Press Release
August 24, 2009

Worsening economic and financial state calls for effective insolvency procedure
ANGARA TO DEFEND UPDATED LENDING AND CREDIT LAW THIS WEEK

With the absence of effective and orderly insolvency procedures in a worsening economic and financial crisis, Senator Edgardo J. Angara couldn't emphasize more the need to pass a measure that will foster growth and competitiveness to prevent and resolve corporate financial difficulties as period of interpelation happens today at the Senate.

"We have an age old insolvency proceedings, it does not suffice the modern business trends and it is generally unable to provide quick resolution of financial dilemmas," said Angara who chairs the Senate Committee on Finance.

Under existing laws, the framework of insolvency and rehabilitation proceedings is inadequate and unresponsive to the modern trends in business, such that it is unable to quickly resolve modern financial issues. This flaw is mostly felt against the backdrop of an economic crisis, wherein the present insolvency regime provides only limited solutions to business entities and is thus unable to salvage enterprises from financial turmoil, as well as to safeguard the rights to claim of many clients.

Senate Bill 61, an act providing for the rehabilitation or liquidation of financial distressed enterprises seeks to establish a more systematic framework for insolvency proceedings and provide equitable treatment to all parties involved in a financial restructuring or rehabilitation.

The bill states that, an insolvent debtor may apply for, and seek, rehabilitation. If the court finds the petition to be sufficient in form and substance, it shall, within five working days from the filing of the petition, issue a Commencement Order, it will then fall under for suspension or stay order.

Within forty days from the initial hearing, and with or without the comments of the creditors, rehabilitation receiver shall submit a report to the court stating preliminary findings and recommendations on whether:

(a)  The debtor is insolvent and if so, the causes thereof and any unlawful or irregular act or acts
      committed by directors or officers in contemplation of the insolvency of the debtor or which
      may have contributed to the insolvency of the debtor;

(b)  The underlying assumptions, the financial goals and the procedures to accomplish such goals
      as stated in the petitioner's rehabilitation plan are realistic, feasible and reasonable;

(c)   There is a substantial likelihood for the debtor to be successfully rehabilitated;

(d)   The petition should be dismissed;

(e)   The debtor should be dissolved and liquidated.

The court then will either dismiss or converse the proceeding. In line with the nitty-gritty proceeding, parties that are involved will be placed on a criteria based to ensure equity and fairness through out the proceeding.

Angara emphasized, "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. Without orderly procedures, the rights of the debtors may not be adequately protected and different creditors may not be treated equitably."

"The Corporate Recovery and Insolvency Act shall provide the remedies that have already proven to be effective in other jurisdictions. Why should we wait, then, for things to turn out for the worst before we ever decide to strengthen and update our legal pillars? The time to act is now, more than ever," ended Angara.

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