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THIRTEENTH CONGRESS OF THE REPUBLIC 
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&I!&; 212 i'L :j 
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OF THE PHILIPPINES 
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First Regular Session 
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t t  K L k  3Y : 
S E N A T E  
s NG. 
Introduced by Senator S. R. OsmeAa 111 
EXPLANATORY NOTE 
On July 19, 2000, the passage of RA 8799 otherwise known as the 
Securities Regulation Code effected the transfer of the quasi-judicial jurisdiction 
of the Securities and Exchange Commission to the Regional Trial Courts. For 
want of anything better, the courts are for the moment compelled to adopt the 
dated 1909 Insolvency Law, and the extremely inadequate PD 902-A. 
This bill, the Corporate Recovery Act, seeks to address the need for a set 
of procedural rules that will govern the complex processes involved in the 
suspension of payments resorted to by ailing business enterprises. It defines the 
rights of debtors and creditors in formal debt relief proceedings and provides the 
guidelines that can facilitate the resolution of the proceedings. 
This bill, which builds on the wealth of insights from current practice, seeks to 
provide fair treatment to all parties involved in a financial restructuring or 
rehabilitation, while maximizing the chances for the survival of the enterprise 
concerned. The provisions of this bill provide an ailing enterprise with four 
different means of relief, to wit: 
e 
Pre-negotiated Rehabilitation 
a 
Fast Track Rehabilitation 
e 
Court-Supervised Rehabilitation; and 
e 
Dissolution - Liquidation 
The experience of the economic crisis of 1997 and 1998 showed the 
immense waste of resources that get tied up in long-drawn out proceedings that 
follow corporate failure. In many cases, the proceedings drag on even to the 
extent of seriously threatening the survival of the subject companies. 
In 
providing a more orderly framework for these proceedings, this bill is an 
important support mechanism needed for Philippine entrepreneurship to survive 
the tortuous competitive environment of the new millennium 
In view of the foregoing, early passage of this bill is earnestly requested 
S E ~ G I O  
OSMENA III 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINES 
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First Regular Session 
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S E N A T  
s NO. 
Introduced by Senator S. R. Osmeiia 111 
AN ACT 
PROVIDING 
FOR 
THE 
RECOVERY 
OF 
FINANCIALLY 
DISTRESSED 
ENTERPRISES AND THE RESOLUTION OF THEIR INDEBTEDNESS 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
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SECTION 1. Short Tifle. - This Act shall be known as the “Corporate 
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Recovery Act.” 
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SEC. 
2. 
Declaration of Policy. - 
It shall be the policy of the State to 
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encourage a juridical debtor and its creditors to collectively and realistically resolve 
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and adjust competing claims and property rights under the supervision and approval 
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of a court when the debtor can no longer pay its debts as they corne due or when the 
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debtor has become insolvent. Such resolutions shall respect the differing priorities 
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amongst claims, and where possible, attempt to maintain the debtor’s operat’ions, 
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even though it may come under different ownership or a different corporate entity as 
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part of the resolution. When such resolutions are not feasible, it is in the interest of 
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the State to allow a speedy liquidation of the juridical debtor’s assets and the payoff of 
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SEC. 3. Definition of Terms. - As used in this Act, the term: 
its debts to the extent possible. 
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a) “Administrative expense” 
shall refer to those expenses incurred after 
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commencement of proceedings that are in the ordinary course of business or that 
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are authorized or mandated under this Act. 


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liquidated, unliquidated, fixed, contingent, unmatured, disputed or undisputed. 
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b) “Claim” shall refer to a right to payment or a right to an equitable remedy that 
results in payment, whether or not such right is the subject of a judgment or is 
c) “Commencement of proceedings” shall refer to the date on which the Court issued 
the order commending the proceedings. 
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the debtor. 
d) “Creditor” shall refer to a juridical entity or physical person holding a claim against 
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e) “Debtor” shall refer to a juridical entity organized in the Philippines unless 
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regardless of whether the property is classified as movable or immovable or 
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whether the lien against the property is statutory or consensual. 
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g) “General unsecured creditor” shall refer to a creditor whose claim or a portion 
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accordance with this Act. 
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juridical entity in question. 
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j) “Involuntary proceedings” shall refer to judicial proceedings commenced by the 
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specifically excluded by a provision in this Act. 
thereof is neither secured, preferred, nor subordinated under this Act. 
h) “Individual notice to creditor and shareholders” shall refer to notification by the 
conservator to creditors and shareholders who have filed a notice or appearance in 
i) “Insider” shall refer to a juridical entity’s director, officer, or other person in control 
of the juridical entity; a partner of the juridical entity in cases when the juridical 
entity is a partnership, a shareholder of the juridical entity holding more than ten 
percent (10%) of the shares thereof, or those persons related to these persons by 
consanguinity or affinity within the fourth civil degree; a partnership in which the 
juridical entity is a general partner, or a juridical entity that is an affiliate of the 
Court’s acceptance of a petition filed under this Act. 
k) “Publication notice” shall refer to notice through publication in a newspaper of 
general circulation for two (2) consecutive weeks. 


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I> “Secured creditor” shall refer to a creditor having a claim for repayment of a debt 
secured by a pledge when the creditor continues to possess the property, or 
secured by a statutory lien or mortgage registered with the appropriate registry of 
property when the property is in the possession of the debtor. 
m) ”Shareholder” shall refer, in addition to a holder of shares of a corporation, to a 
member of a non-stock corporation or association, or a partner in a partnership. 
SEC. 4. 
Exclusions. - 
No bank, licensed securities market participant, 
insurance company, or national and/or government unit may be a debtor under this 
Act unless a provision herein provides for such application 
For purposes of this Section, 
(a) “Bank” shall refer to any bank or quasi-bank that is potentially or actually 
subject to conservatorship, receivership, or liquidation proceedings under 
the New Central Bank Act or successor legislation. 
(b) “Insurance Company” shall refer to those companies that are potentially or 
actually subject to insolvency proceedings under the Insurance Code. 
(c) “Licensed securities market participant” shall refer to a licensed exchange, 
broker, dealer, underwriter, transfer agent, salesman or other persons 
transacting securities who is subject to mandatory investor protection fund 
regulations. 
SEC. 5. Court. - The Court or Courts for hearing and resolving cases brought 
under this Act shall be designated by the Supreme Court. 
SEC. 6. Power of Court. Upon motion or motu propio, the Court may issue 
any order or judgment that is necessary to carry out the provisions in this Act. Parties 
that are granted relief under such orders shall be entitled to immediate execution 
thereof unless such orders are restrained or enjoined by the Court of Appeals or the 
Supreme Court. 
SEC. 7. Procedural Rules. - The Supreme Court may promulgate rules of 
practice, pleading and procedure to substitute for or adopt any provisions in this Act 


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that it determines to be procedural in nature: Provided, however, That such rules 
shall not restrict, enlarge or modify any substantive rights established by this Act. 
SEC. 8. Subsfanfive and Procedural Consolidafion. - Each juridical entity 
shall be considered in separate cases under the proceedings in this Act. The Assets 
and liabilities of a debtor may not be commingled or aggregated with those of another 
under these proceedings: Provided, however, That the Court may allow for procedural 
consolidation of cases to allow for a more efficient and speedy disposition of 
proceedings under this Act. 
SEC. 9. Required Service on Parties. - Service of pleadings and any other 
papers filed with the Court shall be deemed served on the creditors upon the service 
of such on the conservator or liquidator that is appointed pursuant to this Act. Service 
upon shareholders shall be deemed complete upon service on the official authorized 
to accept service. for the debtor: Provided, however, That a party filing a pleading 
concerning a particular property interest of the debtor or a claim against the debtor 
shall serve, in addition to the conservator or liquidator, the parties making the claim of 
having a particular ownership or security interest in the property that is the subject of 
the dispute. 
The Court may establish reasonable requirements for distribution of documents 
in electronic form or otherwise to the creditors and shareholders through the 
conservator or liquidator. 
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0. Collecfive Decision-making of Credifors and Shareholders. - 
Any provision in this Act that refers to approval, rejection or other collective action by 
the creditors (or to a class or sub-group of a class thereon) shall refer to the results of 
a process by which at least half of the creditors (or a class or sub-group of a class 
thereof) have manifested such a decision either through affidavits or the signed 
minutes of a meeting. The means of counting creditors for such decisions shall be 
solely by amount of claim unless specifically stated otherwise in this Act. Decisions of 
shareholders shall be made by majority vote according to the relevant provisions of 
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with this Act. 
