Philippine Financial Rehabilitation And Insolvency Act (FRIA) of 2010 PDF

REPUBLIC ACT NO. 10142 AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS SECTION 1. TITLE. – "FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) OF 2010" www.teamprtc.com.ph ...

REPUBLIC ACT NO. 10142 AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS SECTION 1. TITLE. – "FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) OF 2010" www.teamprtc.com.ph  SECTION 3. NATURE OF PROCEEDINGS The proceedings (rehabilitation and liquidation) shall be in rem; An action or proceeding in rem – ❑ one instituted against a thing/property, and not against a particular person; ❑ its object is the disposition of the property, without reference to the title of individual claimants; ❑ Jurisdiction over all persons is acquired upon publication of the notice of the commencement of the proceedings in any newspaper of general circulation in the Philippines xxx; www.teamprtc.com.ph DEFINITION OF SOME TERMS Debtor – has become insolvent: Individual Debtor ❑ sole proprietorship duly registered with the ❑ a natural person who is a resident DTI; and citizen of the Philippines that has ❑ partnership duly registered with the SEC; become insolvent as defined herein. ❑ corporation duly organized and existing under Philippine laws, or ▪ Term debtor does not include ❑ individual. banks, insurance companies, pre- need companies, and national and Group of Debtors: local government agencies or units. 1) corporations that are financially related to one (Sec. 5 – Exclusions) another as parent corporations, subsidiaries or affiliates; Encumbered Property 2) partnerships that are owned more than fifty ❑ real or personal property of the percent (50%) by the same person; and debtor upon which a lien attaches. 3) single proprietorships that are owned by the same person. www.teamprtc.com.ph Rehabilitation Rehabilitation Plan ❑ the restoration of the debtor to a ❑ a plan by which the financial well- condition of successful operation and being and viability of an insolvent solvency, if it is shown that its debtor can be restored by using continuance of operation is various means xxx or similar economically feasible and its creditors arrangements as may be approved by can recover xxx. the court or creditors. Rehabilitation Receiver Subsidiary ❑ the person or persons, natural or ❑ a corporation more than fifty percent juridical, appointed as such by the (50%) of its voting stock is owned or court and which shall be entrusted controlled, directly or indirectly, with such powers and duties as set through one or more intermediaries by forth herein. another corporation, which becomes its parent corporation. www.teamprtc.com.ph  LIABILITY OF INDIVIDUAL DEBTOR, OWNER OF A SOLE PROPRIETORSHIP, PARTNERS IN A PARTNERSHIP, OR DIRECTORS AND OFFICERS OF CORPORATIONS (Sec. 10) b. Conceal or authorize or approve ❑ Liability – Double the value of the property sold, the concealment, from the embezzled or disposed of or double the amount of the creditors, or embezzles or transaction involved, whichever is higher misappropriates, any property of the debtor. ❑ Having notice of the commencement of the proceedings, or having reason to believe that proceedings are about to be commenced, or in Embezzlement contemplation of the proceedings, willfully commit the ❑ fraudulent taking of personal following acts: property by someone to whom it was entrusted; a. Dispose or cause to be disposed of any property of the debtor other than in the ordinary course of business or ❑ Most often associated with the authorize or approve any transaction in fraud of creditors misappropriation of money; or in a manner grossly disadvantageous to the debtor and/or creditors; or www.teamprtc.com.ph  COURT-SUPERVISED REHABILITATION 1. VOLUNTARY; 2. INVOLUNTARY Voluntary Proceedings – Initiated by Debtor (Sec. 12); ❑ Approved by the debtor – ▪ owner (a sole proprietorship); ▪ majority of the partners (partnership); or ▪ majority vote of the board of directors or trustees and authorized by 2/3 votes of the stockholders representing outstanding capital stock, or in case of non-stock, by the vote of at least 2/3 of the members (corporation). ❑ HOW? By filing a petition for rehabilitation with the court. www.teamprtc.com.ph Involuntary Proceedings – Initiated by creditor or group of creditors (Sec. 13) ❑ With a claim of, or aggregate claims of at least Php1 million, or at least 25% of the subscribed capital stock or partners' contributions, whichever is higher. ❑ HOW? By filing involuntary proceedings against the debtor; ❑ REQUIREMENTS: a. there is no genuine issue of fact or law on the claim/s of the petitioner/s, and that the due and demandable payments thereon have not been made for at least sixty (60) days or that the debtor has failed generally to meet its liabilities as they fall due; or b. a creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor that will prevent the debtor from paying its debts as they become due or will render it insolvent. www.teamprtc.com.ph ACTION ON THE PETITION (Sec. 15) ❑ If the petition for rehabilitation is sufficient in form and substance, the Court 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. ▪ Here, the 5 working days 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. www.teamprtc.com.ph IMPORTANT MATTERS INCLUDED IN THE COMMENCEMENT ORDER (Sec. 16) ❑ The rehabilitation proceedings shall commence upon the issuance of the Commencement Order; ❑ Commencement Order, among others, shall: ▪ Declare that the debtor is under rehabilitation; ▪ Direct the publication of the Commencement Order in a newspaper of general circulation in the Philippines; ▪ Appoint a rehabilitation receiver who may or not be from among the nominees of the petitioner/s; ▪ Direct BIR to file its comment on or opposition to the petition; ▪ Set the case for initial hearing (not be more than 40 days from the date of filing of the petition); ▪ Include Stay or Suspension Order. www.teamprtc.com.ph EFFECTS OF THE STAY OR SUSPENSION ORDER: EXCEPTIONS TO THE STAY OR SUSPENSION ORDER (Sec. 18) 1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against The Stay or Suspension Order shall not the debtor; apply to: 2) suspend all actions to enforce any judgment, a) cases already pending appeal in the attachment or other provisional remedies Supreme Court as of commencement against the debtor; date; 3) prohibit the debtor from selling, encumbering, b) cases pending or filed at a specialized transferring or disposing in any manner any of court or quasi-judicial agency; its properties except in the ordinary course of business; c) enforcement of claims against sureties and other persons solidarily liable with 4) prohibit the debtor from making any payment the debtor, and third party or of its liabilities outstanding as of the accommodation mortgagors xxx. commencement date. www.teamprtc.com.ph EFFECTS OF THE COMMENCEMENT ORDER (Sec. 17) a) vest the rehabilitation with all the powers and SECTION 21. EFFECTIVITY AND functions provided for this Act; DURATION OF COMMENCEMENT ORDER (Sec. 21) ❑ the right to review and obtain records xxx, including bank accounts of the debtor subject to ❑ Commencement Order shall be the approval by the court and posting of the effective for the duration of performance bond filed by the rehabilitation the rehabilitation proceedings receiver; ❑ Provided – there is a substantial b. prohibit or render as null and void the results of any likelihood that the debtor will be extrajudicial activity or process to seize property, sell successfully rehabilitated. xxx encumbered property, or otherwise attempt to collect or enforce a claim against the debtor after commencement date. www.teamprtc.com.ph SECTION 22. ACTION AT THE INITIAL HEARING (Sec. 22) The court shall: SECTION 23. EFFECT OF FAILURE a) determine the creditors who have made timely and TO FILE NOTICE OF CLAIM (Sec proper filing of their notice of claims; 23) b) hear and determine any objection to the qualifications of ❑ A creditor whose claim is not the appointment of the rehabilitation receiver and, if listed in the schedule of debts necessary appoint a new one xxx; and liabilities and who fails to file a notice of claim xxx but c) direct the creditors to comment on the petition and the subsequently files a belated Rehabilitation Plan, and to submit the same to the court claim shall not be entitled to and to the rehabilitation receiver within a period of not participate in the rehabilitation more than 20 days; and proceedings but shall be entitled to receive distributions arising d) direct the rehabilitation receiver to evaluate the financial therefrom. condition of the debtor and to prepare and submit his/her report to the court within 40 days from initial hearing. www.teamprtc.com.ph GIVING DUE COURSE TO OR b) dismiss the petition upon a finding DISMISSAL OF PETITION, OR that: CONVERSION OF PROCEEDINGS 1) debtor is not insolvent; (Sec. 25) 2) petition is a sham filing intended only to delay the enforcement of c) convert the Within 10 days from receipt of the report the rights of creditor/s or of any proceedings into of the rehabilitation receiver, the Court group of creditors; one for the may: 3) the petition, the Rehabilitation liquidation of the Plan and the attachments contain debtor upon a finding a) give due course to the petition any materially false or misleading that: upon a finding that: statements; or 1) debtor is 1) debtor is insolvent; and 4) debtor has committed acts of insolvent; and 2) there is a substantial misrepresentation or in fraud of 2) there is no likelihood for the debtor to be its creditor/s or a group of substantial successfully rehabilitated; creditors. likelihood for the debtor to be ❑ Here, rehabilitation receiver