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THIRTEENTH CONGRESS OF THE REPUBLIC 
9 
OF THE PHILIPPINES 
1 
Second Regular Session 
1 
S E N A T E  
S.No. 
2183 
(In substitution of Senate Bill Nos. 208 and 1847) 
Prepared by the Committee on Banks, Financial Institutions and Currencies, 
with Senators Sergio Osmefia I11 and Edgardo I. Angara, as authors. 
AN ACT 
PROVIDING FOR THE REHABILITATION OR LIQUIDATION 
OF FINANCIALLY DISTRESSED ENTERPRISES 
Be it enacted in the Senate and House of Representatives of the 
Philippines in the Congress assembled: 
CHAPTER I -GENERAL PROVISIONS 
Section 1. Title - This Act shall be known as the "Corporate Recovery 
and Insolvency Act." 
Section 2. Declaration of Policy - It is the policy of the State to 
encourage an insolvent juridical debtor and its creditors to collectively and 
realistically resolve and adjust competing claims and property rights. In 
furtherance thereof, the State shall ensure a timely, fair, transparent, effective 
and efficient rehabilitation or liquidation of an insolvent juridical debtor. The 
rehabilitation or liquidation shall be made with a view to ensuring or maintaining 
certainty and predictability in commercial affairs, shall preserve and maximize the 
value of the assets of the debtor, shall recognize creditor rights and respect 
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priority of claims, and shall ensure equitable treatment of creditors who are 
similarly situated. 
Section 3. Nature of Proceedings - The proceedings under this Act 
shall be In Rem in nature and shall be conducted in a summary and non- 
adversarial manner. 
Section 4. Definition of Terms - As used in this Act the term: 
a. 
"Administrative Expense" shalt refer to those reasonable and 
necessary expenses: 
(i) 
incurred in connection with the filing of a petition under the 
provisions of this Act; 
(ii) 
arising from or in connection with the conduct of the 
proceedings under this Act, including those incurred for the 
rehabilitation or liquidation of the Debtor; 
incurred in the ordinary course of the business of the Debtor 
after the Commencement Date; or 
(iii) 
(iv) 
for the payment of new loans obtained after the 
Commencement Date to finance the rehabilitation of the 
Debtor. 
(v) 
incurred for the fees of the Rehabilitation Receiver or 
Liquidator and of the professionals engaged by them; 
that are otherwise authorized or mandated under this Act. 
(vi) 
"Claim" shall refer to a right to payment or a right to an equitable 
remedy that results in payment by the corporation, whether arising 
from a debt or other type of legal obligation, whether liquidated or 
b. 
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C. 
d. 
e. 
f. 
9. 
h. 
k. 
unliquidated, fixed or contingent, matured or unmatured, disputed 
or undisputed. 
"Commencement Date" shall refer to the date on which the Court 
issues the order referred to in Section 10 of this Act. 
"Commencement Order" shall refer to the order issued by the Court 
under Section 10 of this Act. 
"Court" shall refer to the court designated by the Supreme Court to 
hear and determine, at the first instance, the cases brought under 
this Act. 
"Creditor" shall refer to a natural or juridical person which has a 
Claim against the Debtor that arose on or before the 
Commencement Date. 
"Date of Liquidation" shall refer to the date on which the Court 
issues the order referred to in Section 71 of this Act. 
"Debtor" shall refer to a juridical legal entity duly organized and 
existing under Philippine laws, unless specifically excluded by a 
provision of this Act. 
"Encumbered Property" shall refer to real or personal property of 
the Debtor upon which a Lien attaches. 
"Insolvent" shall refer to the financial condition of a Debtor that is 
generally unable to pay its liabilities as they fall due in the Ordinary 
Course of Business or that has liabilities that are greater than its 
assets. 
"Lien" shall refer to a statutory or contractual charge on real or 
personal property that legally entitles a Creditor to resort to said 
property for payment of the Claim upon which said lien attaches, 


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I. 
“Liquidation” shall refer to the proceedings under Chapter V of this 
Act. 
“Liquidation Order” shall refer to the order issued by the Court 
under Section 71 of this Act. 
“Liquidator” shall refer to the natural person or juridical entity 
appointed as such by the Court and entrusted with such powers 
and duties as set forth in this Act, Providedthat, 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. 
“Ordinary Course of Business” shall refer to transactions consistent 
with both (i) the operation of the Debtor‘s business prior to 
insolvency proceedings, and (ii) ordinary business terms. 
m. 
n. 
0. 
P. 
“Rehabilitation Receiver” shall refer to the 
natural person or 
juridical entity appointed as such by the Court and entrusted with 
such powers and duties as set forth in this Act, Providedthat, if the 
Rehabilitation Receiver 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 Rehabilitation Receiver. 
“Rehabilitation Plan” shall refer to a plan by which the financial 
well-being and viability of an Insolvent Debtor can be restored 
using various means, 
including, 
but not limited to, 
debt 
forgiveness, debt rescheduling, debt-equity conversion and sale of 
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the business (or parts of it) as a going concern, or setting-up of 
new business entity as prescribed in Section 41 hereof. 
"Secured Claim" shall refer to a Claim that is secured by a Lien. 
"Secured Creditor" shall refer to a Creditor with a Secured Claim. 
"Securities Market Participant" shall refer to a broker, dealer, 
underwriter, transfer agent, or other juridical persons transacting 
securities in the capital market. 
"Shareholder" shall refer to a holder of shares of a corporation, or 
to a member of a non-stock corporation or association, or a partner 
in a partnership. 
'Unsecured Claim" shall refer to a Claim that is not secured by a 
Lien. 
"Unsecured Creditor" shall refer to a Creditor with an Unsecured 
Claim. 
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Section 5. Exclusions - The term Debtor does not include banks, 
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insurance companies, pre-need companies, cooperatives and national and local 
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government agencies or units. For purposes of this Section: 
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b. 
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C. 
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"Bank" shall refer to any duly licensed 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. 
"Insurance Company" shall refer to those companies that are 
potentially or actually subject to insolvency proceedings under the 
Insurance Code. 
"Pre-Need Company" refers to any corporation authorized/licensed 
to sell or offer to sell Pre-Need Plans. 
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d. 
"Cooperatives" shall refer to duly registered associations of 
persons, with a common bond of interest, who have voluntarily 
joined together to achieve lawful common social or economic end, 
making equitable contributions to the capital required and 
accepting a fair share of the risk and benefits of the undertaking in 
accordance with universally accepted cooperative principles. 
Provided that government financial institutions other than banks and 
government-owned or-controlled corporations shall be covered by this Act, 
unless their specific charter provides otherwise. 
Section 6. Promulgation of Procedural Rules - The rules of 
pleading, practice, and procedure to govern the proceedings brought under this 
Act shall be promulgated by the Supreme Court. 
CHAPTER XI 
COURTSUPERVISED REHABILITATION 
A. 
INITIATION OF PROCEEDINGS 
Section 7. Petition by Debtor. When approved by a majority vote of 
the board of directors or trustees and authorized by the vote of the stockholders 
representing at least two-thirds (2/3) of the outstanding capital stock, or in case 
of non-stock corporation, by the vote of at least to two-thirds (2/3) of the 
members, in a stockholder's or member's meeting duly called for the purpose, an 
insolvent Debtor may apply for, and seek, Rehabilitation by filing a petition for 
Rehabilitation with the Court. The petition shall be verified, establish the 
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insolvency of the Debtor and the viability of its Rehabilitation, and contain, 
whether as an attachment or as part of the body of the petition, as a minimum: 
a. 
b. 
C. 
d. 
a schedule of the Debtor's debts and liabilities including a list of 
creditors with their addresses, amounts of claims and collaterals, or 
securities, if any; 
an inventory of all its assets including receivables and claims 
against third parties; 
a Rehabilitation Plan, and 
the names of at least three nominees to the position of 
Rehabilitation Receiver. 
Section 8. Petition by Creditor/% Any Creditor or group of Creditors 
with a Claim of, or the aggregate of whose Claims is, at least One Million Pesos 
or at least twenty five percent (25%) of the subscribed capital stock or partners' 
contributions, whichever is higher, may apply for and seek the Rehabilitation of 
the Debtor by filing a petition for the Rehabilitation of the Debtor with the Court. 
The petition shall be verified and shall establish: 
a. 
That there is no genuine issue of fact or law on the Claim/s of the 
petitioner/s, and that the due and demandable payments thereon 
have not been made for at least sixty (60) days; and 
b. 
That there is a substantial likelihood that the Debtor may be 
rehabilitated. 
The petition shall include, whether as an attachment or as part of the 
body of the petition, a Rehabilitation Plan and the names of at least three (3) 
nominees to the position of Rehabilitation Receiver. 