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SEC. 11. 
Creditors’ 
Represenfatives. 
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Creditors may designate 
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representatives to vote or otherwise act on their behalf by filing notice of such 
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representation with the Court and serving a copy on the conservator or liquidator. 
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SEC. 12. Liability of directors and officers. - Directors and officers of a 
the Corporation Code or Civil Code provisions on partnership that are not inconsistent 
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debtor that distributes proceeds from the liquidation of a debtor under proceedings 
other than those described under this Act when the debtor’s funds are insufficient to 
repay all creditors claims in full shall be liable for any claims of creditors that remain 
unpaid after the distribution. 
CHAPTER II. INITIATION OF PROCEEDINGS 
Sub-chapter 1. Voluntary Proceedings 
SEC. 13. Petition to lnifiate Voluntary Proceedings. - A debtor that 
foresees the inability of paying its obligations as they come due, or that believes itself 
to be insolvent may initiate voluntary proceedings under this Act by filing a petition 
with the Court. In order to establish an entitlement to relief under this Act, the 
debtor’s petition shall 
(a) identify the debtor, its principal activities and addresses; 
(b) state the fact of and the cause of the debtor’s insolvency or inability to pay 
its obligation as they become due; 
(c) specifically state the relief sought pursuant to Chapter IV of this Act; 
(d) Include the attachments as required by this Act. 
SEC. 14. Attachments to the Petition, - The following documents shall be 
filed with the petition: 
(a) a verified resolution by the appropriate decision-making body of the debtor 
authorizing the filing of the petition and the initiation of the case; 
(b) the audited annual financial statements of the debtor from the three years prior 
to the filing of the petition; 
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(c) The interim financial statement as of the end of the month prior to the filing of 
the petition; 
(d) A schedule of liabilities indicating the name and address of each creditor, the 
amount of each claim as to principal, interest, or penalties due as of the date 
of filing, and the status of the claim under the provisions on priorities of claims 
under this Act; 
(e) An inventory of assets stating, with reasonable specificity, the nature of each 
asset, the location and condition thereof, the book value or estimated market 
value thereof, any applicable ownership registration data, the encumbrances 
or other claims thereon, and the identities and addresses of the lien holders or 
other parties with interests therein. The inventory shall include a schedule of 
accounts receivable, indicating the nature and amount of each account, the 
persons from whom due, and the dates of maturity. 
(9 Copies of certificates of title to the debtor’s property; 
(9) A schedule of payments and dispositions of assets which the debtor executed 
within a period of one hundred and eighty (180) days prior to the filing if the 
counter-party is not an insider of the debtor; 
(h) A detailed schedule of the cash flow of the debtor for the ninety (90) days from 
the date that the petition is filed, taking into account the expenses likely to be 
incurred in connection with proceedings under this Act. 
(i) An affidavit of a responsible officer of the debtor verifying the truth of the 
matters alleged in the petition and the accuracy of the information contained in 
the attachments; 
(j) Other documents that may be required under this Act depending on the form of 
relief requested, 
SEC. 15. Commencement of Proceedings. - Proceedings shall commence 
upon the Court’s issuance of an order finding the petition and attachments to be 
reasonably sufficient in form and substance. Such an order shall include the elements 
set forth in Section 21 of this Act. It shall also, where applicable, require that the 
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period. 
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Sub-chapter 2. Involuntary Proceedings 
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debtor provide documents not included with its petition within a reasonable time 
SEC. 16. Circumstances Necessary to Initiate Involuntary Proceedings. - 
A creditor shall be entitled to initiate voluntary proceedings against a debtor if: 
(a) he and at least two other creditors of the debtor 
have undisputed or 
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adjudicated claims, the required payments on which have remained for 
more than sixty (60) days; or 
(b) a creditor has initiated foreclosure proceedings against the debtor that will 
prevent the debtor from paying its debts as they come due or will render it 
insolvent. 
SEC. 17. Petition to lnitiafe Involuntary Proceedings. - In order to establish 
an entitlement to relief under this Act, the creditor’s petition shall: 
(a) Identify the debtor, its principal activities, and its address; 
(b) State the circumstances sufficient to support a petition to initiate involuntary 
proceedings; 
(c) Specifically state the relief sought under Chapter IV of this Act. 
SEC. 18. Preliminary Proceedings on the Sufficiency of a Petition. - The 
procedures for service of summons on the debtor as a respondent, preliminary 
remedies, responsive pleadings, and determination of the existence of a viable cause 
of action under this sub-chapter shall be regulated by the Rules of Court. 
SEC. 19. Basis for lnifiating Involuntary Proceedings. The Court shall 
initiate involuntary proceedings upon determining that the debtor is or will be unable to 
meet its debts as they come due or has or will imminently become insolvent. Upon 
establishment of the condition in sub-section (a) of Section 16 of this Act, there shall 
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be a disputable presumption that the debtor cannot meet its debts as they come due. 
The order containing the Court’s finding shall also include the elements set forth in 
Section 24 of this Act. 
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CHAPTER 111 - ADMINISTRATION OF THE PROCEEDINGS 
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Sub-chapter I. 
The Debtor Under Proceedings 
SEC. 20. Effect of Commencement of Proceedings. - The Court’s issuance 
of an order commending proceedings (either voluntary or involuntary) shall: 
vest in the conservator the right to management and control the debtor and 
to exercise all rights of the debtor’s board of directors and management to 
manage the debtor. 
Vest the conservator with the right to review and obtain all records to which 
the debtor’s management had access, including bank accounts of the 
debtor; 
Impose upon the debtor’s management and directors the legal obligation to 
provide the conservator with access to and possession of all records to 
which the debtor’s management and directors had access; 
Suspend all legal proceedings against the debtor in other courts on 
grounds of lis pendens; 
Suspend all actions to enforce any judgments against the debtor; 
Render null and void the results of any extra-judicial activity to seize 
property, sell encumbered property, or otherwise attempt to collect on or 
enforce a claim against the debtor after the commencement of proceedings 
unless otherwise allowed in this Act; 
Render null and void any setoff after commencement of proceedings of any 
debt owed to the debtor by any of the debtor’s concerns; 
Render null and void the perfection of any lien against the debtor’s property 
after the commencement of proceedings; 
Consolidate the resolution of all legal proceedings by and against the 
debtor to the Court: Provided, however, That the Court may allow the 
continuation of cases in other courts where the debtor had initiated the suit. 
Attempts to seek legal or other recourse against the debtor outside these 
proceedings shall be sufficient to support a finding of indirect contempt of Court. 
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The Court may order, through its injunctive and contempt powers, the transfer 
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documents, return of property, 
the annotation of titles and other relevant 
documents, or provide for other appropriate relief to address any violations of this 
Section or to protect the interests of creditors and shareholders. 
Individuals who refuse to accede to request for documents or property 
described in this Section shall be liable for indirect contempt of Court, as well as all 
resulting costs and attorneys’ fees. 
SEC. 21. ’ Exception to Prohibition of Actions Against the Debtor with 
regard fo Securities. - The prohibition in Section 20 of this Act shall not apply to the 
actions of a licensed broker or dealer to sell pledged securities of a debtor pursuant to 
a securities pledge or margin agreement. 
SEC. 22. 
Non-applicability of Suspension Order to Appeals and 
Specialized Proceedings. - The suspension order shall not apply to appeals cases 
filed at the Court of Appeals or the Supreme Court 
prior to commencement of 
proceedings: Provided, That the execution of any judgment resulting from such appeal 
or remand for further proceedings shall be directed to the Court. 
The Court may exclude from its suspension order cases pending or filed at a 
specialized court or a quasi-judicial agency when it determines that the court of 
agency is capable of resolving the claims more quickly, fairly and efficiently than the 
Court: Provided, That the execution of any judgment of such court of agency shall be 
referred to the Court and shall be treated as a non-disputed claim. 
SEC. 23. Application of Suspension to Government Financial Institutions 
The provisions in the preceding Sections shall apply to government financial 
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institutions as creditors, notwithstanding provisions in their charters to the contrary. 
