FRIA positive to get the nod of Congress

CEBU, Philippines - The Financial Rehabilitation and Insolvency Act (FRIA) of 2009 is seen to get the approval of the Congress before the House goes on recess in the next few weeks.

The FRIA 2009 shall give companies and individuals who may be facing financial distress the opportunity to find solution to resolve and adjust competing claims and property rights.

House of Representatives chairman for economic affairs Red Durano said that the bill is scheduled for second reading followed by a third reading the subsequent week thereafter.

“I am positive the Bill will be passed into law. The Senate version authored by Senator Edgardo Angara was already passed and they are now awaiting the House version,” Durano said.

Along with Durano, the FRIA Bill is a consolidation of similar bills introduced by Representatives Juan Edgardo “Sonny” Angara, Ma. Amelita Calimbas-Villarosa, Jaime C. Lopez, Eduardo Nonato N. Joson, and Roman T. Romulo.

Durano announced that on the third week, a bicameral meeting will be set to deliberate on the bill.

A copy on the declaration of policy of the FRIA Bill states that “The rehabilitation or liquidation shall be made with a view to ensure or maintain certainty and predictability in commercial affairs, preserve and maximize the value of the assets of these debtors, recognize creditor rights and respect priority of claims, and ensure equitable treatment of creditors who are similarly situated.

“When rehabilitation is not feasible, it is in the interest of the State to facilitate a speedy and orderly liquidation of these debtors’ assets and the settlement of their obligations,” the bill further reads.

The proposed bill covers the rehabilitation and liquidation of companies- including government owned and controlled corporations- and individuals in financial distress.

“The bill mainly emphasizes on rehabilitation rather than liquidation,” Durano said.

He said FRIA stipulates a fixed period for an appointed trial court to hear petitions for insolvency or liquidation and likewise for the liquidation of assets.

There are two ways to get a commencement order from the court, Durano noted, which is done either voluntarily, where the debtor initiates the order, or involuntarily, or creditor-initiated.

But it is the court which will determine if the case is for insolvency or for liquidation and will appoint a receiver, he added.

This will allow the receiver to protect and maximize the assets of the debtor since the secured creditors will be given the priority on claims.

The court, if it deems viable, may also decide for the rehabilitation of the business.

However, not all companies are covered by the bill, Durano said.

He mentioned banks, insurance and pre-need companies, local government units and some government owned corporations are excluded “because they are already covered by other existing institutions that deal with insolvency cases.— Ehda M. Dagooc