3. Liquidation

State Policy and Scope of Liquidation Under the FRIA

Under Republic Act No. 10142, when rehabilitation is not feasible, it is the policy and interest of the State to facilitate a speedy and orderly liquidation of the debtor's assets and the settlement of its obligations¹. Liquidation must be timely, fair, transparent, effective, and efficient¹. Proceedings are conducted to ensure certainty and predictability in commercial affairs, preserve and maximize asset values, recognize creditor rights, respect the priority of claims, and guarantee the equitable treatment of creditors who are similarly situated¹.

For the purposes of the Act, the term debtor excludes banks, insurance companies, pre-need companies, and national and local government agencies or units². Nevertheless, government-owned or controlled corporations and government financial institutions other than banks are covered, unless their specific charters provide otherwise².

In administering proceedings involving a debtor:

• Claims refer to all claims or demands of whatever nature or character against the debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, or disputed or undisputed, including all claims of the national or local government such as taxes, tariffs, and customs duties³.
• Administrative expenses include reasonable and necessary expenses incurred in filing the petition, arising from or in connection with the conduct of proceedings (including liquidation of the debtor), incurred in the ordinary course of business after the commencement date, and incurred for the fees of the liquidator and engaged professionals³.