Press Release
September 6, 2009

Maintaining RP's steady growth and to protect customers and creditors
ANGARA CALLS FOR UPDATED CORPORATE INSOLVENCY LAW

"Laws, along with man's critical thinking attitude, will have to somehow evolve in response to the changing of the times," thus believes Sen. Edgardo J. Angara. This week Angara is slated for an interpellation with members of the Senate on the passing of the Corporate Recovery and Insolvency Act of 2009 into law, aiming for more comprehensive provisions on the proceedings for rehabilitation and liquidation schemes for financially distressed enterprises, and encouraging creditors to collectively resolve and adjust competing claims and property rights.

"We are stuck with old-fashioned liquidation processes, killing any potential for companies to revive and survive. What we need to provide now is a second chance at life for enterprises rather then killing them with liquidation," noted Angara in his 27 August interpellation in the Senate for a more updated interpretation of insolvency laws to make it more attuned to the present conditions of corporate and investment laws.

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.

"In protecting clients' interests, the core premise is that liquidation should not be used as a way for companies to avoid obligations. On the other hand, financially distressed institutions should be given as much stake in resolving rehabilitative issues rather than taking the case directly to the courts," contended Angara, Chair of the Senate Committee on Finance.

Senate Bill 61 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 issue a commencement order. According to Angara, the first crack at solving the problem should be given to primary parties concerned. Courts can come in later to supervise or manifest its decisions on the case.

Noting the highly specified discussion in his first round of interpellation last week, Angara noted, "For the general public, this seems a very technical issue; however it is necessary for their advantage to know the details of such, since it aims at protecting their interests both as creditors and customers. For a country that tends to be prone to court proceedings, we need to veer away from too much dependence on such to resolve corporate rehabilitation and insolvency issues."

Sen. Angara has been closely studying the insolvency laws of various markets such as the UK, the US, Singapore, Canada, Australia and the EU to derive the best practices of international standards with the hopes of taking any applicable laws into local legislation. He stressed, "Without effective procedures that are applied in a consistent manner, creditors may be unable to collect 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."

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