[REPUBLIC ACT NO.
10142]
AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF
FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS
Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:
CHAPTER I
GENERAL PROVISIONS
SECTION 1. Title. — This Act shall be known as the “Financial Rehabilitation
and Insolvency Act (FRIA) of 2010”.
SEC. 2. Declaration of Policy. — It is the policy of the State to encourage
debtors, both juridical and natural persons, and their creditors to collectively
and realistically resolve and adjust competing claims and property rights. In
furtherance thereof, the State shall ensure a timely, fair, transparent, effective
and efficient rehabilitation or liquidation of debtors. The rehabilitation or
liquidation shall be made with a view to ensure or maintain certainty and
predictability in commercial affairs, preserve and maximize the value of the
assets of these debtors, recognize creditor rights and respect priority of
claims, and ensure equitable treatment of creditors who are similarly situated.
When rehabilitation is not feasible, it is in the interest of the State to facilitate a
speedy and orderly liquidation of these debtors’ assets and the settlement of
their obligations.
SEC. 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 Court.
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.
SEC. 4. Definition of Terms. — As used in this Act, the term:
(a) Administrative expenses shall refer to those reasonable and necessary
expenses:
(1) incurred or arising from the filing of a petition under the provisions of this
Act;
(2) arising from, or in connection with, the conduct of the proceedings under
this Act, including those incurred for the rehabilitation or liquidation of the
debtor;
(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.
(b) Affiliate shall refer to a corporation that directly or indirectly, through one or
more intermediaries, is controlled by, or is under the common control of
another corporation.
(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 unmatured, disputed or
undisputed, including, but not limited to: (1) all claims of the government,
whether national or local, including taxes, tariffs and customs duties; and (2)
claims against directors and officers of the debtor arising from acts done in
the discharge of their functions falling within the scope of their
authority: Provided, That, this inclusion does not prohibit the creditors or third
parties from filing cases against the directors and officers acting in their
personal capacities.
(d) Commencement date shall refer to the date on which the court issues the
Commencement Order, which shall be retroactive to the date of filing of the
petition for voluntary or involuntary proceedings.
(e) Commencement Order shall refer to the order issued by the court under
Section 16 of this Act.
(f) Control shall refer to the power of a parent corporation to direct or govern
the financial and operating policies of an enterprise so as to obtain benefits
from its activities. Control is presumed to exist when the parent owns, directly
or indirectly through subsidiaries or affiliates, more than one-half (1/2) of the
voting power of an enterprise unless, in exceptional circumstances, it can
clearly be demonstrated that such 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 when there is power:
(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;
(3) to appoint or remove the majority of the members of the board of directors
or equivalent governing body; or
(4) to cast the majority votes at meetings of the board of directors or
equivalent governing body.
(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 Act.
(h) Creditor shall refer to a natural or juridical person which has a claim
against the debtor that arose on or before the commencement date.
(i) Date of liquidation shall refer to the date on which the court issues the
Liquidation Order.
(j) Days shall refer to calendar days unless otherwise specifically stated in this
Act.
(k) Debtor shall refer to, unless specifically excluded by a provision of this Act,
a sole proprietorship duly registered with the Department of Trade and
Industry (DTI), a partnership duly registered with the Securities and Exchange
Commission (SEC), a corporation duly organized and existing under
Philippine laws, or an individual debtor who has become insolvent as defined
herein.
(l) Encumbered property shall refer to real or personal property of the debtor
upon which a lien attaches.
(m) General unsecured creditor shall refer to a creditor whose claim or a
portion thereof is neither secured, preferred nor subordinated under this Act.
(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.
(o) Individual debtor shall refer to a natural person who is a resident and
citizen of the Philippines that has become insolvent as defined herein.
(p) Insolvent shall refer to the financial condition of a debtor that is generally
unable to pay its or his liabilities as they fall due in the ordinary course of
business or has liabilities that are greater than its or his assets.
(q) Insolvent debtor’s estate shall refer to the estate of the insolvent 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, whether or not these property and assets
are in the debtor’s possession as of commencement date: Provided, That
trust assets and bailment, and other property and assets of a third party that
are in the possession of the debtor as of commencement date, are excluded
therefrom.
(r) Involuntary proceedings shall refer to proceedings initiated by creditors.
(s) Liabilities shall refer to monetary claims against the debtor, including
stockholder’s advances that have been recorded in the debtor’s audited
financial statements as advances for future subscriptions.
(t) Lien shall refer to a statutory or contractual claim or judicial charge on real
or personal property that legally entitles a creditor to resort to said property for
payment of the claim or debt secured by such lien.
(u) Liquidation shall refer to the proceedings under Chapter V of this Act.
(v) Liquidation Order shall refer to the Order issued by the court under Section
112 of this Act.
(w) Liquidator shall refer to the natural person or juridical entity 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 juridical entity, it must designate a
natural person who possesses all the qualifications and none of the
disqualifications as its representative, it being understood that the juridical
entity and the representative are solidarily liable for all obligations and
responsibilities of the liquidator.
(x) Officer shall refer to a natural person holding a management position
described in or contemplated by a juridical entity’s articles of incorporation,
bylaws or equivalent documents, except for the corporate secretary, the
assistant corporate secretary and
