An out-of-court or informal restructuring agreement or Rehabilitation Plan (OCRA) that meets the minimum requirements is recognized as consistent with the objectives of Republic Act No. 10142, also known as the “Financial Rehabilitation and Insolvency Act (FRIA) of 2010“. Under R.A. 10142, rehabilitation proceedings may be: (a) Out-of-court or informal restructuring agreements or rehabilitation plans; (b) pre-negotiated rehabilitation; (b) court-supervised rehabilitation proceedings.
|Other options – Corporations:||Options – Individuals:|
|* Court-supervised rehabilitation|
* Pre-negotiated rehabilitation
|* Suspension of payments|
* Voluntary insolvency
* Involuntary insolvency
Rehabilitation refers to the restoration of the debtor to a condition of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan, more if the debtor continues as a going concern than if it is immediately liquidated.
An OCRA under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 shall comply with both requirements:
A. Approval by the:
- 1. Debtor;
- 2. Creditors representing at least 67% of the secured obligations of the debtor;
- 3. Creditors representing at least 75% of the unsecured obligations of the debtor; and,
- 4. Creditors holding at least 85% of the total liabilities, secured and unsecured, of the debtor; and,
B. Publication of the notice of the OCRA once a week for at least 3 consecutive weeks in a newspaper of general circulation in the Philippines.
A standstill period may be agreed upon by the parties and shall be effective and enforceable not only against the contracting parties but also against the other creditors. [See Standstill Period in Out-of-Court or Informal Restructuring Agreements]
CRAM DOWN EFFECT
A restructuring/workout agreement or Rehabilitation Plan that is approved pursuant to an informal workout framework referred to in this chapter shall have the same legal effect as confirmation of a Plan in court-supervised rehabilitation proceedings. [See Craw-Down Clause in Rehabilitation Plan in Court-Supervised Rehabilitation Proceedings]
PUBLICATION OF THE OCRA
The notice of the OCRA shall be published once a week for at least 3 consecutive weeks in a newspaper of general circulation in the Philippines. The notice shall contain the following:
- 1. The salient provisions of the OCRA;
- 2. The OCRA is available for inspection or reproduction in the offices of the debtor at the expense of the requesting party;
- 3. The number of secured creditors who approved the OCRA, indicating how much they represent, in terms of percentage, among the secured obligations of the debtor, which should be at least 67%;
- 4. The number of unsecured creditors who approved the OCRA, indicating how much they represent, in terms of percentage, among the unsecured obligations of the debtor, which should be at least 75%;
- 5. The total number of creditors, secured or unsecured, who approved the OCRA, indicating how much they represent, in terms of percentage, among the total liabilities of the debtor, which should be at least 85%;
- 6. Upon its effectivity, the OCRA and its provisions shall be binding upon the debtor and all affected persons, including the creditors, whether or not they participated in the proceedings or opposed the plan or whether or not their claims have been scheduled;
- 7. Payments shall be made to the creditors in accordance with the provisions of the OCRA; and
- 8. The manner and other requirements for the amendment or modification of the OCRA.
The OCRA shall take effect upon the lapse of 15 days from the date of the last publication of its notice.
AMENDMENTS OR MODIDICATIONS
No amendment or modification of the OCRA shall be valid unless it:
- (a) conforms to the manner and other requirements specified by the parties for the amendment or modification of the OCRA; and
- (b) complies with the general requirements for an OCRA.
The amended or modified OCRA shall take effect upon the lapse of 15 days from the date of the last publication of the required notice.
The insolvent debtor and/or creditor may seek court assistance for the execution or implementation of an out-of-court Rehabilitation Plan. Pursuant to the Financial Rehabilitation Rules of Procedure (A.M. No. 12-12-11-SC) or “FR Rules,” the Regional Trial Courts, as courts of general jurisdiction, shall have jurisdiction over the following:
- (1) a petition for court assistance to execute or implement the standstill agreement of the OCRA; and
- (2) a petition for annulment of the standstill agreement or the OCRA.
[See Court Assistance to Implement or Annul the Out-of-Court Rehabilitation Proceeding or the Standstill Period; See also Cross-Border Rehabilitation and Insolvency: Actions of Foreign Creditors and Enforcement Framework of Foreign Proceedings in the Philippines]