Thec ur r e nts p e c i a ll a w go ve r ni ngi ns ol v e nc ypr oc e e di ngsi sRe pub l i cAc t No.1 0 14 2 ,AnAc tPr o vi di ngf ort heRe ha bi l i t a t i onorLi qui da t i onofF i na nc i a l l y Di s t r e s s e dEnt e r pr i s e sa ndI ndi vi dua l s , whi c ht ooke ffe c tonAugus t3 1 ,2 0 10 .I ti s al s oknown wnasal s oknown wnast heFi nanc i alRehabi l i t at i on and I ns ol venc yAct ( F RI A)o f2 0 1 0 .Unl i k et heI ns o l v e nc yAc to f1 9 0 9 ,F RI Aa ndt heF RRul e sdono t l i mi ti ns ol ve nc yt oas i t uat i onwhe r et hede bt or ’ sas s e t sar el e s st ha ni t sl i a bi l i t i e s . I tno wc o v e r sas i t ua t i o n whe r et hede b t o ri suna bl et ome e ti t sobl i g at i onsa s t he yf al ldueeve ni fi t sa s s et sa r emor et ha ni t sl i abi l i t i e s . Que s t i onpr e s e n t e d
Wha ta r et hedi ffe r e nti ns ol v e nc ypr oc e e d i ngsu nde rt heF RI Aa v a i l a bl et o a ni ndi vi dua l , apa r t ne r s h i pa ndac o r por a t i on? Br i e fans we r
Unde rt heFRI A,a ni ndi vi dua lde b t orma ma y no ta v ai lo fr e h a bi l i t a t i o n unl e s she /s h ei sas o l epr opr i e t or s h i p. He /s h ec a nonl ya v ai le i t he rs us pe ns i onof pa yme nt s ,i fhe /s hei si l l i qui d,orl i qui da t i on,i fh e/s hei si ns o l ve ntunde rt he bal anc es he e tc onc e pt .Ont heot he rhand,as ol epr opr i e t or s hi p,apar t ne r s hi p a ndac o r por a t i o nma ye i t he runde r gor e ha bi l i t a t i o norl i qui da t i on.The yc a nno t pr ope r l ya v a i lofs u s pe ns i ono fpa y me me nt s . I nr e ha bi l i t a t i on,ade bt orma ma yonl ybeaj ur i di c a lpe r s o n-e i t he ras o l e pr opr i e t or s h i pdul yr e g i s t e r e dwi t ht heDe pa r t me nto fT r a dea ndI ndus t r y( DTI ) , apar t ner s hi p dul yr egi s t er ed wi t ht heSec ur i t i esand Exc hangeComm mmi s s i on ( S EC)orac o r po r a t i o ndul yor g ani z e da nde x i s t i ngunde rPhi l i ppi nel a ws .1 Ont heo t he rh a nd,i nl i q ui da t i o n,ade b t o rma ma yb ea n yo ft hej ur i di c a l per s onst hatc an be r ehabi l i t at ed,oran i ndi vi dualdebt orwho hasbec ome me 2 i ns o l ve nt .
S e c .1 2 ,F RI A. 1
2Ibid,Sec.90& Sec.103.
Di s c us s i on
I ns o l v e nc ypr o c e e di ng sa r et hes t a t ut o r ypr o c e dur e sb ywhi c hade b t o r obt a i nsfina nc i a lr e l i e fa nd unde r goe sj udi c i a l l ys upe r v i s e dr e or ga ni z a t i on o r 3 l i qui dat i onofi t sa s s et sf ort hebe ne fitofi t sc r e di t or s .
Undert heFRI A,i ha l lr e f e rt ot hefina nc i a lc ondi t i onofade bt or ns o l v ents t hati sge ne r a l l yuna b l et opa yi t so rh i sl i a bi l i t i e sa st h e yf a l ld uei nt h eo r di na r yc o ur s e o fb us i ne s s( i l l i qui di t yore qui t yi ns ol ve nc y)orha sl sl i a b i l i t i e st h a ta r egr e a t e rt h a ni t s 4 o rhi sa s s e t s( ba l a nc e s he e ti ns o l ve nc y) .
TheFRI A pr o vi de sf o r3i ns o l v e nc ypr o c e e di ng s ,na me me l y ,s us pe n s i o no f pa y me me nt s ,r e ha bi l i t a t i ona ndl i qui da t i on,t oe nc o ur a gede bt or sandc r e di t or st o c ol l e c t i ve l yr e s ol vet he i rc ompe t i ngc l a i ms . ndi vi dualde b t or s us pensi on of Fori ,t hey c an onl y avai lofei t her s
,i ft he ya r ei ns o l ve ntunde rt he i l l i q ui di t yc o nc e p t ,ort he yc a nfil ef or payme me nt s a l a nc es h e e tc o nc e p t l i qui da t i on i ft he ya r ei ns o l ve ntunde rt heb . i saj udi c i a li ns o l v e nc ypr oc e e di ngb ywhi c ha n Sus pens i onofPayme ment s i ndi vi dua lde b t o rs rs ub mi mi t s ,f o ra ppr o v a lb yhi sc r e di t o r s ,apr o po s e da gr e e me me n t c o nt a i ni ngpr o pos i t i onsde l a y i ngo re x t e ndi ngt het i meofpa y me me nto fh i sde b t s . 5 I tma yno tbea v ai l e do fb ypa r t ne r s hi psa ndc o r p or a t i ons . I ti sal s ouna va i l a bl e 6 t ononr e s i de ntc i t i z ensa nda l i e ns .
