Article 13p. 13

SPECIAL RULES OF PROCEDURE SUPPLEMENT TO THE RULES OF COURT

does

not

have

adequate

protection

over property

securing its claims; (3) the debtor's secured obligation is

more than the fair market value of the property subject

of the stay and such property is not necessary for the

rehabilitation of the debtor; or (4) the property covered

by the stay order is not essential or necessary to the

rehabilitation and the creditor's failure to enforce its

claim will cause more damage to the creditor than to

the debtor.

(b) For purposes of this Section, the creditor lacks

adequate protection if it can be shown that:

(1) The debtor fails or refuses to honor a pre-existing

agreement with the to keep the property insured;

(2) The debtor fails or refuses to take commercially

reasonable steps to maintain the property; or

(3) The property has depreciated to an extent that the

creditor is undersecured

(c)

Upon

showing

the creditor's lack of adequate

protection,

the

court shall order the rehabilitation

receiver to (1) make arrangements to provide for the

insurance or maintenance of the property, or (2) to

make payments or otherwise provide additional or

replacement security such as that the obligation is fully

secured. If such arrangements are not feasible, the

court shall modify the stay order to allow the secured

creditor lacking adequate protection to enforce its

claim against the debtor; provided, however, that the

court may deny the creditor the remedies in this

paragraph

if

such

remedies

would

prevent

the

continuation of the debtor as a going concern or

otherwise prevent the approval and implementation of

a rehabilitation plan.

Section 11. Qualifications of Rehabilitation Receiver. -

(a) In the appointment of the rehabilitation receiver, the

following

qualifications

shall

be

taken

into

consideration by the court:

(1) Expertise and acumen to manage and operate a

business similar in size and complexity to that of the

debtor;

(2)

Knowledge

in

management,

finance

and

rehabilitation of distressed companies;

(3) General familiarity with the rights of creditors in

suspension of payments or rehabilitation and general

understanding

of

the

duties and obligations of a

rehabilitation receiver;

(4) Good moral character, independence and integrity;

(5) Lack of conflict of interest as defined in this Section;

and

(6) Willingness and ability to file a bond in such amount

as may be determined by the court.

(b) Without limiting the generality of the following, a

rehabilitation

receiver

may

be deemed to have a

conflict of interest if:

(1) He is creditor or stockholder of the debtor;

(2) He is engaged in a line of business which competes

with the debtor;

(3) He is, or was within two (2) years from the filing of

the petition, a director, officer, or employee or the

auditor or accountant of the debtor;

(4) He is or was within two (2) years from the filing of

the

petition,

an

underwriter

of

the

outstanding

securities of the debtor;

(5) He is related by consanguinity or affinity within the

fourth civil degree to any creditor, stockholder, director,

officer, employee, or underwriter of the debtor; or

(6) He has any other direct or indirect material interest

in the debtor or any creditor.

Section 12. Powers and Functions of Rehabilitation

Receiver. - The rehabilitation receiver shall not take over

the management and control of the debtor but shall

closely oversee and monitor the operations of the

debtor during the pendency of the proceedings. For

this purpose, the rehabilitation receiver shall have the

powers,

duties

and

functions

of

a receiver under

Presidential Decree No. 902-A, as amended, and the

Rules of Court.

The rehabilitation receiver shall be considered as an

officer of the court. He shall be primarily tasked to study

the best way to rehabilitate the debtor and to ensure

that the value of the debtor's property is reasonably

maintained pending the determination of whether or

not the debtor should be rehabilitated, as well as

implement the rehabilitation plan after its approval.

Accordingly, he shall have the following powers and

functions:

(a) To verify the accuracy of the petition, including its

annexes such as the Schedule of Debts and Liabilities

and the Inventory of Assets submitted in support to the

petition;

(b)

To

accept

and

incorporate,

when

justified,

amendments to the Schedule of Debts and Liabilities;

(c) To recommend to the court the disallowance of

claims and rejection of amendments t the Schedule of

Debts and Liabilities that lack sufficient proof and

justification;

(d) To submit to the court and make available for review

by the creditors, a revised Schedule of Debts and

Liabilities;

(e) To investigate the acts, conduct, properties, liabilities

and financial condition of the debtor, the operation of

its business and the desirability of the continuance

thereof;

and,

any

other

matter

relevant

to

the

proceeding or to the formulation of a rehabilitation

plan;

(f) To examine under oath the directors and officers of

the debtor and any other witnesses that he may deem

appropriate;

(g) To make available to the creditors documents and

notices necessary for them to follow and participate in

the proceedings;

(h) To report to the court any fact ascertained by him

pertaining to the causes of the debtor's problems,

fraud,

preferences,

dispositions,

encumbrances,

misconduct,

mismanagement

and

irregularities

committed

by

the

stockholders,

directors,

management,, or any other person against the debtor;

(i) To employ such person or persons such as lawyers,

accountants,

appraisers

and staff are necessary in

performing his functions and duties as rehabilitation

receiver;

(j) To monitor the operations of the debtor and to

immediately report to the court any material adverse

change in the debtor's business;

(k)

To

evaluate

the

existing

assets

and

liabilities,

earnings and operations of the debtor;

(l) To determine and recommend to the court the best

way to salvage and protect the interests of the creditors,

stockholders and the general public;

(m) To study the rehabilitation plan proposed by the

debtor or any rehabilitation plan submitted during the

proceedings,

together

with

any

comments

made

thereon;

(n)

To

prohibit

and

report

to

the

court

any

encumbrance, transfer or disposition of the debtor's

property outside of the ordinary course of business or

what is allowed by the court;

(o) To prohibit and report to the court any payments

outside of the ordinary course of business;

(p) To have unlimited access to the debtor's employees,

premises,

books,

records

and

financial documents

during business hours;

© Compiled By RGL

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