SEC. 24. 
Order Commending Proceedings. - 
The order commencing 
proceedings (either voluntary or involuntary) shall : 
(a) identify the debtor, its principal activities, and its address; 
(b) State the grounds for initiating the proceedings; 
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(c) State the relief sought under this Act and any requirements or procedures 
particular to the relief sought; 
(d) State the legal effects of the commencement of the proceedings; 
(e) Appoint a conservator, or liquidator when appropriate; 
(9 Summarize the requirements and deadlines for creditors to establish their 
claims against the debtor; 
(9) Indicate the location(s) at which documents regarding the debtor and the 
proceedings under this Act may be reviewed and copied; 
The conservator shall publish the order in a newspaper of general circulation 
for two (2) consecutive weeks, the date of the first publication to be no later than five 
business days after issuance of the order. 
SEC. 25. 
Properfy of the Debtor Under the Control of Management of 
Third Parties. - Third parties possessing or controlling property of the debtor may 
not sell or otherwise convey it to persons other than the debtor, unless otherwise 
specified by the conservator. 
Upon written request of the conservator and after 
payment of any claims secured by possessory pledges or mechanic’s liens, such third 
parties shall transfer possession or control of such to the latter: Provided, however, 
That the conservator may arrange to have the third party continue to possess, 
manage, or dispose of the property in such an arrangement that would more likely 
preserve and/or increase the value of the property in question or the total value of the 
assets held by the debtor. 
SEC. 26. 
Unencumbered Property that May be Sold or Otherwise 
Transferred During the Proceedings. - The Court may rescind any transfers of the 
debtor’s unencumbered property or encumbrances thereof by the debtor or its agents 
that occur after the commencement of the proceedings and are outside the ordinary 
course of business: Provided, however, That the following transactions may be 
implemented upon a decision of the Court, after notice and hearing: 
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(a) Payments to victims of quasi-delicts upon a showing that the claim of the 
quasi-delict is valid and the debtor has insurance to indemnify the debtor for 
the payments made; 
(b) Sales of the debtor’s unencumbered property if such is in the interest of 
administering 
the debtor 
and facilitating 
the preparation and 
implementation of a rehabilitation plan; 
(c) mortgages or pledges or property in order to provide a substitute lien under 
Sections 28 and 29 of this Act; 
(d) payments made to repurchase property of a debtor that is auctioned off in a 
judicial or extra-judicial sale under Section 27 of this Act; or 
made to reclaim property of the debtor held pursuant to a 
(e) payments 
possessor’s pledge or mechanic’s lien. 
SEC. 27. Foreclosures on Encumbered Assets of the Debtor. - The Court, 
after notick and hearing, may allow a foreclosure on encumbered property of the 
debtor and it sale according to applicable Rules of Court and relevant legislation if 
such foreclosure is in the best interest of the creditors and shareholders of the debtor 
or if such foreclosure is specifically authorized by this Act. 
SEC. 28. Sale or Disposal of Encumbered Property or Property of Others 
in Trust or Otherwise Held by the Debtor, - No provision in this Act shall be read 
as to create a defense against estafa or other criminal charges or civil claims against 
persons responsible for the sale or disposal of encumbered property or property of 
others held by the debtor: Provided, however: That the conservator may sell or 
dispose of such property if: 
(a) such sale or disposal is necessary for the continued operation of the 
debtor’s business; 
(b) the conservator has made arrangements to provide a substitute lien or 
ownership right that provides an equal level or security for the country- 
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(c) the Court, after notice and hearing, has approved the sale or disposal of 
such property according to the criteria in sub-sections (a) and (b) of this 
Section. 
SEC. 29. 
Treatment of Rapidly Depreciating and Encumbered Property 
Owned by fhe Debtor. - Upon the application of a creditor whose claim is secured by 
movable property subject to potentially rapid depreciation, the Court shall, after 
notice and hearing, order the conservator to either: 
(a) allow the property to be foreclosed upon by the secured creditor; 
(b) convey to the secured creditor a lien on substitute property of the debtor if 
such is acceptable to the creditor and is not opposed by any senior lien 
holders of such property, of it such is not available; 
(c) convey to the secured creditor a lien on the residual funds from the sale of 
any encumbered property during the proceedings. 
SEC. 30. Rescission of Pre-commencement Transactions. - Transactions 
that have occurred prior to the commencement of proceedings may be rescinded by 
the Court on grounds that they were executed with an intent to defraud creditors or if 
it finds evidence sufficient to show such a design by the debtor and the third party. A 
disputable presumption of such design shall arise if the transaction: 
(a) provided unreasonably inadequate consideration to the debtor and is 
executed one hundred and eighty (180) days prior to the commencement 
of proceedings if the third party is not an insider of the debtor; 
(b) involves the payment of a dividend to shareholders executed in violation of 
the Corporation Code, the provisions in the debtor’s corporate charter or 
by-laws or other agreements of the debtor; 
(c) involves an accelerated payment of a claim to a creditor one hundred and 
eighty (180) days prior to the commencement of proceedings if the creditor 
is an insider of the debtor and ninety (90) days prior to the commencement 
of proceedings if the creditor is not an insider of the debtor. 


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Provided, however, That nothing in this Section shall prohibit the Court from 
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rescinding a transaction on other grounds provided by relevant legislation and 
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jurisprudence: 
and Provided, further, 
That the provisions of the Civil Code on 
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SEC. 31. Post-commencement lnterest. - lnterest on claims owed by the 
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debtor as of commencement of proceedings shall accrue at the pre-default rates 
rescission shall apply to these transactions in a suppletory manner. 
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established in the debtor’s contract: Provided, however, That secured creditors may 
elect instead to freeze their claims as of the date of the commencement of 
proceedings and be paid a use charge based on the outstanding balance or the value 
of the encumbered property (whichever is less) calculated at a rate equivalent to that 
paid on 91-day government securities sold on or around the date of commencement of 
proceedings. A failure by secured creditors to notify the conservator of such election 
within thirty (30) days shall be deemed a waiver of this right. 
SEC. 32. 
Post-commencement Credit - With the concurrence of the 
committee of general unsecured creditors of the debtor and the approval of the Court, 
the conservator may: 
(a) enter into credit arrangements on behalf of the debtor, the payments under 
which shall be considered an administrative expense; or 
(b) enter into credit arrangements on behalf 
of the debtor, 
secured by 
mortgages of its unsecured property. 
SEC. 33. 
Treatment of Employees. - The conservator may dismiss the 
debtor’s employees from employment. In such cases, there shall be a disputable 
presumption that the grounds of such retrenchment 
shall be to prevent losses. 
Claims of separation pay for months worked prior to commencement of proceedings 
shall be considered a pre-commencement claim and shall be added to the registry of 
claims established in Sub-chapter 2 of this Chapter. Claims for salary and separation 
pay for work performed after commencement of proceedings shall be an 
administrative expense. 


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SEC. 34. Treatment of Lessors and Other Counter-Parties in Contract. - 
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Unless specifically cancelled by a court decree prior to issuance of the order 
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commencing proceedings, all contracts of the debtor with creditors and other third 
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parties shall be deemed to continue in force, regardless of pre-commencement 
defaults by the debtor provided that the debtor makes payments for such services 
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and goods that are provided after commencement of proceedings. 
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Within sixty (60) days following commencement of the proceedings, the 
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conservator shall notify each contractual counter-party of whether the debtor is 
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confirming or breaching the particular contract. Contractual obligations of the debtor 
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arising during this period, and afterwards for confirmed contracts shall be an 
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administrative expense. Contracts now confirmed by the required deadline shall be 
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considered breached. Obligations of the debtor for damages and other penalties 
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arising as the result of the conservator’s election to breach shall be considered a pre- 
commencement claim against the debtor and shall be added to the registry of claims 
established in sub-chapter 2 of this Chapter. 
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SEC. 35. 
Opportunity for Counter-party in Contract fo Cure after 
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Receiving Notice of Confirmation by the Conservator. - Any counter-party in a 
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contract with the debtor shall have a reasonable period of time to cure any breaches 
of its obligations to the debtor that occurred subsequent to commencement of the 
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proceedings upon receiving notice of the conservator” confirmation of the contract. 