Go m me e z S ome r a ,S .( 2 0 1 1 ) . p.7 9 3c a c k’ sLa w Di c t i o na r y , Cr e d i tTr a ns a c t i o ns : No t e sa ndCa s e s , Vo l .I I , i t i ngBl 3 Ni nt hEdi t i o n( 2 0 0 9 ) . S ec . 4( p ) , F RI A. 4 Go m me e z S ome r a ,S .( 2 0 1 1 ) . p.8 48 .Thei ns t i t ut i onof“ Cr e d i tTr a ns a c t i o ns : No t e sa ndCa s e s , Vo l .I I , c o r p o r a t e 5 n ol o ng e re x i s t ,wi t ht h eFRI Ar e c o gni z i ngonl ys us p e ns i o no fpa y m me e nt s s u s pe n s i o no fp a yme n t sp r o c e e d i ng s ” pr o c e e di ngsf o ri ndi vi dua lde bt o r s . t ur a l p e r s o nwhoi 6 S e c t i o n4( o )o ft heF RI Ade fine sa ni ndi vi dua lde b t o ra sana sar e s i de nta ndc i t i z e no f
t hePhi l i ppi ne st ha tha sb e c omei ns o l v e nt .
S us p e ns i onofpa y me me nt si sa l wa y svo l unt a r y .T oa v a i lo ft hi spr o c e e di ng, t heFRI Apr ovi des : Se c t i on9 4.Pe t i t i o n. -Ani ndi vi dua lde b t o rwh who ,po s s e s s i ngs u ffic ffic i e ntpr o pe r t yt o
c o ve ra l lhi sde bt sbutf or e s e e i ngt hei mposs i bi l i t yofme meet i ngt hem whent hey r e s pe c t i v el yf a l ldue[ I l l i qui di t yConc e pt ], t i t i ont mayfil eaveri fiedpe ha theb e
de c l a r e di nt hes t a t eofs u s pe ns i o no fpa y me me nt s byt h ec o ur to ft hepr o v i nc eo rc i t y i nwh i c hheh a sr e s i d e s f ors i x( 6 )mo mont hspr i ort ot hefil i ngofhi spe t i t i on.Hes ha l l a )as c he dul eofde bt sa ndl i a bi l i t i e s ;( b) a t t a c ht ohi spe t i t i on,a sami mi ni mum:( a ni nv e nt o r yo fa s s e t s ; a nd( c )apr o po s e da gr e e me me ntwi t hhi sc r e di t o r s .
heot herhand,i saj udi c i a li ns o l v e nc ypr oc e e di ngb y Li qui da t i on,on t whi c ht heas s e t sofa ni ns ol v e ntde b t ora r er e c o v e r e da ndt he i rv a l uepr e s e r v e d and max i mi ze df ort he pur pos e ofc onve r t i ng t he s am me ei nt o money ,and di s c ha r gi ng t ot heext e ntpos s i bl e ,a l lt hec l a i msa ga i ns tt hei ns o l ve ntde bt or .I t s e d uc et hede b t o r ’ sas s e t st oc a s h,di pur posei st or s c ha r gi ngi t sl i abi l i t i e sand
di vi di ngt hes ur pl usorr e a l l oc a t i ngt hel os s . Li qui da t i on,i nc o nt r a s tt os us pe ns i onofpa yme nt s ,i sa va i l a bl et obo t h i ndi vi dua la ndj ur i di c a lde bt or s . I tma ybevol unt a r yori nv ol unt a r y . Vo l unt a r yl i q ui da t i o ni ni sa v ai l a bl ef ori ndi vi dua lde bt or swh whoa r ei ns o l v e nt unde rt heba l a nc es h e e tc o nc e pt .Thepur pos eo fv ol unt a r yl i qui da t i oni sf ort he i ndi vi dua lde bt ort os e e kadi s c ha r g ef r om hi sde bt sandl i a bi l i t i e s ,t husf r e e i ng 7 t hede bt orofl e ga lr e s pons i bi l i t yf orc e r t a i ns pe c i fie d obl i ga t i ons . TheFRI A
e xpl i c i t l ypr o vi de s : Sec t i on 103 A . p pl i c a t i o n.-An i ndi vi dualdebt orwh whosepr o pe r t i e sa r e no t s u ffic ffic i e ntt oc o v e rhi sl i a bi l i t i e s[ Ba l a nc eShe e tCo nc e p t ],and owi wi ng debt s
ex c ee di ng Fi ve hundr ed t hous and pes os ( Php500, 000 . 00) ,ma may appl yt o be di s c ha r g e df r o m hi sde bt sa nd l i a bi l i t i e sb y fil i ngav e r i fie d pe t i t i onwi t ht he c o ur to ft hepr o vi nc eo rc i t yi nwhi c hheha sr e s i de df o rs i x( 6 )mo nt hspr i o rt o he dul eo fde bt sa nd t hefil i ngofs uc hpe t i t i on.Hes ha l la t t a c ht ohi spe t i t i onasc l i a bi l i t i e sa nda ni nv ent or yofa s s e t s. Thefil i ngofs uc hpe t i t i ons h al lbea na c tof
i n s o l v e n c y . Go m me e z S ome r a ,S .( 2 0 1 1 ) . p.1 0 02 1 0 03 . Cr e d i tTr a ns a c t i o ns : No t e sa ndCa s e s , Vo l .I I , 7
