A.M. NO.

15-04-06-SC
• FINANCIAL LIQUIDATION AND SUSPENSION OF
PAYMENTS RULES OF PROCEDURE FOR
INSOLVENT DEBTORS (FLSP RULES)

• COVERAGE – the practice, pleading and

procedure for the liquidation of insolvent
juridical and individual debtors, and suspension
of payments of insolvent individual debtors
pursuant to FRIA
• Nature of the proceedings - in rem
• in voluntary liquidation proceedings – jurisdiction over all
persons affected is acquired upon publication of the
Liquidation Order
• In involuntary liquidation of juridical debtors – jurisdiction is
acquired upon publication of the petition or motion under
Section 7, Rule 2
• In involuntary liquidation of individual debtors – jurisdiction
over the person of the debtor is acquired upon the service of
summons; over all persons affected by the proceedings -
upon publication of the Liquidation Order
• In suspension of payments – jurisdiction over
all persons affected by the proceedings is
acquired upon publication of the Suspension
of Payments Order
• Shall be summary and non-adversarial.
• Prohibited pleadings
• 1. motion to dismiss
• 2. motion for bill of particulars
• 3. petition for relief
• 4.motion for extension
• 5. motion for postponement/ motions of
similar intent
• 6. reply
• 7. rejoinder
• 8. intervention
• 9. any pleading or motion similar to, or of like effect as, any of
the foregoing

• Note: for stated and fully supported compelling reasons, the

court may allow the filing of motions for extension or
postponement, - VERIFIED AND UNDER OATH

• ANY ORDER ISSUED BY THE COURT IS IMMEDIATELY EXECUTORY

 Voluntary Liquidation of Juridical Debtors

• Who may file?

Insolvent juridical debtor
• Venue – RTC which has jurisdiction over its
principal place of office as specified in the
articles of incorp or partnership. Where the
corp/partnership as registered with the SEC is
in Metro Manila, petition must be filed in the
RTC of the city/municipality where the head
office is located.
 PETITION
• Must be verified by each of the petitioners or
authorized reps/officers if
corporation/partnership or association
• Indicate at least three nominees to the
position of liquidator
 Petition
• Must indicate the names of at least three nominees
as liquidators
• Must include as minimum attachments, the
following:
• 1. certificate attesting to the holding of a meeting of
the Board of Directors/Trustees for the purpose and
approval of a resolution to file the petition, signed
by the secretary , and at least a majority of the
members of the Board present during the meeting.
• 2. a certificate attesting to the holding of a
meeting of the
stockholders/members/partners comprising
the debtor, called for the purpose and the
approval of a resolution to file the petition by
the stockholders holding at least 2/3 of the
OCS, or 2/3 of the members or partners,
signed by the chairman and secretary of the
meeting
• 3. a schedule of debts and liabilities, which
lists all the creditors of the debtor, indicating
the name and last address of record of each
creditor, the amount of each claim as to
principal, interest, or penalties due thirty days
prior to the date of filing, the nature of the
claim, and any pledge, lien, mortgage,
judgment or other security given for the
payment thereof
• 4. inventory of assets, which must list with reasonable
particularity all the assets of the debtor, whether in the
possession of the debtor or third parties, stating the
nature of each asset, the location and condition thereof,
the book value and the market value of the asset,
attaching the corresponding certified copy of the
certificate of title thereof in case of real property or the
evidence of title or ownership in case of movable
property, the encumbrances, liens or claims thereon, if
any, and the identities and addresses of the lien holders
and claimants
• 5. a schedule of current income and expenditures
within three months prior to the filing of the petition
• 6. a list of all properties acquired by the debtor in the
immediately preceding two years
• 7. a list of all properties sold, disposed of, or donated
by the debtor in the immediately preceding two
years
• 8. a schedule of the debtor’s executory contracts and
unexpired leases
• 9. audited financial statements of the debtor
for the immediately preceding three years
• 10. income tax return of the debtor for the
immediately preceding year.
 Motion to Convert Rehab Proceedings into
Liquidation Proceedings
• When there is a pending court-supervised/
pre-negotiated rehab proceeding, the debtor
may file a motion in the same court where the
rehab proceedings are pending to convert the
rehab proceedings into liquidation
proceedings
 Involuntary Proceedings
• Who may file?
Three (3) or more creditors the aggregate of
whose claims is at least either One Million Pesos
(1,000,000.00) or at least twenty-five percent
(25%) of the subscribed capital stock or
partners’ contributions of the insolvent juridical
debtor, whichever is higher
• Where to File?
Regional Trial Court which has jurisdiction over
the principal office of the debtor as specified in
its articles of incorporation or Partnership.
Where the corp/partnership as registered with
the SEC is in Metro Manila, petition must be filed
in the RTC of the city/municipality where the
head office is located.
 Petition must show
1. there is no genuine issue of fact or law on the
claim/s of the petitioner/s, and that the due
and demandable payments thereon have not
been made for at least one hundred eighty
(180) days or that the debtor has failed generally
to meet its liabilities as they fall due;
2. there is no substantial likelihood that the
debtor may be rehabilitated.
 Petition shall include

