In the second month of his presidency, President P-Noy was not able to approve a new law in July as he organized his Cabinet and dealt with early controversies about his executive orders, and as the 15th Congress began its task of legislating. In June 30, 2010, however, a new law was deemed approved, in accordance with Section 27(1), Article VI, of the Philippine Constitution, as it was not acted upon by President GMA within 30 days from the date of her receipt thereof from the 14th Congress. This is Republic Act No. 10142, the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, which was passed by the House of Representatives on February 1, 2010 and the Senate on February 3, 2010.
The FRIA expressly repealed the Insolvency Law (Act No. 1956) as amended, and impliedly repealed, to the extent that they are inconsistent with the provisions of the Act, all other laws, orders, rules and regulations. The FRIA is significant because it covers the rehabilitation of sole proprietorships, partnerships and corporations, provides the legal basis for our procedural rules on corporate rehabilitation (the latest of which is A.M. No. 00-8-10-SC, promulgated by the Supreme Court en banc on December 2, 2009, and took effect on January 16, 2009), and consolidates the laws on insolvency and rehabilitation. The FRIA shall take effect 15 days after its complete publication in the Official Gazette or in at least two national newspapers of general circulation.
I will not venture to summarize the 150-section FRIA, but will just endeavour to discuss provisions which, to my mind, are significant, particularly in connection with rehabilitation proceedings.
The FRIA provides for different types of rehabilitation proceedings for sole proprietorships, partnerships and corporations. The Court-Supervised Rehabilitation (see Chapter II of the FRIA) includes:
(a) Voluntary Proceedings which is a rehabilitation petition initiated by the sole proprietor, by a majority of the partners, or by a majority of the board of directors/trustees and authorized by the corporation’s stockholders representing at least 2/3 of the outstanding capital stock or 2/3 of the members, and
(b) Involuntary Proceedings which is a rehabilitation petition initiated by creditors with an aggregate claim of at least P1 Million or at least 25% of the subscribed capital stock or partners’ contribution, whichever is higher. The Pre-Negotiated Rehabilitation (see Chapter III of the FRIA) is initiated by the insolvent debtor, by itself or jointly with any of its creditors, and seeks the approval of a pre-negotiated Rehabilitation Plan endorsed or approved by creditors holding at least 2/3 of the debtor’s total liabilities, including secured creditors holding more than 50% of the secured claims, and unsecured creditors holding more than 50% of the unsecured claims.