Press Release
November 12, 2009


Senator Edgardo J. Angara led the Senate in passing the Corporate Recovery and Insolvency Act of 2009, which provides for a comprehensive framework on the proceedings for rehabilitation and liquidation of financially distressed companies, and encouraging creditors to collectively resolve and adjust competing claims and property rights.

"In the absence of such mechanisms, we are stuck with old-fashioned liquidation processes, killing any possibility for companies to recover from financial trouble. What we need to provide now is a second chance at life for enterprises rather than killing them through liquidation," Angara said in his interpellation.

The law will update the country's archaic, 100-year old insolvency laws to make it more attuned to the present conditions of corporate and investment laws. "Laws, along with man's critical thinking attitude, will have to somehow evolve in response to the changing of the times," said Angara.

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.

Angara noted, "This seems a very technical issue; however it is necessary for the public to know the details of this law, since it aims to protect 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."

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."

Senate Bill 61 was approved yesterday on third reading in the Senate. To also cover small- and medium-scale businesses in the proposed legislation, its as also been proposed to use the title Business Recovery and Insolvency Act.

News Latest News Feed