1. the schedule of debts and liabilities, including a

list of its known creditors with their addresses,
amounts of claims and collaterals, or securities, if
any;
2. the debtor’s assets, including receivables and
claims against third parties; and
3. the audited financial statements of the debtor
for the immediately preceding three (3) years.
 Motion to Convert
• When there is a pending court-supervised or pre-
negotiated rehabilitation proceedings, three (3) or
more creditors the aggregate of whose claims is at
least either One Million Pesos (P1,000,000.00) or at
least twenty-five percent (25%) of the subscribed
capital, or partners’ contributions, of the debt or,
whichever is higher, may file a motion in the same
court where the rehabilitation proceedings are
pending to convert the rehabilitation proceedings
into liquidation proceedings.
 Action on the Petition/Motion
• If sufficient in form and substance, court shall issue
an ORDER
1. directing the publication of the petition or motion in
a newspaper of general circulation in the Philippines
once a week for two (2) consecutive weeks;
2. directing the debtor, all known creditors, and
any other interested party, to file their comment on
the petition or motion within fifteen (15) days from
notice of the order
3. directing that a copy of the petition or motion be served
on the debtor and on all known creditors, unless they
exceed twenty (20) in number, in which case, service shall
be made on at least the first twenty (20) largest known
creditors of the debtor in terms of credits held. However, if
there are more than twenty (20) known creditors (who are
not petitioners) and one or more of them acquired their
credit/s within the six (6)-month period immediately
preceding the filing of the petition, the number of creditors
to be served copies of the petition shall be increased by
the same number
 INDIVIDUAL DEBTORS
• Suspension of Payments
Who may file?
An individual debtor who has assets that exceed his
liabilities but foresees the impossibility of paying
his debts when they respectively fall due
Where?
Court having jurisdiction over the province or city
where he has resided for six (6) months prior to the
filing of the petition.
Petition includes:
• Three nominees to the position of
commissioner
• a schedule of debts and liabilities, including a
list of creditors with their addresses, amount
of claims and collaterals, if any;
• an inventory of all the debtor’s assets,
including receivables and claims against third
parties;
• a schedule of current income and expenditures within three
(3) months prior to the filing of the petition;
• the income tax return of the debtor for the immediately
preceding year;
• a list of all properties acquired by the debtor in the
immediately preceding two (2) years;
• a list of all properties sold, disposed of, or donated by the
debtor in the immediately preceding two (2) years;
• a schedule of the debtor’s executory contracts and unexpired
leases; and
• a proposed agreement with the creditors.
SUSPENSION OF PAYMENTS ORDER
• If sufficient in form and substance, the court shall
issue an Order of Suspension of Payments, within
five days from filing of petition:
1. prohibiting creditors from suing or instituting
proceedings for collection against the debtor, except:
(i) creditors having claims for personal labor,
maintenance, expense of last illness and funeral of the
wife or children of the debtor incurred within sixty (60)
days immediately prior to the filing of the petition; and
(ii) secured creditors;
2. calling a meeting of all the creditors named in
the schedule of debts and liabilities at a time not
less than fifteen (15) days nor more than forty
(40) days from the date of such order and
designating the date, time, and place of the
meeting;
3. directing such creditors to present written
evidence of their claims before the scheduled
creditors’ meeting;
4.directing the publication of the said order in a
newspaper of general circulation in the Philippines
once a week for two (2) consecutive weeks, with
the first publication to be made within seven (7)
days from the time of the issuance of the order;
5. directing the clerk of court to send or cause
the sending of a copy of the order by registered
mail, postage prepaid, to all creditors named in the
schedule of debts and liabilities;
6. prohibiting the petitioner from selling,
transferring, encumbering or disposing his property,
except those used in the ordinary operations of
commerce or of industry in which the petitioner is
engaged as long as the proceedings are pending;
7. prohibiting the petitioner from making any
payment outside of the necessary or legitimate
expenses of his business or industry, as long as the
proceedings are pending; and
8. appointing a commissioner to preside over
the creditors’ meeting, who may or may not be
from among the nominees of the debtor.
 Commissioner
• a citizen of the Philippines or a resident thereof for six (6) months
immediately preceding his appointment;
• of good moral character and with acknowledged integrity,
impartiality and independence;
• has the requisite knowledge of insolvency laws, rules and
procedures; and has no conflict of interest; Provided, that such
conflict of interest may be waived, expressly or impliedly, by a party
who may be prejudiced thereby.

