REPUBLIC ACT No.

10142 (2) arising from, or in connection with, the conduct of the proceedings under this
Act, including those incurred for the rehabilitation or liquidation of the debtor;
AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION (3) incurred in the ordinary course of business of the debtor after the
OF FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS commencement date;
(4) for the payment of new obligations obtained after the commencement date to
Be it enacted by the Senate and House of Representatives of the Philippine Congress
finance the rehabilitation of the debtor;
Assembled: CHAPTER I GENERAL PROVISIONS
(5) incurred for the fees of the rehabilitation receiver or liquidator and of the
Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and professionals engaged by them; and
Insolvency Act (FRIA) of 2010". (6) that are otherwise authorized or mandated under this Act or such other
expenses as may be allowed by the Supreme Court in its rules.
Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, (b) Affiliate shall refer to a corporation that directly or indirectly, through one or
both juridical and natural persons, and their creditors to collectively and realistically more intermediaries, is controlled by, or is under the common control of another
resolve and adjust competing claims and property rights. In furtherance thereof, the corporation.
State shall ensure a timely, fair, transparent, effective and efficient rehabilitation or (c) Claim shall refer to all claims or demands of whatever nature or character against
liquidation of debtors. The rehabilitation or liquidation shall be made with a view to the debtor or its property, whether for money or otherwise, liquidated or
ensure or maintain certainly and predictability in commercial affairs, preserve and unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed,
maximize the value of the assets of these debtors, recognize creditor rights and including, but not limited to; (1) all claims of the government, whether national or
respect priority of claims, and ensure equitable treatment of creditors who are local, including taxes, tariffs and customs duties; and (2) claims against directors and
similarly situated. When rehabilitation is not feasible, it is in the interest of the State officers of the debtor arising from acts done in the discharge of their functions falling
to facilities a speedy and orderly liquidation of these debtor's assets and the within the scope of their authority: Provided, That, this inclusion does not prohibit
settlement of their obligations. the creditors or third parties from filing cases against the directors and officers acting
in their personal capacities.
Section 3. Nature of Proceedings. - The proceedings under this Act shall be in rem.
(d) Commencement date shall refer to the date on which the court issues the
Jurisdiction over all persons affected by the proceedings shall be considered as
Commencement Order, which shall be retroactive to the date of filing of the petition
acquired upon publication of the notice of the commencement of the proceedings in
for voluntary or involuntary proceedings.
any newspaper of general circulation in the Philippines in the manner prescribed by
(e) Commencement Order shall refer to the order issued by the court under Section
the rules of procedure to be promulgated by the Supreme Court.
16 of this Act.
The proceedings shall be conducted in a summary and non-adversarial manner (f) Control shall refer to the power of a parent corporation to direct or govern the
consistent with the declared policies of this Act and in accordance with the rules of financial and operating policies of an enterprise so as to obtain benefits from its
procedure that the Supreme Court may promulgate. activities. Control is presumed to exist when the parent owns, directly or indirectly
through subsidiaries or affiliates, more than one-half (1/2) of the voting power of an
Section 4. Definition of Terms. - As used in this Act, the term: enterprise unless, in exceptional circumstances, it can clearly be demonstrated that
such ownership does not constitute control. Control also exists even when the parent
(a) Administrative expenses shall refer to those reasonable and necessary expenses:
owns one-half (1/2) or less of the voting power of an enterprise when there is power:
(1) incurred or arising from the filing of a petition under the provisions of this Act;
(1) over more than one-half (1/2) of the voting rights by virtue of an agreement
with investors;
 (2) to direct or govern the financial and operating policies of the enterprise under a date, as well as all other property and assets in which the debtor has an ownership
statute or an agreement; interest, whether or not these property and assets are in the debtor's possession as of
(3) to appoint or remove the majority of the members of the board of directors or commencement date: Provided, That trust assets and bailment, and other property
equivalent governing body; or and assets of a third party that are in the possession of the debtor as of
(4) to cast the majority votes at meetings of the board of directors or equivalent commencement date, are excluded therefrom.
governing body. (r) Involuntary proceedings shall refer to proceedings initiated by creditors.
(g) Court shall refer to the court designated by the Supreme Court to hear and (s) Liabilities shall refer to monetary claims against the debtor, including
determine, at the first instance, the cases brought under this Act. stockholder's advances that have been recorded in the debtor's audited financial
(h) Creditor shall refer to a natural or juridical person which has a claim against the statements as advances for future subscriptions.
debtor that arose on or before the commencement date. (t) Lien shall refer to a statutory or contractual claim or judicial charge on real or
(i) Date of liquidation shall refer to the date on which the court issues the Liquidation personal property that legality entities a creditor to resort to said property for
Order. payment of the claim or debt secured by such lien.
(j) Days shall refer to calendar days unless otherwise specifically stated in this Act. (u) Liquidation shall refer to the proceedings under Chapter V of this Act.
(k) Debtor shall refer to, unless specifically excluded by a provision of this Act, a (v) Liquidation Order shall refer to the Order issued by the court under Section 112
sole proprietorship duly registered with the Department of Trade and Industry (DTI), of this Act.
a partnership duly registered with the Securities and Exchange Commission (SEC), a (w) Liquidator shall refer to the natural person or juridical entity appointed as such
corporation duly organized and existing under Philippine laws, or an individual by the court and entrusted with such powers and duties as set forth in this Act:
debtor who has become insolvent as defined herein. Provided, That, if the liquidator is a juridical entity, it must designated a natural
(l) Encumbered property shall refer to real or personal property of the debtor upon person who possesses all the qualifications and none of the disqualifications as its
which a lien attaches. representative, it being understood that the juridical entity and the representative are
(m) General unsecured creditor shall refer to a creditor whose claim or a portion solidarity liable for all obligations and responsibilities of the liquidator.
thereof its neither secured, preferred nor subordinated under this Act. (x) Officer shall refer to a natural person holding a management position described in
(n) Group of debtors shall refer to and can cover only: (1) corporations that are or contemplated by a juridical entity's articles of incorporation, bylaws or equivalent
financially related to one another as parent corporations, subsidiaries or affiliates; (2) documents, except for the corporate secretary, the assistant corporate secretary and
partnerships that are owned more than fifty percent (50%) by the same person; and the external auditor.
(3) single proprietorships that are owned by the same person. When the petition (y) Ordinary course of business shall refer to transactions in the pursuit of the
covers a group of debtors, all reference under these rules to debtor shall include and individual debtor's or debtor's business operations prior to rehabilitation or
apply to the group of debtors. insolvency proceedings and on ordinary business terms.
(o) Individual debtor shall refer to a natural person who is a resident and citizen of (z) Ownership interest shall refer to the ownership interest of third parties in property
the Philippines that has become insolvent as defined herein. held by the debtor, including those covered by trust receipts or assignments of
(p) Insolvent shall refer to the financial condition of a debtor that is generally unable receivables.
to pay its or his liabilities as they fall due in the ordinary course of business or has (aa) Parent shall refer to a corporation which has control over another corporation
liabilities that are greater than its or his assets. either directly or indirectly through one or more intermediaries.
(q) Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which (bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured
includes all the property and assets of the debtor as of commencement date, plus the creditors' committee, a stakeholder, a party with an ownership interest in property
property and assets acquired by the rehabilitation receiver or liquidator after that held by the debtor, a secured creditor, the rehabilitation receiver, liquidator or any
other juridical or natural person who stands to be benefited or injured by the outcome more intermediaries by another corporation, which thereby becomes its parent
of the proceedings and whose notice of appearance is accepted by the court. corporation.
(cc) Possessory lien shall refer to a lien on property, the possession of which has (pp) Unsecured claim shall refer to a claim that is not secured by a lien.
been transferred to a creditor or a representative or agent thereof. (qq) Unsecured creditor shall refer to a creditor with an unsecured claim.
(dd) Proceedings shall refer to judicial proceedings commenced by the court's (rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.
acceptance of a petition filed under this Act. (ss) Voting creditor shall refer to a creditor that is a member of a class of creditors,
(ee) Property of others shall refer to property held by the debtor in which other the consent of which is necessary for the approval of a Rehabilitation Plan under this
persons have an ownership interest. Act.
(ff) Publication notice shall refer to notice through publication in a newspaper of
general circulation in the Philippines on a business day for two (2) consecutive Section 5. Exclusions. - The term debtor does not include banks, insurance
weeks. companies, pre-need companies, and national and local government agencies or
(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of units.
successful operation and solvency, if it is shown that its continuance of operation is For purposes of this section:
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 (a) Bank shall refer to any duly licensed bank or quasi-bank that is potentially or
if it is immediately liquidated. actually subject to conservatorship, receivership or liquidation proceedings under the
(hh) Rehabilitation receiver shall refer to the person or persons, natural or juridical, New Central Bank Act (Republic Act No. 7653) or successor legislation;
appointed as such by the court pursuant to this Act and which shall be entrusted with
such powers and duties as set forth herein. (b) Insurance company shall refer to those companies that are potentially or actually
(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and subject to insolvency proceedings under the Insurance Code (Presidential Decree No.
viability of an insolvent debtor can be restored using various means including, but 1460) or successor legislation; and
not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-
(c) Pre-need company shall refer to any corporation authorized/licensed to sell or
reorganization, dacion en pago, debt-equity conversion and sale of the business (or
offer to sell pre-need plans.
parts of it) as a going concern, or settingup of new business entity as prescribed in
Section 62 hereof, or other similar arrangements as may be approved by the court or Provided, That government financial institutions other than banks and government-
creditors. owned or controlled corporations shall be covered by this Act, unless their specific
(jj) Secured claim shall refer to a claim that is secured by a lien. charter provides otherwise.
(kk) Secured creditor shall refer to a creditor with a secured claim.
(ll) Secured party shall refer to a secured creditor or the agent or representative of Section 6. Designation of Courts and Promulgation of Procedural Rules. - The
such secured creditor. Supreme Court shall designate the court or courts that will hear and resolve cases
(mm) Securities market participant shall refer to a broker dealer, underwriter, brought under this Act and shall promulgate the rules of pleading, practice and
transfer agent or other juridical persons transacting securities in the capital market. procedure to govern the proceedings brought under this Act.
(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to a
Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall be
member of a nonstock corporation or association or a partner in a partnership.
considered as a separate entity under the proceedings in this Act. Under these
(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the
proceedings, the assets and liabilities of a debtor may not be commingled or
voting stock of which is owned or controlled directly or indirectly through one or
aggregated with those of another, unless the latter is a related enterprise that is commenced, or in contemplation of the proceedings, willfully commit the following
owned or controlled directly or indirectly by the same interests: Provided, however, acts:
That the commingling or aggregation of assets and liabilities of the debtor with those
of a related enterprise may only be allowed where: (a) Dispose or cause to be disposed of any property of the debtor other than in the
ordinary course of business or authorize or approve any transaction in fraud of
(a) there was commingling in fact of assets and liabilities of the debtor and the creditors or in a manner grossly disadvantageous to the debtor and/or creditors; or
related enterprise prior to the commencement of the proceedings;
(b) Conceal or authorize or approve the concealment, from the creditors, or
(b) the debtor and the related enterprise have common creditors and it will be more embezzles or misappropriates, any property of the debtor.
convenient to treat them together rather than separately;
The court shall determine the extent of the liability of an owner, partner, director or
(c) the related enterprise voluntarily accedes to join the debtor as party petitioner and officer under this section. In this connection, in case of partnerships and
to commingle its assets and liabilities with the debtor's; and corporations, the court shall consider the amount of the shareholding or partnership
or equity interest of such partner, director or officer, the degree of control of such
(d) The consolidation of assets and liabilities of the debtor and the related enterprise partner, director or officer over the debtor, and the extent of the involvement of such
is beneficial to all concerned and promotes the objectives of rehabilitation. partner, director or debtor in the actual management of the operations of the debtor.
Provided, finally, That nothing in this section shall prevent the court from joining Section 11. Authorization to Exchange Debt for Equity. - Notwithstanding applicable
other entities affiliated with the debtor as parties pursuant to the rules of procedure as banking legislation to the contrary, any bank, whether universal or not, may acquire
may be promulgated by the Supreme Court. and hold an equity interest or investment in a debtor or its subsidiaries when
conveyed to such bank in satisfaction of debts pursuant to a Rehabilitation or
Section 8. Decisions of Creditors. - Decisions of creditors shall be made according to
Liquidation Plan approved by the court: Provided, That such ownership shall be
the relevant provisions of the Corporation Code in the case of stock or nonstock
subject to the ownership limits applicable to universal banks for equity investments
corporations or the Civil Code in the case of partnerships that are not inconsistent
and: Provided, further, That any equity investment or interest acquired or held
with this Act.
pursuant to this section shall be disposed by the bank within a period of five (5) years
Section 9. Creditors Representatives. - Creditors may designate representatives to or as may be prescribed by the Monetary Board.
vote or otherwise act on their behalf by filing notice of such representation with the
court and serving a copy on the rehabilitation receiver or liquidator.
CHAPTER II
Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship, Partners
COURT-SUPERVISED REHABILITATION
in a Partnership, or Directors and Officers. - Individual debtor, owner of a sole
proprietorship, partners in a partnership, or directors and officers of a debtor shall be (A) Initiation Proceedings.
liable for double the value of the property sold, embezzled or disposed of or double
the amount of the transaction involved, whichever is higher to be recovered for (1) Voluntary Proceedings.
benefit of the debtor and the creditors, if they, having notice of the commencement
of the proceedings, or having reason to believe that proceedings are about to be Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When approved
by the owner in case of a sole proprietorship, or by a majority of the partners in case
of a partnership, or in case of a corporation, by a majority vote of the board of
directors or trustees and authorized by the vote of the stockholders representing at Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any
least two-thirds (2/3) of the outstanding capital stock, or in case of nonstock creditor or group of creditors with a claim of, or the aggregate of whose claims is, at
corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholder's least One Million Pesos (Php1,000,000.00) or at least twenty-five percent (25%) of
or member's meeting duly called for the purpose, an insolvent debtor may initiate the subscribed capital stock or partners' contributions, whichever is higher, may
voluntary proceedings under this Act by filing a petition for rehabilitation with the initiate involuntary proceedings against the debtor by filing a petition for
court and on the grounds hereinafter specifically provided. The petition shall be rehabilitation with the court if:
verified to establish the insolvency of the debtor and the viability of its rehabilitation,
and include, whether as an attachment or as part of the body of the petition, as a (a) there is no genuine issue of fact on law on the claim/s of the petitioner/s, and that
minimum the following: the due and demandable payments thereon have not been made for at least sixty (60)
days or that the debtor has failed generally to meet its liabilities as they fall due; or
(a) Identification of the debtor, its principal activities and its addresses;
(b) Statement of the fact of and the cause of the debtor's insolvency or inability to (b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings
pay its obligations as they become due; against the debtor that will prevent the debtor from paying its debts as they become
(c) The specific relief sought pursuant to this Act; due or will render it insolvent.
(d) The grounds upon which the petition is based; Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition for
(e) Other information that may be required under this Act depending on the form of rehabilitation shall be verified to establish the substantial likelihood that the debtor
relief requested; may be rehabilitated, and include:
(f) Schedule of the debtor's debts and liabilities including a list of creditors with their
addresses, amounts of claims and collaterals, or securities, if any; (a) identification of the debtor its principal activities and its address;
(g) An inventory of all its assets including receivables and claims against third (b) the circumstances sufficient to support a petition to initiate involuntary
parties; rehabilitation proceedings under Section 13 of this Act;
(h) A Rehabilitation Plan; (c) the specific relief sought under this Act;
(i) The names of at least three (3) nominees to the position of rehabilitation receiver; (d) a Rehabilitation Plan;
and (e) the names of at least three (3) nominees to the position of rehabilitation receiver;
(j) Other documents required to be filed with the petition pursuant to this Act and the (f) other information that may be required under this Act depending on the form of
rules of procedure as may be promulgated by the Supreme Court. relief requested; and
g) other documents required to be filed with the petition pursuant to this Act and the
A group of debtors may jointly file a petition for rehabilitation under this Act when rules of procedure as may be promulgated by the Supreme Court.
one or more of its members foresee the impossibility of meeting debts when they
respectively fall due, and the financial distress would likely adversely affect the (B) Action on the Petition and Commencement of Proceedings.
financial condition and/or operations of the other members of the group and/or the
participation of the other members of the group is essential under the terms and Section 15. Action on the Petition. - If the court finds the petition for rehabilitation to
conditions of the proposed Rehabilitation Plan. be sufficient in form and substance, it shall, within five (5) working days from the
filing of the petition, issue a Commencement Order. If, within the same period, the
(2) Involuntary Proceedings. court finds the petition deficient in form or substance, the court may, in its discretion,
give the petitioner/s a reasonable period of time within which to amend or
supplement the petition, or to submit such documents as may be necessary or proper
to put the petition in proper order. In such case, the five (5) working days provided k) prohibit the debtor's suppliers of goods or services from withholding the supply of
above for the issuance of the Commencement Order shall be reckoned from the date goods and services in the ordinary course of business for as long as the debtor makes
of the filing of the amended or supplemental petition or the submission of such payments for the services or goods supplied after the issuance of the Commencement
documents. Order;
(l) authorize the payment of administrative expenses as they become due;
Section 16. Commencement of Proceedings and Issuance of a Commencement (m) set the case for initial hearing, which shall not be more than forty (40) days from
Order. - The rehabilitation proceedings shall commence upon the issuance of the the date of filing of the petition for the purpose of determining whether there is
Commencement Order, which shall: substantial likelihood for the debtor to be rehabilitated;
(n) make available copies of the petition and rehabilitation plan for examination and
(a) identify the debtor, its principal business or activity/ies and its principal place of
copying by any interested party;
business;
(o) indicate the location or locations at which documents regarding the debtor and
b) summarize the ground/s for initiating the proceedings;
the proceedings under Act may be reviewed and copied;
(c) state the relief sought under this Act and any requirement or procedure particular
(p) state that any creditor or debtor who is not the petitioner, may submit the name or
to the relief sought;
nominate any other qualified person to the position of rehabilitation receiver at least
(d) state the legal effects of the Commencement Order, including those mentioned in
five (5) days before the initial hearing;
Section 17 hereof;
(q) include s Stay or Suspension Order which shall:
(e) declare that the debtor is under rehabilitation;
(1) suspend all actions or proceedings, in court or otherwise, for the enforcement
(f) direct the publication of the Commencement Order in a newspaper of general
of claims against the debtor;
circulation in the Philippines once a week for at least two (2) consecutive weeks,
(2) suspend all actions to enforce any judgment, attachment or other provisional
with the first publication to be made within seven (7) days from the time of its
remedies against the debtor;
issuance;
(3) prohibit the debtor from selling, encumbering, transferring or disposing in any
(g) If the petitioner is the debtor direct the service by personal delivery of a copy of
manner any of its properties except in the ordinary course of business; and
the petition on each creditor holding at least ten percent (10%) of the total liabilities
(4) prohibit the debtor from making any payment of its liabilities outstanding as of
of the debtor as determined from the schedule attached to the petition within five (5)
the commencement date except as may be provided herein.
days; if the petitioner/s is/are creditor/s, direct the service by personal delivery of a
copy of the petition on the debtor within five (5) days; Section 17. Effects of the Commencement Order. - Unless otherwise provided for in
(h) appoint a rehabilitation receiver who may or not be from among the nominees of this Act, the court's issuance of a Commencement Order shall, in addition to the
the petitioner/s and who shall exercise such powers and duties defined in this Act as effects of a Stay or Suspension Order described in Section 16 hereof:
well as the procedural rules that the Supreme Court will promulgate;
(i) summarize the requirements and deadlines for creditors to establish their claims (a) vest the rehabilitation with all the powers and functions provided for this Act,
against the debtor and direct all creditors to their claims with the court at least five such as the right to review and obtain records to which the debtor's management and
(5) days before the initial hearing; directors have access, including bank accounts or whatever nature of the debtor
(j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its subject to the approval by the court of the performance bond filed by the
comment on or opposition to the petition or its claim/s against the debtor under such rehabilitation receiver;
procedures as the Supreme Court provide; (b) prohibit or otherwise serve as the legal basis rendering null and void the results of
any extrajudicial activity or process to seize property, sell encumbered property, or
otherwise attempt to collection or enforce a claim against the debtor after transactions in accordance with the provisions of the Securities Regulation Code and
commencement date unless otherwise allowed in this Act, subject to the provisions its implementing rules and regulations;
of Section 50 hereof; (f) the clearing and settlement of financial transactions through the facilities of a
(c) serve as the legal basis for rendering null and void any setoff after the clearing agency or similar entities duly authorized, registered and/or recognized by
commencement date of any debt owed to the debtor by any of the debtor's creditors; the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and the
(d) serve as the legal basis for rendering null and void the perfection of any lien SEC as well as any form of actions of such agencies or entities to reimburse
against the debtor's property after the commencement date; and themselves for any transactions settled for the debtor; and
e) consolidate the resolution of all legal proceedings by and against the debtor to the (g) any criminal action against individual debtor or owner, partner, director or officer
court Provided. However, That the court may allow the continuation of cases on of a debtor shall not be affected by any proceeding commend under this Act.
other courts where the debtor had initiated the suit.
Section 19. Waiver of taxes and Fees Due to the National Government and to Local
Attempts to seek legal of other resource against the debtor outside these proceedings Government Units (LGUs). - Upon issuance of the Commencement Order by the
shall be sufficient to support a finding of indirect contempt of court. court, and until the approval of the Rehabilitation Plan or dismissal of the petition,
whichever is earlier, the imposition of all taxes and fees including penalties, interests
Section 18. Exceptions to the Stay or Suspension Order. - The Stay or Suspension and charges thereof due to the national government or to LGUs shall be considered
Order shall not apply: waived, in furtherance of the objectives of rehabilitation.
(a) to cases already pending appeal in the Supreme Court as of commencement date Section 20. Application of Stay or Suspension Order to Government Financial
Provided, That any final and executory judgment arising from such appeal shall be Institutions. - The provisions of this Act concerning the effects of the
referred to the court for appropriate action; Commencement Order and the Stay or Suspension Order on the suspension of rights
(b) subject to the discretion of the court, to cases pending or filed at a specialized to foreclose or otherwise pursue legal remedies shall apply to government financial
court or quasi-judicial agency which, upon determination by the court is capable of institutions, notwithstanding provisions in their charters or other laws to the contrary.
resolving the claim more quickly, fairly and efficiently than the court: Provided, That
any final and executory judgment of such court or agency shall be referred to the Section 21. Effectivity and Duration of Commencement Order. - Unless lifted by the
court and shall be treated as a non-disputed claim; court, the Commencement Order shall be for the effective for the duration of the
(c) to the enforcement of claims against sureties and other persons solidarily liable rehabilitation proceedings for as long as there is a substantial likelihood that the
with the debtor, and third party or accommodation mortgagors as well as issuers of debtor will be successfully rehabilitated. In determining whether there is substantial
letters of credit, unless the property subject of the third party or accommodation likelihood for the debtor to be successfully rehabilitated, the court shall ensure that
mortgage is necessary for the rehabilitation of the debtor as determined by the court the following minimum requirements are met:
upon recommendation by the rehabilitation receiver;
(d) to any form of action of customers or clients of a securities market participant to (a) The proposed Rehabilitation Plan submitted complies with the minimum contents
recover or otherwise claim moneys and securities entrusted to the latter in the prescribed by this Act;
ordinary course of the latter's business as well as any action of such securities market (b) There is sufficient monitoring by the rehabilitation receiver of the debtor's
participant or the appropriate regulatory agency or self-regulatory organization to business for the protection of creditors;
pay or settle such claims or liabilities; (c) The debtor has met with its creditors to the extent reasonably possible in attempts
(e) to the actions of a licensed broker or dealer to sell pledged securities of a debtor to reach consensus on the proposed Rehabilitation Plan;
pursuant to a securities pledge or margin agreement for the settlement of securities
(d) The rehabilitation receiver submits a report, based on preliminary evaluation, Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is not
stating that the underlying assumptions and the goals stated in the petitioner's listed in the schedule of debts and liabilities and who fails to file a notice of claim in
Rehabilitation Plan are realistic reasonable and reasonable or if not, there is, in any accordance with the Commencement Order but subsequently files a belated claim
case, a substantial likelihood for the debtor to be successfully rehabilitated because, shall not be entitled to participate in the rehabilitation proceedings but shall be
among others: entitled to receive distributions arising therefrom.
(1) there are sufficient assets with/which to rehabilitate the debtor;
(2) there is sufficient cash flow to maintain the operations of the debtor; Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from the
(3) the debtor's, partners, stockholders, directors and officers have been acting in initial hearing and with or without the comments of the creditors or any of them, the
good faith and which due diligence; rehabilitation receiver shall submit a report to the court stating his preliminary
(4) the petition is not s sham filing intended only to delay the enforcement of the findings and recommendations on whether:
rights of the creditor's or of any group of creditors; and (a) the debtor is insolvent and if so, the causes thereof and any unlawful or irregular
(5) the debtor would likely be able to pursue a viable Rehabilitation Plan; act or acts committed by the owner/s of a sole proprietorship partners of a
(e) The petition, the Rehabilitation Plan and the attachments thereto do not contain partnership or directors or officers of a corporation in contemplation of the
any materially false or misleading statement; insolvency of the debtor or which may have contributed to the insolvency of the
(f) If the petitioner is the debtor, that the debtor has met with its creditor/s debtor;
representing at least three-fourths (3/4) of its total obligations to the extent (b) the underlying assumptions, the financial goals and the procedures to accomplish
reasonably possible and made a good faith effort to reach a consensus on the such goals as stated in the petitioner's Rehabilitation Plan are realistic, feasible and
proposed Rehabilitation Plan if the petitioner/s is/are a creditor or group of creditors, reasonable;
that/ the petitioner/s has/have met with the debtor and made a good faith effort to (c) there is a substantial likelihood for the debtor to be successfully rehabilitated;
reach a consensus on the proposed Rehabilitation Plan; and (d) the petition should be dismissed; and
(g) The debtor has not committed acts misrepresentation or in fraud of its creditor/s (e) the debtor should be dissolved and/or liquidated.
or a group of creditors.
Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of
Section 22. Action at the Initial Hearing. - At the initial hearing, the court shall: Proceedings. - Within ten (10) days from receipt of the report of the rehabilitation
(a) determine the creditors who have made timely and proper filing of their notice of receiver mentioned in Section 24 hereof the court may:
claims; (a) give due course to the petition upon a finding that:
(b) hear and determine any objection to the qualifications of the appointment of the (1) the debtor is insolvent; and
rehabilitation receiver and, if necessary appoint a new one in accordance with this (2) there is a substantial likelihood for the debtor to be successfully rehabilitated;
Act; (b) dismiss the petition upon a finding that:
(c) direct the creditors to comment on the petition and the Rehabilitation Plan, and to (1)debtor is not insolvent;
submit the same to the court and to the rehabilitation receiver within a period of not (2) the petition i8 a sham filing intended only to delay the enforcement of the
more than twenty (20) days; and rights of the creditor/s or of any group of creditors;
(d) direct the rehabilitation receiver to evaluate the financial condition of the debtor (3)the petition, the Rehabilitation Plan and the attachments thereto contain any
and to prepare and submit to the court within forty (40) days from initial hearing the materially false or misleading statements; or
report provided in Section 24 hereof.
 (4)the debtor has committed acts of misrepresentation or in fraud of its creditor/s (a)A citizen of the Philippines or a resident of the Philippines in the six (6) months
or a group of creditors; immediately preceding his nomination;
(c)convert the proceedings into one for the liquidation of the debtor upon a finding (b)Of good moral character and with acknowledged integrity, impartiality and
that: independence;
(1)the debtor is insolvent; and (c)Has the requisite knowledge of insolvency and other relevant commercial laws,
(2)there is no substantial likelihood for the debtor to be successfully rehabilitated rules and procedures, as well as the relevant training and/or experience that may be
as determined in accordance with the rules to be promulgated by the Supreme necessary to enable him to properly discharge the duties and obligations of a
Court. rehabilitation receiver; and
(d)Has no conflict of interest: Provided, That such conflict of interest may be
Section 26. Petition Given Due Course. - If the petition is given due course, the court waived, expressly or impliedly, by a party who may be prejudiced thereby.
shall direct the rehabilitation receiver to review, revise and/or recommend action on
the Rehabilitation Plan and submit the same or a new one to the court within a period Other qualifications and disqualification’s of the rehabilitation receiver shall be set
of not more than ninety (90) days. forth in procedural rules, taking into consideration the nature of the business of the
debtor and the need to protect the interest of all stakeholders concerned.
The court may refer any dispute relating to the Rehabilitation Plan or the
rehabilitation proceedings pending before it to arbitration or other modes of dispute Section 30.Initial Appointment of the Rehabilitation Receiver. - The court shall
resolution, as provided for under Republic Act No. 9285, Or the Alternative Dispute initially appoint the rehabilitation receiver, who mayor may not be from among the
Resolution Act of 2004, should it determine that such mode will resolve the dispute nominees of the petitioner, However, at the initial hearing of the petition, the
more quickly, fairly and efficiently than the court. creditors and the debtor who are not petitioners may nominate other persons to the
position. The court may retain the rehabilitation receiver initially appointed or
Section 27.Dismissal of Petition. - If the petition is dismissed pursuant to paragraph appoint another who mayor may not be from among those nominated.
(b) of Section 25 hereof, then the court may, in its discretion, order the petitioner to
pay damages to any creditor or to the debtor, as the case may be, who may have been In case the debtor is a securities market participant, the court shall give priority to the
injured by the filing of the petition, to the extent of any such injury. nominee of the appropriate securities or investor protection fund.