Section 9. Action on the Petition. If the Court finds the Petition to 
be sufficient in form and substance, it shall, within five (5) working days from the 
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filing of the petition, issue a Commencement Order. If, within the same period, 
the Court finds the petition deficient in form or substance, the Court may, in its 
discretion, give the petitioner/s a reasonable period of time within which to 
amend or supplement the petition, or to submit such documents as may be 
necessary or proper to put the petition in proper order. In such case, the five (5) 
working days provided above for the issuance of the Commencement Order shall 
be reckoned from the date of the filing of the amended or supplemental petition 
or the submission of such documents. 
8. 
ADMINISTRATION OF THE PROCEEDINGS 
Section 10. Commencement of Proceedings. The Rehabilitation 
Proceedings shall commence upon the issuance of the Commencement Order, 
which shall: 
a. 
b. 
C. 
d. 
e. 
Identify the Debtor, its principal business or activity/ies, and its 
principal place of business; 
Summarize the ground/s for the filing of the petition; 
Declare that the Debtor is under rehabilitation; 
Direct the publication of the Commencement Order in a newspaper 
of general circulation once a week for at least two (2) consecutive 
weeks, with the first publication to be made within seven (7) days 
from the time of its issuance; 
If the petitioner is the Debtor, direct the service by personal 
delivery of a copy of the Petition on each Creditor holding at least 
ten percent (lO0/o) 
of the total liabilities of the Debtor as 
determined from the schedule attached to the petition within five 
(5) days; If the petitioner/s is/are Creditor/s, direct the service by 
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f. 
9. 
h. 
i. 
i. 
k. 
I. 
m. 
personal delivery of a copy of the petition on the Debtor within five 
(5) days. 
Appoint a Rehabilitation Receiver, who may or may not be from 
among the nominees of the petitioner/s; 
Direct all Creditors to file their Claims with the Court at least five 
(5) days before the initial hearing; 
Prohibit the Debtor's suppliers of goods or services from 
withholding supply of goods and services in the ordinary course of 
business for as long as the Debtor makes payments for the services 
or goods supplied after the issuance of the Stay Order; 
Authorize the payment of Administrative Expenses as they become 
due; 
Set the case for initial hearing, which shall not be more than forty 
(40) days from the date of filing of the petition; 
Make available copies of the petition and Rehabilitation Plan for 
examination and copying by any interested party. 
State that any Creditor or the Debtor, who is not the petitioner, 
may submit the name or nominate any other qualified person to 
the position of Rehabilitation Receiver at least five (5) days before 
the initial hearing; 
Include a Suspension or Stay Order which shall: 
(i) 
Suspend all actions or proceedings, in court or otherwise, for 
the enforcement of Claims against the Debtor. However, the 
suspension order shall not apply: 
1. To cases already pending appeal in the Supreme Court as 
at the Commencement Date; Provided, That, any final 
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and executory judgment arising from such appeal shall 
be referred to the Court for appropriate action. 
2. To the enforcement of claims against sureties and other 
persons solidarily liable with the Debtor, and third party 
or accommodation mortgagors; 
3. To any form of action of customers or clients of a 
Securities Market Participant to recover or otherwise 
clalm moneys and securities entrusted to the latter in the 
ordinary course of the latter’s business as well as any 
action of such Securities Market Participant or the 
appropriate 
regulatory 
agency 
or 
self-regulatory 
organization to pay or settle such claims or liabilities.. 
Suspend all actions to enforce any judgment, attachment or 
other provisional remedies against the Debtor; 
Prohibit the Debtor from selling, encumbering, transferring 
or disposing in any manner any of its properties except in 
the ordinary course of business; and 
Prohibit the Debtor from making any payment of its liabilities 
outstanding as of the Commencement Date except as may 
be provided herein. 
(ii) 
(iii) 
(iv) 
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Section 11. Suspension or Stay Order. The Suspension or Stay Order 
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shall be effective for a period of three (3) months from the date of the filing of 
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the petition. I f  there is a substantial likelihood that the Debtor will be 
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successfully rehabilitated, it may be extended for three (3) months at a time, 
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provided, that, in no case shall the total period of extension exceed fifteen (15) 
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months. In determining whether there is substantial likelihood for the Debtor to 
be successfully rehabilitated, the Court shall ensure that the following minimum 
requirements are met: 
a. 
b. 
C. 
d. 
e. 
The Rehabilitation Receiver submits a report, based on preliminary 
evaluation, stating that the underlying assumptions and the 
financial goals stated in the petitioner’s Rehabilitation Plan are 
realistic, feasible and reasonable; or, if not, there is, in any case, a 
substantial likelihood for the Debtor to be successfully rehabilitated 
because, among others, there are sufficient assets with which to 
rehabilitate the Debtor and there is sufficient cash flow to maintain 
the operations of the Debtor; 
The petition is not a sham filing intended only to delay the 
enforcement of the rights of the Creditors, or of a Creditor, or of 
any group of Creditors; 
The petition, the Rehabilitation Plan and the attachments thereto 
do not contain any materially false or misleading statements; 
If the petitioner is the Debtor, that the Debtor has met with its 
Creditorls representing at least three-fourths (3/4) of its total 
obligations and made a good faith effort to reach a consensus on 
the Rehabilitation Plan; If the petitioner/s is a Creditor or group of 
Creditors, That the petitioner/s has met with the Debtor and made 
a good faith effort to reach a consensus on the Rehabilitation Plan; 
and 
The Debtor has not committed acts of misrepresentation or in fraud 
of its Creditors, or a Creditor or a group of Creditors. 
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Section 12. Action at the Initial Hearing. At the initial hearing, the 
Court shall: (a) Determine the Creditors who have made a timely and proper 
filing of their notice of Claims; (b) Hear and determine any objection to the 
qualifications or the appointment of the Rehabilitation Receiver and, if necessary, 
appoint a new one in accordance with Section 20 or Section 24 hereof; (c) Direct 
the Creditors to comment on the petition and the Rehabilitation Plan, and to 
submit the same to the Court and to the Rehabilitation Receiver within a period 
of not more than twenty (20) days; (d) Direct the Rehabilitation Receiver to 
evaluate the financial condition of the Debtor and to prepare and submit to the 
Court within forty (40) days from the initial hearing the Report mentioned in 
Section 14 hereof. 
Section 13. Effect of Failure to File Notice of Claim. A Creditor 
whose Claim is not listed in the Schedule of Debts and Liabilities and who fails to 
file a notice of claim in accordance with the Commencement Order but 
subsequently files a belated Claim shall not be entitled to participate in the 
Rehabilitation proceedings but shall be entitled to receive distributions arising 
therefrom. 
Section 14. Report of the Rehabilitation Receiver. Within forty (40) 
days from the initial hearing, and with or without the comments of the Creditors 
or any of them, the Rehabilitation Receiver shall submit a Report to the Court 
stating his preliminary findings and recommendations on whether: 
a. 
The Debtor is insolvent and if so, the causes thereof and any 
unlawful or irregular act or acts committed by directors or officers 
in contemplation of the insolvency of the Debtor or which may have 
contributed to the insolvency of the Debtor; 
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b. 
The underlying assumptions, the financial goals and the procedures 
to accomplish such goals as stated in the petitioner's Rehabilitation 
Plan are realistic, feasible and reasonable; 
There is a substantial likelihood for the Debtor to be successfully 
rehabilitated; 
c. 
d. 
e. 
Section 15. Giving Due Course to or Dismissal of Petition, or 
Conversion of Proceedings. Within ten (10) days from receipt of the Report of 
the Rehabilitation Receiver mentioned in Section 14 hereof, the Court may: 
The petition should be dismissed, or 
the Debtor should be dissolved and liquidated. 
a. 
Give due course to the petition upon a finding that: (i) The Debtor 
is Insolvent, and (ii) There is a substantial likelihood for the Debtor 
to be successfully rehabilitated; 
Dismiss the petition upon a finding that 
b. 
the Debtor is not Insolvent; 
the petition is a sham filing intended only to delay the 
enforcement of the rights of the Creditors, or of a Creditor, 
or of any group of Creditors; 
the petition, the Rehabilitation Plan and the attachments 
thereto 
contain 
any 
materially false 
or 
misleading 
statements; or 
the Debtor has committed acts of misrepresentation or in 
fraud of its Creditors, or a Creditor or a group of Creditors. 
c. 