I nvo l unt a r yl i q ui da t i o n,ont heot he rha nd,i sa va i l a bl et oc r e di t or sofi ndi vi dua l debt or spr ovi dedt hatt her equi r eme ment soft hel aw on numberofc r edi t or sor v al ueofc l a i mso rb ot hi sme me ta ndpr o vi de da na c tofi ns o l v e nc yi sa l l e g e da nd t he r e a f t e re s t a bl i s he d.TheFRI Ae xpl i c i t l ypr o vi de s : Se c t i o n1 0 5 .Pe t i t i o n;Ac t so fI ns o l v e nc y . -An yc r e di t o ro rg r o upo fc r e di t o r swi t ha
c l ai m of ,orwi wi t h cl ai msaggre gat i ng atl eas tFi ve hundr ed t hous and pes os ( Php5 0 0 ,0 0 0. 0 0 )ma ma yfil eav e r i fie dpe t i t i o nf orl i qui da t i o nwi t ht hec our to ft he pr o vi nc eo rc i t yi nwhi c ht hei ndi vi dua lde bt orr e s i de s . The f o l l o w wi i ng s h a l lb ec o ns i de r e da c t so fi ns o l v e nc y ,a nd t he pe t i t i o nf o r l i qui da t i ons hal ls e tf or t hora l l e geatl e as toneofs uc ha c t s : ( a )Tha ts u c hpe r s o ni sa b outt ode pa r to rh asd e pa r t e df r o mt heRe pub l i co ft he Phi l i ppi ne s ,wi t hi nt e ntt ode f r a udhi sc r e di t or s ; ( b)Tha tbe i nga bs e n tf r o mt heRe publ i co ft hePhi l i ppi ne s , wi t hi nt e ntt ode f r a ud hi sc r e di t or s , her e ma ma i nsa b s e nt ; ( c )Tha th ec onc e a l shi ms e l ft oa v oi dt hes e r v i c eofl e g alpr o c e s sf o rt hepur p os e o fhi nde r i ngo rde l a y i ngt hel i qui da t i ono rofde f r a udi nghi sc r e di t o r s ; ( d)Tha th ec o n c e a l s ,o ri sr e mo mo vi n g,a n yo fhi spr o pe r t yt oa v o i di t sb e i n g a t t a c he do rt a ke no nl e g alpr o c e s s ; ( e )Tha theha ss uffe r e dhi sp r o pe r t yt or e ma ma i nunde ra t t a c hme nto rl e g a lpr o c e s s f o rt h r e e( 3 )d a ysf o rt hepur p os eofh i nde r i ngo rde l a y i ngt hel i q ui da t i o no rof de f r a udi nghi sc r e di t o r s ; ( f )Tha theha sc o nf e s s e do ro ffe r e dt oa l l o wj udg m me e nti nf a v o rofa n yc r e di t o ro r cl ai mant f or t he pur pose ofhi nder i ng or del ayi ng t he l i qui dat i on or of de f r a udi nga nyc r e di t o r so rc l a i ma nt ; ( g )T ha theha swi l l f ul l ys u ffe r e dj udgme ntt ob et a k e na g ai ns thi mb yde f a ul tf o r t he pur poseofhi nder i ng ordel ayi ng t he l i qui dat i on orofdef r audi ng hi s c r e di t or s ; ( h )Tha th eha ss uffe r e do rpr o c ur e dhi sp r o pe r t yt ob et a k e no nl e g a lpr o c e s s wi t hi nt e n tt og i v eapr e f e r e n c et oo neo rmo mo r eofh i sc r e di t o r sa nd t h e r e b y hi nde ro rd el a yt h el i qui da t i o no rde f r a uda nyo neofhi sc r e di t o r s ; ( i )Tha th eha sma ma dea n ya s s i gnme nt ,g i f t ,s a l e ,c o n ve y a nc eort r a ns f e ro fhi s e s t a t e ,pr o pe r t y ,r i ght sorc r e di t swi wi t hi nt e ntt ohi nde rorde l a yt hel i qui da t i ono r de f r a udhi sc r e di t or s ; ( j )Tha th eha s ,i nc o nt e m mp pl a t i o no fi ns o l v e nc y ,ma dean ypa y m me e nt ,g i f t ,g r a nt , s a l e ,c onv eya nc eort r a ns f e rofhi se s t a t e ,pr o pe r t y ,r i ght sorc r e di t s ; ( k)Thatbei ng a mer chantort r ades man,he has gener al l y def aul t ed i nt he pa yme nto fh i sc ur r e nto bl i g at i onsf o rape r i odo ft hi r t y( 3 0 )da y s ;
( l )T ha tf o rape r i o do ft hi r t y( 3 0 )da y s ,heha sf a i l e d,a f t e rde ma ma nd,t opa ya ny moneysdeposi t edwi t hhi m orr ec ei vedbyhi mi nafiduci ar y;and ( m)Thata n ex ec ut i on havi ng beeni s s ued agai nsthi m on finalj udgme mentf or money ,hes hal lhavebeenf ound t obewi t houts uffici entpropert ys ubj ec tt o e x e c ut i o nt os a t i s f yt h ej udgme nt .
Thepe t i t i o ni ngc r e di t o r /ss h al lpo s tab ond i ns u c ha st hec o ur ts ha l ldi r e c t , c o ndi t i one dt ha ti ft hepe t i t i o nf o rl i qui da t i on i sdi s mi mi s s e db yt hec o ur t ,or wi t hdr a wn wnb yt hepe t i t i o ne r ,o ri ft hede bt o rs ha l lno tb ede c l a r e da ni ns o l v e nt t hepe t i t i one r swi wi l lpa yt ot hede bt o ral lc o s t s ,e x pe ns e s ,da ma ma ge soc c a s i o ne db y t hepr o c e e di ngsa nda t t or n e y' sf e e s .
