Getting the Deal Through – Restructuring & Insolvency 2013
June, 2013 - Ricardo Ma. P.G. Ongkiko, Anthony W. Dee, Russel L. Rodriguez
What legislation is applicable to insolvencies and reorganisations? What criteria are applied in your country to determine if a debtor is insolvent?
The applicable law is Republic Act No. 10142, known as the Financial Rehabilitation and Insolvency Act of 2010 (FRIA). The FRIA took effect on 18 July 2010.
A debtor is considered insolvent if it is unable to pay its liabilities as they fall due in the ordinary course of business or has liabilities that are greater than its assets (FRIA section 4(p)).
2 Courts
What courts are involved in the insolvency process? Are there restrictions on the matters that the courts may deal with?
The Supreme Court has yet to designate the court or courts that will hear and resolve cases brought under the FRIA. In previous Supreme Court rulings, however, the regional trial courts were given jurisdiction over corporate rehabilitation and liquidation proceedings. This is consistent with the regional trial courts’ authority as courts of general jurisdiction. In the absence of designated courts, cases under the FRIA are usually assigned to regional trial courts designated as commercial courts.
Furthermore, the Supreme Court has yet to promulgate the rules of procedure to govern the proceedings brought under the FRIA.
3 Excluded entities and excluded assets
What entities are excluded from customary insolvency proceedings and what legislation applies to them? What assets are excluded from insolvency proceedings or are exempt from claims of creditors?
Banks, insurance companies and pre-need companies are not covered by the FRIA. The rehabilitation of banks, insurance companies and pre-need companies is governed by Republic Act No. 7653 (the New Central Bank Act), Presidential Decree No. 612 (Insurance Code of the Philippines) and Republic Act No. 9829 (Pre-Need Code of the Philippines), respectively...
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