| TABLE OF CONTENTS: | |
| RULE 1. Coverage and General Provisions | RULE 4. Provisions Common to Liquidation in Insolvency |
| RULE 3. Insolvency of Individual Debtors | RULE 5. Procedural Remedies |
RULE 2
LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS
A. VOLUNTARY LIQUIDATION
SEC. 1. WHO MAY FILE PETITION; VENUE; CONTENTS. – An insolvent juridical debtor may file a verified petition for liquidation in the Regional Trial Court which has jurisdiction over its principal office as specified in its articles of incorporation or partnership. Where the principal office of the corporation or partnership as registered with the Securities and Exchange Commission (SEC) is in Metro Manila, the petition must be filed in the Regional Trial Court of the city or municipality where the head office is located. The petition shall indicate the names of at least three (3) nominees to the position of liquidator and shall include, as minimum attachments, the following:
(a) a certificate attesting to the holding of a meeting of the Board of Directors of a stock corporation or the Board of Trustees of a non-stock corporation, as the case may be, called for the purpose and the approval during the meeting of a resolution to file the petition, signed by the secretary of the meeting and at least a majority of the members of the Board present during the meeting;
(b) a certificate attesting to the holding of a meeting of the stockholders, members or partners comprising the debtor, as the case may be, called for the purpose and the approval during the meeting of a resolution to file the petition by the stockholders holding at least two-thirds (2/3) of the outstanding capital stock of the stock corporation, or two-thirds (2/3) of the members or partners in case of a non-stock corporation, association or partnership, as the case may be, signed by the chairman and the secretary of the meeting;
(c) a schedule of debts and liabilities, which lists all the creditors of the debtor, indicating the name and last address of record of each creditor; the amount of each claim as to principal, interest, or penalties due thirty (30) days prior to the date of filing; the nature of the claim; and any pledge, lien, mortgage, judgment or other security given for the payment thereof;
(d) an inventory of assets, which must list with reasonable particularity all the assets of the debtor, whether in the possession of the debtor or third parties, stating the nature of each asset; the location and condition thereof; the book value and market value of the asset, attaching the corresponding certified copy of the certificate of title thereof in case of real property, or the evidence of title or ownership in case of movable property; the encumbrances, liens or claims thereon, if any, and the identities and addresses of the lien holders and claimants;
(e) a schedule of current income and expenditures within three (3) months prior to the filing of the petition;
(f) a list of all properties acquired by the debtor in the immediately preceding two (2) years;
(g) a list of all properties sold, disposed of, or donated by the debtor in the immediately preceding two (2) years;
(h) a schedule of the debtor’s executory contracts and unexpired leases;
(i) the audited financial statements of the debtor for the immediately preceding three (3) years; and
(j) the income tax return of the debtor for the immediately preceding year.
All attachments to the petition shall be deemed part and parcel of the verified petition.
SEC. 2. FILING OF A MOTION TO CONVERT REHABILITATION PROCEEDINGS INTO LIQUIDATION PROCEEDINGS. – When there is a pending court-supervised or pre-negotiated rehabilitation proceeding, the debtor may file a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. The motion shall be verified and shall contain or set forth the same matters mentioned in the preceding section and the grounds relied upon as provided under the FRIA.
SEC 3. ACTION ON THE PETITION OR MOTION. – If the court finds the petition or motion, as the case may be, to be sufficient in form and substance, it shall issue the Liquidation Order mentioned in Section 2, Rule 4 (A) of these Rules. Otherwise, the court shall dismiss the petition or deny the motion. The court may take any action necessary for the foregoing purposes but it shall have a maximum period of ten (10) working days from the date of the filing of the petition or motion to issue the Liquidation Order, dismiss the petition, or deny the motion.
