Object 1

FRIA
Main Idea: 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.
Meaning, ang FRIA ay established to ensure na si debtor ay makakabayad kay creditor by way of
Rehabilitation. Rehabilitation, according sa batas, ay defined as the capability to be classified as going
concern pag nagcalculate ng present value of payments at kung mag iimprove ba ang normal
operations ng business. Pag hindi na kaya mag undergo ng rehabilitation, direcho liquidate na. Ibebenta
na yung assets ni debtor to settle the obligations.
EXCLUSIONS: (Di kasama under the law to eb classified as debtor) (independent entities to)
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.
Provided, That government financial institutions other than banks and government-owned or controlled
corporations shall be covered by this Act, unless their specific charter provides otherwise.
THE MAIN POINT OF THE LAW
Sa FRIA law, ang focus lang talaga eh kung ano ang ginagawa sa proceedingsng Liquidation and
Insolvency.
Eto yung pinakamadaling outline na maiintindihan:
1. Liquidation of Insolvent Juridical Debtors
1.1 Voluntary Liquidation
1.2 Involuntary Liquidation
1.3 Conversion by the Court into Liquidation Proceedings

2. Insolvency of Individual Debtors

2.1 Suspension of Payments
2.1.1 Petition
2.1.2 Action on the Petition
2.1.3 Actions suspended; Suspension Order
2.1.4 Creditors Meeting
2.1.5 Persons who may refrain from voting
2.1.6 Rejection of the proposed agreement
2.1.7 Objections
2.1.8 Effects of approval of proposed agreement
2.1.9 Failure of individual debtor to perform agreement
2.2 Voluntary Liquidation
2.3 Involuntary Liquidation
2.3.1 The Petition
2.3.2 Acts of Insolvency
2.3.3 Order to Individual Debtor to Show Cause
2.3.4 Default
2.3.5 Absent individual debtor
3. Common provisions
3.1 Determination of Claims
3.1.1 Registry of Claims
3.1.2 Right of Set-off
3.1.3 Opposition or Challenge to Claims
3.1.4 Submission of Disputed to the Court
3.2 Avoidance Proceedings

1. Liquidation of Insolvent Juridical Debtors

Sabi dito, liquidation may be VOLUNTARY or INVOLUNTARY. Voluntary pag si debtor mismo nag
initiate na mag liquidate. Involuntary pag walang choice si debtor and three or more creditors na mismo
ang nag initiate.
1.1 Voluntary Liquidation
Pwedeng mag initiate ng liquidation si debtor by filing a petition for liquidation sa court. I ve
verify ng court yung petition, I po prove na insolvent talaga si debtor at lalagyan ng:
a. Schedule of Liabilities
b. List of Assets including receivables and claims against third parties
c. Names of at least three nominations to the position of liquidator.
Yung tatlong document sa taas, pwedeng maging part as attachment or pwedeng kasama talaga sa
liquidation petition.
If kunwari, Rehabilitation Proceedings pa lang yung nagaganap or pinagpaplanuhan, pwedeng magfle
ng petition si debtor na magkaroon na agad ng Liquidation Proceedings. Same process sa taas, I ve
verify, I po prove ang insolvency at lalagyan ulit ng tatlong documents dun sa taas, tapos the court will
issue na a Liquidation Order.
1.2 Involuntary Liquidation
Three or more creditors ang dapat mag initiate. AGGREGATE ng claims nila ay either dapat
nasa One Million Pesos (1,000,000) or 25% of the subscribed capital stock or partners contributions of
the debtor, whichever is higher. Pwedeng mag file ng petition pero the petition should show that:
a. Di nakabayad si debtor for 180 days or has failed generally to settle the liability kahit due and
demandable na ang payments
b. Walang pag-asang ma-rehabilitate pa si debtor.
If nasa rehabilitation proceedings na or pre-rehabilitation proceedings na ang court, pwede ring I move
ng creditors ang proceedings to Liquidation proceedings. Same procedures. Verify, Prove, submit the
documents. After maipasa ang petition at masuri ng court, mag iisue ang court ng order na:
a. I publish ang petition sa general circulation newspaper once a week for 2 consecutive weeks
b. mag comment ang debtor at all creditors sa Petition withing fifteen (15) days from the date of
last publication.
If sa tingin ng court ay legit yung petition, then mag I issue na sila ng Liquidation Order.
1.3 Conversion by the Court into Liquidation Proceedings
If sa tingin ng Court eh di na talaga kayang I rehabilitate si debtor, sila na mismo mag I initiate ng
Liquidation proceeding at mag I issue na agad ng Liquidation Order.
2. Insolvency of Individual Debtors
Parang Number 1 lang to pero ang pinagkaiba eh debtors are individually insolvent. Pwede silang
magpadeclare na under sila ng state of suspension of payments, voluntary liquidation, and
involuntary liquidation.