ol ep r opr i e t or s hi p,apar t ne r s hi pand I nc ont r a s tt oi ndi vi dua lde bt or s ,as ac o r p or at i on ma ma yunde r goe i t he rr e ha bi l i t a t i onorl i qui da t i on.The y ,ho we we v e r ,
c a nno tpr ope r l ya v a i lo fs us p e ns i o no fpa y me me nt s . Re ha bi l i t a t i on r e f e r st ot her e s t or a t i on oft hede bt ort oac o ndi t i on of
s uc c e s s f ulope r a t i ona nds o l ve nc y ,i fi ti ss hownt ha ti t sc ont i nua nc eofope r a t i on c o nomi c a l l yf e a s i bl ea r edi t or sc a nr ec o ve rbywa yo ft hepr es ent i se nd i t sc
,mor ei ft he v a l ueo fpa y me ment spr oj ec t e di nt hepl a n( pr es entv a l uer ec o ve r y ) 8 de b t orc o nt i nue sa sago i ngc o nc e r nt ha ni fi ti si mme di a t e l yl i qui da t e d. The
pur po s eo fr e ha b i l i t a t i o n pr o c e e di ng si st oe na b l et hec o mp mpa n yt og a i nane w l e a s eonl i f eandt he r e b ya l l ow c r e di t or st obepa i dt he i rc l a i msf r om i t se a r ni ngs9. bt ormay I ti same a nst or e or g ani z eade b t or ’ sfina nc i a la ffa i r ss ot ha tt he de c o nt i nuet oe x i s tasafinanc i ale n t i t y wi t hc r e di t or ss a t i s f yi ngt he i rc l a i msf r o m ,
t hede bt or ’ sf ut ur ee ar n i ngs . The r ea r e3k i ndsofr e ha b i l i t a t i o npr o c e e di ng sunde rt heFRI A,na me me l y , c our t s upe r vi s e dr e ha bi l i t a t i on,pr e ne got i a t e dr e ha bi l i t a t i on a nd out of c o ur t r e habi l i t at i on. o u r t s u p e r v i s e d The fir s t ki nd of r e habi l i t at i on pr oc e e di ng i s c r e h a b i l i t a t i o nwhi c hma ye i t he rb ev ol unt a r yori n vol unt a r y .
8Ibid,Sec.4(gg). 9 Ex pr e s sI n ve s t me nt sI I IPr i v at eLt d.v .Ba y a nT e l e c o mm mmuni c a t i o ns , I nc . ,G. R.No s .1 7 44 5 75 9 ,De c e mb mbe r5 , 2 0 1 2 ,6 8 7S CRA5 0 ,8 6 8 7
o l unt a r yp r o c e e d i ng sf sf I nv orc o ur t s upe r v i s e dr e ha bi l i t a t i on,ade bt orma ma y onl ybeaj ur i di c a lpe r s on-e i t he ras ol epr opr i e t or s hi pdul yr e gi s t e r e dwi t ht he De pa r t me ntofTr a dea ndI ndus t r y( DTI ) ,apa r t ne r s hi pdul yr e g i s t e r e dwi t ht he S e c ur i t i e sa ndEx c h a ng eCo mm mmi s s i o n( S EC)o rac o r p or a t i o ndul yor g a ni z e da nd e x i s t i ngunde rPhi l i ppi nel a ws .10 I tdoe sno t ,ho we we v e r ,i nc l udeba nks ,i ns ur a nc e c o mp mpa ni e s ,pr e ne e dc o mp mpa ni e s ,a ndna t i o na la ndl o c a lg ov e r nme n ta g e nc i e so r uni t swi wi t ht hee x c e p t i onofgo ve r nme ntfina nc i a li ns t i t ut i o nso t he rt ha nba nks and GOCCswhi c hs hal lbe c ove r ed by FRI A,unl es st hei rs pec i fic c har t er pr o vi de so t he r wi s e . T oi ni t i a t es a i dpr oc e e di ngs , a ni ns o l v entde bt orma ma yfil eave r i fie dpe t i t i on f orr e ha bi l i t a t i onwi t ht hec our ta ndont hegr oundss pe c i fic a l l ypr o vi de di nt he Ac twhi c hmu mus tbepr e v i ous l yappr o ve db yt hef o l l o wi wi nge nt i t i e s11:
De bt or
Whe nI ni t i at e d
Sol epr opr i e t or s hi p
Whena ppr ove dbyt heo wner
Pa r t ne r s h i p
Whenappr ovedbyama maj ori t yoft hepart ner s
Co r po r a t i o n
When appr ovedbyamaj or i t yvot eoft heboar d ofdi r ec t or sor t r us t e e sa nda ut ho r i z e db yt hevo t eofs t o c kho l de r sr e pr e s e nt i nga t l e a s t2 /3 o ft he o ut s t a ndi ng c a p i t a ls t o c ki n as t o c kho l de r ’ s me e t i ngdul yc a l l e df o rt hepur po s eo ra tl e a s t2 /3oft heme me m mb b e r s ( no ns t o c kc o r p or a t i o n)i name me m mb b e r ’ sme me e t i ngdul yc a l l e df o rt he purpose
Thepe t i t i ons ha l lbeve r i fie dt oe s t a bl i s ht hei ns o l ve nc yoft hede bt ora nd t hevi a bi l i t yofi t sr e ha bi l i t a t i ona ndi nc l ude ,whe t he ra sa na t t a c hme ntora spa r t oft hebodyoft hepe t i t i on, a sami t hef ol l owi ng: ni mum ( a )I de nt i fic a t i onoft hede bt or , i t spr i nc i pa la c t i vi t i e sa ndi t sa ddr e s s e s ; ( b)S t a t e me me ntoft hef a c tofa ndt hec aus eoft hede bt or ' si ns o l v enc yori na bi l i t yt o pa yi t so bl i g a t i o nsa st he ybe c o me medue ; S e c .1 2 ,F RI A. 10
11Ibid.
( c )Thes pe c i ficr e l i e fs o ughtpur s ua ntt ot hi sAc t ; ( d)Thegr oundsuponwhi cht hepet i t i oni sbas ed; ( e)Ot heri nf or mat i on t hatma mayber equi r edundert hi sAc tdependi ng on t he f or m ofr e l i e fr e q ue s t e d; ( f )S c he dul eoft hede bt or ' sde bt sandl i a bi l i t i e si nc l udi ngal i s tofc r e di t or swi wi t h t he i ra ddr e s s e s ,a mo mount sofc l a i msa ndc ol l a t e r a l s , ors e c ur i t i e s ,i fa ny; ( g)Ani n ve nt or yofa l li t sa s s e t si nc l udi ngr e c e i v abl e sandc l a i msa ga i ns tt hi r d pa r t i e s ; ( h)ARe ha bi l i t a t i onPl a n; ( i )Thena me me sofa tl e a s tt hr e e( 3 )no mi mi ne e st ot hepos i t i o no fr e h abi l i t a t i on r e c e i ve r ; a nd ( j )Ot he rd oc u me me nt sr e q ui r e dt ob efil e dwi t ht hepe t i t i o npur s u a ntt ot hi sAc t 12 andt her ul esofpr oce dur easmaybepr omu mul gat edbyt heSupr eme meCour t .
