Section 3. Nature of Proceedings.

 - The proceedings under this Act shall be in

rem. Jurisdiction over all persons affected by the proceedings shall be considered
as acquired upon publication of the notice of the commencement of the
proceedings in any newspaper of general circulation in the Philippines in the
manner prescribed by the rules of procedure to be promulgated by the Supreme
Fourteenth Congress Court.
Third Regular Session
The proceedings shall be conducted in a summary and non-adversarial manner
consistent with the declared policies of this Act and in accordance with the rules
of procedure that the Supreme Court may promulgate.

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, Section 4. Definition of Terms. - As used in this Act, the term:
two thousand nine.
(a) Administrative expenses shall refer to those reasonable and necessary
REPUBLIC ACT No. 10142 expenses:

AN ACT PROVIDING FOR THE REHABILITATION OR (1) incurred or arising from the filing of a petition under the
LIQUIDATION OF FINANCIALLY DISTRESSED ENTERPRISES AND provisions of this Act;
INDIVIDUALS
(2) arising from, or in connection with, the conduct of the
Be it enacted by the Senate and House of Representatives of the Philippine proceedings under this Act, including those incurred for the
Congress Assembled: rehabilitation or liquidation of the debtor;

CHAPTER I (3) incurred in the ordinary course of business of the debtor

GENERAL PROVISIONS after the commencement date;

Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and (4) for the payment of new obligations obtained after the
Insolvency Act (FRIA) of 2010". commencement date to finance the rehabilitation of the debtor;

Section 2. Declaration of Policy. - It is the policy of the State to encourage (5) incurred for the fees of the rehabilitation receiver or
debtors, both juridical and natural persons, and their creditors to collectively and liquidator and of the professionals engaged by them; and
realistically resolve and adjust competing claims and property rights. In
furtherance thereof, the State shall ensure a timely, fair, transparent, effective (6) that are otherwise authorized or mandated under this Act or
and efficient rehabilitation or liquidation of debtors. The rehabilitation or such other expenses as may be allowed by the Supreme Court
liquidation shall be made with a view to ensure or maintain certainly and in its rules.
predictability in commercial affairs, preserve and maximize the value of the
assets of these debtors, recognize creditor rights and respect priority of claims, (b) Affiliate shall refer to a corporation that directly or indirectly,
and ensure equitable treatment of creditors who are similarly situated. When through one or more intermediaries, is controlled by, or is under the
rehabilitation is not feasible, it is in the interest of the State to facilities a speedy common control of another corporation.
and orderly liquidation of these debtor's assets and the settlement of their
obligations.
(c) Claim shall refer to all claims or demands of whatever nature or
character against the debtor or its property, whether for money or
otherwise, liquidated or unliquidated, fixed or contingent, matured or (h) Creditor shall refer to a natural or juridical person which has a claim
unmatured, disputed or undisputed, including, but not limited to; (1) all against the debtor that arose on or before the commencement date.
claims of the government, whether national or local, including taxes,
tariffs and customs duties; and (2) claims against directors and officers (i) Date of liquidation shall refer to the date on which the court issues
of the debtor arising from acts done in the discharge of their functions the Liquidation Order.
falling within the scope of their authority: Provided, That, this inclusion
does not prohibit the creditors or third parties from filing cases against (j) Days shall refer to calendar days unless otherwise specifically stated
the directors and officers acting in their personal capacities. in this Act.

(d) Commencement date shall refer to the date on which the court issues (k) Debtor shall refer to, unless specifically excluded by a provision of
the Commencement Order, which shall be retroactive to the date of this Act, a sole proprietorship duly registered with the Department of
filing of the petition for voluntary or involuntary proceedings. Trade and Industry (DTI), a partnership duly registered with the
Securities and Exchange Commission (SEC), a corporation duly
(e) Commencement Order shall refer to the order issued by the court organized and existing under Philippine laws, or an individual debtor
under Section 16 of this Act. who has become insolvent as defined herein.

(f) Control shall refer to the power of a parent corporation to direct or (l) Encumbered property shall refer to real or personal property of the
govern the financial and operating policies of an enterprise so as to debtor upon which a lien attaches.
obtain benefits from its activities. Control is presumed to exist when the
parent owns, directly or indirectly through subsidiaries or affiliates, (m) General unsecured creditor shall refer to a creditor whose claim or
more than one-half (1/2) of the voting power of an enterprise unless, in a portion thereof its neither secured, preferred nor subordinated under
exceptional circumstances, it can clearly be demonstrated that such this Act.
ownership does not constitute control. Control also exists even when the
parent owns one-half (1/2) or less of the voting power of an enterprise
(n) Group of debtors shall refer to and can cover only: (1) corporations
when there is power:
that are financially related to one another as parent corporations,
subsidiaries or affiliates; (2) partnerships that are owned more than fifty
(1) over more than one-half (1/2) of the voting rights by virtue percent (50%) by the same person; and (3) single proprietorships that
of an agreement with investors; are owned by the same person. When the petition covers a group of
debtors, all reference under these rules to debtor shall include and apply
(2) to direct or govern the financial and operating policies of the to the group of debtors.
enterprise under a statute or an agreement;
(o) Individual debtor shall refer to a natural person who is a resident and
(3) to appoint or remove the majority of the members of the citizen of the Philippines that has become insolvent as defined herein.
board of directors or equivalent governing body; or
(p) Insolvent shall refer to the financial condition of a debtor that is
(4) to cast the majority votes at meetings of the board of generally unable to pay its or his liabilities as they fall due in the
directors or equivalent governing body. ordinary course of business or has liabilities that are greater than its or
his assets.
(g) Court shall refer to the court designated by the Supreme Court to
hear and determine, at the first instance, the cases brought under this (q) Insolvent debtor's estate shall refer to the estate of the insolvent
Act. debtor, which includes all the property and assets of the debtor as of
commencement date, plus the property and assets acquired by the
rehabilitation receiver or liquidator after that date, as well as all other
property and assets in which the debtor has an ownership interest, (aa) Parent shall refer to a corporation which has control over another
whether or not these property and assets are in the debtor's possession as corporation either directly or indirectly through one or more
of commencement date: Provided, That trust assets and bailment, and intermediaries.
other property and assets of a third party that are in the possession of the
debtor as of commencement date, are excluded therefrom. (bb) Party to the proceedings shall refer to the debtor, a creditor, the
unsecured creditors' committee, a stakeholder, a party with an ownership
(r) Involuntary proceedings shall refer to proceedings initiated by interest in property held by the debtor, a secured creditor, the
creditors. rehabilitation receiver, liquidator or any other juridical or natural person
who stands to be benefited or injured by the outcome of the proceedings
(s) Liabilities shall refer to monetary claims against the debtor, and whose notice of appearance is accepted by the court.
including stockholder's advances that have been recorded in the debtor's
audited financial statements as advances for future subscriptions. (cc) Possessory lien shall refer to a lien on property, the possession of
which has been transferred to a creditor or a representative or agent
(t) Lien shall refer to a statutory or contractual claim or judicial charge thereof.
on real or personal property that legality entities a creditor to resort to
said property for payment of the claim or debt secured by such lien. (dd) Proceedings shall refer to judicial proceedings commenced by the
court's acceptance of a petition filed under this Act.
(u) Liquidation shall refer to the proceedings under Chapter V of this
Act. (ee) Property of others shall refer to property held by the debtor in
which other persons have an ownership interest.
(v) Liquidation Order shall refer to the Order issued by the court under
Section 112 of this Act. (ff) Publication notice shall refer to notice through publication in a
newspaper of general circulation in the Philippines on a business day for
(w) Liquidator shall refer to the natural person or juridical entity two (2) consecutive weeks.
appointed as such by the court and entrusted with such powers and
duties as set forth in this Act: Provided, That, if the liquidator is a (gg) Rehabilitation shall refer to the restoration of the debtor to a
juridical entity, it must designated a natural person who possesses all the condition of successful operation and solvency, if it is shown that its
qualifications and none of the disqualifications as its representative, it continuance of operation is economically feasible and its creditors can
being understood that the juridical entity and the representative are recover by way of the present value of payments projected in the plan,
solidarity liable for all obligations and responsibilities of the liquidator. more if the debtor continues as a going concern than if it is immediately
liquidated.
(x) Officer shall refer to a natural person holding a management position
described in or contemplated by a juridical entity's articles of (hh) Rehabilitation receiver shall refer to the person or persons, natural
incorporation, bylaws or equivalent documents, except for the corporate or juridical, appointed as such by the court pursuant to this Act and
secretary, the assistant corporate secretary and the external auditor. which shall be entrusted with such powers and duties as set forth herein.

(y) Ordinary course of business shall refer to transactions in the pursuit (ii) Rehabilitation Plan shall refer to a plan by which the financial well-
of the individual debtor's or debtor's business operations prior to being and viability of an insolvent debtor can be restored using various
rehabilitation or insolvency proceedings and on ordinary business terms. means including, but not limited to, debt forgiveness, debt rescheduling,
reorganization or quasi-reorganization, dacion en pago, debt-equity
(z) Ownership interest shall refer to the ownership interest of third conversion and sale of the business (or parts of it) as a going concern, or
parties in property held by the debtor, including those covered by trust setting-up of new business entity as prescribed in Section 62 hereof, or
receipts or assignments of receivables. other similar arrangements as may be approved by the court or creditors.
 (jj) Secured claim shall refer to a claim that is secured by a lien. (b) Insurance company shall refer to those companies that are
potentially or actually subject to insolvency proceedings under the
(kk) Secured creditor shall refer to a creditor with a secured claim. Insurance Code (Presidential Decree No. 1460) or successor legislation;
and
(ll) Secured party shall refer to a secured creditor or the agent or
representative of such secured creditor. (c) Pre-need company shall refer to any corporation authorized/licensed
to sell or offer to sell pre-need plans.
(mm) Securities market participant shall refer to a broker dealer,
underwriter, transfer agent or other juridical persons transacting Provided, That government financial institutions other than banks and
securities in the capital market. government-owned or controlled corporations shall be covered by this Act,
unless their specific charter provides otherwise.
(nn) Stakeholder shall refer, in addition to a holder of shares of a
corporation, to a member of a nonstock corporation or association or a Section 6. Designation of Courts and Promulgation of Procedural Rules. - The
partner in a partnership. Supreme Court shall designate the court or courts that will hear and resolve cases
brought under this Act and shall promulgate the rules of pleading, practice and
(oo) Subsidiary shall refer to a corporation more than fifty percent procedure to govern the proceedings brought under this Act.
(50%) of the voting stock of which is owned or controlled directly or
indirectly through one or more intermediaries by another corporation, Section 7. Substantive and Procedural Consolidation. - Each juridical entity
which thereby becomes its parent corporation. shall be considered as a separate entity under the proceedings in this Act. Under
these proceedings, the assets and liabilities of a debtor may not be commingled
(pp) Unsecured claim shall refer to a claim that is not secured by a lien. or aggregated with those of another, unless the latter is a related enterprise that is
owned or controlled directly or indirectly by the same interests: Provided,
however, That the commingling or aggregation of assets and liabilities of the
(qq) Unsecured creditor shall refer to a creditor with an unsecured
debtor with those of a related enterprise may only be allowed where:
claim.
(a) there was commingling in fact of assets and liabilities of the debtor
(rr) Voluntary proceedings shall refer to proceedings initiated by the
and the related enterprise prior to the commencement of the
debtor.
proceedings;
(ss) Voting creditor shall refer to a creditor that is a member of a class of
(b) the debtor and the related enterprise have common creditors and it
creditors, the consent of which is necessary for the approval of a
will be more convenient to treat them together rather than separately;
Rehabilitation Plan under this Act.
(c) the related enterprise voluntarily accedes to join the debtor as party
Section 5. Exclusions. - The term debtor does not include banks, insurance
petitioner and to commingle its assets and liabilities with the debtor's;
companies, pre-need companies, and national and local government agencies or
and
units.
(d) The consolidation of assets and liabilities of the debtor and the
For purposes of this section:
related enterprise is beneficial to all concerned and promotes the
objectives of rehabilitation.
(a) Bank shall refer to any duly licensed bank or quasi-bank that is
potentially or actually subject to conservatorship, receivership or
Provided, finally, That nothing in this section shall prevent the court from
liquidation proceedings under the New Central Bank Act (Republic Act
joining other entities affiliated with the debtor as parties pursuant to the rules of
No. 7653) or successor legislation;
procedure as may be promulgated by the Supreme Court.
Section 8. Decisions of Creditors. - Decisions of creditors shall be made interest acquired or held pursuant to this section shall be disposed by the bank
according to the relevant provisions of the Corporation Code in the case of stock within a period of five (5) years or as may be prescribed by the Monetary Board.
or nonstock corporations or the Civil Code in the case of partnerships that are not
inconsistent with this Act. CHAPTER II
COURT-SUPERVISED REHABILITATION
Section 9. Creditors Representatives. - Creditors may designate representatives
to vote or otherwise act on their behalf by filing notice of such representation (A) Initiation Proceedings.
with the court and serving a copy on the rehabilitation receiver or liquidator.
(1) Voluntary Proceedings.
Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship,
Partners in a Partnership, or Directors and Officers. - Individual debtor, owner Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When
of a sole proprietorship, partners in a partnership, or directors and officers of a approved by the owner in case of a sole proprietorship, or by a majority of the
debtor shall be liable for double the value of the property sold, embezzled or partners in case of a partnership, or in case of a corporation, by a majority vote
disposed of or double the amount of the transaction involved, whichever is of the board of directors or trustees and authorized by the vote of the
higher to be recovered for benefit of the debtor and the creditors, if they, having stockholders representing at least two-thirds (2/3) of the outstanding capital
notice of the commencement of the proceedings, or having reason to believe that stock, or in case of nonstock corporation, by the vote of at least two-thirds (2/3)
proceedings are about to be commenced, or in contemplation of the proceedings, of the members, in a stockholder's or member's meeting duly called for the
willfully commit the following acts: purpose, an insolvent debtor may initiate voluntary proceedings under this Act
by filing a petition for rehabilitation with the court and on the grounds
(a) Dispose or cause to be disposed of any property of the debtor other hereinafter specifically provided. The petition shall be verified to establish the
than in the ordinary course of business or authorize or approve any insolvency of the debtor and the viability of its rehabilitation, and include,
transaction in fraud of creditors or in a manner grossly disadvantageous whether as an attachment or as part of the body of the petition, as a minimum the
to the debtor and/or creditors; or following:

