Article 59Supplement v1, p. 59

COMMERCIAL LAWS SUPPLEMENT

(b) The lifting of the Stay Order and any other court order

holding in abeyance any action for the enforcement of a

claim against the debtor.

Provided, however, That if the termination of proceedings

is due to failure of rehabilitation or dismissal of the

petition for reasons other than technical grounds, the

proceedings

shall

be

immediately

converted

to

liquidation as provided in Section 92 of this Act.

CHAPTER III Pre-Negotiated Rehabilitation

SECTION 76. Petition by Debtor. — An insolvent debtor, by

itself or jointly with any of its creditors, may file a verified

petition

with

the

court

for

the

approval

of

a

pre-negotiated

Rehabilitation

Plan

which

has

been

endorsed

or

approved

by creditors holding at least

two-thirds (2/3) of the total liabilities of the debtor,

including

secured

creditors

holding

more than fifty

percent (50%) of the total secured claims of the debtor

and unsecured creditors holding more than fifty percent

(50%) of the total unsecured claims of the debtor. The

petition shall include, as a minimum:

(a) a schedule of the debtor's debts and liabilities;

(b) an inventory of the debtor's assets;

(c) the pre-negotiated Rehabilitation Plan, including the

names

of

at

least

three

(3) qualified nominees for

rehabilitation receiver; and

(d) a summary of disputed claims against the debtor and

a report on the provisioning of funds to account for

appropriate payments should any such claims be ruled

valid or their amounts adjusted.

SECTION 77. Issuance of Order. — Within five (5) working

days,

and

after

determination

that

the

petition

is

sufficient in form and substance, the court shall issue an

Order which shall:

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

and its principal place of business;

(b) declare that the debtor is under rehabilitation;

(c) summarize the ground/s for the filing of the petition;

(d) direct the publication of the 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;

(e) direct the service by personal delivery of a copy of the

petition on each creditor who is not a petitioner holding

at least ten percent (10%) of the total liabilities of the

debtor, as determined in the schedule attached to the

petition, within three (3) days;

(f) state that copies of the petition and the Rehabilitation

Plan are available for examination and copying by any

interested party;

(g)

state

that creditors and other interested parties

opposing the petition or Rehabilitation Plan may file their

objections or comments thereto within a period of not

later than twenty (20) days from the second publication

of the Order;

(h) appoint a rehabilitation receiver, if provided for in the

Plan; and

(i) include a Suspension or Stay Order as described in this

Act.

SECTION 78. Approval of the Plan. — Within ten (10) days

from the date of the second publication of the Order, the

court shall approve the Rehabilitation Plan unless a

creditor or other interested party submits an objection to

it in accordance with the next succeeding section.

SECTION 79. Objection to the Petition or Rehabilitation

Plan. — Any creditor or other interested party may submit

to the court a verified objection to the petition or the

Rehabilitation Plan not later than eight (8) days from the

date of the second publication of the Order mentioned in

Section 77 hereof. The objections shall be limited to the

following:

(a) The allegations in the petition or the Rehabilitation

Plan, or the attachments thereto, are materially false or

misleading;

(b) The majority of any class of creditors do not in fact

support the Rehabilitation Plan;

(c) The Rehabilitation Plan fails to accurately account for a

claim

against

the

debtor

and

the

claim

is

not

categorically declared as a contested claim; or

(d) The support of the creditors, or any of them, was

induced by fraud.

Copies

of

any

objection

to

the

petition

or

the

Rehabilitation Plan shall be served on the debtor, the

rehabilitation receiver (if applicable), the secured creditor

with

the

largest

claim

and

who

supports

the

Rehabilitation Plan, and the unsecured creditor with the

largest claim and who supports the Rehabilitation Plan.

SECTION 80. Hearing on the Objections. — After receipt

of an objection, the court shall set the same for hearing.

The date of the hearing shall be no earlier than twenty

(20) days and no later than thirty (30) days from the date

of the second publication of the Order mentioned in

Section 77 hereof. If the court finds merit in the objection,

it shall direct the debtor, when feasible, to cure the defect

within a reasonable period. If the court determines that

the debtor or creditors supporting the Rehabilitation Plan

acted in bad faith, or that the objection is non-curable,

the court may order the conversion of the proceedings

into liquidation. A finding by the court that the objection

has no substantial merit, or that the same has been

cured, shall be deemed an approval of the Rehabilitation

Plan.

SECTION 81. Period for Approval of Rehabilitation Plan. —

The court shall have a maximum period of one hundred

twenty (120) days from the date of the filing of the

petition to approve the Rehabilitation Plan. If the court

fails to act within the said period, the Rehabilitation Plan

shall be deemed approved.

SECTION 82. Effect of Approval. — Approval of a Plan

under this chapter shall have the same legal effect as

confirmation of a Plan under Chapter II of this Act.

CHAPTER IV Out-of-Court or Informal

Restructuring Agreements or Rehabilitation Plans

SECTION

83.

Out-of-Court

or

Informal

Restructuring

Agreements and Rehabilitation Plans. — An out-of-court

or informal restructuring agreement or Rehabilitation

Plan that meets the minimum requirements prescribed

in this chapter is hereby recognized as consistent with

the objectives of this Act.

SECTION 84. Minimum Requirements of Out-of-Court or

Informal Restructuring Agreements and Rehabilitation

Plans.

—

For

an

out-of-court

or

informal

restructuring/workout agreement or Rehabilitation Plan

to qualify under this chapter, it must meet the following

minimum requirements:

(a) The debtor must agree to the out-of-court or informal

restructuring/workout agreement or Rehabilitation Plan;

(b) It must be approved by creditors representing at least

sixty-seven percent (67%) of the secured obligations of

the debtor;

(c) It must be approved by creditors representing at least

seventy-five percent (75%) of the unsecured obligations of

the debtor; and

(d) It must be approved by creditors holding at least

eighty-five percent (85%) of the total liabilities, secured

and unsecured, of the debtor.

SECTION 85. Standstill Period. — A standstill period that

may be agreed upon by the parties pending negotiation

and

finalization

of

the

out-of-court

or

informal

restructuring/workout agreement or Rehabilitation Plan

© Compiled by RGL

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