Angara files bill on
corporate recovery and insolvency

Expect a trouble-free corporate recovery program from the Congress.

Senator Edgardo J. Angara filed 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.

"The present legislative framework of our insolvency proceedings is sorely outdated," he stressed.

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.

"However, it remains inadequate and unresponsive to the modern business trends and unable to provide quick resolution of financial dilemmas," the Senator, chair of the Senate committee on Banks, Financial Institutions and Currencies emphasized.

The outdated proceeding was aggravated during the economic crisis of 1997 and 1998 when long-drawn out proceedings following corporate failures caused immense waste of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

"Without effective procedures, creditors will be unable to collect on their claims, which will adversely affect the future availability of credit. And without orderly procedures, the rights of the debtors may not be adequately protected and different creditors may not be treated equitably," 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."