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Sub-Chapter 2. Determination of Claims 
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SEC. 36. ‘Determination of Tax Liabilities. - The debtor shall, as soon as 
reasonably possible, 
file a tax return for determination of tax liabilities as of 
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commencement of proceedings. 
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SEC. 37. 
Establishment of a Preliminary Registry of Claims. - Within 
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twenty (20) days of appointment, the conservator shall establish a preliminary registry 
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of claims. Such registry shall state for each claim: 
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(b) the amount of the claim as of the date of commencement of proceedings, if 
the claim is not unliquidated; 
(c) the extent to which it is secured by a lien on the debtor’s property as of the 
date of the commencement of the proceedings; 
(d) its preference classification among those established by Sub-chapter 4 of 
Chapter 4 of this Act; 
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(e) whether it is undisputed, disputed, contingent or unliquidated; 
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(9 the basis of the claim and a reference to the underlying documents 
supporting the claim of the dispute thereof. 
The preliminary registry of claims shall subtotal the disputed, undisputed, and 
contingent claims for each preference class, 
including an estimate of unpaid 
administrative expenses that will have accrued by the close of the proceedings. 
Records of the claim kept in the normal course of business by the debtor shall be 
prima facie evidence of an undisputed claim and will be the basis for its inclusion in 
the preliminary registry of claims. Where appropriate, the conservator shall divide a 
claim into secured and unsecured classes depending on the estimated value of the 
en cu m be red property . 
Upon completion of the registry, the conservator shall make it available for 
public inspection and provide publication notice to creditors and shareholders on 
where and when they may inspect it. 
SEC. 38, 
Procedure for Supplementing the Preliminary Registry of 
Claims. - Any person may file an application to the conservator to recognize a claim 
against the debtor within twenty (20) days after the second date of publication notice 
that the preliminary registry of claims has become available. 
SEC. 39. Procedures for Determining Disputed and Undisputed Claims. - 
Within thirty (30) days from the expiration date for supplementing the preliminary 
registry of claims, creditors, shareholders and other interested parties may submit a 
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challenge of a claim or claims to the Court, serving a certified copy on the conservator 
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and the challenged creditor. Such challenge shall se forth with reasonable specificity 
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the basis therefor. Upon the expiration of the thirty (30) days challenge period, the 
conservator shall submit to the Court the registry of claims containing the undisputed 
claims that have not bee subject to challenge. Such claims shall become final upon 
the filing of the register and may be subsequently set aside only on grounds of fraud, 
accident, mistake or excusable neglect. 
SEC. 40. Procedure for Adjudicating Disputed, 
Challenged, 
and 
Unliquidated Claims. - 
Decisions of the conservator regarding a claim may be 
appealed to the court. In such disputes, the parties shall be the conservator and the 
disputing creditor or the debtor (in cases where a claim is alleged to be wrongfully 
allowed): 
Provided, however, 
That any creditor or other party who might be 
prejudiced by the allowance or disallowance of the claim may intervene in the 
proceeding . 
SEC. 41. 
Procedure for Appealing Decisions of the Conservator 
Regarding Disputed, Challenged, and Unliquidated Claims. - The procedures for 
appealing the decisions of the conservator shall be governed by applicable Rules of 
court. 
SEC. 42. 
Estoppel of Secured Creditors Regarding Overvaluation of 
Their Encumbered Property. - A secured creditor claiming a full or partial security 
shall be estopped from claiming as an unsecured creditor the difference between the 
claimed and realized value of the encumbered property if the amount realized from a 
sale of the encumbered property fails to cover the claimed or attributed value thereof. 
Such amount shall be a subordinated claim under Section I06 of this Act. 
SEC. 43. Estimation of Claims for Purposes of Voting or Serving on a 
Creditors’ Committee. - Upon request of a creditor or shareholder, the Court shall 
after notice and hearing, estimate a disputed, challenged, or unliquidated claim for 
determination of the creditor’s rights in participating in collective decision-making of 
creditors. Provided, however, That any creditor who might be prejudiced by the 
estimation of the claim may participate in the proceedings. 
Sub-chapter 3. 
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The Conservator and the Unsecured Creditor’s Committee 
SEC. 
44. 
Who May Serve as Conservafor. - 
Any individual with the 
following qualifications may serve as a conservator: 
(a) expertise and acumen to manage and operate a business similar in size 
and complexity as that of the debtor under the circumstances called for 
depending on the particular relief requested. 
(b) Knowledge in management, 
finance and rehabilitation 
of distressed 
companies ; 
(c) General familiarity with the provisions of this Act and the rights and duties 
of a conservator thereunder; 
(d) Absence of any criminal record or evidence of questionable moral 
character; 
(e) Willingness and ability to file a bond in such amount as may be determined 
by the Court. 
A group of individuals who combine to meet the above qualifications, or a 
juridical entity with employees that combine to meet the above qualifications may 
serve as a conservatorship committee or as a conservator, respectively. 
SEC. 45. Conflicts oflnferesf. - No individual may serve as conservator, 
perform conservatorship functions as an employee of a conservator, or serve on a 
conservatorship committee if he has a conflict of interest: Provided, however, That 
conflicts of interest that might compromise the conservator’s duty to the debtor may 
be waived by vote of the debtor’s board of directors, and conflicts of interest that 
might compromise the conservator’s duties toward the creditors or shareholders may 
be waived by a simple majority decision of the disinterested parties. 
For purposes of this section, a conservator, a member of a conservatorship 
committee or an employee of a juridical entity serving as a conservator shall have a 
conflict of interest if: 
(a) he is a creditor or stockholder of the debtor; 
(b) he is engaged in a competing line of business as the debtor; 
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(c) he is, or was, within two (2) years prior to the filing of the petition, a 
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director, officer or employee of the debtor or any of its present creditors; or 
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(d) he is, or was within two (2) years prior to the filing of the petition, the 
auditor, accountant of the debtor, or a director, officer or employee thereof; 
(e) he is, or was within two (2) years prior to the filing of the petition, an 
underwriter of the outstanding securities of the debtor, or a director, officer 
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(f) he is related by consanguinity or affinity within the fourth civil degree to the 
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individuals enumerated in this Section; or 
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(9) he has any other direct or indirect material interest in the debtor or any 
creditor sufficient to cause reasonably based concern that such interest 
would compromise impartiality or diligence in performing conservatorship 
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duties. 
SEC. 46. Appoinfmenf of a Conservator. - The conservator shall be 
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appointed by the Court: Provided, however, 
That the Court shall appoint as 
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conservator any qualified individual whose nomination is supported by more than fifty 
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percent (50%) of the secured creditors and general unsecured creditor, if evidence of 
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such is submitted with the petition or by a manifestation to the Court prior to the 
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conservator’s appoint men t . 
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SEC. 47. Rights and Duties o f a  Conservafor. - Subject to the control of the 
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Court, the conservator shall administer and preserve the property of the debtor during 
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the pendency of the proceedings, for purposes of protecting the interests of the 
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creditors and shareholders thereof, taking into account their rights as determined by 
this Act, the rules of procedure of the Court, and other applicable laws: Provided, 
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however, That absent evidence of circumstances justifying more direct management, 
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the rights and responsibilities of administering and preserving the assets of the debtor 
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shall be delegated to the debtor’s management. 
The conservator shall further be deemed an officer of the Court tasked with 
facilitating the resolution of the various rights of the creditors and shareholders. 
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The Conservator shall not be subject of any action, claim or demand in 
connection with any act done or omitted to be done by him in good faith in the 
exercise of his functions and in connection with the exercise of his powers conferred 
by this Act or other actions duly approved by the Court. 
SEC. 48. 
Dufy to 
Report on Steps Taken to Protecf the Value of 
Encumbered Property and Property of Ofhers. - On a monthly basis, or according 
to a schedule approved by the Court, the conservator shall report to the Court and 
interested parties the steps taken to maintain the value of encumbered property and 
property of others held by the debtor during the course of the proceedings. 
SEC. 49. Dufy to Act as Service Agent for Parties Making an Appearance. 
- The conservator shall serve as the agent for receiving service of all pleadings and 
other papers filed in connection with the proceedings under this Act and shall keep a 
complete and accurate record of all pleadings filed during the proceedings as well as a 
summary log describing each pleading. The conservator shall immediately deliver, by 
messenger, mail, fax or electronic means to all parties making an appearance copies 
of documents (or notice of their availability for inspection and copying) filed with the 
Court and shall file with the Court and affidavit of service to this effect. 