to shall ❑ Here, court may order petitioner to successfully review, revise and/or recommend pay damages to any creditor or to rehabilitated xxx. action on the Rehabilitation Plan and the debtor who may have been submit the same or a new one to the injured by the filing of the petition. court within 90 days. (Sec. 26) (Sec. 27) www.teamprtc.com.ph  REHABILITATION RECEIVER REMOVAL (Sec. 32) QUALIFICATIONS (Sec. 29) ❑ May be removed at any time by the court either motu proprio or upon motion by any creditor/s a) A citizen of the Philippines, or a holding more than 50% of the total obligations of resident of the Philippines in the 6 the debtor; months immediately preceding his nomination; ❑ Grounds for Removal: b) Of good moral character and with a) Incompetence, gross negligence xx; acknowledged integrity, b) Lack of a particular or specialized competency; impartiality and independence; c) Illegal acts or conduct in the performance of his c) Has the requisite knowledge of duties and powers; insolvency and other relevant d) Lack of qualification or presence of any commercial laws, rules and disqualification; procedures xxx; e) Conflict of interest that arises after his d) Has no conflict of interest. appointment; f) Manifest lack of independence. www.teamprtc.com.ph COMPENSATION AND TERMS OF CONFLICT OF INTEREST (Sec. 40) SERVICE (Sec. 33) ❑ Conflict of interest. ❑ Entitled to compensation for ❑ An individual shall be deemed to have a conflict of reasonable fees and expenses from the interest if he is so situated as to be materially debtor according to the terms influenced in the exercise of his judgment for or approved by the court after notice and against any party to the proceedings. xxx hearing. IMMUNITY (Sec. 41) ❑ Prior to such hearing – Quantum meruit – a reasonable sum of money to ❑ Rehabilitation receiver (and all persons employed be paid for services rendered or work by him) shall not be subject to any action claim done when the amount due is not or demand in connection with any act done or stipulated in a legally enforceable omitted to be done by them in good faith in contract. connection with the exercise of their powers and functions. www.teamprtc.com.ph X USE, PRESERVATION AND DISPOSAL OF ASSETS AND TREATMENT OF ASSETS AND CLAIMS AFTER COMMENCEMENT DATE Section 48. Use or Disposition of Assets. - Except as otherwise provided herein, no funds or property of the debtor shall be used or disposed of except in the ordinary course of business of the debtor, or unless necessary to finance the administrative VV expenses of the rehabilitation proceedings. Section 49. Sale of Assets. - The court, upon application of the rehabilitation receiver, may authorize the sale of unencumbered property of the debtor outside the ordinary course of business upon a showing that the property, by its nature or because of other circumstance, is perishable, costly to maintain, susceptible to devaluation or otherwise in jeopardy. www.teamprtc.com.ph X Section 50. Sale or Disposal of Encumbered Property of the Debtor and Assets of Third Parties Held by Debtor. The court may authorize the sale, transfer, conveyance or disposal of encumbered property of the debtor, or property of others held by the debtor where there is a security interest pertaining to third parties under a financial, credit or other similar transactions if, upon application of the rehabilitation receiver and with the consent of the affected owners of the property, or secured creditor/s in VVthe case of encumbered property of the debtor and, after notice and hearing, the court determines that: a. such sale, transfer, conveyance or disposal is necessary for the continued operation of the debtor's business; and b. 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. www.teamprtc.com.ph X Section 51. Assets of Debtor Held by Third Parties. – In the case of possessory pledges, mechanic's liens or similar claims, third parties who have in their possession or control property of the debtor shall not transfer, convey or otherwise dispose of the same to persons other than the debtor, unless upon prior approval of the rehabilitation receiver. Xxx Section 52. Rescission or Nullity of Sale, Payment, Transfer or Conveyance of Assets. – The VV court may rescind or declare as null and void any sale, payment, transfer or conveyance of the debtor's unencumbered property or any encumbering thereof by the debtor or its agents or representatives after the commencement date which are not in the ordinary course of the business of the debtor: Provided, however, That the unencumbered property may be sold, encumbered or otherwise disposed of upon order of the court after notice and hearing xxx. www.teamprtc.com.ph  Section 53. Assets Subject to Rapid Obsolescence, Depreciation and X Diminution of Value. – Upon the application of a secured creditor holding a lien against or holder of an