Corporation Code Notes: (DISSOLUTION)

1. DISSOLUTION – the extinguishment of the franchise of a corporation and the termination of its corporate existence
2. Modes of Dissolution: (VISER)
(1) Voluntary Dissolution,
(2) Involuntary Dissolution,
(3) Shortening of Term,
(4) Expiration of Term, and
(5) Revocation of the Certificate of Incorporation by the SEC.
3. De Jure and De Facto Dissolution
DE JURE DISSOLUTION DE FACTO DISSOLUTION
one that is "adjudged and determined by judicial sentence, or brought one which takes place in substance and in fact when the corporation
about by an act of or with the consent of the sovereign power, or which by reason of insolvency, cessation of business, or, otherwise,
results from expiration of the charter period of corporate life." suspends all operations and, it may be, goes into liquidation still
retaining its primary franchise to be a corporation.
4. Power to Dissolve – What the law has granted, the law may take away.
– dissolution of the corporation must be in accordance with the procedure prescribed by law
5. VOLUNTARY DISSOLUTION
I. Voluntary dissolution where no creditors are affected. (Sec. 134, RCCP)
1) A meeting must be held on the call of the directors or trustees;
2) Notice of the meeting should be given to the stockholders/members of record, whether or not entitled to vote at the meeting, by
personal delivery or by registered mail or by other means authorized under the By-Laws at least 20 days prior to the meeting;
3) The notice of meeting should also be published once in a newspaper published in the place where the corporation's principal office is
located or if there is no such newspaper, in a newspaper of general circulation in the Philippines;
4) The resolution to dissolve must be approved by the majority of the directors/trustees and approved by the stockholders
representing at least a majority of the outstanding capital stock or majority of members;
5) A verified request for dissolution shall be filed with the SEC and the latter shall approve the request and issue the certificate of
dissolution within 15 days from receipt of the verified request.
II. Voluntary dissolution where creditors are affected. (Sec. 135, RCCP)
1) Approval by the stockholders representing at least 2/3 of the outstanding capital stock or 2/3 of members in a meeting called for
that purpose is required;
2) It is necessary to file a verified petition for dissolution with the SEC signed by majority of the corporation's directors or trustees
verified by the president or secretary or one of the directors/trustees. All claims and demands against the corporation must be stated in
the petition;
3) The SEC shall issue an order fixing the deadline for filing objections, which shall be not less than 30 days nor more than 60 days
after the entry of the order;
4) A copy of the order shall be published at least once a week for three consecutive weeks in a newspaper of general circulation in the
place where the principal office of the corporation is located, or if none, then in a newspaper of general circulation in the Philippines;
5) The same order shall also be posted for three consecutive weeks in three public places in the city or municipality where the
corporation's principal office is located;
6) After the expiration of the time to file objections, a hearing shall be conducted upon prior five-day notice to hear the petition and the
objections raised;
7) Judgment shall be rendered by the SEC dissolving the corporation and directing the disposition of its assets as justice requires; the
judgment may include the appointment of a receiver to collect the assets and pay the corporation's debts;
8) The dissolution takes effect upon issuance by the SEC of the certificate of dissolution.
6. INVOLUNTARY DISSOLUTION
 Modes of Involuntary Dissolution:
(1) Filing a verified complaint under Section 138;
(2) Revocation of the Articles of Incorporation by the SEC;
(3) Quo warranto proceedings.
 Grounds. Section 138 of the RCCP provides for the following grounds for involuntary dissolution:
1) Non-use of corporate charter as provided under Section 21 of the RCCP;
2) Continuous inoperation of a corporation as provided under Section 21 of the RCCP;
3) Upon receipt of a lawful court order dissolving the corporation;
4) Upon finding by final judgment that the corporation procured its incorporation through fraud;
5) Upon finding by final judgment that the corporation:
(i) Was created for the purpose of committing, concealing or aiding the commission of securities violations, smuggling, tax
evasion, money laundering, or graft and corrupt practices;
(ii) Committed or aided in the commission of securities violations, smuggling, tax evasion, money laundering, or graft and
corrupt practices, and its stockholders knew of the same; and
(iii) Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other fraudulent or illegal acts by its
directors, trustees, officers, or employees.
