Be It Enacted by The Senate and House of Representatives of The Philippine Congress Assembled
Be It Enacted by The Senate and House of Representatives of The Philippine Congress Assembled
10142
CHAPTER I
GENERAL PROVISIONS
(1) incurred or arising from the filing of a petition under the provisions of
this Act;
(3) incurred in the ordinary course of business of the debtor after the
commencement date;
(4) for the payment of new obligations obtained after the commencement
date to finance the rehabilitation of the debtor;
(5) incurred for the fees of the rehabilitation receiver or liquidator and of
the professionals engaged by them; and
(6) that are otherwise authorized or mandated under this Act or such other
expenses as may be allowed by the Supreme Court in its rules.
(1) over more than one-half (1/2) of the voting rights by virtue of an
agreement with investors;
(2) to direct or govern the financial and operating policies of the enterprise
under a statute or an agreement;
(i) Date of liquidation shall refer to the date on which the court issues the
Liquidation Order.
(n) Group of debtors shall refer to and can cover only: (1) corporations that
are financially related to one another as parent corporations, subsidiaries or
affiliates; (2) partnerships that are owned more than fifty percent (50%) by
the same person; and (3) single proprietorships that 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 to the group of debtors.
Section 5. Exclusions. - The term debtor does not include banks, insurance
companies, pre-need companies, and national and local government
agencies or units.
(a) Bank shall refer to any duly licensed bank or quasi-bank that is
potentially or actually subject to conservatorship, receivership or liquidation
proceedings under the New Central Bank Act (Republic Act No. 7653) or
successor legislation;
(b) Insurance company shall refer to those companies that are potentially
or actually subject to insolvency proceedings under the Insurance Code
(Presidential Decree No. 1460) or successor legislation; and
(a) there was commingling in fact of assets and liabilities of the debtor and
the related enterprise prior to the commencement of the proceedings;
(b) the debtor and the related enterprise have common creditors and it will
be more convenient to treat them together rather than separately;
(c) the related enterprise voluntarily accedes to join the debtor as party
petitioner and to commingle its assets and liabilities with the debtor's; and
(d) The consolidation of assets and liabilities of the debtor and the related
enterprise is beneficial to all concerned and promotes the objectives of
rehabilitation.
Provided, finally, That nothing in this section shall prevent the court from
joining other entities affiliated with the debtor as parties pursuant to the
rules of procedure as may be promulgated by the Supreme Court.
The court shall determine the extent of the liability of an owner, partner,
director or officer under this section. In this connection, in case of
partnerships and corporations, the court shall consider the amount of the
shareholding or 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 involvement of such partner, director or debtor
in the actual management of the operations of the debtor.
CHAPTER II
COURT-SUPERVISED REHABILITATION
(a) Identification of the debtor, its principal activities and its addresses;
(b) Statement of the fact of and the cause of the debtor's insolvency or
inability to pay its obligations as they become due;
(e) Other information that may be required under this Act depending on the
form of relief requested;
(f) Schedule of the debtor's debts and liabilities including a list of creditors
with their addresses, amounts of claims and collaterals, or securities, if
any;
(g) An inventory of all its assets including receivables and claims against
third parties;
(i) The names of at least three (3) nominees to the position of rehabilitation
receiver; and
(j) Other documents required to be filed with the petition pursuant to this
Act and the rules of procedure as may be promulgated by the Supreme
Court.
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 when they respectively fall due, and the financial distress would likely
adversely affect the financial condition and/or operations of the other
members of the group and/or the participation of the other members of the
group is essential under the terms and conditions of the proposed
Rehabilitation Plan.
(a) identification of the debtor its principal activities and its address;
(e) the names of at least three (3) nominees to the position of rehabilitation
receiver;
(f) other information that may be required under this Act depending on the
form of relief requested; and
(g) other documents required to be filed with the petition pursuant to this
Act and the rules of procedure as may be promulgated by the Supreme
Court.
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)
working days from the filing of the petition, issue a Commencement Order.