I na l lc a s e s ,t hepe t i t i onmus ta l l e get ha tr e ha bi l i t a t i onoft hei ns ol ve nt de bt ori se c onomi c a l l yf e as i bl eandr e ha bi l i t a t i onr e s ul t si nbe t t e rpr e s e ntva l ue r e c o ve r yf ort hec r e di t or s . On t he ot he r ha nd, i n v o l unt a r y p r o c e e d i ng sf or c o ur t s upe r vi s e d r e ha bi l i t a t i on a r ej udi c i a li ns o l ve nc y pr oc e e di ngsi ns t i t ut e db y ac r e di t oror gr oupofc r e di t or sa ga i ns ta ni ns o l v e ntde bt or ,pr o vi de dt ha tt her e q ui r e me me nt so f t hel aw on numberofc r edi t or sorval ueofc l ai ms ,orbot hi sme met ;and t he c i r c ums t a nc er e qui r i ngr e ha bi l i t a t i oni sal l e ge da ndt he r e a f t e re s t a bl i s he d.The FRI Ae xpl i c i t l ypr o vi de st ha t : Se c t i o n1 3 .Ci r c u ms ms t a nc e sNe c e s s a r yt oI ni t i a t eI nv o l unt a r y Pr o c e e d i ng s .-Any
c r e di t oro rg r o upo fc r e di t o r swi wi t hac l a i m of ,o rt hea ggr e g at eofwho s ec l a i msi s , a tl e a s tOneMi Mi l l i o nPe s o s( Php1 , 0 0 0, 0 0 0. 0 0 )o ra tl e a s tt we nt y fiv epe r c e nt( 2 5 %) %) oft hes ubs c r i be dc a pi t a ls t oc ko rpa r t ne r s 'c o nt r i but i ons ,whi c he ve ri shi ghe r , ma yi ni t i a t ei n vol unt a r ypr oc e e di ngsa ga i ns tt hede bt o rbyfil i ngape t i t i onf o r r e ha bi l i t a t i onwi t ht hec our ti f : ( a )t he r ei snog e nui nei s s ueoff a c to nl a wo nt hec l a i m/so ft hepe t i t i o ne r /s , a nd t hatt hedueanddema mandabl epayme ment st here onhavenotbeenma madef oratl eas t bt orha sf a i l e dg ene r a l l yt ome e ti t sl i a bi l i t i e sas s i x t y( 6 0 )da y so rt h att hede
or t he yf a l ldue;
12Ibid.
( b)ac r e di t or ,o t h ert ha nt hepe t i t i one r /s ,ha si ni t i a t e df or e c l os ur epr o c e e di ngs e v e ntt hedebt o rf r o m pa y i ngi t sde b t sast hey a ga i ns tt hede bt ort ha twi l lpr be c o me medueo rwi l lr e nde ri ti ns o l v e nt .
Toi ni t i a t es a i dpr o ce edi ngs ,t hec r e di t or /s ' pe t i t i onf orr e ha bi l i t at i ons ha l l be ve r i fie dt oe s t abl i s ht he s ubs t ant i a ll i ke l i hood t hatt he de bt or ma y be r e ha bi l i t a t e d,a ndi nc l ude : ( a )i de nt i fic at i onoft hede bt ori t spr i nc i pa la c t i vi t i e sa ndi t sa ddr e s s ; ( b)t he c i r c ums t a nc e ss uffic i e ntt os uppo r ta pe t i t i o nt oi ni t i a t ei n vol unt a r y r e h abi l i t a t i onpr o c e e di ngsunde rS e c t i on1 3oft hi sAc t ; ( c )t hes pe c i ficr e l i e fs o ughtunde rt hi sAc t ; ( d)aRe ha bi l i t a t i onPl a n; ( e )t hena me me sofa tl e a s tt hr e e( 3 )no mi mi ne e st ot hepo s i t i on ofr e ha bi l i t a t i o n r e c e i v e r ; ( f )o t he ri nf o r ma ma t i o nt ha tma yber e q ui r e dunde rt hi sAc tde pe ndi ngo nt hef o r m ofr e l i e fr e que s t e d;a nd ( g )o t he rd oc u me me nt sr e q ui r e dt ob efil e dwi t ht hepe t i t i o npur s u a ntt ot hi sAc t 13 andt her ul esofpr oce dur easmaybepr omu mul gat edbyt heSupr eme meCour t .
e ne g ot i at e d The s e c ond ki nd of r e habi l i t at i on pr oc e edi ng i s pr r e habi l i t at i onwhi c hi sc om mm menc ed by t hefil i ng ofaver i fied pet i t i on byan
i ns ol ve ntde bt or ,byi t s e l forj oi nt l ywi t ha nyofi t sc r e di t or s ,wi t ht hec our tf ort he a ppr o va lo fapr e ne g ot i a t e d Re ha b i l i t a t i o n Pl a n whi c hha sbe e ne ndo r s e do r a ppr ove dbyc r e di t or shol di nga tl e as tt wot hi r ds( 2 /3 )oft het ot a ll i a bi l i t i e sof t hede b t or ,i nc l udi ngs e c ur e dc r e di t or shol di ngmor et ha nfif t ype r c e n t( 5 0 %) %)o f t het o t a ls e c ur e dc l a i mso ft hede bt o ra nduns e c ur e dc r e di t or sho l di ngmor et ha n 1 4 fif t ype r c e nt( 5 0 %) %)oft het o t a luns e c ur e dc l a i mso ft hede bt or .
