Article 52Supplement v1, p. 52

COMMERCIAL LAWS SUPPLEMENT

(a) The proposed Rehabilitation Plan submitted complies

with the minimum contents prescribed by this Act;

(b) There is sufficient monitoring by the rehabilitation

receiver of the debtor's business for the protection of

creditors;

(c) The debtor has met with its creditors to the extent

reasonably possible in attempts to reach a consensus on

the proposed Rehabilitation Plan;

(d) The rehabilitation receiver submits a report, based on

preliminary

evaluation,

stating

that

the

underlying

assumptions

and

the

financial

goals

stated

in

the

petitioner's Rehabilitation Plan are realistic, feasible and

reasonable; or, if not, there is, in any case, a substantial

likelihood for the debtor to be successfully rehabilitated

because, among others:

(1) there are sufficient assets with which to rehabilitate

the debtor;

(2) there is sufficient cash flow to maintain the operations

of the debtor;

(3) the debtor's owner/s, partners, stockholders, directors

and officers have been acting in good faith and with due

diligence;

(4) the petition is not a sham filing intended only to delay

the enforcement of the rights of the creditor/s or of any

group of creditors; and

(5) the debtor would likely be able to pursue a viable

Rehabilitation Plan;

(e)

The

petition,

the

Rehabilitation

Plan

and

the

attachments thereto do not contain any materially false

or misleading statement;

(f) If the petitioner is the debtor, that the debtor has met

with its creditor/s representing at least three-fourths (3/4)

of its total obligations to the extent reasonably possible

and made a good faith effort to reach a consensus on the

proposed Rehabilitation Plan; if the petitioner/s is/are a

creditor

or

group

of

creditors,

that

the

petitioner/s

has/have met with the debtor and made a good faith

effort

to

reach

a

consensus

on

the

proposed

Rehabilitation Plan; and

(g)

The

debtor

has

not

committed

acts

of

misrepresentation or in fraud of its creditor/s or a group of

creditors.

SECTION 22. Action at the Initial Hearing. — At the initial

hearing, the court shall:

(a) determine the creditors who have made timely and

proper filing of their notice of claims;

(b) hear and determine any objection to the qualifications

or the appointment of the rehabilitation receiver and, if

necessary, appoint a new one in accordance with this Act;

(c) direct the creditors to comment on the petition and

the Rehabilitation Plan, and to submit the same to the

court and to the rehabilitation receiver within a period of

not more than twenty (20) days; and

(d)

direct the rehabilitation receiver to evaluate the

financial condition of the debtor and to prepare and

submit to the court within forty (40) days from the initial

hearing the report provided in Section 24 hereof.

SECTION 23. Effect of Failure to File Notice of Claim. — A

creditor whose claim is not listed in the schedule of debts

and liabilities and who fails to file a notice of claim in

accordance

with

the

Commencement

Order

but

subsequently files a belated claim shall not be entitled to

participate in the rehabilitation proceedings but shall be

entitled to receive distributions arising therefrom.

SECTION 24. Report of the Rehabilitation Receiver. —

Within forty (40) days from the initial hearing, and with or

without the comments of the creditors or any of them,

the rehabilitation receiver shall submit a report to the

court

stating

his

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

the

owner/s

of

a

sole

proprietorship,

partners

of a

partnership, or directors or officers of a corporation 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; and

(e) the debtor should be dissolved and/or liquidated.

SECTION

25.

Giving

Due

Course to or Dismissal of

Petition, or Conversion of Proceedings. — Within ten (10)

days from receipt of the report of the rehabilitation

receiver mentioned in Section 24 hereof, the court may:

(a) give due course to the petition upon a finding that:

(1) the debtor is insolvent; and

(2) there is a substantial likelihood for the debtor to be

successfully rehabilitated;

(b) dismiss the petition upon a finding that:

(1) debtor is not insolvent;

(2) the petition is a sham filing intended only to delay the

enforcement of the rights of the creditor/s or of any group

of creditors;

(3)

the

petition,

the

Rehabilitation

Plan

and

the

attachments

thereto

contain

any

materially false or

misleading statements; or

(4) the debtor has committed acts of misrepresentation

or in fraud of its creditor/s or a group of creditors;

(c) convert the proceedings into one for the liquidation of

the debtor upon a finding that:

(1) the debtor is insolvent; and

(2) there is no substantial likelihood for the debtor to be

successfully rehabilitated as determined in accordance

with the rules to be promulgated by the Supreme Court.

SECTION 26. Petition Given Due Course. — If the petition

is

given

due

course,

the

court

shall

direct

the

rehabilitation

receiver

to

review,

revise

and/or

recommend

action

on

the

Rehabilitation

Plan

and

submit the same or a new one to the court within a

period of not more than ninety (90) days.

The

court

may

refer

any

dispute

relating

to

the

Rehabilitation

Plan

or the rehabilitation proceedings

pending before it to arbitration or other modes of dispute

resolution, as provided for under Republic Act No. 9285 , or

the Alternative Dispute Resolution Act of 2004 , should it

determine that such mode will resolve the dispute more

quickly, fairly and efficiently than the court.

SECTION 27. Dismissal of Petition. — If the petition is

dismissed pursuant to paragraph (b) of Section 25 hereof,

then the court may, in its discretion, order the petitioner

to pay damages to any creditor or to the debtor, as the

case may be, who may have been injured by the filing of

the petition, to the extent of any such injury.

(C)

The

Rehabilitation

Receiver,

Management

Committee and Creditors' Committee.

SECTION 28. Who May Serve as a Rehabilitation Receiver.

— Any qualified natural or juridical person may serve as a

rehabilitation receiver: Provided, That if the rehabilitation

receiver is a juridical entity, it must designate a natural

person/s who possess/es all the qualifications and none of

the

disqualifications

as

its

representative,

it

being

understood

that

the

juridical

entity

and

the

representative/s are solidarily liable for all obligations and

responsibilities of the rehabilitation receiver.

© Compiled by RGL

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