Financial Rehabilitation and Insolvency Act (FRIA) of 2010

Section 1

An insolvent debtor, by itself or jointly with any of its creditors, may file a verified petition with the court for the approval of a Pre-Negotiated Rehabilitation Plan. The petition shall comply with Section 2 (A), Rule 2 of these Rules, where applicable, and be supported by an affidavit showing the written approval or endorsement of 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. Further, the petition shall also include as a minimum the following: a Schedule of Debts and Liabilities which lists all the creditors of the debtor, indicating the name and last address of record of each creditor; the amount of each claim as to principal, interest, or penalties due thirty (30) days prior to the date of filing; the nature of the claim; and any pledge, lien, mortgage, judgment or other security given for the payment thereof; an Inventory of Assets which must list with reasonable particularity all the assets of the debtor, whether in the possession of the debtor or third parties, stating the nature of each asset, its location and condition, its book value and market value, and attaching the corresponding certified copy of the certificate of title thereof in case of real property, or the evidence of title or ownership in case of movable property, the encumbrances, liens or claims thereon, if any; and the identities and addresses of the lien holders and claimants. The Inventory shall include:a Schedule of Accounts Receivable which must indicate the amount of each account, the persons from whom due and their correct addresses, the dates of maturity, and the potential for collectability categorizing them as highly collectible to remotely collectible; anda Schedule of Existing Claims against third parties which must indicate the name and last address of record of each third party against whom the debtor has a claim; the nature and amount of the claim, including the principal, interest, or penalties due from each third party and any pledge, lien, mortgage, judgment or other security or collateral given for the payment of each claim; and a brief statement of the facts which gave rise to the claim; an Inventory of Assets which must list with reasonable particularity all the assets of the debtor, whether in the possession of the debtor or third parties, stating the nature of each asset, its location and condition, its book value and market value, and attaching the corresponding certified copy of the certificate of title thereof in case of real property, or the evidence of title or ownership in case of movable property, the encumbrances, liens or claims thereon, if any; and the identities and addresses of the lien holders and claimants. The Inventory shall include: a Schedule of Accounts Receivable which must indicate the amount of each account, the persons from whom due and their correct addresses, the dates of maturity, and the potential for collectability categorizing them as highly collectible to remotely collectible; and a Schedule of Existing Claims against third parties which must indicate the name and last address of record of each third party against whom the debtor has a claim; the nature and amount of the claim, including the principal, interest, or penalties due from each third party and any pledge, lien, mortgage, judgment or other security or collateral given for the payment of each claim; and a brief statement of the facts which gave rise to the claim; 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; an Affidavit of General Financial Condition which shall contain answers to the questions or matters prescribed in Annex "A" of these Rules; and the Pre-Negotiated Rehabilitation Plan, including the names of at least three (3) qualified nominees for rehabilitation receiver; All attachments to the petition shall be deemed part and parcel of the verified petition.

Section 2

Within five (5) working days from the date of filing the petition, if the court determines that the petition is sufficient in form and substance, it shall issue an Order which shall: identify the debtor, its principal business or activity/ies and its principal place of business; declare that the debtor is under rehabilitation; summarize the ground/s for the filing of the petition; direct the publication of the Order in a newspaper of general circulation in the Philippines once a week for at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of its issuance; 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 from the issuance of the Order; state that copies of the petition and the Pre-Negotiated Rehabilitation Plan are available for examination and copying by any interested party; state that if no verified objection to the petition or the Pre-Negotiated Rehabilitation Plan is submitted with the court within eight (8) days from the date of the second publication of the Order required under Subsection (D) above, the court shall approve the Pre-Negotiated Rehabilitation Plan within ten (10) days from the date of the second publication of the Order, pursuant to Section 4 of this Rule; state that creditors and other interested parties may submit their comments on the petition or the Pre-Negotiated Rehabilitation Plan within a period of not later than twenty (20) days from the second publication of the Order, under Section 6 of this Rule; appoint a rehabilitation receiver, if not provided for in the Pre-Negotiated Rehabilitation Plan; and impose a Suspension or Stay Order as described in these Rules.

Section 3

The Order shall have the same effects as a Commencement Order under Section 9, Rule 2 of these Rules. It shall retroact to the date of the filing of the petition and shall be effective for one hundred twenty (120) days from the filing of the petition unless earlier lifted by the court on account of (a) the approval of the Pre-Negotiated Rehabilitation Plan, or (b) the termination of the rehabilitation proceedings.

Section 4

If no verified objection to the petition or the Rehabilitation Plan is filed within eight (8) days from the date of the second publication of the Order provided in the preceding section, the court shall approve the rehabilitation plan within ten (10) days from the date of the second publication of such order. The approved rehabilitation plan shall not be implemented until after the lapse of twenty (20) days from the date of the second publication of the Order, unless the court conducts a hearing pursuant to Section 7 of this Rule to consider the comments filed within twenty (20) days from the date of the second publication of the Order.

Section 5

Any creditor or other interested party can only object on the following limited grounds: the allegations in the petition or the Pre-Negotiated Rehabilitation Plan, or the attachments thereto, are materially false or misleading; the majority of any class of creditors do not in fact support the Pre-Negotiated Rehabilitation Plan; the support of the creditors or any of them was induced by fraud; or the Pre-Negotiated Rehabilitation Plan fails to accurately account for a claim against the debtor and the claim is not categorically declared as a contested claim. The objection must be submitted to and received by the court not later than eight (8) days from the date of the second publication of the Commencement Order. Copies of any objection to the petition or the Pre-Negotiated Rehabilitation Plan shall be served on the debtor, the rehabilitation receiver (if applicable), the secured creditor with the largest claim and who supports the Pre-Negotiated Rehabilitation Plan, and the unsecured creditor with the largest claim and who supports the Pre-Negotiated Rehabilitation Plan.

Section 6

Any creditor or other interested party may submit his comments on the petition or the Pre-Negotiated Rehabilitation Plan based on grounds other than those enumerated in Section 5 of this Rule.

Section 7

After receipt of objections under Section 5 and comments under Section 6, both of this Rule, the court shall set the case for hearing not earlier than twenty (20) days nor later than thirty (30) days from the date of the second publication of the Order issued pursuant to Section 2 of this Rule. If the court finds the objection meritorious, it shall direct the debtor, when feasible, to cure the defect within fifteen (15) days from receipt of the order. If the court determines that the debtor or creditors supporting the Pre-Negotiated Rehabilitation Plan acted in bad faith, or that the objection is non-curable, the court may convert the rehabilitation proceedings into liquidation. A finding by the court that the objection has no substantial merit or that the same has been cured shall be deemed an approval of the Pre-Negotiated Rehabilitation Plan.

Section 8

The court shall have a maximum period of one hundred twenty (120) days from the filing of the petition to approve or disapprove the Pre-Negotiated Rehabilitation Plan filed under this Rule. If the court fails to so act within the said period, the Pre-Negotiated Rehabilitation Plan shall be deemed approved. In such a case, the court shall certify that no action has been made within the one hundred twenty (120)-day period and the Pre-Negotiated Plan is deemed approved pursuant to Section 81 of the Act.

Section 9

Approval of the Pre-Negotiated Rehabilitation Plan under this Rule shall have the same legal effect as confirmation of a rehabilitation plan under Section 66, Rule 2 of these Rules.