 SEC is empowered to (Section 6 of Presidential Decree No. 902-A):
1) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships,
or associations, upon any of the grounds provided by law, including the following:
 Fraud in procuring its certificate of registration;
 Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the
general public;
 Refusal to comply or defiance of any lawful order of the SEC restraining the commission of acts that would amount to
a grave violation of its franchise;
 Continuous inoperation for a period of at least five years;
 Failure to file By-Laws within the required period;
 Failure to file required reports in appropriate forms as determined by the SEC within the prescribed period.
7. EXPIRATION AND SHORTENING OF TERM
 A corporation is deemed dissolved if its term provided for in the Articles of Incorporation expired, w/o a valid extension having been
effected.
 Expiration of the corporate term is a form of involuntary dissolution.
 Shortening of term may also be a form of voluntary dissolution if no period will remain after the shortening of the corporate term. The
procedure for shortening of the corporate term is provided for in Section 36 of the RCCP
8. Effects of Dissolution
 Corporation ceases as a body corporate to continue business for which it was established
 The assets of a corporation will be liquidated and legal title to remaining corporate properties is transferred to the stockholders who
become co-owners thereof.
  Continues for 3 years for purposes of winding up or liquidation; upon expiration of the 3-year period the corporation ceases to exist for all
purposes.
 A dissolved corporation can no longer continue its operations. Winding up is the sole business of the dissolved corporation.
 Section 138 of the RCCP provides that if the corporation is ordered dissolved by final judgment pursuant to the grounds set forth in
subparagraph (e) thereof, its assets, after payment of its liabilities, shall, upon petition of the SEC with the appropriate court, be forfeited
in favor of the national government. Such forfeiture shall be without prejudice to the rights of innocent stockholders and employees
for services rendered, and to the application of other penalty or sanction under the RCCP or other laws.
9. Incorporation of New Corporation
 Stockholders are not prevented from conveying their respective shareholdings toward the creation of a new corporation to continue the
business of the old. However, in the absence of liquidation of the properties of the dissolved corporation, the rights and properties of the
dissolved corporation cannot be deemed to be transferred to the new corporation although the two corporations have the same name.
10. Revocation of Certificate by SEC
 The corporation is dissolved if its Certificate of Incorporation is dissolved by the SEC.
 Section 158 of RCCP – after due notice and hearing, if the SEC finds that any provision of the RCCP has been violated, rules or
regulations, or any of the SEC’s orders has been violated, the SEC may impose any or all of the following sanctions, taking into
consideration the EXTENT of participation, NATURE, EFFECTS, FREQUENCY and SERIOUSNESS of the violation:
a) Imposition of a fine;
b) Issuance of a permanent cease and desist order (Section 17 of the RCCP: FAILURE to comply with the cease and desist order
issued by the SEC for the use of a name that violates the provisions thereof);
c) Suspension or revocation of the certificate of incorporation; and
d) Dissolution of the corporation and forfeiture of its assets under the conditions in Title XIV of the RCCP.
 Revocation of the certificate of incorporation can be made by the SEC under Section 178 when the corporation, without justifiable reason,
refuses or obstructs the exercise of the visitorial powers of the SEC.
 Corporations with revoked registration may file petitions to lift the order of revocation in accordance with the procedure provided for by the
SEC (See SEC Resolution No. 598, Series of 2010). The corporation with suspended or revoked status may file a petition to set aside the
 order of suspension or revocation at any time provided that there is substantial evidence that the corporation is an on-going concern or
has not stopped operation even during the period of suspension or revocation [Memorandum Circular No. 5, Series of 2016, dated June
9, 2016 (See documentary requirements enumerated therein for the petition for the lifting of suspension or revocation)].