ni mum: Thepe t i t i ons ha l li nc l udeasami ( a )as c he dul eoft hede bt or ' sde bt sa ndl i a bi l i t i e s ; ( b)a ni nve nt or yoft hede bt or ' sa s s e t s ; ( c )t hepr e ne go t i a t e dRe ha bi l i t a t i onPl a n,i nc l udi ngt hena me me sofa tl e a s tt hr e e ( 3 )qua l i fie dnomi ne e sf orr e ha bi l i t a t i onr e c e i ve r ; a nd
S e c .1 4 ,F RI A. 13 Se c.7 6, I b i d . 14
( d)as ummar y ofdi s put ed c l ai msagai ns tt he debt orand a r epor ton t he pr ovi s i oni ng off undst o ac countf orappr opr i at epayme ment sshoul d any s uch 15 c l a i msb er ul e dv al i do rt he i ra mo mo unt sa dj us t e d.
Thet hi r dki ndofr e ha bi l i t a t i onpr oc e e di ngi sout of c our tr e habi l i t at i on whi c hi sa ne x t r a j udi c i a li ns o l v e nc ypr oc e e di nga ndi nv ol v e st hene go t i a t i ona nd event ualappr ovalofanO nOut o f Co ur to rI nf o r ma lRe s t r u c t ur i ngAg r e e me nt( o ra n Out o f Co u r to rI nf o r ma lWo Wo r k o ut Ag r e e me nt ,o ra n Out o f Co u r to rI nf o r ma l 1 6 Re h ab i l i t a t i o nPl a n) .
Pur s ua ntt oS e c .8 4oft heFRI A,a nout of c o ur tori nf or ma lr e s t r uc t ur i ng agr e e me nt or Re habi l i t at i on Pl an mus t me e tt he f ol l ow wi i ng mi ni mum r e q ui r e me me nt s : ( a )T hede b t o rmu mus ta g r e et ot heout o f c o ur to ri nf o r ma ma lr e s t r uc t ur i ng /wo r k o ut a gr e e me me nto rRe ha bi l i t a t i onPl a n; ( b)I tmus tbea ppr o v e db yc r e di t or sr e pr e s e nt i nga tl e a s ts i x t y s e v e n( 6 7%)oft he s e c ur e dobl i ga t i onso ft hede bt or ; ( c )I tmu mus tb ea ppr o v e db yc r e di t o r sr e p r e s e nt i nga tl e a s ts e v e nt y fiv epe r c e n t ( 7 5 %) %)oft heuns e c ur e dob l i g at i onso ft hede b t o r ; a nd ( d)I tmus tbea ppr o v e db yc r e di t o r sh ol di nga tl e a s te i ght y fiv epe r c e nt( 8 5 %) %)o f t het o t a ll i a bi l i t i e s ,s e c ur e da nduns e c ur e d,oft hede bt or .
Thebe ne fitofa nout of c o ur tr e ha bi l i t a t i oni st ha tt hepa r t i e sma ma ya gr e et oa s t ands t i l lpe r i od,pe ndi ng ne g ot i a t i o na nd fina l i z a t i o n oft heout o f c o ur to r
i nf or ma lr e s t r uc t ur i ng/wor k outa gr e e me me ntorRe ha bi l i t a t i onPl a n,whi c hs h al lbe e ffe c t i v ea nde nf or c e a bl enotonl ya ga i ns tt hec ont r a c t i ngpa r t i e sbuta l s oaga i ns t t heot he rc r e di t or s :Pr o vi de d,Tha t( a )s uc ha gr e e me me nti sa ppr o ve db yc r e di t or s r e pr e s e nt i ngmor et ha nfif t ype r c e nt( 5 0%)oft het ot a ll i a bi l i t i e soft hede bt or ;( b) no t i c et he r e o fi s pub l i s hi ng i n a ne ws pa pe ro fg e ne r a lc i r c u l a t i o ni nt he Phi l i ppi ne sonc eawe e kf o rt wo( 2 )c o ns e c ut i v ewe e ks ;a nd ( c )t hes t a nds t i l l
15Ibid. Go m me e z S ome r a ,S .( 2 0 1 1 ) . p.9 8 3 9 8 4 .AnOut Cr e d i tTr a ns a c t i o ns : No t e sa ndCa s e s ,Vo l .I I , o f Co ur to r 16 sac o ns e ns ua lc o nt r a c tbe t we e na ni ns o l v e ntde bt o ra ndi t sc r e di t o r st ha ta me me nds I n f o r ma lRe h a bi l i t a t i o nPl a ni o rmo mo di fie st het e r mso ft hec l a i msa g a i ns tt hede b t o r .
pe r i od doe s note xc ee d one hundr e dt we nt y( 12 0)da ys f r om t he dat e of 17 e ffe c t i vi t y .