(C) The Rehabilitation Receiver, Management Committee and Creditors' If a qualified natural person or entity is nominated by more than fifty percent (50%)
Committee. of the secured creditors and the general unsecured creditors, and satisfactory
evidence is submitted, the court shall appoint the creditors' nominee as rehabilitation
Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural or receiver.
juridical person may serve as a rehabilitation receiver: Provided, That if the
rehabilitation receiver is a juridical entity, it must designate a natural person/s who
possess/es all the qualifications and none of the disqualification’s as its
representative, it being understood that the juridical entity and the representative/s
are solidarily liable for all obligations and responsibilities of the rehabilitation
receiver.

Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation receiver

shall have the following minimum qualifications:
Section 31. Powers, Duties and Responsibilities of the Rehabilitation Receiver. - The (m) To assume and exercise the powers of management of the debtor, if directed by
rehabilitation receiver shall be deemed an officer of the court with the principal duty the court pursuant to Section 36 hereof;
of preserving and maximizing the value of the assets of the debtor during the (n) To exercise such other powers as may, from time to time, be conferred upon him
rehabilitation proceedings, determining the viability of the rehabilitation of the by the court; and
debtor, preparing and recommending a Rehabilitation Plan to the court, and
implementing the approved Rehabilitation Plan, To this end, and without limiting the To submit a status report on the rehabilitation proceedings every quarter or as may be
generality of the foregoing, the rehabilitation receiver shall have the following required by the court motu proprio. or upon motion of any creditor. or as may be
powers, duties and responsibilities: provided, in the Rehabilitation Plan.

(a)To verify the accuracy of the factual allegations in the petition and its annexes; Unless appointed by the court, pursuant to Section 36 hereof, the rehabilitation
(b)To verify and correct, if necessary, the inventory of all of the assets of the debtor, receiver shall not take over the management and control of the debtor but may
and their valuation; recommend the appointment of a management committee over the debtor in the cases
(c)To verify and correct, if necessary, the schedule of debts and liabilities of the provided by this Act.
debtor; Section 32.Removal of the Rehabilitation Receiver. – The rehabilitation receiver
(d)To evaluate the validity, genuineness and true amount of all the claims against the may be removed at any time by the court either motu proprio or upon motion by any
debtor; creditor/s holding more than fifty percent (50%) of the total obligations of the debtor,
(e)To take possession, custody and control, and to preserve the value of all the on such grounds as the rules of procedure may provide which shall include, but are
property of the debtor; not limited to, the following:
(f)To sue and recover, with the approval of the court, all amounts owed to, and all
properties pertaining to the debtor; (a) Incompetence, gross negligence, failure to perform or failure to exercise the
(g)To have access to all information necessary, proper or relevant to the operations proper degree of care in the performance of his duties and powers;
and business of the debtor and for its rehabilitation; (b) Lack of a particular or specialized competency required by the specific case;
(h) To sue and recover, with the. approval of the court, all property or money of the (c) Illegal acts or conduct in the performance of his duties and powers;
debtor paid, transferred or disbursed in fraud of the debtor or its creditors, or which (d) Lack of qualification or presence of any disqualification;
constitute undue preference of creditor/s; (e) Conflict of interest that arises after his appointment; and
(i) To monitor the operations and the business of the debtor to ensure that no (f) Manifest lack of independence that is detrimental to the general body of the
payments or transfers of property are made other than in the ordinary course of stakeholders.
business;
(j) With the court's approval, to engage the services of or to employ persons or Section 33.Compensation and Terms of Service. The rehabilitation receiver and his
entities to assist him in the discharge of his functions; direct employees or independent contractors shall be entitled to compensation for
(k) To determine the manner by which the debtor may be best rehabilitated, to reasonable fees and expenses from the debtor according to the terms approved by the
review) revise and/or recommend action on the Rehabilitation Plan and submit the court after notice and hearing. Prior to such hearing, the rehabilitation receiver and
same or a new one to the court for approval; his direct employees shall be entitled to reasonable compensation based on quantum
(1) To implement the Rehabilitation Plan as approved by the court, if 80 provided meruit. Such costs shall be considered administrative expenses.
under the Rehabilitation Plan;
Section 34.Oath and Bond of the Rehabilitation Receiver. Prior to entering upon his
powers, duties and responsibilities, the rehabilitation receiver shall take an oath and
file a bond, in such amount to be fixed by the court, conditioned upon the faithful Section 38.Qualifications of Members of the Management Committee. - The
and proper discharge of his powers, duties and responsibilities. qualifications and disqualification’s of the members of the management committee
shall be set forth in the procedural rules, taking into consideration the nature of the
Section 35.Vacancy. - Incase the position of rehabilitation receiver is vacated for any business of the debtor and the need to protect the interest of all stakeholders
reason whatsoever. the court shall direct the debtor and the creditors to submit the concerned.
name/s of their nominee/s to the position. The court may appoint any of the qualified
nominees. or any other person qualified for the position. Section 39.Employment of Professionals. - Upon approval of the court, and after
notice and hearing, the rehabilitation receiver or the management committee may
Section 36.Displacement of Existing Management by the Rehabilitation Receiver or employ specialized professionals and other experts to assist each in the performance
Management Committee. – Upon motion of any interested party, the court may of their duties. Such professionals and other experts shall be considered either
appoint and direct the rehabilitation receiver to assume the powers of management of employees or independent contractors of the rehabilitation receiver or the
the debtor, or appoint a management committee that will undertake the management management committee, as the case may be. The qualifications and disqualification’s
of the debtor. upon clear and convincing evidence of any of the following of the professionals and experts may be set forth in procedural rules, taking into
circumstances: consideration the nature of the business of the debtor and the need to protect the
interest of all stakeholders concerned.
(a) Actual or imminent danger of dissipation, loss, wastage or destruction of the
debtor’s assets or other properties; Section 40.Conflict of Interest. - No person may be appointed as a rehabilitation
(b) Paralyzation of the business operations of the debtor; or receiver, member of a_ management committee, or be employed by the rehabilitation
(c) Gross mismanagement of the debtor. or fraud or other wrongful conduct on the receiver or the management committee if he has a conflict of interest. An individual
part of, or gross or willful violation of this Act by. existing management of the shall be deemed to have a conflict of interest if he is so situated as to be materially
debtor Or the owner, partner, director, officer or representative/s in management of influenced in the exercise of his judgment for or against any party to the proceedings.
the debtor. Without limiting the generality of the foregoing, an individual shall be deemed to
have a conflict of interest if:
In case the court appoints the rehabilitation receiver to assume the powers of
management of the debtor. the court may: (a) he is a creditor, owner, partner or stockholder of the debtor;
(b) he is engaged in a line of business which competes with that of the debtor;
(1) require the rehabilitation receiver to post an additional bond;
(c) he is, or was, within five (5) years from the filing of the petition, a director,
(2) authorize him to engage the services or to employ persona or entities to assist him
officer, owner, partner or employee of the debtor or any of the creditors, or the
in the discharge of his managerial functions; and
auditor or accountant of the debtor;
(3) authorize a commensurate increase in his compensation.
(d) he is, or was, within two (2) years from the filing of the petition, an underwriter
Section 37.Role of the Management Committee. – When appointed pursuant to the of the outstanding securities of the debtor;
foregoing section, the management committee shall take the place of the (e) he is related by consanguinity or affinity within the fourth civil degree to any
management and the governing body of the debtor and assume their rights and individual creditor, owners of a sale proprietorship-debtor, partners of a partnership-
responsibilities. debtor or to any stockholder, director, officer, employee or underwriter of a
corporation-debtor; or
The specific powers and duties of the management committee, whose members shall (f) he has any other direct or indirect material interest in the debtor or any of the
be considered as officers of the court, shall be prescribed by the procedural rules. creditors.
Any rehabilitation receiver, member of the management committee or persons
employed or contracted by them possessing any conflict of interest shall make the
appropriate disclosure either to the court or to the creditors in case of out-of-court (D) Determination of Claims.
rehabilitation proceedings. Any party to the proceeding adversely affected by the Section 44.Registry of Claims. - Within twenty (20) days from his assumption into
appointment of any person with a conflict of interest to any of the positions office, the rehabilitation receiver shall establish a preliminary registry of claims. The
enumerated above may however waive his right to object to such appointment and, if rehabilitation receiver shall make the registry available for public inspection and
the waiver is unreasonably withheld, the court may disregard the conflict of interest, provide publication notice to the debtor, creditors and stakeholders on where and
taking into account the general interest of the stakeholders. when they may inspect it. All claims included in the registry of claims must be duly
Section 41.Immunity. - The rehabilitation receiver and all persons employed by him, supported by sufficient evidence.
and the members of the management committee and all persons employed by it, shall Section 45.Opposition or Challenge of Claims. – Within thirty (30) days from the
not be subject to any action. claim or demand in connection with any act done or expiration of the period stated in the immediately preceding section, the debtor,
omitted to be done by them in good faith in connection with the exercise of their creditors, stakeholders and other interested parties may submit a challenge to claim/s
powers and functions under this Act or other actions duly approved by the court. to the court, serving a certified copy on the rehabilitation receiver and the creditor
Section 42.Creditors' Committee. - After the creditors' meeting called pursuant to holding the challenged claim/so Upon the expiration of the thirty (30)-day period, the
Section 63 hereof, the creditors belonging to a class may formally organize a rehabilitation receiver shall submit to the court the registry of claims which shall
committee among themselves. In addition, the creditors may, as a body, agree to include undisputed claims that have not been subject to challenge.
form a creditors' committee composed of a representative from each class of Section 46.Appeal. - Any decision of the rehabilitation receiver regarding a claim
creditors, such as the following: may be appealed to the court.
(a) Secured creditors; (c) Trade creditors and suppliers; and
(b) Unsecured creditors; (d) Employees of the debtor.
(E) Governance.
In the election of the creditors' representatives, the rehabilitation receiver or his
representative shall attend such meeting and extend the appropriate assistance as may Section 47.Management. - Unless otherwise provided herein, the management of the
be defined in the procedural rules. juridical debtor shall remain with the existing management subject to the applicable
law/s and agreement/s, if any, on the election or appointment of directors, managers
Section 43.Role of Creditors' Committee. - The creditors' committee when
Or managing partner. However, all disbursements, payments or sale, disposal,
constituted pursuant to Section 42 of this Act shall assist the rehabilitation receiver in
assignment, transfer or encumbrance of property , or any other act affecting title or
communicating with the creditors and shall be the primary liaison between the
interest in property, shall be subject to the approval of the rehabilitation receiver
rehabilitation receiver and the creditors. The creditors' committee cannot exercise or
and/or the court, as provided in the following subchapter.
waive any right or give any consent on behalf of any creditor unless specifically
authorized in writing by such creditor. The creditors' committee may be authorized
by the court or by the rehabilitation receiver to perform such other tasks and
functions as may be defined by the procedural rules in order to facilitate the (F) Use, Preservation and Disposal of Assets and Treatment of Assets and
rehabilitation process. Claims after Commencement Date.
Section 48.Use or Disposition of Assets. - Except as otherwise provided herein, no or control property of the debtor shall not transfer, conveyor otherwise dispose of the
funds or property of the debtor shall he used or disposed of except in the ordinary same to persons other than the debtor, unless upon prior approval of the
course of business of the debtor, or unless necessary to finance the administrative rehabilitation receiver. The rehabilitation receiver may also:
expenses of the rehabilitation proceedings.
(a) demand the surrender or the transfer of the possession or control of such property
Section 49.Sale of Assets. - The court, upon application of the rehabilitation receiver, to the rehabilitation receiver or any other person, subject to payment of the claims
may authorize the sale of unencumbered property of the debtor outside the ordinary secured by any possessory Iien/s thereon;
course of business upon a showing that the property, by its nature or because of other
circumstance, is perishable, costly to maintain, susceptible to devaluation or (b) allow said third parties to retain possession or control, if such an arrangement
otherwise injeopardy. would more likely preserve or increase the value of the property in question or the
total value of the assets of the debtor; or
Section 50.Sale or Disposal of Encumbered Property of the Debtor and Assets of
Third Parties Held by Debtor. The court may authorize the sale, transfer, conveyance (c) undertake any otI1er disposition of the said property as may be beneficial for the
or disposal of encumbered property of the debtor, or property of others held by the rehabilitation of the debtor, after notice and hearing, and approval of the court.
debtor where there is a security interest pertaining to third parties under a financial, Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of
credit or other similar transactions if, upon application of the rehabilitation receiver Assets. - The court may rescind or declare as null and void any sale, payment,
and with the consent of the affected owners of the property, or secured creditor/s in transfer or conveyance of the debtor's unencumbered property or any encumbering
the case of encumbered property of the debtor and, after notice and hearing, the court thereof by the debtor or its agents or representatives after the commencement date
determines that: which are not in the ordinary course of the business of the debtor: Provided,
(a) such sale, transfer, conveyance or disposal is necessary for the continued however, That the unencumbered property may be sold, encumbered or otherwise
operation of the debtor's business; and disposed of upon order of the court after notice and hearing:

(b) the debtor has made arrangements to provide a substitute lien or ownership right (a) if such are in the interest of administering the debtor and facilitating the
that provides an equal level of security for the counter-party's claim or right. preparation and implementation of a Rehabilitation Plan;
(b) in order to provide a substitute lien, mortgage or pledge of property under this
Provided, That properties held by the debtor where the debtor has authority to sell Act;
such as trust receipt or consignment arrangements may be sold or disposed of by (c) for payments made to meet administrative expenses as they arise;
the .debtor, if such sale or disposal is necessary for the operation of the debtor's (d) for payments to victims of quasi delicts upon a showing that the claim is valid
business, and the debtor has made arrangements to provide a substitute lien or and the debtor has insurance to reimburse the debtor for the payments made;
ownership right that provides an equal level of security for the counter-party's claim (e) for payments made to repurchase property of the debtor that is auctioned off in a
or right. judicial or extrajudicial sale under. This Act; or
(f) for payments made to reclaim property of the debtor held pursuant to a possessory
Sale or disposal of property under this section shall not give rise to any criminal lien.
liability under applicable laws.
Section 53.Assets Subject to Rapid Obsolescence, Depreciation and Diminution of
Section 51.Assets of Debtor Held by Third Parties. – In the case of possessory Value. - Upon the application of a secured creditor holding a lien against or holder of
pledges, mechanic's liens or similar claims, third parties who have in their possession an ownership interest in property held by the debtor that is subject to potentially
rapid obsolescence, depreciation or diminution in value, the court shall, after notice The payment of the foregoing obligations shall be considered administrative
and hearing, order the debtor or rehabilitation receiver to take reasonable steps expenses under this Act.
necessary to prevent the depreciation. If depreciation cannot be avoided and such
depreciation is jeopardizing the security or property interest of the secured creditor or Section 56.Treatment of Employees, Claims. Compensation of employees required
owner, the court shall: to carry on the business shall be considered an administrative expense. Claims of
separation pay for months worked prior to the commencement date shall be
(a) allow the encumbered property to be foreclosed upon by the secured creditor considered a pre- ommencement claim. Claims for salary and separation pay for
according to the relevant agreement between the debtor and the secured creditor, work performed after the commencement date shall be an administrative expense.
applicable rules of procedure and relevant legislation: Provided. That the proceeds of
the sale will be distributed in accordance with the order prescribed under the rules of Section 57.Treatment of Contracts. - Unless cancelled by virtue of a final judgment
concurrence and preference of credits; or of a court of competent jurisdiction issued prior to the issuance of the
(b) upon motion of, or with the consent of the affected secured creditor or interest Commencement Order, or at anytime thereafter by the court before which the
owner. order the conveyance of a lien against or ownership interest in substitute rehabilitation proceedings are pending, all valid and subbsisting contracts of the
property of the debtor to the secured creditor: Provided. That other creditors holding debtor with creditors and other third parties as at the commencement date shall
liens on such property, if any, do not object thereto, or, if such property is not continue in force: Provided, That within ninety (90) days following the
available; commencement of proceedings, the debtor, with the consent of the rehabilitation
(c) order the conveyance to the secured creditor or holder . of an ownership interest receiver, shall notify each contractual counter-party of whether it is confirming the
of a lien on the residual funds from the sale of encumbered property during the particular contract. Contractual obligations of the debtor arising or performed during
proceedings; or this period, and afterwards for confirmed contracts, shall be considered
(d) allow the sale or disposition of the property: Provided. That the sale or administrative expenses. Contracts not confirmed within the required deadline shall
disposition will maximize the value of the property for the benefit of the secured be considered terminated. Claims for actual damages, if any, arising as a result of the
creditor and the debtor, and the proceeds of the sale will be distributed in accordance election to terminate a contract shall be considered a pre-commencement claim
with the order prescribed under the rules of concurrence and preference of credits. against the debtor. Nothing contained herein shall prevent the cancellation or
termination of any contract of the debtor for any ground provided by law.
Section 54.Post-commencement Interest. - The rate and term of interest, if any, on
secured and unsecured claims shall be determined and provided for in the approved
Rehabilitation Plan. (G) Avoidance Proceedings.
Section 55.Post-commencement Loans and Obligations. - With the approval of the Section 58.Rescission or Nullity of Certain Pre-commencement Transactions. Any
court upon the recommendation of the rehabilitation receiver, the debtor, in order to transaction occurring prior to commencement date entered into by the debtor or
enhance its rehabilitation. may: involving its funds or assets may be rescinded or declared null and void on the
(a) enter into credit arrangements; or ground that the same was executed with intent to defraud a creditor or creditors or
(b) enter into credit arrangements, secured by mortgages of its unencumbered which constitute undue preference of creditors. Without limiting the generality of the
property or secondary mortgages of encumbered property with the approval of senior foregoing, a disputable presumption of such design shall arise if the transaction:
secured parties with regard to the encumbered property; or (a) provides unreasonably inadequate consideration to the debtor and is executed
(c) incur other obligations as may be essential for its rehabilitation. within ninety (90) days prior to the commencement date;
(b) involves an accelerated payment of a claim to a creditor within ninety (90) days Section 60.No Diminution of Secured Creditor Rights. The issuance of the
prior to the commencement date; Commencement Order and the Suspension or Stay Order, and any other provision of
(c) provides security or additional security executed within ninety (90) days prior to this Act, shall not be deemed in any way to diminish or impair the security or lien of
the commencement date; a secured creditor, or the value of his lien or security, except that his right to enforce
(d) involves creditors, where a creditor obtained, or received the benefit of, more said security or lien may be suspended during the term of the Stay Order. The court,
than its pro rata share in the assets of the debtor, executed at a time when the debtor upon motion or recommendation of the rehabilitation receiver, may allow a secured
was insolvent; or creditor to enforce his security or lien, or foreclose upon property of the debtor
(e) is intended to defeat, delay or hinder the ability of the creditors to collect claims securing his/its claim, if the said property is not necessary for the rehabilitation of the
where the effect of the transaction is to put assets of the debtor beyond the reach of debtor. The secured creditor and/or the other lien holders shall be admitted to the
creditors or to otherwise prejudice the interests of creditors. rehabilitation proceedings only for the balance of his claim, if any.

Provided, however, That nothing in this section shall prevent the court from Section 61.Lack of Adequate Protection. - The court, on motion or motu proprio,
rescinding or declaring as null and void a transaction on other grounds provided by may terminate, modify or set conditions for the continuance of suspension of
relevant legislation and jurisprudence: Provided, further, That the provisions of the payment, or relieve a claim from the coverage thereof, upon showing that:
Civil Code on rescission shall in any case apply to these transactions.
(a) a creditor does not have adequate protection over property securing its claim; or
Section 59.Actions for Rescission or Nullity. - (a) The rehabilitation receiver or, with (b) the value of a claim secured by a lien on property which is not necessary for
his conformity, any creditor may initiate and prosecute any action to rescind, or rehabilitation of the debtor exceeds the fair market value of the said property.
declare null and void any transaction described in Section 58 hereof. If the
rehabilitation receiver does not consent to the filing or prosecution of such action, For purposes of this section, a creditor shall be deemed to lack adequate protection if
it can be shown that:
(b) If leave of court is granted under subsection (a), the rehabilitation receiver shall
assign and transfer to the creditor all rights, title and interest in the chose in action or (a) the debtor fails or refuses to honor a pre-existing agreement with the creditor to
subject matter of the proceeding, including any document in support thereof. keep the property insured;
(b) the debtor fails or refuses to take commercially reasonable steps to maintain the
(c) Any benefit derived from a proceeding taken pursuant to subsection (a), to the property; or
extent of his claim and the costs, belongs exclusively to the creditor instituting the (c) the property has depreciated to an extent that the creditor is under secured.
proceeding, and the surplus, if any, belongs to the estate.
Upon showing of a lack of protection, the court shall order the debtor or the
(d) Where, before an order is made under subsection (a), the rehabilitation receiver rehabilitation receiver to make arrangements to provide for the insurance or
(or liquidator) signifies to the court his readiness to institute the proceeding for the maintenance of the property; or to make payments or otherwise provide additional or
benefit of the creditors, the order shall fix the time within which he shall do so and, replacement security such that the obligation is fully secured. If such arrangements
m that case, the benefit derived from the proceeding, if instituted within the time are not feasible, the court may modify the Stay Order to allow the secured creditor
limits so fixed, belongs to the estate. lacking adequate protection to enforce its security claim against the debtor: Provided,
however, That the court may deny the creditor the remedies in this paragraph if the
property subject of the enforcement is required for the rehabilitation of the debtor.
(H) Treatment of Secured Creditors.
(i) Administration of Proceedings. (m) identify the debtor's role in the implementation of the Plan;
(n) state any rehabilitation covenants of the debtor, the breach of which shall be
Section 62.Contents of a Rehabilitation Plan. – The Rehabilitation Plan shall, as a considered a material breach of the Plan;
minimum: (o) identify those responsible for the future management of the debtor and the
supervision and implementation of the Plan, their affiliation with the debtor and their
(a) specify the underlying assumptions, the financial goals and the procedures
remuneration;
proposed to accomplish such goals;
(p) address the treatment of claims arising after the confirmation of the
(b) compare the amounts expected to be received by the creditors under the
Rehabilitation Plan;
Rehabilitation Plan with those that they will receive if liquidation ensues within the
(q) require the debtor and its counter-parties to adhere to the terms of all contracts
next one hundred twenty (120) days;
that the debtor has chosen to confirm;
(c) contain information sufficient to give the various classes of creditors a reasonable
(r) arrange for the payment of all outstanding administrative expenses as a condition
basis for determining whether supporting the Plan is in their financial interest when
to the Plan's approval unless such condition has been waived in writing by the
compared to the immediate liquidation of the debtor, including any reduction of
creditors concerned;
principal interest and penalties payable to the creditors;
(s) arrange for the payment" of all outstanding taxes and assessments, or an adjusted
(d) establish classes of voting creditors;
amount pursuant to a compromise settlement with the BlR Or other applicable tax
(e) establish subclasses of voting creditors if prior approval has been granted by the
authorities;
court;
(t) include a certified copy of a certificate of tax clearance or evidence of a
(f) indicate how the insolvent debtor will be rehabilitated including, but not limited
compromise settlement with the BIR;
to, debt forgiveness, debt rescheduling, reorganization or quasi-reorganization.
(u) include a valid and binding r(,solution of a meeting of the debtor's stockholders to
dacion en pago, debt-equity conversion and sale of the business (or parts of it) as a
increase the shares by the required amount in cases where the Plan contemplates an
going concern, or setting-up of a new business entity or other similar arrangements
additional issuance of shares by the debtor;
as may be necessary to restore the financial well-being and visibility of the insolvent
(v) state the compensation and status, if any, of the rehabilitation receiver after the
debtor;
approval of the Plan; and
(g) specify the treatment of each class or subclass described in subsections (d) and
(w) contain provisions for conciliation and/or mediation as a prerequisite to court
(e);
assistance or intervention in the event of any disagreement in the interpretation or
(h) provide for equal treatment of all claims within the same class or subclass, unless
implementation of the Rehabilitation Plan.
a particular creditor voluntarily agrees to less favorable treatment;
(i) ensure that the payments made under the plan follow the priority established Section 63.Consultation with Debtor and Creditors. – if the court gives due course to
under the provisions of the Civil Code on concurrence and preference of credits and the petition, the rehabilitation receiver shall confer with the debtor and all the classes
other applicable laws; of creditors, and may consider their views and proposals ill the review, revision or
(j) maintain the security interest of secured creditors and preserve the liquidation preparation of a new Rehabilitation Plan.
value of the security unless such has been waived or modified voluntarily;
(k) disclose all payments to creditors for pre-commencement debts made during the Section 64.Creditor Approval of Rehabilitation Plan. – The rehabilitation receiver
proceedings and the justifications thereof; shall notify the creditors and stakeholders that the Plan is ready for their
(1) describe the disputed claims and the provisioning of funds to account for examination. Within twenty (2Q) days from the said notification, the rehabilitation
appropriate payments should the claim be ruled valid or its amount adjusted; receiver shall convene the creditors, either as a whole or per class, for purposes of
voting on the approval of the Plan. The Plan shall be deemed rejected unless Section 67.Hearing on the Objections. - If objections have been submitted during the
approved by all classes of creditors w hose rights are adversely modified or affected relevant period, the court shall issue an order setting the time and date for the hearing
by the Plan. For purposes of this section, the Plan is deemed to have been approved or hearings on the objections.
by a class of creditors if members of the said class holding more than fifty percent
(50%) of the total claims of the said class vote in favor of the Plan. The votes of the If the court finds merit in the objection, it shall order the rehabilitation receiver or
creditors shall be based solely on the amount of their respective claims based on the other party to cure the defect, whenever feasible. If the court determines that the
registry of claims submitted by the rehabilitation receiver pursuant to Section 44 debtor acted in bad faith, or that it is not feasible to cure the defect, the court shall
hereof. convert the proceedings into one for the liquidation of the debtor under Chapter V of
this Act.
Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm the
Rehabilitation Plan if all of the following circumstances are present: Section 68.Confirmation of the Rehabilitation Plan. – If no objections are filed
within the relevant period or, if objections are filed, the court finds them lacking in
(a)The Rehabilitation Plan complies with the requirements specified in this Act. merit, or determines that the basis for the objection has been cured, or determines
(b) The rehabilitation receiver recommends the confirmation of the Rehabilitation that the debtor has complied with an order to cure the objection, the court shall issue
Plan; an order confirming the Rehabilitation Plan.
(c) The shareholders, owners or partners of the juridical debtor lose at least their
controlling interest as a result of the Rehabilitation Plan; and The court may confirm the Rehabilitation Plan notwithstanding unresolved disputes
(d) The Rehabilitation Plan would likely provide the objecting class of creditors with over claims if the Rehabilitation Plan has made adequate provisions for paying such
compensation which has a net present value greater than that which they would have claims.
received if the debtor were under liquidation. For the avoidance of doubt, the provisions of other laws to the contrary
Section 65.Submission of Rehabilitation Plan to the Court. - 1fthe Rehabilitation notwithstanding, the court shall have the power to approve or implement the
Plan is approved, the rehabilitation receiver shall submit the same to the court for Rehabilitation Plan despite the lack of approval, or objection from the owners,
confirmation. Within five (5) days from receipt of the Rehabilitation Plan, the court partners or stockholders of the insolvent debtor: Provided, That the terms thereof are
shall notify the creditors that the Rehabilitation Plan has been submitted for necessary to restore the financial well-being and viability of the insolvent debtor.
confirmation, that any creditor may obtain copies of the Rehabilitation Plan and that Section 69.Effect of Confirmation of the Rehabilitation Plan, - The confirmation of
any creditor may file an objection thereto. the Rehabilitation Plan by the court shall result in the following:
Section 66.Filing of Objections to Rehabilitation Plan. – A creditor may file an (a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and
objection to the Rehabilitation Plan within twenty (20) days from receipt of notice all persons who may be affected by . it, including the creditors, whether or not such
from the court that the Rehabilitation Plan has been submitted for confirmation. persons have participated in the proceedings or opposed the Rehabilitation Plan or
Objections to a Rehabilitation Plan shall be limited to the following: whether or not their claims have been scheduled;
(a) The creditors' support was induced by fraud; (b) The debtor shall comply with the provisions of the Rehabilitation Plan and shall
(b)The documents or data relied upon in the Rehabilitation Plan are materially false take all actions necessary to carry out the Plan;
or misleading; or (c) Payments shall be made to the creditors in accordance with the provisions of the
(c)The Rehabilitation Plan is in fact not supported by the voting creditors. Rehabilitation Plan;
(d) Contracts and other arrangements between the debtor and its creditors shall be Section 74. Termination of Proceedings. - The rehabilitation proceedings under
interpreted as continuing to apply to the extent that they do not conflict with the Chapter II shall, upon motion by any stakeholder or the rehabilitation receiver be
provisions of the Rehabilitation Plan; terminated by order of the court either declaring a successful implementation of the
(e) Any compromises on amounts or rescheduling of timing of payments by the Rehabilitation Plan or a failure of rehabilitation.
debtor shall be binding on creditors regardless of whether or not the Plan is
successfully implement; and There is failure of rehabilitation in the following cases:
(f) Claims arising after approval of the Plan that are otherwise not treated by the Plan (a) Dismissal of the petition by the court;
are not subject to any Suspension Order. (b) The debtor fails to submit a Rehabilitation Plan;
The Order confirming the Plan shall comply with Rules 36 of the Rules of Court: (c) Under the Rehabilitation Plan submitted by the debtor, there is no substantial
Provided, however, That the court may maintain jurisdiction over the case in order to likelihood that the debtor can be rehabilitated within a reasonable period;
resolve claims against the debtor that remain contested and allegations that the debtor (d) The Rehabilitation Plan or its amendment is approved by the court but in the
has breached the Plan. implementation thereof, the debtor fails to perform its obligations thereunder or there
is a failure to realize the objectives, targets or goals set forth therein, including the
Section 70. Liability of General Partners of a Partnership for Unpaid Balances Under timelines and conditions for the settlement of the obligations due to the creditors and
an Approved Plan. - The approval of the Plan shall not affect the rights of creditors other claimants;
to pursue actions against the general partners of a partnership to the extent they are (e) The commission of fraud in securing the approval of the Rehabilitation Plan or its
liable under relevant legislation for the debts thereof. amendment; and
(f) Other analogous circumstances as may be defined by the rules of procedure.
Section 71. Treatment of Amounts of Indebtedness or Obligations Forgiven or
Reduced. - Amounts of any indebtedness or obligations reduced or forgiven in Upon a breach of, or upon a failure of the Rehabilitation Plan the court, upon motion
connection with a Plan's approval shall not be subject to any tax in furtherance of the by an affected party may:
purposes of this Act.
(1) Issue an order directing that the breach be cured within a specified period of time,
Section 72. Period for Confirmation of the Rehabilitation Plan. - The court shall have falling which the proceedings may be converted to a liquidation;
a maximum period of one (1) year from the date of the filing of the petition to (2) Issue an order converting the proceedings to a liquidation;
confirm a Rehabilitation Plan. If no Rehabilitation Plan is confirmed within the said (3) Allow the debtor or rehabilitation receiver to submit amendments to the
period, the proceedings may upon motion or motu propio, be converted into one for Rehabilitation Plan, the approval of which shall be governed by the same
the liquidation of the debtor . requirements for the approval of a Rehabilitation Plan under this subchapter;
(4) Issue any other order to remedy the breach consistent with the present regulation,
Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the other applicable law and the best interests of the creditors; or (
confirmation of the Rehabilitation Plan, the rehabilitation receiver shall provide a 5) Enforce the applicable provisions of the Rehabilitation Plan through a writ of
final report and accounting to the court. Unless the Rehabilitation Plan specifically execution.
requires and describes the role of the rehabilitation receiver after the approval of the
Rehabilitation Plan, the court shall discharge the rehabilitation receiver of his duties. Section 75. Effects of Termination. - Termination of the proceedings shall result in
the following:
(j) Termination of Proceedings
(a) The discharge of the rehabilitation receiver subject to his submission of a final (b) declare that the debtor is under rehabilitation;
accounting; and (c) summarize the ground./s for the filling of the petition;
(d) direct the publication of the Order in a newspaper of general circulation in the
(b) The lifting of the Stay Order and any other court order holding in abeyance any Philippines once a week for at least two (2) consecutive weeks, with the first
action for the enforcement of a claim against the debtor. publication to be made within seven (7) days from the time of its issuance;
(e) direct the service by personal delivery of a copy of the petition on each creditor
Provided, however, That if the termination of proceedings is due to failure of
who is not a petitioner holding at least ten percent (10%) of the total liabilities of the
rehabilitation or dismissal of the petition for reasons other than technical grounds,
debtor, as determined in the schedule attached to the petition, within three (3) days;
the proceedings shall be immediately converted to liquidation as provided in Section
(f) state that copies of the petition and the Rehabilitation Plan are available for
92 of this Act.
examination and copying by any interested party;
(g) state that creditors and other interested parties opposing the petition or
Rehabilitation Plan may file their objections or comments thereto within a period of
CHAPTER III not later than twenty (20) days from the second publication of the Order;
PRE-NEGOTIATED REHABILITATION (h) appoint a rehabilitation receiver, if provided for in the Plan; and
(i) include a Suspension or Stay Order as described in this Act.
Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with any of
its creditors, may file a verified petition with the court for the approval of a pre- Section 78. Approval of the Plan. - Within ten (10) days from the date of the second
negotiated Rehabilitation Plan which has been endorsed or approved by creditors publication of the Order, the court shall approve the Rehabilitation Plan unless a
holding at least two-thirds (2/3) of the total liabilities of the debtor, including secured creditor or other interested party submits an objection to it in accordance with the
creditors holding more than fifty percent (50%) of the total secured claims of the next succeeding section.
debtor and unsecured creditors holding more than fifty percent (50%) of the total
unsecured claims of the debtor. The petition shall include as a minimum: Section 79. Objection to the Petition or Rehabilitation Plan. - Any creditor or other
interested party may submit to the court a verified objection to the petition or the
(a) a schedule of the debtor's debts and liabilities; Rehabilitation Plan not later than eight (8) days from the date of the second
(b) an inventory of the debtor's assets; publication of the Order mentioned in Section 77 hereof. The objections shall be
(c) the pre-negotiated Rehabilitation Plan, including the names of at least three (3) limited to the following:
qualified nominees for rehabilitation receiver; and
(d) a summary of disputed claims against the debtor and a report on the provisioning (a) The allegations in the petition or the Rehabilitation Plan or the attachments
of funds to account for appropriate payments should any such claims be ruled valid thereto are materially false or misleading;
or their amounts adjusted. (b) The majority of any class of creditors do not in fact support the Rehabilitation
Plan;
Section 77. Issuance of Order. - Within five (5) working days, and after (c) The Rehabilitation Plan fails to accurately account for a claim against the debtor
determination that the petition is sufficient in form and substance, the court shall and the claim in not categorically declared as a contested claim; or
issue an Order which shall; (d) The support of the creditors, or any of them was induced by fraud.
(a) identify the debtor, its principal business of activity/ies and its principal place of Copies of any objection to the petition of the Rehabilitation Plan shall be served on
business; the debtor, the rehabilitation receiver (if applicable), the secured creditor with the
largest claim and who supports the Rehabilitation Plan, and the unsecured creditor (a) The debtor must agree to the out-of-court or informal restructuring/workout
with the largest claim and who supports the Rehabilitation Plan. agreement or Rehabilitation Plan;
(b) It must be approved by creditors representing at least sixty-seven (67%) of the
Section 80. Hearing on the Objections. - After receipt of an objection, the court shall secured obligations of the debtor;
set the same for hearing. The date of the hearing shall be no earlier than twenty (20) (c) It must be approved by creditors representing at least seventy-five percent (75%)
days and no later than thirty (30) days from the date of the second publication of the of the unsecured obligations of the debtor; and
Order mentioned in Section 77 hereof. If the court finds merit in the objection, it (d) It must be approved by creditors holding at least eighty-five percent (85%) of the
shall direct the debtor, when feasible to cure the detect within a reasonable period. If total liabilities, secured and unsecured, of the debtor.
the court determines that the debtor or creditors supporting the Rehabilitation Plan
acted in bad faith, or that the objection is non-curable, the court may order the Section 85. Standstill Period. - A standstill period that may be agreed upon by the
conversion of the proceedings into liquidation. A finding by the court that the parties pending negotiation and finalization of the out-of-court or informal
objection has no substantial merit, or that the same has been cured shall be deemed restructuring/workout agreement or Rehabilitation Plan contemplated herein shall be
an approval of the Rehabilitation Plan. effective and enforceable not only against the contracting parties but also against the
other creditors: Provided, That (a) such agreement is approved by creditors
Section 81. Period for Approval of Rehabilitation Plan. - The court shall have a representing more than fifty percent (50%) of the total liabilities of the debtor; (b)
maximum period of one hundred twenty (120) days from the date of the filing of the notice thereof is publishing in a newspaper of general circulation in the Philippines
petition to approve the Rehabilitation Plan. If the court fails to act within the said once a week for two (2) consecutive weeks; and (c) the standstill period does not
period, the Rehabilitation Plan shall be deemed approved. exceed one hundred twenty (120) days from the date of effectivity. The notice must
invite creditors to participate in the negotiation for out-of-court rehabilitation or
Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have the
restructuring agreement and notify them that said agreement will be binding on all
same legal effect as confirmation of a Plan under Chapter II of this Act.
creditors if the required majority votes prescribed in Section 84 of this Act are met.

