BASIS TO RENDER NULL AND VOID ANY
EXTRAJUDICIAL ACTIVITY TO POSSESS, SEIZE, SELL ENCUMBERED PROPERTY, ATTEMPT
TO COLLECT, OR ENFORCE CLAIM AFTER THE COMMENCEMENT DATE
• 3. SERVE AS LEGAL BASIS TO RENDER NULL AND VOID ANY SETOFF (COMPENSATION)
AFTER COMMENCEMENT DATE
• 4. SERVE AS LEGAL BASIS TO RENDER NULL AND VOID PERFECTION OF ANY LIEN
AGAINST DEBTOR’S PROPERTY AFTER THE COMMENCEMENT DATE
• 5. CONSOLIDATE THE RESOLUTION OF ALL LEGAL PROCEEDING BY AND AGAINST THE
DEBTOR TO THE [INSOLVENCY] COURT → BUT THE COURT MAY ALLOW CONTINUATION
OF OTHER CASES
EFFECTS OF STAY ORDER SUSPENSION (SECTION 16)
BINDING EFFECT:
✓ DEBTOR; AND
✓ ALL CREDITORS WHO MAY BE AFFECTED BY IT
• INCLUDING CREDITORS WHETHER OR NOT SUCH HAVE PARTICIPATED IN THE
PROCEEDINGS OR OPPOSED THE PLAN
• WHETHER OR NOT THE CLAIMS HAVE BEEN SCHEDULED
2. SECTION 72: THE COURT SHALL HAVE A MAXIMUM PERIOD OF 1 YEAR FROM FILING TO CONFIRM
A REHABILITATION PLAN AND IF NO PLAN IS CONFIRMED WITHIN THE SAID PERIOD, THE
PROCEEDINGS, BY MOTION OR MOTU PROPRIO MAY BE CONVERTED INTO ONE FOR LIQUIDATION.
THE LIQUIDATION ORDER SHALL NOT AFFECT THE RIGHT OF THE SECURED
CREDITOR TO ENFORCE HIS LIEN.
OPTIONS TO SECURED CREDITOR
1. WAIVE HIS SECURITY RIGHT AND PARTICIPATE AND SHARE IN THE
DISTRIBUTION OF ASSETS
2. 2. MAINTAIN HIS RIGHTS UNDER THE SECURITY OR LIEN
IF CREDITOR CHOOSES TO MAINTAIN SECURITY; THE FOLLOWING CAN
HAPPEN:
1. FIX VALUE OF PROPERTY IN MANNER AGREED UPON BY CREDITOR AND
LIQUIDATOR
A. IF CLAIM IS MORE THAN THE VALUE OF THE PROPERTY
I. CONVEY THE PROPERTY
II. CREDITOR, AS TO THE BALANCE, BE ADMITTED IN LIQUIDATION
B. IF CLAIM IS LESS THAN THE VALUE OF THE PROPERTY
I. CONVEY THE PROPERTY
II. CREDITOR PAYS THE EXCESS VALUE BACK TO THE DEBTOR
III. DEBTOR WAIVES REDEMPTION
2. LIQUIDATOR MAY SELL PROPERTY AND ENTIRE CLAIM SATISFIED FROM
PROCEEDS; OR
3. ENFORCEMENT OF LIEN UNDER THE APPLICABLE LAW (PPSA, ACT 3135, RULE
68)
PROVE FIRST BEFORE PAID: ALL CLAIMS MUST BE DULY PROVEN BEFORE
BEING PAID
OPPOSITION OR CHALLENGE TO CLAIMS
(SECTION 125)
• DISPUTING OF CLAIMS
➢ WITHIN 30 DAYS FROM EXPIRATION TO FILE FOR RECOGNITION OF CLAIM
A. THE CREDITORS, INDIVIDUAL DEBTORS, OWNER/S ETC. MAY SUBMIT A
CHALLENGE TO THE CLAIM
▪ TO THE COURT
▪ SERVING A COPY TO THE LIQUIDATOR AND CREDITOR HOLDING THE CLAIM
• UNDISPUTED CLAIMS
➢ SUBMIT REGISTRY OF CLAIMS CONTAINING UNDISPUTED CLAIMS TO THE COURT
➢ UNDISPUTED CLAIMS BECOME FINAL UPON THE FILING OF THE REGISTER
• SET ASIDE ONLY: FRAUD, ACCIDENT, MISTAKE OR INEXCUSABLE NEGLECT
V. LIQUIDATION PLAN (SECTION 129)