Convert the proceedings into one for the Liquidation of the Debtor 
upon a finding that -- 
(i) 
the Debtor is Insolvent; and 
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(ii) 
either there is no substantial likelihood for the Debtor to be 
successfully rehabilitated, or, If the petitioner is the Debtor, 
that the Debtor has not met with its Creditor/s representing 
at least three-fourths (3/4) of its total liabilities and made a 
good faith effort to reach a consensus on the Rehabilitation 
Plan; or, I f  the petitionerb is a Creditor or group of 
Creditors, that the petitioner/s has not met with the Debtor 
and made a good faith effort to reach a consensus on the 
Rehabilitation Plan. 
Section 16. Petition Given Due Course. I f  the petition is given due 
course, the Court shall direct the Rehabilitation Receiver to review, revise and/or 
recommend action on the Rehabilitation Plan and subniit the same or a new one 
to the Court within a period of not more than ninety (90) days. 
Section 17. Dismissal of Petition. If the petition is dismissed pursuant 
to paragraph (b) of Section 15, 
then, the Court may, in its discretion, order the petitioner to pay damages to any 
Creditor or to the Debtor, as the case may be, who may have been injured by 
the filing of the petition, to the extent of any such injury. 
C. 
THE REHABILITATION RECEIVER 
Section 18. Qualifications of a Rehabilitation Receiver. The 
Rehabilitation Receiver shall have the following minimum qualifications: He 
a. 
is a citizen of the Philippines; 
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b. 
is a resident of the Philippines in the six months immediately 
preceding his nomination; 
c. 
is of good moral character and with acknowledged integrity, 
impartiality and independence; 
d. 
has 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 Rehabilitation 
Receiver.; and 
has no conflict of interest, provided, that, such conflict of interest 
may be waived, expressly or impliedly, by a patty who may 
prejudiced thereby. 
e. 
Section 19. Conflict of Interest. An individual shall be deemed to have 
a conflict of interest if he is so situated as to be presumed to be unduly 
influenced in the exercise of his judgment as Rehabilitation Receiver for or 
against the Debtor or any Creditor. Without limiting the generality of the 
foregoing, an individual shall be deemed to have a conflict of interest i t  
He is a Creditor or stockholder of the Debtor; 
He is engaged in a line of business which competes with that of the 
Debtor; 
He is, or was, within five (5) years from the filing of the petition, a 
director, officer, or employee of the Debtor or any of the Creditors, 
or the auditor or accountant of the Debtor; 
He is, or was within two (2) years from the filing of the petition, an 
underwriter of the outstanding securities of the Debtor; 
a. 
b. 
c. 
d. 
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any of the Creditors. 
e. 
He is related by consanguinity or affinity within the fourth civil 
degree to any individual Creditor, or to any stockholder, director, 
officer, employee, or underwriter of the Debtor; or 
He has any other direct or indirect material interest in the Debtor or 
f. 
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Section 20. Appointment of the Rehabilitation Receiver. The Court 
shall initially appoint the Rehabilitation Receiver, who may or may not be from 
among the nominees of the petitioner. However, at the initial hearing of the 
petition, the Creditors and the Debtor who are not petitioners may nominate 
other persons to the position. The Court may retain the Rehabilitation Receiver 
initially appointed or appoint another who may or may not be from among those 
nominated. 
Section 21. Oath and Bond of the Rehabilitation Receiver. Prior to 
entering upon his powers, duties and responsibilities, the Rehabilitation Receiver 
shall take an oath and file a bond, in such amount to be fixed by the Court, 
conditioned upon the faithful and proper discharge of his powers, duties and 
responsibilities. 
Section 22. Powers, 
Duties 
and 
Responsibilities 
of 
the 
Rehabilitation Receiver. The Rehabilitation Receiver shall be deemed an 
officer of the Court with the principal duty of preserving and maximizing the 
value of the assets of the Debtor during the Rehabilitation Proceedings, 
determining the viability of the Rehabilitation of the Debtor, preparing and 
recommending a Rehabilitation Plan to the Court, and implementing the 
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approved Rehabilitation Plan. To this end, and without limiting the generality of 
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the foregoing, the Rehabilitation Receiver shall have the following powers, duties 
and responsibilities: 
a. 
b. 
C. 
d. 
e. 
f. 
9. 
h. 
I .  ; 
j. 
To verify the accuracy of the factual allegations in the petition and 
its annexes; 
To verify 
and correct, if necessary, the inventory of all of the 
assets of the Debtor, and their valuation; 
To verify 
and correct, if necessary, the schedule of debts and 
liabilities of the Debtor; 
To evaluate the validity, genuineness, and true amount of all the 
Claims against the Debtor; 
To take possession, custody and control, and to preserve the value 
of all the property of the Debtor; 
To sue and recover, with the approval of the Court, all amounts 
owed to, and all properties pertaining to the Debtor; 
To have access to all information necessary, proper or relevant to 
the operations and business of the Debtor and for its 
Rehabilitation; 
To sue and recover, with the approval of the Court, all property or 
money of the Debtor paid, transferred or'disbursed in fraud of the 
Debtor or its Creditors, or which constitute undue preference of 
Creditor/s; 
To monitor the operations and the business of the Debtor to ensure 
that no payments or transfers of property are made other than in 
the ordinary course of business; 
With the Court's approval, to engage the services of or to employ 
persons or entities to assist him in the discharge of his functions; 
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k. 
To determine the manner by which the Qebtor may be best 
rehabilitated, to review, revise and/or reco$mend action on the 
Rehabilitation Plan and submit the same or a hew one to the Court 
for approval; and 
To implement the Rehabilitation Plan as approved by the Court, if 
so provided under the Rehabilitation Plan; 
To exercise such other powers as may frdm time to time be 
conferred upon him by the Court; and 
To submit a status report on the Rehabilitatidn proceedings every 
quarter or as may be required by the Court &Vuprupf7o, or upon 
I 
I. 
m. 
n. 
motion of any Creditor, or as may be provided, in the Rehabilitation 
Plan. 
Section 23. Removal 
of 
the 
Rehabilitation 
Receiver. 
The 
Rehabilitation Receiver may be removed at any time by [he Court for cause, 
either motu proprio or upon motion by any Creditor or Creditors holding more 
than fifty percent (50%) of the total obligations of the Debtqr. 
I 
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Section 24. Vacancy. In case the position of Rehabilitation Receiver is 
vacated for any reason whatsoever, the Court shall directithe Debtor and the 
Creditors to submit the name/s of their nominee/s to the position. The Court may 
appoint any of the qualified nominees, or any other person qualified for the 
position. 
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Section 25. Compensation. The Rehabilitation Receiver and the 
persons and entities engaged or employed by him to assist in the discharge of 
his powers and duties shall be entitled to such reasonable compensation as may 
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be determined by the Rehabilitation Court, which shall not exceed the maximum 
amount as may be prescribed by the Supreme Court. 
D. 
DETERMINATION OF CLAIMS 
Section 26. Registry of Claims. Within twenty (20) days from his 
assumption into office, the Rehabilitation Receiver shall establish a preliminary 
registry of claims. The Rehabilitation Receiver shall make the registry available 
for public inspection and provide publication notice to Creditors and Shareholders 
on where and when they may inspect it. All claims included in the registry of 
claims must be duly supported by sufficient evidence. 
Section 27. Opposition or Challenge of Claims, Within thirty (30) 
days from the expiration of the period stated in the immediately preceding 
Section, Creditors, Shareholders and other interested parties may submit a 
challenge to a Claim or Claims to the Court, serving a certified copy on the 
Rehabilitation Receiver and the Creditor holding the challenged Claim. Upon the 
expiration of the thirty (30) day period, the Rehabilitation Receiver shall submit 
to the Court the registry of claims containing the undisputed claims that have not 
been subject to challenge. 
Section 28. Appeal. Any decision of the Rehabilitation Receiver 
regarding a Claim may be appealed to the Court. 
E. 
USE, 
PRESERVATION AND 
DISPOSAL OF 
ASSETS AFTER 
COMMENCEMENT DATE. 
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Section 29. Use or Disposition of Assets. Except as otherwise 
provided herein, no funds or property of the Debtor shall be used or disposed of 
except in the Ordinary Course of Business of the Debtor, or unless necessary to 
finance the Administrative Expenses of the rehabilitation proceedings. 
Section 30. Rescission or Nullity of Sale, Payment, Transfer or 
Conveyance of Assets. The Court may rescind or declare as null and void any 
sale, payment, transfer or conveyance of the Debtor's unencumbered property or 
any encumbering thereof by the Debtor or its agents or representatives which 
are not in the ordinary course of the business of the Debtor. 
Section 31. Sale of Assets. The Court, upon application of the 
Rehabilitation Receiver, may authorize the sale of unencumbered property of the 
Debtor outside the ordinary course of business upon a showing that the 
property, by its nature or because of other circumstance, is perishable, costly to 
maintain, susceptible to devaluation or otherwise in jeopardy. 
