CHAPTER I

GENERAL PROVISIONS

Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and Insolvency Act
(FRIA) of 2010".

Section 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 certainly 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 facilities a speedy and orderly liquidation of these
debtor's assets and the settlement of their obligations.

Section 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.

Section 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 its
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 legality entities 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 designated 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 solidarity 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 the external auditor.
(y) Ordinary course of business shall refer to transactions in the pursuit of the individual
debtor's or debtor's business operations prior to rehabilitation or insolvency proceedings and
on ordinary business terms.

(z) Ownership interest shall refer to the ownership interest of third parties in property held by
the debtor, including those covered by trust receipts or assignments of receivables.

(aa) Parent shall refer to a corporation which has control over another corporation either
directly or indirectly through one or more intermediaries.

(bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured creditors'
committee, a stakeholder, a party with an ownership interest in property held by the debtor, a
secured creditor, the rehabilitation receiver, liquidator or any other juridical or natural person
who stands to be benefited or injured by the outcome of the proceedings and whose notice
of appearance is accepted by the court.

(cc) Possessory lien shall refer to a lien on property, the possession of which has been
transferred to a creditor or a representative or agent thereof.

(dd) Proceedings shall refer to judicial proceedings commenced by the court's acceptance of
a petition filed under this Act.

(ee) Property of others shall refer to property held by the debtor in which other persons have
an ownership interest.

(ff) Publication notice shall refer to notice through publication in a newspaper of general
circulation in the Philippines on a business day for two (2) consecutive weeks.

(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of successful
operation and solvency, if it is shown that its continuance of operation is economically
feasible and its creditors can recover by way of the present value of payments projected in
the plan, more if the debtor continues as a going concern than if it is immediately liquidated.

(hh) Rehabilitation receiver shall refer to the person or persons, natural or juridical, appointed
as such by the court pursuant to this Act and which shall be entrusted with such powers and
duties as set forth herein.

(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and viability of an
insolvent debtor can be restored using various means 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 new business entity as prescribed in Section 62 hereof, or other similar arrangements
as may be approved by the court or creditors.

(jj) Secured claim shall refer to a claim that is secured by a lien.

(kk) Secured creditor shall refer to a creditor with a secured claim.

(ll) Secured party shall refer to a secured creditor or the agent or representative of such
secured creditor.
 (mm) Securities market participant shall refer to a broker dealer, underwriter, transfer agent
or other juridical persons transacting securities in the capital market.

(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to a member of

a nonstock corporation or association or a partner in a partnership.

(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting stock
of which is owned or controlled directly or indirectly through one or more intermediaries by
another corporation, which thereby becomes its parent corporation.

(pp) Unsecured claim shall refer to a claim that is not secured by a lien.

(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.

(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.

(ss) Voting creditor shall refer to a creditor that is a member of a class of creditors, the
consent of which is necessary for the approval of a Rehabilitation Plan under this Act.

Section 5. Exclusions. - The term debtor does not include banks, insurance companies, pre-need
companies, and national and local government agencies or units.

For purposes of this section:

(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

(c) Pre-need company shall refer to any corporation authorized/licensed to sell or offer to sell
pre-need plans.

Section 6. Designation of Courts and Promulgation of Procedural Rules. - The Supreme Court shall
designate the court or courts that will hear and resolve cases brought under this Act and shall
promulgate the rules of pleading, practice and procedure to govern the proceedings brought under
this Act.

Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall be considered as a
separate entity under the proceedings in this Act. Under these proceedings, the assets and liabilities
of a debtor may not be commingled or aggregated with those of another, unless the latter is a related
enterprise that is owned or controlled directly or indirectly by the same interests: Provided,
however, That the commingling or aggregation of assets and liabilities of the debtor with those of a
related enterprise may only be allowed where:

(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.

CHAPTER II
COURT-SUPERVISED REHABILITATION

(A) Initiation Proceedings.

(1) Voluntary Proceedings.

Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When approved by the owner in
case of a sole proprietorship, or by a majority of the partners in case of a partnership, or in case of a
corporation, by a majority vote of the board of directors or trustees and authorized by the vote of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or in case of
nonstock corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholder's or
member's meeting duly called for the purpose, an insolvent debtor may initiate voluntary
proceedings under this Act by filing a petition for rehabilitation with the court and on the grounds
hereinafter specifically provided. The petition shall be verified to establish the insolvency of the
debtor and the viability of its rehabilitation, and include, whether as an attachment or as part of the
body of the petition, as a minimum the following:

(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;

(c) The specific relief sought pursuant to this Act;

(d) The grounds upon which the petition is based;

(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;

(h) A Rehabilitation Plan;

(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.
(2) Involuntary Proceedings.

Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any creditor or group of
creditors with a claim of, or the aggregate of whose claims is, at least One Million Pesos
(Php1,000,000.00) or at least twenty-five percent (25%) of the subscribed capital stock or partners'
contributions, whichever is higher, may initiate involuntary proceedings against the debtor by filing a
petition for rehabilitation with the court if:

(a) there is no genuine issue of fact on 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.

Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition for rehabilitation
shall be verified to establish the substantial likelihood that the debtor may be rehabilitated, and
include:

(a) identification of the debtor its principal activities and its address;

(b) the circumstances sufficient to support a petition to initiate involuntary rehabilitation

proceedings under Section 13 of this Act;

(c) the specific relief sought under this Act;

(d) a Rehabilitation Plan;

(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.

(B) Action on the Petition and Commencement of Proceedings.

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.

Section 16. Commencement of Proceedings and Issuance of a Commencement Order. - The

rehabilitation proceedings shall commence upon the issuance of the Commencement Order, which
shall:
(a) identify the debtor, its principal business or activity/ies and its principal place of business;

(b) summarize the ground/s for initiating the proceedings;

(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;

(e) declare that the debtor is under rehabilitation;

(f) direct the publication of the Commencement 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;

(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;

(l) authorize the payment of administrative expenses as they become due;

(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;

(o) indicate the location or locations at which documents regarding the debtor and the
proceedings under Act may be reviewed and copied;
 (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;

(q) include s Stay or Suspension Order which shall:

(1) suspend all actions or proceedings, in court or otherwise, for the enforcement of
claims against the debtor;

(2) suspend all actions to enforce any judgment, attachment or other provisional
remedies against the debtor;

(3) prohibit the debtor from selling, encumbering, transferring or disposing in any
manner any of its properties except in the ordinary course of business; and

(4) prohibit the debtor from making any payment of its liabilities outstanding as of the
commencement date except as may be provided herein.

Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from the initial hearing
and with or without the comments of the creditors or any of them, the rehabilitation receiver shall
submit a report to the court stating his preliminary findings and recommendations on whether:

(a) the debtor is insolvent and if so, the causes thereof and any unlawful or irregular act or
acts committed by the owner/s of a sole proprietorship partners of a partnership or directors
or officers of a corporation in contemplation of the insolvency of the debtor or which may
have contributed to the insolvency of the debtor;

(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;

(c) there is a substantial likelihood for the debtor to be successfully rehabilitated;

(d) the petition should be dismissed; and

(e) the debtor should be dissolved and/or liquidated.

Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of Proceedings. - Within
ten (10) days from receipt of the report of the rehabilitation receiver mentioned in Section 24 hereof
the court may:

(a) give due course to the petition upon a finding that:

(1) the debtor is insolvent; and

(2) there is a substantial likelihood for the debtor to be successfully rehabilitated;

(b) dismiss the petition upon a finding that:

(1)debtor is not insolvent;

 (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:

(1)the debtor is insolvent; and

(2)there is no substantial likelihood for the debtor to be successfully rehabilitated as

determined in accordance with the rules to be promulgated by the Supreme Court.

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.

(C) The Rehabilitation Receiver, Management Committee and Creditors' Committee.

Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural or juridical person
may serve as a rehabilitation receiver: Provided, That if the rehabilitation receiver is a juridical entity,
it must designate a natural person/s who possess/es all the qualifications and none of the
disqualifications as its representative, it being understood that the juridical entity and the
representative/s are solidarily liable for all obligations and responsibilities of the rehabilitation
receiver.

Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation receiver shall have the
following minimum qualifications:

(a)A citizen of the Philippines or a resident of the Philippines in the six (6) months
immediately preceding his nomination;

(b)Of good moral character and with acknowledged integrity, impartiality and independence;

(c)Has the requisite knowledge of insolvency and other relevant commercial laws, rules and
procedures, as well as the relevant training and/or experience that may be necessary to
enable him to properly discharge the duties and obligations of a rehabilitation receiver; and

(d)Has no conflict of interest: Provided, That such conflict of interest may be waived,
expressly or impliedly, by a party who may be prejudiced thereby.

Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate of whose claims is
at least either One million pesos (Php1,000,000,00) or at least twenty-five percent (25%0 of the
subscribed capital stock or partner's contributions of the debtor, whichever is higher, may apply for
and seek the liquidation of an insolvent debtor by filing a petition for liquidation of the debtor with the
court. The petition shall show that:
 (a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that the
due and demandable payments thereon have not been made for at least one hundred eighty
(180) days or that the debtor has failed generally to meet its liabilities as they fall due; and

(b) there is no substantial likelihood that the debtor may be rehabilitated.