11. Petition for Revival - shall be approved by at least a majority of the directors or trustees and stockholders representing majority of the
outstanding capital stock or majority of the members of a non-stock corporation (SEC Memorandum Circular No. 23, Series of 2019)
 SEC Memorandum Circular No. 23, Series of 2019 dated November 21, 2019 entitled "Guidelines on the Revival of Expired
Corporations" provides for the rules on petitions for the revival of the corporate existence that can be filed by the following corporations:
1) Corporations whose corporate term had already expired;
2) An expired corporation whose Certificate of Registration had been revoked for non-filing of reports (General Information
Sheet and Audited Financial Statements) provided that it shall file a proper Petition to Lift its Revoked Status (which can be
incorporated in the Petition to Revive) plus pay the proper penalties;
3) An expired corporation whose Certificate of Registration has been suspended provided that it shall file a proper Petition to
Lift its suspended Status (which can be incorporated in the Petition to Revive) plus pay the proper penalties;
4) An expired corporation whose corporate name has been validly re-used, and is currently being used by an existing
corporation, duly registered with the SEC, provided that the former shall change its name within 30 days from revival of
corporate existence.
 The lifting of the order of revocation restores the corporation. The effect of reinstatement of the corporation relates back to the date of
revocation as if the revocation had never occurred. = "the reinstatement has the effect of ratifying and confirming all acts and proceedings
of the corporation's officers, directors, and stockholders which would have been legal and valid but for the dissolution." (Fletcher)
 If the corporation is involved in a pending intra-corporate controversy = the petition to lift the order of revocation shall be granted only
upon the finality of any decision in the intra-corporate controversy.
12. LIQUIDATION – a process by which all the assets of the corporation are converted into liquid assets (cash) in order to facilitate the payment
of obligations to creditors, and the remaining balance if any is to be distributed to the stockholders
– refers to the winding up of affairs of the corporation by reducing its assets, paying its debts, and apportioning the profit or loss; may
consist of adjusting the debts and claims, that is, collecting all that is due the corporation, the settlement and adjustment of claims against it,
and the payment of its just debts; corporation may sell its properties during the liquidation period
 Section 139 does not require the approval of the liquidation or distribution of assets of a dissolved corporation by the SEC.
 Liquidation is not within the jurisdiction of the SEC. Under Sections 134 and 135 of the RCCP, the SEC has jurisdiction to order the
dissolution of a corporation. However, the Court ruled that “jurisdiction over the liquidation of the corporation now pertains to the
appropriate regional trial courts.”
13. Modes of Liquidation:
 normal method – The directors and executive officers take charge of the winding-up operations.
 Alternative method – assigning the properties of the corporation to the trustees for the benefit of its creditors and shareholders. However,
RECEIVERS can likewise be appointed. The appointment of receiver rests with the sound discretion of the court, which must be
exercised with caution and governed by legal and equitable principles, the violation of which will amount to its abuse.
 Under Section 135 of the RCCP, the SEC may also appoint a receiver.
 Liquidation of the Corporation may be made through:
(1) liquidation through the Board of Directors;
(2) liquidation through a trustee to whom the properties are conveyed; and
(3) liquidation through a receiver.
 Revocation of Articles of Incorporation does not result in the termination of the liabilities of a corporation.
 If the properties are conveyed to the trustee, all the interest of the corporation in the properties vests in the trustees and the beneficial
interest in the stockholders, members, creditors or other persons in interest.
14. Effect on Business
 Transactions that are not for the purpose of liquidation shall be considered void.
 Once a corporation is dissolved, be it voluntarily or involuntarily, liquidation, which is the process of settling the affairs of the corporation,
will ensue. This consists of (1) collection of all that is due the corporation, (2) the settlement and adjustment of claims against it, and (3)
the payment of its debts. Xxxx Winding up the affairs of the corporation means the collection of all assets, the payment of all its
creditors, and the distribution of the remaining assets, if any among the stockholders thereof in accordance with their contracts, or if there
be no special contract, on the basis of their respective interests. The manner of liquidation or winding up may be provided for in the
corporate by-laws and this would prevail unless it is inconsistent with law (Yu vs. Yukayguan).