ownership interest in property held by the debtor that is subject to potentially rapid obsolescence, depreciation or diminution in value, the court shall, after notice and hearing, order the debtor or rehabilitation receiver to take reasonable steps necessary to prevent the depreciation. If depreciation cannot be avoided and such depreciation is jeopardizing the security or property interest of the secured creditor or owner, the court shall: VV a) allow the encumbered property to be foreclosed by the secured creditor xxx; b) xxx order the conveyance of a lien against or ownership interest in substitute property of the debtor to the secured creditor xxx; c) order the conveyance to the secured creditor or holder of an ownership interest of a lien on the residual funds from the sale of encumbered property xxx; d) allow the sale or disposition of the property xxx. Obsolescence – uselessness; oldness; outmodedness. www.teamprtc.com.ph  TREATMENT OF SECURED CREDITORS Section 60. No Diminution of Secured Creditor Rights. ❑ The issuance of the Commencement Order and the Suspension or Stay Order shall not diminish or impair the security or lien of a secured creditor, or the value of his lien or security, except that his right to enforce said security or lien may be suspended during the VVterm of the Stay Order. ❑ The court xxx may allow a secured creditor to enforce his security or lien, or foreclose upon property of the debtor securing his/its claim, if the said property is not necessary for the rehabilitation of the debtor. www.teamprtc.com.ph  REHABILITATION PLAN (PLAN) 1. Rehabilitation receiver shall notify the Grounds for objections: creditors a Plan has been submitted to a) The creditors' support was induced by fraud; court – ready for examination; b) The documents or data relied upon in the Rehabilitation Plan are materially false or 2. Within 20 days from the notice, creditors misleading; or c) The Rehabilitation Plan is in fact not supported by shall convene to vote to approve the Plan the voting creditors. (Sec. 64); VV 5. If there is an objection, court shall issue an order 3. If Plan is approved, rehabilitation receiver shall setting time and date for the hearing (Sec. 67); submit the approved plan to court for confirmation (Sec. 65); 6. If the court finds merit in the objection, it shall order the rehabilitation receiver or other party to 4. Court shall notify the creditors, who may file cure the defect; an objection thereto (within 20 days from ❑ If debtor acted in bad faith, or that it is not receipt of notice) (Sec. 66); feasible to cure the defect, court shall convert the rehabilitation proceedings into liquidation of the debtor. www.teamprtc.com.ph ❑ Court shall issue an order confirming the Rehabilitation Plan (Sec. 68): 1. If no objections are filed; or 2. If objections are filed but the court finds them lacking in merit; or 3. The basis for the objection has been cured; or 4. Debtor has complied with an order to cure the objection. https://cdn-icons-png.flaticon.com/512/4087/4087900.png ❑ Court has maximum period of one (1) year to confirm a Rehabilitation Plan, counted from the date of the filing of the petition; ❑ If not confirmed within the said period, the proceedings may (upon motion or motu propio) be converted into one for the liquidation of the debtor. (Sec. 72) www.teamprtc.com.ph Termination of Rehabilitation Proceedings (Sec. 74) Effects of Termination (Sec. 75) ❑ Upon motion by any stakeholder or the rehabilitation a) The discharge of the rehabilitation receiver, be terminated by order of the court either receiver subject to his submission declaring a successful implementation of the of a final accounting; Rehabilitation Plan or a failure of rehabilitation. b) The lifting of the Stay Order and ❑ There is failure of rehabilitation in the following cases: any other court order holding in a) Dismissal of the petition by the court; abeyance any action for the b) Debtor fails to submit a Rehabilitation Plan; VV enforcement of a claim against the c) Under the Rehabilitation Plan xxx, there is no substantial debtor. likelihood that the debtor can be rehabilitated within a reasonable period; ❑ If the termination of proceedings is due to failure of rehabilitation or d) Debtor fails to perform its obligations under the dismissal of the petition for reasons Rehabilitation Plan or its amendment; other than technical grounds, the e) There is fraud in securing the approval of the proceedings shall be immediately Rehabilitation Plan or its amendment; and converted to liquidation. f) Other analogous circumstances as may be defined by the rules of procedure. www.teamprtc.com.ph  PRE-NEGOTIATED REHABILITATION Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with any of its creditors, may file a verified petition with the court for the approval of a pre-negotiated Rehabilitation Plan which has been endorsed