An individual shall be deemed to have a conflict of interest if he is

so situated as to be materially influenced in the exercise of his
judgment for or against any party to the proceedings.
 VOLUNTARY LIQUIDATION
• Who may file?
An individual debtor whose liabilities exceed his
assets and whose debts exceed Five Hundred
Thousand Pesos (P500,000.00)
• Where?
court having jurisdiction over the province or
city where he has resided for six (6) months
prior to the filing of the petition
 Petition
• At least three nominees for liquidator
• A schedule of debts and liabilities, including a list of creditors with their
addresses, amount of claims and collaterals, if any;
• An inventory of all the debtor's assets, including receivables and claims
against third parties;
• A schedule of current income and expenditures within three (3) months
prior to the filing of the petition;
• The income tax return of the debtor for the immediately preceding year;
• A list of all properties acquired by the debtor in the immediately
preceding two (2) years;
• A list of all properties sold, disposed of, or donated by the debtor in the
immediately preceding two (2) years;
• A schedule of the debtor's executory contracts and unexpired leases.
 Involuntary Liquidation
• Who may file?
Any creditor or creditors with a claim of, or the
aggregate of whose claims is, at least Five
Hundred Thousand Pesos (P500,000.00)
• Where?
the court of the province or city where the
debtor resides.
 Acts of Insolvency
• Petition shall state particulars of at least one of
the following acts of insolvency:

1. that the debtor is about to depart or has

departed from the Philippines, with intent to
defraud his creditors;
2. That being absent from the Philippines, with
intent to defraud his creditors, he remains absent;
3. that the debtor conceals himself to avoid the service of legal process for the purpose of
hindering or delaying the liquidation or of defrauding his creditors;
4. that the debtor conceals, or is removing, any of his property to avoid its being attached or
taken on legal process;
5. that the debtor has allowed his property to remain under attachment or legal process for
three (3) days for the purpose of hindering or delaying the liquidation or of defrauding his
creditors;
6. that the debtor has confessed or offered to allow judgment in favor of any creditor for the
purpose of hindering or delaying the liquidation or of defrauding any creditor;
7. that the debtor has wilfully allowed judgment to be taken against him by default for the
purpose of hindering or delaying the liquidation or of defrauding his creditors;
8. that the debtor has suffered or procured his property to be taken on legal process with intent
to give a preference to one or more of his creditors and thereby hinder or delay the liquidation
or defraud any one of his creditors;
9. that the debtor 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 creditors;
10. that the debtor has, in contemplation of insolvency, made any
payment, gift, grant, sale, conveyance or transfer of his estate, property,
rights or credits;
11. that being a merchant or tradesman, the debtor has generally
defaulted in the payment of his current obligations for a period of thirty
(30) days;
12. that for a period of thirty (30) days, the debtor has failed, after
demand, to pay any moneys deposited with him or received by him in a
fiduciary capacity; or
13. that an execution having been issued against him on final judgment
for money, the debtor shall have been found to be without sufficient
property subject to execution to satisfy the judgment.