Section 32. Assets of Debtor Held by Third Parties. Third parties 
who have in their possession or control property of the Debtor shall not transfer, 
convey, or otherwise dispose of the same to persons other than the Debtor, 
unless otherwise 
upon prior approval of the Rehabilitation Receiver. The 
Rehabilitation Receiver may also: 
a. 
Demand the surrender or the transfer of the possession or control 
of such property to the Rehabilitation Receiver or any other person, 
subject to payment of the Claims secured by any possessory Lien/s 
thereon; 
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b. 
Allow said third parties to retain possession or control, if such an 
arrangement would more likely preserve or increase the value of 
the property in question or the total value of the assets of the 
Debtor; or 
Undertake any other disposition of the said property as may be 
beneficial for the rehabilitation of the Debtor, after notice and 
hearing, and approval of the Court. 
c. 
Section 33. Assets of Third Parties Held by Debtor. The Court may 
authorize the sale, transfer, conveyance or disposal of Encumbered Property of 
the Debtor, or property of others held by the Debtor where there is a security 
interest pertaining to third parties under a financial, credit or other similar 
transactions if, upon application of the Rehabilitation Receiver and with the 
consent of the affected owners of the property, or Secured Creditor/s in the case 
of Encumbered Property of the Debtor, and after notice and hearing, the Court 
determines that: 
a. 
Such sale, transfer, conveyance or disposal is necessary for the 
continued operation of the Debtor's business; 
The Debtor has made arrangements to provide a substitute Lien or 
ownership right that provides an equal level of security for the 
counter-party's claim or right. 
b. 
Section 34. Assets Subject to Rapid Obsolescence, Depreciation, 
and Diminution of Value. Upon the application of a Secured Creditor holding a 
Lien against or ownership interest in property held by the Debtor that is subject 
to potentially rapid obsolescence, depreciation or diminution in value, the Court 
shall, after notice and hearing, order the Debtor or Rehabilitation Receiver to 
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take reasonable steps necessary to prevent the depreciation. If depreciation 
cannot be avoided and such depreciation is jeopardizing the security or property 
interest of the Secured Creditor or owner, the Court shall: 
a. 
b. 
C. 
Allow the Encumbered Property to be foreclosed upon by the 
Secured Creditor according to the relevant agreement between the 
Debtor and the Secured Creditor, Provided, That, the proceeds of 
the sale will be distributed in accordance with the order prescribed 
under the rules of concurrence and preference of credits; or 
Upon motion of, or with the consent of the affected Secured 
Creditor, order the conveyance of a Lien against or ownership 
interest in substitute property of the Debtor to the Secured 
Creditor, Provided, that other Creditors holding Liens on such 
property, if any, do not object thereto; or 
Allow the sale or disposition of the property, Provided, that the sale 
or disposition will maximize the value of the property for the 
benefit of the Secured Creditor and the Debtor and the proceeds of 
the sale will be distributed in accordance with the order prescribed 
under the rules of concurrence and preference of credits. 
F. 
AVOIDANCE PROCEEDINGS 
Section 35. Rescissian or Nullity of Certain Pre-Commencement 
Date Transactions. Any transaction occurring prior to Commencement Date 
entered into by the Debtor or involving its funds or assets may be rescinded or 
declared null and void on the ground that the same was executed with intent to 
defraud a Creditor or Creditors or which constitute undue preference of 
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Creditors. Without limiting the generality of the foregoing, a disputable 
presumption of such design shall arise if the transaction: 
a. 
Provides unreasonably inadequate consideration to the Debtor and 
is executed within ninety (90) days prior to the Commencement 
Date; 
Involves an accelerated payment of a claim to a Creditor within 
ninety (90) days prior to the Commencement Date; 
Provides security or additional security executed within ninety (90) 
days prior to the Commencement Date; 
Involves Creditors, where a Creditor obtained, or received the 
benefit of, more than its pro rata share in the assets of the Debtor, 
executed at a time when the Debtor was Insolvent; or 
Is intended to defeat, delay or hinder the ability of the Creditors to 
collect Claims where the effect of the transaction is to put assets of 
the Debtor beyond the reach of Creditors or to otherwise prejudice 
the interests of Creditors. 
b. 
c. 
d. 
e. 
Provided, however, That nothing in this Section shall prevent the Court 
from rescinding or declaring as null and void a transaction on other grounds 
provided by law. 
Section 36. Actions for Rescission or Nullity. The Rehabilitation 
Receiver or, with his conformity, any Creditor, may initiate and prosecute any 
action to rescind, or declare null and void any transaction described in the 
immediately preceding paragraph. If the Rehabilitation Receiver does not 
consent to the filing or prosecution of such action, any Creditor may seek leave 
of the Court to commence said action. 
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Section 37. Treatment of Contracts. Unless cancelled by virtue of a 
judgment of a Court of competent jurisdiction issued prior to the issuance of the 
Commencement Order, or at anytime thereafter by the Court before which the 
rehabilitation proceedings are pending, all valid and subsisting contracts of the 
Debtor with Creditors and other third parties as at the Commencement Date shall 
continue in force,: 
Provide($ That within ninety (90) days following the 
commencement of proceedings, the Debtor, with the consent of the 
Rehabilitation Receiver, shall notify each contractual counter-party of whether it 
is confirming the particular contract. 
Contractual obligations of the Debtor 
arising or performed during this period, and afterwards for confirmed contracts, 
shall be an Administrative Expense. Contracts not confirmed within the required 
deadline shall be considered terminated. Claims for actual damages, if any, 
arising as a result of the election to terminate a contract shall be considered a 
pre-commencement Claim against the Debtor. Nothing contained herein shall 
prevent the cancellation or termination of any contract of the Debtor for any 
ground provided by law. 
H. 
TREATMENT OF SECURED CREDITORS 
Section 38. No Diminution of Secured Creditor Rights. The 
issuance of the Commencement Order and the Stay Order, and any other 
provision of this Act, shall not be deemed in any way to diminish or impair the 
security or Lien of a Secured Creditor, or the value of his Lien or Security, except 
that his right to enforce said security or Lien may be suspended during the term 
of the Stay Order. 
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The Court, upon motion or recommendation of the Rehabilitation 
Receiver, may allow a Secured Creditor to enforce his security or Lien, or 
foreclose upon property of the Debtor securing his/its Claim, if the said property 
is not necessary for the rehabilitation of the Debtor and the proceeds of the sale 
will be distributed in accordance with the order prescribed under the rules of 
concurrence and preference of credits. The Secured Creditor and/or the other 
Lien holders shall be admitted to the Rehabilitation Proceedings only for the 
balance of his Claim, if any. 
A Secured Creditor shall enjoy preference in the payment of his Claim with 
respect to income or cash generated from the use, utilization, employment, 
application or exploitation of the Debtor’s Property securing his Claim. 
Section 39. Modification or Termination of Stay Order. At any time 
during the effectivity of the Stay Order, the Court, motu proprio or upon motion, 
may terminate, modify or set conditions for the continuance of the Stay Order, or 
relieve a Claim from the coverage thereof, upon a showing that: (a) a Creditor 
does not have adequate protection over property securing its Claim, or (b) the 
value of a Claim secured by a Lien on property which is not necessary for 
Rehabilitation of the Debtor exceeds the fair market value of said property. 
For purposes of this section, a Creditor shall be deemed to lack adequate 
protection if it can be shown that: 
a. 
The Debtor fails or refuses to honor an agreement with the Creditor 
to keep the property insured; or 
The Debtor fails or refuses to take commercially reasonable steps 
to maintain and preserve the property; or 
The property has depreciated since the Commencement Date to an 
extent that the Creditor is undersecured. 
b. 
c. 
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Upon a showing of a lack of adequate protection, the Court shall order the 
Debtor or the Rehabilitation Receiver to make arrangements to provide for the 
insurance or maintenance of the property, or to make payments or otherwise 
provide additional or replacement security such that the Claim is fully secured. If 
such arrangements are not feasible, the Court may allow the Secured Creditor 
lacking adequate protection to enforce its security, Provided, that the proceeds of 
the sale will be distributed in accordance with the order prescribed under the rules of 
concurrence and preference of credits. 
I. 