The 
conservator may charge a reasonable fee for this service, the rates for which are to be 
approved by the Court: Provided, however, That such notice shall be free of charge if 
the creditor consents to notice by electronic mail and submits a valid electronic mail 
i 
address as part of its notice of appearance. 
SEC. 50. Suspension of Cases in Ofher Courts. - The conservator shall 
have the right and duty in pending cases against the debtor in other courts to appear 
on behalf of the debtor and move to have such cases suspended pending the 
resolution of the proceedings in the Court. 
SEC. 51. 
Recording of Pending Proceedings at Property Registration 
Offices. - The conservator shall take all reasonable steps to preserve the rights of 
the debtor through submissions to the applicable land and property registries in 
accordance with applicable legislation: Provided, That no such actions shall diminish 
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or otherwise compromise the rights of claimants with valid, prior-registered liens 
against such property. 
SEC. 52. Removal o f a  Conservator. - The conservator may be removed by 
a decision of the Court for cause, or regardless of cause, by a decision supported by 
at least five of the seven members of the general unsecured creditors’ committee. 
SEC. 53. Employment of Professionals. - Upon approval of the Court, and 
after notice and hearing, the conservator may employ specialized professionals and 
other experts to assist him in the performance of his duties, who shall be considered 
either employees or independent contractors of the conservator. Such individuals 
shall enjoy rights of the conservator to the extent such is delegated to them. 
SEC. 54. Compensation and Terms of Service. The conservator and his 
direct employees or independent contractors shall be entitled to compensation for 
reasonable fees and expenses from the debtor according to terms approved by the 
Court after notice and hearing. Prior to such hearing, the conservator and his direct 
employees shall be entitled to reasonable compensation on the grounds of quantum 
merit. Such costs shall be an administrative expense. 
SEC. 55. 
General Unsecured Creditors’ Committee. Unless otherwise 
provided for in this Act, the Court shall appoint a committee of seven general 
unsecured creditors that have the largest such claims against the debtor and that are 
willing to serve in such capacity. 
SEC. 56. Rights of the General Unsecured Creditors’ Commitfee. The 
unsecured creditors’ committee shall have the right to: 
(a) object to petitions for post-commencement financing requested by the 
conservator; 
(b) review the conservator’s records in connection with the administration of 
the debtor; 
(c) remove the conservator from his position in accordance 
with the 
procedures in this Act; 
(d) prepare a rehabilitation plan if so required under this Act; and 
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(e) appoint one attorney to represent the legal interests of the general 
unsecured creditors, the reasonable costs of which shall be reimbursable 
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form the debtor as an administrative expense. 
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CHAPTER IV - REMEDIES 
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Sub-chapter 1. Fast Track Rehabilitation 
SEC. 57. Default Relief. - The debtors and creditors shall be limited to relief 
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under this sub-chapter unless: 
(a) the debtor has initiated voluntary proceedings under this Act seeking relief 
under Sub-chapter 3 of this Chapter; 
(b) the debtor is a non-stock corporation or a partnership or 
(c) more than half of the secured creditors request conversion to relief under 
sub-chapter 2 of this Chapter within thirty days of notice of commencement 
of proceedings. 
SEC. 58. Presentation and Approval of Plan. Within thirty (30) days of 
commencement of proceedings, the conservator shall submit a time bound plan for 
implementing the relief allowed under this sub-chapter, serving individual notice on 
creditors and shareholders that a plan is available to them for review and comment. 
The Court shall set a hearing on the plan no later than thirty (30) days from 
the date of notice of its submission. The plan shall be approved by the Court no later 
than ten (IO) days after the hearing unless the plan fails to provide sufficient detail as 
to how it will be implemented or if it violates the provisions of this Act. 
SEC. 59. ' Establishment and Capitalization of a Subsidiary of the Debtor. 
- The conservator shall establish a subsidiary corporation (NewCo) whose shares 
shall be issued to be debtor in the form of a single class of common stock: Provided, 
however, 
That five (5) 
of the issued shares may be issued to nominee 
holders/incorporators, one of whom shall be the conservator. The number of shares 
issued shall equal the amount of indebtedness of the debtor represented by its 
disputed and undisputed claims reflected in the registry of claims. The par value of 
each share shall be one peso: Provided, however, That the debtor may issue no par 
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value shares if the amount of the indebtedness exceeds the estimated value of the 
debtor’s assets. 
The consideration for the shares shall be the property of the debtor, including 
its non-rejected leasehold and contractual rights and obligations. 
Contractual 
provisions prohibiting such transfers or assignments shall be deemed null and void: 
Provided, 
That encumbered property shall be transferred to NewCo subject to 
existing liens. 
SEC. 60. Non-requirement of Approval of Shareholders. - Notwithstanding 
the provisions of the Corporate Code, the debtor, through the conservator, may 
transfer all or substantially all of the assets of the debtor to NewCo without the 
approval of the debtor’s shareholders. 
SEC. 61. lssuance of Bonds. - The conservator may also arrange for the 
issuance of bonds by NewCo to the debt: Provided, That the total nominal value of 
such bonds shall not exceed twenty percent (20%) of the debt of the debtor and the 
monthly payments on which shall not exceed twenty percent (20%) of the monthly 
payment obligations of the debtor at the time of commencement of proceedings: 
Such bonds may be secured by liens on property of NewCo. Notwithstanding any 
contractual prohibitions or regulations to the contrary, the conservator may establish 
and register liens on encumbered property of NewCo: Provided, That such liens are 
junior to pre-existing liens. 
SEC. 62. Offer to Current Shareholders. - In cases where the debtor had 
initiated voluntary proceedings, the shareholders of the debtor shall have the option 
of purchasing up to twenty percent (20%) of the shares of NewCo, prior to their 
public sale. The purchase price of the shares shall be equal to twenty percent (20%) 
of the total disputed and undisputed claims. The expiration date for receiving offers 
shall be no later than sixty (60) days from approval of the plan. Each purchase offer 
shall be combined with the offer to tender at least twenty percent (20%) of the shares 
of the debtor. In cases where more than one offer is tendered, the winner of the 
tender shall be the offeror submitting the greatest number of the debtor’s shares. The 
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funds tendered by the purchases shall be held in escrow until the auction of the 
remaining shares. Shares that are submitted in a winning bid shall obtain the status 
of treasury shares of the debtor. 
SEC. 63. Aucfion of Shares. - The shares and bonds of NewCo shall be 
offered to the public in a manner designed to maximize the price paid: Provided, 
however, That the reserve price for the shares and bonds shall be equal to the amount 
of the secured claims against the debtor plus estimated outstanding administrative 
costs of the pr.oceedings, less the amount raised from any initial offering to 
shareholders. 
SEC. 64. Creditor Claim Cerfificafes. - In order to facilitate the liquidity of 
claims and increase demand for the shares of NewCo, the conservator or his agent, 
with the approval of the Court, may issue up to five creditor claim certificates for each 
claim, to be denoted series A-E. Each such certificate shall indicate on its face the 
amount of the claim and its priority status under Sub-chapter 4 of this Chapter. At 
the request of the creditor and for a reasonable fee, the conservator or his agent 
shall issue certificates in smaller amounts. 
SEC. 65. 
Transferring creditor claim cerfificafes. - 
Individuals may 
purchase creditor claim certificates of any series from creditors or other holders, the 
consideration for which may be cash or a promise of shares in NewCo. 
Such 
certificates may be transferred by delivery or through a registry administered by the 
conservator or a transfer agent designated by the conservator. A creditor may 
transfer differing series of Creditor Claim Certificates to various potential bidders. 
SEC. 66. Use of creditor claim certificates in bidding. - 
The auction 
organizer shall accept creditor claim certificates in lieu of cash or in a combination 
therewith, taking into account the valuation calculated under Section 67 of this Act. 
The inclusion of a creditor claim certificate in a winning bid shall be deemed a 
complete waiver of the right represented by the certificate to participate in the 
distribution of cash proceeds from the sale. 
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SEC. 67. Valuation of Creditor Claim Certificates Submifted in Bidding. - 
The value ascribed to a creditor claim certificate of any particular class submitted in a 
bid shall be proportional to the extent that cash generated from the offering of shares 
is available to pay non-submitted claim certificates of that particular class. 