(b) Conceal or authorize or approve the concealment, from the creditors, (a) Identification of the debtor, its principal activities and its addresses;
or embezzles or misappropriates, any property of the debtor.
(b) Statement of the fact of and the cause of the debtor's insolvency or
The court shall determine the extent of the liability of an owner, partner, director inability to pay its obligations as they become due;
or officer under this section. In this connection, in case of partnerships and
corporations, the court shall consider the amount of the shareholding or (c) The specific relief sought pursuant to this Act;
partnership or equity interest of such partner, director or officer, the degree of
control of such partner, director or officer over the debtor, and the extent of the
(d) The grounds upon which the petition is based;
involvement of such partner, director or debtor in the actual management of the
operations of the debtor.
(e) Other information that may be required under this Act depending on
the form of relief requested;
Section 11. Authorization to Exchange Debt for Equity. - Notwithstanding
applicable banking legislation to the contrary, any bank, whether universal or
not, may acquire and hold an equity interest or investment in a debtor or its (f) Schedule of the debtor's debts and liabilities including a list of
subsidiaries when conveyed to such bank in satisfaction of debts pursuant to a creditors with their addresses, amounts of claims and collaterals, or
Rehabilitation or Liquidation Plan approved by the court: Provided, That such securities, if any;
ownership shall be subject to the ownership limits applicable to universal banks
for equity investments and: Provided, further, That any equity investment or (g) An inventory of all its assets including receivables and claims
against third parties;
 (h) A Rehabilitation Plan; (c) the specific relief sought under this Act;

(i) The names of at least three (3) nominees to the position of (d) a Rehabilitation Plan;
rehabilitation receiver; and
(e) the names of at least three (3) nominees to the position of
(j) Other documents required to be filed with the petition pursuant to rehabilitation receiver;
this Act and the rules of procedure as may be promulgated by the
Supreme Court. (f) other information that may be required under this Act depending on
the form of relief requested; and
A group of debtors may jointly file a petition for rehabilitation under this Act
when one or more of its members foresee the impossibility of meeting debts (g) other documents required to be filed with the petition pursuant to
when they respectively fall due, and the financial distress would likely adversely this Act and the rules of procedure as may be promulgated by the
affect the financial condition and/or operations of the other members of the Supreme Court.
group and/or the participation of the other members of the group is essential
under the terms and conditions of the proposed Rehabilitation Plan. (B) Action on the Petition and Commencement of Proceedings.

(2) Involuntary Proceedings. Section 15. Action on the Petition. - If the court finds the petition for
rehabilitation to be sufficient in form and substance, it shall, within five (5)
Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any working days from the filing of the petition, issue a Commencement Order. If,
creditor or group of creditors with a claim of, or the aggregate of whose claims within the same period, the court finds the petition deficient in form or
is, at least One Million Pesos (Php1,000,000.00) or at least twenty-five percent substance, the court may, in its discretion, give the petitioner/s a reasonable
(25%) of the subscribed capital stock or partners' contributions, whichever is period of time within which to amend or supplement the petition, or to submit
higher, may initiate involuntary proceedings against the debtor by filing a such documents as may be necessary or proper to put the petition in proper order.
petition for rehabilitation with the court if: In such case, the five (5) working days provided above for the issuance of the
Commencement Order shall be reckoned from the date of the filing of the
(a) there is no genuine issue of fact on law on the claim/s of the amended or supplemental petition or the submission of such documents.
petitioner/s, and that the due and demandable payments thereon have not
been made for at least sixty (60) days or that the debtor has failed Section 16. Commencement of Proceedings and Issuance of a Commencement
generally to meet its liabilities as they fall due; or Order. - The rehabilitation proceedings shall commence upon the issuance of the
Commencement Order, which shall:
(b) a creditor, other than the petitioner/s, has initiated foreclosure
proceedings against the debtor that will prevent the debtor from paying (a) identify the debtor, its principal business or activity/ies and its
its debts as they become due or will render it insolvent. principal place of business;

Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition (b) summarize the ground/s for initiating the proceedings;
for rehabilitation shall be verified to establish the substantial likelihood that the
debtor may be rehabilitated, and include: (c) state the relief sought under this Act and any requirement or
procedure particular to the relief sought;
(a) identification of the debtor its principal activities and its address;
(d) state the legal effects of the Commencement Order, including those
(b) the circumstances sufficient to support a petition to initiate mentioned in Section 17 hereof;
involuntary rehabilitation proceedings under Section 13 of this Act;
(e) declare that the debtor is under rehabilitation; (o) indicate the location or locations at which documents regarding the
debtor and the proceedings under Act may be reviewed and copied;
(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) (p) state that any creditor or debtor who is not the petitioner, may submit
consecutive weeks, with the first publication to be made within seven the name or nominate any other qualified person to the position of
(7) days from the time of its issuance; rehabilitation receiver at least five (5) days before the initial hearing;

(g) If the petitioner is the debtor direct the service by personal delivery (q) include s Stay or Suspension Order which shall:
of a copy of the petition on each creditor holding at least ten percent
(10%) of the total liabilities of the debtor as determined from the (1) suspend all actions or proceedings, in court or otherwise, for
schedule attached to the petition within five (5) days; if the petitioner/s the enforcement of claims against the debtor;
is/are creditor/s, direct the service by personal delivery of a copy of the
petition on the debtor within five (5) days; (2) suspend all actions to enforce any judgment, attachment or
other provisional remedies against the debtor;
(h) appoint a rehabilitation receiver who may or not be from among the
nominees of the petitioner/s and who shall exercise such powers and (3) prohibit the debtor from selling, encumbering, transferring
duties defined in this Act as well as the procedural rules that the or disposing in any manner any of its properties except in the
Supreme Court will promulgate; ordinary course of business; and

(i) summarize the requirements and deadlines for creditors to establish (4) prohibit the debtor from making any payment of its
their claims against the debtor and direct all creditors to their claims liabilities outstanding as of the commencement date except as
with the court at least five (5) days before the initial hearing; may be provided herein.

(j) direct Bureau of internal Revenue (BIR) to file and serve on the Section 17. Effects of the Commencement Order. - Unless otherwise provided
debtor its comment on or opposition to the petition or its claim/s against for in this Act, the court's issuance of a Commencement Order shall, in addition
the debtor under such procedures as the Supreme Court provide; to the effects of a Stay or Suspension Order described in Section 16 hereof:

(k) prohibit the debtor's suppliers of goods or services from withholding (a) vest the rehabilitation with all the powers and functions provided for
the supply of goods and services in the ordinary course of business for this Act, such as the right to review and obtain records to which the
as long as the debtor makes payments for the services or goods supplied debtor's management and directors have access, including bank accounts
after the issuance of the Commencement Order; or whatever nature of the debtor subject to the approval by the court of
the performance bond filed by the rehabilitation receiver;
(l) authorize the payment of administrative expenses as they become
due; (b) prohibit or otherwise serve as the legal basis rendering null and void
the results of any extrajudicial activity or process to seize property, sell
(m) set the case for initial hearing, which shall not be more than forty encumbered property, or otherwise attempt to collection or enforce a
(40) days from the date of filing of the petition for the purpose of claim against the debtor after commencement date unless otherwise
determining whether there is substantial likelihood for the debtor to be allowed in this Act, subject to the provisions of Section 50 hereof;
rehabilitated;
(c) serve as the legal basis for rendering null and void any setoff after
(n) make available copies of the petition and rehabilitation plan for the commencement date of any debt owed to the debtor by any of the
examination and copying by any interested party; debtor's creditors;
 (d) serve as the legal basis for rendering null and void the perfection of the Securities Regulation Code and its implementing rules and
any lien against the debtor's property after the commencement date; and regulations;

(e) consolidate the resolution of all legal proceedings by and against the (f) the clearing and settlement of financial transactions through the
debtor to the court Provided. However, That the court may allow the facilities of a clearing agency or similar entities duly authorized,
continuation of cases on other courts where the debtor had initiated the registered and/or recognized by the appropriate regulatory agency like
suit. the Bangko Sentral ng Pilipinas (BSP) and the SEC as well as any form
of actions of such agencies or entities to reimburse themselves for any
Attempts to seek legal of other resource against the debtor outside these transactions settled for the debtor; and
proceedings shall be sufficient to support a finding of indirect contempt of court.
(g) any criminal action against individual debtor or owner, partner,
Section 18. Exceptions to the Stay or Suspension Order. - The Stay or director or officer of a debtor shall not be affected by any proceeding
Suspension Order shall not apply: commend under this Act.

(a) to cases already pending appeal in the Supreme Court as of Section 19. Waiver of taxes and Fees Due to the National Government and to
commencement date Provided, That any final and executory judgment Local Government Units (LGUs). - Upon issuance of the Commencement Order
arising from such appeal shall be referred to the court for appropriate by the court, and until the approval of the Rehabilitation Plan or dismissal of the
action; petition, whichever is earlier, the imposition of all taxes and fees including
penalties, interests and charges thereof due to the national government or to
(b) subject to the discretion of the court, to cases pending or filed at a LGUs shall be considered waived, in furtherance of the objectives of
specialized court or quasi-judicial agency which, upon determination by rehabilitation.
the court is capable of resolving the claim more quickly, fairly and
efficiently than the court: Provided, That any final and executory Section 20. Application of Stay or Suspension Order to Government Financial
judgment of such court or agency shall be referred to the court and shall Institutions. - The provisions of this Act concerning the effects of the
be treated as a non-disputed claim; Commencement Order and the Stay or Suspension Order on the suspension of
rights to foreclose or otherwise pursue legal remedies shall apply to government
(c) to the enforcement of claims against sureties and other persons financial institutions, notwithstanding provisions in their charters or other laws
solidarily liable with the debtor, and third party or accommodation to the contrary.
mortgagors as well as issuers of letters of credit, unless the property
subject of the third party or accommodation mortgage is necessary for Section 21. Effectivity and Duration of Commencement Order. - Unless lifted by
the rehabilitation of the debtor as determined by the court upon the court, the Commencement Order shall be for the effective for the duration of
recommendation by the rehabilitation receiver; the rehabilitation proceedings for as long as there is a substantial likelihood that
the debtor will be successfully rehabilitated. In determining whether there is
(d) to any form of action of customers or clients of a securities market substantial likelihood for the debtor to be successfully rehabilitated, the court
participant to recover or otherwise claim moneys and securities shall ensure that the following minimum requirements are met:
entrusted to the latter in the ordinary course of the latter's business as
well as any action of such securities market participant or the (a) The proposed Rehabilitation Plan submitted complies with the
appropriate regulatory agency or self-regulatory organization to pay or minimum contents prescribed by this Act;
settle such claims or liabilities;
(b) There is sufficient monitoring by the rehabilitation receiver of the
(e) to the actions of a licensed broker or dealer to sell pledged securities debtor's business for the protection of creditors;
of a debtor pursuant to a securities pledge or margin agreement for the
settlement of securities transactions in accordance with the provisions of
 (c) The debtor has met with its creditors to the extent reasonably (a) determine the creditors who have made timely and proper filing of
possible in attempts to reach consensus on the proposed Rehabilitation their notice of claims;
Plan;
(b) hear and determine any objection to the qualifications of the
(d) The rehabilitation receiver submits a report, based on preliminary appointment of the rehabilitation receiver and, if necessary appoint a
evaluation, stating that the underlying assumptions and the goals stated new one in accordance with this Act;
in the petitioner's Rehabilitation Plan are realistic reasonable and
reasonable or if not, there is, in any case, a substantial likelihood for the (c) direct the creditors to comment on the petition and the Rehabilitation
debtor to be successfully rehabilitated because, among others: Plan, and to submit the same to the court and to the rehabilitation
receiver within a period of not more than twenty (20) days; and
(1) there are sufficient assets with/which to rehabilitate the
debtor; (d) direct the rehabilitation receiver to evaluate the financial condition
of the debtor and to prepare and submit to the court within forty (40)
(2) there is sufficient cash flow to maintain the operations of the days from initial hearing the report provided in Section 24 hereof.
debtor;
Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is
(3) the debtor's, partners, stockholders, directors and officers not listed in the schedule of debts and liabilities and who fails to file a notice of
have been acting in good faith and which due diligence; claim in accordance with the Commencement Order but subsequently files a
belated claim shall not be entitled to participate in the rehabilitation proceedings
(4) the petition is not s sham filing intended only to delay the but shall be entitled to receive distributions arising therefrom.
enforcement of the rights of the creditor's or of any group of
creditors; and Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from
the initial hearing and with or without the comments of the creditors or any of
(5) the debtor would likely be able to pursue a viable them, the rehabilitation receiver shall submit a report to the court stating his
Rehabilitation Plan; preliminary findings and recommendations on whether:

(e) The petition, the Rehabilitation Plan and the attachments thereto do (a) the debtor is insolvent and if so, the causes thereof and any unlawful
not contain any materially false or misleading statement; 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
(f) If the petitioner is the debtor, that the debtor has met with its contemplation of the insolvency of the debtor or which may have
creditor/s representing at least three-fourths (3/4) of its total obligations contributed to the insolvency of the debtor;
to the extent reasonably possible and made a good faith effort to reach a
consensus on the proposed Rehabilitation Plan if the petitioner/s is/are a (b) the underlying assumptions, the financial goals and the procedures to
creditor or group of creditors, that/ the petitioner/s has/have met with the accomplish such goals as stated in the petitioner's Rehabilitation Plan
debtor and made a good faith effort to reach a consensus on the are realistic, feasible and reasonable;
proposed Rehabilitation Plan; and
(c) there is a substantial likelihood for the debtor to be successfully
(g) The debtor has not committed acts misrepresentation or in fraud of rehabilitated;
its creditor/s or a group of creditors.
(d) the petition should be dismissed; and
Section 22. Action at the Initial Hearing. - At the initial hearing, the court shall:
(e) the debtor should be dissolved and/or liquidated.
Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of Alternative Dispute Resolution Act of 2004, should it determine that such mode
Proceedings. - Within ten (10) days from receipt of the report of the will resolve the dispute more quickly, fairly and efficiently than the court.
rehabilitation receiver mentioned in Section 24 hereof the court may:
Section 27.Dismissal of Petition. - If the petition is dismissed pursuant to
(a) give due course to the petition upon a finding that: paragraph (b) of Section 25 hereof, then the court may, in its discretion, order the
petitioner to pay damages to any creditor or to the debtor, as the case may be,
(1) the debtor is insolvent; and who may have been injured by the filing of the petition, to the extent of any such
injury.
(2) there is a substantial likelihood for the debtor to be
successfully rehabilitated; (C) The Rehabilitation Receiver, Management Committee and Creditors'
Committee.
(b) dismiss the petition upon a finding that:
Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural
(1)debtor is not insolvent; or juridical person may serve as a rehabilitation receiver: Provided, That if the
rehabilitation receiver is a juridical entity, it must designate a natural person/s
who possess/es all the qualifications and none of the disqualification’s as its
(2) the petition i8 a sham filing intended only to delay the
representative, it being understood that the juridical entity and the
enforcement of the rights of the creditor/s or of any group of
representative/s are solidarily liable for all obligations and responsibilities of the
creditors;
rehabilitation receiver.
(3)the petition, the Rehabilitation Plan and the attachments
Section 29.Qualifications of a Rehabilitation Receiver.  - The rehabilitation
thereto contain any materially false or misleading statements; or
receiver shall have the following minimum qualifications:
(4)the debtor has committed acts of misrepresentation or in
(a)A citizen of the Philippines or a resident of the Philippines in the six
fraud of its creditor/s or a group of creditors;
(6) months immediately preceding his nomination;
(c)convert the proceedings into one for the liquidation of the debtor
(b)Of good moral character and with acknowledged integrity,
upon a finding that:
impartiality and independence;
(1)the debtor is insolvent; and
(c)Has the requisite knowledge of insolvency and other relevant
commercial laws, rules and procedures, as well as the relevant training
(2)there is no substantial likelihood for the debtor to be and/or experience that may be necessary to enable him to properly
successfully rehabilitated as determined in accordance with the discharge the duties and obligations of a rehabilitation receiver; and
rules to be promulgated by the Supreme Court.
(d)Has no conflict of interest: Provided, That such conflict of interest
Section 26.Petition Given Due Course. - If the petition is given due course, the may be waived, expressly or impliedly, by a party who may be
court shall direct the rehabilitation receiver to review, revise and/or recommend prejudiced thereby.
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.
Other qualifications and disqualification’s of the rehabilitation receiver shall be
set forth in procedural rules, taking into consideration the nature of the business
The court may refer any dispute relating to the Rehabilitation Plan or the of the debtor and the need to protect the interest of all stakeholders concerned.
rehabilitation proceedings pending before it to arbitration or other modes of
dispute resolution, as provided for under Republic Act No. 9285, Or the
Section 30.Initial Appointment of the Rehabilitation Receiver. - The court shall (g)To have access to all information necessary, proper or relevant to the
initially appoint the rehabilitation receiver, who mayor may not be from among operations and business of the debtor and for its rehabilitation;
the nominees of the petitioner, However, at the initial hearing of the petition, the
creditors and the debtor who are not petitioners may nominate other persons to (h) To sue and recover, with the. approval of the court, all
the position. The court may retain the rehabilitation receiver initially appointed property or  money of the debtor paid, transferred or disbursed in fraud
or appoint another who mayor may not be from among those nominated. of the debtor or its creditors, or which constitute undue preference of
creditor/s;
In case the debtor is a securities market participant, the court shall give priority
to the nominee of the appropriate securities or investor protection fund. (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
If a qualified natural person or entity is nominated by more than fifty percent ordinary course of business;
(50%) of the secured creditors and the general unsecured creditors, and
satisfactory evidence is submitted, the court shall appoint the creditors' nominee (j) With the court's approval, to engage the services of or to employ
as rehabilitation receiver. persons or entities to assist him in the discharge of his functions;

Section 31.Powers, Duties and Responsibilities of the Rehabilitation Receiver. - (k) To determine the manner by which the debtor may be best
The rehabilitation receiver shall be deemed an officer of the court with the rehabilitated, to review) revise and/or recommend action on the
principal duty of preserving and maximizing the value of the assets of the debtor Rehabilitation Plan and submit the same or a new one to the court for
during the rehabilitation proceedings, determining the viability of the approval;
rehabilitation of the debtor, preparing and recommending a Rehabilitation Plan
to the court, and implementing the approved Rehabilitation Plan, To this end, (1) To implement the Rehabilitation Plan as approved by the court, if 80
and without limiting the generality of the foregoing, the rehabilitation receiver provided under the Rehabilitation Plan;
shall have the following powers, duties and responsibilities:
(m) To assume and exercise the powers of management of the debtor, if
(a)To verify the accuracy of the factual allegations in the petition and its directed by the court pursuant to Section 36 hereof;
annexes;
(n) To exercise such other powers as may, from time to time, be
(b)To verify and correct, if necessary, the inventory of all of the assets conferred upon him by the court; and
of the debtor, and their valuation;
To submit a status report on the rehabilitation proceedings every quarter
(c)To verify and correct, if necessary, the schedule of debts and or as may be required by the court motu proprio. or upon motion of any
liabilities of the debtor; creditor. or as may be provided, in the Rehabilitation Plan.

(d)To evaluate the validity, genuineness and true amount of all the Unless appointed by the court, pursuant to Section 36 hereof, the
claims against the debtor; rehabilitation receiver shall not take over the management and control of
the debtor but may recommend the appointment of a management
(e)To take possession, custody and control, and to preserve the value of committee over the debtor in the cases provided by this Act.
all the property of the debtor;
Section 32.Removal of the Rehabilitation Receiver. – The rehabilitation receiver
(f)To sue and recover, with the approval of the court, all amounts owed may be removed at any time by the court either motu proprio  or upon motion by
to, and all properties pertaining to the debtor; any creditor/s holding more than fifty percent (50%) of the total obligations of
the debtor, on such grounds as the rules of procedure may provide which shall
include, but are not limited to, the following:
 (a) Incompetence, gross negligence, failure to perform or failure to (b) Paralyzation of the business operations of the debtor; or
exercise the proper degree of care in the performance of his duties and
powers; (c) Gross mismanagement of the debtor. or fraud or other wrongful
conduct on the part of, or gross or willful violation of this Act by.
(b) Lack of a particular or specialized competency required by the existing management of the debtor Or the owner, partner, director,
specific case; officer or representative/s in management of the debtor.

(c) Illegal acts or conduct in the performance of his duties and powers; In case the court appoints the rehabilitation receiver to assume the powers of
management of the debtor. the court may:
(d) Lack of qualification or presence of any disqualification;
(1) require the rehabilitation receiver to post an additional bond;
(e) Conflict of interest that arises after his appointment; and
(2) authorize him to engage the services or to employ persona or entities
(f) Manifest lack of independence that is detrimental to the general body to assist him in the discharge of his managerial functions; and
of the stakeholders.
(3) authorize a commensurate increase in his compensation.
Section 33.Compensation and Terms of Service. The rehabilitation receiver and
his direct employees or independent contractors shall be entitled to compensation Section 37.Role of the Management Committee. – When appointed pursuant to
for reasonable fees and expenses from the debtor according to the terms the foregoing section, the management committee shall take the place of the
approved by the court after notice and hearing. Prior to such hearing, the management and the governing body of the debtor and assume their rights and
rehabilitation receiver and his direct employees shall be entitled to reasonable responsibilities.
compensation based on quantum meruit.  Such costs shall be considered
administrative expenses. The specific powers and duties of the management committee, whose members
shall be considered as officers of the court, shall be prescribed by the procedural
Section 34.Oath and Bond of the Rehabilitation Receiver. Prior to entering upon rules.
his powers, duties and responsibilities, the rehabilitation receiver shall take an
oath and file a bond, in such amount to be fixed by the court, conditioned upon Section 38.Qualifications of Members of the Management Committee.  - The
the faithful and proper discharge of his powers, duties and responsibilities. qualifications and disqualification’s of the members of the management
committee shall be set forth in the procedural rules, taking into consideration the
Section 35.Vacancy. - Incase the position of rehabilitation receiver is vacated for nature of the business of the debtor and the need to protect the interest of all
any reason whatsoever. the court shall direct the debtor and the creditors to stakeholders concerned.
submit the name/s of their nominee/s to the position. The court may appoint any
of the qualified nominees. or any other person qualified for the position. Section 39.Employment of Professionals.  - Upon approval of the court, and after
notice and hearing, the rehabilitation receiver or the management committee may
Section 36.Displacement of Existing Management by the Rehabilitation employ specialized professionals and other experts to assist each in the
Receiver  or Management Committee.  – Upon motion of any interested party, the performance of their duties. Such professionals and other experts shall be
court may appoint and direct the rehabilitation receiver to assume the powers of considered either employees or independent contractors of the rehabilitation
management of the debtor, or appoint a management committee that will receiver or the management committee, as the case may be. The qualifications
undertake the management of the debtor. upon clear and convincing evidence of and disqualification’s of the professionals and experts may be set forth in
any of the following circumstances: procedural rules, taking into consideration the nature of the business of the
debtor and the need to protect the interest of all stakeholders concerned.
(a) Actual or imminent danger of dissipation, loss, wastage or
destruction of the debtor’s assets or other properties;
Section 40.Conflict of Interest. - No person may be appointed as a rehabilitation act done or omitted to be done by them in good faith in connection with the
receiver, member of a_ management committee, or be employed by the exercise of their powers and functions under this Act or other actions duly
rehabilitation receiver or the management committee if he has a conflict of approved by the court. 1awp++il

interest.
Section 42.Creditors' Committee.  - After the creditors' meeting called pursuant
An individual shall be deemed to have a conflict of interest if he is so situated as to Section 63 hereof, the creditors belonging to a class may formally organize a
to be materially influenced in the exercise of his judgment for or against any committee among
party to the proceedings. Without limiting the generality of the foregoing, an
individual shall be deemed to have a conflict of interest if: themselves. In addition, the creditors may, as a body, agree to form a creditors'
committee composed of a representative from each class of creditors, such as the
(a) he is a creditor, owner, partner or stockholder of the debtor; following:

(b) he is engaged in a line of business which competes with that of the (a) Secured creditors;
debtor;
(b) Unsecured creditors;
(c) he is, or was, within five (5) years from the filing of the petition, a
director, officer, owner, partner or employee of the debtor or any of the (c) Trade creditors and suppliers; and
creditors, or the auditor or accountant of the debtor;
(d) Employees of the debtor.
(d) he is, or was, within two (2) years from the filing of the petition, an
underwriter of the outstanding securities of the debtor; In the . election of the creditors' representatives, the rehabilitation receiver or his
representative shall attend such meeting and extend the appropriate assistance as
(e) he is related by consanguinity or affinity within the fourth civil may be defined in the procedural rules.
degree to any individual creditor, owners of a sale proprietorship-debtor,
partners of a partnership- debtor or to any stockholder, director, officer, Section 43.Role of Creditors' Committee.  - The creditors' committee when
employee or underwriter of a corporation-debtor; or constituted pursuant to Section 42 of this Act shall assist the rehabilitation
receiver in communicating with the creditors and shall be the primary liaison
(f) he has any other direct or indirect material interest in the debtor or between the rehabilitation receiver and the creditors. The creditors' committee
any of the creditors. cannot exercise or waive any right or give any consent on behalf of any creditor
unless specifically authorized in writing by such creditor. The creditors'
Any rehabilitation receiver, member of the management committee or persons committee may be authorized by the court or by the rehabilitation receiver to
employed or contracted by them possessing any conflict of interest shall make perform such other tasks and functions as may be defined by the procedural rules
the appropriate disclosure either to the court or to the creditors in case of out-of- in order to facilitate the rehabilitation process.
court rehabilitation proceedings. Any party to the proceeding adversely affected
by the appointment of any person with a conflict of interest to any of the (D) Determination of Claims.
positions enumerated above may however waive his right to object to such
appointment and, if the waiver is unreasonably withheld, the court may disregard Section 44.Registry of Claims.  - Within twenty (20) days from his assumption
the conflict of interest, taking into account the general interest of the into office, the rehabilitation receiver shall establish a preliminary registry of
stakeholders. claims. The rehabilitation receiver shall make the registry available for public
inspection and provide
Section 41.Immunity.  - The rehabilitation receiver and all persons employed by
him, and the members of the management committee and all persons employed
by it, shall not be subject to any action. claim or demand in connection with any
publication notice to the debtor, creditors and stakeholders on where and when others held by the debtor where there is a security interest pertaining to third
they may inspect it. All claims included in the registry of claims must be duly parties under a financial, credit or other similar transactions if, upon application
supported by sufficient evidence. of the rehabilitation receiver and with the consent of the affected owners of the
property, or secured creditor/s in the case of encumbered property of the debtor
Section 45.Opposition or Challenge of Claims.  – Within thirty (30) days from and, after notice and hearing, the court determines that:
the expiration of the period stated in the immediately preceding section, the
debtor, creditors, stakeholders and other interested parties may submit a (a) such sale, transfer, conveyance or disposal is necessary for the
challenge to claim/s to the court, serving a certified copy on the rehabilitation continued operation of the debtor's business; and
receiver and the creditor holding the challenged claim/so Upon the expiration of
the thirty (30)-day period, the rehabilitation receiver shall submit to the court the (b) the debtor has made arrangements to provide a substitute lien or
registry of claims which shall include undisputed claims that have not been ownership right that provides an equal level of security for the counter-
subject to challenge. party's claim or right.

Section 46.Appeal. - Any decision of the rehabilitation receiver regarding a Provided,  That properties held by the debtor where the debtor has authority to
claim may be appealed to the court. sell such as trust receipt or consignment arrangements may be sold or disposed
of by the .debtor, if such sale or disposal is necessary for the operation of the
(E) Governance. debtor's business, and the debtor has made arrangements to provide a substitute
lien or ownership right that provides an equal level of security for the counter-
Section 47.Management. - Unless otherwise provided herein, the management party's claim or right.
of the juridical debtor shall remain with the existing management subject to the
applicable law/s and agreement/s, if any, on the election or appointment of Sale or disposal of property under this section shall not give rise to any criminal
directors, managers Or managing partner. However, all disbursements, payments liability under applicable laws.
or sale, disposal, assignment, transfer or encumbrance of property , or any other
act affecting title or interest in property, shall be subject to the approval of the Section 51.Assets of Debtor Held by Third Parties.  – In the case of possessory
rehabilitation receiver and/or the court, as provided in the following subchapter. pledges, mechanic's liens or similar claims, third parties who have in their
possession or control property of the debtor shall not transfer, conveyor
(F) Use, Preservation and Disposal of Assets and Treatment of Assets and otherwise dispose of the same to persons other than the debtor, unless upon prior
Claims after Commencement Date. approval of the rehabilitation receiver. The rehabilitation receiver may also:

Section 48.Use or Disposition of Assets.  - Except as otherwise provided herein, (a) demand the surrender or the transfer of the possession or control of
no funds or property of the debtor shall he used or disposed of except in the such property to the rehabilitation receiver or any other person, subject
ordinary course of business of the debtor, or unless necessary to finance the to payment of the claims secured by any possessory Iien/s thereon;
administrative expenses of the rehabilitation proceedings.
(b) allow said third parties to retain possession or control, if such an
Section 49.Sale of Assets. - The court, upon application of the rehabilitation arrangement would more likely preserve or increase the value of the
receiver, may authorize the sale of unencumbered property of the debtor outside property in question or the total value of the assets of the debtor; or
the ordinary course of business upon a showing that the property, by its nature or
because of other circumstance, is perishable, costly to maintain, susceptible to (c) undertake any otI1er disposition of the said property as may be
devaluation or otherwise injeopardy. beneficial for the rehabilitation of the debtor, after notice and hearing,
and approval of the court.
Section 50.Sale or Disposal of Encumbered Property of the Debtor and Assets
of Third Parties Held by Debtor. The court may authorize the sale, transfer, Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of
conveyance or disposal of encumbered property of the debtor, or property of Assets. - The court may rescind or declare as null and void any sale, payment,
transfer or conveyance of the debtor's unencumbered property or any interest in substitute property of the debtor to the secured
encumbering thereof by the debtor or its agents or representatives after the creditor: Provided.  That other creditors holding liens on such property,
commencement date which are not in the ordinary course of the business of the if any, do not object thereto, or, if such property is not available;
debtor: Provided, however,  That the unencumbered property may be sold,
encumbered or otherwise disposed of upon order of the court after notice and (c) order the conveyance to the secured creditor or holder . of an
hearing: ownership interest of a lien on the residual funds from the sale of
encumbered property during the proceedings; or
(a) if such are in the interest of administering the debtor and facilitating
the preparation and implementation of a Rehabilitation Plan; (d) allow the sale or disposition of the property: Provided. That the sale
or disposition will maximize the value of the property for the benefit of
(b) in order to provide a substitute lien, mortgage or pledge of property the secured creditor and the debtor, and the proceeds of the sale will be
under this Act; distributed in accordance with the order prescribed under the rules of
concurrence and preference of credits.
(c) for payments made to meet administrative expenses as they arise;
Section 54.Post-commencement Interest.  - The rate and term of interest, if any,
(d) for payments to victims of quasi delicts upon a showing that the on secured and unsecured claims shall be determined and provided for in the
claim is valid and the debtor has insurance to reimburse the debtor for approved Rehabilitation Plan.
the payments made;
Section 55.Post-commencement Loans and Obligations.  - With the approval of
(e) for payments made to repurchase property of the debtor that is the court upon the recommendation of the rehabilitation receiver, the debtor, in
auctioned off in a judicial or extrajudicial sale under. This Act; or order to enhance its

(f) for payments made to reclaim property of the debtor held pursuant to rehabilitation. may:
a possessory lien.
(a) enter into credit arrangements; or
Section 53.Assets Subject to Rapid Obsolescence, Depreciation and Diminution
of Value.  - Upon the application of a secured creditor holding a lien against or (b) enter into credit arrangements, secured by mortgages of its
holder of an ownership interest in property held by the debtor that is subject to unencumbered property or secondary mortgages of encumbered
potentially rapid obsolescence, depreciation or diminution in value, the court property with the approval of senior secured parties with regard to the
shall, after notice and hearing, order the debtor or rehabilitation receiver to take encumbered property; or
reasonable steps necessary to prevent the depreciation. If depreciation cannot be
avoided and such depreciation is jeopardizing the security or property interest of (c) incur other obligations as may be essential for its rehabilitation.
the secured creditor or owner, the court shall:
The payment of the foregoing obligations shall be considered administrative
(a) allow the encumbered property to be foreclosed upon by the secured expenses under this Act.
creditor according to the relevant agreement between the debtor and the
secured creditor, applicable rules of procedure and relevant Section 56.Treatment of Employees, Claims.  Compensation of employees
legislation: Provided.  That the proceeds of the sale will be distributed in required to carry on the business shall be considered an administrative expense.
accordance with the order prescribed under the rules of concurrence and Claims of separation pay for months worked prior to the commencement date
preference of credits; or shall be considered a pre- ommencement claim. Claims for salary and separation
pay for work performed after the commencement date shall be an administrative
(b) upon motion of, or with the consent of the affected secured creditor expense.
or interest owner. order the conveyance of a lien against or ownership
Section 57.Treatment of Contracts.  - Unless cancelled by virtue of a final debtor beyond the reach of creditors or to otherwise prejudice the
judgment of a court of competent jurisdiction issued prior to the issuance of the interests of creditors.
Commencement Order, or at anytime thereafter by the court before which the
rehabilitation proceedings are pending, all valid and subbsisting contracts of the Provided, however,  That nothing in this section shall prevent the court from
debtor with creditors and other third parties as at the commencement date shall rescinding or declaring as null and void a transaction on other grounds provided
continue in force: Provided,  That within  ninety (90) days following the by relevant legislation and jurisprudence: Provided, further,  That the provisions
commencement of proceedings, the debtor, with the consent of the rehabilitation of the Civil Code on rescission shall in any case apply to these transactions.
receiver, shall notify each contractual counter-party of whether it is confirming
the particular contract. Contractual obligations of the debtor arising or performed Section 59.Actions for Rescission or Nullity.  - (a) The rehabilitation receiver or,
during this period, and afterwards for confirmed contracts, shall be considered with his conformity, any creditor may initiate and prosecute any action to
administrative expenses. Contracts not confirmed within the required deadline rescind, or declare null and void any transaction described in Section 58 hereof.
shall be considered terminated. Claims for actual damages, if any, arising as a If the rehabilitation receiver does not consent to the filing or prosecution of such
result of the election to terminate a contract shall be considered a pre- action,
commencement claim against the debtor. Nothing contained herein shall prevent
the cancellation or termination of any contract of the debtor for any ground
(b) If leave of court is granted under subsection (a), the rehabilitation receiver
provided by law.
shall assign and transfer to the creditor all rights, title and interest in the chose in
action or subject matter of the proceeding, including any document in support
(G) Avoidance Proceedings. thereof.

Section 58.Rescission or Nullity of Certain Pre- (c) Any benefit derived from a proceeding taken pursuant to subsection (a), to
commencement Transactions. Any transaction occurring prior to the extent of his claim and the costs, belongs exclusively to the creditor
commencement date entered into by the debtor or involving its funds or assets instituting the proceeding, and the surplus, if any, belongs to the estate.
may be 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
(d) Where, before an order is made under subsection (a), the rehabilitation
preference of creditors. Without limiting the generality of the foregoing, a
receiver (or liquidator) signifies to the court his readiness to institute the
disputable presumption of such design shall arise if the transaction:
proceeding for the benefit of the creditors, the order shall fix the time within
which he shall do so and, m that case, the benefit derived from the proceeding, if
(a) provides unreasonably inadequate consideration to the debtor and is instituted within the time limits so fixed, belongs to the estate.
executed within ninety (90) days prior to the commencement date;
(H) Treatment of Secured Creditors.
(b) involves an accelerated payment of a claim to a creditor within
ninety (90) days prior to the commencement date;
Section 60.No Diminution of Secured Creditor Rights.  The issuance of the
Commencement Order and the Suspension or Stay Order, and any other
(c) provides security or additional security executed within ninety (90) provision of this Act, shall not be
days prior to the commencement date;
deemed in any way to diminish or impair the security or lien of a secured
(d) involves creditors, where a creditor obtained, or received the benefit creditor, or the value of his lien or security, except that his right to enforce said
of, more than its pro rata share in the assets of the debtor, executed at a security or lien may be suspended during the term of the Stay Order.
time when the debtor was insolvent; or
The court, upon motion or recommendation of the rehabilitation receiver, may
(e) is intended to defeat, delay or hinder the ability of the creditors to allow a secured creditor to enforce his security or lien, or foreclose upon
collect claims where the effect of the transaction is to put assets of the property of the debtor
securing his/its claim, if the said property is not necessary for the rehabilitation (b) compare the amounts expected to be received by the creditors under
of the debtor. The secured creditor and/or the other lien holders shall be admitted the Rehabilitation Plan with those that they will receive if liquidation
to the rehabilitation proceedings only for the balance of his claim, if any. ensues within the next one hundred twenty (120) days;

Section 61.Lack of Adequate Protection. - The court, on motion or motu (c) contain information sufficient to give the various classes of creditors
proprio,  may terminate, modify or set conditions for the continuance of a reasonable basis for determining whether supporting the Plan is in
suspension of payment, or relieve a claim from the coverage thereof, upon their financial interest when compared to the immediate liquidation of
showing that: (a) a creditor does not have adequate protection over property the debtor, including any reduction of principal interest and penalties
securing its claim; or payable to the creditors;