Section 86. Cram Down Effect. - A restructuring/workout agreement or

CHAPTER IV Rehabilitation Plan that is approved pursuant to an informal workout framework
OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR referred to in this chapter shall have the same legal effect as confirmation of a Plan
REHABILITATION PLANS under Section 69 hereof. The notice of the Rehabilitation Plan or restructuring
agreement or Plan shall be published once a week for at least three (3) consecutive
Section 83. Out-of-Court or Informal Restructuring Agreements and Rehabilitation weeks in a newspaper of general circulation in the Philippines. The Rehabilitation
Plans. - An outof-curt or informal restructuring agreement or Rehabilitation Plan that Plan or restructuring agreement shall take effect upon the lapse of fifteen (15) days
meets the minimum requirements prescribed in this chapter is hereby recognized as from the date of the last publication of the notice thereof.
consistent with the objectives of this Act.
Section 87. Amendment or Modification. - Any amendment of an out-of-court
Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring restructuring/workout agreement or Rehabilitation Plan must be made in accordance
Agreements and Rehabilitation Plans. - For an out-of-court or informal with the terms of the agreement and with due notice on all creditors.
restructuring/workout agreement or Rehabilitation Plan to qualify under this chapter,
it must meet the following minimum requirements: Section 88. Effect of Court Action or Other Proceedings. - Any court action or other
proceedings arising from, or relating to, the out-of-court or informal
restructuring/workout agreement or Rehabilitation Plan shall not stay its twenty-five percent (25%0 of the subscribed capital stock or partner's contributions
implementation, unless the relevant party is able to secure a temporary restraining of the debtor, whichever is higher, may apply for and seek the liquidation of an
order or injunctive relief from the Court of Appeals. insolvent debtor by filing a petition for liquidation of the debtor with the court. The
petition shall show that:
Section 89. Court Assistance. - The insolvent debtor and/or creditor may seek court
assistance for the execution or implementation of a Rehabilitation Plan under this (a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that
Chapter, under such rules of procedure as may be promulgated by the Supreme the due and demandable payments thereon have not been made for at least one
Court. hundred eighty (180) days or that the debtor has failed generally to meet its liabilities
as they fall due; and
(b) there is no substantial likelihood that the debtor may be rehabilitated.
CHAPTER V At any time during the pendency of or after a rehabilitation court-supervised or pre-
LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS negotiated rehabilitation proceedings, three (3) or more creditors whose claims is at
least either One million pesos (Php1,000,000.00) or at least twenty-five percent
Section 90. Voluntary Liquidation. - An insolvent debtor may apply for liquidation
(25%) of the subscribed capital or partner's contributions of the debtor, whichever is
by filing a petition for liquidation with the court. The petition shall be verified, shall
higher, may also initiate liquidation proceedings by filing a motion in the same court
establish the insolvency of the debtor and shall contain, whether as an attachment or
where the rehabilitation proceedings are pending to convert the rehabilitation
as part of the body of the petition;
proceedings into liquidation proceedings. The motion shall be verified, shall contain
(a) a schedule of the debtor's debts and liabilities including a list of creditors with or set forth the same matters required in the preceding paragraph, and state that the
their addresses, amounts of claims and collaterals, or securities, if any; movants are seeking the immediate liquidation of the debtor.
(b) an inventory of all its assets including receivables and claims against third
If the petition or motion is sufficient in form and substance, the court shall issue an
parties; and
Order:
(c) the names of at least three (3) nominees to the position of liquidator.
(1) directing the publication of the petition or motion in a newspaper of general
At any time during the pendency of court-supervised or pre-negotiated rehabilitation
circulation once a week for two (2) consecutive weeks; and
proceedings, the debtor may also initiate liquidation proceedings by filing a motion
(2) directing the debtor and all creditors who are not the petitioners to file their
in the same court where the rehabilitation proceedings are pending to convert the
comment on the petition or motion within fifteen (15) days from the date of last
rehabilitation proceedings into liquidation proceedings. The motion shall be verified,
publication.
shall contain or set forth the same matters required in the preceding paragraph, and
state that the debtor is seeking immediate dissolution and termination of its corporate If, after considering the comments filed, the court determines that the petition or
existence. motion is meritorious, it shall issue the Liquidation Order mentioned in Section 112
hereof.
If the petition or the motion, as the case may be, is sufficient in form and substance,
the court shall issue a Liquidation Order mentioned in Section 112 hereof. Section 92. Conversion by the Court into Liquidation Proceedings. - During the
pendency of courtsupervised or pre-negotiated rehabilitation proceedings, the court
Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate of
may order the conversion of rehabilitation proceedings to liquidation proceedings
whose claims is at least either One million pesos (Php1,000,000,00) or at least
pursuant to (a) Section 25(c) of this Act; or (b) Section 72 of this Act; or (c) Section
75 of this Act; or (d) Section 90 of this Act; or at any other time upon the (d) directing the clerk of court to cause the sending of a copy of the Order by
recommendation of the rehabilitation receiver that the rehabilitation of the debtor is registered mail, postage prepaid, to all creditors named in the schedule of debts and
not feasible. Thereupon, the court shall issue the Liquidation Order mentioned in liabilities;
Section 112 hereof. (e) forbidding the individual debtor from selling, transferring, encumbering or
disposing in any manner of his property, except those used in the ordinary operations
Section 93. Powers of the Securities and Exchange Commission (SEC). - The of commerce or of industry in which the petitioning individual debtor is engaged so
provisions of this chapter shall not affect the regulatory powers of the SEC under long as the proceedings relative to the suspension of payments are pending;
Section 6 of Presidential Decree No. 902-A, as amended, with respect to any (f) prohibiting the individual debtor from making any payment outside of the
dissolution and liquidation proceeding initiated and heard before it. necessary or legitimate expenses of his business or industry, so long as the
proceedings relative to the suspension of payments are pending; and
(g) appointing a commissioner to preside over the creditors' meeting.
CHAPTER VI
Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the
INSOLVENCY OF INDIVIDUAL DEBTORS
court may issue an order suspending any pending execution against the individual
(A) Suspension of Payments. debtor. Provide, That properties held as security by secured creditors shall not be the
subject of such suspension order. The suspension order shall lapse when three (3)
Section 94. Petition. - An individual debtor who, possessing sufficient property to months shall have passed without the proposed agreement being accepted by the
cover all his debts but foreseeing the impossibility of meeting them when they creditors or as soon as such agreement is denied.
respectively fall due, may file a verified petition that he be declared in the state of
suspension of payments by the court of the province or city in which he has resides No creditor shall sue or institute proceedings to collect his claim from the debtor
for six (6) months prior to the filing of his petition. He shall attach to his petition, as from the time of the filing of the petition for suspension of payments and for as long
a minimum: (a) a schedule of debts and liabilities; (b) an inventory of assess; and (c) as proceedings remain pending except:
a proposed agreement with his creditors.
(a) those creditors having claims for personal labor, maintenance, expense of last
Section 95. Action on the Petition. - If the court finds the petition sufficient in form illness and funeral of the wife or children of the debtor incurred in the sixty (60) days
and substance, it shall, within five (5) working days from the filing of the petition, immediately prior to the filing of the petition; and
issue an Order: (b) secured creditors.
(a) calling a meeting of all the creditors named in the schedule of debts and liabilities
Section 97. Creditors' Meeting. - The presence of creditors holding claims amounting
at such time not less than fifteen (15) days nor more than forty (40) days from the
to at least three-fifths (3/5) of the liabilities shall be necessary for holding a meeting.
date of such Order and designating the date, time and place of the meeting;
The commissioner appointed by the court shall preside over the meeting and the
(b) directing such creditors to prepare and present written evidence of their claims
clerk of court shall act as the secretary thereof, subject to the following rules:
before the scheduled creditors' meeting;
(c) directing the publication of the said order in a newspaper of general circulation (a) The clerk shall record the creditors present and amount of their respective claims;
published in the province or city in which the petition is filed once a week for two (b) The commissioner shall examine the written evidence of the claims. If the
(2) consecutive weeks, with the first publication to be made within seven (7) days creditors present hold at least three-fifths (3/5) of the liabilities of the individual
from the time of the issuance of the Order; debtor, the commissioner shall declare the meeting open for business;
(c) The creditors and individual debtor shall discuss the propositions in the proposed individual debtor to vote in favor of the proposed agreement; or (c) fraudulent
agreement and put them to a vote; conveyance of claims for the purpose of obtaining a majority. The court shall hear
(d) To form a majority, it is necessary: and pass upon such objection as soon as possible and in a summary manner.
(1) that two-thirds (2/3) of the creditors voting unite upon the same proposition;
and In case the decision of the majority of creditors to approve the individual debtor's
(2) that the claims represented by said majority vote amount to at least three-fifths proposal or any amendment thereof made during the creditors' meeting is annulled
(3/5) of the total liabilities of the debtor mentioned in the petition; and by the court, the court shall declare the proceedings terminated and the creditors shall
(e) After the result of the voting has been announced, all protests made against the be at liberty to exercise the rights which may correspond to them.
majority vote shall be drawn up, and the commissioner and the individual debtor Section 101. Effects of Approval of Proposed Agreement. - If the decision of the
together with all creditors taking part in the voting shall sign the affirmed majority of the creditors to approve the proposed agreement or any amendment
propositions. thereof made during the creditors' meeting is uphold by the court, or when no
No creditor who incurred his credit within ninety (90) days prior to the filing of the opposition or objection to said decision has been presented, the court shall order that
petition shall be entitled to vote. the agreement be carried out and all parties bound thereby to comply with its terms.