SEC. 68. Effect of Failure fo Meet Reserve Price for Controlling Block of 
Shares. - A failure of the auction to garner an amount of cash and secured creditor 
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claim certificates, which when added to the amount raised by the offer to current 
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shareholders, equals the amount of the secured claims and estimated administrative 
costs shall result in a conversion to liquidation procedures under this Act. In such 
case the money in escrow from any shareholder offer and from the bidders shall be 
returned, the contracts transferring the property of the debtor to NewCo shall be 
rescinded, and any liens created to secure bonds of NewCo shall be cancelled. 
SEC. 69. Calling of Shareholders’ Meefing. - The conservator shall call an 
extraordinary shareholders’ meeting no later than thirty (30) days after the finalization 
of the sale of the shares of the NewCo. The meeting shall call for, among other 
things, the election of new members of the board of directors of the NewCo. 
SEC. 70. Dissolution of fhe Debfor. - After distribution of the proceeds from 
the sale of the shares of NewCo, the conservator shall assume the rights and duties 
of a liquidator 
of the debtor and finalize its dissolution according to procedures 
described in Sub-chapter 4 of this Chapter. 
Su b-C ha pter 2. Court-Su pervised Re ha b i I itati o n 
SEC. 71. Who is Eligible. - Relief under this Sub-chapter is available to the 
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following debtors: 
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(a) stock corporations, the majority of the secured creditors of which have 
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sought relief under this sub-chapter, either through a motion submitted to 
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the court, or in an affidavit attached to the petition, or 
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(b) non-stock corporations, partnerships and associations. 
SEC. 72. Initial Meeting of Debtor and Creditors. Within thirty (30) days of 
commencement of proceedings, the conservator shall hold a meeting of creditors, the 
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SEC'. 73. Preparation o f a  Rehabilitation Plan. - The debtor, through its 
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Board of Directors, shall prepare a plan for initial submission to the conservator and 
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the Court for distribution to the creditors and shareholders by no later than ninety (90) 
time and place of which shall be established in the order. The debtor shall be 
required to send a representative to answer questions under oath concerning matters 
of concern to the creditors. 
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dyas after commencement of proceedings. The Board of Directors of the debtor may 
act on behalf of the shareholders to hire an individual group of financial and legal 
experts to act as a rehabilitation planner: Provided, however, That the debtor may 
waive its right to submitting a plan if it states so in its petition, in which case the 
committee of general unsecured creditors may prepare a plan for initial submission to 
the creditors and shareholders no later than one hundred and twenty (120) days after 
commencement of proceedings. The committee of general unsecured creditors may 
hire an individual or group of financial and legal experts to act as a rehabilitation 
planner. 
SEC. 74. Compensation of a Rehabilitation Planner. The compensation of 
a rehabilitation planner shall not be considered an administrative expense. 
SEC. 75. Effect of Failure to Submit Plan to Conservator within the 
required Period. - The Court shall convert the proceedings to liquidation under 
Sub-chapter 4 of this Chapter if a plan is not submitted to the conservator within the 
required period. Provided, That the Court may allow an extension of time if approved 
by a majority of the secured creditors and general unsecured creditors. 
SEC. 76. Minimal Contents o f a  Plan. - In order to be approved by the 
Court, the Plan shall: 
(a) contain information sufficient to give the various classes of creditors and 
shareholders a reasonable basis for determining whether supporting the 
plan is in their financial interest when compared to the liquidation of the 
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(b) establish classes of creditors and shareholders based on the classes of 
priority claims established in sub-chapter 4 of this Chapter. 
(c) specify the treatment of each class described in subsection (b); 
(d) provide for equal treatment of all unpaid claims within a class unless the 
particular creditor voluntarily agrees to less favorable treatment; 
(e) disclose all payments of pre-petition debts made during the proceedings 
and the justifications thereof; 
(9 describe the claims against the debtor still subject to dispute and the 
provisioning of funds to account for appropriate payments should be claim 
be ruled valid or its amount adjusted; 
(9) require the debtor and its counter-parties to adhere to the terms of all 
contracts that the conservator has chosen to confirm; 
(h) arrange for the payment of all outstanding administrative expenses as a 
condition of the plan’s approval unless such condition has been waived in 
writing by a specific creditor; 
(i) contain a valid 
and binding resolution of a meeting of the debtor’s 
shareholders to increase the shares by the required amount in cases 
where the plan 
issuance of shares by the 
debtor; 
contemplates an additional 
(j) include opinion letters of attorneys of the rehabilitation planner certifying that 
the transactions and arrangements of the plan are consistent with the law. 
SEC. 77. Disclosure fo credifors and shareholders. - Upon its completion, 
the plan shall be submitted to the conservator and the Court. The conservator shall 
make copies of the plan available to the creditors and shareholders for review and 
copying and shall within 
five (5) days 
of receipt, 
notify each creditor 
and 
shareholder who has made an appearance of such availability. Such notice shall 
inform the creditors 
and shareholders that they have the right to submit to the 
conservator a manifestation of their opposition to the plan within forty-five (45) days 
of receipt of notice that the plan is available for review. 
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SEC. 78. Submission of Plan for Approval. - If the majority of a creditor or 
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shareholder class has not submitted a manifestation of opposition to the plan after 
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forty-five (45) days from the time it was distributed to the creditors and shareholders, 
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the conservator 
shall submit the plan to the Court 
for approval along with a 
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manifestation of no opposition. If a majority of a class of creditors or shareholders 
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opposes the plan, the conservator shall submit a manifestation of such to the Court 
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instead of a plan for approval. 
SEC. 79. Conversion to Liquidation Proceedings Upon Rejection of the 
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Plan. - Upon receipt of a manifestation by the conservator that a majority of a 
creditor or shareholder class has rejected the plan, the Court shall convert the 
proceedings to those under Sub-chapter 4 of this Chapter. 
SEC. 80. Minimum Standards for Confirmation. - The Court shall approve a 
plan only if the following requirements are met: 
(a) the plan conforms to the requirements of Section 76 of this Act; 
(b) the plan maintains the security of interest of secured creditors unless such 
has been waived or modified voluntarily; 
(c) the plan has been disclosed to creditors and shareholders according to 
the provisions in Section 77 of this Act; and 
(d) the plan is not rejected by the majority of any class of creditors or 
shareholders established in the plan. 
If the Court determines that the plan fails to meet the minimal requirements 
established in this Sub-chapter, and if determines that such non-conformity was not in 
bad faith and is reasonably curable, it shall order the return of the plan to its authors 
for correction and resubmission to the creditors or shareholders for review. 
SEC. 81. Approval of plan notwithstanding disputes over claims. - The 
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Court may approve a plan notwithstanding unresolved disputes over claims so long 
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as the required support of the plan is maintained regardless of the outcome of the 
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disputes and the plan can accommodate payment of the claims regardless of the 
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outcome of the disputes. 
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SEC. 82. Effect of Approval. - Approval of the plan shall discharge the 
financial payment obligations of the debtor unless otherwise allowed to the extent 
called for by the plan. Contracts and other arrangements between the debtor and its 
creditors shall be deemed to continue to apply to the extent that they do not conflict 
with the payment provisions of the plan. Any compromises on amounts payable by 
the debtor shall be binding on all creditors regardless of whether or not the plan is 
successfully implemented, unless the plan is revoked on grounds of fraud. Claims 
arising after approval of the plan that are otherwise not treated by the plan are not 
subject to any suspension order. 
Unless an arrangement otherwise is specifically called for in the rehabilitation 
plan, the order shall revest full control of the debtor back to the debtor’s management. 
The order approving the plan shall comply with Rule 36 of the Rules of Court: 
Provided, however, That the Court may maintain jurisdiction over the case in order to 
resolve claims against the debtor that remain contested. 
SEC. 83. 
Liabilify of General Partners 
of a Partnership for Unpaid 
Balances Under an Approved Plan. - The approval of the plan shall not affect the 
rights of creditors to pursue actions against the general partners of a partnership to 
the extent they are liable under relevant legislation for the debts thereof. 
SEC. 84 
Treatment of lncome Derived from Forgiveness of Debt. - 
lncome imputed upon the debtor by any indebtedness reduced in connection with a 
plan’s approval shall be considered income earned prior to commencement 
of 
proceedings under this Act. 