(b) the value of a claim secured by a lien on property which is not necessary for (d) establish classes of voting creditors;
rehabilitation of the debtor exceeds the fair market value of the said property.
(e) establish subclasses of voting creditors if prior approval has been
For purposes of this section, a creditor shall be deemed to lack adequate granted by the court;
protection if it can be shown that:
(f) indicate how the insolvent debtor will be rehabilitated including, but
(a) the debtor fails or refuses to honor a pre-existing agreement with the not limited to, debt forgiveness, debt rescheduling, reorganization or
creditor to keep the property insured; quasi-reorganization. dacion en pago,  debt-equity conversion and sale
of the business (or parts of it) as a going concern, or setting-up of a new
(b) the debtor fails or refuses to take commercially reasonable steps to business entity or other similar arrangements as may be necessary to
maintain the property; or restore the financial well-being and visibility of the insolvent debtor;

(c) the property has depreciated to an extent that the creditor is under (g) specify the treatment of each class or subclass described in
secured. subsections (d) and (e);

Upon showing of a lack of protection, the court shall order the debtor or the (h) provide for equal treatment of all claims within the same class or
rehabilitation receiver to make arrangements to provide for the insurance or subclass, unless a particular creditor voluntarily agrees to less favorable
maintenance of the property; or to make payments or otherwise provide treatment;
additional or replacement security such that the obligation is fully secured. If
such arrangements are not feasible, the court may modify the Stay Order to allow (i) ensure that the payments made under the plan follow the priority
the secured creditor lacking adequate protection to enforce its security claim established under the provisions of the Civil Code on concurrence and
against the debtor: Provided, however,  That the court may deny the creditor the preference of credits and other applicable laws;
remedies in this paragraph if the property subject of the enforcement is required
for the rehabilitation of the debtor. (j) maintain the security interest of secured creditors and preserve the
liquidation value of the security unless such has been waived or
(i) Administration of Proceedings. modified voluntarily;

Section 62.Contents of a Rehabilitation Plan.  – The Rehabilitation Plan shall, as (k) disclose all payments to creditors for pre-commencement debts made
a minimum: during the proceedings and the justifications thereof;

(a) specify the underlying assumptions, the financial goals and the (1) describe the disputed claims and the provisioning of funds to account
procedures proposed to accomplish such goals; 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; all the classes of creditors, and may consider their views and proposals ill the
review, revision or preparation of a new Rehabilitation Plan.
(n) state any rehabilitation covenants of the debtor, the breach of which
shall be considered a material breach of the Plan; Section 64.Creditor Approval of Rehabilitation Plan. – The rehabilitation
receiver shall notify the creditors and stakeholders that the Plan is ready for their
(o) identify those responsible for the future management of the debtor examination. Within twenty (2Q) days from the said notification, the
and the supervision and implementation of the Plan, their affiliation with rehabilitation receiver shall convene the creditors, either as a whole or per class,
the debtor and their remuneration; for purposes of voting on the approval of the Plan. The Plan shall be deemed
rejected unless approved by all classes of creditors w hose rights are adversely
(p) address the treatment of claims arising after the confirmation of the modified or affected by the Plan. For purposes of this section, the Plan is deemed
Rehabilitation Plan; 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 votes of the creditors shall be based solely on the amount
(q) require the debtor and its counter-parties to adhere to the terms of all
of their respective claims based on the registry of claims submitted by the
contracts that the debtor has chosen to confirm;
rehabilitation receiver pursuant to Section 44 hereof.
(r) arrange for the payment of all outstanding administrative expenses as
Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm
a condition to the Plan's approval unless such condition has been waived
the Rehabilitation Plan if all of the following circumstances are present:
in writing by the creditors concerned;
(a)The Rehabilitation Plan complies with the requirements specified in
(s) arrange for the payment" of all outstanding taxes and assessments, or
this Act.
an adjusted amount pursuant to a compromise settlement with the BlR
Or other applicable tax authorities;
(b) The rehabilitation receiver recommends the confirmation of the
Rehabilitation Plan;
(t) include a certified copy of a certificate of tax clearance or evidence
of a compromise settlement with the BIR;
(c) The shareholders, owners or partners of the juridical debtor lose at
least their controlling interest as a result of the Rehabilitation Plan; and
(u) include a valid and binding r(,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 (d) The Rehabilitation Plan would likely provide the objecting class of
debtor; creditors with compensation which has a net present value greater than
that which they would have received if the debtor were under
liquidation.
(v) state the compensation and status, if any, of the rehabilitation
receiver after the approval of the Plan; and
Section 65.Submission of Rehabilitation Plan to the Court.  - 1fthe Rehabilitation
Plan is approved, the rehabilitation receiver shall submit the same to the court for
(w) contain provisions for conciliation and/or mediation as a
confirmation. Within five (5) days from receipt of the Rehabilitation Plan, the
prerequisite to court assistance or intervention in the event of any
court shall notify the creditors that the Rehabilitation Plan has been submitted for
disagreement in the interpretation or implementation of the
confirmation, that any creditor may obtain copies of the Rehabilitation Plan and
Rehabilitation Plan.
that any creditor may file an objection thereto.
Section 63.Consultation with Debtor and Creditors.  – if the court gives due
Section 66.Filing of Objections to Rehabilitation Plan. – A creditor may file an
course to the petition, the rehabilitation receiver shall confer with the debtor and
objection to the Rehabilitation Plan within twenty (20) days from receipt of
notice from the court that the Rehabilitation Plan has been submitted for
confirmation. Objections to a Rehabilitation Plan shall be limited to the creditors, whether or not such persons have participated in the
following: proceedings or opposed the Rehabilitation Plan or whether or not their
claims have been scheduled;
(a) The creditors' support was induced by fraud;
(b) The debtor shall comply with the provisions of the Rehabilitation
(b)The documents or data relied upon in the Rehabilitation Plan are Plan and shall take all actions necessary to carry out the Plan;
materially false or misleading; or
(c) Payments shall be made to the creditors in accordance with the
(c)The Rehabilitation Plan is in fact not supported by the voting provisions of the Rehabilitation Plan;
creditors.
(d) Contracts and other arrangements between the debtor and its
Section 67.Hearing on the Objections.  - If objections have been submitted creditors shall be interpreted as continuing to apply to the extent that
during the relevant period, the court shall issue an order setting the time and date they do not conflict with the provisions of the Rehabilitation Plan;
for the hearing or hearings on the objections.
(e) Any compromises on amounts or rescheduling of timing of payments
If the court finds merit in the objection, it shall order the rehabilitation receiver by the debtor shall be binding on creditors regardless of whether or not
or other party to cure the defect, whenever feasible. If the court determines that the Plan is successfully implement; and
the debtor acted in bad faith, or that it is not feasible to cure the defect, the court
shall convert the proceedings into one for the liquidation of the debtor under (f) Claims arising after approval of the Plan that are otherwise not
Chapter V of this Act. treated by the Plan are not subject to any Suspension Order.

Section 68.Confirmation of the Rehabilitation Plan.  – If no objections are filed The Order confirming the Plan shall comply with Rules 36 of the Rules of
within the relevant period or, if objections are filed, the court finds them lacking Court: Provided, however, That the court may maintain jurisdiction over the case
in merit, or determines that the basis for the objection has been cured, or in order to resolve claims against the debtor that remain contested and
determines that the debtor has complied with an order to cure the objection, the allegations that the debtor has breached the Plan.
court shall issue an order confirming the Rehabilitation Plan.
Section 70. Liability of General Partners of a Partnership for Unpaid Balances
The court may confirm the Rehabilitation Plan notwithstanding unresolved Under an Approved Plan. - The approval of the Plan shall not affect the rights of
disputes over claims if the Rehabilitation Plan has made adequate provisions for creditors to pursue actions against the general partners of a partnership to the
paying such claims. extent they are liable under relevant legislation for the debts thereof.

For the avoidance of doubt, the provisions of other laws to the contrary Section 71. Treatment of Amounts of Indebtedness or Obligations Forgiven or
notwithstanding, the court shall have the power to approve or implement the Reduced. - Amounts of any indebtedness or obligations reduced or forgiven in
Rehabilitation Plan despite the lack of approval, or objection from the owners, connection with a Plan's approval shall not be subject to any tax in furtherance of
partners or stockholders of the insolvent debtor: Provided, That the terms thereof the purposes of this Act.
are necessary to restore the financial well-being and viability of the insolvent
debtor. Section 72. Period for Confirmation of the Rehabilitation Plan. - The court shall
have a maximum period of one (1) year from the date of the filing of the petition
Section 69.Effect of Confirmation of the Rehabilitation Plan,  - The confirmation to confirm a Rehabilitation Plan.
of the Rehabilitation Plan by the court shall result in the following:
If no Rehabilitation Plan is confirmed within the said period, the proceedings
(a) The Rehabilitation Plan and its provisions shall be binding upon the may upon motion or motu propio, be converted into one for the liquidation of the
debtor and all persons who may be affected by . it, including the debtor .
Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the (1) Issue an order directing that the breach be cured within a specified
confirmation of the Rehabilitation Plan, the rehabilitation receiver shall provide a period of time, falling which the proceedings may be converted to a
final report and accounting to the court. Unless the Rehabilitation Plan liquidation;
specifically requires and describes the role of the rehabilitation receiver after the
approval of the Rehabilitation Plan, the court shall discharge the rehabilitation (2) Issue an order converting the proceedings to a liquidation;
receiver of his duties.
(3) Allow the debtor or rehabilitation receiver to submit amendments to
(j) Termination of Proceedings the Rehabilitation Plan, the approval of which shall be governed by the
same requirements for the approval of a Rehabilitation Plan under this
Section 74. Termination of Proceedings. - The rehabilitation proceedings under subchapter;
Chapter II shall, upon motion by any stakeholder or the rehabilitation receiver be
terminated by order of the court either declaring a successful implementation of (4) Issue any other order to remedy the breach consistent with the
the Rehabilitation Plan or a failure of rehabilitation. present regulation, other applicable law and the best interests of the
creditors; or
There is failure of rehabilitation in the following cases:
(5) Enforce the applicable provisions of the Rehabilitation Plan through
(a) Dismissal of the petition by the court; a writ of execution.

(b) The debtor fails to submit a Rehabilitation Plan; Section 75. Effects of Termination. - Termination of the proceedings shall result
in the following:
(c) Under the Rehabilitation Plan submitted by the debtor, there is no
substantial likelihood that the debtor can be rehabilitated within a (a) The discharge of the rehabilitation receiver subject to his submission
reasonable period; of a final accounting; and

(d) The Rehabilitation Plan or its amendment is approved by the court (b) The lifting of the Stay Order and any other court order holding in
but in the implementation thereof, the debtor fails to perform its abeyance any action for the enforcement of a claim against the debtor.
obligations thereunder or there is a failure to realize the objectives,
targets or goals set forth therein, including the timelines and conditions Provided, however, That if the termination of proceedings is due to failure of
for the settlement of the obligations due to the creditors and other rehabilitation or dismissal of the petition for reasons other than technical
claimants; grounds, the proceedings shall be immediately converted to liquidation as
provided in Section 92 of this Act.
(e) The commission of fraud in securing the approval of the
Rehabilitation Plan or its amendment; and CHAPTER III
PRE-NEGOTIATED REHABILITATION
(f) Other analogous circumstances as may be defined by the rules of
procedure. Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with
any of its creditors, may file a verified petition with the court for the approval of
Upon a breach of, or upon a failure of the Rehabilitation Plan the court, upon a pre-negotiated Rehabilitation Plan which has been endorsed or approved by
motion by an affected party may: creditors holding at least two-thirds (2/3) of the total liabilities of the debtor,
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. The petition shall
include as a minimum:
 (a) a schedule of the debtor's debts and liabilities; (i) include a Suspension or Stay Order as described in this Act.

(b) an inventory of the debtor's assets; Section 78. Approval of the Plan. - Within ten (10) days from the date of the
second publication of the Order, the court shall approve the Rehabilitation Plan
(c) the pre-negotiated Rehabilitation Plan, including the names of at unless a creditor or other interested party submits an objection to it in accordance
least three (3) qualified nominees for rehabilitation receiver; and with the next succeeding section.