2.1 Suspension of Payments

2.1.1 Petition
If si debtor ay may sufficient property to cover all his debts pero he foresees na di siya
makakabayad on time, pwede siyang mag file ng petition to put him in a state of Suspension of
Payments by the court of his city kung saan siya nakatira for Six (6) months prior to his filing of
petition. Syempre, kailangan may I attach siya:
a. Schedule of Debts
b. List of Assets including receivables and claims against third parties
c. Proposed agreement with Creditors
2.1.2 Action on the Petition
If the court deems the petition is LEGIT AF, within five (5) working days from the filing
of petition, mag iissue siya ng ORDER na:
a. Calling a meeting of creditors na listed sa schedule of debts not less than 15 days pero not more than
40 days from the issuance of Order, naka designate na ang date , time, and place ng meeting.
b. magdala ang creditors ng written evidence ng claims nila against the debtor before the meeting
c. I publish sa general circulation ng newspaper of the city kung saan nakafile ang petition for two
consecutive weeks with the first publication made within 7 days from the issue of order.
d. I send ng court clerk ang copy ng order through registered mail, postage prepaid, sa creditors listed
sa schedule of debts ni debtors.
e. bawal I dispose, I benta, I transfer, or I subject sa encumbrance (I mortgage) ang properties ni debtor
except those properties na ginagamit sa ordinary course of business, hanggang pending ang kaso.
f. debtor is not permitted to issue any payments na hindi legitimate expenses of his business, hanggang
pending ang kaso.
g. mag a appoint ng commissioner na mag momoderate ng creditors meeting
2.1.3 Suspension Order
Pwedeng mag issue ang court ng suspension order na mag uutos na di muna pwedeng I execute ang any
pending na kaso kay debtor. Mag la lapse lang ang Suspension Order pag three (3) months na eh wala
pa ring acceptance ang creditor sa proposed agreement or di talaga tinanggap ang agreement.
EXCEPTION: Di sakop ng suspension order ang properties held as security by secured creditors.
Wala ding creditor ang makakapagsampa ng kaso or makakapag execute ng kaso sa debtor hanggat
pending ang proceedings.
EXCEPTION: (a) Those creditors na may claims against Labor, maintenance, expense of last illness
and funeral of the wife or children of the debtor incurred in the sixty (60) days prior to the filing of the
petition AT (b) secured creditors.