 The dissolution of the corporation carries with it the termination of the corporation's juridical personality. Any new business in which the
dissolved corporation would engage in, other than those for the purpose of liquidation, 'will be a void transaction because of the non-
existence of the corporate party.’
15. Effect on Board Authority – If liquidation is through a receiver, the appointment of a receiver operates to suspend the authority of a corporation
and its directors and officers over its properties and effects. Such authority is reposed on the receiver.
16. Service of Summons
  Section 11 of Rule 14 of the Rules of Court provides that when the defendant is a corporation, partnership or association organized under
the laws of the Philippine with a juridical personality = service may be made on the president, managing partner, general manager,
corporate secretary, treasurer, or in-house counsel; applies even if the corporation is already dissolved.
 Nowhere in the RCCP "is there any special provision on how process shall be served upon a dissolved defendant corporation. The
absence of any such provision, however, should not leave petitioners without any remedy, unable to pursue recovery for wrongs
committed by the corporation before its dissolution. Since our law recognizes the liability of a dissolved corporation to an aggrieved
creditor, it is but logical for the law to allow service of process upon a dissolved corporation. Otherwise, substantive rights would be lost
by the mere lack of explicit technical rules."
17. Period – Liquidate within 3years; However, if full liquidation can only be effected after the three-year period and there is no trustee, the
directors may be permitted to complete the liquidation by continuing as trustees by legal implication. There is no time limit within which the
liquidation should be completed in the hands of the trustees. After three years, the Board can act but only for the purpose of settling and
closing the affairs of the corporation.
 lawyers who are handling cases for the corporation – can be considered the trustees of the assets of the dissolved corporation after the
three-year period
 If no trustee is appointed, the corporation cannot be permitted to take advantage of such non-appointment thereby allowing unjust
enrichment at the expense of the creditors.
 To the same effect is the rule if the co􀁦rt will appoint a receiver to liquidate assets of the corporation. The three-year period does not
apply and actions may be instituted even after the same period.
 The Supreme Court held that, "although the time during which the corporation, through its own officers, may conduct the liquidation of its
assets and sue and be sued as a corporation is limited to three years from the time the period of dissolution commences, there is no
time limit within which the trustees must complete a liquidation placed in their hands. What is provided in Section 139 of the RCCP is that
the conveyance to the trustees must be made within the three-year period. But it may be found impossible to complete the work of
liquidation within the three-year period or to reduce disputed claims to judgment. The trustees to whom the corporate assets have been
conveyed pursuant to the authority of Section 139 may sue and be sued as such in all matters connected with the liquidation."
18. Effect on Claims – there is also nothing that bars recovery of the debts of the corporation after the three-year liquidation period. Corporate
creditors may follow its assets as in the nature of trust fund into the hands of the stockholders.
19. Filing of New Cases after 3years – the Court has ruled that an appointed receiver, an assignee, or a trustee may institute suits or continue
pending actions on behalf of the corporation, even after the winding-up period. It is submitted that a receiver or a trustee can still commence
actions after the three-year period provided that it is in furtherance of the liquidation process. Unfairness may result and controversies may
be left unsettled if actions are not allowed after the three-year period if the non-filing of the case within the same period could not be done
without the fault of the trustee or the receiver.
20. Effect on Rights – Similarly, dissolution or even the expiration of the three-year liquidation period should not be a bar to a corporation's
enforcement of its rights as a corporation. The rule is consistent with Section 184 of the RCCP which provides that "no right or remedy in favor
of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation or
by any subsequent amendment or repeal of this Code or of any part thereof.
21. Rights of Stockholders – the termination of the life of the corporation does not by itself extinguish or diminish the rights of stockholders, to wit:
a. right to a share in the assets
b. right to inspect the books and records of the corporation (provided the requirements for its exercise are present)
22. Liquidating Dividends – shall be distributed after the corporation is dissolved and all its creditors have been paid
– Defined as dividends that are actually distributions of assets of the corporation upon dissolution. They are not paid on account of
earnings or profits but as a return of capital.