Section 98. Persons Who May Refrain From Voting. - Creditors who are unaffected The court may also issue all orders which may be necessary or proper to enforce the
by the Suspension Order may refrain from attending the meeting and from voting agreement on motion of any affected party. The Order confirming the approval of the
therein. Such persons shall not be bound by any agreement determined upon at such proposed agreement or any amendment thereof made during the creditors' meeting
meeting, but if they should join in the voting they shall be bound in the same manner shall be binding upon all creditors whose claims are included in the schedule of debts
as are the other creditors. and liabilities submitted by the individual debtor and who were properly summoned,
but not upon: (a) those creditors having claims for personal labor, maintenance,
Section 99. Rejection of the Proposed Agreement. - The proposed agreement shall be expenses of last illness and funeral of the wife or children of the debtor incurred in
deemed rejected if the number of creditors required for holding a meeting do not the sixty (60) days immediately prior to the filing of the petition; and (b) secured
attend thereat, or if the two (2) majorities mentioned in Section 97 hereof are not in creditors who failed to attend the meeting or refrained from voting therein.
favor thereof. In such instances, the proceeding shall be terminated without recourse
and the parties concerned shall be at liberty to enforce the rights which may Section 102. Failure of Individual Debtor to Perform Agreement. - If the individual
correspond to them. debtor fails, wholly or in part, to perform the agreement decided upon at the meeting
of the creditors, all the rights which the creditors had against the individual debtor
Section 100. Objections. - If the proposal of the individual debtor, or any amendment before the agreement shall revest in them. In such case the individual debtor may be
thereof made during the creditors' meeting, is approved by the majority of creditors made subject to the insolvency proceedings in the manner established by this Act.
in accordance with Section 97 hereof, any creditor who attended the meeting and
who dissented from and protested against the vote of the majority may file an
objection with the court within ten (10) days from the date of the last creditors' (B) Voluntary Liquidation.
meeting. The causes for which objection may be made to the decision made by the
majority during the meeting shall be: (a) defects in the call for the meeting, in the Section 103. Application. - An individual debtor whose properties are not sufficient
holding thereof and in the deliberations had thereat which prejudice the rights of the to cover his liabilities, and owing debts exceeding Five hundred thousand pesos
creditors; (b) fraudulent connivance between one or more creditors and the (Php500,000.00), may apply to be discharged from his debts and liabilities by filing a
verified petition with the court of the province or city in which he has resided for six (h) That he has suffered or procured his property to be taken on legal process with
(6) months prior to the filing of such petition. He shall attach to his petition a intent to give a preference to one or more of his creditors and thereby hinder or delay
schedule of debts and liabilities and an inventory of assets. The filing of such petition the liquidation or defraud any one of his creditors;
shall be an act of insolvency. (i) That he has made any assignment, gift, sale, conveyance or transfer of his estate,
property, rights or credits with intent to hinder or delay the liquidation or defraud his
Section 104. Liquidation Order. - If the court finds the petition sufficient in form and creditors;
substance it shall, within five (5) working days issue the Liquidation Order (j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale,
mentioned in Section 112 hereof. conveyance or transfer of his estate, property, rights or credits;
(k) That being a merchant or tradesman, he has generally defaulted in the payment of
his current obligations for a period of thirty (30) days;
(C) In voluntary Liquidation. (l) That for a period of thirty (30) days, he has failed, after demand, to pay any
moneys deposited with him or received by him in a fiduciary; and
Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with a (m) That an execution having been issued against him on final judgment for money,
claim of, or with claims aggregating at least Five hundred thousand pesos (Php500, he shall have been found to be without sufficient property subject to execution to
000.00) may file a verified petition for liquidation with the court of the province or satisfy the judgment.
city in which the individual debtor resides.
The petitioning creditor/s shall post a bond in such as the court shall direct,
The following shall be considered acts of insolvency, and the petition for liquidation conditioned that if the petition for liquidation is dismissed by the court, or withdrawn
shall set forth or allege at least one of such acts: by the petitioner, or if the debtor shall not be declared an insolvent the petitioners
will pay to the debtor all costs, expenses, damages occasioned by the proceedings
(a) That such person is about to depart or has departed from the Republic of the
and attorney's fees.
Philippines, with intent to defraud his creditors;
(b) That being absent from the Republic of the Philippines, with intent to defraud his Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of such
creditors, he remains absent; creditors' petition, the court shall issue an Order requiring the individual debtor to
(c) That he conceals himself to avoid the service of legal process for the purpose of show cause, at a time and place to be fixed by the said court, why he should not be
hindering or delaying the liquidation or of defrauding his creditors; adjudged an insolvent. Upon good cause shown, the court may issue an Order
(d) That he conceals, or is removing, any of his property to avoid its being attached forbidding the individual debtor from making payments of any of his debts, and
or taken on legal process; transferring any property belonging to him. However, nothing contained herein shall
(e) That he has suffered his property to remain under attachment or legal process for affect or impair the rights of a secured creditor to enforce his lien in accordance with
three (3) days for the purpose of hindering or delaying the liquidation or of its terms.
defrauding his creditors;
(f) That he has confessed or offered to allow judgment in favor of any creditor or Section 107. Default. - If the individual debtor shall default or if, after trial, the
claimant for the purpose of hindering or delaying the liquidation or of defrauding any issues are found in favor of the petitioning creditors the court shall issue the
creditors or claimant; Liquidation Order mentioned in Section 112 hereof.
(g) That he has willfully suffered judgment to be taken against him by default for the
Section 108. Absent Individual Debtor. - In all cases where the individual debtor
purpose of hindering or delaying the liquidation or of defrauding his creditors;
resides out of the Republic of the Philippines; or has departed therefrom; or cannot,
after due diligence, be found therein; or conceals himself to avoid service of the the damages sustained by him, not to exceed the amount of the respective bonds.
Order to show cause, or any other preliminary process or orders in the matter, then Such damages shall be fixed and allowed by the court. If either the petitioners or the
the petitioning creditors, upon submitting the affidavits requisite to procedure an debtor shall appeal from the decision of the court, upon final hearing of the petition,
Order of publication, and presenting a bond in double the amount of the aggregate the appellant shall be required to give bond to the successful party in a sum double
sum of their claims against the individual debtor, shall be entitled to an Order of the the amount of the value of the property in controversy, and for the costs of the
court directing the sheriff of the province or city in which the matter is pending to proceedings.
take into his custody a sufficient amount of property of the individual debtor to
satisfy the demands of the petitioning creditors and the costs of the proceedings. Any person interested in the estate may take exception to the sufficiency of the
Upon receiving such Order of the court to take into custody of the property of the sureties on such bond or bonds. When excepted to the petitioner's sureties, upon
individual debtor, it shall be the duty of the sheriff to take possession of the property notice to the person excepting of not less than two (2) nor more than five (5) days,
and effects of the individual debtor, not exempt from execution, to an extent must justify as to their sufficiency; and upon failure to justify, or of others in their
sufficient to cover the amount provided for and to prepare within three (3) days from place fail to justify at the time and place appointed the judge shall issue an Order
the time of taking such possession, a complete inventory of all the property so taken, vacating the order to take the property of the individual debtor into the custody of the
and to return it to the court as soon as completed. The time for taking the inventory sheriff, or denying the appeal, as the case may be.
and making return thereof may be extended for good cause shown to the court. The Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds are
sheriff shall also prepare a schedule of the names and residences of the creditors, and presented to the court or a judge thereof, asking for and obtaining an Order of
the amount due each, from the books of the debtor, or from such other papers or data publication and an Order for the custody of the property of the individual debtor and
of the individual debtor available as may come to his possession, and shall file such thereafter the petitioners shall make it appear satisfactorily to the court or a judge
schedule or list of creditors and inventory with the clerk of court. thereof that the interest of the parties to the proceedings will be subserved by a sale
Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds; thereof, the court may order such property to be sold in the same manner as property
Exemptions to Sureties. - In all cases where property is taken into custody by the is sold under execution, the proceeds to de deposited in the court to abide by the
sheriff, if it does not embrace all the property and effects of the debtor not exempt result of the proceedings.
from execution, any other creditor or creditors of the individual debtor, upon giving
bond to be approved by the court in double the amount of their claims, singly or
jointly, shall be entitled to similar orders and to like action, by the sheriff; until all CHAPTER VII
claims be provided for, if there be sufficient property or effects. All property taken PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF
into custody by the sheriff by virtue of the giving of any such bonds shall be held by INDIVIDUAL AND JURIDICAL DEBTORS
him for the benefit of all creditors of the individual debtor whose claims shall be
duly proved as provided in this Act. The bonds provided for in this section and the Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor
preceding section to procure the order for custody of the property and effects of the shall include both individual debtor as defined in Section 4(o) and debtor as defined
individual debtor shall be conditioned that if, upon final hearing of the petition in in Section 4(k) of this Act.
insolvency, the court shall find in favor of the petitioners, such bonds and all of them
shall be void; if the decision be in favor of the individual debtor, the proceedings
shall be dismissed, and the individual debtor, his heirs, administrators, executors or (A) The Liquidation Order.
assigns shall be entitled to recover such sum of money as shall be sufficient to cover
Section 112. Liquidation Order. - The Liquidation Order shall: case, the suit may proceed to judgment, and any final and executor judgment therein
for a claim against the debtor shall be filed and allowed in court; and
(a) declare the debtor insolvent; (e) no foreclosure proceeding shall be allowed for a period of one hundred eighty
(b) order the liquidation of the debtor and, in the case of a juridical debtor, declare it (180) days.
as dissolved;
(c) order the sheriff to take possession and control of all the property of the debtor, Section 114. Rights of Secured Creditors. - The Liquidation Order shall not affect
except those that may be exempt from execution; the right of a secured creditor to enforce his lien in accordance with the applicable
(d) order the publication of the petition or motion in a newspaper of general contract or law. A secured creditor may:
circulation once a week for two (2) consecutive weeks;
(e) direct payments of any claims and conveyance of any property due the debtor to (a) waive his right under the security or lien, prove his claim in the liquidation
the liquidator; proceedings and share in the distribution of the assets of the debtor; or
(f) prohibit payments by the debtor and the transfer of any property by the debtor; (b) maintain his rights under the security or lien:
(g) direct all creditors to file their claims with the liquidator within the period set by If the secured creditor maintains his rights under the security or lien:
the rules of procedure;
(h) authorize the payment of administrative expenses as they become due; (1) the value of the property may be fixed in a manner agreed upon by the creditor
(i) state that the debtor and creditors who are not petitioner/s may submit the names and the liquidator. When the value of the property is less than the claim it secures,
of other nominees to the position of liquidator; and the liquidator may convey the property to the secured creditor and the latter will be
(j) set the case for hearing for the election and appointment of the liquidator, which admitted in the liquidation proceedings as a creditor for the balance. If its value
date shall not be less than thirty (30) days nor more than forty-five (45) days from exceeds the claim secured, the liquidator may convey the property to the creditor and
the date of the last publication. waive the debtor's right of redemption upon receiving the excess from the creditor;
(2) the liquidator may sell the property and satisfy the secured creditor's entire claim
Section 113. Effects of the Liquidation Order. - Upon the issuance of the Liquidation from the proceeds of the sale; or
Order: (3) the secure creditor may enforce the lien or foreclose on the property pursuant to
(a) the juridical debtor shall be deemed dissolved and its corporate or juridical applicable laws.
existence terminated;
(b) legal title to and control of all the assets of the debtor, except those that may be
exempt from execution, shall be deemed vested in the liquidator or, pending his (B) The Liquidator.
election or appointment, with the court;
(c) all contracts of the debtor shall be deemed terminated and/or breached, unless the Section 115. Election of Liquidator. - Only creditors who have filed their claims
liquidator, within ninety (90) days from the date of his assumption of office, declares within the period set by the court, and whose claims are not barred by the statute of
otherwise and the contracting party agrees; limitations, will be allowed to vote in the election of the liquidator. A secured
(d) no separate action for the collection of an unsecured claim shall be allowed. Such creditor will not be allowed to vote, unless: (a) he waives his security or lien; or (b)
actions already pending will be transferred to the Liquidator for him to accept and has the value of the property subject of his security or lien fixed by agreement with
settle or contest. If the liquidator contests or disputes the claim, the court shall allow, the liquidator, and is admitted for the balance of his claim.
hear and resolve such contest except when the case is already on appeal. In such a
The creditors entitled to vote will elect the liquidator in open court. The nominee (d) to redeem all mortgages and pledges, and so satisfy any judgement which may be
receiving the highest number of votes cast in terms of amount of claims, ad who is an encumbrance on any property sold by him;
qualified pursuant to Section 118 hereof, shall be appointed as the liquidator. (e) to settle all accounts between the debtor and his creditors, subject to the approval
of the court;
Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator if: (f) to recover any property or its value, fraudulently conveyed by the debtor;
(g) to recommend to the court the creation of a creditors' committee which will assist
(a) on the date set for the election of the liquidator, the creditors do not attend;
him in the discharge of the functions and which shall have powers as the court deems
(b) the creditors who attend, fail or refuse to elect a liquidator;
just, reasonable and necessary; and
(c) after being elected, the liquidator fails to qualify; or
(h) upon approval of the court, to engage such professional as may be necessary and
(d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein,
reasonable to assist him in the discharge of his duties.
the court may instead set another hearing of the election of the liquidator.
In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall
Provided further, That nothing in this section shall be construed to prevent a
have the right and duty to take all reasonable steps to manage and dispose of the
rehabilitation receiver, who was administering the debtor prior to the commencement
debtor's assets with a view towards maximizing the proceedings therefrom, to pay
of the liquidation, from being appointed as a liquidator.
creditors and stockholders, and to terminate the debtor's legal existence. Other duties
Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his powers, of the liquidator in accordance with this section may be established by procedural
duties and responsibilities, the liquidator shall take an oath and file a bond, In such rules.
amount to be fixed by the court, conditioned upon the proper and faithful discharge
A liquidator shall be subject to removal pursuant to procedures for removing a
of his powers, duties and responsibilities.
rehabilitation receiver.
Section 118. Qualifications of the Liquidator. - The liquidator shall have the
Section 120. Compensation of the Liquidator. - The liquidator and the persons and
qualifications enumerated in Section 29 hereof. He may be removed at any time by
entities engaged or employed by him to assist in the discharge of his powers and
the court for cause, either motu propio or upon motion of any creditor entitled to vote
duties shall be entitled to such reasonable compensation as may determined by the
for the election of the liquidator.
liquidation court, which shall not exceed the maximum amount as may be prescribed
Section 119. Powers, Duties and Responsibilities of the Liquidator. - The liquidator by the Supreme Court.
shall be deemed an officer of the court with the principal duly of preserving and
Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a
maximizing the value and recovering the assets of the debtor, with the end of
record of all moneys received and all disbursements mad by him or under his
liquidating them and discharging to the extent possible all the claims against the
authority as liquidator. He shall render a quarterly report thereof to the court , which
debtor. The powers, duties and responsibilities of the liquidator shall include, but not
report shall be made available to all interested parties. The liquidator shall also
limited to:
submit such reports as may be required by the court from time to time as well as a
(a) to sue and recover all the assets, debts and claims, belonging or due to the debtor; final report at the end of the liquidation proceedings.
(b) to take possession of all the property of the debtor except property exempt by law
Section 122. Discharge of Liquidator. - In preparation for the final settlement of all
from execution;
the claims against the debtor , the liquidator will notify all the creditors, either by
(c) to sell, with the approval of the court, any property of the debtor which has come
publication in a newspaper of general circulation or such other mode as the court
into his possession or control;
may direct or allow, that will apply with the court for the settlement of his account Section 126. Submission of Disputed to the Court. - The liquidator shall resolve
and his discharge from liability as liquidator. The liquidator will file a final disputed claims and submit his findings thereon to the court for final approval. The
accounting with the court, with proof of notice to all creditors. The accounting will liquidator may disallow claims.
be set for hearing. If the court finds the same in order, the court will discharge the
liquidator.
(D) Avoidance Proceedings.

(C) Determination of Claims Section 127. Rescission or Nullity of Certain Transactions. - Any transaction
occurring prior to the issuance of the Liquidation Order or, in case of the conversion
Section 123. Registry of Claims. - Within twenty (20) days from his assumption into of the rehabilitation proceedings prior to the commencement date, entered into by the
office the liquidator shall prepare a preliminary registry of claims of secured and debtor or involving its assets, may be rescinded or declared null and void on the
unsecured creditors. Secured creditors who have waived their security or lien, or ground that the same was executed with intent to defraud a creditor or creditors or
have fixed the value of the property subject of their security or lien by agreement which constitute undue preference of creditors. The presumptions set forth in Section
with the liquidator and is admitted as a creditor for the balance , shall be considered 58 hereof shall apply.
as unsecured creditors. The liquidator shall make the registry available for public
inspection and provide publication notice to creditors, individual debtors owner/s of Section 128. Actions for Rescission or Nullity. –
the sole proprietorship-debtor, the partners of the partnership-debtor and (a) The liquidator or, with his conformity, a creditor may initiate and prosecute any
shareholders or members of the corporation-debtor, on where and when they may action to rescind, or declare null and void any transaction described in the
inspect it. All claims must be duly proven before being paid. immediately preceding paragraph. If the liquidator does not consent to the filling or
Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and prosecution of such action, any creditor may seek leave of the court to commence
creditor of each other one debt shall be set off against the other, and only the balance, said action.
if any shall be allowed in the liquidation proceedings. (b) if leave of court is granted under subsection (a) hereof, the liquidator shall assign
Section 125. - Opposition or Challenge to Claims. - Within thirty (30 ) days from the and transfer to the creditor all rights, title and interest in the chose in action or
expiration of the period for filing of applications for recognition of claims, creditors, subject matter of the proceeding, including any document in support thereof.
individual debtors, owner/s of the sole proprietorship-debtor, partners of the (c) Any benefit derived from a proceeding taken pursuant to subsection (a) hereof, to
partnership-debtor and shareholders or members of the corporation -debtor and other the extent of his claim and the costs, belongs exclusively to the creditor instituting
interested parties may submit a challenge to claim or claims to the court, serving a the proceeding, and the surplus, if any, belongs to the estate.
certified copy on the liquidator and the creditor holding the challenged claim. Upon
the expiration of the (30) day period, the rehabilitation receiver shall submit to the (d) Where, before an orders is made under subsection (a) hereof, the liquidator
court the registry of claims containing the undisputed claims that have not been signifies to the court his readiness to the institute the proceeding for the benefit of the
subject to challenge. Such claims shall become final upon the filling of the register creditors, the order shall fix the time within which he shall do so and, in that case the
and may be subsequently set aside only on grounds or fraud, accident, mistake or benefit derived from the proceedings, if instituted within the time limits so fixed,
inexcusable neglect. belongs to the estate.
(E) The Liquidation Plan. purposes of this chapter, credits for services rendered by employees or laborers to the
debtor shall enjoy first preference under Article 2244 of the Civil Code, unless the
Section 129. The Liquidation Plan. - Within three (3) months from his assumption claims constitute legal liens under Article 2241 and 2242 thereof.
into office, the Liquidator shall submit a Liquidation Plan to the court. The
Liquidation Plan shall, as a minimum enumerate all the assets of the debtor and a Section 134. Order Removing the Debtor from the List of Registered Entitles at the
schedule of liquidation of the assets and payment of the claims. Securities and Exchange Commission. - Upon determining that the liquidation has
been completed according to this Act and applicable law, the court shall issue an
Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court, Order approving the report and ordering the SEC to remove the debtor from the
upon petition and after hearing, to exempt and set apart, for the use and benefit of the registry of legal entities.
said insolvent, such real and personal property as is by law exempt from execution,
and also a homestead; but no such petition shall be heard as aforesaid until it is first Section 135. Termination of Proceedings. - Upon receipt of evidence showing that
proved that notice of the hearing of the application therefor has been duly given by the debtor has been removed from the registry of legal entities at the SEC. The court
the clerk, by causing such notice to be posted it at least three (3) public places in the shall issue an Order terminating the proceedings.
province or city at least ten (10) days prior to the time of such hearing, which notice
shall set forth the name of the said insolvent debtor, and the time and place appointed
for the hearing of such application, and shall briefly indicate the homestead sought to (F) Liquidation of a Securities Market Participant.
be exempted or the property sought to be set aside; and the decree must show that
such proof was made to the satisfaction of the court, and shall be conclusive Section 136. Liquidation of a Securities Market Participant. - The foregoing
evidence of that fact. provisions of this chapter shall be without prejudice to the power of a regulatory
agency or self- regulatory organization to liquidate trade-related claims of clients or
Section 131. Sale of Assets in Liquidation. - The liquidator may sell the customers of a securities market participant which, for purposes of investor
unencumbered assets of the debtor and convert the same into money. The sale shall protection, are hereby deemed to have absolute priority over other claims of
be made at public auction. However, a private sale may be allowed with the approval whatever nature or kind insofar as trade-related assets are concerned.
of the court if; (a) the goods to be sold are of a perishable nature, or are liable to
quickly deteriorate in value, or are disproportionately expensive to keep or maintain; For purposes of this section, trade -related assets include cash, securities, trading
or (b) the private sale is for the best interest of the debtor and his creditors. With the right and other owned and used by the securities market participant in the ordinary
approval of the court, unencumbered property of the debtor may also be conveyed to course of this business.
a creditor in satisfaction of his claim or part thereof.

Section 132. manner of Implementing the Liquidation Plan. - The Liquidator shall
implement the Liquidation Plan as approved by the court. Payments shall be made to CHAPTER VIII
the creditors only in accordance with the provisions of the Plan. PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR
REHABILITAION PROCEEDINGS
Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and its
Implementation shall ensure that the concurrence and preference of credits as (A) Banks and Other Financial Institutions Under Rehabilitation Receivership
enumerated in the Civil Code of the Philippines and other relevant laws shall be Pursuant to a State-funded or State-mandated Insurance System.
observed, unless a preferred creditor voluntarily waives his preferred right. For
Section 137. Provision of Assistance. - The court shall issue orders, adjudicate (c) whether other jurisdictions have given recognition to the foreign proceeding;
claims and provide other relief necessary to assist in the liquidation of a financial (d) the extent that the foreign proceeding recognizes the rights of creditors and other
under rehabilitation receivership established by a state-funded or state-mandated interested parties in a manner substantially in accordance with the manner prescribed
insurance system. in this Act; and
(e) the extent that the foreign proceeding has recognized and shown deference to
Section 138. Application of Relevant Legislation. - The liquidation of bank, financial proceedings under this Act and previous legislation.
institutions, insurance companies and pre-need companies shall be determined by
relevant legislation. The provisions in this Act shall apply in a suppletory manner.

CHAPTER IX FUNDS FOR REHABILITATION OF GOVERNMENT-

OWNED AND CONTROLLED CORPORATIONS
(B) Cross-Border Insolvency Proceedings.
Section 143. Funds for Rehabilitation of Government -owned and Controlled
Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. - Subject Corporations. - Public funds for the rehabilitation of government-owned and
to the provision of Section 136 hereof and the rules of procedure that may be adopted controlled corporations shall be released only pursuant to an appropriation by
by the Supreme Court, the Model Law on Cross-Border Insolvency of the United Congress and shall be supported by funds actually available as certified by the
Nations Center for International Trade and Development is hereby adopted as part of National Treasurer.
this Act.
The Department of Finance, in collaboration with the Department of Budget and
Section 140. Initiation of Proceedings. - The court shall set a hearing in connection Management, shall promulgate the rules for the use and release of said funds.
with an insolvency or rehabilitation proceeding taking place in a foreign jurisdiction,
upon the submission of a petition by the representative of the foreign entity that is
the subject of the foreign proceeding.
CHAPTER X
Section 141. Provision of Relief. - The court may issue orders: MISCELLANEOUS PROVISIOS

(a) suspending any action to enforce claims against the entity or otherwise seize or Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar as
foreclose on property of the foreign entity located in the Philippines; they are applicable, shall likewise apply to proceedings in Chapters II and IV.
(b) requiring the surrender property of the foreign entity to the foreign representative;
or Section 145. Penalties. - An owner, partner, director, officer or other employee of the
(c) providing other necessary relief. debtor who commits any one of the following acts shall, upon conviction thereof, be
punished by a fine of not more than One million pesos (Php 1, 000,000.00) and
Section 142. Factors in Granting Relief. - In determining whether to grant relief imprisonment for not less than three(3) months nor more than five (5) years for each
under this subchapter, the court shall consider; offense;

(a) the protection of creditors in the Philippines and the inconvenience in pursuing (a) if he shall, having notice of the commencement of the proceedings, or having
their claim in a foreign proceeding; reason to believe that proceedings are about to be commented, or in contemplation of
(b) the just treatment of all creditors through resort to a unified insolvency or the proceedings hide or conceal, or destroy or cause to be destroyed or hidden any
rehabilitation proceedings; property belonging to the debtor or if he shall hide, destroy, after mutilate or falsify,
or cause to be hidden, destroyed, altered, mutilated or falsified, any book, deed,
document or writing relating thereto; if he shall, with intent to defraud the creditors
of the debtor, make any payment sale, assignment, transfer or conveyance of any
property belongings to the debtor

(b) if he shall, having knowledge belief of any person having proved a false or
fictitious claim against the debtor, fail to disclose the same to the rehabilitation
receiver of liquidator within one (1) month after coming to said knowledge or belief;
or if he shall attempt to account for any of the debtors property by fictitious losses or
expense; or

(c) if he shall knowingly violate a prohibition or knowingly fail to undertake an

obligation established by this Act.

Section 146. Application to Pending Insolvency, Suspension of Payments and

Rehabilitation Cases. - This Act shall govern all petitions filed after it has taken
effect. All further proceedings in insolvency, suspension of payments and
rehabilitation cases then pending, except to the extent that in opinion of the court
their application would not be feasible or would work injustice, in which event the
procedures set forth in prior laws and regulations shall apply.

Section 147. Application to Pending Contracts. - This Act shall apply to all contracts
of the debtor regardless of the date of perfection.

Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As amended
is hereby repealed. All other laws, orders, rules and regulations or parts thereof
inconsistent with any provision of this Act are hereby repealed or modified
accordingly. A GUIDE TO THE PHILIPPINE COMPETITION ACT

Section 149. Separability Clause. - If any provision of this Act shall be held invalid, On 21 July 2015, the president of the Philippines, Benigno Aquino III, signed into
the remainder of this Act not otherwise affected shall remain in full force effect law the Philippine Competition Act (the Competition Act) advancing the Philippines’
readiness for ASEAN Economic Integration. The Competition Act came into effect on
Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after its 8 August 2015. This leaves only one ASEAN country without a comprehensive
complete publication in the Official Gazette or in at least two (2) national newspaper competition policy ahead of the December 2015 target date set out in the ASEAN
of general circulation. Regional Guidelines on Competition Policy.

