FINANCIAL

REHABILITATION AND
INSOLVENCY ACT
FRIA -2010
 POLICIES
- expressly repealed the Insolvency Law
 A.
to encourage debtors, both juridical and natural
persons, and their creditors to collectively and
realistically resolve and adjust competing claims and
property rights;
 B.State shall ensure a timely, fair, transparent,
effective, and efficient rehabilitation or liquidation of
debtors;
 C.When rehabilitation is not feasible, it is in the
interest of the State to facilitate a speedy and orderly
liquidation of the debtors’ assets and the settlement
of their obligations (Sec. 2, FRIA).
DEBTOR
- shall refer to a sole proprietorship duly
registered with the DTI, a partnership duly
registered with the SEC, a corporation duly
organized and existing under Philippine laws, or an
individual debtor who has become insolvent.

INSOLVENT
- shall refer to the financial condition of a debtor
that is generally unable to pay its or his liabilities as
they fall due in the ordinary course of business or
has liabilities that are greater than its or his assets.
CREDITOR
- shall refer to a natural or juridical person
which has a claim against the debtor that
arose on or before the commencement date.

GENERAL UNSECURED CREDITOR

- refer to a creditor whose claim or a
portion thereof is neither secured, preferred
nor subordinated under the FRIA.

SECURED CREDITOR
- shall refer to a creditor with a secured
claim.
TYPE OF BUSINESS TYPE OF PROCEEDING WHO WILL APPROVE OR
ORGANIZATION FILE PETITION

Sole Proprietorship Voluntary Rehabilitation Owner / Proprietor

Partnership Voluntary Rehabilitation Majority of Partners

Corporation Voluntary Rehabilitation 1. Majority of the Dir. Or

Trustees and
2. SHs rep. 2/3 of the
Outstanding Capital or 2/3 of
member in NSC
SOLE PROPRIETORSHIP, Involuntary Rehabilitation Creditor or group of creditors
PARTNERSHIP, and CORP with a claim of, or the
aggregate of whose claims is,
at least P1,000,000.00 or at
least 25% of the subscribed
capital stocks or partners’s
contribution, whichever is
higher (Sec. 13)

SP, P, and C Voluntary Liquidation (Sec. 90) Insolvent Debtor

SP, P, and C Involuntary Liquidation a. 3 or more creditors, and b.

(Sec.91) the aggregate of whose claims
is at least either P1,000,000.00
or at least 25% of the
subscribed capital stock or
partner’s contributions of the
debtor whichever is higher.
Individual Debtor Suspension of Payment (Sec. Individual Debtor
94)

Individual Debtor Voluntary Liquidation (Sec. Individual Debtor with at least

103) P500,000.00 debts who does
not have sufficient assets to
cover his liabilities

Individual Debtor Involuntary Liquidation Any creditor or group of

(Petition for Acts of Insolvency) creditors with a claim of, or
Sec. 105 with claims of, or with
aggregate at least P500,000.00
EXCLUDED DEBTORS
 Excluded from the operation of the
FRIA are debtors which are 1. banks,
2. pre-need companies, 3. insurance
companies, and 4. national and local
government agencies or units.
 Rehabilitation of banks, pre-need
companies, and insurance companies
is still governed by their respective
governing special laws. (Sec. 5)
 REHABILITATION
Shall refer to the restoration of the
debtor to a condition of successful
operation and solvency, if it is shown that
its continuance of operation is
ECONOMICALLY FEASIBLE and its
creditors can recover by way of the
present value of payments projected in
the plan, more if the debtor continues as
a going concern than if it is immediately
liquidated. (Sec. 4[gg])
 REHABILITATION PLAN
 Shallrefer to a plan by which the financial
well-being and viability of an insolvent debtor
can be restored using various means
including, but not limited to, debt forgiveness,
debt rescheduling, reorganization or quasi-
reorganization, dacion en pago, debt-equity
conversion and sale of the business as a
going concern, or setting up of new business
entity, or other similar arrangements as may
be approved by the court or creditors (Sec.
62).
- A Rehabilitation Plan is attached to the
Petition for Rehabilitation. It is
indispensable.
- The Rehabilitation Plan 1) may be
approved by the creditors (50% of the
total claims) Sec. 64;
- 2) confirmed by the court after
approval of the creditors or even
without such approval or even over the
objection of the creditors (Sec. 68)
 CRAM DOWN RULE
The Rehabilitation Plan (including pre-
negotiated plans) confirmed by the
Court shall be binding upon the debtor
and all persons who may be affected
by it, including creditors, whether or
not such persons have participated in
the proceedings, opposed the Plan or
whether or not their claims have been
scheduled (Secs. 69, 82, and 86).
 STAY ORDER
 Thecourt having jurisdiction over the
rehabilitation case shall issue a Commencement
Order which shall include a Stay Order (Sec.16).
The Stay or Suspension Order shall:
 1.
Suspend all actions or proceedings in court or
otherwise, for the enforcement of claims against
the debtor;
 2.prohibit the debtor from selling, encumbering,
transferring, or disposing in any manner any of
its properties except in the ordinary course of
business;
 - The Commencement Order and
consequently the Stay Order shall be
effective for the entire duration of
the rehabilitation proceedings (Sec.
21).

- The order may be lifted if there

is no substantial likelihood for the
debtor to be successfully
rehabilitated.
Thank you and
God bless!