 Even if there was a duly approved dissolution, the corporate existence does not automatically cease. The corporation has three years after
dissolution to liquidate its affairs.
 A corporation can be liquidated through the following modes: (1) liquidation through the Board of Directors; (2) liquidation through a trustee to
whom the properties are conveyed; and (3) liquidation through a receiver. The board, the trustee, or the receiver as the case may be will then
convey the property and distribute it among the creditors after paying the corporate debts. It is submitted that the specific property may
either be sold and the proceeds thereof distributed to the stockholders after paying corporate debts or they may actually physically divide the
property if no creditor will be affected.
 If there is still a pending case when the three (3) year period to liquidate expired and there is no trustee that is appointed, the counsel of the
corporation who prosecuted and represented the interest of the corporation may be considered a trustee of said corporation with respect
to the same case and he can continue to represent the corporation. (Gelano v. Court of Appeals, G.R. No. L-39050, February 24, 1981) (1981
Bar)
 Question: If the three-year extended life expires without a trustee or receiver being designated by the corporation within that period and that
time (expiry of the three-year extended term), the corporate liquidation is not yet over, how, if at all, can a final settlement of the corporate
affairs be made?
Answer: The final settlement can be made through the Board of Directors. The members of the Board of Directors can continue with the
winding of the corporate affairs until final liquidation. They can act as trustees or receivers for this purpose. (1997 Bar)
 Although Section 139 of the RCCP provides that the corporation continues to be a body corporate for three years after its dissolution for the
purpose of prosecuting and defending suits by and against it and for enabling it to settle and close its affairs, the expiration of the said period
does not mean that the pending cases will be terminated. Pending suits upon the expiration of the three-year period after its dissolution may
be prosecuted by the lawyer who is handling the cases and the latter will act as the trustee for such purpose. (2000 Bar)
23. Rehabilitation – occurs when a corporation is in distress but the directors and shareholders believe that it can still continue,hence, the
corporation may consider rehabilitation rather than outright dissolution
– shall refer to the restoration of the debtor to a condition of successful operation and solvency, if it is shown that its continuance of
operation is 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 if it is immediately liquidated
– contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former
position of successful operation and solvency
– governed by Republic Act No. 10142 otherwise known as the Financial Rehabilitation and Insolvency Act of 2010 that lapsed into law
on July 18, 2010. The applicable Rule is Supreme Court A.M. 12-12-11-SC, ''Financial Rehabilitation Rules of Procedure
(2013)"known as the FR Rules.
– 2-Pronged PURPOSE of Rehabilitation Proceedings:
(a) to efficiently and equitably distribute the assets of the insolvent debtor to its creditors; and
(b) to provide the debtor with a fresh start, viz.: Rehabilitation proceedings in our jurisdiction have equitable and rehabilitative
purposes.
– The purpose of rehabilitation proceedings is to enable the company to gain a new lease on life and thereby allow creditors to be paid
their claims from its earnings.
– The basic issues in rehabilitation proceedings concern the viability and desirability of continuing the business operations of the
petitioning corporation. The determination of such issues was to be carried out by the court-appointed rehabilitation receiver.
24. Who can File for Rehabilitation – The rules do "not make any distinction between a corporation which is already in debt and a corporation
which foresees the possibility of debt, or which would eventually yet surely fall into the same, but may at present be free from any financial
liability. Despite the insolvency of a corporation, it cannot be hindered to file a petition for corporate rehabilitation.
25. REHABILITATION PLAN – one of the indispensable attachments to a Petition for Rehabilitation; It:
(1) may be approved by the creditors (50% of the total claims); and
(2) confirmed by the court after approval of the creditors or even without such approval or even over the objection of the creditors. A
rehabilitation plan may also be (1) a pre-negotiated rehabilitation plan or (2) an out-of-court informal rehabilitation.