LIABILITY OF DIRECTORS AND OFFICERS 
Section 40. Liability of Directors and Officers. The directors and 
officers of a Debtor shall be liable up to double the value of the property sold, 
embezzled or disposed of or the amount of the transaction involved, whichever is 
higher, to be recovered for the benefit of the Debtor and the Creditors if they, 
having notice of the commencement of the proceedings or in contemplation of 
the proceedings, willfully commit the following acts: 
a. 
dispose or cause to be disposed of any property of the Debtor 
other than in the ordinary course of business or authorize or 
approve any transactions fraudulently or in a manner grossly 
disadvantageous to the Debtor and/or Creditors; or 
b. 
conceal, or authorize or approve the concealment, from the 
Creditors, or embezzle or misappropriate, any property of the 
Debtor. 
In determining the extent of the liability of a director or an officer under 
this section, the Court shall consider the amount of the shareholding or equity 
interest of such director or officer, the degree of the involvement of such director 
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or officer in the acts complained of as well as the extent to which he benefited 
from the transaction. 
3. 
THE REHABILITATION PLAN 
Section 41. Contents of a Rehabilitation Plan. The Rehabilitation 
Plan shall, as a minimum: 
a. 
b. 
C. 
d. 
e. 
f. 
9. 
h. 
Specify the underlying assumptions, the financial goals and the 
procedures proposed to accomplish such goals; 
Compare the amounts expected to be received by the creditors 
under the Rehabilitation Plan with those that they will receive if 
Liquidation ensues within the next one hundred twenty (120) days; 
Contain information sufficient to give the various classes of 
Creditors a reasonable basis for determining whether supporting 
the 
Plan is in their financial interest when compared to the 
immediate Liquidation of the Debtor; 
Establish classes of voting Creditors; 
Establish sub-classes of voting Creditors if prior approval has been 
granted by the Court; 
Indicate how the Plan will be implemented; 
Specify the treatment of each class or sub-class described in sub- 
sections (b) and (c); 
Provide for equal treatment of all Claims within the same class or 
sub-class, unless a particular Creditor voluntarily agrees to less 
favorable treatment: 
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i. 
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k. 
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m. 
n. 
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P. 
Maintain the security interest of Secured Creditors and preserve the 
Liquidation value of the security unless such has been waived or 
modified voluntarily; 
Disclose all payments to Creditors for pre-commencement debts 
made during the proceedings and the justifications thereof; 
Describe the Disputed Claims and the provisioning of funds to 
account for appropriate payments should the Claim be ruled valid 
or its amount adjusted; 
Identify the Debtor’s Role in the implementation of the Plan; 
State any Rehabilitation covenants of the Debtor, the breach of 
which shall be considered a material breach of the Plan; 
Identify those responsible for the future management of the Debtor 
and the supervision and implementation of the 
Plan, their 
affiliation with the Debtor, and their remuneration; 
Address the treatment of Claims arising after the confirmation of 
the Rehabilitation Plan; and 
Provide for the resolution of any breach of the Rehabilitation Plan 
by the Debtor. 
Section 42. Consultation with Debtor and Creditors. If the Court 
gives due course to the petition, the Rehabilitation Receiver shall confer with the 
,Debtor and all the classes of Creditors, and may consider their views and 
proposals, in the review, revision, or preparation of a new Rehabilitation Plan. 
Section 43. Approval of Rehabilitation Plan. The Rehabilitation 
Receiver shall notify the Creditors and Shareholders that the Plan is ready for 
their examination. Within twenty (20) days from said notification, the 
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Rehabilitation Receiver shall convene the Creditors, either as a whole or per 
class, for purposes of voting on the approval of the Pian. The Pian shall be 
deemed rejected unless approved by all classes of Creditors whose rights are 
adversely modified or affected by the Plan. For purposes of this Section, the 
Plan is deemed to have been approved by a class of Creditors if members of said 
class holding more than fifty percent (50%) of the total Claims of said class vote 
in favor of the Plan. The votes of the Creditors shall be based solely on the 
amount of their respective Claims based on the registry of claims submitted by 
the Rehabilitation Receiver pursuant to Section 27 hereof. 
Notwithstanding the rejection of the Rehabilitation Plan, the Court may 
confirm the Rehabilitation Plan if all of the following circumstances are present: 
a. 
The Rehabilitation Receiver nevertheless proceeds to recommend 
the confirmation of the Rehabilitation Plan; 
b. 
The Shareholders or owners of the Debtor lose at least their 
controlling interest as a result of the Rehabilitation Plan; and 
The Rehabilitation Plan would likely provide the objecting class of 
Creditors with compensation which has a net present value greater 
than that which they would have received if under Liquidation. 
c. 
Section 44. Rejection of Rehabilitation Pian. If the Rehabilitation 
Plan is rejected, the Rehabilitation Receiver shall immediately report such fact to 
the Court. Upon receipt of notice of rejection, the Court shall convert the 
proceedings into one for the Liquidation of the Debtor. 
Section 45. Submission of Rehabilitation Plan to the Court. If the 
Rehabilitation Plan is approved, the Rehabilitation Receiver shall submit the same 
to the Court for confirmation. Within five (5) days from receipt of the 
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Rehabilitation Pian, the Court shall notify the Creditors that the Rehabilitation 
Plan has been submitted for confirmation, that any Creditor may obtain copies of 
the Rehabilitation Plan, and that any Creditor may file an objection thereto. 
Section 46. Filing of Objections to Rehabilitation Plan. A Creditor 
may file an objection to the Rehabilitation Plan within twenty (20) days from 
receipt of notice from the Court that the Rehabilitation Plan has been submitted 
for confirmation. 
Objections to a Rehabilitation Plan shall be limited to the 
following: 
a. 
The documents or data relied upon in the Rehabilitation Plan are 
materially false or misleading; or 
The Rehabilitation Plan is in fact not supported by the voting 
Creditors. 
b. 
Section 47. Hearing on the Objections. If objections have been 
submitted during the relevant period, the Court shall issue an order setting the 
time and date for the hearing or hearings on the objections. I f  the Court finds 
tnerit in the objection, it shall order the Rehabilitation Receiver or other party to 
cure the defect, whenever feasible. If the Court determines that it is not feasible 
to cure the defect, the Court shall convert the proceedings into one for the 
Liquidation of the Debtor. 
Section 48. Confirmation of the Rehabilitation Plan. If no 
objections are filed within the relevant period or, if objections are filed, the Court 
finds them lacking in merit, or determines that the basis for the objection has 
been cured, the Court shall issue an order confirming the Rehabilitation Plan. 
The Court may confirm the Rehabilitation Plan notwithstanding unresolved 
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disputes over Claims if the Rehabilitationplan has made adequate provisions for 
paying such Claims. 
Section 49. Period for Confirmation of the Rehabilitation Plan. 
The Court shall have a maximum period of eighteen (18) months from the date 
of the filing of the petition to confirm a Rehabilitation Plan. If no Rehabilitation 
Plan is confirmed within the said period, the proceedings shall be converted into 
one for the Liquidation of the Debtor. 
Section 50. Effect of Confirmation of the: Rehabilitation Plan. The 
confirmation of the Rehabilitation Plan by the Court shall result in the following: 
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The Rehabilitation Pian and its provisions shall be binding upon the 
Debtor and all persons who may be affected by it, including the 
Creditors, whether or not such persons have participated in the 
proceedings or opposed the Rehabilitation Plan or whether or not 
their Claims have been scheduled; 
The Debtor shall comply with the provisions of the Rehabilitation 
Plan and shall take all actions necessary to carry out the pian; 
Payments shall be made to the Creditors in accordance with the 
provisions of the Rehabilitation Plan; 
Contracts and other arrangements between the Debtor and its 
Creditors shall be interpreted as continuing to apply to the extent 
that they do not conflict with the provisions of the Rehabilitation 
Plan; and 
Any compromises on amounts or rescheduling of timing of 
payments by the Debtor shall be binding on creditors regardless of 
whether or not the plan is successfully implemented. 
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Section 51. Tax Exemption on Reduction of Liabilities of the 
Debtor. Any reduction in the Debtor's liabilities arising or resulting from a 
Rehabilitation Plan's approval shall not be subject to any tax, 
Section 52. Accounting; Discharge of Rehabilitation Receiver. 
Upon the confirmation of the Rehabilitation Plan, the Rehabilitation Receiver shall 
provide a final report and accounting to the Court. Unless the Rehabilitation Plan 
specifically requires and describes the role of the Rehabilitation Receiver after 
the approval of the Rehabilitation Plan, the Court shall discharge the 
Rehabilitation Receiver of his duties. 
Section 53. Effects of Breach or Failure of the Rehabilitation Plan. 
Upon a breach of, or upon a failure of the Rehabilitation Plan, the Court, upon 
motion by an affected party, may: 
a. 
b. 
C. 
d. 