If, within the same period, the court finds the petition deficient in form or
substance, the court may, in its discretion, give the petitioner/s a
reasonable period of time within which to amend or supplement the
petition, or to submit such documents as may be necessary or proper to
put the petition in proper order. 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 amended or supplemental
petition or the submission of such documents (magre-recommence).
(a) identify the debtor, its principal business or activity/ies and its principal
place of business;
(c) state the relief sought under this Act and any requirement or procedure
particular to the relief sought;
(d) state the legal effects of the Commencement Order, including those
mentioned in Section 17 hereof;
(g) If the petitioner is the debtor direct the service by personal delivery of a
copy of the petition on each creditor holding at least ten percent (10%) of
the total liabilities of the debtor as determined from the schedule attached
to the petition within five (5) days; if the petitioner/s is/are creditor/s, direct
the service by personal delivery of a copy of the petition on the debtor
within five (5) days;
(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
duties defined in this Act as well as the procedural rules that the Supreme
Court will promulgate;
(i) summarize the requirements and deadlines for creditors to establish
their claims against the debtor and direct all creditors to their claims with
the court at least five (5) days before the initial hearing;
(j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its
comment on or opposition to the petition or its claim/s against the debtor
under such procedures as the Supreme Court provide;
(k) prohibit the debtor's suppliers of goods or services from withholding the
supply of goods and services in the ordinary course of business for as long
as the debtor makes payments for the services or goods supplied after the
issuance of the Commencement Order;
(m) set the case for initial hearing, which shall not be more than forty (40)
days from the date of filing of the petition for the purpose of determining
whether there is substantial likelihood for the debtor to be rehabilitated;
(n) make available copies of the petition and rehabilitation plan for
examination and copying by any interested party;
(p) state that any creditor or debtor who is not the petitioner, may submit
the name or nominate any other qualified person to the position of
rehabilitation receiver at least five (5) days before the initial hearing;
(4) prohibit the debtor from making any payment of its liabilities
outstanding as of the commencement date except as may be provided
herein.
(a) vest the rehabilitation with all the powers and functions provided for
this Act, such as the right to review and obtain records to which the
debtor's management and directors have access, including bank accounts
or whatever nature of the debtor subject to the approval by the court of the
performance bond filed by the rehabilitation receiver;
(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
encumbered property, or otherwise attempt to collection or enforce a claim
against the debtor after commencement date unless otherwise allowed in
this Act, subject to the provisions of Section 50 hereof;
(c) serve as the legal basis for rendering null and void any setoff after the
commencement date of any debt owed to the debtor by any of the debtor's
creditors;
(d) serve as the legal basis for rendering null and void the perfection of any
lien against the debtor's property after the commencement date; and
(e) consolidate the resolution of all legal proceedings by and against the
debtor to the court Provided. However, That the court may allow the
continuation of cases on other courts where the debtor had initiated the
suit.
Attempts to seek legal of other resource against the debtor outside these
proceedings shall be sufficient to support a finding of indirect contempt of
court.
(g) any criminal action against individual debtor or owner, partner, director
or officer of a debtor shall not be affected by any proceeding commend
under this Act.
Section 19. Waiver of taxes and Fees Due to the National Government and
to Local Government Units (LGUs). - Upon issuance of the Commencement
Order by the court, and until the approval of the Rehabilitation Plan or
dismissal of the petition, whichever is earlier, the imposition of all taxes
and fees including penalties, interests and charges thereof due to the
national government or to LGUs shall be considered waived, in furtherance
of the objectives of rehabilitation.