At any time during the pendency of or after a rehabilitation court-supervised or pre-negotiated

rehabilitation proceedings, three (3) or more creditors whose claims is at least either One million
pesos (Php1,000,000.00) or at least twenty-five percent (25%) of the subscribed capital or partner's
contributions of the debtor, whichever is higher, may also initiate liquidation proceedings by filing a
motion in the same court where the rehabilitation proceedings are pending to convert the
rehabilitation proceedings into liquidation proceedings. The motion shall be verified, shall contain or
set forth the same matters required in the preceding paragraph, and state that the movants are
seeking the immediate liquidation of the debtor.

If the petition or motion is sufficient in form and substance, the court shall issue an Order:

(1) directing the publication of the petition or motion in a newspaper of general circulation
once a week for two (2) consecutive weeks; and

(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.

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

(A) Suspension of Payments.

Section 94. Petition. - 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. He shall attach to his
petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of assess; and (c) a
proposed agreement with his creditors.

(B) Voluntary Liquidation.

Section 103. Application. - An individual debtor whose properties are not sufficient to cover his
liabilities, and owing debts exceeding Five hundred thousand pesos (Php500,000.00), 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. He shall attach to
his petition a schedule of debts and liabilities and an inventory of assets. The filing of such petition
shall be an act of insolvency.
Section 104. Liquidation Order. - If the court finds the petition sufficient in form and substance it
shall, within five (5) working days issue the Liquidation Order mentioned in Section 112 hereof.

(C) In voluntary Liquidation.

Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with a claim of, or with
claims aggregating at least Five hundred thousand pesos (Php500, 000.00) may file a verified
petition for liquidation with the court of the province or city in which the individual debtor resides.

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;

(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;

(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 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.

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.

(A) The Liquidation Order.

Section 112. Liquidation Order. - The Liquidation Order shall:

(a) declare the debtor insolvent;

(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;

(d) order the publication of the petition or motion in a newspaper of general circulation once a
week for two (2) consecutive weeks;

(e) direct payments of any claims and conveyance of any property due the debtor to the
liquidator;

(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;

(h) authorize the payment of administrative expenses as they become due;

(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.

(E) The Liquidation Plan.

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.
Section 131. Sale of Assets in Liquidation. - The liquidator may sell the unencumbered assets of the
debtor and convert the same into money. The sale shall be made at public auction. However, a
private sale may be allowed with the approval of the court if; (a) the goods to be sold are of a
perishable nature, or are liable to quickly deteriorate in value, or are disproportionately expensive to
keep or maintain; or (b) the private sale is for the best interest of the debtor and his creditors.

Section 135. Termination of Proceedings. - Upon receipt of evidence showing that the debtor has
been removed from the registry of legal entities at the SEC. The court shall issue an Order te(F)
Liquidation of a Securities Market Participant.

Section 136. Liquidation of a Securities Market Participant. - The foregoing provisions of this
chapter shall be without prejudice to the power of a regulatory agency or self- regulatory
organization to liquidate trade-related claims of clients or customers of a securities market
participant which, for purposes of investor protection, are hereby deemed to have absolute priority
over other claims of whatever nature or kind insofar as trade-related assets are concerned.

CHAPTER VIII
PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITAION PROCEEDINGS

(A) Banks and Other Financial Institutions Under Rehabilitation Receivership Pursuant to a
State-funded or State-mandated Insurance System.

Section 137. Provision of Assistance. - The court shall issue orders, adjudicate claims and provide
other relief necessary to assist in the liquidation of a financial under rehabilitation receivership
established by a state-funded or state-mandated insurance system.

Section 138. Application of Relevant Legislation. - The liquidation of bank, financial institutions,
insurance companies and pre-need companies shall be determined by relevant legislation. The
provisions in this Act shall apply in a suppletory manner.

(B) Cross-Border Insolvency Proceedings.

Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. - Subject to the provision
of Section 136 hereof and the rules of procedure that may be adopted by the Supreme Court, the
Model Law on Cross-Border Insolvency of the United Nations Center for International Trade and
Development is hereby adopted as part of this Act.

Section 140. Initiation of Proceedings. - The court shall set a hearing in connection with an
insolvency or rehabilitation proceeding taking place in a foreign jurisdiction, upon the submission of a
petition by the representative of the foreign entity that is the subject of the foreign proceeding.
CHAPTER IX
FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND CONTROLLED
CORPORATIONS

Section 143. Funds for Rehabilitation of Government -owned and Controlled Corporations. - Public
funds for the rehabilitation of government-owned and controlled corporations shall be released only
pursuant to an appropriation by Congress and shall be supported by funds actually available as
certified by the National Treasurer.

The Department of Finance, in collaboration with the Department of Budget and Management, shall
promulgate the rules for the use and release of said funds.