B. Financial Rehabilitation and Insolvency (RA 10142)

Financial Rehabilitation and Insolvency Act (FRIA) of 2010: Initiation and Key Definitions

Under Republic Act No. 10142, officially cited as the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010," an insolvent debtor may initiate voluntary proceedings by filing a petition for rehabilitation with the court¹,². To be properly initiated, the petition must be approved by the owner in the case of a sole proprietorship, or by a majority of the partners in a partnership². In the case of a stock corporation, it requires a majority vote of the board of directors and authorization by stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or for a nonstock corporation, a majority vote of the board of trustees and authorization by the vote of at least two-thirds (2/3) of the members in a meeting duly called for the purpose². The petition must be verified to establish the debtor's insolvency and the viability of its rehabilitation, setting forth the debtor's identity, the cause of its insolvency, the specific relief and grounds sought, and a schedule of its debts and liabilities².

Section 4 of the FRIA establishes important statutory definitions governing these proceedings:

• Administrative expenses: Reasonable and necessary expenses incurred or arising from filing the petition; arising from or in connection with the conduct of proceedings, including rehabilitation or liquidation; incurred in the ordinary course of business after the commencement date; for payment of new obligations obtained post-commencement to finance rehabilitation; for the fees of the rehabilitation receiver, liquidator, and engaged professionals; or otherwise authorized under the Act or by the Supreme Court³.
• Affiliate: A corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation³.
• Claim: 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, disputed or undisputed, specifically including all claims of the national or local government for taxes, tariffs, and customs duties³.