or approved by 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 https://cdn-icons-png.flaticon.com/512/4087/4087900.png than fifty percent (50%) of the total unsecured claims of the debtor. Xxx 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. Xxx Similar contents with that of the Commencement Order). www.teamprtc.com.ph 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 Section 81. Period for Approval of Rehabilitation Plan unless a creditor or other Rehabilitation Plan. - The court shall have interested party submits an objection to it xxx. a maximum period of one hundred twenty (120) days from the date of the filing of the Section 79. Objection to the Petition or petition to approve the Rehabilitation Plan. Rehabilitation Plan. - Any creditor or other If the court fails to act within the said interested party may submit to the court a verified period, the Rehabilitation Plan shall be objection to the petition or the Rehabilitation https://cdn-icons-png.flaticon.com/512/4087/4087900.png deemed approved. Plan not later than eight (8) days from the date of the second publication of the Order xxx. Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have the Section 80. Hearing on the Objections. - After same legal effect as confirmation of a Plan receipt of an objection, the court shall set the under Chapter II of this Act. same for hearing – no earlier than twenty (20) days and no later than thirty (30) days from the date of the second publication of the Order xxx. www.teamprtc.com.ph  OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR REHABILITATION PLANS Section 83. Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans. – An out-of-court or informal restructuring agreement or Rehabilitation Plan that meets the minimum requirements prescribed in this chapter is hereby recognized as consistent with the objectives of this Act. Section 85. Standstill Period. - A standstill period that may be agreed upon https://cdn-icons-png.flaticon.com/512/4087/4087900.png by the parties pending negotiation and finalization of the out-of-court or informal restructuring/workoutagreement or Rehabilitation Plan contemplated herein shall be effective and enforceable not only against the contracting parties but also against the other creditors: xxx www.teamprtc.com.ph Section 86. Cram Down Effect Also known as the “cram-down clause” – ❑ A restructuring/workout agreement or ❑ A rehabilitation plan may be approved Rehabilitation Plan that is approved pursuant even over the opposition of the to an informal workout framework xxx shall creditors holding a majority of the have the same legal effect as confirmation corporation’s total liabilities if there is a of a Plan. showing that rehabilitation is feasible and the opposition of the creditors is ❑ The notice of the Rehabilitation Plan or manifestly unreasonable; https://cdn-icons-png.flaticon.com/512/4087/4087900.png restructuring agreement or Plan shall be published once a week for at least three (3) ❑ This obliges creditors to accept the consecutive weeks in a newspaper of general terms and conditions of the circulation in the Philippines. rehabilitation plan, preferring long-term viability over immediate but incomplete ❑ The Rehabilitation Plan or restructuring recovery. agreement shall take effect upon the lapse of fifteen (15) days from the date of the last publication of the notice thereof. www.teamprtc.com.ph Section 88. Effect of Court Action or Other Proceedings https://cdn-icons-png.flaticon.com/512/4087/4087900.png ❑ Any court action or other proceedings arising from, or relating to, the out- of-court or informal restructuring/workout agreement or Rehabilitation Plan shall not stay its implementation, unless the relevant party is able to secure a temporary restraining order or injunctive relief from the Court of Appeals. www.teamprtc.com.ph  LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS Section 91. Involuntary Liquidation. Section 90. Voluntary Liquidation. ❑ Three (3) or more creditors the aggregate of whose claims is at least ❑ An insolvent debtor may apply for liquidation by either 1 million pesos or at least filing a petition for liquidation with the court. twenty-five percent (25%) of the subscribed capital stock or partner's ❑ The petition shall be verified, shall establish the contributions of the debtor, insolvency of the debtor and shall contain: https://cdn-icons-png.flaticon.com/512/4087/4087900.png whichever is higher, may apply for and seek the liquidation of an a) a schedule of the debtor's debts and liabilities insolvent debtor by filing a petition for including a list of creditors with their addresses, liquidation of the debtor with the amounts of claims and collaterals, or securities, if court. any; 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. www.teamprtc.com.ph  Section 92. Conversion by the Court into Liquidation