1. General Principles

General Principles under the Financial Rehabilitation and Insolvency Act

Proceedings under Republic Act No. 10142 are in rem, where jurisdiction over all persons affected is considered acquired upon publication of the notice of the commencement of the proceedings in any newspaper of general circulation in the Philippines¹. The proceedings are conducted in a summary and non-adversarial manner consistent with the declared policies of the law and the procedural rules promulgated by the Supreme Court¹.

Under the Act, a "claim" is broadly defined to encompass 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 government such as national and local taxes, tariffs, and customs duties². Meanwhile, "administrative expenses" cover reasonable and necessary expenses such as those arising from filing the petition, conducting the proceedings, operating the debtor in the ordinary course of business after the commencement date, securing new obligations to finance rehabilitation, and paying the fees of receivers, liquidators, and engaged professionals².

Involuntary proceedings may be commenced against a debtor by any creditor or group of creditors holding a claim or aggregate claims of at least One Million Pesos (Php1,000,000.00) or at least twenty-five percent (25%) of the subscribed capital stock or partners' contributions, whichever is higher³. The petitioning creditors must demonstrate that there is no genuine issue of fact or law on their claims and that due payments have remained unpaid for at least sixty (60) days or the debtor has generally failed to meet liabilities as they fall due, or that another creditor has initiated foreclosure proceedings that will render the debtor insolvent or prevent debt payment³.