ANGARA BATS FOR AN EFFECTIVE DEBT RECOVERY PROCEDURE
After PERA and CISA,

Senator Edgardo J. Angara today said there is a need to improve insolvency procedures in the country in order to ensure an effective debt recovery process.

"The absence of effective and orderly insolvency procedures can aggravate economic and financial crises. Without effective procedures that are applied in a consistent manner, creditors may be unable to collect on their claims, which will adversely affect the future availability of credit," said Angara, who chairs Senate Committee on Banks, Financial Institutions and Currencies.

He added, "Without orderly procedures, the rights of the debtors may not be adequately protected and different creditors may not be treated equitably. On the other hand, the consistent application of orderly and effective insolvency procedures plays a critical role in fostering growth and competitiveness and may also assist in the prevention and resolution of financial crises."

Angara also observed that the present legislative for insolvency proceedings is 'sorely outdated.'

He noted that the insolvency proceedings in the Philippines are governed by Act No. 1956, otherwise known as the Insolvency Law, passed in 1909. It gave the courts jurisdiction over petitions for insolvency and suspension of payments. Subsequently, Presidential Decree No 902-A passed in 1976 and amended in 1981, vested the Securities and Exchange Commission (SEC) with jurisdiction over petitions for suspension of payments and rehabilitation filed by corporations, partnerships, and associations.

In 2000, the Securities Regulation Code transferred jurisdiction over petitions for suspension of payments and rehabilitation for corporations and partnerships from the SEC to the regular courts. Thereafter, the Supreme Court has released the rules of procedure for rehabilitation proceedings.

The outdated proceeding was aggravated during the economic crisis of 1997 and 1998 when long-drawn out proceedings following corporate failures caused immense waste of resources.

"There were cases when the proceedings drag on to the extent of seriously threatening the survival of the subject companies," Angara said.

With this, Angara filed Senate Bill 61 or the Corporate Recovery and Insolvency Act which aims to provide a clear framework for the insolvency proceedings for companies who are undergoing financial restructuring or rehabilitation or those unable to pay its liabilities or has liabilities greater than its assets.

"It will maximize the chances of survival of the ailing company through fast-track rehabilitation, court-supervised rehabilitation, pre-negotiated rehabilitation and dissolution-liquidation," Angara explained.

Insolvency procedures play a critical role in fostering growth and competitiveness. "We need clear-cut proceedings to prevent and resolve our financial crises," Angara said.