(c) The debtor has met with its creditors to the extent reasonably possible
in attempts to reach consensus on the proposed Rehabilitation Plan;
(2) there is sufficient cash flow to maintain the operations of the debtor;
(3) the debtor's, partners, stockholders, directors and officers have been
acting in good faith and which due diligence;
(4) the petition is not s sham filing intended only to delay the enforcement
of the rights of the creditor's or of any group of creditors; and
(5) the debtor would likely be able to pursue a viable Rehabilitation Plan;
(e) The petition, the Rehabilitation Plan and the attachments thereto do not
contain any materially false or misleading statement;
(f) If the petitioner is the debtor, that the debtor has met with its creditor/s
representing at least three-fourths (3/4) of its total obligations to the extent
reasonably possible and made a good faith effort to reach a consensus on
the proposed Rehabilitation Plan if the petitioner/s is/are a creditor or
group of creditors, that/ the petitioner/s has/have met with the debtor and
made a good faith effort to reach a consensus on the proposed
Rehabilitation Plan; and
(g) The debtor has not committed acts misrepresentation or in fraud of its
creditor/s or a group of creditors.
Section 22. Action at the Initial Hearing. - At the initial hearing, the court
shall:
(a) determine the creditors who have made timely and proper filing of their
notice of claims;
(c) direct the creditors to comment on the petition and the Rehabilitation
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
(b) the underlying assumptions, the financial goals and the procedures to
accomplish such goals as stated in the petitioner's Rehabilitation Plan are
realistic, feasible and reasonable;
(2) the petition i8 a sham filing intended only to delay the enforcement of
the rights of the creditor/s or of any group of creditors;
(3)the petition, the Rehabilitation Plan and the attachments thereto contain
any materially false or misleading statements; or
(4)the debtor has committed acts of misrepresentation or in fraud of its
creditor/s or a group of creditors;
(c)convert the proceedings into one for the liquidation of the debtor upon a
finding that:
Section 26.Petition Given Due Course. - If the petition is given due course,
the court shall direct the rehabilitation receiver to review, revise and/or
recommend action on the Rehabilitation Plan and submit the same or a
new one to the court within a period of not more than ninety (90) days.
The court may refer any dispute relating to the Rehabilitation Plan or the
rehabilitation proceedings pending before it to arbitration or other modes
of dispute resolution, as provided for under Republic Act No. 9285, Or the
Alternative Dispute Resolution Act of 2004, should it determine that such
mode will resolve the dispute more quickly, fairly and efficiently than the
court.
(a)A citizen of the Philippines or a resident of the Philippines in the six (6)
months immediately preceding his nomination;
(a)To verify the accuracy of the factual allegations in the petition and its
annexes;
(b)To verify and correct, if necessary, the inventory of all of the assets of
the debtor, and their valuation;
(c)To verify and correct, if necessary, the schedule of debts and liabilities of
the debtor;
(d)To evaluate the validity, genuineness and true amount of all the claims
against the debtor;
(e)To take possession, custody and control, and to preserve the value of all
the property of the debtor;
(f)To sue and recover, with the approval of the court, all amounts owed to,
and all properties pertaining to the debtor;
(g)To have access to all information necessary, proper or relevant to the
operations and business of the debtor and for its rehabilitation;
(h) To sue and recover, with the. approval of the court, all
property or money of the debtor paid, transferred or disbursed in fraud of
the debtor or its creditors, or which constitute undue preference of
creditor/s;
(i) To monitor the operations and the business of the debtor to ensure that
no payments or transfers of property are made other than in the ordinary
course of business;
(j) With the court's approval, to engage the services of or to employ persons
or entities to assist him in the discharge of his functions;
(k) To determine the manner by which the debtor may be best rehabilitated,
to review) revise and/or recommend action on the Rehabilitation Plan and
submit the same or a new one to the court for approval;
(n) To exercise such other powers as may, from time to time, be conferred
upon him by the court; and
(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) he is, or was, within two (2) years from the filing of the petition, an
underwriter of the outstanding securities of the debtor;
(f) he has any other direct or indirect material interest in the debtor or any
of the creditors.
(E) Governance.
(F) Use, Preservation and Disposal of Assets and Treatment of Assets and
Claims after Commencement Date.
Provided, That properties held by the debtor where the debtor has authority
to 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 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-party's claim or right.
