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Makati City is the financial hub of the Philippines, home to many local and international businesses. Restructuring and insolvency law in Makati City refers to the legal processes and frameworks available to businesses and individuals who are facing financial distress and are unable to meet their debt obligations. The goal of restructuring is often to rehabilitate or reorganize a company so it can continue its operations, while insolvency involves the fair settlement of debts through liquidation or rehabilitation. These laws are crucial for protecting creditor and debtor rights, supporting business continuity, and ensuring economic stability within the city.
Legal support in restructuring and insolvency situations can be vital for both businesses and individuals. Here are some common scenarios where professional legal advice is needed:
An experienced lawyer provides guidance on compliance, negotiations, and court filings, ensuring that all parties’ interests are legally protected throughout the process.
Restructuring and insolvency in Makati City are governed principally by Philippine national law, particularly the Financial Rehabilitation and Insolvency Act of 2010 (FRIA) or Republic Act No. 10142. This law sets out the processes for out-of-court and court-supervised rehabilitation, pre-negotiated rehabilitation, and liquidation of insolvent debtors. Key aspects include:
Local courts in Makati City such as the Regional Trial Court have specialized commercial divisions that handle restructuring and insolvency cases. Compliance with local rules and timelines is paramount.
Restructuring involves reorganizing a business’s debts and operations to restore its financial health and continue its activities. Insolvency refers to a financial state where the debtor cannot pay its debts as they become due, often leading to formal proceedings like liquidation or rehabilitation.
Both individuals and corporations registered or operating in Makati City can file for rehabilitation or insolvency. Creditors may also initiate proceedings if certain legal criteria are met.
A court-appointed rehabilitation receiver temporarily manages the business, and a stay order is issued to suspend all claims against the company. Operations may continue under a rehabilitation plan aimed at paying creditors over time.
Generally, corporations have separate legal personalities, so directors and shareholders are not personally liable unless there is fraud, gross negligence, or other extraordinary circumstances proven in court.
The duration varies depending on complexity, court backlog, and creditor cooperation, but rehabilitation proceedings are expected to be concluded within a year from commencement, although this can sometimes be extended.
Yes, out-of-court or informal restructuring agreements are available under FRIA, especially if major creditors representing at least 67 percent agree to the terms. Legal guidance is still recommended.
A stay order temporarily halts all collection activities, lawsuits, and enforcement of claims against the debtor, giving time to formulate a rehabilitation plan or orderly liquidation.
Employees are recognized as creditors and their claims for wages and benefits are given preference. Legal processes also provide for continued employment if the business is rehabilitated.
Payments follow a specific legal order: secured creditors are paid first, followed by employees, government claims, and finally unsecured creditors. Any remaining assets go to shareholders.
While not always mandatory, having a lawyer is highly advisable due to the complexity of the laws, court procedures, and the importance of protecting your legal and financial interests.
For more information and assistance on restructuring and insolvency matters, consider reaching out to the following:
These organizations can offer guidance or direct you to specialist lawyers familiar with Makati’s business environment and applicable laws.
If you believe you require legal assistance regarding restructuring and insolvency in Makati City, take the following steps:
Taking these steps early can help you regain control over your financial future, whether you are seeking to rescue your business or navigate the process of orderly debt settlement in Makati City.
