The Philippines now has an up to date bankruptcy framework which aims for a faster and more orderly rehabilitation or liquidation of financially distressed companies and individuals. This took 10 years to achieve. Before the end of the 14th session of the congress they passed the “Financial Rehabilitation and Insolvency Act” on Tuesday. This is finally replacing the stone-old Insolvency Law of 1909. The bill now just needs the signature of President Gloria Macapagal Arroyo and then it will be the new bankruptcy law of the Philippines. The new bankruptcy law bill was filed with the House of Representatives of the 11th Congress nearly 10 years ago on July 20, 2000.
House Representatives Juan Edgardo “Sonny” Angara, Ramon “Red” Durano VI, who were among the proponents of the law, said that this reform would give banks and other lenders a reason to lend at cheaper rates as they would know in advance that their rights as creditors were protected. This is one effect of the new bankruptcy law. “The lack of a modern insolvency legislation caused untold damage to our economy. Mere liquidity problems nearly spelled the death knell for businesses. Our vintage 1909 Insolvency Law was simply not responsive to the 21st century needs of our financially distressed companies. It did not have Chapter 11-like provisions that could have resuscitated them back to life. Many of our companies have suffered a perverted death in the process,” said Sen. Edgardo Angara, one of the bill’s proponents. “Over the years, our economy was unduly deprived of these engines of growth and our people thousands, if not millions, of jobs,” he said.
Under the new bankruptcy law, called Financial Rehabilitation and Insolvency Act, a court-supervised rehabilitation is available for debtors who are able to get more than 50 percent but less than 67 percent creditor approval for their rehabilitation. However, they must not have more than 50 percent of each class of creditors (secured and unsecured creditors) agreeing to the plan.
Those debtors who get between 67 percent and 85 percent creditor approval for their own rehabilitation or restructuring plan should consider applying for a pre packaged or pre negotiated rehabilitation. Similar to the court-supervised rehabilitation, debtors must not have more than 50 percent of each class of creditors agreeing to the plan.
As per the bankruptcy law out-of-court or informal rehabilitation will apply for debtors who secure at least 85 percent creditor approval, with a minimum of 67 percent of secured creditors and 75 percent of unsecured creditors agreeing to the bankruptcy plan. Unlike the court-supervised and pre-packaged bankruptcy protection, there is no need to go to court unless debtors want to seek assistance to enforce the plan or restructure the agreement. Another remedy type offered under new Philippine bankruptcy law is debt forgiveness or the amount by which the debt is reduced, which releases debtors from any tax on the part of either the creditor or the debtor.
In case the debtors cannot be rehabilitated, the new legislation states that they must go into liquidation for an orderly settlement of debts and liabilities. So if you run a company which is not doing so well right now you might wanna check out the new ways to protect you and your business partners as well as banks and lenders from the worst effects of a bankruptcy.Some local news is curated - Original might have been posted at a different date/ time! Click the source link for details.