(d) a summary of disputed claims against the debtor and a report on the Section 79. Objection to the Petition or Rehabilitation Plan. - Any creditor or
provisioning of funds to account for appropriate payments should any other interested party may submit to the court a verified objection to the petition
such claims be ruled valid or their amounts adjusted. 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. The objections
Section 77. Issuance of Order. - Within five (5) working days, and after shall be limited to the following:
determination that the petition is sufficient in form and substance, the court shall
issue an Order which shall; (a) The allegations in the petition or the Rehabilitation Plan or the
attachments thereto are materially false or misleading;
(a) identify the debtor, its principal business of activity/ies and its
principal place of business; (b) The majority of any class of creditors do not in fact support the
Rehabilitation Plan;
(b) declare that the debtor is under rehabilitation;
(c) The Rehabilitation Plan fails to accurately account for a claim
(c) summarize the ground./s for the filling of the petition; against the debtor and the claim in not categorically declared as a
contested claim; or
(d) direct the publication of the Order in a newspaper of general
circulation in the Philippines once a week for at least two (2) (d) The support of the creditors, or any of them was induced by fraud.
consecutive weeks, with the first publication to be made within seven
(7) days from the time of its issuance; Copies of any objection to the petition of the Rehabilitation Plan shall be served
on the debtor, the rehabilitation receiver (if applicable), the secured creditor with
(e) direct the service by personal delivery of a copy of the petition on the largest claim and who supports the Rehabilitation Plan, and the unsecured
each creditor who is not a petitioner holding at least ten percent (10%) creditor with the largest claim and who supports the Rehabilitation Plan.
of the total liabilities of the debtor, as determined in the schedule
attached to the petition, within three (3) days; Section 80. Hearing on the Objections. - After receipt of an objection, the court
shall set the same for hearing. The date of the hearing shall be no earlier than
(f) state that copies of the petition and the Rehabilitation Plan are twenty (20) days and no later than thirty (30) days from the date of the second
available for examination and copying by any interested party; publication of the Order mentioned in Section 77 hereof. If the court finds merit
in the objection, it shall direct the debtor, when feasible to cure the detect within
a reasonable period. If the court determines that the debtor or creditors
(g) state that creditors and other interested parties opposing the petition
supporting the Rehabilitation Plan acted in bad faith, or that the objection is non-
or Rehabilitation Plan may file their objections or comments thereto
curable, the court may order the conversion of the proceedings into liquidation.
within a period of not later than twenty (20) days from the second
A finding by the court that the objection has no substantial merit, or that the
publication of the Order;
same has been cured shall be deemed an approval of the Rehabilitation Plan.
(h) appoint a rehabilitation receiver, if provided for in the Plan; and
Section 81. 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 approve the Rehabilitation Plan. If the court fails to act within the agreement will be binding on all creditors if the required majority votes
said period, the Rehabilitation Plan shall be deemed approved. prescribed in Section 84 of this Act are met.

Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have Section 86. Cram Down Effect. - A restructuring/workout agreement or
the same legal effect as confirmation of a Plan under Chapter II of this Act. Rehabilitation Plan that is approved pursuant to an informal workout framework
referred to in this chapter shall have the same legal effect as confirmation of a
CHAPTER IV Plan under Section 69 hereof. The notice of the Rehabilitation Plan or
OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS restructuring agreement or Plan shall be published once a week for at least three
OR REHABILITATION PLANS (3) consecutive weeks in a newspaper of general circulation in the Philippines.
The Rehabilitation Plan or restructuring agreement shall take effect upon the
Section 83. Out-of-Court or Informal Restructuring Agreements and lapse of fifteen (15) days from the date of the last publication of the notice
Rehabilitation Plans. - An out-of-curt or informal restructuring agreement or thereof.
Rehabilitation Plan that meets the minimum requirements prescribed in this
chapter is hereby recognized as consistent with the objectives of this Act. Section 87. Amendment or Modification. - Any amendment of an out-of-court
restructuring/workout agreement or Rehabilitation Plan must be made in
Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring accordance with the terms of the agreement and with due notice on all creditors.
Agreements and Rehabilitation Plans. - For an out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan to qualify under this Section 88. Effect of Court Action or Other Proceedings. - Any court action or
chapter, it must meet the following minimum requirements: other proceedings arising from, or relating to, the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan shall not stay its
(a) The debtor must agree to the out-of-court or informal implementation, unless the relevant party is able to secure a temporary
restructuring/workout agreement or Rehabilitation Plan; restraining order or injunctive relief from the Court of Appeals.

(b) It must be approved by creditors representing at least sixty-seven Section 89. Court Assistance. - The insolvent debtor and/or creditor may seek
(67%) of the secured obligations of the debtor; court assistance for the execution or implementation of a Rehabilitation Plan
under this Chapter, under such rules of procedure as may be promulgated by the
Supreme Court.
(c) It must be approved by creditors representing at least seventy-five
percent (75%) of the unsecured obligations of the debtor; and
CHAPTER V
LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS
(d) It must be approved by creditors holding at least eighty-five percent
(85%) of the total liabilities, secured and unsecured, of the debtor.
Section 90. Voluntary Liquidation. - An insolvent debtor may apply for
liquidation by filing a petition for liquidation with the court. The petition shall be
Section 85. Standstill Period. - A standstill period that may be agreed upon by
verified, shall establish the insolvency of the debtor and shall contain, whether as
the parties pending negotiation and finalization of the out-of-court or informal
an attachment or as part of the body of the petition;
restructuring/workout agreement or Rehabilitation Plan contemplated herein
shall be effective and enforceable not only against the contracting parties but
also against the other creditors: Provided, That (a) such agreement is approved (a) a schedule of the debtor's debts and liabilities including a list of
by creditors representing more than fifty percent (50%) of the total liabilities of creditors with their addresses, amounts of claims and collaterals, or
the debtor; (b) notice thereof is publishing in a newspaper of general circulation securities, if any;
in the Philippines once a week for two (2) consecutive weeks; and (c) the
standstill period does not exceed one hundred twenty (120) days from the date of (b) an inventory of all its assets including receivables and claims against
effectivity. The notice must invite creditors to participate in the negotiation for third parties; and
out-of-court rehabilitation or restructuring agreement and notify them that said
 (c) the names of at least three (3) nominees to the position of liquidator. (1) directing the publication of the petition or motion in a newspaper of
general circulation once a week for two (2) consecutive weeks; and
At any time during the pendency of court-supervised or pre-negotiated
rehabilitation proceedings, the debtor may also initiate liquidation proceedings (2) directing the debtor and all creditors who are not the petitioners to
by filing a motion in the same court where the rehabilitation proceedings are file their comment on the petition or motion within fifteen (15) days
pending to convert the rehabilitation proceedings into liquidation proceedings. from the date of last publication.
The motion shall be verified, shall contain or set forth the same matters required
in the preceding paragraph, and state that the debtor is seeking immediate If, after considering the comments filed, the court determines that the petition or
dissolution and termination of its corporate existence. motion is meritorious, it shall issue the Liquidation Order mentioned in Section
112 hereof.
If the petition or the motion, as the case may be, is sufficient in form and
substance, the court shall issue a Liquidation Order mentioned in Section 112 Section 92. Conversion by the Court into Liquidation Proceedings. - During the
hereof. pendency of court-supervised or pre-negotiated rehabilitation proceedings, the
court may order the conversion of rehabilitation proceedings to liquidation
Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate proceedings pursuant to (a) Section 25(c) of this Act; or (b) Section 72 of this
of whose claims is at least either One million pesos (Php1,000,000,00) or at least Act; or (c) Section 75 of this Act; or (d) Section 90 of this Act; or at any other
twenty-five percent (25%0 of the subscribed capital stock or partner's time upon the recommendation of the rehabilitation receiver that the
contributions of the debtor, whichever is higher, may apply for and seek the rehabilitation of the debtor is not feasible. Thereupon, the court shall issue the
liquidation of an insolvent debtor by filing a petition for liquidation of the debtor Liquidation Order mentioned in Section 112 hereof.
with the court. The petition shall show that:
Section 93. Powers of the Securities and Exchange Commission (SEC). - The
(a) there is no genuine issue of fact or law on the claims/s of the provisions of this chapter shall not affect the regulatory powers of the SEC under
petitioner/s, and that the due and demandable payments thereon have not Section 6 of Presidential Decree No. 902-A, as amended, with respect to any
been made for at least one hundred eighty (180) days or that the debtor dissolution and liquidation proceeding initiated and heard before it.
has failed generally to meet its liabilities as they fall due; and
CHAPTER VI
(b) there is no substantial likelihood that the debtor may be rehabilitated. INSOLVENCY OF INDIVIDUAL DEBTORS

At any time during the pendency of or after a rehabilitation court-supervised or (A) Suspension of Payments.
pre-negotiated rehabilitation proceedings, three (3) or more creditors whose
claims is at least either One million pesos (Php1,000,000.00) or at least twenty- Section 94. Petition. - An individual debtor who, possessing sufficient property
five percent (25%) of the subscribed capital or partner's contributions of the to cover all his debts but foreseeing the impossibility of meeting them when they
debtor, whichever is higher, may also initiate liquidation proceedings by filing a respectively fall due, may file a verified petition that he be declared in the state
motion in the same court where the rehabilitation proceedings are pending to of suspension of payments by the court of the province or city in which he has
convert the rehabilitation proceedings into liquidation proceedings. The motion resides for six (6) months prior to the filing of his petition. He shall attach to his
shall be verified, shall contain or set forth the same matters required in the petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of
preceding paragraph, and state that the movants are seeking the immediate assess; and (c) a proposed agreement with his creditors.
liquidation of the debtor.
Section 95. Action on the Petition. - If the court finds the petition sufficient in
If the petition or motion is sufficient in form and substance, the court shall issue form and substance, it shall, within five (5) working days from the filing of the
an Order: petition, issue an Order:
 (a) calling a meeting of all the creditors named in the schedule of debts (a) those creditors having claims for personal labor, maintenance,
and liabilities at such time not less than fifteen (15) days nor more than expense of last illness and funeral of the wife or children of the debtor
forty (40) days from the date of such Order and designating the date, incurred in the sixty (60) days immediately prior to the filing of the
time and place of the meeting; petition; and

(b) directing such creditors to prepare and present written evidence of (b) secured creditors.
their claims before the scheduled creditors' meeting;
Section 97. Creditors' Meeting. - The presence of creditors holding claims
(c) directing the publication of the said order in a newspaper of general amounting to at least three-fifths (3/5) of the liabilities shall be necessary for
circulation published in the province or city in which the petition is filed holding a meeting. The commissioner appointed by the court shall preside over
once a week for two (2) consecutive weeks, with the first publication to the meeting and the clerk of court shall act as the secretary thereof, subject to the
be made within seven (7) days from the time of the issuance of the following rules:
Order;
(a) The clerk shall record the creditors present and amount of their
(d) directing the clerk of court to cause the sending of a copy of the respective claims;
Order by registered mail, postage prepaid, to all creditors named in the
schedule of debts and liabilities; (b) The commissioner shall examine the written evidence of the claims.
If the creditors present hold at least three-fifths (3/5) of the liabilities of
(e) forbidding the individual debtor from selling, transferring, the individual debtor, the commissioner shall declare the meeting open
encumbering or disposing in any manner of his property, except those for business;
used in the ordinary operations of commerce or of industry in which the
petitioning individual debtor is engaged so long as the proceedings (c) The creditors and individual debtor shall discuss the propositions in
relative to the suspension of payments are pending; the proposed agreement and put them to a vote;

(f) prohibiting the individual debtor from making any payment outside (d) To form a majority, it is necessary:
of the necessary or legitimate expenses of his business or industry, so
long as the proceedings relative to the suspension of payments are (1) that two-thirds (2/3) of the creditors voting unite upon the
pending; and same proposition; and

(g) appointing a commissioner to preside over the creditors' meeting. (2) that the claims represented by said majority vote amount to
at least three-fifths (3/5) of the total liabilities of the debtor
Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the mentioned in the petition; and
court may issue an order suspending any pending execution against the
individual debtor. Provide, That properties held as security by secured creditors (e) After the result of the voting has been announced, all protests made
shall not be the subject of such suspension order. The suspension order shall against the majority vote shall be drawn up, and the commissioner and
lapse when three (3) months shall have passed without the proposed agreement the individual debtor together with all creditors taking part in the voting
being accepted by the creditors or as soon as such agreement is denied. shall sign the affirmed propositions.

