[Full text of A.M. NO. 15-04-06-SC dated 21 April 2015, approving the Financial Liquidation and Suspension of Payments Rules of Procedure for Insolvent Debtors (2015), otherwise known as the “FLSP Rules”, issued by the Supreme Court pursuant to Republic Act No. 10142. For the summaries/discussions, refer to the Table of Contents. The full text of the FLSP Rules is reproduced below.]

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FINANCIAL LIQUIDATION AND SUSPENSION OF PAYMENTS RULES OF PROCEDURE FOR INSOLVENT DEBTORS (2015) 

Pursuant to Section 6, Chapter I of Republic Act No. 10142, otherwise known as the “Financial Rehabilitation and Insolvency Act (FRIA) of 2010,” the Court hereby adopts and promulgates the following Rules of Procedure for the Liquidation of Insolvent Juridical and Individual Debtors, and Suspension of Payments of Insolvent Individual Debtors: 

RULE 1

COVERAGE AND GENERAL PROVISIONS 

SEC. 1. TITLE. – These Rules shall be known and cited as the “Financial Liquidation and Suspension of Payments Rules of Procedure for Insolvent Debtors” or the “FLSP Rules.” 

SEC. 2. SCOPE. – These Rules shall govern the practice, pleading, and procedure for the liquidation of insolvent juridical and individual debtors, and suspension of payments of insolvent individual debtors pursuant to the FRIA. 

They shall similarly govern all further proceedings in insolvency cases already pending, except to the extent that, in the opinion of the court, its application would not be feasible or would work injustice, in which event the procedures originally applicable shall continue to govern. 

These Rules shall have suppletory application to the liquidation of entities expressly excluded from the coverage of the FRIA under Section 5, Chapter I thereof. 

SEC. 3. NATURE OF PROCEEDINGS. – The proceedings under these Rules shall be in rem. 

In voluntary liquidation proceedings of both juridical and individual debtors, jurisdiction over all persons affected by the proceedings is acquired upon publication of the Liquidation Order as provided in these Rules. 

In involuntary liquidation proceedings of juridical debtors, jurisdiction over all persons affected by the proceedings is acquired upon publication of the petition or motion under Section 7, Rule 2 (B) of these Rules. 

In involuntary liquidation proceedings of individual debtors, jurisdiction over the person of the debtor is acquired upon service of summons in accordance with Section 15, Rule 3 (C) of these Rules; whereas jurisdiction over all other persons affected by the proceedings is acquired upon publication of the Liquidation Order under Section 2, Rule 4 (A) of these Rules. 

In suspension of payments proceedings, jurisdiction over all persons affected by the proceedings is acquired upon publication of the Suspension of Payments Order as provided in these Rules. 

The proceedings shall be summary and non-adversarial in nature. The following pleadings are prohibited: 

(a) motion to dismiss;
(b) motion for a bill of particulars;
(c) petition for relief;
(d) motion for extension;
(e) motion for postponement and other motions of similar intent;
(f) reply;
(g) rejoinder;
(h) intervention; and
(i) anypleadingormotionsimilarto,oroflikeeffectas,anyoftheforegoing. 

For stated and fully supported compelling reasons, the court may allow the filing of motions for extension or postponement, provided, the same shall be verified and under oath. 

Any pleading, motion, or other submission by any interested party shall be supported by verified statements that the affiant has read the submission and its factual allegations are true and correct of his personal knowledge or based on authentic records, and shall contain supporting annexes, which the submitting party shall attest as faithful reproductions of the originals. An unverified submission shall be considered as not filed. An improperly verified submission may be considered as not filed, at the discretion of the judge. Upon motion, the court may order that the originals of the annexes to a submission be produced in court for examination or comparison by a party to the proceedings. 

All pleadings or motions shall be filed simultaneously in three (3) printed and two (2) digitized copies in compact discs, flash drives, or other compatible Information and Communications Technology (ICT) media, in PDF format. 

The court may decide matters on the basis of the pleadings and other documentary evidence, and conduct clarificatory hearings when necessary. 

Any order issued by the court under these Rules is immediately executory. Review of any order of the court shall be in accordance with Rule 5 of these Rules. Provided, however, that the reliefs ordered by the trial or appellate courts shall take into account the need for resolution of the proceedings in a just, equitable, and speedy manner. 

SEC. 4. CONSTRUCTION OF RULES. – These Rules shall be liberally construed to promote a timely, fair, transparent, effective, and efficient liquidation and suspension of payments of debtors, in accordance with the declared policy of the FRIA. 