2.1.4 Creditors Meeting

Kailangan yung mga present creditors eh may claims na mag a aggregate to 3/5 ng stated
dun sa schedule of liabilities. May appointed commissioner na din na mag pe preside over the meeting
at yung court clerk ay magiging secretary na bound to do the ff:
a. I record ang creditors na present at ang kanilang amount of claims
b. Pag na-examine at na-determine ni commissioner na 3/5 nga ng claims ay present, the meeting is
open for business.
c. I di discuss ang proposed actions against sa debtor and mag vo vote.
d. To have a majority vote, 2/3 ng creditors ay dapat nag a agree sa same proposition, and ang mga
nag agree ay dapat may 3/5 of the claims against kay debtor.
e. After I announce ang results, protests against the results shall be drawn up. Mag a agree ang
commissioner, debtors at creditors at mag sa sign sa affirmed proposition.
No creditor who incurred his credit within ninety (90) days prior to the filing of the petition shall be
entitled to vote.
2.1.5 Persons who may refrain from voting
Pwedeng mag refrain from voting ang creditors na hindi sakop ng suspension order. Should they
participate to vote, magiging bound sila in the same manner as those creditors in the suspension order.
2.1.6 Rejection of the proposed agreement
Syempre pag nag vote na I reject, marereject talaga. Pag walang majority vote, marereject. Pag di
umabot sa 3/5 ang claims, marereject. At this time, the meeting is considered terminated WITHOUT
RECOURSE at bahala na ang creditors sa mga buhay nila at bahala na sila mag enforce ng mga rights
na naka assign sa kanila as creditors.
2.1.7 Objections
Pag na approve yung proposed agreement and may nagprotest, the protesting creditor shall file an
objection with the court ten (10) days from the last creditors meeting. Pwedeng maging cause ng
objections ang:
a. Defects in the call for the meeting, holding of the meeting, and deliberations na ma pe prejudice ang
rights ng mga creditors
b. pagkakampihan between one or more creditors and the debtor na mag vote sa isang proposition
c. Fraudulent claims para lang magkaroon ng majority vote at umabot sa 3/5
I eexamine to ng court. If in any case, na annul ang decision ng creditors and debtors during the
creditors meeting, I dedeclare ng court na terminated ang proceedings at bahala na sa buhay nila ang
mga creditors at bahala na sila mag enforce ng kanila kanilang rights as a creditor.
2.1.8 Effect of Acceptance of Agreement
BASIC. Edi lahat ng parties concerned dun sa proceeding ay bound by the terms na nandun sa
proposed agreement. I o order ng court ang immediate performance and execution ng agreement.

Binding to sa creditors and individual debtors EXCEPT dun sa mga nasa SECOND EXCEPTION sa
suspension order.
2.1.9 Failure of the debtor to perform agreement
If the debtor fails wholly, or partly sa agreement, then all rights of the creditors shall revest. Meaning,
the debtor may be subject under insolvency proceedings.
2.2 Voluntary Liquidation
If si debtor ay may utang na not lower than five hundred thousand pesos (500,000) and his properties
are not sufficient to cover his debts, he may file a petition to be discharged from all his liabilities in the
court of the city kung saan siya nakatira for the last 6 months prior to his filing of petition. Syempre,
mag a attach ulit siya ng Schedule of Liabilities and List of Assets. Mismong petition ang magseserve
as an act of insolvency.
If the court deems na ang petition ay LEGIT AF, then they will issue the Liquidation Order.
2.3 Involuntary Liquidation
2.3.1 The Petition
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.
2.3.2. Acts of Insolvency
Eto yung magiging basehan ng petition. Kailangan at least one, nangyari:
a. Lumipad or nagpaplanong lumipad sa ibang bansa to defraud the creditors
b. With the intention na lumipad sa ibang bansa to defraud creditor, nananatili siyang nagtatago
c. Nagtatago para bumagal ang process ng liquidation or to defraud creditors
d. nagtago ng property para di maging subject to liquidation
e. Nag place ng property under attachment or legal process to delay liquidation or to defraud creditors
f. 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. Nag suffer na siya sa judgment to delay liquidation.
h. Nag procure siya ng property to suffer under legal process in favor of one creditor over others to
delay liquidation
I. Nag assign, nagregalo, nagbenta, nagtransfer ng property with the purpose of delaying the liquidation
(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.
If in any case madismiss ang kaso, hindi madeclare ng insolvent si debtor or mag withdraw ng kaso si
petitioner, babayaran niya lahat ng expenses ng kaso kay debtor, including attorneys fees.
2.3.3 Order to Individual Debtor to Show Cause
On a specific time, date, and place set by the court, kailangan I prove ng debtor, on a good cause, na di
siya insolvent. Upon determination na good cause, the court will issue an order na nag fo forbid kay
debtor to make payments of his debts and tranfer any properties belonging to him. However, di ito
nakaka impair ng rights ng secured creditors to enforce their claims against debtors.
Meaning, EXCEPTION ulit dito ang secured creditors.
2.3.4 Default
If nadefault na ang debtor or nadetermine na after trial na ang odds ay in favor sa petitioner creditors,
mag I issue agad ang court ng Liquidation Order.
2.3.5 Absent Individual Debtor
Pag nagtatago si debtor, mag I issue ang court ng order to have the sheriff of the city to take into
custody the properties of the individual debtor in an amount na sufficient to cover the claims against
the debtor and the expenses of the court proceedings. Within 3 days, dapat magpresent si sheriff ng list
of assets na nakuha niya at return them to court immediately. Pwedeng maextend ang filing ng list ni
sheriff on a good cause. Magpeprepare din si sheriff ng names ng creditors, address nila, at claims nila
against the debtor. Ibibigay lahat to ng sheriff sa court clerk.
3. Common Provisions
3.1.1 Registry of Claims
Within twenty (20) days from the assumption of the liquidator into his office, magpeprepare siya ng
registry of claims for both secured and unsecured creditors. Pag partially secured creditors, yung part
na unsecured liabilities, magiging part ng unsecured creditors list. The registry is made available to
public and for inspection. Mag po provide din ng publication notice to debtors and creditors. Tapos all
claims must be proven before being paid.
3.1.2 Right of Set-off (offset)
Syempre pag creditor-debtor or debtor-creditor parehas ang debtor at creditor, pwedeng I offset tapos
yung balance, yun yung available claims of creditor against the debtor.
3.1.3 Challenge to Claims
Within 30 days of filing for application of claims, pwedeng I challenge ang claims na nasa registry of
claims. After the expiration of 30 days, the rehabilitation receiver will submit to the court the registry
of claims na hindi na challenge. Eto yung mga magiging subject to payment and final na unless maging
grounds siya for fraud, mistake, accidents, or inexcusable neglect.
3.1.4 Submission of Disputed Claims to the Court
Si Liquidator ang may responsibility to settle the disputed claims to the court and subject the claims for
court approval upon examinations ng kanyang findings. The liquidator may disallow claims.