Issue an order directing that the breach be cured within a specified 
period of time, failing which the proceedings may be converted to 
a Liquidation; 
Issue an order converting the proceedings to a Liquidation; 
Allow the Debtor or Rehabilitation Receiver to submit amendments 
to the Rehabilitation Plan, the approval of which shall be governed 
by the same requirements for the approval of a Rehabilitation Plan 
under this Sub-chapter; 
Issue any other order to remedy the breach consistent with the 
present regulation, other applicable law, and the best interests of 
the Creditors;or 
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e. 
Enforce the applicable provisions of the Rehabilitation Plan. 
CHAPTER I11 
PRE-NEGOTIATED REHABILITATION 
Section 54. Petition by Debtor. An Insolvent Debtor, by itself or jointly 
with any of its Creditors, may file a verified petition with the Court for the 
approval of a pre-negotiated Rehabilitation Plan which has been endorsed or 
approved by Creditors holding at least two-thirds of the total obligations of the 
Debtor, including Secured Creditors holding more than fifty percent (50%) of the 
total Secured Claims of the Debtor and Unsecured Creditors holding more than 
fifty percent (50%) of the total Unsecured Claims of the Debtor. The petition 
shall include as a minimum: 
a. 
b. 
C. 
d. 
a schedule of the Debtor's debts and liabilities, 
an inventory of the Debtor's assets, 
the pre-negotiated Rehabilitation Plan, including the names of at 
least three (3) nominees for Rehabilitation Receiver, and 
a summary of disputed Claims against the Debtor and a report on 
the provisioning of funds to account for appropriate payments 
should any such Claims be ruled valid or their amounts adjusted. 
Section 55. Issuance of Order. Within five (5) working days, and after 
determination that the petition is sufficient in form and substance, the Court shall 
issue an Order which shall: 
a. 
Identify the Debtor, its principal business or activity/ies, and its 
principal place of business; 
Declare that the Debtor is under Rehabilitation; 
b. 
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C. 
d. 
e. 
f. 
9. 
h. 
i. 
Summarize the ground/s for the filing of the petition; 
Direct the publication of the Order in a newspaper of general 
circulation once a week for at least two (2) consecutive weeks, with 
the first publication to be made within seven (7) days from the time 
of its issuance; 
Direct the service by personal delivery of a copy of the petition on 
each Creditor who is not a petitioner holding at least ten percent 
(iOo/o) of the total liabilities of the Debtor, as determined in the 
schedule attached to the petition, within three (3) days; 
State that copies of the petition and the Rehabilitation Plan are 
available for examination and copying by any interested party; 
State that Creditors and other interested parties opposing the 
petition or Rehabilitation Plan may file their objections or comments 
thereto within a period of not later than twenty days from the 
second publication of the Order; 
Appoint a Rehabilitation Receiver, if provided for in the Plan; and 
Include a Suspension or Stay Order as described in Section iO(m) 
above. 
Section 56. Approval of the Plan. Within ten days from the date of the 
second publication of the Order, the Court shall approve the Rehabilitation Plan 
unless a Creditor or other interested party submits an objection to it in 
accordance with the next succeeding Section. 
Section 57. Objection to the Petition or Rehabilitation Plan. Any 
Creditor or other interested party may submit to the Court an objection to the 
petition or the Rehabilitation Plan not later than eight days from the date of the 
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second publication of the Order mentioned in Section 55. The objections shall be 
limited to the following: 
a. 
b. 
C. 
d. 
The allegations in the petition or the Rehabilitation Plan, or the 
attachments thereto, are materially false or misleading; 
The majority of any class of Creditors do not in fact support the 
Rehabilitation Plan; 
The Rehabilitation Plan fails to accurately account for a Claim 
against the Debtor and the claim is not categorically declared as a 
contested claim; or 
The support of the Creditors, or any of them, was induced by 
fraud. 
Copies of any objection to the petition or the Rehabilitation Plan shall be 
served on the Debtor, the Rehabilitation Receiver (if applicable), the Secured 
Creditor with the largest Claim and who supports the Rehabilitation Plan, and the 
Unsecured Creditor with the largest Claim and who supports the Rehabilitation 
Plan. 
Section 58. Hearing on the Objections. After receipt of an objection, 
the Court shall set the same for hearing. The date of the hearing shall be no 
earlier than twenty (20) and no later than thirty (30) days from the date of the 
second publication of the Order mentioned in Section 55. If the Court finds merit 
in the objection, it shall direct the Debtor, when feasible, to cure the defect 
within a reasonable period. I f  the Court determines that the Debtor or Creditors 
supporting the Rehabilitation Pian acted in bad faith, or that the objection is non- 
curable, the Court may order the conversion of the proceedings into Liquidation. 
A finding by the Court that the objection has no substantial merit, or that the 
same has been cured, shall be deemed an approval of the Rehabilitation Plan. 
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shall have a maximum period of sixty (60) days from the date of the filing of the 
petition to approve the Rehabilitation Plan. If the Court fails to act within said 
period, the Rehabilitation Plan shall be deemed approved. 
Section 60. Effects of Approval of the Rehabilitation Plan. 
Approval of the Plan under this Chapter shall have the same legal effect as 
confirmation of a Rehabilitation Plan under Section 50. 
Chapter I V  
OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS 
OR REHABILITATION PLANS 
Section 61. Out-of-Court or Informal Restructuring Agreements 
or Rehabilitation Plans - An out-of-Court or informal restructuring agreement 
or rehabilitation plan that meets the minimum requirements prescribed in this 
Chapter is hereby recognized as consistent with the ob;jectives of this Act. 
Section 62. Minimum Requirements of Out-of-court or Informal 
Restructuring Agreements and Rehabilitation Plans. - For an out-of-court 
or informal restructuring/workout agreement or Rehabilitation Plan to qualify 
under this Chapter, it must meet the following minimum requirements: 
a. 
The Debtor must agree to the out-of-court or informal 
restructuring/workout agreement or Rehabilitation Plan; 
It must be approved by Creditors representing at least sixty-seven 
(67%) of the secured obligations of the Debtor; and 
b. 
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c. 
It must be approved by Creditors representing at least seventy-five 
percent (75%) of the unsecured obligations of the Debtor. 
It must be approved by Creditors holding at least eighty percent 
(80%) of the total obligations, secured and unsecured, of the 
Debtor. 
d. 
Section 63. Standstill Period - A standstill period that may be agreed 
upon by the parties pending negotiation and finalization of the out-of-court or 
informal restructuring/workout agreement or Rehabilitation Plan contemplated 
herein shall be effective and enforceable not only against the contracting parties 
but also against the other Creditors, provided that it is approved by Creditors 
representing at least seventy-five percent of the total obligations of the Debtor 
and the standstill period does not exceed one hundred twenty (120) days from 
the date of effectivity. 
Section 64. Cram Down Effect. - A restructuring/workout agreement 
or Rehabilitation Plan that is approved pursuant to a informal workout framework 
referred to in this Chapter shall have the same legal effect as confirmation of a 
Plan under Section 50 hereof. 
Section 65. Amendment or Modification. - Any amendment of an 
out-of-Court restructuring/workout agreement or Rehabilitation Plan must be 
made in accordance with the terms of the agreement . 
Section 66. Effect OF Court Action or Other Proceeding. - Any 
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Court action or other proceedings arising from, or relating to, the out-of-court or 
informal restructuring/workout agreement or Rehabilitation Plan shall not stay its 
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implementation, unless the relevant party is able to secure a temporary 
restraining order or injunctive relief from the appropriate Court. 
CHAPTER V - LIQUIDATION I N  INSOLVENCY 
A. 
INITIATION OF PROCEEDINGS 
Section 67. Voluntary Liquidation. An Insolvent Debtor may apply for 
Liquidation by filing a petition for Liquidation with the Court. The petition shall be 
verified, shall establish the insolvency of the Debtor and shall contain, whether 
as an attachment or as part of the body of the petition: 
a, 
a schedule of the Debtor's debts and liabilities including a list of 
creditors with their addresses, amounts of claims and collaterals, or 
securities, if any; 
b. 
an inventory of all its assets including receivables and claims 
against third parties; and 
the names of at least three nominees to the position of Liquidator. 
c. 
At any time during the pendency of Court-supervised or pre-negotiated 
Rehabilitation proceedings, the Debtor may also initiate Liquidation proceedings 
by filing a motion in the same Court where the Rehabilitation proceedings are 
pending to convert the Rehabilitation Proceedings into Liquidation Proceedings. 
The motion shall be verified, shall contain or set forth the same matters required 
in the preceding paragraph, and state that the Debtor is seeking immediate 
dissolution and termination of its corporate existence. 
If the petition or the motion, as the case may be, is sufficient in form and 
substance, the Court shall issue a Liquidation Order mentioned in Section 71 
he reof. 