– refers to a plan by which the financial wellbeing and viability of an insolvent debtor can be restored using various means including,
but not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-reorganization, dacion en pago, debt-equity
conversion and sale of the business (or parts of it) as a going concern, or setting-up of new business entity, or other similar
arrangements as may be approved by the court or creditors
– The court may approve a rehabilitation plan even over the opposition of creditors holding a majority of the total liabilities of the
debtor, if, in its judgment, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable.
The rehabilitation plan, once approved, is binding upon the debtor and all persons who may be affected by it, including the
creditors, whether or not such persons have participated in the proceedings or have opposed the plan or whether or not their
claims have been scheduled. A successful rehabilitation usually depends on two factors:
(1) a positive change in the business fortunes of the debtor, and
(2) the willingness of the creditors and shareholders to arrive at a compromise agreement on repayment burdens, extent of
dilution, etc. The debtor must demonstrate by convincing and compelling evidence that these circumstances exist or are likely to
exist by the time the debtor submits his 'revised or substitute rehabilitation plan for the final approval of the court.’
– ECONOMIC FEASIBILITY: a Rehabilitation Plan which absolutely lacks feasibility should not be approved; characteristics of an
economically feasible rehabilitation plan:
(1) The debtor has assets that can generate more cash if used in its daily operations than if sold;
(2) Liquidity issues can be addressed by a practicable business plan that will generate enough cash to sustain daily operations;
and
(3) The debtor has a definite source of financing for the proper and full implementation of a Rehabilitation Plan that is anchored
on realistic assumptions and goals. It was also observed that in addition to the tests of economic feasibility, the law provides
for better present value recovery for its creditors.
"Present value recovery acknowledges that, in order to pave way for rehabilitation, the creditor will not be paid by the debtor when the credit falls
due. The court may order a suspension of payments to set a rehabilitation plan in motion; in the meantime, the creditor remains unpaid. By the time
the creditor is paid, the financial and economic conditions will have been changed. Money paid in the past has a different value in the future. It is
unfair if the creditor merely receives the face value of the debt. Present value of the credit takes into account the interest that the amount of
money would have earned if the creditor were paid on time. Trial courts must ensure that the projected cash flow from a business' rehabilitation
plan allows for the closest present value recovery for its creditors. If the projected cash flow is realistic and allows the corporation to meet all its
obligations, then courts should favor rehabilitation over liquidation. However, if the projected cash flow is unrealistic, then courts should consider
converting the proceedings into that for liquidation to protect the creditors."
26. KINDS OF REHABILITATION:
a. Rehabilitation agreed out of court
b. Cout supervised rehabilitation – which may either be:
i. Voluntary Rehabilitation – The VERIFIED PETITION filed by the debtor-corporation must allege and establish the following:
(1) the insolvency of the debtor, and
(2) the viability of its rehabilitation.
ii. Involuntary Rehabilitation - A creditor or group of creditors may initiate involuntary proceedings against the debtor by filing a
petition for rehabilitation with the court if:
(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 60 days; or
(2) that the debtor has failed generally to meet its liabilities as they fall due; or
(3) a creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor that will prevent the debtor
from paying its debts as they become due or will render it insolvent.
27. Liquidation and Rehabilitation cannot be undertaken at the same time.
REHABILITATION LIQUIDATION
corporations have to maintain their assets to continue business corporations preserve their assets in order to sell them; Without these
operations assets, business operations are effectively discontinued. The proceeds
of the sale are distributed equitably among creditors, and surplus is
divided or losses are re-allocated.
28. Reduction of Liability – A court-approved rehabilitation plan may include a reduction of liability. Reduction of the amount due to creditors does
not violate the non-impairment of contracts' clause of the Constitution.