Sale or disposal of property under this section shall not give rise to any
criminal liability under applicable laws.
(a) if such are in the interest of administering the debtor and facilitating the
preparation and implementation of a Rehabilitation Plan;
(d) for payments to victims of quasi delicts upon a showing that the claim
is valid and the debtor has insurance to reimburse the debtor for the
payments made;
(b) upon motion of, or with the consent of the affected secured creditor or
interest owner. order the conveyance of a lien against or ownership interest
in substitute property of the debtor to the secured creditor: Provided. That
other creditors holding liens on such property, if any, do not object thereto,
or, if such property is not available;
(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 the
secured creditor and the debtor, and the proceeds of the sale will be
distributed in accordance with the order prescribed under the rules of
concurrence and preference of credits.
Section 54.Post-commencement Interest. - The rate and term of interest, if
any, on secured and unsecured claims shall be determined and provided
for in the approved Rehabilitation Plan.
(c) provides security or additional security executed within ninety (90) days
prior to the commencement date;
(d) involves creditors, where a creditor obtained, or received the benefit of,
more than its pro rata share in the assets of the debtor, executed at a time
when the debtor was insolvent; or
Provided, however, That nothing in this section shall prevent the court from
rescinding or declaring as null and void a transaction on other grounds
provided by relevant legislation and jurisprudence: Provided, further, That
the provisions of the Civil Code on rescission shall in any case apply to
these transactions.
(c) Any benefit derived from a proceeding taken pursuant to subsection (a),
to the extent of his claim and the costs, belongs exclusively to the creditor
instituting the proceeding, and the surplus, if any, belongs to the estate.
(d) Where, before an order is made under subsection (a), the rehabilitation
receiver (or liquidator) signifies to the court his readiness to institute the
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 instituted within the time limits so fixed, belongs to the
estate.
securing his/its claim, if the said property is not necessary for the
rehabilitation of the debtor. The secured creditor and/or the other lien
holders shall be admitted to the rehabilitation proceedings only for the
balance of his claim, if any.
(a) a creditor does not have adequate protection over property securing its
claim; or
(a) the debtor fails or refuses to honor a pre-existing agreement with the
creditor to keep the property insured;
(c) the property has depreciated to an extent that the creditor is under
secured.
Upon showing of a lack of protection, the court shall order the debtor or the
rehabilitation receiver to make arrangements to provide for the insurance
or maintenance of the property; or to make payments or otherwise provide
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 the secured creditor lacking adequate protection to enforce its
security claim against the debtor: Provided, however, That the court may
deny the creditor the remedies in this paragraph if the property subject of
the enforcement is required for the rehabilitation of the debtor.
(a) specify the underlying assumptions, the financial goals and the
procedures proposed to accomplish such goals;
(f) indicate how the insolvent debtor will be rehabilitated including, but not
limited to, debt forgiveness, debt rescheduling, reorganization or 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 business
entity or other similar arrangements as may be necessary to restore the
financial well-being and visibility of the insolvent debtor;
(h) provide for equal treatment of all claims within the same class or
subclass, unless a particular creditor voluntarily agrees to less favorable
treatment;
(i) ensure that the payments made under the plan follow the priority
established under the provisions of the Civil Code on concurrence and
preference of credits and other applicable laws;
(j) maintain the security interest of secured creditors and preserve the
liquidation value of the security unless such has been waived or modified
voluntarily;
(1) describe the disputed claims and the provisioning of funds to account
for appropriate payments should the claim be ruled valid or its amount
adjusted;
(n) state any rehabilitation covenants of the debtor, the breach of which
shall be considered a material breach of the Plan;
(o) identify those responsible for the future management of the debtor and
the supervision and implementation of the Plan, their affiliation with the
debtor and their remuneration;
(p) address the treatment of claims arising after the confirmation of the
Rehabilitation Plan;
(q) require the debtor and its counter-parties to adhere to the terms of all
contracts that the debtor has chosen to confirm;
(s) arrange for the payment" of all outstanding taxes and assessments, or
an adjusted amount pursuant to a compromise settlement with the BlR Or
other applicable tax authorities;
(v) state the compensation and status, if any, of the rehabilitation receiver
after the approval of the Plan; and
Section 63.Consultation with Debtor and Creditors. – if the court gives due
course to the petition, the rehabilitation receiver shall confer with the
debtor and all the classes of creditors, and may consider their views and
proposals ill the review, revision or preparation of a new Rehabilitation
Plan.
