Article 50Supplement v1, p. 50

COMMERCIAL LAWS SUPPLEMENT

CHAPTER II Court-Supervised Rehabilitation

(A) Initiation Proceedings.

(1) Voluntary Proceedings.

SECTION 12. Petition to Initiate Voluntary Proceedings by

Debtor. — When approved by the owner in case of a sole

proprietorship, or by a majority of the partners in case of a

partnership, or, in case of a corporation, by a majority vote

of the board of directors or trustees and authorized by the

vote of the stockholders representing at least two-thirds

(2/3) of the outstanding capital stock, or in case of

nonstock corporation, by the vote of at least two-thirds

(2/3) of the members, in a stockholder's or member's

meeting duly called for the purpose, an insolvent debtor

may initiate voluntary proceedings under this Act by

filing a petition for rehabilitation with the court and on

the grounds hereinafter specifically provided. The petition

shall be verified to establish the insolvency of the debtor

and the viability of its rehabilitation, and include, whether

as an attachment or as part of the body of the petition, as

a minimum, the following:

(a) Identification of the debtor, its principal activities and

its addresses;

(b) Statement of the fact of and the cause of the debtor's

insolvency or inability to pay its obligations as they

become due;

(c) The specific relief sought pursuant to this Act;

(d) The grounds upon which the petition is based;

(e) Other information that may be required under this Act

depending on the form of relief requested;

(f) Schedule of the debtor's debts and liabilities including

a list of creditors with their addresses, amounts of claims

and collaterals, or securities, if any;

(g) An inventory of all its assets including receivables and

claims against third parties;

(h) A Rehabilitation Plan;

(i) The names of at least three (3) nominees to the

position of rehabilitation receiver; and

(j) Other documents required to be filed with the petition

pursuant to this Act and the rules of procedure as may be

promulgated by the Supreme Court.

A

group

of

debtors

may

jointly

file

a

petition

for

rehabilitation under this Act when one or more of its

members foresee the impossibility of meeting debts

when they respectively fall due, and the financial distress

would

likely

adversely

affect

the

financial condition

and/or operations of the other members of the group

and/or the participation of the other members of the

group is essential under the terms and conditions of the

proposed Rehabilitation Plan.

(2) Involuntary Proceedings.

SECTION

13.

Circumstances

Necessary

to

Initiate

Involuntary Proceedings. — Any creditor or group of

creditors with a claim of, or the aggregate of whose

claims is, at least One million pesos (Php1,000,000.00) or

at least twenty-five percent (25%) of the subscribed

capital stock or partners' contributions, whichever is

higher, may initiate involuntary proceedings against the

debtor by filing a petition for rehabilitation with the court

if:

(a) there is no genuine issue of fact or law on the claim/s

of the petitioner/s, and that the due and demandable

payments thereon have not been made for at least sixty

(60) days or that the debtor has failed generally to meet

its liabilities as they fall due; or

(b) a creditor, other than the petitioner/s, has initiated

foreclosure

proceedings against the debtor that will

prevent the debtor from paying its debts as they become

due or will render it insolvent.

SECTION 14. Petition to Initiate Involuntary Proceedings.

—

The

creditor/s'

petition

for rehabilitation shall be

verified to establish the substantial likelihood that the

debtor may be rehabilitated, and include:

(a) identification of the debtor, its principal activities and

its address;

(b) the circumstances sufficient to support a petition to

initiate

involuntary

rehabilitation

proceedings

under

Section 13 of this Act;

(c) the specific relief sought under this Act;

(d) a Rehabilitation Plan;

(e) the names of at least three (3) nominees to the

position of rehabilitation receiver;

(f) other information that may be required under this Act

depending on the form of relief requested; and

(g) other documents required to be filed with the petition

pursuant to this Act and the rules of procedure as may be

promulgated by the Supreme Court.

(B) Action on the Petition and Commencement of

Proceedings.

SECTION 15. Action on the Petition. — If the court finds

the petition for rehabilitation to be sufficient in form and

substance, it shall, within five (5) working days from the

filing of the petition, issue a Commencement Order. If,

within the same period, the court finds the petition

deficient in form or substance, the court may, in its

discretion, give the petitioner/s a reasonable period of

time within which to amend or supplement the petition,

or to submit such documents as may be necessary or

proper to put the petition in proper order. In such case,

the five (5) working days provided above for the issuance

of the Commencement Order shall be reckoned from the

date of the filing of the amended or supplemental

petition or the submission of such documents.

SECTION

16.

Commencement

of

Proceedings

and

Issuance

of

a

Commencement

Order.

—

The

rehabilitation proceedings shall commence upon the

issuance of the Commencement Order, which shall:

(a) identify the debtor, its principal business or activity/ies

and its principal place of business;

(b)

summarize

the

ground/s

for

initiating

the

proceedings;

(c)

state

the

relief

sought

under this Act and any

requirement or procedure particular to the relief sought;

(d) state the legal effects of the Commencement Order,

including those mentioned in Section 17 hereof;

(e) declare that the debtor is under rehabilitation;

(f) direct the publication of the Commencement Order in

a newspaper of general circulation in the Philippines

once a week for at least two (2) consecutive weeks, with

the first publication to be made within seven (7) days

from the time of its issuance;

(g) if the petitioner is the debtor, direct the service by

personal delivery of a copy of the petition on each

creditor holding at least ten percent (10%) of the total

liabilities of the debtor as determined from the schedule

attached to the petition within five (5) days; if the

petitioner/s is/are creditor/s, direct the service by personal

delivery of a copy of the petition on the debtor within five

(5) days;

(h) appoint a rehabilitation receiver who may or may not

be from among the nominees of the petitioner/s, and

who shall exercise such powers and duties defined in this

Act as well as the procedural rules that the Supreme

Court will promulgate;

(i)

summarize

the

requirements

and

deadlines

for

creditors to establish their claims against the debtor and

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