Following the passage of Republic Act (RA) No. 10142, or the Financial Rehabilitation and Insolvency Act of 2010 (FRIA), the Supreme Court promulgated the Financial Liquidation and Suspension of Payment Rules of Procedure for Insolvent Debtors in 2015 (A.M. No. 15-04-06-SC), or the FLSP Rules.
The FLSP Rules applies to corporations, partnerships and individuals. It governs the practice, pleading and procedure for all proceedings brought under the FRIA. Jurisdiction lies with the special commercial courts designated by the Supreme Court, whose orders are immediately executory, subject to Rule 5 which provides motion for reconsideration and petition for certiorari under Rule 65 of the Revised Rules of Court, as remedies of an aggrieved party.
The nature of proceedings under the FLSP Rules is in rem, or conclusive against all the world. They are categorized as follows: (1) rehabilitation (voluntary or involuntary) and (2) liquidation (voluntary or involuntary) for juridical debtors; and (1) suspension of payment and (2) liquidation (voluntary or involuntary) for individual debtors.
In the case of Hanjin Heavy Industries and Construction Philippines, known as HHIC Phil., based in Subic Bay Freeport Zone (SBFZ), it filed a voluntary petition for rehabilitation, not for liquidation. See https://www.gmanetwork.com/news/money/companies/680971/korean-shipbuilder-s-hanjin-philippines-files-for-rehab-amid-debt-burden/story/. Rehabilitation refers to 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. (Sec. 4 [gg], FRIA)
HHIC Phil. may, however, convert its petition for voluntary rehabilitation into voluntary liquidation and file it before the same commercial court. (Sec. 3, Rule 2, FLSP Rules)
FRIA has been enacted (and FLSP Rules promulgated) as the State considers it its policy to “ensure a timely, fair, transparent, effective and efficient rehabilitation or liquidation of debtors. The rehabilitation or liquidation shall be made with a view to ensure or maintain certainly and predictability in commercial affairs, preserve and maximize the value of the assets of these debtors, recognize creditor rights and respect priority of claims, and ensure equitable treatment of creditors who are similarly situated. When rehabilitation is not feasible, it is in the interest of the State to facilities a speedy and orderly liquidation of these debtor's assets and the settlement of their obligations.” (Sec. 2, FRIA)