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Section 68. Involuntary Liquidation. Three or more Creditors the 
aggregate of whose Claims is at least either One Million Pesos (P1,000,000.00) 
or at least Twenty Five Per Cent (25%) of the subscribed capital stock or 
partner's contributions of the Debtor, whichever is higher, may apply for and 
seek the Liquidation of an Insolvent Debtor by filing a Petition for Liquidation of 
the Debtor with the Court. The Petition shall show that: 
a. 
There is no genuine issue of fact or law on the Claim/s of the 
petitioner/s, and that the due and demandable payments thereon 
have not been made for at least one hundred eighty (180) days; 
and 
b. 
There is no substantial likelihood that the Debtor may be 
rehabilitated. 
At any time during the pendency of or after a rehabilitation Court- 
supervised or pre-negotiated Rehabilitation proceedings, three or more Creditors 
whose Claims is at least either One Million Pesos (P1,000,000.00) or at 
least Twenty Five 
Per Cent (25%) of the subscribed capital or 
partner's contributions of the Debtor, whichever is higher, may also 
initiate Liquidation proceedings by filing a motion in the same Court where the 
Rehabilitation proceedings are pending to convert the Rehabilitation Proceedings 
into Liquidation Proceedings. The motion shall be verified, shall contain or set 
forth the same matters required in the preceding paragraph, and state that the 
movants are seeking the immediate Liquidation of the Debtor. 
If the petition or motion is sufficient in form and substance, the Court 
shall issue an order: 
a. 
Directing the publication of the petition or motion in a newspaper 
of general circulation once a week for two consecutive weeks; 
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b. 
Directing the Debtor and all Creditors who are not the petitioners to 
file their covment on the petition or motion within fifteen (15) days 
from the date of last publication. 
If, after considering the comments filed, the Court determines that the 
petition or motion is meritorious, it shall issue the Liquidation Order mentioned in 
Section 71 hereof. 
Section 69. Conversion 
by 
the 
Court 
into 
Liquidation 
Proceedings. During the pendency of Court-supervised or pre-negotiated 
Rehabilitation proceedings, the Court may order the conversion of Rehabilitation 
proceedings to Liquidation proceedings pursuant to (i) Section 15(c) of this Act, 
or (ii) Section 44 of this Act, or (iii) Section 47 of this Act, or (iv) Section 49 of 
this Act, or (v) Section 53(a) of this Act, or (vi) Section 58 of this Act, or at any 
other time upon the recommendation of the Rehabilitation Receiver that the 
rehabilitation of the Debtor is not feasible. Thereupon, the Court shall issue the 
Liquidation Order mentioned in Section 71 hereof. 
Section 70. Powers of the Securities and Exchange Commission. 
The provisions of this Chapter shall not affect the regulatory powers of the 
Securities and Exchange Commission under Section 6 of Presidential Decree No. 
902-A, as amended, with respect to any dissolution and Liquidation proceeding 
initiated and heard before it. 
6. 
THE LIQUIDATION ORDER 
Section 71. Liquidation Order. The Liquidation Order shall: 
a. 
Declare the Debtor Insolvent: 
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b. 
C. 
d. 
e, 
f. 
9. 
h. 
I. 
j. 
Order the Dissolution and Liquidation of the Debtor; 
Order the Sheriff to take possession and control of ail the property 
of the Debtor; 
Order the publication of the petition or motion in a newspaper of 
general circulation once a week for two consecutive weeks; 
Direct payments of any Claims and conveyance of any property due 
the Debtor to the Liquidator; 
Prohibit payments by the Debtor and the transfer of any property 
by the Debtor; 
Direct all Creditors to file their Claims with the Liquidator within the 
period set by the rules of procedure; 
Authorize the payment of Administrative Expenses as they become 
due; 
State that the Debtor and Creditors who are not petitioner/s may 
submit the names of other nominees to the position of Liquidator; 
and 
Set the case for hearing for the election and appointment of the 
Liquidator, which date shall not be less than thirty (30) days nor 
more than forty-five (45) days from the date of the last publication; 
Section 72. Effects of the Liquidation Order. Upon the issuance of 
the Liquidation Order 
a. 
The Debtor shall be deemed dissolved and its corporate existence 
terminated; 
Legal title to and control of all the assets of the Debtor shall be 
deemed vested in the Liquidator or, pending his election or 
b. 
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appointment, with the Court; 
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c. 
All contracts of the Debtor shall be deemed terminated and/or 
breached, unless the Liquidator, within ninety (90) days from the 
date of his assumption of office, declares otherwise and the 
contracting party agrees; 
No separate action for the collection of an Unsecured Claim shall be 
allowed. Such actions already pending will be transferred to the 
Liquidator for him to accept and settle or contest. If the Liquidator 
contests or disputes the Claim, the Court, except when the case is 
already on appeal. 
In such a case, the suit may proceed to 
judgment, and any final and executory judgment therein for a 
Claim against the Debtor shall be filed and allowed in Court. 
No foreclosure proceeding shall be allowed for a period of one 
hundred eighty (180) days.( 
d. 
e. 
Section 73. Rights of Secured Creditors. T'he Liquidation Order shall 
not affect the right of a Secured Creditor to enforce his Lien in accordance with 
the applicable contract or law. A Secured Creditor may: 
a. 
b. 
a. 
Waive his rights under the security or Lien, prove his Claim in the 
Liquidation proceedings, and share in the distribution of the assets 
of the Debtor; or 
Maintain his rights under his security or Lien. 
If the Secured Creditor maintains his rights under the security or 
Lien: 
The value of the property may be fixed in a manner agreed upon 
by the Creditor and the Liquidator. 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 
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C. 
the Liquidation proceedings as a Creditor for the balance; if its 
value exceeds the Claim secured, the Liquidator may convey the 
property to the Creditor and waive the Debtor's right of redemption 
upon receiving the excess from the Creditor; or 
b. 
The Liquidator may sell the property and satisfy the Secured 
Creditor's entire Claim from the proceeds of the sale; or 
The Secured Creditor may enforce the Lien or foreclose on the 
property pursuant to applicable laws. 
c. 
THE LIQUIDATOR 
Section 74. Election of Liquidator. Only Creditors who have filed their 
Claims within the period set by the Court, and whose Claims are not barred by 
the statute of limitations, will be allowed to vote in the election of the Liquidator. 
A Secured Creditor will not be allowed to vote, unless (a) he waives his security 
or Lien, or (b) has the value of the property subject of his security or Lien fixed 
by agreement with the Liquidator, and is admitted for the balance of his Claim. 
The Creditors entitled to vote will elect the Liquidator in open Court. The 
nominee receiving the highest number of votes cast in terms of amount of 
Claims, and who is qualified pursuant to Section 71 hereof, shall be appointed as 
the Liquidator. 
Section 75. Court-appointed Liquidator. The Court may appoint the 
Liquidator if 
a. 
on the date set for the election of the Liquidator, the Creditors do 
not attend; 
the Creditors who attend fail or refuse to elect a Liquidator, 
b. 
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c. 
d. 
after being elected, the Liquidator fails to qualify, or 
a vacancy occurs for any reason whatsoever. I n  any of the cases 
provided herein, the Court may instead set another hearing for the 
election of the Liquidator. 
Section 76. Oath and bond of the Liquidator. Prior to entering upon 
his powers, duties and responsibilities, 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 77. Qualifications of the Liquidator. The Liquidator shall 
have the qualifications enumerated in Section 18 hereof. He may be removed at 
any time by the Court for cause, either motu proprio or upon motion of any 
Creditor entitled to vote for the election of the Liquidator. 
Section 78. 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 Debtor, with the end of liquidating them and discharging to the extent 
possible all the Claims against the Debtor. The powers, duties and responsibilities 
of the Liquidator shall include, but not be limited to: 
a. 
To sue and recover all the assets, debts, and Claims, belonging or 
due to the Debtor; 
To take possession of all the property of the Debtor except 
property exempt by law from execution; 
To sell, with the approval of the Court, any property of the Debtor 
which has come into his possession or control; 
b. 
c. 
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d. 
To redeem all mortgages and pledges, and to satisfy any judgment 
which may be an encumbrance on any property sold by him; 
To settle all accounts between the Debtor and his Creditors, subject 
to the approval of the Court; 
To recover any property, or its value, fraudulently conveyed by the 
Debtor; 
To recommend to the Court the creation of a Creditor’s committee 
which will assist him in the discharge of his functions and which 
shall have powers as the Court deems just, reasonable and 
necessary; and 
Upon approval of the Court, to engage such professionals as may 
be necessary and reasonable to assist him in the discharge of his 
duties. 
e. 
f. 
g. 
h. 
