Article 49Supplement v1, p. 49

COMMERCIAL LAWS SUPPLEMENT

court pursuant to this Act and which shall be entrusted

with such powers and duties as set forth herein.

(ii) Rehabilitation Plan shall refer to a plan by which the

financial well-being and viability of an insolvent debtor

can be restored using various means including, but not

limited

to,

debt

forgiveness,

debt

rescheduling,

reorganization or quasi-reorganization, dacion en pago,

debt-equity conversion and sale of the business (or parts

of it) as a going concern, or setting-up of new business

entity as prescribed in Section 62 hereof, or other similar

arrangements as may be approved by the court or

creditors.

(jj) Secured claim shall refer to a claim that is secured by a

lien.

(kk) Secured creditor shall refer to a creditor with a

secured claim.

(ll) Secured party shall refer to a secured creditor or the

agent or representative of such secured creditor.

(mm) Securities market participant shall refer to a broker,

dealer,

underwriter,

transfer

agent

or other juridical

persons transacting securities in the capital market.

(nn) Stakeholder shall refer, in addition to a holder of

shares of a corporation, to a member of a nonstock

corporation or association or a partner in a partnership.

(oo) Subsidiary shall refer to a corporation more than fifty

percent (50%) of the voting stock of which is owned or

controlled directly or indirectly through one or more

intermediaries by another corporation, which thereby

becomes its parent corporation.

(pp) Unsecured claim shall refer to a claim that is not

secured by a lien.

(qq) Unsecured creditor shall refer to a creditor with an

unsecured claim.

(rr) Voluntary proceedings shall refer to proceedings

initiated by the debtor.

(ss) Voting creditor shall refer to a creditor that is a

member of a class of creditors, the consent of which is

necessary for the approval of a Rehabilitation Plan under

this Act.

SECTION 5. Exclusions. — The term debtor does not

include

banks,

insurance

companies,

pre-need

companies, and national and local government agencies

or units.

For purposes of this section:

(a)

Bank

shall

refer

to

any

duly

licensed

bank

or

quasi-bank

that

is potentially or actually subject to

conservatorship, receivership or liquidation proceedings

under the New Central Bank Act ( Republic Act No. 7653 )

or successor legislation;

(b) Insurance company shall refer to those companies

that are potentially or actually subject to insolvency

proceedings

under

the

Insurance

Code ( Presidential

Decree No. 1460 ) or successor legislation; and

(c) Pre-need company shall refer to any corporation

authorized/licensed to sell or offer to sell pre-need plans.

Provided, That government financial institutions other

than

banks

and

government-owned

or

-controlled

corporations shall be covered by this Act, unless their

specific charter provides otherwise.

SECTION 6. Designation of Courts and Promulgation of

Procedural Rules. — The Supreme Court shall designate

the court or courts that will hear and resolve cases

brought under this Act and shall promulgate the rules of

pleading,

practice

and

procedure

to

govern

the

proceedings brought under this Act.

SECTION 7. Substantive and Procedural Consolidation. —

Each juridical entity shall be considered as a separate

entity under the proceedings in this Act. Under these

proceedings, the assets and liabilities of a debtor may not

be commingled or aggregated with those of another,

unless the latter is a related enterprise that is owned or

controlled directly or indirectly by the same interests:

Provided, however, That the commingling or aggregation

of assets and liabilities of the debtor with those of a

related enterprise may only be allowed where:

(a) there was commingling in fact of assets and liabilities

of the debtor and the related enterprise prior to the

commencement of the proceedings;

(b) the debtor and the related enterprise have common

creditors and it will be more convenient to treat them

together rather than separately;

(c) the related enterprise voluntarily accedes to join the

debtor as party petitioner and to commingle its assets

and liabilities with the debtor's; and

(d) The consolidation of assets and liabilities of the debtor

and the related enterprise is beneficial to all concerned

and promotes the objectives of rehabilitation.

Provided, finally, That nothing in this section shall prevent

the court from joining other entities affiliated with the

debtor as parties pursuant to the rules of procedure as

may be promulgated by the Supreme Court.

SECTION

8.

Decisions

of

Creditors.

—

Decisions

of

creditors

shall

be

made

according

to

the

relevant

provisions of the Corporation Code in the case of stock or

nonstock corporations or the Civil Code in the case of

partnerships that are not inconsistent with this Act.

SECTION 9. Creditors' Representatives. — Creditors may

designate representatives to vote or otherwise act on

their behalf by filing notice of such representation with

the court and serving a copy on the rehabilitation receiver

or liquidator.

SECTION 10. Liability of Individual Debtor, Owner of a Sole

Proprietorship, Partners in a Partnership, or Directors

and

Officers.

—

Individual

debtor,

owner

of a sole

proprietorship, partners in a partnership, or directors and

officers of a debtor shall be liable for double the value of

the property sold, embezzled or disposed of or double the

amount of the transaction involved, whichever is higher,

to be recovered for the benefit of the debtor and the

creditors, if they, having notice of the commencement of

the

proceedings,

or

having

reason

to

believe

that

proceedings

are

about

to

be

commenced,

or

in

contemplation of the proceedings, willfully commit the

following acts:

(a) Dispose or cause to be disposed of any property of the

debtor other than in the ordinary course of business or

authorize or approve any transaction in fraud of creditors

or in a manner grossly disadvantageous to the debtor

and/or creditors; or

(b) Conceal, or authorize or approve the concealment,

from the creditors, or embezzles or misappropriates, any

property of the debtor.

The court shall determine the extent of the liability of an

owner, partner, director or officer under this section. In

this connection, in case of partnerships and corporations,

the court shall consider the amount of the shareholding

or partnership or equity interest of such partner, director

or officer, the degree of control of such partner, director

or

officer

over

the

debtor,

and

the

extent

of

the

involvement of such partner, director or debtor in the

actual management of the operations of the debtor.

SECTION 11. Authorization to Exchange Debt for Equity. —

Notwithstanding applicable banking legislation to the

contrary, any bank, whether universal or not, may acquire

and hold an equity interest or investment in a debtor or

its

subsidiaries

when

conveyed

to

such

bank

in

satisfaction of debts pursuant to a Rehabilitation or

Liquidation Plan approved by the court: Provided, That

such ownership shall be subject to the ownership limits

applicable to universal banks for equity investments and:

Provided, further, That any equity investment or interest

acquired

or

held

pursuant

to

this

section shall be

disposed by the bank within a period of five (5) years or as

may be prescribed by the Monetary Board.

© Compiled by RGL

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