As i de f r o m r e ha bi l i t a t i o n,a s o l e pr opr i e t o r s hi p,a pa r t ne r s hi pa nd a c o r por a t i onma ya l s oa va i lofl ur i di c a lde bt ormu mus tbei ns o l v e nt i qui da t i on.Thej e i t he runde rt hei l l i qui di t yore qui t yc o nc e ptorb al a nc es he e tc onc e pt .I ne v er y c a s e ,t her e ha bi l i t a t i onoft hej ur i di c a lde bt ors houl dnotbeec onomi c a l l yf e as i bl e ordoe snotr e s ul ti nbe t t e rpr e s e ntva l uer e c o ve r yf ort hec r e di t or s . Aspr e vi ous l y me nt i o ne d,t hepur pos eo fl i qui da t i o ni st or e d uc et hede b t o r ’ sas s e t st oc a s h, di s c har gi ngi t sl i abi l i t i e sanddi vi di ngt hes ur pl usorr e a l l oc a t i ngt hel os s . 1 8 I nt hec a s eofPh i l i p p i neVe t e r a n sBa n kEmp l o y e e sUni o n NUBEv .Ve g a , t he
S upr e me meCour tdi s t i ngui s h ed l i qui da t i onf r om r e ha bi l i t a t i on.I nt ha tc a s e ,t he c our ts t a t e d: Li qui da t i on,i nc o r po r a t i o nl a w,c o nno t e sawi wi ndi ngupo rs e t t l i ngwi t hc r e di t o r s a ndde bt or s . I ti st hewi wi ndi ngupofac or p or a t i ons ot ha ta s s e t sa r edi s t r i but e dt o t ho s ee nt i t l e dt or e c e i v et he m m. .I ti st hepr o c e s sofr e duc i ng a s s e t st oc a s h, di s c ha r gi ngl i a bi l i t i e sa nddi vi di ngs ur pl uso rl os s . On t he oppos i t e end oft he s pect r um i sr ehabi l i t at i on whi c hc onnot es a r eopeni ng or r eor gani zat i on.Rehabi l i t at i on cont emp mpl at es a cont i nuance of c or por a t el i f eanda c t i vi t i e si na ne ffor tt or e s t or ea ndr e i ns t a t et hec or por a t i ont o i t sf or me me rpos i t i onofs uc c e s s f ulope r a t i ona nds o l v enc y . I ti sc r ys t a lc l e art ha tt hec o nc e p to fl i qui da t i o ni sdi a me me t r i c a l l yo ppo s e do r c o nt r a r yt ot hec onc e ptofr e ha bi l i t a t i on, s u c ht ha tb ot hc a n no tb eunde r t a k e na t
t hes a me met i me .( Ci t a t i o nso mi mi t t e d)
Thedi ffe r e nc eb e t we e nt he2pr o c e e di ngswa sa l s ohi g hl i ght e di nt hec a s eo fB fBPI 1 9 v .Sa r a b i aMa n o rHo Ho t e lCo r p . wher et he Supr em me eCour t ,c i t i ng Wo nde rBoo k
Co r p o r a t i o nv .Ph i l i p pi neBa nko fCo mmuni c a t i o ns , e xpl a i ne dt ha t : S e c .8 5 ,F RI A. 17 G. R.No .1 0 5 3 64 ,J une2 8 ,2 0 0 1 .Whi l et hec a s ewa sde c i de db e f o r et heFRI At o oke ffe c t ,t hedi s t i nc t i o n 18 be t we e nl i qui dat i onandr e habi l i t at i oni ss t i l lappl i c abl eunde rt hes ai dAc t . G. R.No .1 7 58 4 4,J ul y2 9 ,2 0 13 . 19
Re ha bi l i t a t i oni sxxxa va i l a bl et oac or por a t i on[ whi c h] ,whi l ei l l i qui d,ha sas s e t s i qui di t y t ha tc a ng ene r a t emo mor ec a s hi fus e di ni t sda i l yope r a t i onst ha ns o l d.I t sl i s suescan be addr es s ed by a pr ac t i c abl e busi nes spl an t h atwi l lge ne r a t e
e no ughc a s ht os u s t a i nda i l yo pe r a t i ons ,ha sade fini t es o ur c eo ffi na nc i ngf ori t s pr operand f ul li mpl eme ment at i on,and anchore d on r eal i s t i cass umpt i onsand sr eme medy s houl d be deni ed t oc or por at i onswh whos ei nsol venc y goal s .Thi a ppe a r st obei r r e ve r s i bl ea ndwhoses ol epur posei st odel ayt heenf orc eme mentof
a nyo ft her i ght so ft hec r e di t o r s , whi c hi sr e n de r e dob vi o usb yt hef o l l o wi wi ng:( a ) t hea bs e nc eo fas o unda ndwo r k a b l eb us i ne s spl a n;( b )b a s e l e s sa ndune x pl a i ne d a s s umpt i ons ,t a r g e t sa ndgoa l s ;( c )s pe c ul a t i v ec a pi t a li nf us i onorc o mp mpl e t el a c k t he r e o ff o rt hee x ec ut i o no ft hebus i ne s spl a n;( d)c a s hflo wc a nno ts us t a i nda i l y ope r a t i ons ; a nd( e )ne ga t i v ene twor t ha ndt hea s s e t sa r ene a rf ul lde pr e c i a t i onor f ul l yde pr e c i a t e d.