SEC. 5. DEFINITION OF TERMS. – Terms used but not defined herein shall have the same meanings ascribed to them in the FRIA: 

(a)  Administrative expenses shall refer to those reasonable and necessary expenses 

1)  incurred in connection with the filing of a petition under these Rules, including filing and professional fees in preparing the petition; 

2)  arising from, or in connection with the proceedings under these Rules; 

3)  incurred in the ordinary course of business of the debtor after the commencement date; 

4)  incurred for the fees of the liquidator/commissioner and/or of the professionals he may engage; and 

5)  those otherwise authorized or mandated under the FRIA or such other expenses authorized under these Rules. 

(b)  Asset is anything of value, which may be either tangible or intangible. Tangible assets can be current assets or fixed assets. Current assets may include cash on hand, money in banks or inventory, while fixed assets may include plant, building, property and equipment. Intangible assets may include intellectual property (such as copyrights, patents, and trademarks) and financial assets (such as accounts receivables, subscriptions receivables, and bonds and stocks). 

The value of these assets must appear in the latest audited financial statements immediately preceding the filing of the petition. In case the debtor is less than three (3) years in operation, it is sufficient that the book value is based on the audited financial statement/s for the two (2) years or year immediately preceding the filing of the petition, as the case may be. 

(c)  Commencement date shall refer to the date on which the court issues a commencement order in a rehabilitation case. 

(d)  Court/s shall refer to the Regional Trial Court/s designated by the Supreme Court as special commercial court/s. 

(e)  Insolvency shall refer to the financial incapacity of the debtors to pay their liabilities as they fall due in the ordinary course of business or whenever their liabilities are greater than their assets. 

(f)  Liquidation shall refer to the proceedings under Chapters V, VI (B) and (C), and VII of the FRIA. 

(g)  Liquidation Order shall refer to the order issued by the court pursuant to Section 2, Rule 4 (A) of these Rules. 

(h)  Liquidator shall refer to the natural person or juridical entity appointed as such by the court pursuant to these Rules and entrusted with such powers and duties as set forth herein; Provided, that if the liquidator is a juridical entity, it must designate a natural person who possesses all the qualifications and none of the disqualifications as its representative, it being understood that the juridical entity and the representative are solidarily liable for all obligations and responsibilities of the liquidator. 

(i)  Proceedings, unless the term is used in a different context, shall refer to liquidation proceedings or suspension of payments proceedings, as the case may be, under these Rules. 

(j)  Suspension of Payments Order shall refer to the order issued by the court pursuant to Section 2, Rule 3 (A) of these Rules. 

(k)  Working day shall have the same meaning as business day. 

SEC. 6. DEBTOR SPOUSES AS PARTIES. – A married individual debtor shall sue or be sued jointly with his or her spouse, except as provided by law. 

SEC. 7. APPLICABILITY OF RULE 5 OF THE FR RULES. – Rule 5 of the FR Rules on Cross-Border Insolvency Proceedings is hereby made applicable to liquidation proceedings and, for this purpose, is adopted as part of these Rules. 

SEC. 8. LIABILITY OF INDIVIDUAL DEBTOR, OWNER OF A SOLE PROPRIETORSHIP, PARTNERS IN A PARTNERSHIP, OR DIRECTORS AND OFFICERS. – The individual debtor, owner of a sole proprietorship, the partners in a partnership, or the directors and officers of a corporate debtor shall be liable for double the value of the property sold, embezzled or disposed of, or double the amount of the transaction involved, whichever is higher, to be recovered for the benefit of the debtor and the creditors, if they, having notice of the commencement of the proceedings, or having reason to believe that the proceedings are about to be commenced, or in contemplation thereof, willfully commit the following acts: 

(a)  dispose or cause to be disposed any property of the debtor other than in the ordinary course of business or authorize or approve any transaction in fraud of creditors or in a manner grossly disadvantageous to the debtor and/or creditors; or 

(b)  conceal, authorize or approve the concealment from the creditors, or embezzle or misappropriate, any property of the debtor. 

The court shall determine the extent of the liability of an owner, partner, director or officer under this section. In this connection, in case of partnerships and corporations, the court shall consider the amount of the shareholding or partnership or equity interest of such partner, director or officer, the degree of control of such partner, director or officer over the debtor, and the extent of the involvement of such partner, director or debtor in the actual management of the operations of the debtor. 

RULE  2. Liquidation of Insolvent Juridical Debtors	RULE 4. Provisions Common to Liquidation in Insolvency
RULE 3. Insolvency of Individual Debtors	RULE 5. Procedural Remedies