Section 79. Compensation of the Liquidator. The Liquidator and the 
persons and entities engaged or employed by him to assist in the discharge of 
his powers and duties shall be entitled to such reasonable compensation as may 
be determined by the Liquidation Court, which shall not exceed the maximum 
amount as may be prescribed by the Supreme Court. 
Section 80. Reporting Requirements. The Liquidator shall make and 
keep a record of all money received and all disbursements made by him or under 
his authority as Liquidator. He shall render a quarterly report thereof to the 
Court, which report shall be made available to all interested parties. The 
Liquidator shall also submit such reports as may be required by the Court from 
time to time as well a final report at the end of the Liquidation proceedings. 
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Section 81. Discharge of Liquidator. In preparation for the final 
settlement of all the Claims against the Debtor, the Liquidator will notify all the 
Creditors, either by publication in a newspaper of general circulation or such 
other mode as the Court may direct or allow, that he will apply with the Court for 
the settlement of his account and his discharge from liability as Liquidator. The 
Liquidator will file a final accounting with the Court, with proof of notice to all 
Creditors. The accounting will be set for hearing. I f  the Court finds the same in 
order, the Court will discharge the Liquidator. 
D. 
DETERMINATION OF CLAIMS 
Section 82. Registry of Claims. Within twenty (20) days from his 
assumption into office, the Liquidator shall prepare a preliminary registry of 
Claims of Secured and Unsecured Creditors. Secured Creditors who have waived 
their security or Lien, or have fixed the value of the property subject of their 
security or Lien by agreement with the Liquidator and is admitted as a Creditor 
for the balance, shall be considered as Unsecured Creditors. The Rehabilitation 
Receiver shall make the registry available for public inspection and provide 
publication notice to Creditors and Shareholders on where and when they may 
inspect it. All Claims must be duly proven before being paid. 
Section 83. Right of Set-off. If the Debtor and a Creditor are mutually 
Debtor and Creditor of each other, one debt shall be set off against the other, 
and only the balance, if any, shall be allowed in the Liquidation proceedings. 
Section 84. Opposition or Challenge to Claims. Within thirty (30) 
days from the expiration of the period for filing of applications for recognition of 
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Claims, Creditors, Shareholders and other interested parties may submit a 
challenge to a Claim or Claims to the Court, serving a certified copy on the 
Liquidator and the Creditor holding the challenged Claim. Upon the expiration of 
the thirty (30) day period, the Rehabilitation Receiver shall submit to the Court 
the registry of Claims containing the undisputed Claims that have not been 
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. 
Section 85. Submission of Disputed Claims to Court. The Liquidator 
shall resolve disputed Claims, and submit his findings thereon to the Court for 
final approval. The Liquidator may disallow Claims. 
E. 
AVOIDANCE PROCEEDINGS 
Section 86. Rescission or Nullity of Certain Transactions. Any 
transaction occurring prior to the issuance of the Liquidation Order or, in case of 
the conversion of the Rehabilitation proceedings to Liquidation proceedings, prior 
to the Commencement Date, entered into by the Debtor or involving its assets 
may be rescinded or declared null and void on the ground that the same was 
executed with intent to defraud a Creditor or Creditors or which constitute undue 
preference of Creditors. The presumptions set forth in Section 35 shall apply. 
Section 87. Actions for Rescission or Nullity. The Liquidator or, with 
his conformity, a Creditor, may initiate and prosecute any action to rescind, or 
declare null and void any transaction described in the immediately preceding 
paragraph. If the Liquidator does not consent to the filing or prosecution of such 
action, any Creditor may seek leave of the Court to cornmence said action. 
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F. 
THE LIQUIDATION PLAN 
Section 88. The Liquidation Plan. Within three (3) months from his 
assumption into office, the Liquidator shall submit a Liquidation Plan to the 
Court. The Liquidation Plan shall, as a minimum, enumerate all the assets of the 
Debtor, all the Claims against the Debtor, and a schedule of Liquidation of the 
assets and payment of the Claims. 
Section 89. Sale of Assets in Liquidation. ,The Liquidator may sell 
the unencumbered assets of the Debtor and convert the same into money. The 
sale shall be made at public auction. However, a private sale may be allowed 
with the approval of the Court if: (a) the goods to be sold are of a perishable 
nature, or are liable to quickly deteriorate in value, or are disproportionately 
expensive to keep or maintain, or (b) the private sale is for the best interest of 
the Debtor and his Creditors. 
With the approval of the Court, unencumbered property of the Debtor 
may also be conveyed to a Creditor in satisfaction of his Claim, or part thereof. 
Section 90. Manner of Implementing the Liquidation Plan. The 
Liquidator shall implement the Liquidation Plan as approved by the Court. 
Payments shall be made to the Creditors only in accordance with the provisions 
of the Plan. 
Section 91. Concurrence and Preference of Credits. The Liquidation 
Plan and its implementation shall ensure that the concurrence and preference of 
credits as enumerated in the Civil Code of the Philippines shall be observed, 
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unless a preferred Creditor voluntarily waives his preferred right. For purposes of 
this Chapter, credits for services rendered by employees or laborers to the 
Debtor shall enjoy first preference under Article 2244 of the Civil Code, unless 
the Claims constitute legal lens under Articles 2241 and 2242 thereof. 
G. 
LIQUIDATION OF A SECURITIES MARKET PARTICIPANT 
Section 92. Liquidation of a Securities Market Participant. The 
foregoing provisions of this Chapter shall be without prejudice to the power of a 
regulatory agency or self-regulatory organization to liquidate trade-related claims 
of clients or customers of a Securities Market Participant which, for purposes of 
investor protection, are hereby deemed to have absolute priority over all other 
Claims of whatever nature or kind insofar as trade-related assets are concerned. 
For purposes of this Section, "trade-related assets" include cash, securities, 
trading right and other assets owned and used by the Securities Market 
Participant in the ordinary course of its business. 
CHAPTER V I  
FOREIGN CORPORATIONS WITH ASSETS I N  THE PHILIPPINES 
Section 93. Petition by Foreign Entity. The Court shall set a hearing 
in connection with an insolvency or rehabilitation proceeding taking place 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. 
Section 94. Action by the Court. The Court may issue orders: 
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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; 
requiring the surrender of property of the foreign entity to the 
foreign representative; or 
c. 
providing other necessary relief. 
b. 
Section 95. Factors in Granting Relief. 
In determining whether to 
grant relief under this Sub-chapter, the Court shall consider: 
a. 
b. 
C. 
d. 
e. 
the protection of Creditors in the Philippines and the inconvenience 
in pursuing their Claims in a foreign proceeding; 
the just treatment of all Creditors through resort to a unified 
insolvency or rehabilitation proceeding; 
whether other jurisdictions have given recognition to the foreign 
proceeding; 
the extent that the foreign proceeding recognizes the rights of 
Creditors and other interested parties in a manner substantially in 
accordance with the manner prescribed in this Act; and 
the extent that the foreign proceeding has recognized and shown 
deference to proceedings under this Act and previous legislation. 
CHAPTER VI1 
PROVISION COMMON TO 
CHAPTERS 11,111, IV, V and V I  
Section 96. Authorization 
to 
Exchange 
Debt 
for 
Equity. 
Notwithstanding applicable banking legislation to the contrary, any bank, 
whether universal or not, may acquire and hold an equity interest or investment 
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in a Debtor or its subsidiaries when conveyed to such bank in satisfaction of 
debts pursuant to a Rehabilitation or Liquidation Plan approved by the Court: 
Provided, That such ownership shall be subject to the ownership limits applicable 
to universal banks for equity investments and: Provided further, That any equity 
investment or interest acquired or held pursuant to this Section shall be disposed 
by the bank within a period of five (5) years or as may be prescribed by the 
Monetary Board. 
MISCELLANEOUS PROVISIONS 
Section 97. Separability Provision - If any provision of this Act shall 
be held invalid, the remainder of this Act not otherwise affected shall remain in 
full force and effect. 
Section 98. Repealing Clause. All provisions of existing laws, insofar 
as they are inconsistent with this Act, are hereby repealed and/or amended. 
These include particularly Section 110 of Presidential Decree No. 442, as 
amended, the provisions of Concurrence and Preference of Credits under the 
Civil Code of the Philippines, Presidential Decree No. 902-A, as amended, and Act 
No. 1956, as amended. 
Section 99. Effective Date -This Act shall take effect fifteen (15) days 
after its complete publication in the Official Gazette or in at least two (2) national 
newspapers of general circulation. 
Section 100. 
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 
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regulations shall apply. 
4 
Approved, 
5 
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 
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