Forj ur i di c a lde bt or s ,l i qui da t i onma ya l s obev ol unt a r yori nvol unt a r y .I n vo l unt a r yl i q ui d a t i o n,a ni ns o l v e ntde b t orma ma ya ppl yf o rl i q ui da t i o nb yfil i nga or l i qui dat i on wi t ht he c our t or by fil i ng a mot oc o n ve r t pet i t i on f i on t r e ha bi l i t a t i on pr oc e e di ngsi nt ol i qui da t i on pr oc e e di ngs .The FRI Ae x pl i c i t l y p r o v i d e s : Se c t i o n9 0.Vo l unt a r yLi q ui d a t i o n .-Ani ns o l v e ntde bt orma ma ya ppl yf orl i qui da t i o n
byfil i ngape t i t i onf orl i qui dat i onwi t ht hec our t .Thepe t i t i ons hal lbeve r i fie d, s h a l le s t a b l i s ht hei ns o l v e nc yo ft hede b t o ra nd s h a l lc o nt a i n,whe t he ra sa n a t t a c hme nto ra spa r to ft hebo dyo ft hepe t i t i o n; ( a )as c h e dul eoft hede bt or ' sde bt sand l i a bi l i t i e si nc l udi ng al i s tof c r e di t or swi wi t ht he i ra ddr e s s e s ,a mo mo unt sofc l a i msand c o l l a t e r a l s ,or s e cur i t i e s ,i fa ny; ( b)a ni n ve nt or yofa l li t sa s s e t si nc l udi ngr e c e i va bl e sandc l a i msa ga i ns t t hi r dpa r t i e s ;a nd ( c )t hena me me sofa tl e a s tt hr e e( 3 )n omi ne e st ot hepos i t i onofl i qui da t or At any t i me duri ng t he pendenc y of c our t s uper vi s ed or pre negot i at ed r e h abi l i t a t i onpr o c e e di ngs ,t hede bt o rma ma ya l s oi ni t i a t el i qui da t i onpr o c e e di ngs byfil i ngamot i oni nt hes amec our twhe r et her e ha bi l i t a t i onpr oc e e di ngsa r e pe ndi ngt oc o nv e r tt her e ha bi l i t a t i o n pr o c e e di ngsi nt ol i qui da t i o n pr o c e e di ngs . Themo mo t i ons h al lb ev e r i fie d,s h a l lc o nt a i nors e tf o r t ht hes a me mema ma t t e r sr e qui r e d i nt hepr ec edi ng par agraph,and s t at et hatt hedebt ori ssee ki ng i mmedi at e di s s o l ut i ona ndt e r mi mi na t i onofi t sc o r por a t ee xi s t e nc exx x
I nvo l unt a r yl i q ui d a t i o n,ont c r e d i t o r s heot herhand,ma ybec om mm me nc e dby yc byfil i ngape t i t i onf orl i qui dat i onorbyfil i ngamot i ont oc onve r tr e habi l i t at i on pr oc e e di ngsi nt ol i qui da t i onpr oc e e di ngs . TheFRI Ae x pl i c i t l ypr o vi de s : Se c t i o n9 1 .I nv o l unt a r yLi q ui d at i o n.-Thr e e( 3 )ormo mo r ec r e di t o r st hea ggr e g at eof
who s ec l a i msi sa tl e a s te i t he rOnemi l l i o n pe s o s( Php1 , 0 0 0, 0 0 0, 0 0 )o ratl e a s t t went yfive per ce nt ( 25%0 %0 of t he s ubsc r i bed c api t al s t ock or par t ner ' s c o nt r i b ut i o nsoft hede b t o r ,whi c h e v e ri shi g he r ,ma ya ppl yf o ra nd s e e kt he l i qui da t i onofa ni ns o l v entde bt orb yfil i ngape t i t i onf orl i qui da t i onoft hede bt or wi t ht hec o ur t .Thepe t i t i ons ha l ls h ow t ha t : ( a)t her ei sno genui nei ss ueoff actorl aw on t he cl ai ms /soft he pet i t i oner /s ,andt hatt hedueanddema mandabl epayme ment st her eonhave notbeenmadef oratl eas tonehundr edei ght y( 180)daysort hatt he de bt orha sf a i l e dge ne r a l l yt ome eti t sl i a bi l i t i e sast he yf a l l due ;a nd ( b)t he r ei snos ubs t a nt i a ll i ke l i hoodt ha tt hede bt orma ma yber e ha bi l i t a t e d. Ata nyt i medur i ngt hepe nde nc yofo ra f t e rar e ha bi l i t a t i o nc o ur t s u pe r v i s e do r pr e ne go t i a t e dr e ha bi l i t a t i o n pr oc e e di ngs ,t hr e e( 3 )o rm mo or ec r e di t or swh whos e c l a i msi sa tl e a s te i t he rOnemi mi l l i onpe s o s( P hp1 , 0 0 0, 0 0 0. 0 0 )o ra tl e a s tt we nt y fi ve pe r c e n t( 2 5%)oft hes ubs c r i be dc a pi t a lorpa r t ne r ' sc o nt r i but i onsoft hede bt or , whi c h e ve ri shi ghe r ,ma ya l s oi ni t i a t el i qui da t i onpr o c e e di ngsb yfil i ngamo mo t i o n i nt hes a me mec o ur twhe r et her e h a bi l i t a t i o npr o c e e di ng sa r epe ndi ngt oc o n ve r t t her e ha bi l i t a t i o npr o c e e di ngsi nt ol i qui da t i onpr oc e e di ngs .Themo t i ons h a l lb e v e r i fie d,s h a l lc o nt a i no rs e tf o r t ht hes a me mema ma t t e r sr e q ui r e di nt hepr e c e di ng pa r a gr a ph,a nds t a t et ha tt hemo mo va nt sa r es e e k i ngt hei mme di a t el i q ui da t i o no f t hede bt o r . I ft hepe t i t i o no rmo mo t i oni ss u ffic ffic i e nti nf or ma nds ub s t a nc e ,t hec our ts h al li s s ue anOr Or der : ( 1 )d i r e c t i ngt hepubl i c a t i ono ft hepe t i t i o normo mo t i o ni nane ws ws p ape ro f g e ne r a lc i r c ul a t i o nonc eawe we e kf o rt wo( 2 )c o ns e c u t i v ewe we e ks ; a nd ( 2 )di r e c t i ngt hede bt o ra nda l lc r e di t or swh whoa r eno tt hepe t i t i o ne r st o fil et he i rc o mm mme nto nt hepe t i t i o no rmo mo t i onwi wi t hi nfif t e e n( 1 5 )da ysf r o m t heda t eofl a s tpubl i c a t i on.
Thec ec o u r tma ya l s oor de rt hec o nv e r s i ono fr e ha bi l i t a t i onpr oc e e di ngst o l i qui dat i on pr ocee di ngs dur i ng t he pendency of c our t s uper vi s ed or pr e20 ne got i a t e dr e ha bi l i t a t i onpr oc e e di ngs .
S e c .9 2 ,F RI A. 20