3.2 Avoidance Proceedings

Any transaction occurring prior to the issuance of the Liquidation Order or, in case of the conversion of
the rehabilitation proceedings prior to the commencement date, entered into by the debtor or involving
its assets, may be rescinded or declared null and void on the ground that the same was executed with
intent to defraud a creditor or creditors or which constitute undue preference of creditors. A disputable
presumption of such intent shall arise if the transaction:
(a) provides unreasonably inadequate consideration to the debtor and is executed within ninety (90)
days prior to the commencement date;
(b) involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the
commencement date;
(c) provides security or additional security executed within ninety (90) days prior to the
commencement date;
(d) involves creditors, where a creditor obtained, or received the benefit of, more than its pro rata share
in the assets of the debtor, executed at a time when the debtor was insolvent; or
(e) is intended to defeat, delay or hinder the ability of the creditors to collect claims where the effect of
the transaction is to put assets of the debtor beyond the reach of creditors or to otherwise prejudice the
interests of creditors.
The liquidator or, with his conformity, a creditor may initiate and prosecute any action to rescind, or
declare null and void any transaction described in the immediately preceding paragraph. If the
liquidator does not consent to the filling or prosecution of such action, any creditor may seek leave of
the court to commence said action.
If leave of court is granted, the liquidator shall assign and transfer to the creditor all rights, title and
interest in the chose in action or subject matter of the proceeding, including any document in support
thereof.
Any benefit derived from the proceeding, to the extent of his claim and the costs, belongs exclusively
to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate.
Where, before an order is made, the liquidator signifies to the court his readiness to the institute the
proceeding for the benefit of the creditors, the order shall fix the time within which he shall do so and,
in that case the benefit derived from the proceedings, if instituted within the time limits so fixed,
belongs to the estate.
SOURCES:
http://attyatwork.com/insolvency-proceedings-under-the-financial-rehabilitation-and-insolvency-actfria-of-2010/#action
http://www.lawphil.net/statutes/repacts/ra2010/ra_10142_2010.html