Article 45p. 45

SPECIAL RULES OF PROCEDURE SUPPLEMENT TO THE RULES OF COURT

SECTION 7. When a Secured Creditor Maintains His

Security or Lien . — If a secured creditor elects to enforce

or maintain his right under the security or lien, at his

option:

(a) the value of the property may be fixed in a manner

agreed upon by the creditor and the liquidator, and

approved by the court.

When the value of the property is less than the claim it

secures, the liquidator may convey the property to the

secured creditor and the latter will be admitted in the

liquidation proceedings as an unsecured creditor for

the balance. If the value of the property exceeds the

claim secured, the liquidator may convey the property

to the secured creditor and waive the debtor's right of

redemption

upon

receiving

the

excess

from

the

creditor. In any case, any other creditor or interested

party

may, upon a prima facie showing that the

valuation is too low, contest the valuation and propose

another mode by which to dispose of the property, or to

otherwise convert it to cash or its equivalent, to ensure

that the true maximum value of the property under the

circumstances is obtained. A dissenting creditor or any

other creditor or interested party may also offer to

purchase the property at the price it is valued by the

secured creditor and the liquidator, as approved by the

court. At all times, it shall be the duty of the court to

ensure that the property is valued at its maximum

under the circumstances. In case there is conflict on the

valuation of the property, the court may appoint an

independent

third

party

appraiser

to

assist

in

determining the proper valuation of the property;

(b) the liquidator may sell the property and satisfy the

secured creditor's entire claim from the proceeds of the

sale. The sale shall be made under such terms and

conditions as the liquidator and the secured creditor

may agree upon, as approved by the court, provided,

that the costs of the sale, if any, shall be for the account

of the secured creditor; or

(c)

the

secured

creditor

may

enforce

the

lien or

foreclose on the property pursuant to applicable laws.

C. The Liquidator

SECTION 8. Qualifications of the Liquidator . — The

liquidator shall:

(a) be a citizen of the Philippines or a resident thereof

for

six

(6)

months

immediately

preceding

his

nomination;

(b) be of good moral character and with acknowledged

integrity, impartiality and independence;

(c) have the requisite knowledge of insolvency and

other relevant commercial laws, rules and procedures,

as well as the relevant training and/or experience that

may be necessary to enable him to properly discharge

the duties and obligations of a liquidator; and

(d) have no conflict of interest: Provided, that such

conflict

of

interest

may

be

waived,

expressly

or

impliedly, by a party who may be prejudiced thereby.

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 a creditor, owner, partner or stockholder of a

creditor of the debtor;

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

with that of the debtor;

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

the petition or motion for conversion, a director, officer,

owner, partner or employee of the debtor or any of the

creditors,

or

acted

as

legal counsel or auditor or

accountant of the debtor or any of the creditors;

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

the petition or motion for conversion, an underwriter of

the outstanding securities of the debtor;

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

fourth civil degree to any individual creditor, owner of a

sole

proprietorship-debtor,

partner

in

a

partnership-debtor

or

stockholder,

director,

officer,

employee or underwriter of a corporate-debtor;

(g) he has any other direct or indirect material interest

in the debtor or any of the creditors; or

(h) he was the receiver or member of the management

committee, the counsel or an employee of either, when

there is a showing that the financial distress of the

debtor

was

not

arrested

or

its

fiscal

condition

deteriorated and resulted in its liquidation by reason of

his lack of diligence or foresight.

A nominee or an elected or appointed liquidator and

their personnel shall immediately disclose to the court

any ground that may give rise to an actual or potential

conflict

of

interest,

regardless

of

his

personal

assessment of its sufficiency, as soon as he becomes

aware of it.

If the liquidator is a juridical entity, it must designate a

natural person who possesses all the qualifications and

none of the disqualifications as its representative, it

being understood that the juridical entity and the

representative are solidarily liable for all obligations and

responsibilities of the liquidator.

SECTION 9. Election of Liquidator . — The creditors

entitled to vote will elect the liquidator in open court. To

constitute a quorum for the election of the liquidator,

creditors representing or holding at least a majority of

the total claims entitled to vote must be present either

in person or by proxy. Only creditors who were included

in the schedule of debts and liabilities or registry of

claims, or have filed their claims within the period set

by the court, and whose claims are not barred by the

statute of limitations, are entitled to vote. A secured

creditor shall not be entitled to vote, unless: (a) he

waives his right under the security or lien; and (b) has

the value of the property subject of his security or lien

fixed and approved by the court, and is admitted for

the balance of his claim. The nominee receiving the

highest number of votes cast in terms of the amount of

claim

held

or

represented,

and

who

is

qualified

pursuant to Section 8 of this Rule, shall be appointed as

the liquidator.

SECTION 10. Court-Appointed Liquidator . — The court

may appoint the liquidator if:

(a) on the date set for the election of the liquidator,

there is no quorum;

(b) the creditors who attend either fail or refuse to elect

a liquidator;

(c) after being elected, the liquidator fails to qualify; or

(d) a vacancy occurs for any reason whatsoever.

In any of these cases, the court, upon motion or motu

proprio , and for good cause shown, may set another

date or hearing for the election of the liquidator. Any

person appointed by the court to administer the debtor

as a rehabilitation receiver prior to the commencement

of the liquidation may subsequently be appointed as its

liquidator.

SECTION 11. Oath and Bond of the Liquidator . — Prior to

assuming his office, the liquidator shall take an oath

and file a bond, in such amount to be fixed by the

court,

conditioned

upon

the

proper

and

faithful

discharge of his powers, duties and responsibilities.

SECTION 12. Powers, Duties and Responsibilities of the

Liquidator . — The liquidator shall be deemed an officer

of the court with the principal duty of preserving and

maximizing the value and recovering the assets of the

© Compiled By RGL

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