(c) The shareholders, owners or partners of the juridical debtor lose at least
their controlling interest as a result of the Rehabilitation Plan; and
(d) The Rehabilitation Plan would likely provide the objecting class of
creditors with compensation which has a net present value greater than
that which they would have received if the debtor were under liquidation.
If the court finds merit in the objection, it shall order the rehabilitation
receiver or other party to cure the defect, whenever feasible. If the court
determines that the debtor acted in bad faith, or that it is not feasible to
cure the defect, (OTHERWISE) the court shall convert the proceedings into
one for the liquidation of the debtor under Chapter V of this Act.
For the avoidance of doubt, the provisions of other laws to the contrary
notwithstanding, the court shall have the power to approve or implement
the Rehabilitation Plan despite the lack of approval, or objection from the
owners, partners or stockholders of the insolvent debtor: Provided, That the
terms thereof are necessary to restore the financial well-being and viability
of the insolvent debtor.
Section 69.Effect of Confirmation of the Rehabilitation Plan, - The
confirmation of the Rehabilitation Plan by the court shall result in the
following:
(a) The Rehabilitation Plan and its provisions shall be binding upon the
debtor and all persons who may be affected by . it, including the creditors,
whether or not such persons have participated in the proceedings or
opposed the Rehabilitation Plan or whether or not their claims have been
scheduled;
(b) The debtor shall comply with the provisions of the Rehabilitation Plan
and shall take all actions necessary to carry out the Plan;
(d) Contracts and other arrangements between the debtor and its creditors
shall be interpreted as continuing to apply to the extent that they do not
conflict with the provisions of the Rehabilitation Plan;
(f) Claims arising after approval of the Plan that are otherwise not treated
by the Plan are not subject to any Suspension Order.
The Order confirming the Plan shall comply with Rules 36 of the Rules of
Court: Provided, however, That the court may maintain jurisdiction over the
case in order to resolve claims against the debtor that remain contested
and allegations that the debtor has breached the Plan.
Upon a breach of, or upon a failure of the Rehabilitation Plan the court,
upon motion by an affected party may:
(1) Issue an order directing that the breach be cured within a specified
period of time, falling which the proceedings may be converted to a
liquidation;
(4) Issue any other order to remedy the breach consistent with the present
regulation, other applicable law and the best interests of the creditors; or
CHAPTER III
PRE-NEGOTIATED REHABILITATION
(d) a summary of disputed claims against the debtor and a report on the
provisioning of funds to account for appropriate payments should any such
claims be ruled valid or their amounts adjusted.
Section 77. Issuance of Order. - Within five (5) working days, and after
determination that the petition is sufficient in form and substance, the
court shall issue an Order which shall;
(a) identify the debtor, its principal business of activity/ies and its principal
place of business;
(b) declare that the debtor is under rehabilitation;
(e) direct the service by personal delivery of a copy of the petition on each
creditor who is not a petitioner holding at least ten percent (10%) of the
total liabilities of the debtor, as determined in the schedule attached to the
petition, within three (3) days;
(f) state that copies of the petition and the Rehabilitation Plan are available
for examination and copying by any interested party;
(g) state that creditors and other interested parties opposing the petition or
Rehabilitation Plan may file their objections or comments thereto within a
period of not later than twenty (20) days from the second publication of the
Order;
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 unless a creditor or other interested party submits an objection to it in
accordance with the next succeeding section.