Proceedings. ❑ At any time during the pendency ❑ During the pendency of court-supervised or pre- of court-supervised or pre- negotiated rehabilitation proceedings, the court negotiated rehabilitation may order the conversion of rehabilitation proceedings, the debtor may also proceedings to liquidation proceedings xxx initiate liquidation proceedings https://cdn-icons-png.flaticon.com/512/4087/4087900.png by filing a motion in the same Section 93. Powers of the Securities and court where the rehabilitation Exchange Commission (SEC) proceedings are pending to convert the rehabilitation ❑ The regulatory powers of the SEC under Sec. 6 proceedings into liquidation of PD No. 902-A, as amended, with respect to proceedings. any dissolution and liquidation proceeding initiated and heard before it. www.teamprtc.com.ph  INSOLVENCY OF INDIVIDUAL DEBTORS (A) SUSPENSION OF PAYMENTS ❑ An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in the state of suspension of payments by the court of the province or city in which he has resides for six (6) months prior to the filing of his petition. https://cdn-icons-png.flaticon.com/512/4087/4087900.png ❑ Contents of Petition: (a) a schedule of debts and liabilities; (b) an inventory of assess; and (c) a proposed agreement with his creditors. (Sec. 94) ❑ 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 (Sec. 95) www.teamprtc.com.ph  (B) VOLUNTARY LIQUIDATION ❑ An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts exceeding Php500,000, may apply to be discharged from his debts and liabilities by filing a verified petition with the court of the province or city in which he has resided for six (6) months prior to the filing of such petition. https://cdn-icons-png.flaticon.com/512/4087/4087900.png ❑ Contents of Petition: schedule of debts and liabilities, and an inventory of assets. (Sec. 103) ❑ If the court finds the petition sufficient in form and substance it shall, within five (5) working days issue the Liquidation Order. (Sec. 104) www.teamprtc.com.ph  (C) INVOLUNTARY LIQUIDATION Petition; Acts of Insolvency. ❑ Any creditor or group of creditors with a claim of, or with claims aggregating at least Php500, 000 may file a verified petition for liquidation with the court of the province or city in which the individual debtor resides. (Sec. 105) ❑ The following shall be considered acts of insolvency, and the petition for liquidation shall set forth or allege at least one of such acts: https://cdn-icons-png.flaticon.com/512/4087/4087900.png 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; www.teamprtc.com.ph 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 defraudinghttps://cdn-icons-png.flaticon.com/512/4087/4087900.png any creditors or claimant; g) That he has willfully suffered judgment to be taken against him by default for the purpose of hindering or delaying the liquidation or of defrauding his creditors; h) That he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors; www.teamprtc.com.ph 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; j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance or transfer of his estate, property, rights or credits; k) That being a merchant or tradesman, he has generally defaulted in the https://cdn-icons-png.flaticon.com/512/4087/4087900.png payment of his current obligations for a period of thirty (30) days; 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. www.teamprtc.com.ph Section 106. Order to Individual Debtor to Show Cause. ❑ Upon the filing of such creditors’ petition, the court shall issue an Order requiring the individual debtor to show cause xxx why he should not be adjudged an insolvent. ❑ Court may issue an Order forbidding the individual debtor from making payments of any of his debts, and transferring any property belonging to him. https://cdn-icons-png.flaticon.com/512/4087/4087900.png ❑ But the rights of a secured creditor to enforce his lien in accordance with its terms shall affected or impaired 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. www.teamprtc.com.ph Section 108. Absent Individual Debtor. ❑ Instances where a creditor shall be entitled to an Order directing the sheriff of the province or city in which the matter is pending to take into his custody a sufficient amount of property of the individual debtor to satisfy the demands of the petitioning creditors and the costs of the proceedings: 1. Where the individual debtor resides out of the Republic of the Philippines; or 2. Has departed therefrom; or https://cdn-icons-png.flaticon.com/512/4087/4087900.png 3. Cannot, after due diligence, be found therein; or 4. Conceals himself to avoid service of the Order to show cause xxx; ❑ Requirements: a. Submission of affidavits; b. Posting a bond in double the amount of the aggregate sum of their claims against the individual debtor. - END - www.teamprtc.com.ph THANK YOU!!! www.teamprtc.com.ph