No creditor shall sue or institute proceedings to collect his claim from the debtor No creditor who incurred his credit within ninety (90) days prior to the filing of
from the time of the filing of the petition for suspension of payments and for as the petition shall be entitled to vote.
long as proceedings remain pending except:
Section 98. Persons Who May Refrain From Voting. - Creditors who are in the schedule of debts and liabilities submitted by the individual debtor and
unaffected by the Suspension Order may refrain from attending the meeting and who were properly summoned, but not upon: (a) those creditors having claims
from voting therein. Such persons shall not be bound by any agreement for personal labor, maintenance, expenses of last illness and funeral of the wife
determined upon at such meeting, but if they should join in the voting they shall or children of the debtor incurred in the sixty (60) days immediately prior to the
be bound in the same manner as are the other creditors. filing of the petition; and (b) secured creditors who failed to attend the meeting
or refrained from voting therein.
Section 99. Rejection of the Proposed Agreement. - The proposed agreement
shall be deemed rejected if the number of creditors required for holding a Section 102. Failure of Individual Debtor to Perform Agreement. - If the
meeting do not attend thereat, or if the two (2) majorities mentioned in Section individual debtor fails, wholly or in part, to perform the agreement decided upon
97 hereof are not in favor thereof. In such instances, the proceeding shall be at the meeting of the creditors, all the rights which the creditors had against the
terminated without recourse and the parties concerned shall be at liberty to individual debtor before the agreement shall revest in them. In such case the
enforce the rights which may correspond to them. individual debtor may be made subject to the insolvency proceedings in the
manner established by this Act.
Section 100. Objections. - If the proposal of the individual debtor, or any
amendment thereof made during the creditors' meeting, is approved by the (B) Voluntary Liquidation.
majority of creditors in accordance with Section 97 hereof, any creditor who
attended the meeting and who dissented from and protested against the vote of Section 103. Application. - An individual debtor whose properties are not
the majority may file an objection with the court within ten (10) days from the sufficient to cover his liabilities, and owing debts exceeding Five hundred
date of the last creditors' meeting. The causes for which objection may be made thousand pesos (Php500,000.00), may apply to be discharged from his debts and
to the decision made by the majority during the meeting shall be: (a) defects in liabilities by filing a verified petition with the court of the province or city in
the call for the meeting, in the holding thereof and in the deliberations had which he has resided for six (6) months prior to the filing of such petition. He
thereat which prejudice the rights of the creditors; (b) fraudulent connivance shall attach to his petition a schedule of debts and liabilities and an inventory of
between one or more creditors and the individual debtor to vote in favor of the assets. The filing of such petition shall be an act of insolvency.
proposed agreement; or (c) fraudulent conveyance of claims for the purpose of
obtaining a majority. The court shall hear and pass upon such objection as soon Section 104. Liquidation Order. - If the court finds the petition sufficient in form
as possible and in a summary manner. and substance it shall, within five (5) working days issue the Liquidation Order
mentioned in Section 112 hereof.
In case the decision of the majority of creditors to approve the individual debtor's
proposal or any amendment thereof made during the creditors' meeting is (C) In voluntary Liquidation.
annulled by the court, the court shall declare the proceedings terminated and the
creditors shall be at liberty to exercise the rights which may correspond to them.
Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors
with a claim of, or with claims aggregating at least Five hundred thousand pesos
Section 101. Effects of Approval of Proposed Agreement. - If the decision of the (Php500, 000.00) may file a verified petition for liquidation with the court of the
majority of the creditors to approve the proposed agreement or any amendment province or city in which the individual debtor resides.
thereof made during the creditors' meeting is uphold by the court, or when no
opposition or objection to said decision has been presented, the court shall order
The following shall be considered acts of insolvency, and the petition for
that the agreement be carried out and all parties bound thereby to comply with its
liquidation shall set forth or allege at least one of such acts:
terms.
(a) That such person is about to depart or has departed from the
The court may also issue all orders which may be necessary or proper to enforce
Republic of the Philippines, with intent to defraud his creditors;
the agreement on motion of any affected party. The Order confirming the
approval of the proposed agreement or any amendment thereof made during the
creditors' meeting shall be binding upon all creditors whose claims are included (b) That being absent from the Republic of the Philippines, with intent
to defraud his creditors, he remains absent;
(c) That he conceals himself to avoid the service of legal process for the The petitioning creditor/s shall post a bond in such as the court shall direct,
purpose of hindering or delaying the liquidation or of defrauding his conditioned that if the petition for liquidation is dismissed by the court, or
creditors; withdrawn by the petitioner, or if the debtor shall not be declared an insolvent
the petitioners will pay to the debtor all costs, expenses, damages occasioned by
(d) That he conceals, or is removing, any of his property to avoid its the proceedings and attorney's fees.
being attached or taken on legal process;
Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of
(e) That he has suffered his property to remain under attachment or legal such creditors' petition, the court shall issue an Order requiring the individual
process for three (3) days for the purpose of hindering or delaying the debtor to show cause, at a time and place to be fixed by the said court, why he
liquidation or of defrauding his creditors; should not be adjudged an insolvent. Upon good cause shown, the court may
issue an Order forbidding the individual debtor from making payments of any of
(f) That he has confessed or offered to allow judgment in favor of any his debts, and transferring any property belonging to him. However, nothing
creditor or claimant for the purpose of hindering or delaying the contained herein shall affect or impair the rights of a secured creditor to enforce
liquidation or of defrauding any creditors or claimant; his lien in accordance with its terms.

(g) That he has willfully suffered judgment to be taken against him by Section 107. Default. - If the individual debtor shall default or if, after trial, the
default for the purpose of hindering or delaying the liquidation or of issues are found in favor of the petitioning creditors the court shall issue the
defrauding his creditors; Liquidation Order mentioned in Section 112 hereof.

(h) That he has suffered or procured his property to be taken on legal Section 108. Absent Individual Debtor. - In all cases where the individual debtor
process with intent to give a preference to one or more of his creditors resides out of the Republic of the Philippines; or has departed therefrom; or
and thereby hinder or delay the liquidation or defraud any one of his cannot, after due diligence, be found therein; or conceals himself to avoid service
creditors; of the Order to show cause, or any other preliminary process or orders in the
matter, then the petitioning creditors, upon submitting the affidavits requisite to
procedure an Order of publication, and presenting a bond in double the amount
(i) That he has made any assignment, gift, sale, conveyance or transfer
of the aggregate sum of their claims against the individual debtor, shall be
of his estate, property, rights or credits with intent to hinder or delay the
entitled to an Order of the court directing the sheriff of the province or city in
liquidation or defraud his creditors;
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
(j) That he has, in contemplation of insolvency, made any payment, gift, creditors and the costs of the proceedings. Upon receiving such Order of the
grant, sale, conveyance or transfer of his estate, property, rights or court to take into custody of the property of the individual debtor, it shall be the
credits; duty of the sheriff to take possession of the property and effects of the individual
debtor, not exempt from execution, to an extent sufficient to cover the amount
(k) That being a merchant or tradesman, he has generally defaulted in provided for and to prepare within three (3) days from the time of taking such
the payment of his current obligations for a period of thirty (30) days; possession, a complete inventory of all the property so taken, and to return it to
the court as soon as completed. The time for taking the inventory and making
(l) That for a period of thirty (30) days, he has failed, after demand, to return thereof may be extended for good cause shown to the court. The sheriff
pay any moneys deposited with him or received by him in a fiduciary; shall also prepare a schedule of the names and residences of the creditors, and
and the amount due each, from the books of the debtor, or from such other papers or
data of the individual debtor available as may come to his possession, and shall
(m) That an execution having been issued against him on final judgment file such schedule or list of creditors and inventory with the clerk of court.
for money, he shall have been found to be without sufficient property
subject to execution to satisfy the judgment. Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds;
Exemptions to Sureties. - In all cases where property is taken into custody by the
sheriff, if it does not embrace all the property and effects of the debtor not Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor
exempt from execution, any other creditor or creditors of the individual debtor, shall include both individual debtor as defined in Section 4(o) and debtor as
upon giving bond to be approved by the court in double the amount of their defined in Section 4(k) of this Act.
claims, singly or jointly, shall be entitled to similar orders and to like action, by
the sheriff; until all claims be provided for, if there be sufficient property or (A) The Liquidation Order.
effects. All property taken into custody by the sheriff by virtue of the giving of
any such bonds shall be held by him for the benefit of all creditors of the Section 112. Liquidation Order. - The Liquidation Order shall:
individual debtor whose claims shall be duly proved as provided in this Act. The
bonds provided for in this section and the preceding section to procure the order
(a) declare the debtor insolvent;
for custody of the property and effects of the individual debtor shall be
conditioned that if, upon final hearing of the petition in insolvency, the court
shall find in favor of the petitioners, such bonds and all of them shall be void; if (b) order the liquidation of the debtor and, in the case of a juridical
the decision be in favor of the individual debtor, the proceedings shall be debtor, declare it as dissolved;
dismissed, and the individual debtor, his heirs, administrators, executors or
assigns shall be entitled to recover such sum of money as shall be sufficient to (c) order the sheriff to take possession and control of all the property of
cover the damages sustained by him, not to exceed the amount of the respective the debtor, except those that may be exempt from execution;
bonds. Such damages shall be fixed and allowed by the court. If either the
petitioners or the debtor shall appeal from the decision of the court, upon final (d) order the publication of the petition or motion in a newspaper of
hearing of the petition, the appellant shall be required to give bond to the general circulation once a week for two (2) consecutive weeks;
successful party in a sum double the amount of the value of the property in
controversy, and for the costs of the proceedings. (e) direct payments of any claims and conveyance of any property due
the debtor to the liquidator;
Any person interested in the estate may take exception to the sufficiency of the
sureties on such bond or bonds. When excepted to the petitioner's sureties, upon (f) prohibit payments by the debtor and the transfer of any property by
notice to the person excepting of not less than two (2) nor more than five (5) the debtor;
days, must justify as to their sufficiency; and upon failure to justify, or of others
in their place fail to justify at the time and place appointed the judge shall issue (g) direct all creditors to file their claims with the liquidator within the
an Order vacating the order to take the property of the individual debtor into the period set by the rules of procedure;
custody of the sheriff, or denying the appeal, as the case may be.
(h) authorize the payment of administrative expenses as they become
Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds due;
are presented to the court or a judge thereof, asking for and obtaining an Order of
publication and an Order for the custody of the property of the individual debtor (i) state that the debtor and creditors who are not petitioner/s may
and thereafter the petitioners shall make it appear satisfactorily to the court or a submit the names of other nominees to the position of liquidator; and
judge thereof that the interest of the parties to the proceedings will be subserved
by a sale thereof, the court may order such property to be sold in the same
manner as property is sold under execution, the proceeds to de deposited in the (j) set the case for hearing for the election and appointment of the
court to abide by the result of the proceedings. liquidator, which date shall not be less than thirty (30) days nor more
than forty-five (45) days from the date of the last publication.
CHAPTER VII
PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF Section 113. Effects of the Liquidation Order. - Upon the issuance of the
INDIVIDUAL AND JURIDICAL DEBTORS Liquidation Order:
 (a) the juridical debtor shall be deemed dissolved and its corporate or waive the debtor's right of redemption upon receiving the excess from
juridical existence terminated; the creditor;

(b) legal title to and control of all the assets of the debtor, except those (2) the liquidator may sell the property and satisfy the secured creditor's
that may be exempt from execution, shall be deemed vested in the entire claim from the proceeds of the sale; or
liquidator or, pending his election or appointment, with the court;
(3) the secure creditor may enforce the lien or foreclose on the property
(c) all contracts of the debtor shall be deemed terminated and/or pursuant to applicable laws.
breached, unless the liquidator, within ninety (90) days from the date of
his assumption of office, declares otherwise and the contracting party (B) The Liquidator.
agrees;
Section 115. Election of Liquidator. - Only creditors who have filed their claims
(d) no separate action for the collection of an unsecured claim shall be within the period set by the court, and whose claims are not barred by the statute
allowed. Such actions already pending will be transferred to the of limitations, will be allowed to vote in the election of the liquidator. A secured
Liquidator for him to accept and settle or contest. If the liquidator creditor will not be allowed to vote, unless: (a) he waives his security or lien; or
contests or disputes the claim, the court shall allow, hear and resolve (b) has the value of the property subject of his security or lien fixed by
such contest except when the case is already on appeal. In such a case, agreement with the liquidator, and is admitted for the balance of his claim.
the suit may proceed to judgment, and any final and executor judgment
therein for a claim against the debtor shall be filed and allowed in court; The creditors entitled to vote will elect the liquidator in open court. The nominee
and receiving the highest number of votes cast in terms of amount of claims, ad who
is qualified pursuant to Section 118 hereof, shall be appointed as the liquidator.
(e) no foreclosure proceeding shall be allowed for a period of one
hundred eighty (180) days. Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator
if:
Section 114. Rights of Secured Creditors. - The Liquidation Order shall not
affect the right of a secured creditor to enforce his lien in accordance with the (a) on the date set for the election of the liquidator, the creditors do not
applicable contract or law. A secured creditor may: attend;

(a) waive his right under the security or lien, prove his claim in the (b) the creditors who attend, fail or refuse to elect a liquidator;
liquidation proceedings and share in the distribution of the assets of the
debtor; or
(c) after being elected, the liquidator fails to qualify; or
(b) maintain his rights under the security or lien:
(d) a vacancy occurs for any reason whatsoever, In any of the cases
provided herein, the court may instead set another hearing of the
If the secured creditor maintains his rights under the security or lien: election of the liquidator.

(1) the value of the property may be fixed in a manner agreed upon by Provided further, That nothing in this section shall be construed to prevent a
the creditor and the liquidator. When the value of the property is less rehabilitation receiver, who was administering the debtor prior to the
than the claim it secures, the liquidator may convey the property to the commencement of the liquidation, from being appointed as a liquidator.
secured creditor and the latter will be admitted in the liquidation
proceedings as a creditor for the balance. If its value exceeds the claim
Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his
secured, the liquidator may convey the property to the creditor and
powers, duties and responsibilities, the liquidator shall take an oath and file a
bond, In such amount to be fixed by the court, conditioned upon the proper and of the debtor's assets with a view towards maximizing the proceedings
faithful discharge of his powers, duties and responsibilities. therefrom, to pay creditors and stockholders, and to terminate the debtor's legal
existence. Other duties of the liquidator in accordance with this section may be
Section 118. Qualifications of the Liquidator. - The liquidator shall have the established by procedural rules.
qualifications enumerated in Section 29 hereof. He may be removed at any time
by the court for cause, either motu propio or upon motion of any creditor entitled A liquidator shall be subject to removal pursuant to procedures for removing a
to vote for the election of the liquidator. rehabilitation receiver.