(b) The majority of any class of creditors do not in fact support the
Rehabilitation Plan;
(c) The Rehabilitation Plan fails to accurately account for a claim against
the debtor and the claim in not categorically declared as a contested claim;
or
(d) The support of the creditors, or any of them was induced by fraud.
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 said period, the Rehabilitation Plan shall be deemed
approved.
Section 82. Effect of Approval. - Approval of a Plan under this chapter shall
have the same legal effect as confirmation of a Plan under Chapter II of
this Act.
CHAPTER IV
OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR
REHABILITATION PLANS
(b) an inventory of all its assets including receivables and claims against
third parties; and
(c) the names of at least three (3) nominees to the position of liquidator.
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 hereof.
If the petition or motion is sufficient in form and substance, the court shall
issue an Order:
(2) directing the debtor and all creditors who are not the petitioners to file
their comment on the petition or motion within fifteen (15) days from the
date of last publication.
If, after considering the comments filed, the court determines that the
petition or motion is meritorious, it shall issue the Liquidation Order
mentioned in Section 112 hereof.
Section 92. Conversion by the Court into Liquidation Proceedings. - During
the pendency of court-supervised or pre-negotiated rehabilitation
proceedings, the court may order the conversion of rehabilitation
proceedings to liquidation proceedings pursuant to (a) Section 25(c) of this
Act; or (b) Section 72 of this Act; or (c) Section 75 of this Act; or (d) Section
90 of this Act; or at any other time upon the recommendation of the
rehabilitation receiver that the rehabilitation of the debtor is not feasible.
Thereupon, the court shall issue the Liquidation Order mentioned in Section
112 hereof.
CHAPTER VI
INSOLVENCY OF INDIVIDUAL DEBTORS
Section 95. Action on the Petition. - If the court finds the petition sufficient
in form and substance, it shall, within five (5) working days from the filing
of the petition, issue an Order:
(a) calling a meeting of all the creditors named in the schedule of debts and
liabilities at such time not less than fifteen (15) days nor more than forty
(40) days from the date of such Order and designating the date, time and
place of the meeting;
(b) directing such creditors to prepare and present written evidence of their
claims before the scheduled creditors' meeting;
(d) directing the clerk of court to cause the sending of a copy of the Order
by registered mail, postage prepaid, to all creditors named in the schedule
of debts and liabilities;
(f) prohibiting the individual debtor from making any payment outside of
the necessary or legitimate expenses of his business or industry, so long as
the proceedings relative to the suspension of payments are pending; and
(a) those creditors having claims for personal labor, maintenance, expense
of last illness and funeral of the wife or children of the debtor incurred in
the sixty (60) days immediately prior to the filing of the petition; and
(a) The clerk shall record the creditors present and amount of their
respective claims;
(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 the
individual debtor, the commissioner shall declare the meeting open for
business;
(c) The creditors and individual debtor shall discuss the propositions in the
proposed agreement and put them to a vote;
(1) that two-thirds (2/3) of the creditors voting unite upon the same
proposition; and
(2) that the claims represented by said majority vote amount to at least
three-fifths (3/5) of the total liabilities of the debtor mentioned in the
petition; and
(e) After the result of the voting has been announced, all protests made
against the majority vote shall be drawn up, and the commissioner and the
individual debtor together with all creditors taking part in the voting shall
sign the affirmed propositions.
No creditor who incurred his credit within ninety (90) days prior to the filing
of the petition shall be entitled to vote.
Section 98. Persons Who May Refrain From Voting. - Creditors who are
unaffected by the Suspension Order may refrain from attending the
meeting and from voting therein. Such persons shall not be bound by any
agreement determined upon at such meeting, but if they should join in the
voting they shall be bound in the same manner as are the other creditors.
The court may also issue all orders which may be necessary or proper to
enforce 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 in the schedule of debts and liabilities
submitted by the individual debtor and who were properly summoned, but
not upon: (a) those creditors having claims for personal labor,
maintenance, expenses of last illness and funeral of the wife or children of
the debtor incurred in the sixty (60) days immediately prior to the filing of
the petition; and (b) secured creditors who failed to attend the meeting or
refrained from voting therein.
