Article 54Supplement v1, p. 54

COMMERCIAL LAWS SUPPLEMENT

the powers of management of the debtor, or appoint a

management

committee

that

will

undertake

the

management of the debtor, upon clear and convincing

evidence of any of the following circumstances:

(a)

Actual

or

imminent

danger

of

dissipation,

loss,

wastage or destruction of the debtor's assets or other

properties;

(b) Paralyzation of the business operations of the debtor;

or

(c) Gross mismanagement of the debtor, or fraud or other

wrongful conduct on the part of, or gross or willful

violation of this Act by, existing management of the

debtor

or

the

owner,

partner,

director,

officer

or

representative/s in management of the debtor.

In case the court appoints the rehabilitation receiver to

assume the powers of management of the debtor, the

court may:

(1) require the rehabilitation receiver to post an additional

bond;

(2) authorize him to engage the services or to employ

persons or entities to assist him in the discharge of his

managerial functions; and

(3)

authorize

a

commensurate

increase

in

his

compensation.

SECTION 37. Role of the Management Committee. —

When appointed pursuant to the foregoing section, the

management committee shall take the place of the

management and the governing body of the debtor and

assume their rights and responsibilities.

The specific powers and duties of the management

committee,

whose

members

shall be considered as

officers of the court, shall be prescribed by the procedural

rules.

SECTION

38.

Qualifications

of

Members

of

the

Management

Committee.

—

The

qualifications

and

disqualifications of the members of the management

committee shall be set forth in the procedural rules,

taking into consideration the nature of the business of

the debtor and the need to protect the interest of all

stakeholders concerned.

SECTION

39.

Employment

of

Professionals. — Upon

approval of the court, and after notice and hearing, the

rehabilitation receiver or the management committee

may employ specialized professionals and other experts

to assist each in the performance of their duties. Such

professionals and other experts shall be considered either

employees

or

independent

contractors

of

the

rehabilitation receiver or the management committee, as

the case may be. The qualifications and disqualifications

of the professionals and experts may be set forth in

procedural rules, taking into consideration the nature of

the business of the debtor and the need to protect the

interest of all stakeholders concerned.

SECTION 40. Conflict of Interest. — No person may be

appointed as a rehabilitation receiver, member of a

management

committee,

or

be

employed

by

the

rehabilitation receiver or the management committee if

he has a conflict of interest.

An individual shall be deemed to have a conflict of

interest if he is so situated as to be materially influenced

in the exercise of his judgment for or against any party to

the proceedings. Without limiting the generality of the

foregoing, an individual shall be deemed to have a

conflict of interest if:

(a) he is a creditor, owner, partner or stockholder of the

debtor;

(b) he is engaged in a line of business which competes

with that of the debtor;

(c) he is, or was, within five (5) years from the filing of the

petition, a director, officer, owner, partner or employee of

the debtor or any of the creditors, or the auditor or

accountant of the debtor;

(d) he is, or was, within two (2) years from the filing of the

petition, an underwriter of the outstanding securities of

the debtor;

(e) he is related by consanguinity or affinity within the

fourth civil degree to any individual creditor, owner/s of a

sole

proprietorship-debtor,

partners

of

a

partnership-debtor or to any stockholder, director, officer,

employee or underwriter of a corporation-debtor; or

(f) he has any other direct or indirect material interest in

the debtor or any of the creditors.

Any rehabilitation receiver, member of the management

committee or persons employed or contracted by them

possessing

any

conflict

of

interest

shall

make

the

appropriate disclosure either to the court or to the

creditors

in

case

of

out-of-court

rehabilitation

proceedings.

Any

party to the proceeding adversely

affected by the appointment of any person with a conflict

of interest to any of the positions enumerated above may

however waive his right to object to such appointment

and, if the waiver is unreasonably withheld, the court may

disregard the conflict of interest, taking into account the

general interest of the stakeholders.

SECTION 41. Immunity. — The rehabilitation receiver and

all persons employed by him, and the members of the

management committee and all persons employed by it,

shall not be subject to any action, claim or demand in

connection with any act done or omitted to be done by

them in good faith in connection with the exercise of

their powers and functions under this Act or other actions

duly approved by the court.

SECTION 42. Creditors' Committee. — After the creditors'

meeting

called

pursuant

to

Section

63

hereof,

the

creditors belonging to a class may formally organize a

committee among themselves. In addition, the creditors

may, as a body, agree to form a creditors' committee

composed

of

a

representative

from

each

class

of

creditors, such as the following:

(a) Secured creditors;

(b) Unsecured creditors;

(c) Trade creditors and suppliers; and

(d) Employees of the debtor.

In

the election of the creditors' representatives, the

rehabilitation receiver or his representative shall attend

such meeting and extend the appropriate assistance as

may be defined in the procedural rules.

SECTION

43.

Role

of

Creditors'

Committee.

—

The

creditors'

committee

when

constituted

pursuant

to

Section 42 of this Act shall assist the rehabilitation

receiver in communicating with the creditors and shall be

the primary liaison between the rehabilitation receiver

and

the

creditors.

The

creditors'

committee

cannot

exercise or waive any right or give any consent on behalf

of any creditor unless specifically authorized in writing by

such

creditor.

The

creditors'

committee

may

be

authorized by the court or by the rehabilitation receiver to

perform such other tasks and functions as may be

defined by the procedural rules in order to facilitate the

rehabilitation process.

(D) Determination of Claims.

SECTION 44. Registry of Claims. — Within twenty (20)

days from his assumption into office, the rehabilitation

receiver shall establish a preliminary registry of claims.

The

rehabilitation

receiver

shall

make

the

registry

available for public inspection and provide publication

notice to the debtor, creditors and stakeholders on where

and when they may inspect it. All claims included in the

registry of claims must be duly supported by sufficient

evidence.

SECTION 45. Opposition or Challenge of Claims. — Within

thirty (30) days from the expiration of the period stated in

the immediately preceding section, the debtor, creditors,

stakeholders and other interested parties may submit a

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