SEC. 85. Effect of Failure fo Approve. - A failure to approve the plan by the 
Court shall result in a conversion of proceedings under this Sub-chapter to those 
under sub-chapter 4 of this Chapter. 
SEC. 86. Revocation of Plan on Grounds of Fraud. - Within ninety (90) 
days from the approval of the rehabilitation plan, and after notice and hearing, the 
Court may revoke the approval thereof on the grounds of fraudulent inducement. In 
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such case, the debtor shall come under the proceedings in Sub-chapter 4 of this 
Chapter. 
SEC. 87. Discharge offhe Conservator. - Upon issuance of approval of the 
rehabilitation plan, the conservator shall provide a final report and accounting to the 
Court. The Court shall then discharge the conservator of his duties. 
Sub-chapter 3. Pre-negotiated Rehabilitation 
SEC. 88. Requirements. - any debtor as defined under this Act may file a 
petition seeking pre-negotiated rehabilitation as a form of relief. The petition, in 
addition to the requirements under Sub-chapter 2 of this Chapter shall include: 
(a) five copies of a rehabilitation plan prepared in accordance with the 
requirements established in Sub-chapter 2 of this Chapter; 
(b) a judicial compromise agreement under Title XIV of the Civil Code 
evidencing consent by creditors and shareholders sufficient to allow an 
approval under Sub-Chapter 2 of this Act; 
(c) 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; 
(d) the name of a qualified candidate for conservator, supported by more than 
half of the secured creditors and general unsecured creditors. 
SEC. 89. Procedures. - Upon receipt of a petition seeking pre-negotiated 
rehabilitation, the Court shall issue an order in accordance with Sub-chapter 1 of 
chapter 3 of this Act, supplemented with information sufficient to inform interested 
parties as to the deadlines and procedures established in this sub-chapter. 
SEC. 90. Exempfion From Deferminafion of Claims. - The requirements of 
Sub-chapter 3 of Chapter 3 shall not apply to proceedings under this Sub-chapter. 
SEC. 91. 
Inspection and Review of Rehabilitafion Plan. 
- 
Upon 
commencement of the proceedings, the conservator shall make available for review 
and copying the rehabilitation plan by any interested party. 
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SEC. 92. Approval by She Court. - Within fifty (50) days from the date of the 
second publication notice that proceedings have commenced the Court shall approve 
the plan unless a creditor submits an objection to it in accordance with this Sub- 
chapter. 
SEC. 93. Objecfjon. - Any creditor or shareholder, within forty-five (45) days 
from the second date of publication notice of commencement of proceedings may 
submit to the Court an objection to a plan filed under this Sub-chapter. Objections to 
a rehabilitation plan shall be limited to the following: 
(a) the plan fails to include the information or attachments required by Sub- 
chapter 2 of this Chapter; 
(b) the documents filed by the debtor are materially false or misleading; 
(c) a majority of any class of creditors does not support the plan; 
(d) the plan fails to accurately account for a claim against the debtor; or 
(e) the creditors’ support was induced by fraud. 
Copies of any objection to the plan shall be served 
on the debtor, 
the 
and the largest seven secured creditors and largest seven general 
conservator, 
unsecured creditors who support the plan. 
SEC. 94. Hearing an objecfion. - Upon receipt of an objection, the Court 
shall issue an order setting the time and date of the hearing on the objection. The 
date of such hearing shall be no earlier than sixty (60) and no later than seventy (70) 
days after the second date of publication notice of commencement of proceedings. If 
the Court finds the objection valid, it shall order, when possible, the debtor to cure the 
petition of plan within a reasonable period. If the Court determines that the debtor 
and/or creditors acted in bad faith, or that the bases for objection are non-curable, 
the Court shall order the conversion of these proceedings to those under Sub- 
Chapter 4 of this chapter. A finding by the Court that the objection lacks merit shall 
issue an order approving the plan in accordance with sub-chapter 2 of this chapter. 
28 
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SEC. 95. Effect of Approval. - Approval of the plan under this Chapter shall 
have the same legal effect as approval of a plan under sub-chapter 2 of this chapter. 
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Sub-chapter 4. Dissolution and Liquidation 
SEC. 
96. 
Requirements for hifiation. - 
Dissolution and liquidation 
proceedings shall commence either: 
(a) upon a finding that a petition to initiate voluntary proceedings seeking such 
relief is sufficient in form and substance; or 
(b) upon issuance of an order converting the proceedings under other forms of 
relief to those under this sub-chapter: Provided, That such order shall 
contain the relevant information required under Section 24 of this Act. 
SEC. 97. Appointment of a Liquidator. - The order commending liquidation 
proceedings shall name a liquidator, who may be the conservator administering the 
debtor prior to the commencement of liquidation portion of the proceedings. 
SEC. 98. 
Consequences of lnitiating Liquidation Proceedings. - The 
commencement 
of liquidation proceedings shall either initiate or continue the 
administration of the debtor in accordance with Chapter I l l  of this Act subject to the 
particular provisions under this Sub-chapter: 
Provided, 
however, That upon an 
initiation of liquidation proceedings, the debtor shall be declared dissolved and all 
contracts and agreements of the debtor shall be deemed breached as of the date of 
commencement of proceedings. 
SEC. 99. Specific Rights and Duties of a Liquidafor. - In addition to the 
rights and duties of a conservator, the liquidator shall have the following rights and 
duties: 
(a) to file a notice with the Securities and Exchange Commission that the 
dissolution of the debtor has commenced; 
(b) in cases when there has been an order converting the proceedings from 
other proceedings in this Chapter, to publish the order in a newspaper of 
general circulation for two (2) consecutive weeks, the date of the first 
publication to be no later than five (5) business days after issuance of the 
order; 
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(c) to discontinue the business operations of the debtor except for those 
operations necessary to maintain the value of the properties of the debtor 
prior to their sale; 
(d) to dismiss the debtor’s management and work force to the extent that they 
are not needed to maintain the value of the properties of the debtor prior 
to their sale; 
(e) to transfer possession of all properties held in trust or other custodial 
arrangement by the debtor to the beneficiaries or to a successor trustee, 
taking into account the requirement of any applicable trust arrangement; 
(f) to return or surrender all properties of third parties used by the debtor under 
lease: Provided, That the liquidator may postpone such transfer if such 
properties are needed to maintain the value of the properties of the debtor 
prior to their sale’ 
(9) to submit to the Court within forty-five (45) days from his qualification an 
inventory of all the assets of the debtor describing with sufficient 
particularity the nature, condition and value thereof; 
(h) to submit to the Court a liquidation plan in accordance with the 
requirements of this Act not later than sixty (60) days 
from the 
commencement of the proceedings; 
(i) to sell assets of the debtor prior to the approval of the liquidation plan if 
such assets are subject to rapid depreciation in value, or such sales are 
necessary to raise funds to preserve the assets of the debtor: Provided, 
however, That the sale of the assets shall be made under commercially 
reasonable conditions in a manner reasonably designed to maximize the 
revenues gained from the sale; 
(j) to keep the funds of the debtor that are not needed for immediate 
disbursement in bank accounts insured by the Philippine Deposit Insurance 
Corporation, 
or in bills and other evidences of indebtedness of the 
Republic of the Philippines of the Bangko Sentral ng Pilipinas; 
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time impose on him. 
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SEC. 100. Compensation of the liquidator. - The compensation scheme for 
4 the liquidator shall be established with a view towards providing the liquidator with 
5 
reasonable incentives to maximize the amount of money paid out to creditors and 
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shareholders for legitimate claims. 
(k) to perform such other duties and function as the Court may from time to 
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SEC. IUI. Requirements of a Liquidation Plan. - The liquidation plan shall 
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(a) describe with reasonable detail the assets of the debtor including any 
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readily ascertainable values; 
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(b) disclose the details of any sales, abandonment, or other dispositions of the 
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debtor’s assets by the liquidator prior to the submission of the plan; 
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(c) describe the manner for selling the debtor’s assets and how this manner is 
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superior to other methods in terms of the likelihood of obtaining the greatest 
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recovery for the creditors and shareholders; 
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(d) specifically describe the treatment of encumbered assets of the debtor 
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(abandonment, dacion en pago, sales bundled with other assets); 
(e) specifically describe the treatment of cause of action, receivable and other 
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claims held by the debtor (action by the liquidator, or assignment); 
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(9 state the amount of undisputed indebtedness of the 
debtor for each 
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preference class; 
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(9) describe the amount of disputed or contingent liabilities and their likelihood 
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of maturity and impact on the undisputed creditors and shareholders. 