The following shall be considered acts of insolvency, and the petition for
liquidation shall set forth or allege at least one of such acts:
(a) That such person is about to depart or has departed from the Republic
of the Philippines, with intent to defraud his creditors;
(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
purpose of hindering or delaying the liquidation or of defrauding his
creditors;
(d) That he conceals, or is removing, any of his property to avoid its being
attached or taken on legal process;
(e) That he has suffered his property to remain under attachment or legal
process for three (3) days for the purpose of hindering or delaying the
liquidation or of defrauding his creditors;
(f) That he has confessed or offered to allow judgment in favor of any
creditor or claimant for the purpose of hindering or delaying the liquidation
or of defrauding any creditors or claimant;
(i) That he has made any assignment, gift, sale, conveyance or transfer of
his estate, property, rights or credits with intent to hinder or delay the
liquidation or defraud his creditors;
(l) That for a period of thirty (30) days, he has failed, after demand, to pay
any moneys deposited with him or received by him in a fiduciary; and
(m) That an execution having been issued against him on final judgment for
money, he shall have been found to be without sufficient property subject
to execution to satisfy the judgment.
The petitioning creditor/s shall post a bond in such as the court shall direct,
conditioned that if the petition for liquidation is dismissed by the court, or
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 the proceedings and attorney's fees.
Section 107. Default. - If the individual debtor shall default or if, after trial,
the issues are found in favor of the petitioning creditors the court shall
issue the Liquidation Order mentioned in Section 112 hereof.
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 exempt from execution, any other creditor or creditors of the
individual debtor, upon giving bond to be approved by the court in double
the amount of their 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 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 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 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 the decision be in
favor of the individual debtor, the proceedings shall be 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 cover the
damages sustained by him, not to exceed the amount of the respective
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 hearing of the petition, the appellant shall be required to give bond to
the successful party in a sum double the amount of the value of the
property in controversy, and for the costs of the proceedings.
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 notice to the person excepting of not less than two (2) nor
more than five (5) 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 an Order vacating the order to take the
property of the individual debtor into the custody of the sheriff, or denying
the appeal, as the case may be.
Section 110. Sale Under Execution. - If, in any case, proper affidavits and
bonds 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 and thereafter the petitioners shall make it
appear satisfactorily to the court or a 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 court to abide by the
result of the proceedings.
CHAPTER VII
PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF INDIVIDUAL
AND JURIDICAL DEBTORS
Section 111. Use of Term Debtor. - For purposes of this chapter, the term
debtor shall include both individual debtor as defined in Section 4(o) and
debtor as defined in Section 4(k) of this Act.
(b) order the liquidation of the debtor and, in the case of a juridical debtor,
declare it as dissolved;
(c) order the sheriff to take possession and control of all the property of the
debtor, except those that may be exempt from execution;
(f) prohibit payments by the debtor and the transfer of any property by the
debtor;
(g) direct all creditors to file their claims with the liquidator within the
period set by the rules of procedure;
(i) state that the debtor and creditors who are not petitioner/s may submit
the names of other nominees to the position of liquidator; and
(j) set the case for hearing for the election and appointment of the
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.
(a) the juridical debtor shall be deemed dissolved and its corporate or
juridical existence terminated;
(b) legal title to and control of all the assets of the debtor, except those that
may be exempt from execution, shall be deemed vested in the liquidator or,
pending his election or appointment, with the court;
(c) all contracts of the debtor shall be deemed terminated and/or breached,
unless the liquidator, within ninety (90) days from the date of his
assumption of office, declares otherwise and the contracting party agrees;
(a) waive his right under the security or lien, prove his claim in the
liquidation proceedings and share in the distribution of the assets of the
debtor; or
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed upon by the
creditor and the liquidator. When the value of the property is less than the
claim it secures, the liquidator may convey the property to the secured
creditor and the latter will be admitted in the liquidation proceedings as a
creditor for the balance. If its value exceeds the claim secured, the
liquidator may convey the property to the creditor and waive the debtor's
right of redemption upon receiving the excess from the creditor;
(2) the liquidator may sell the property and satisfy the secured creditor's
entire claim from the proceeds of the sale; or
(3) the secure creditor may enforce the lien or foreclose on the property
pursuant to applicable laws.