29. Cram Down Rule – This principle refers to the court-approved Rehabilitation Plan that shall be binding upon the debtor and all persons who
may be affected by it, including creditors, whether or not such persons have participated in the proceedings, or opposed the Plan, or whether
or not their claims have been scheduled. It consists of two things: (1) approval despite opposition by the creditors of the distressed corporation;
and (2) binding effect of the approved plan are binding on the debtor and all persons who may be affected by it including creditors. While the
Cram Down Principle, in effect, dilutes contracts, the Supreme Court has rejected the invocation of the non-impairment clause to give way to a
valid exercise of police power and to afford protection to labor.
30. Rehabilitation Receiver – The Commencement Order vests the rehabilitation receiver all the powers under FRIA including right of access and
right of review and obtain records to which the debtor corporation's management and director have access, including bank accounts of
whatever nature of the debtor, subject the approval of a performance bond by the court.
– Submits his initial report within 40 days from the termination of the initial hearing. The report shall contain the following findings:
(1) the debtor is insolvent,
(2) any unlawful or irregular act in contemplation of insolvency or which have contributed to the insolvency,
(3) the Rehabilitation Plan is realistic, feasible and reasonable,
(4) the substantial likelihood that the debtor will be rehabilitated,
(5) if the Petition should be dismissed, or
(6) if the debtor should be dissolve and/or liquidated
31. Commencement Order – If the Court finds the petition sufficient in form and substance, it shall, within five working days from the filing of a
Petition for rehabilitation issue a Commencement Order. The contents of the Commencement Order are detailed in Section 8 of the 2013 FR
Rules. It directs creditors to file a notice of claim within five days before the initial hearing. If the claim is not listed in the schedule of
debts and liabilities attached by the petitioner, the creditor must file a verified notice of claim within the same five-day period. "If a creditor
files a belated claim, he shall not be entitled to participate in the distributions arising therefrom if recommended and approved by the
rehabilitation receiver, and approved by the court.
32. Stay Order – included in the Commencement Order to be issued by the court having jurisdiction over the rehabilitation case under Section 6 of
FRIA. The Stay or Suspension Order shall:
(1) suspend all actions or proceedings, in court or otherwise for the enforcement of claims against the debtor;
(2) suspend all actions to enforce any judgment, attachment, or other provisional remedies against the debtor;
(3) prohibit the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of
business; and
(4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided herein.
 – Under the expanded concept of claim (suspended claim), the following are covered by the Stay Order:
(1) Money claim for missing luggage against a common carrier;
(2) Illegal dismissal cases with claims for backwages and other unpaid benefits filed before the National Labor Relations Commission;
(3) Case filed before the Housing and Land Use Regulatory Board to rescind a sale of a subdivision lot with corresponding refund of the price;
(4) Ejectment cases;
(5) Complaint for rescission of contract of assignment of leasehold right with damages;
(6) Enforcement of repairman's maritime lien;
(7) A claim for the value of shares belonging to the plaintiff that was illegally sold by the liquidators of a corporation. Although the original claim
was for the return of the shares, but the claim was the subject of a supervening event - the sale of the shares. After the sale, the money raised
therefrom became generic in the form of money that were commingled with cash and other assets of the corporation.
The Commencement Order and consequently the Stay Order shall be effective for the entire duration of the rehabilitation proceedings. Its
effects are retroactive to the filing the Petition. The order may be lifted if there is no substantial likelihood for the debtor to be successfully
rehabilitated.
33. RATIONALE FOR SUSPENSION OF CLAIMS:
(1) To enable the rehabilitation receiver to effectively exercise its/his powers free from or unburdened by any judicial or extrajudicial
interference that might unduly hinder or prevent the 'rescue' of the debtor company (time, resources, and effort will be used to litigate); and
(2) To enable the management committee or the rehabilitation receiver to substitute the defendant in any pending action against it before any
court, tribunal, board, or body.
34. Suspended Claims – refer to all claims or demands of whatever nature or character against the debtor or its property, whether for money or
otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, including, but not limited to (1) all
claims of the government, whether national or local, including taxes, tariffs, and customs duties; and (2) claims against directors and officers of
the debtor arising from acts done in the discharge of their functions falling within the scope of their authority.