The Competition Act establishes the Philippines' first consolidated framework on

competition policy, and has been over 20 years in the making. The Competition Act
prohibits business practices that restrict market competition through anti-competitive that is in violation of the Competition Act.
agreements and abuse of a dominant position, and introduces a compulsory
notification regime for certain mergers and acquisitions. It additionally prescribes
Key features of the Competition Act
administrative and criminal penalties for violations of the law. The Competition Act
has extraterritorial effect, meaning that it is enforceable against acts committed
within or outside the Philippines which affect trade, industry or commerce in the
Philippines. The Philippines Competition Commission and enforcement powers

The Competition Act also establishes the Philippines Competition Commission (the The Competition Act provides for the establishment of the Commission, an
Commission) as the authority with primary responsibility for implementing and independent quasi-judicial body with primary jurisdiction to oversee the
enforcing national competition policy. implementation and enforcement of the Competition Act and its rules and
regulations.
Background and timing Key aspects of the new law
Competition law has long been part of the The Commission will be composed of a chair and four commissioners who will each
Philippines' legal system, but prior to the  Prohibits entities be appointed by the president. The Commission will take on the role of regulator,
enactment of the Competition Act there was from entering into and will have wide-ranging powers to conduct investigations, including powers to
no single comprehensive competition law anti-competitive
issue subpoenas to require the production of books, records, documents and other
regime in the Philippines. Rather, the laws agreements
were scattered between the Revised Penal  Prohibits abuse of data, and the power to summon witnesses. The Commission may also carry out
Code (the country's principal criminal statute) their dominant inspections of business premises and other offices, land and vehicles, under a court
and various sector-specific legislation. position by entities order.
 Sets out a framework
While earlier drafts of the Competition Act for the compulsory The Commission can impose administrative fines and penalties (discussed under
borrowed concepts from US antitrust law, notification of "Penalties" below). Decisions of the Commission shall be appealable to the Court of
many of the key provisions in the finalised mergers and Appeals in accordance with the Rules of Court. The Department of Justice, which
version of the Competition Act are based on acquisitions where was previously designated as the Competition Authority, will be responsible for the
the EU model, particularly the provisions on the value of the
preliminary investigation and prosecution of criminal offences under the
anti-competitive agreements and abuse of a transaction exceeds
dominant position. This is more in line with PHP1 billion Competition Act.
antitrust regimes adopted in other ASEAN (approximately
countries, as well as with countries in the USD21.7 million)
wider Asia Pacific region.  Prohibits mergers
Extraterritorial effect
and acquisitions
Although the Competition Act came into which substantially The Competition Act is intended to have extraterritorial effect, being enforceable
effect on 8 August 2015, 15 days after its prevent, restrict or
publication in the Government Gazette, it lessen competition against "any person or entity engaged in any trade, industry and commerce in the
provides for a transitional period (with respect  Administrative fines Republic of the Philippines". It is likewise applicable to "international trade having
to liability for administrative, civil or criminal and, in some cases, direct, substantial, and reasonably foreseeable effects in trade, industry, or commerce
penalties) of two years for businesses to cure criminal penalties for in the Republic of the Philippines, including those that result from acts done outside
any existing structure, conduct, practice or act breach of the law the Republic of the Philippines".
The definition of "entity" in the Competition Act also explicitly encompasses effect of a particular agreement in the market if it is only alleged to be anti-
"domestic or foreign" entities. competitive by effect. The Competition Act is, however, silent on both this point and
how the Commission intends to deal with the three categories of anti-competitive
agreements (although such agreements would be void under the Civil Code of the
Philippines). Much will therefore depend on the implementing regulations or
Anti-competitive agreements
guidelines that are to be issued by the Commission.
In common with most established competition law regimes, the Competition Act
A broad definition of "agreement" is adopted in the Competition Act, encompassing
contains provisions prohibiting anti-competitive agreements. Unusually, the
any type or form of contract, arrangement, understanding, collective
Competition Act makes adistinction between three types of anti-competitive
recommendation, or concerted action, whether formal or informal, explicit or tacit,
agreement, prohibiting:
written or oral. It is not, however, clear whether the provisions on anti-competitive
1. Agreements between or amongst competitors (which are prohibited per se) (Type agreements apply to vertical agreements (i.e. entities operating at different levels of
1): the supply chain). The Type 1 and Type 2 prohibitions only apply to agreements
between competitors (i.e. entities operating at the same level of the market), whereas
(a) restricting competition as to price, or components thereof, or other terms of trade; the Type 3 prohibition may arguably extend to both agreements between competitors
and and vertical agreements. Intragroup agreements, on the other hand, are exempted
(b) fixing prices at an auction or in any form of bidding - including cover bidding, from being treated as agreements between competitors (although they are not
bid suppression, bid rotation and market allocation - and other analogous practices of explicitly exempted from the application of all provisions on anti-competitive
bid manipulation. agreements).
2. Agreements between or amongst competitors which have the object or effect of
substantially preventing, restricting or lessening competition (Type 2):
Abuse of a dominant position
(a) setting, limiting, or controlling production, markets, technical development or
investment; and The Competition Act also prohibits entities from abusing their dominant position by
(b) dividing or sharing the market, whether by volume of sales or purchases, engaging in conduct that would substantially prevent, restrict or lessen competition.
territory, type of goods or services, buyers or sellers, or any other means.
Is there a dominant position?
3. Agreements, other than Types 1 and Types 2 above, which have the object or
The Competition Act defines a "dominant position" as a position of economic
effect of substantially preventing, restricting or lessening competition (although
strength that an entity (or entities) hold, which makes it capable of controlling the
those agreements which contribute to improving the production or distribution of
relevant market independently from any, or a combination of any, competitors,
goods and services or to promoting technical or economic progress, while allowing
customers, suppliers or consumers.
consumers a fair share of the resulting benefits, may not necessarily be deemed a
violation of the Competition Act) (Type 3). The Commission will determine whether or not an entity has a dominant position in a
relevant market by taking into account a number of factors specified in the
The practice of regulators in other jurisdictions is to declare anti-competitive per se
Competition Act, including market share. The Competition Act does, however,
agreements, or those which have an anti-competitive purpose or object, as void upon
create a rebuttable presumption of dominance with a 50% or more market share in
mere proof of their existence. On the other hand, regulators must still analyse the
the relevant market. Going forward, the Commission may revise the threshold for The Competition Act also allows for the same pro-competitive effects exception as
establishing a dominant position or minimum level of share in the relevant market set out above in relation to Type 3 agreements, to be applied in the context of abuse
that could give rise to a presumption of dominance. of dominance. The wording of the exception is very similar to the wording of the
pro-competitive effects exception in the EU, but in the EU its application is reserved
Is there an abuse? to anti-competitive agreements. The Competition Act also allows certain conduct to
be justified on efficiency or objective necessity grounds.
Having a dominant position is not in itself prohibited by the Competition Act. As is
the case in most established competition regimes, it is the abuse of a dominant
position that is prohibited.
Mergers and acquisitions – a mandatory notification regime
The Competition Act sets out a list of conduct that is considered abuse, including:
The Competition Act establishes a pre-completion An "acquisition" is
 selling goods or services below cost with the object of driving competition mandatory notification regime for merger or defined as the
out of the relevant market acquisition agreements where the value exceeds purchase of securities
 imposing barriers to entry or committing acts that prevent competitors from PHP1 billion (approximately USD21.7 million). It is or assets, through
growing within the market in an anti-competitive manner not clear in the Competition Act how this value contract or other
 making a transaction subject to acceptance by the other parties of obligations threshold should be calculated, although guidance means, for the
from the Commission is anticipated. The Competition purpose of obtaining
which, by their nature or according to commercial usage, have no connection
Act also provides scope for the Commission to control by: (i) one
to the transaction introduce additional notification thresholds, such as entity of the whole or
 setting prices or other terms or conditions that discriminate unreasonably market shares, that could apply in specific sectors or part of another; (ii)
between customers or sellers of the same goods or services across all sectors. two or more entities
 making the supply of particular goods or services dependent upon the over another; or (iii)
purchase of other goods or services from the supplier, which have no direct Transactions that exceed the threshold cannot be one or more entities
connection with the main goods or services to be supplied completed until 30 days after the parties have over one or more
provided a notice to the Commission (the entities. "Control" is
 directly or indirectly imposing unfairly low purchase prices upon goods or
Notification Period). The Commission can extend the defined by reference
services provided by marginalised service providers and producers Notification Period to 90 days should it require to a concept of
 directly or indirectly imposing an unfair purchase or selling price on further information to assess the merger or decisive influence that
competitors, customers, suppliers or consumers acquisition. Under the Civil Code, "days" means is similar to that
 limiting production, markets or technical development, to the prejudice of calendar days. found in EU
consumers. legislation.

It is not clear whether the extensive list of abusive conduct set out in the Competition
Act should be considered exhaustive. While a number of these examples of abusive If the Notification Period expires and the Commission has issued no decision, the
conduct are familiar from established competition law regimes, the Competition Act transaction shall be deemed approved and the parties shall be free to complete the
is unusual in pursuing social policy goals by giving explicit protection to transaction. If, during the Notification Period, the Commission determines that the
marginalised and "less fortunate" sectors of Philippines society and the economy. agreement entails a merger or acquisition that substantially prevents, restricts or
lessens competition in the relevant market or in the market for goods or services, it
may:
 (a) prohibit the implementation of the agreement; administrative remedies may also be adopted to encourage voluntary compliance
(b) prohibit the implementation of the agreement unless and until it is modified by with the Competition Act.
changes specified by the Commission; or
(c) prohibit the implementation of the agreement unless and until the pertinent The most serious types of anti-competitive agreements (i.e. Type 1 and Type 2
party or parties enters into legally enforceable agreements specified by the agreements as set out above) may also attract criminal sanctions of imprisonment
Commission. from two to seven years, and a fine of between PHP50 million (approximately
USD1.1 million) and PHP250 million (approximately USD5.4 million). Such
The Competition Act also sets out possible exemptions for otherwise prohibited penalties would be imposed on the responsible officers and directors of the entities
mergers, including where the merger brings about gains in efficiency that are greater involved.
than any anti-competitive effects, or where a party to the merger is faced with actual
or imminent financial failure. The acquisition of stocks or shares solely for The Competition Act also stipulates that the Commission shall develop a leniency
investment purposes, and which are not used for voting or exercising control, is also programme. This would, in certain specified circumstances, grant immunity from
explicitly exempt from prohibition. suit or a reduction of any fines that would otherwise be imposed on a participant in
any Type 1 or Type 2 agreements. Unusually, the Competition Act also indicates that
Any transaction completed in violation of the above notification requirement shall be the leniency programme will provide for immunity from third party damages actions
considered void and the parties subject to an administrative fine of 1% to 5% of the and criminal prosecutions.
value of the transaction. Additional fines may also be imposed for engaging in an
anti-competitive merger or acquisition (as set out in further detail below). Furthermore, entities facing criminal prosecution may advance a plea of nolo
contendere, which enables an entity to agree to accept punishment as if a guilty plea
has been submitted but without accepting or denying culpability. Such a plea can not
then be used against the entity to prove liability in any follow-on civil or other cause
Penalties – both civil and criminal of action.
The Commission can impose administrative penalties of up to PHP100 million The Competition Act also allows for civil actions to be brought by any person who
(approximately USD2.2 million) for first offences, and up to PHP250 million suffers direct injury by reason of any violation of the Competition Act. Such actions
(approximately USD5.4 million) for second offences on entities - found to have may be initiated after the Commission has completed a preliminary inquiry.
entered into an anti-competitive agreement, abused their dominant position, or
engaged in a prohibited merger or acquisition. This is significantly higher than the Actions for companies
previous penalties imposed under the Revised Penal Code, and should provide a
significant deterrent for anti-competitive practices. In addition, fines can be tripled if The Competition Act sets out a comprehensive framework for, and provides the
the violation involves the trade or movement of basic necessities and prime Commission with, significant investigative and enforcement powers in the form of
commodities, defined in The Price Act (Republic Act No. 7581) as including an both administrative and criminal sanctions. While it may have taken over 20 years to
extensive list of consumer goods, pharmaceuticals and construction materials. pass this law, president Aquino has long been a strong advocate of the need for a
comprehensive competition law, and it is expected that the implementation of the
Additional administrative penalties may be imposed for failure to comply with an Competition Act will be expedited and strictly enforced.
order of the Commission or for supplying incorrect or misleading information to the
Commission. The Commission may also apply remedies including injunctions, Businesses, including foreign companies that conduct business with Filipino
forced divestments and disgorgement of excess profits. Non-adversarial companies and consumers, are well-advised to use the two-year transition period to
review their pricing strategies, market approaches, contractual arrangements, and people; and an expanding productivity as the key to raising the quality of life for all,
commercial transactions, to ensure compliance with the provisions of the especially the underprivileged and the constitutional mandate that the State shall
Competition Act. regulate or prohibit monopolies when the public interest so requires and that no
combinations in restraint of trade or unfair competition shall be allowed, the State
shall:
Begun and held in Metro Manila, on Monday, the twenty-eighth day of July, two (a) Enhance economic efficiency and promote free and fair competition in trade,
thousand fourteen. industry and all commercial economic activities, as well as establish a National
Competition Policy to be implemented by the Government of the Republic of the
[Republic Act No. 10667]
Philippines and all of its political agencies as a whole;
AN ACT PROVIDING FOR A NATIONAL COMPETITION POLICY
(b) Prevent economic concentration which will control the production, distribution,
PROHIBITING ANTICOMPETITIVE AGREEMENTS, ABUSE OF
trade, or industry that will unduly stifle competition, lessen, manipulate or constrict
DOMINANT POSITION AND ANTI-COMPETITIVE MERGERS AND
the discipline of free markets; and
ACQUISITIONS, ESTABLISHING THE PHILIPPINE COMPETITION
COMMISSION AND APPROPRIATING FUNDS THEREFOR (c) Penalize all forms of anti-competitive agreements, abuse of dominant position
and anti-competitive mergers and acquisitions, with the objective of protecting
Be it enacted by the Senate and House of Representatives of the Philippines in
consumer welfare and advancing domestic and international trade and economic
Congress assembled:
development.
CHAPTER I
Sec. 3. Scope and Application. — This Act shall be enforceable against any person
GENERAL PROVISIONS
or entity engaged in any trade, industry and commerce in the Republic of the
SECTION 1. Short Title. – This Act shall be known as the “Philippine Competition Philippines. It shall likewise be applicable to international trade having direct,
Act”. substantial, and reasonably foreseeable effects in trade, industry, or commerce in the
Republic of the Philippines, including those that result from acts done outside the
SEC. 2. Declaration of Policy. – The efficiency of market competition as a Republic of the Philippines.
mechanism for allocating goods and services is a generally accepted precept. The
State recognizes that past measures undertaken to liberalize key sectors in the This Act shall not apply to the combinations or activities of workers or employees
economy need to be reinforced by measures that safeguard competitive conditions. nor to agreements or arrangements with their employers when such combinations,
The State also recognizes that the provision of equal opportunities to all promotes activities, agreements, or arrangements are designed solely to facilitate collective
entrepreneurial spirit, encourages private investments, facilitates technology bargaining in respect of conditions of employment.
development and transfer and enhances resource productivity. Unencumbered market
Sec. 4. Definition of Terms. – As used in this Act:
competition also serves the interest of consumers by allowing them to exercise their
right of choice over goods and services offered in the market. (a) Acquisition refers to the purchase of securities or assets, through contract or other
means, for the purpose of obtaining control by:
Pursuant to the constitutional goals for the national economy to attain a more
(1) One (1) entity of the whole or part of another;
equitable distribution of opportunities, income, and wealth; a sustained increase in
(2) Two (2) or more entities over another; or
the amount of goods and services produced by the nation for the benefit of the
 (3) One (1) or more entities over one (1) or more entities; the conditions of competition are sufficiently homogenous and which can be
(b) Agreement refers to any type or form of contract, arrangement, understanding, distinguished from neighboring areas because the conditions of competition are
collective recommendation, or concerted action, whether formal or informal, explicit different in those areas.
or tacit, written or oral;
(c) Conduct refers to any type or form of undertaking, collective recommendation,
independent or concerted action or practice, whether formal or informal; CHAPTER II
(d) Commission refers to the Philippine Competition Commission created under this PHILIPPINE COMPETITION COMMISSION
Act;
(e) Confidential business information refers to information which concerns or relates Sec. 5. Philippine Competition Commission. – To implement the national
to the operations, production, sales, shipments, purchases, transfers, identification of competition policy and attain the objectives and purposes of this Act, an independent
customers, inventories, or amount or source of any income, profits, losses, quasi-judicial body is hereby created, which shall be known as the Philippine
expenditures; Competition Commission (PCC), hereinafter referred to as the Commission, and
(f) Control refers to the ability to substantially influence or direct the actions or which shall be organized within sixty (60) days after the effectivity of this Act. Upon
decisions of an entity, whether by contract, agency or otherwise; establishment of the Commission, Executive Order No. 45 designating the
(g) Dominant position refers to a position of economic strength that an entity or Department of Justice as the Competition Authority is hereby amended. The Office
entities hold which makes it capable of controlling the relevant market independently for Competition (OFC) under the Office of the Secretary of Justice shall however be
from any or a combination of the following: competitors, customers, suppliers, or retained, with its powers and functions modified pursuant to Section 13 of this
consumers; Chapter. The Commission shall be an attached agency to the Office of the President.
(h) Entity refers to any person, natural or juridical, sole proprietorship, partnership,
combination or association in any form, whether incorporated or not, domestic or Sec. 6. Composition of the Commission. – The Commission shall be composed of a
foreign, including those owned or controlled by the government, engaged directly or Chairperson and four (4) Commissioners. The Chairperson and the Commissioners
indirectly in any economic activity; shall be citizens and residents of the Philippines, of good moral character, of
(i) Market refers to the group of goods or services that are sufficiently recognized probity and independence and must have distinguished themselves
interchangeable or substitutable and the object of competition, and the geographic professionally in public, civic or academic service in any of the following fields:
area where said goods or services are offered; economics, law, finance, commerce or engineering. They must have been in the
(j) Merger refers to the joining of two (2) or more entities into an existing entity or to active practice of their professions for at least ten (10) years, and must not have been
form a new entity; candidates for any elective national or local office in the immediately preceding
(k) Relevant market refers to the market in which a particular good or service is sold elections, whether regular or special: Provided, That at least one (1) shall be a
and which is a combination of the relevant product market and the relevant member of the Philippine Bar with at least ten (10) years of experience in the active
geographic market, defined as follows: practice of law, and at least one (1) shall be an economist. The Chairperson and the
(1) A relevant product market comprises all those goods and/or services which are Commissioners who shall have the rank equivalent of cabinet secretary and
regarded as interchangeable or substitutable by the consumer or the customer, by undersecretary, respectively, shall be appointed by the President.
reason of the goods and/or services’ characteristics, their prices and their intended
Sec. 7. Term of Office. – The term of office of the Chairperson and the
use; and
Commissioners shall be seven (7) years without reappointment. Of the first set of
(2) The relevant geographic market comprises the area in which the entity
appointees, the Chairperson shall hold office for seven (7) years and of the first four
concerned is involved in the supply and demand of goods and services, in which
(4) Commissioners, two (2) shall hold office for a term of seven (7) years and two Sec. 10. Quorum. – Three (3) members of the Commission shall constitute a quorum
(2) for a term of five (5) years. In case a vacancy occurs before the expiration of the and the affirmative vote of three (3) members shall be necessary for the adoption of
term of office, the appointment to such vacancy shall only be for the unexpired term any rule, ruling, order, resolution, decision or other acts of the Commission.
of the predecessor.
Sec. 11. Staff. – The Commission shall appoint, fix the compensation, and determine
The Chairperson and the Commissioners shall enjoy security of tenure and shall not the status, qualifications, and duties of an adequate staff, which shall include an
be suspended or removed from office except for just cause as provided by law. Executive Director of the Commission. The Executive Director shall be appointed by
the Commission and shall have relevant experience in any of the fields of law,
Sec. 8. Prohibitions and Disqualifications. – The Commissioners shall not, during economics, commerce, management, finance or engineering for at least ten (10)
their tenure, hold any other office or employment. They shall not, during their tenure, years. The members of the technical staff, except those performing purely clerical
directly or indirectly practice any profession, except in a teaching capacity, functions, shall possess at least a Bachelor’s Degree in any of the following lines of
participate in any business, or be financially interested in any contract with, or any specialization: economics, law, finance, commerce, engineering, accounting, or
franchise, or special privileges granted by the government or any subdivision, management.
agency, or instrumentality thereof, including government-owned and -controlled
corporations or their subsidiaries. They shall strictly avoid conflict of interest in the Sec. 12. Powers and Functions. — The Commission shall have original and primary
conduct of their office. They shall not be qualified to run for any office in the jurisdiction over the enforcement and implementation of the provisions of this Act,
election immediately succeeding their cessation from office: Provided, That the and its implementing rules and regulations. The Commission shall exercise the
election mentioned hereof is not a Barangay election or a Sangguniang Kabataan following powers and functions:
election. Provided, they shall not be allowed to personally appear or practice as
counsel or agent on any matter pending before the Commission for two (2) years (a) Conduct inquiry, investigate, and hear and decide on cases involving any
following their cessation from office. violation of this Act and other existing competition laws motu proprio or upon
receipt of a verified complaint from an interested party or upon referral by the
No spouse or relative by consanguinity or affinity within the fourth civil degree of concerned regulatory agency, and institute the appropriate civil or criminal
any of the Commissioners, the Chairperson and the Executive Director of the proceedings;
Commission may appear as counsel nor agent on any matter pending before the (b) Review proposed mergers and acquisitions, determine thresholds for notification,
Commission or transact business directly or indirectly therein during incumbency determine the requirements and procedures for notification, and upon exercise of its
and within two (2) years from cessation of office. powers to review, prohibit mergers and acquisitions that will substantially prevent,
restrict, or lessen competition in the relevant market;
Sec. 9. Compensation and Other Emoluments for Members and Personnel of the (c) Monitor and undertake consultation with stakeholders and affected agencies for
Commission. — The compensation and other emoluments for the members and the purpose of understanding market behavior;
personnel of the Commission shall be exempted from the coverage of Republic Act (d) Upon finding, based on substantial evidence, that an entity has entered into an
No. 6758, otherwise known as the “Salary Standardization Act”. For this purpose, anti-competitive agreement or has abused its dominant position after due notice and
the salaries and other emoluments of the Chairperson, the Commissioners, and hearing, stop or redress the same, by applying remedies, such as, but not limited to,
personnel of the Commission shall be set based on an objective classification system, issuance of injunctions, requirement of divestment, and disgorgement of excess
taking into consideration the importance and responsibilities attached to the profits under such reasonable parameters that shall be prescribed by the rules and
respective positions, and shall be submitted to the President of the Philippines for his regulations implementing this Act;
approval.
(e) Conduct administrative proceedings, impose sanctions, fines or penalties for any (m) Conduct, publish, and disseminate studies and reports on anti-competitive
noncompliance with or breach of this Act and its implementing rules and regulations conduct and agreements to inform and guide the industry and consumers;
(IRR) and punish for contempt; (n) Intervene or participate in administrative and regulatory proceedings requiring
(f) Issue subpoena duces tecum and subpoena ad testificandum to require the consideration of the provisions of this Act that are initiated by government agencies
production of books, records, or other documents or data which relate to any matter such as the Securities and Exchange Commission, the Energy Regulatory
relevant to the investigation and personal appearance before the Commission, Commission and the National Telecommunications Commission;
summon witnesses, administer oaths, and issue interim orders such as show cause (o) Assist the National Economic and Development Authority, in consultation with
orders and cease and desist orders after due notice and hearing in accordance with relevant agencies and sectors, in the preparation and formulation of a national
the rules and regulations implementing this Act; competition policy;
(g) Upon order of the court, undertake inspections of business premises and other (p) Act as the official representative of the Philippine government in international
offices, land and vehicles, as used by the entity, where it reasonably suspects that competition matters;
relevant books, tax records, or other documents which relate to any matter relevant to (q) Promote capacity building and the sharing of best practices with other
the investigation are kept, in order to prevent the removal, concealment, tampering competition-related bodies;
with, or destruction of the books, records, or other documents; (r) Advocate pro-competitive policies of the government by:
(h) Issue adjustment or divestiture orders including orders for corporate (1) Reviewing economic and administrative regulations, motu proprio or upon
reorganization or divestment in the manner and under such terms and conditions as request, as to whether or not they adversely affect relevant market competition, and
may be prescribed in the rules and regulations implementing this Act. Adjustment or advising the concerned agencies against such regulations; and
divestiture orders, which are structural remedies, should only be imposed: (2) Advising the Executive Branch on the competitive implications of government
(1) Where there is no equally effective behavioral remedy; or actions, policies and programs; and
(2) Where any equally effective behavioral remedy would be more burdensome (s) Charging reasonable fees to defray the administrative cost of the services
for the enterprise concerned than the structural remedy. Changes to the structure rendered.
of an enterprise as it existed before the infringement was committed would only
be proportionate to the substantial risk of a lasting or repeated infringement that Sec. 13. Office for Competition (OFC), Powers and Functions. — The OFC under
derives from the very structure of the enterprise; the Department of Justice (DOJ-OFC) shall only conduct preliminary investigation
(i) Deputize any and all enforcement agencies of the government or enlist the aid and and undertake prosecution of all criminal offenses arising under this Act and other
support of any private institution, corporation, entity or association, in the competition-related laws in accordance with Section 31 of Chapter VI of this Act.
implementation of its powers and functions; The OFC shall be reorganized and allocated resources as may be required therefor to
(j) Monitor compliance by the person or entities concerned with the cease and desist effectively pursue such mandate.
order or consent judgment;
(k) Issue advisory opinions and guidelines on competition matters for the effective
enforcement of this Act and submit annual and special reports to Congress, including CHAPTER III
proposed legislation for the regulation of commerce, trade, or industry; PROHIBITED ACTS
(l) Monitor and analyze the practice of competition in markets that affect the
Philippine economy; implement and oversee measures to promote transparency and Sec. 14. Anti-Competitive Agreements. –
accountability; and ensure that prohibitions and requirements of competition laws are
(a) The following agreements, between or among competitors, are per se prohibited:
adhered to;
 (1) Restricting competition as to price, or components thereof, or other terms of (c) Making a transaction subject to acceptance by the other parties of other
trade; obligations which, by their nature or according to commercial usage, have no
(2) Fixing price at an auction or in any form of bidding including cover bidding, connection with the transaction;
bid suppression, bid rotation and market allocation and other analogous practices (d) Setting prices or other terms or conditions that discriminate unreasonably
of bid manipulation; between customers or sellers of the same goods or services, where such customers or
(b) The following agreements, between or among competitors which have the object sellers are contemporaneously trading on similar terms and conditions, where the
or effect of substantially preventing, restricting or lessening competition shall be effect may be to lessen competition substantially: Provided, That the following shall
prohibited: be considered permissible price differentials:
(1) Setting, limiting, or controlling production, markets, technical development, or (1) Socialized pricing for the less fortunate sector of the economy;
investment; (2) Price differential which reasonably or approximately reflect differences in the
(2) Dividing or sharing the market, whether by volume of sales or purchases, cost of manufacture, sale, or delivery resulting from differing methods, technical
territory, type of goods or services, buyers or sellers or any other means; conditions, or quantities in which the goods or services are sold or delivered to the
(c) Agreements other than those specified in (a) and (b) of this section which have buyers or sellers;
the object or effect of substantially preventing, restricting or lessening competition (3) Price differential or terms of sale offered in response to the competitive price of
shall also be prohibited: Provided, Those which contribute to improving the payments, services or changes in the facilities furnished by a competitor; and
production or distribution of goods and services or to promoting technical or (4) Price changes in response to changing market conditions, marketability of goods
economic progress, while allowing consumers a fair share of the resulting benefits, or services, or volume;
may not necessarily be deemed a violation of this Act. (e) Imposing restrictions on the lease or contract for sale or trade of goods or services
concerning where, to whom, or in what forms goods or services may be sold or
An entity that controls, is controlled by, or is under common control with another traded, such as fixing prices, giving preferential discounts or rebate upon such price,
entity or entities, have common economic interests, and are not otherwise able to or imposing conditions not to deal with competing entities, where the object or effect
decide or act independently of each other, shall not be considered competitors for of the restrictions is to prevent, restrict or lessen competition substantially: Provided,
purposes of this section. That nothing contained in this Act shall prohibit or render unlawful:
(1) Permissible franchising, licensing, exclusive merchandising or exclusive
SEC. 15. Abuse of Dominant Position. – It shall be prohibited for one or more
distributorship agreements such as those which give each party the right to
entities to abuse their dominant position by engaging in conduct that would
unilaterally terminate the agreement; or
substantially prevent, restrict or lessen competition:
(2) Agreements protecting intellectual property rights, confidential information, or
(a) Selling goods or services below cost with the object of driving competition out of trade secrets;
the relevant market: Provided, That in the Commission’s evaluation of this fact, it (f) Making supply of particular goods or services dependent upon the purchase of
shall consider whether the entity or entities have no such object and the price other goods or services from the supplier which have no direct connection with the
established was in good faith to meet or compete with the lower price of a competitor main goods or services to be supplied;
in the same market selling the same or comparable product or service of like quality; (g) Directly or indirectly imposing unfairly low purchase prices for the goods or
(b) Imposing barriers to entry or committing acts that prevent competitors from services of, among others, marginalized agricultural producers, fisherfolk, micro-,
growing within the market in an anti-competitive manner except those that develop small-, medium-scale enterprises, and other marginalized service providers and
in the market as a result of or arising from a superior product or process, business producers;
acumen, or legal rights or laws;
(h) Directly or indirectly imposing unfair purchase or selling price on their market share in the relevant market in excess of minimum thresholds, that may be
competitors, customers, suppliers or consumers, provided that prices that develop in applied specifically to a sector, or across some or all sectors, in determining whether
the market as a result of or due to a superior product or process, business acumen or parties to a merger or acquisition shall notify the Commission under this Chapter.
legal rights or laws shall not be considered unfair prices; and
(i) Limiting production, markets or technical development to the prejudice of An agreement consummated in violation of this requirement to notify the
consumers, provided that limitations that develop in the market as a result of or due Commission shall be considered void and subject the parties to an administrative fine
to a superior product or process, business acumen or legal rights or laws shall not be of one percent (1%) to five percent (5%) of the value of the transaction.
a violation of this Act: Should the Commission deem it necessary, it may request further information that
Provided, That nothing in this Act shall be construed or interpreted as a prohibition are reasonably necessary and directly relevant to the prohibition under Section 20
on having a dominant position in a relevant market or on acquiring, maintaining and hereof from the parties to the agreement before the expiration of the thirty (30)-day
increasing market share through legitimate means that do not substantially prevent, period referred. The issuance of such a request has the effect of extending the period
restrict or lessen competition: within which the agreement may not be consummated for an additional sixty (60)
days, beginning on the day after the request for information is received by the
Provided, further, That any conduct which contributes to improving production or parties: Provided, That, in no case shall the total period for review by the
distribution of goods or services within the relevant market, or promoting technical Commission of the subject agreement exceed ninety (90) days from initial
and economic progress while allowing consumers a fair share of the resulting benefit notification by the parties.
may not necessarily be considered an abuse of dominant position:
When the above periods have expired and no decision has been promulgated for
Provided, finally, That the foregoing shall not constrain the Commission or the whatever reason, the merger or acquisition shall be deemed approved and the parties
relevant regulator from pursuing measures that would promote fair competition or may proceed to implement or consummate it. All notices, documents and
more competition as provided in this Act. information provided to or emanating from the Commission under this section shall
be subject to confidentiality rule under Section 34 of this Act except when the release
of information contained therein is with the consent of the notifying entity or is
mandatorily required to be disclosed by law or by a valid order of a court of
CHAPTER IV
competent jurisdiction, or of a government or regulatory agency, including an
MERGERS AND ACQUISITIONS
exchange.
SEC. 16. Review of Mergers and Acquisitions. — The Commission shall have the
In the case of the merger or acquisition of banks, banking institutions, building and
power to review mergers and acquisitions based on factors deemed relevant by the
loan associations, trust companies, insurance companies, public utilities, educational
Commission.
institutions and other special corporations governed by special laws, a favorable or
SEC. 17. Compulsory Notification. – Parties to the merger or acquisition agreement no-objection ruling by the Commission shall not be construed as dispensing of the
referred to in the preceding section wherein the value of the transaction exceeds one requirement for a favorable recommendation by the appropriate government agency
billion pesos (P1,000,000,000.00) are prohibited from consummating their agreement under Section 79 of the Corporation Code of the Philippines.
until thirty (30) days after providing notification to the Commission in the form and
containing the information specified in the regulations issued by the Commission:
Provided, That the Commission shall promulgate other criteria, such as increased
A favorable recommendation by a governmental agency with a competition mandate (b) A party to the merger or acquisition agreement is faced with actual or imminent
shall give rise to a disputable presumption that the proposed merger or acquisition is financial failure, and the agreement represents the least anti-competitive arrangement
not violative of this Act. among the known alternative uses for the failing entity’s assets:

SEC. 18. Effect of Notification. — If within the relevant periods stipulated in the Provided, That an entity shall not be prohibited from continuing to own and hold the
preceding section, the Commission determines that such agreement is prohibited stock or other share capital or assets of another corporation which it acquired prior to
under Section 20 and does not qualify for exemption under Section 21 of this the approval of this Act or acquiring or maintaining its market share in a relevant
Chapter, the Commission may: market through such means without violating the provisions of this Act:

(a) Prohibit the implementation of the agreement; Provided, further, That the acquisition of the stock or other share capital of one or
(b) Prohibit the implementation of the agreement unless and until it is modified by more corporations solely for investment and not used for voting or exercising control
changes specified by the Commission. and not to otherwise bring about, or attempt to bring about the prevention, restriction,
(c) Prohibit the implementation of the agreement unless and until the pertinent party or lessening of competition in the relevant market shall not be prohibited.
or parties enter into legally enforceable agreements specified by the Commission.
SEC. 22. Burden of Proof. – The burden of proof under Section 21 lies with the
SEC. 19. Notification Threshold. – The Commission shall, from time to time, adopt parties seeking the exemption. A party seeking to rely on the exemption specified in
and publish regulations stipulating: Section 21(a) must demonstrate that if the agreement were not implemented,
significant efficiency gains would not be realized.
(a) The transaction value threshold and such other criteria subject to the notification
requirement of Section 17 of this Act; SEC. 23. Finality of Rulings on Mergers and Acquisitions. – Merger or acquisition
(b) The information that must be supplied for notified merger or acquisition; agreements that have received a favorable ruling from the Commission, except when
(c) Exceptions or exemptions from the notification requirement; and such ruling was obtained on the basis of fraud or false material information, may not
(d) Other rules relating to the notification procedures. be challenged under this Act.

SEC. 20. Prohibited. Mergers and Acquisitions. – Merger or acquisition agreements

that substantially prevent, restrict or lessen competition in the relevant market or in
the market for goods or services as may be determined by the Commission shall be CHAPTER V
prohibited. DISPOSITION OF CASES

SEC. 21. Exemptions from Prohibited. Mergers and Acquisitions. – Merger or Sec 24. Relevant Market. – For purposes of determining the relevant market, the
acquisition agreement prohibited under Section 20 of this Chapter may, nonetheless, following factors, among others, affecting the substitutability among goods or
be exempt from prohibition by the Commission when the parties establish either of services constituting such market and the geographic area delineating the boundaries
the following: of the market shall be considered:

(a) The concentration has brought about or is likely to bring about gains in (a) The possibilities of substituting the goods or services in question, with others of
efficiencies that are greater than the effects of any limitation on competition that domestic or foreign origin, considering the technological possibilities, extent to
result or likely to result from the merger or acquisition agreement; or which substitutes are available to consumers and time required for such substitution;
(b) The cost of distribution of the good or service, its raw materials, its supplements (a) Define the relevant market allegedly affected by the anti-competitive agreement
and substitutes from other areas and abroad, considering freight, insurance, import or conduct, following the principles laid out in Section 24 of this Chapter;
duties and non-tariff restrictions; the restrictions imposed by economic agents or by (b) Determine if there is actual or potential adverse impact on competition in the
their associations; and the time required to supply the market from those areas; relevant market caused by the alleged agreement or conduct, and if such impact is
substantial and outweighs the actual or potential efficiency gains that result from the
(c) The cost and probability of users or consumers seeking other markets; and agreement or conduct;
(c) Adopt a broad and forward-looking perspective, recognizing future market
(d) National, local or international restrictions which limit access by users or
developments, any overriding need to make the goods or services available to
consumers to alternate sources of supply or the access of suppliers to alternate
consumers, the requirements of large investments in infrastructure, the requirements
consumers.
of law, and the need of our economy to respond to international competition, but also
SEC. 25. Control of an Entity. – In determining the control of an entity, the taking account of past behavior of the parties involved and prevailing market
Commission may consider the following: conditions;
(d) Balance the need to ensure that competition is not prevented or substantially
Control is presumed to exist when the parent owns directly or indirectly, through restricted and the risk that competition efficiency, productivity, innovation, or
subsidiaries, more than one half (1/2) of the voting power of an entity, unless in development of priority areas or industries in the general interest of the country may
exceptional circumstances, it can clearly be demonstrated that such ownership does be deterred by overzealous or undue intervention; and
not constitute control. Control also exists even when an entity owns one half (1/2) or (e) Assess the totality of evidence on whether it is more likely than not that the entity
less of the voting power of another entity when: has engaged in anticompetitive agreement or conduct including whether the entity’s
conduct was done with a reasonable commercial purpose such as but not limited to
(a) There is power over more than one half (1/2) of the voting rights by virtue of an
phasing out of a product or closure of a business, or as a reasonable commercial
agreement with investors;
response to the market entry or conduct of a competitor.
(b) There is power to direct or govern the financial and operating policies of the
entity under a statute or agreement; SEC. 27. Market Dominant Position. – In determining whether an entity has market
(c) There is power to appoint or remove the majority of the members of the board of dominant position for purposes of this Act, the Commission shall consider the
directors or equivalent governing body; following:
(d) There is power to cast the majority votes at meetings of the board of directors or
equivalent governing body; (a) The share of the entity in the relevant market and whether it is able to fix prices
(e) There exists ownership over or the right to use all or a significant part of the unilaterally or to restrict supply in the relevant market;
assets of the entity; (b) The existence of barriers to entry and the elements which could foreseeably alter
(f) There exist rights or contracts which confer decisive influence on the decisions of both said barriers and the supply from competitors;
the entity. (c) The existence and power of its competitors;
(d) The possibility of access by its competitors or other entities to its sources of
SEC. 26. Determination of Anti-Competitive Agreement or Conduct. – In inputs;
determining whether anti-competitive agreement or conduct has been committed, the (e) The power of its customers to switch to other goods or services;
Commission shall: (f) Its recent conducts; and
(g) Other criteria established by the regulations of this Act.
There shall be a rebuttable presumption of market dominant position if the market
share of an entity in the relevant market is at least fifty percent (50%), unless a new
market share threshold is determined by the Commission for that particular sector. CHAPTER VI
FINES AND PENALTIES
The Commission shall from time to time determine and publish the threshold for
dominant position or minimum level of share in the relevant market that could give Sec. 29. Administrative Penalties. –
rise to a presumption of dominant position. In such determination, the Commission (a) Administrative Fines. – In any investigation under Chapter III, Sections 14 and
would consider the structure of the relevant market, degree of integration, access to 15, and Chapter IV, Sections 17 and 20 of this Act, after due notice and hearing, the
end-users, technology and financial resources, and other factors affecting the control Commission may impose the following schedule of administrative fines on any
of a market, as provided in subsections (a) to (g) of this section. entity found to have violated the said sections:
The Commission shall not consider the acquiring, maintaining and increasing of First offense: Fine of up to one hundred million pesos (P100,000,000.00);
market share through legitimate means not substantially preventing, restricting, or
lessening competition in the market such as but not limited to having superior skills, Second offense: Fine of not less than one hundred million pesos (P100,000,000.00)
rendering superior service, producing or distributing quality products, having but not more than two hundred fifty million pesos (P250,000,000.00).
business acumen, and the enjoyment and use of protected intellectual property rights
as violative of this Act. In fixing the amount of the fine, the Commission shall have regard to both the
gravity and the duration of the violation.
SEC. 28. Forbearance. – The Commission may forbear from applying the
provisions of this Act, for a limited time, in whole or in part, in all or specific cases, (b) Failure to Comply With an Order of the Commission. – An entity which fails or
on an entity or group of entities, if in its determination: refuses to comply with a ruling, order or decision issued by the Commission shall
pay a penalty of not less than fifty thousand pesos (P50,000.00) up to two million
(a) Enforcement is not necessary to the attainment of the policy objectives of this pesos (P2,000,000.00) for each violation and a similar amount of penalty for each
Act; day thereafter until the said entity fully complies. Provided that these fines shall only
(b) Forbearance will neither impede competition in the market where the entity or accrue daily beginning forty-five (45) days from the time that the said decision, order
group of entities seeking exemption operates nor in related markets; and or ruling was received.
(c) Forbearance is consistent with public interest and the benefit and welfare of the
consumers. (c) Supply of Incorrect or Misleading Information. – The Commission may likewise
impose upon any entity fines of up to one million pesos (PI,000,000.00) where,
A public hearing shall be held to assist the Commission in making this intentionally or negligently, they supply incorrect or misleading information in any
determination. document, application or other paper filed with or submitted to the Commission or
supply incorrect or misleading information in an application for a binding ruling, a
The Commission’s order exempting the relevant entity or group of entities under this proposal for a consent judgment, proceedings relating to a show cause order, or
section shall be made public. Conditions may be attached to the forbearance if the application for modification of the Commission’s ruling, order or approval, as the
Commission deems it appropriate to ensure the long-term interest of consumers. case may be.
In the event that the basis for the issuance of the exemption order ceases to be valid, (d) Any other violations not specifically penalized under the relevant provisions of
the order may be withdrawn by the Commission. this Act shall be penalized by a fine of not less than fifty thousand pesos
(P50,000.00) up to two million pesos (P2,000,000.00). Provided that the schedule of performance of certain acts by the respondent entity, the continued performance of
fines indicated in this section shall be increased by the Commission every five (5) which would result in a material and adverse effect on consumers or competition in
years to maintain their real value from the time it was set. the relevant market.