The creditors entitled to vote will elect the liquidator in open court. The
nominee 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.
(a) on the date set for the election of the liquidator, the creditors do not
attend;
(d) a vacancy occurs for any reason whatsoever, In any of the cases
provided herein, the court may instead set another hearing of the election
of the liquidator.
(a) to sue and recover all the assets, debts and claims, belonging or due to
the debtor;
(b) to take possession of all the property of the debtor except property
exempt by law from execution;
(c) to sell, with the approval of the court, any property of the debtor which
has come into his possession or control;
(d) to redeem all mortgages and pledges, and so satisfy any judgement
which may be an encumbrance on any property sold by him;
(e) to settle all accounts between the debtor and his creditors, subject to
the approval of the court;
(f) to recover any property or its value, fraudulently conveyed by the debtor;
Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor
and creditor of each other one debt shall be set off against the other, and
only the balance, if any shall be allowed in the liquidation proceedings.
(b) if leave of court is granted under subsection (a) hereof, the liquidator
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 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 to the
creditor instituting the proceeding, and the surplus, if any, belongs to the
estate.
(d) Where, before an orders is made under subsection (a) hereof, the
liquidator signifies to the court his readiness to the institute the proceeding
for the benefit of the creditors, the order shall fix the time within which he
shall do so and, in that case the benefit derived from the proceedings, if
instituted within the time limits so fixed, belongs to the estate.
Section 129. The Liquidation Plan. - Within three (3) months from his
assumption into office, the Liquidator shall submit a Liquidation Plan to the
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.
With the approval of the court, unencumbered property of the debtor may
also be conveyed to a creditor in satisfaction of his claim or part thereof.
Section 134. Order Removing the Debtor from the List of Registered Entitles
at the Securities and Exchange Commission. - Upon determining that the
liquidation has been completed according to this Act and applicable law,
the court shall issue an Order approving the report and ordering the SEC to
remove the debtor from the registry of legal entities.
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 ordinary course of this business.
CHAPTER VIII
PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITAION
PROCEEDINGS
(a) suspending any action to enforce claims against the entity or otherwise
seize or foreclose on property of the foreign entity located in the
Philippines;
(b) requiring the surrender property of the foreign entity to the foreign
representative; or
(b) the just treatment of all creditors through resort to a unified insolvency
or rehabilitation proceedings;
(c) whether other jurisdictions have given recognition to the foreign
proceeding;
(d) the extent that the foreign proceeding recognizes the rights of creditors
and other interested parties in a manner substantially in accordance with
the manner prescribed in this Act; and
(e) the extent that the foreign proceeding has recognized and shown
deference to proceedings under this Act and previous legislation.
CHAPTER IX
FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS
CHAPTER X
MISCELLANEOUS PROVISIOS
(b) if he shall, having knowledge belief of any person having proved a false
or fictitious claim against the debtor, fail to disclose the same to the
rehabilitation receiver of liquidator within one (1) month after coming to
said knowledge or belief; or if he shall attempt to account for any of the
debtors property by fictitious losses or expense; or
Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days
after its complete publication in the Official Gazette or in at least two (2)
national newspaper of general circulation.
Approved,
This Act which is a consolidation of House Bill No. 7090 and Senate Bill No.
61 was finally passed by the House of Representatives and the Senate on
February 1. 2010 and February 2, 2010, respectively.
(Sgd.) EMMA LIRIO-REYES
Secretary of Senate
(Sgd.) MARILYN B. BARUA-YAP
Secretary General
House of Representatives
(Sgd.) GLORIA MACAPAGAL-ARROYO
President of the Philippines