SEC. 102. Hearing and Approval of Plan. - Upon receipt of the liquidation 
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plan, the Court shall issue an order setting a hearing therefrom, informing the 
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creditors that the Plan has been submitted and is available for examination and 
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copying, and directing all creditors of record to submit their comment or opposition 
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thereto no later than fifteen (15) days before the date of the hearing. 
SEC. 103. Disposition of Encumbered Property Held by the Debtor. - The 
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liquidator may arrange to dispose of encumbered property of the debtor through any 
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means allowed by law in order to maximize the liquidation dividend for the creditors 
2 
and shareholders: Provided, however, That the liquidator may not sell encumbered 
3 
property bundled with other property if the amount offered or bid is not sufficient to 
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cover the amount of the claims of the creditors holding liens on the property offered 
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for sale: Provided, further, That the restrictions on the rights of secured creditors to 
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foreclose on and sell encumbered immovable property shall not extend beyond sixty 
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(60) days from the date of the approval of the liquidation pian and thirty (30) days from 
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such date with regard to all other encumbered property. 
SEC. 104. Rules for Payment of Claims Secured by Encumbered Property. 
I O  
- The liquidator shall distribute the proceeds of the sale of encumbered property, 
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after paying reasonable costs of sale, relevant property taxes, and the expenses 
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necessary to extinguish any possessory liens, according to a priority established by 
the date of their registration in the appropriate registry. No subsequently registered 
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lien holder shall receive payment unless all lien holders senior thereto are paid in 
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full. Proceeds remaining after payment of claims secured by registered liens shall be 
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applied to claims secured by statutory non-possessory liens on the property not 
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registered with the appropriate registry: Provided, That portions of claims arising 
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from imposition of a fine, penalty, forfeiture, or exemplary or punitive damages that 
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are not compensatory 
for pecuniary loss suffered by the creditor 
shall be paid 
20 
according to Section 106 of this Act. 
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Where proceeds are insufficient to pay in full a claim secured by a registered 
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lien, the portion remaining unpaid shall be paid according to Section 106 of this Act. 
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Where proceeds are insufficient to pay in full all claims secured by unregistered 
statutory liens, the proceeds from the sale shall be applied to such claims on a pro- 
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rata basis. Portions of such claims not covered by the proceeds from the sale shall 
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be paid according to Section 106 of this Act. 
SEC. 105. Rule for Payment of Unsecured Claims. - The liquidator shall 
2s 
pay the undisputed unsecured claims of the debtor according to the order set forth in 
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Section 106 of this Act. The liquidator shall not pay the claims of any particular class 
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unless and until the creditors of the more senior classes have been paid in full. 
Where assets are available only to pay a portion of a class, the liquidator shall make 
payment on a proLrata basis. 
SEC. 106. Priority of Unsecured Claims. - The liquidator shall distribute the 
proceeds from the sale of unencumbered property and shall distribute the surpluses 
from the sale of encumbered property according to the following order in accordance 
with the procedures established in Section 105 of this Act: 
(a) administrative expenses; 
(b) unpaid labor wages, other mandate compensation and corresponding 
withholding tax on laborers; 
(c) claims of Government for taxes and other mandatory contributions to local 
budgetary agencies not otherwise treated in this Sub-chapter arising 
through transactions entered into up to the day before commencement 
proceedings; 
(d) all claims not otherwise specified in this Section; 
(e) portions of claims arising from imposition of a fine, penalty, forfeiture or 
exemplary or punitive damages that are not compensation for pecuniary 
loss suffered by the creditor; 
(9 claims which have been subordinated by either consent of the creditor or by 
a provision in this Act or other legislation. 
Proceeds remaining after payment to the creditors listed in this Section shall 
be paid to shareholders of the debtor according to the priorities established in relevant 
legislation. 
SEC. 107. Contingency for Dispufed Claims. - The liquidator shall set 
aside funds for paying all disputed claims. In the event that claims are denied and 
appeals on such decisions are exhausted, the liquidator shall distribute the funds to 
unpaid undisputed creditors and shareholders according to the order of priority in 
Sections 104 and 106 of this Act. 
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SEC. 108. Submission and review of final reporf of liquidator. - Upon 
distribution of the proceeds, the liquidator shall submit a report to the Court which 
shall describe the methods and results 
of the sale of debtor's assets and the 
distribution of proceeds to the creditors. The liquidator shall also send copies of the 
report to the creditors and shareholders or notify them that the report is available for 
review and copying. Upon receipt of the report, the Court shall schedule a hearing, 
notice of which shall be sent to the creditors and shareholders by the liquidator. At 
the hearing, the liquidator shall answer any questions of the Court of the creditors or 
shareholders concerning the liquidation of the debtor. 
SEC. 109. Order 
Removing the Debtor From the List of Registered 
Entities at the Securities and Exchange Commission. - Upon determining that the 
liquidation has been completed according to this Act and applicable law, the Court 
shall issue an order approving the report and ordering the Securities and Exchange 
Commission to remove the debtor from the registry of legal entities. 
SEC. I 
I O .  Termination of Proceedings. - Upon receipt of evidence showing 
that the debtor has been removed from the registry of legal entities at the Securities 
and Exchange Commission, it shall issue an order terminating the proceedings. 
CHAPTER V. 
PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITATION 
PROCEEDINGS 
SEC. 113. Initiation of Proceedings. - The court shall set a hearing in 
connection with an insolvency or rehabilitation proceeding in a foreign jurisdiction, 
upon the submission of a petition by the representative of the foreign entity that is the 
subject of the foreign proceeding. 
SEC. 114. ' Provision of Relief. - The Court may issue orders: 
(a) suspending any actions to enforce claims against the entity or otherwise 
seize or foreclose on property of the foreign entity 
located in the 
Philippines; 
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(b) requiring 
the surrender of property of the foreign entity to the foreign 
representative; 
(c) providing other necessary relief. 
SEC. 115. Facfors Determining €nfif/emenf fo Relief. - In determining 
whether to grant relief under this Sub-chapter, the Court shall consider: 
(a) the protection of creditors in the Philippines and the inconvenience in 
pursuing their claims in a foreign proceeding; 
(b) the just treatment of all creditors through resort to a unified insolvency or 
rehab i I i ta t ion proceeding ; 
(c) whether 
other jurisdictions have given recognition to the foreign 
proceeding; 
(d) the extent that the foreign proceeding recognizes the rights of creditors and 
other interested parties in a manner substantially in accordance with the 
manner proscribed in this Act; and 
(e) the extent that the foreign proceeding has recognized and shown deference 
to proceedings under this Act and previous legislation. 
CHAPTER VI. MISCELLANEOUS PROVISIONS 
SEC. 116, Separabilify Provisions. - If any section or provision of this Act 
shall be declared unconstitutional or invalid, the other section or provisions thereof 
shall continue in full force and effect. 
SEC. 117. Repealing Clause. - The specified section of the following Acts 
are hereby deemed repealed: 
(a) the Insolvency Law, Sections 51 and 52; 
(b) Presidential Decree No. 902-A, Section 5(d); and 
(c) The Corporation Code, Section 119. 
SEC. 118. Amending Clause. - Article 2237 of the Civil Code is hereby 
amended to read as follows: "Insolvency and rehabilitation of juridical entities shall be 
governed by special laws; the provisions of this Code shall apply in a suppletory 
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manner. Insolvency of physical persons shall be governed by special laws insofar as 
they are not inconsistent with this Code.” 
SEC. 119. Effectivity. - 
This law shall take effect immediately upon its 
approval. 
SEC. 120. Application to Pending Insolvency, Suspension of Payments 
and Rehabilitation Cases. This act shall govern all petitions filed after it takes 
effect, and also all further proceedings in insolvency, suspension of payments and 
rehabilitation cases then pending, except to the extent that in the opinion of the Court 
their application would not be feasible or would work injustice, in which event the 
procedures set forth in prior laws and regulations shall apply. 
Approved, 
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