SEC. 30. Criminal Penalties. – An entity that enters into any anti-competitive If the evidence so warrants, the Commission may file before the DOJ criminal
agreement as covered by Chapter III, Section 14(a) and 14(b) under this Act shall, complaints for violations of this Act or relevant laws for preliminary investigation
for each and every violation, be penalized by imprisonment from two (2) to seven (7) and prosecution before the proper court. The DOJ shall conduct such preliminary
years, and a fine of not less than fifty million pesos (P50,000,000.00) but not more investigation in accordance with the Revised Rules of Criminal Procedure.
than two hundred fifty million pesos (P250,000,000.00). The penalty of
imprisonment shall be imposed upon the responsible officers, and directors of the The preliminary inquiry shall, in all cases, be completed by the Commission within
entity. ninety (90) days from submission of the verified complaint, referral, or date of
initiation by the Commission, motu proprio, of the same.
When the entities involved are juridical persons, the penalty of. imprisonment shall
be imposed on its officers, directors, or employees holding managerial positions, Except as provided in Section 12(i) of Chapter II of this Act, no law enforcement
who are knowingly and willfully responsible for such violation. agency shall conduct any kind of fact-finding, inquiry or investigation into any
competition-related matters.

Sec. 32. Relationship With Sector Regulators. – The Commission shall have
CHAPTER VII original and primary jurisdiction in the enforcement and regulation of all
ENFORCEMENT competition-related issues.

Sec. 31. Fact Finding; Preliminary Inquiry. – The Commission, motu proprio, or The Commission shall still have jurisdiction if the issue involves both competition
upon the filing of a verified complaint by an interested party or upon referral by a and noncompetition issues, but the concerned sector regulator shall be consulted and
regulatory agency, shall have the sole and exclusive authority to initiate and conduct afforded reasonable opportunity to submit its own opinion and recommendation on
a fact-finding or preliminary inquiry for the enforcement of this Act based on the matter before the Commission makes a decision on any case.
reasonable grounds.
Where appropriate, the Commission and the sector regulators shall work together to
The Commission, after considering the statements made, or documents or articles issue rules and regulations to promote competition, protect consumers, and prevent
produced in the course of the fact-finding or preliminary inquiry, shall terminate the abuse of market power by dominant players within their respective sectors.
same by:
Sec. 33. Power to Investigate and Enforce Orders and Resolutions. – The
(a) Issuing a resolution ordering its closure if no violation or infringement of this Act Commission shall conduct inquiries by administering oaths, issuing subpoena duces
is found; or tecum and summoning witnesses, and commissioning consultants or experts. It shall
(b) Issuing a resolution to proceed, on the basis of reasonable grounds, to the conduct determine if any provision of this Act has been violated, enforce its orders and carry
of a full administrative investigation. out its resolutions by making use of any available means, provisional or otherwise,
under existing laws and procedures including the power to punish for contempt and
The Commission, after due notice and hearing, and on the basis of facts and evidence to impose fines.
presented, may issue an order for the temporary cessation or desistance from the
Sec. 34. Confidentiality of Information. – Confidential business information Even after the Commission has received information about the illegal activity after a
submitted by entities, relevant to any inquiry or investigation being conducted fact-finding or preliminary inquiry has commenced, the reporting entity will be
pursuant to this Act as well as any deliberation in relation thereto, shall not, in any granted leniency, provided preceding conditions (b) and (c) and the following
manner, be directly or indirectly disclosed, published, transferred, copied, or additional requirements are complied with:
disseminated. Likewise, the Commission shall, to the extent possible, subject such
information to the confidentiality rule provided under this section when it issues (1) The entity is the first to come forward and qualify for leniency;
notices, bulletins, rulings and other documents: Provided, That the confidentiality (2) At the time the entity comes forward, the Commission does not have evidence
rule shall not apply if the notifying entity consents to the disclosure, or the document against the entity that is likely to result in a sustainable conviction; and
or information is mandatorily required to be disclosed by law or by a valid order of a (3) The Commission determines that granting leniency would not be unfair to others.
court of competent jurisdiction or of a government or regulatory agency, including Such program shall include the immunity from any suit or charge of affected parties
an exchange. The identity of the persons who provide information to the and third parties, exemption, waiver, or gradation of fines and/or penalties giving
Commission under condition of anonymity, shall remain confidential, unless such precedence to the entity submitting such evidence. An entity cooperating or
confidentiality is expressly waived by these persons. furnishing information, document or data to the Commission in connection to an
investigation being conducted shall not be subjected to any form of reprisal or
Any violation of this provision shall be imposed a fine of not less than one million discrimination.
pesos (P1,000,000.00) but not more than five million pesos (P5,000,000.00).
Such reprisal or discrimination shall be considered a violation of this Act subject to
Sec. 35. Leniency Program. – The Commission shall develop a Leniency Program to the sanctions provided in this Act.
be granted to any entity in the form of immunity from suit or reduction of any fine
which would otherwise be imposed on a participant in an anti-competitive agreement Nothing in this section shall preclude prosecution for entities that report to the
as provided in Section 14(a) and 14(b) of this Act in exchange for the voluntary Commission false, misleading, or malicious information, data or documents
disclosure of information regarding such an agreement which satisfies specific damaging to the business or integrity of the entities under inquiry as a violation of
criteria prior to or during the fact-finding or preliminary inquiry stage of the case. said section. An entity found to have reported false, misleading or malicious
information, data, or document may be penalized by a fine not less than the penalty
Immunity from suit will be granted to an entity reporting illegal anti-competitive imposed in the section reported to have been violated by the entity complained of.
activity before a fact-finding or preliminary inquiry has begun if the following
conditions are met: The DOJ-OFC may likewise grant leniency or immunity as provided in this section
in the event that there is already a preliminary investigation pending before it.
(a) At the time the entity comes forward, the Commission has not received
information about the activity from any other source; SEC. 36. Nolo Contendere. – An entity charged in a criminal proceeding pursuant to
(b) Upon the entity’s discovery of illegal activity, it took prompt and effective action Section 14(a) and 14(b) of this Act may enter a plea of Nolo Contendere, in which he
to terminate its participation therein; does not accept nor deny responsibility for the charges but agrees to accept
(c) The entity reports the wrongdoing with candor and completeness and provides punishment as if he had pleaded guilty. The plea cannot be used against the
full, continuing, and complete cooperation throughout the investigation; and defendant entity to prove liability in a civil suit arising from the criminal action nor
(d) The entity did not coerce another party to participate in the activity and clearly in another cause of action: Provided, That a plea of Nolo Contendere may be entered
was not the leader in, or the originator of, the activity. only up to arraignment and subsequently, only with the permission of the court
which shall accept it only after weighing its effect on the parties, the public and the (c) Consent Order. – At any time prior to the conclusion by the Commission of its
administration of justice. inquiry, any entity under inquiry may, without in any manner admitting a violation of
this Act or any other competition laws, submit to the Commission a written proposal
SEC. 37. Non-Adversarial Remedies. — As an implementing and enforcement for the entry of a consent order, specifying therein the terms and conditions of the
policy, the Commission shall, under such rules and regulations it may prescribe, proposed consent order which shall include among others the following:
encourage voluntary compliance with this Act and other competition laws by making
available to the parties concerned the following and other analogous nonadversarial (1) The payment of an amount within the range of fines provided for under this Act;
administrative remedies, before the institution of administrative, civil or criminal (2) The required compliance report as well as an entity to submit regular compliance
action: reports;
(3) Payment of damages to any private party/parties who may have suffered injury;
(a) Binding Ruling. — Where no prior complaint or investigation has been initiated, and
any entity that is in doubt as to whether a contemplated act, course of conduct, (4) Other terms and conditions that the Commission deems appropriate and
agreement, or decision, is in compliance with, is exempt from, or is in violation of necessary for the effective enforcement of this Act or other Competition Laws:
any of the provisions of this Act, other competition laws, or implementing rules and
regulations thereof, may request the Commission, in writing, to render a binding Provided, That a consent order shall not bar any inquiry for the same or similar acts
ruling thereon: Provided, That the ruling is for a specified period, subject to if continued or repeated;
extension as may be determined by the Commission, and based on substantial
evidence. (d) Monitoring of Compliance. – The Commission shall monitor the compliance by
the entity or entities concerned, their officers, and employees, with the final and
In the event of an adverse binding ruling on an act, course or conduct, agreement, or executory binding ruling, cease and desist order, or approval of a consent judgment.
decision, the applicant shall be provided with a reasonable period, which in no case Upon motion of an interested party/parties, the Commission shall issue a certification
shall be more than ninety (90) days, to abide by the ruling of the Commission and or resolution to the effect that the entity or entities concerned have, or have not, as
shall not be subject to administrative, civil, or criminal action unless the applicant the case may be, complied with a final and executory ruling, order, or approval.
fails to comply with the provisions of this Act;
(e) Inadmissibility of Evidence in Criminal Proceedings. – The request for a binding
(b) Show Cause Order. — Upon preliminary findings motu proprio or on written ruling, the show cause order, or the proposal for consent order; the facts, data, and
complaint under oath by an interested party that any entity is conducting its business, information therein contained or subsequently supplied by the entity or entities
in whole or in part in a manner that may not be in accord with the provisions of this concerned; admissions, oral or written, made by them against their interest; all other
Act or other competition laws, and it finds that the issuance of a show cause order documents filed by them, including their evidence presented in the proceedings
would be in the interest of the public, the Commission shall issue and serve upon before the Commission; and the judgment or order rendered thereon; shall not be
such entity or entities a written description of its business conduct complained of, a admissible as evidence in any criminal proceedings arising from the same act subject
statement of the facts, data, and information together with a summary of the evidence of the binding ruling, show cause order or consent order against such entity or
thereof, with an order requiring the said entity or entities to show cause, within the entities, their officers, employees, and agents.
period therein fixed, why no order shall issue requiring such person or persons to
cease and desist from continuing with its identified business conduct, or pay the Sec. 38. Contempt. — The Commission may summarily punish for contempt by
administrative fine therein specified, or readjust its business conduct or practices; imprisonment not exceeding thirty (30) days or by a fine not exceeding one hundred
thousand pesos (P 100,000.00), or both, any entity guilty of such misconduct in the
presence of the Commission in its vicinity as to seriously interrupt any hearing, arise in connection with the exercise of their powers and performance of their duties
session or any proceeding before it, including cases in which an entity willfully fails and functions.
or refuses, without just cause, to comply with a summons, subpoena or subpoena
duces tecum legally issued by the Commission being present at a hearing, The Commission shall underwrite or advance litigation costs and expenses, including
proceeding, session or investigation, refused to be sworn as a witness or to answer legal fees and other expenses of external counsel, or provide legal assistance to its
questions or to furnish information when lawfully required to do so. Chairperson, Commissioners, officers, employees, or agents in connection with any
civil, criminal, administrative or any other action or proceeding, to which they are
Sec. 39. Appeals of the Decisions of the Commission. – Decisions of the made a party by reason of, or in connection with, the exercise of authority or
Commission shall be appealable to the Court of Appeals in accordance with the performance of duties and functions under this Act: Provided, That such legal
Rules of Court. The appeal shall not stay the order, ruling or decision sought to be protection shall not apply to any civil, criminal, administrative, or any action or
reviewed, unless the Court of Appeals shall direct otherwise upon such terms and proceeding that may be initiated by the Commission, against such Chairperson,
conditions it may deem just. In the appeal, the Commission shall be included as a Commissioners, officers, employees, or agents: Provided, further, That the
party respondent to the case. Chairperson, Commissioners, officers, employees, or agents, who shall resign, retire,
transfer to another agency or be separated from the service, shall continue to be
Sec. 40. ‘Writ of Execution. – Upon the finality of its binding ruling, order, provided with such legal protection in connection with any act done or omitted to be
resolution, decision, judgment, or rule or regulation, collectively, the Commission done by them in good faith during their tenure or employment with the Commission:
may issue a writ of execution to enforce its decision and the payment of the Provided, finally, That in the event of a settlement or compromise, indemnification
administrative fines provided in the preceding sections. shall be provided only in connection with such matters covered by the settlement as
to which the Commission is advised by counsel that the persons to be indemnified
SEC. 41. Basic Necessities and Prime Commodities. – If the violation involves the
did not commit any negligence or misconduct.
trade or movement of basic necessities and prime commodities as defined by
Republic Act No. 7581, as amended, the fine imposed by the Commission or the The costs and expenses incurred in defending the aforementioned action, suit or
courts, as the case may be, shall be tripled. proceeding may be paid by the Commission in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf of the
Sec. 42. Immunity from Suit. – The Chairperson, the Commissioners, officers,
Chairperson, Commissioner, officer, employee, or agent to repay the amount
employees and agents of the Commission shall not be subject to any action, claim or
advanced should it ultimately be determined by the Commission that one is not
demand in connection with any act done or omitted by them in the performance of
entitled to be indemnified as provided in this section.
their duties and exercise of their powers except for those actions and omissions done
in evident bad faith or gross negligence. Sec. 44. Jurisdiction of the Regional Trial Court. – The Regional Trial Court of the
city or province where the entity or any of the entities whose business act or conduct
Sec. 43. Indemnity. – Unless the actions of the Commission or its Chairperson, any
Constitutes the subject matter of a case, conducts its principal place of business, shall
of its Commissioners, officers, employees and agents are found to be in willful
have original and exclusive jurisdiction, regardless of the penalties and fines herein
violation of this Act, performed with evident bad faith or gross negligence, the
imposed, of all criminal and civil cases involving violations of this Act and other
Commission, its Chairperson, Commissioners, officers, employees and agents are
competition-related laws. If the defendant or anyone is charged in the capacity of a
held free and harmless to the fullest extent permitted by law from any liability, and
director, officer, shareholder, employee, or agent of a corporation or other juridical
they shall be indemnified for any and all liabilities, losses, claims, demands,
entity who knowingly and willfully authorized the commission of the offense
damages, deficiencies, costs and expenses of whatsoever kind and nature that may
charged, the Regional Trial Court of the city or province where such corporation or Any temporary restraining order, preliminary injunction or preliminary mandatory
juridical entity conducts its principal place of business, shall have jurisdiction. injunction issued in violation of this section is void and of no force and effect. Any
judge who violates this section shall be penalized by suspension of at least one (1)
Sec. 45. Private Action. – Any person who suffers direct injury by reason of any year without pay in addition to other criminal, civil or administrative penalties.
violation of this Act may institute a separate and independent civil action after the
Commission has completed the preliminary inquiry provided under Section 31. SEC. 48. Trade Associations. – Nothing contained in this Act shall be construed to
prohibit the existence and operation of trade associations organized to promote
quality standards and safety issues: Provided, That, these associations shall not in
any way be used to justify any violation of this Act: Provided, however, That it shall
CHAPTER VIII
not be illegal to use the association as a forum to discuss or promote quality
OTHER PROVISIONS
standards, efficiency, safety, security, productivity, competitiveness and other
Sec. 46. Statute of Limitations. — Any action arising from a violation of any matters of common interest involving the industry: Provided, further, That such is
provision of this Act shall be forever barred unless commenced within five (5) years done without any anti-competitive intent or effect.
from:
SEC. 49. Congressional Oversight Committee. – To oversee the implementation of
• For criminal actions, the time the violation is discovered by the offended party, the this Act, there shall be created a Congressional Oversight Committee on Competition
authorities, or their agents; and (COCC) to be composed of the Chairpersons of the Senate Committees on Trade and
• For administrative and civil actions, the time the cause of action accrues. Commerce, Economic Affairs, and Finance, the Chairpersons of the House of
Representatives Committees on Economic Affairs, Trade and Industry, and
Sec. 47. Prohibition on the Issuance of Temporary Restraining Orders, Appropriations and two (2) members each from the Senate and the House of
Preliminary Injunctions and Preliminary Mandatory Injunctions. — Except for Representatives who shall be designated by the Senate President and the Speaker of
the Court of Appeals and the Supreme Court, no other court shall issue any the House of Representatives: Provided, That one (1) of the two (2) Senators and one
temporary restraining order, preliminary injunction or preliminary mandatory (1) of the two (2) House Members shall be nominated by the respective Minority
injunction against the Commission in the exercise of its duties or functions: Leaders of the Senate and the House of Representatives. The Congressional
Provided, That, this prohibition shall apply in all cases, disputes or controversies Oversight Committee shall be jointly chaired by the Chairpersons of the Senate
instituted by a private party, including, but not limited to, cases filed by entities or Committee on Trade and Commerce and the House of Representatives Committee on
those claiming to have rights through such entities: Provided, however, That, this Economic Affairs. The Vice Chairperson of the Congressional Oversight Committee
prohibition shall not apply when the matter is of extreme urgency involving a shall be jointly held by the Chairpersons of the Senate Committee on Economic
constitutional issue, such that the non-issuance of a temporary restraining order will Affairs and the House of Representatives Committee on Trade and Industry. The
result in grave injustice and irreparable injury to the public: Provided, further, That, Secretariat of the COCC shall be drawn from the existing personnel of the Senate
the applicant shall file a bond, in an amount to be fixed by the Court, but in no case and House of Representatives committees comprising the Congressional Oversight
shall it exceed twenty percent (20%) of the imposable fines provided for under Committee.
Chapter VI, Section 29 of this Act: Provided, finally, That in the event that the court
finally decides that the applicant was not entitled to the relief applied for, the bond
shall accrue in favor of the Commission.
CHAPTER IX
FINAL PROVISIONS
Sec. 50. Implementing Rules and Regulations. — Within one hundred eighty (180) Sec. 54. Separability Clause. – If any clause, sentence, section or part of this Act
days from the effectivity of this Act, the Commission, in consultation with the DOJ- shall be adjudged by a court of competent jurisdiction to be invalid, such judgment
OFC and concerned sector regulators shall promulgate the necessary implementing shall not affect, impair or invalidate the remainder of this Act, but shall be confined
rules and regulations for the implementation of this Act: Provided, That, the in its operation to the clause, sentence, paragraph, section, or part thereof directly
Commission may revise such implementing rules and regulations as it deems involved in the controversy.
necessary: Provided, however, That such revised implementing rules and regulations
shall only take effect fifteen (15) days following its publication in two (2) Sec. 55. Repealing Clause. – The following laws, and all other laws, decrees,
newspapers of general circulation. executive orders and regulations, or part or parts thereof inconsistent with any
provision of this Act, are hereby repealed, amended or otherwise modified
Sec. 51. Appropriations and Use of Fees, Charges and Penalties. – The initial accordingly:
budgetary requirements of the Commission of three hundred million pesos
(P300,000,000.00) is hereby appropriated. (a) Article 186 of Act No. 3815, otherwise known as the Revised Penal Code:
Provided, That violations of Article 186 of the Revised Penal Code committed before
All fees, fines, penalties collected by the Commission shall not be retained by the the effectivity of this Act may continue to be prosecuted unless the same have been
Commission, but will be remitted to the National Treasury and shall accrue to the barred by prescription, and subject to the procedure under Section 31 of this Act;
general funds. (b) Section 4 of Commonwealth Act No. 138;
(c) Section 43(u) on Functions of the ERC of Republic Act No. 9136, entitled “An
Such funds necessary for the continuous and effective operation of the Commission Act Ordaining Reforms in the Electric Power Industry, Amending for the Purpose
shall be included in the annual General Appropriations Act. Certain Laws and for Other Purposes”, otherwise known as the “Electric Power
Industry Reform Act of2001”, insofar as the provision thereof is inconsistent with
Sec. 52. Transparency Clause. — Final decisions, orders and rulings of the
this Act;
Commission shall be published on the official website subject to Section 34 of this
(d) Section 24 on Illegal Acts of Price Manipulation and Section 25 on Penalty for
Act.
Illegal Acts of Price Manipulation of Republic Act No. 9502, entitled “An Act
Records of public proceedings shall be made available to the public subject to Providing for Cheaper and Quality Medicines, Amending for the Purpose Republic
Section 34 of this Act. Act No. 8293 or the Intellectual Property Code, Republic Act No. 6675 or the
Generics Act of 1988, and Republic Act No. 5921 or the Pharmacy Law, and for
Sec. 53. Transitional Clause. — In order to allow affected parties time to renegotiate Other Purposes”, otherwise known as the “Universally Accessible Cheaper and
agreements or restructure their business to comply with the provisions of this Act, an Quality Medicines Act of 2008”. insofar as the provisions thereof are inconsistent
existing business structure, conduct, practice or any act that may be in violation of with this Act; and
this Act shall be subject to the administrative, civil and criminal penalties prescribed (e) Executive Order No. 45, Series of 2011, Designating the Department of Justice as
herein only if it is not cured or is continuing upon the expiration of two (2) years the Competition Authority, Department of Justice Circular 005 Series of 2015, and
after the effectivity of this Act: Provided, That this section shall not apply to other related issuances, insofar as they are inconsistent with the provisions of this
administrative, civil and criminal proceedings against anticompetitive agreement or Act.
conduct, abuse of dominant position, and anti-competitive mergers and acquisitions,
initiated prior to the entry into force of this Act: Provided, further, That during the Sec. 56. Effectivity Clause. – This Act shall take effect fifteen (15) days following
said two (2)- year period, the government shall undertake an advocacy program to its publication in the Official Gazette or at least two (2) national newspapers of
inform the general public of the provisions of this Act.
general circulation. Notwithstanding any provision herein, this Act shall have no
retroactive effect.