Press Release
June 16, 2009

Angara: Worsening economic and financial state
calls for effective insolvency procedure

With the absence of effective and orderly insolvency procedures in a worsening economic and financial crisis, Senator Edgardo J. Angara urges his colleagues to pass a measure that will foster growth and competitiveness to prevent and resolve corporate financial difficulties.

"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.

He added, "This inadequacy and unresponsiveness of the insolvency proceedings were deeply felt during the economic crisis of 1997 and 1998 when long-drawn out proceedings following corporate failures caused immense waste of resources and gravely threatened survival of companies in our country."

Senate Bill no. 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 neatty 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."

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