Law 6.pdf - BM1808 FINANCIAL REHABILITATION AND INSOLVENCY ACT(FRIA OF 2010 REPUBLIC ACT NO 10142 General Provisions Policies(Section 2 1 It is the

Law 6.pdf - BM1808 FINANCIAL REHABILITATION AND INSOLVENCY...

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BM1808 06 Handout 1 *Property of STI [email protected] Page 1 of 14 FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) OF 2010 REPUBLIC ACT NO. 10142 General Provisions Policies (Section 2) 1. 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. 2. The State shall ensure a timely, fair, transparent, effective and efficient rehabilitation or liquidation of debtors. 3. 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. 4. When rehabilitation is not feasible, it is in the interest of the State to facilitate a speedy and orderly liquidation of these debtor's assets and the settlement of their obligations. Key Definitions 1. Debtor is 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. a. Individual Debtor is a natural person who is a resident and citizen of the Philippines that has become insolvent as defined herein. b. Group of debtors refers 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 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 2. Insolvent refers 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. a. Liabilities are 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. b. Ordinary course of business refers 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. 3. Creditor is a natural or juridical person who has a claim against the debtor that arose on or before the commencement date. Commencement date is 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.
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