Category Archives: Corporate Law

Introduction to Insolvency in the Philippines: Suspension of Payments, Financial Rehabilitation and Liquidation

Insolvency is defined as the financial incapacity of debtors to pay their liabilities as they fall due in the ordinary course of business, or whenever their liabilities are greater than their assets. A debtor may refer to an individual debtor (natural persons) or juridical persons. The Philippines has specific rules for different proceedings affecting insolvent debtors and their creditors. 

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Post-Quarantine Procedure for Filing of GIS/AFS: Salient Points of SEC MC 18

The procedure for filing and receiving of corporate the reportorial requirements under the Revised Corporation Code — Audited Financial Statements (AFS) and General Information Sheet (GIS) — after the Enhanced Community Quarantine (ECQ) has been adopted by the Securities and Exchange Commission (SEC) through Memorandum Circular No. 18, series of 2020, dated 11 May 2020 (see also Extension of Deadlines). This covers all corporations, including branch offices, representative offices, regional headquarters and regional operating headquarters of foreign corporations. Here are the salient points of MC 18. 

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Secured Creditors: Common Provisions in Insolvency Proceedings for Individual and Juridical Debtors

A “secured creditor” refers to s creditor with a secured claim. The Liquidation Order shall not affect the right of a secured creditor to enforce his lien in accordance with the applicable contract or law, unless he waives his right. The provisions cited/discussed below are from Republic Act No. 10142, also known as the “Financial Rehabilitation and Insolvency Act (FRIA) of 2010,“ as fleshed out in the FLSP Rules. These common provisions apply to liquidation of juridical debtors, and voluntary/involuntary liquidation of individual debtors.

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Liquidation of Insolvent Juridical Debtors under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010

Insolvency, or the state of being insolvent, is 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. Insolvency proceedings may cover an individual debtor or a juridical debtor. This article covers only juridical debtors (there are separate rules for voluntary and involuntary liquidation of individual debtors).

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Jurisdiction and Nature of Proceedings in Financial Liquidation and Suspension of Payments

Financial liquidation and suspension of payment proceedings are in rem, which means that it is binding on everyone and not just the parties who participated in the case. Financial liquidation covers both individual and juridical persons, as provided under the Financial Liquidation and Suspension of Payments Rules of Procedure for Insolvent Debtors (2105), also known as the “FLSP Rules”. The FLSP Rules, issued by the Supreme Court pursuant to Section 6 of Republic Act No. 10142, also covers suspension of payments for insolvent individual debtors.

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Authentication of Articles of Incorporation in Registration of Domestic Corporations

In registering with the Securities and Exchange Commission (SEC), a new domestic corporation must file its Articles of Incorporation, duly signed and “acknowledged or authenticated“,  containing substantially the required matters (see Contents of Articles of Incorporation). Acknowledgement and authentication are done differently, as provided in SEC Memorandum Circular No. 16 dated 29 April 2020 (Re: Guidelines on Authentication of Articles of Incorporation in Applications for Registration of New Domestic Corporations, published on 30 April 2020 in Manila Bulletin and Philippine Star).

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Corporations: Penalties for Incomplete, Inaccurate, False or Misleading Statements or Reports

A corporation registered with the Securities and Exchange Commission (SEC) must comply with certain reportorial requirements, including the basic requirements of General Information Sheet (GIS) and the Annual Financial Statements (FS). [See General Information Sheet (GIS), Financial Statements (FS): Reportorial Requirements of Corporations]

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