Section 119. Powers, Duties and Responsibilities of the Liquidator. - The Section 120. Compensation of the Liquidator. - The liquidator and the persons
liquidator shall be deemed an officer of the court with the principal duly of and entities engaged or employed by him to assist in the discharge of his powers
preserving and maximizing the value and recovering the assets of the debtor, and duties shall be entitled to such reasonable compensation as may determined
with the end of liquidating them and discharging to the extent possible all the by the liquidation court, which shall not exceed the maximum amount as may be
claims against the debtor. The powers, duties and responsibilities of the prescribed by the Supreme Court.
liquidator shall include, but not limited to:
Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a
(a) to sue and recover all the assets, debts and claims, belonging or due record of all moneys received and all disbursements mad by him or under his
to the debtor; authority as liquidator. He shall render a quarterly report thereof to the court ,
which report shall be made available to all interested parties. The liquidator shall
(b) to take possession of all the property of the debtor except property also submit such reports as may be required by the court from time to time as
exempt by law from execution; well as a final report at the end of the liquidation proceedings.

(c) to sell, with the approval of the court, any property of the debtor Section 122. Discharge of Liquidator. - In preparation for the final settlement of
which has come into his possession or control; all the claims against the debtor , the liquidator will notify all the creditors, either
by publication in a newspaper of general circulation or such other mode as the
(d) to redeem all mortgages and pledges, and so satisfy any judgement court may direct or allow, that will apply with the court for the settlement of his
which may be an encumbrance on any property sold by him; account and his discharge from liability as liquidator. The liquidator will file a
final accounting with the court, with proof of notice to all creditors. The
accounting will be set for hearing. If the court finds the same in order, the court
(e) to settle all accounts between the debtor and his creditors, subject to
will discharge the liquidator.
the approval of the court;
(C) Determination of Claims
(f) to recover any property or its value, fraudulently conveyed by the
debtor;
Section 123. Registry of Claims. - Within twenty (20) days from his assumption
into office the liquidator shall prepare a preliminary registry of claims of secured
(g) to recommend to the court the creation of a creditors' committee
and unsecured creditors. Secured creditors who have waived their security or
which will assist him in the discharge of the functions and which shall
lien, or have fixed the value of the property subject of their security or lien by
have powers as the court deems just, reasonable and necessary; and
agreement with the liquidator and is admitted as a creditor for the balance , shall
be considered as unsecured creditors. The liquidator shall make the registry
(h) upon approval of the court, to engage such professional as may be available for public inspection and provide publication notice to creditors,
necessary and reasonable to assist him in the discharge of his duties. individual debtors owner/s of the sole proprietorship-debtor, the partners of the
partnership-debtor and shareholders or members of the corporation-debtor, on
In addition to the rights and duties of a rehabilitation receiver, the liquidator, where and when they may inspect it. All claims must be duly proven before
shall have the right and duty to take all reasonable steps to manage and dispose being paid.
Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and to the creditor instituting the proceeding, and the surplus, if any, belongs
creditor of each other one debt shall be set off against the other, and only the to the estate.
balance, if any shall be allowed in the liquidation proceedings.
(d) Where, before an orders is made under subsection (a) hereof, the
Section 125. - Opposition or Challenge to Claims. - Within thirty (30 ) days liquidator signifies to the court his readiness to the institute the
from the expiration of the period for filing of applications for recognition of proceeding for the benefit of the creditors, the order shall fix the time
claims, creditors, individual debtors, owner/s of the sole proprietorship-debtor, within which he shall do so and, in that case the benefit derived from the
partners of the partnership-debtor and shareholders or members of the proceedings, if instituted within the time limits so fixed, belongs to the
corporation -debtor and other interested parties may submit a challenge to claim estate.
or claims to the court, serving a certified copy on the liquidator and the creditor
holding the challenged claim. Upon the expiration of the (30) day period, the (E) The Liquidation Plan.
rehabilitation receiver shall submit to the court the registry of claims containing
the undisputed claims that have not been subject to challenge. Such claims shall Section 129. The Liquidation Plan. - Within three (3) months from his
become final upon the filling of the register and may be subsequently set aside assumption into office, the Liquidator shall submit a Liquidation Plan to the
only on grounds or fraud, accident, mistake or inexcusable neglect. court. The Liquidation Plan shall, as a minimum enumerate all the assets of the
debtor and a schedule of liquidation of the assets and payment of the claims.
Section 126. Submission of Disputed to the Court. - The liquidator shall resolve
disputed claims and submit his findings thereon to the court for final approval. Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court,
The liquidator may disallow claims. upon petition and after hearing, to exempt and set apart, for the use and benefit
of the said insolvent, such real and personal property as is by law exempt from
(D) Avoidance Proceedings. execution, and also a homestead; but no such petition shall be heard as aforesaid
until it is first proved that notice of the hearing of the application therefor has
Section 127. Rescission or Nullity of Certain Transactions. - Any transaction been duly given by the clerk, by causing such notice to be posted it at least three
occurring prior to the issuance of the Liquidation Order or, in case of the (3) public places in the province or city at least ten (10) days prior to the time of
conversion of the rehabilitation proceedings prior to the commencement date, such hearing, which notice shall set forth the name of the said insolvent debtor,
entered into by the debtor or involving its assets, may be rescinded or declared and the time and place appointed for the hearing of such application, and shall
null and void on the ground that the same was executed with intent to defraud a briefly indicate the homestead sought to be exempted or the property sought to
creditor or creditors or which constitute undue preference of creditors. The be set aside; and the decree must show that such proof was made to the
presumptions set forth in Section 58 hereof shall apply. satisfaction of the court, and shall be conclusive evidence of that fact.

Section 128. Actions for Rescission or Nullity. - (a) The liquidator or, with his Section 131. Sale of Assets in Liquidation. - The liquidator may sell the
conformity, a creditor may initiate and prosecute any action to rescind, or declare unencumbered assets of the debtor and convert the same into money. The sale
null and void any transaction described in the immediately preceding paragraph. shall be made at public auction. However, a private sale may be allowed with the
If the liquidator does not consent to the filling or prosecution of such action, any approval of the court if; (a) the goods to be sold are of a perishable nature, or are
creditor may seek leave of the court to commence said action. liable to quickly deteriorate in value, or are disproportionately expensive to keep
or maintain; or (b) the private sale is for the best interest of the debtor and his
(b) if leave of court is granted under subsection (a) hereof, the liquidator creditors.
shall assign and transfer to the creditor all rights, title and interest in the
chose in action or subject matter of the proceeding, including any With the approval of the court, unencumbered property of the debtor may also be
document in support thereof. conveyed to a creditor in satisfaction of his claim or part thereof.

(c) Any benefit derived from a proceeding taken pursuant to subsection

(a) hereof, to the extent of his claim and the costs, belongs exclusively
Section 132. manner of Implementing the Liquidation Plan. - The Liquidator Section 137. Provision of Assistance. - The court shall issue orders, adjudicate
shall implement the Liquidation Plan as approved by the court. Payments shall claims and provide other relief necessary to assist in the liquidation of a financial
be made to the creditors only in accordance with the provisions of the Plan. under rehabilitation receivership established by a state-funded or state-mandated
insurance system.
Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and
its Implementation shall ensure that the concurrence and preference of credits as Section 138. Application of Relevant Legislation. - The liquidation of bank,
enumerated in the Civil Code of the Philippines and other relevant laws shall be financial institutions, insurance companies and pre-need companies shall be
observed, unless a preferred creditor voluntarily waives his preferred right. For determined by relevant legislation. The provisions in this Act shall apply in a
purposes of this chapter, credits for services rendered by employees or laborers suppletory manner.
to the debtor shall enjoy first preference under Article 2244 of the Civil Code,
unless the claims constitute legal liens under Article 2241 and 2242 thereof. (B) Cross-Border Insolvency Proceedings.

Section 134. Order Removing the Debtor from the List of Registered Entitles at Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. -
the Securities and Exchange Commission. - Upon determining that the Subject to the provision of Section 136 hereof and the rules of procedure that
liquidation has been completed according to this Act and applicable law, the may be adopted by the Supreme Court, the Model Law on Cross-Border
court shall issue an Order approving the report and ordering the SEC to remove Insolvency of the United Nations Center for International Trade and
the debtor from the registry of legal entities. Development is hereby adopted as part of this Act.

Section 135. Termination of Proceedings. - Upon receipt of evidence showing Section 140. Initiation of Proceedings. - The court shall set a hearing in
that the debtor has been removed from the registry of legal entities at the SEC. connection with an insolvency or rehabilitation proceeding taking place in a
The court shall issue an Order terminating the proceedings. foreign jurisdiction, upon the submission of a petition by the representative of
the foreign entity that is the subject of the foreign proceeding.
(F) Liquidation of a Securities Market Participant.
Section 141. Provision of Relief. - The court may issue orders:
Section 136. Liquidation of a Securities Market Participant. - The foregoing
provisions of this chapter shall be without prejudice to the power of a regulatory (a) suspending any action to enforce claims against the entity or
agency or self- regulatory organization to liquidate trade-related claims of clients otherwise seize or foreclose on property of the foreign entity located in
or customers of a securities market participant which, for purposes of investor the Philippines;
protection, are hereby deemed to have absolute priority over other claims of
whatever nature or kind insofar as trade-related assets are concerned. (b) requiring the surrender property of the foreign entity to the foreign
representative; or
For purposes of this section, trade -related assets include cash, securities, trading
right and other owned and used by the securities market participant in the (c) providing other necessary relief.
ordinary course of this business.
Section 142. Factors in Granting Relief. - In determining whether to grant relief
CHAPTER VIII under this subchapter, the court shall consider;
PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR
REHABILITAION PROCEEDINGS
(a) the protection of creditors in the Philippines and the inconvenience
in pursuing their claim in a foreign proceeding;
(A) Banks and Other Financial Institutions Under Rehabilitation
Receivership Pursuant to a State-funded or State-mandated Insurance
(b) the just treatment of all creditors through resort to a unified
System.
insolvency or rehabilitation proceedings;
 (c) whether other jurisdictions have given recognition to the foreign the debtor, make any payment sale, assignment, transfer or conveyance
proceeding; of any property belongings to the debtor

(d) the extent that the foreign proceeding recognizes the rights of (b) if he shall, having knowledge belief of any person having proved a
creditors and other interested parties in a manner substantially in false or fictitious claim against the debtor, fail to disclose the same to
accordance with the manner prescribed in this Act; and the rehabilitation receiver of liquidator within one (1) month after
coming to said knowledge or belief; or if he shall attempt to account for
(e) the extent that the foreign proceeding has recognized and shown any of the debtors property by fictitious losses or expense; or
deference to proceedings under this Act and previous legislation.
(c) if he shall knowingly violate a prohibition or knowingly fail to
CHAPTER IX undertake an obligation established by this Act.
FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS Section 146. Application to Pending Insolvency, Suspension of Payments and
Rehabilitation Cases. - This Act shall govern all petitions filed after it has taken
Section 143. Funds for Rehabilitation of Government -owned and Controlled effect. All further proceedings in insolvency, suspension of payments and
Corporations. - Public funds for the rehabilitation of government-owned and rehabilitation cases then pending, except to the extent that in opinion of the court
controlled corporations shall be released only pursuant to an appropriation by their application would not be feasible or would work injustice, in which event
Congress and shall be supported by funds actually available as certified by the the procedures set forth in prior laws and regulations shall apply.
National Treasurer.
Section 147. Application to Pending Contracts. - This Act shall apply to all
The Department of Finance, in collaboration with the Department of Budget and contracts of the debtor regardless of the date of perfection.
Management, shall promulgate the rules for the use and release of said funds.
Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As
CHAPTER X amended is hereby repealed. All other laws, orders, rules and regulations or parts
MISCELLANEOUS PROVISIOS thereof inconsistent with any provision of this Act are hereby repealed or
modified accordingly.
Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar
as they are applicable, shall likewise apply to proceedings in Chapters II and IV. Section 149. Separability Clause. - If any provision of this Act shall be held
invalid, the remainder of this Act not otherwise affected shall remain in full force
Section 145. Penalties. - An owner, partner, director, officer or other employee effect
of the debtor who commits any one of the following acts shall, upon conviction
thereof, be punished by a fine of not more than One million pesos (Php 1, Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after
000,000.00) and imprisonment for not less than three(3) months nor more than its complete publication in the Official Gazette or in at least two (2) national
five (5) years for each offense; newspaper of general circulation.

(a) if he shall, having notice of the commencement of the proceedings,

or having reason to believe that proceedings are about to be commented,
or in contemplation of the proceedings hide or conceal, or destroy or
cause to be destroyed or hidden any property belonging to the debtor or
if he shall hide, destroy, after mutilate or falsify, or cause to be hidden,
destroyed, altered, mutilated or falsified, any book, deed, document or
writing relating thereto; if he shall, with intent to defraud the creditors of