Court-supervised proceedings is one of the options for rehabilitation of insolvent juridical persons under the the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 (Republic Act No. 10142). If the court finds the petition for rehabilitation (see Initiation of Proceedings) to be sufficient in form and substance, it shall, within 5 working days from the filing of the petition, issue a Commencement Order.
The Commencement Order shall include a Stay or Suspension Order which shall:
- (1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor;
- (2) suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor;
- (3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in the ordinary course of business; and
- (4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided herein.
EXCEPTIONS TO THE STAY OR SUSPENSION ORDER
The Stay or Suspension Order shall not apply:
A. To cases already pending appeal in the Supreme Court as of commencement date. Any final and executory judgment arising from such appeal shall be referred to the court for appropriate action;
B. Subject to the discretion of the court, to cases pending or filed at a specialized court or quasi-judicial agency which, upon determination by the court, is capable of resolving the claim more quickly, fairly and efficiently than the court. Any final and executory judgment of such court or agency shall be referred to the court and shall be treated as a non-disputed claim;
C. To the enforcement of claims against sureties and other persons solidarily liable with the debtor, and third party or accommodation mortgagors as well as issuers of letters of credit, unless the property subject of the third party or accommodation mortgage is necessary for the rehabilitation of the debtor as determined by the court upon recommendation by the rehabilitation receiver;
D. To any form of action of customers or clients of a securities market participant to recover or otherwise claim moneys and securities entrusted to the latter in the ordinary course of the latter’s business as well as any action of such securities market participant or the appropriate regulatory agency or self-regulatory organization to pay or settle such claims or liabilities;
E. To the actions of a licensed broker or dealer to sell pledged securities of a debtor pursuant to a securities pledge or margin agreement for the settlement of securities transactions in accordance with the provisions of the Securities Regulation Code and its implementing rules and regulations;
F. The clearing and settlement of financial transactions through the facilities of a clearing agency or similar entities duly authorized, registered and/or recognized by the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and the SEC as well as any form of actions of such agencies or entities to reimburse themselves for any transactions settled for the debtor; and