B. INVOLUNTARY LIQUIDATION
SEC. 4. WHO MAY FILE PETITION; VENUE; CONTENTS. – Three (3) or more creditors the aggregate of whose claims is at least either One Million Pesos (P1,000,000.00) or at least twenty- five percent (25%) of the subscribed capital stock or partners’ contributions of the insolvent juridical debtor, whichever is higher, may file a petition for the liquidation of an insolvent juridical debtor in the Regional Trial Court which has jurisdiction over the principal office of the debtor as specified in its articles of incorporation or partnership. Where the principal office of the corporation or partnership as registered with the SEC is in Metro Manila, the petition must be filed in the Regional Trial Court of the city or municipality where the head office is located. The petition must be verified by each of the petitioners or, if the petitioners or any of them is a corporation, partnership, or association, then by any of their duly authorized officer/s or representative/s. The petition shall indicate the names of at least three (3) nominees to the position of liquidator, and must show that:
(a) there is no genuine issue of fact or law on the claim/s of the petitioner/s, and that the due and demandable payments thereon have not been made for at least one hundred eighty (180) days or that the debtor has failed generally to meet its liabilities as they fall due; and
(b) there is no substantial likelihood that the debtor may be rehabilitated.
The petition shall also include information to the best knowledge of the petitioners on:
(a) the schedule of debts and liabilities, including a list of its known creditors with their addresses, amounts of claims and collaterals, or securities, if any;
(b) the debtor’s assets, including receivables and claims against third parties; and
(c) the audited financial statements of the debtor for the immediately preceding three (3) years.
SEC. 5. BOND. – The petitioners shall post a bond in an amount at least equal in value to the aggregate of their claims, conditioned upon payment to the debtor of all expenses and damages it may incur by reason of the filing of the petition if the same is later denied or dismissed by the court, or withdrawn by the petitioners without the consent of the debtor.
SEC. 6. FILING OF A MOTION TO CONVERT REHABILITATION PROCEEDINGS INTO LIQUIDATION PROCEEDINGS. – When there is a pending court-supervised or pre-negotiated rehabilitation proceedings, three (3) or more creditors the aggregate of whose claims is at least either One Million Pesos (1,000,000.00) or at least twenty-five percent (25%) of the subscribed capital, or partners’ contributions, of the debtor, whichever is higher, may file a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. The motion shall be verified and shall contain or set forth the same matters mentioned in Section 4 of this Rule.
SEC. 7. ACTION ON THE PETITION OR MOTION. – If the court finds the petition or motion sufficient in form and substance, it shall issue an order:
(a) directing the publication of the petition or motion in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks;
(b) directing the debtor, all known creditors, and any other interested party, to file their comment on the petition or motion within fifteen (15) days from notice of the order; and
(c) directing that a copy of the petition or motion be served on the debtor and on all known creditors, unless they exceed twenty (20) in number, in which case, service shall be made on at least the first twenty (20) largest known creditors of the debtor in terms of credits held. However, if there are more than twenty (20) known creditors (who are not petitioners) and one or more of them acquired their credit/s within the six (6)-month period immediately preceding the filing of the petition, the number of creditors to be served copies of the petition shall be increased by the same number.
SEC. 8. HEARING ON THE PETITION OR MOTION. – The court shall conduct a hearing if the petition or motion, as well as the comments thereto raise issues of facts.
On the basis of the pleadings and the hearing conducted, if any, the court shall determine whether the evidence is sufficient to warrant the issuance of a Liquidation Order mentioned in Section 2, Rule 4 (A) of these Rules. Otherwise, the court shall dismiss the petition or deny the motion.
SEC. 9. CONVERSION BY THE COURT OF REHABILITATION PROCEEDINGS INTO LIQUIDATION PROCEEDINGS. – After notice and hearing, the court where rehabilitation proceedings are pending may also order the conversion of rehabilitation proceedings into liquidation proceedings in those cases authorized by law, or at any other time upon the recommendation of the rehabilitation receiver or management committee that the rehabilitation of the debtor is no longer feasible. In such case, the FLSP Rules shall apply.
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