13TH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINES 
1 
First Regular Session 
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Introduced by 
Senator Edgardo 3. Angara 
EXPLANATORY NOTE 
The absence of effective and orderly insolvency procedures can aggravate 
economic and financial crises. Without effective procedures that are applied in a 
consistent manner, creditors may be unable to collect on their claims, which will 
adversely affect the future availability of credit. Without orderly procedures, the rights of 
the debtors may not be adequately protected and different creditors may not be treated 
equitably. 
On the other hand, the consistent application of orderly and effective 
insolvency procedures plays a critical role in fostering growth and competitiveness and 
may also assist in the prevention and resolution of financial crises. 
Insolvency proceedings in the Philippines are governed by Act No. 1956, 
otherwise known as the Insolvency Law, passed in 1909. It vested the courts with 
jurisdiction over petitions for insolvency and suspension of payments. Subsequently, 
Presidential Decree No 902-A ("PD 902-A"), passed in 1976 and amended in 1981, 
vested the Securities and Exchange Commission ("SEC") with jurisdiction over petitions 
for suspension of payments and rehabilitation filed by corporations, partnerships, and 
associations. The Securities Regulation Code, which took effect on 8 August 2000, 
transferred jurisdiction over petitions for suspension of payments and rehabilitation for 
corporations and partnerships from the SEC to the regular courts. Thereafter, the 
Supreme Court has released the rules of procedure for rehabilitation proceedings. 
The legislative framework of our insolvency proceedings is sorely outdated. 
Likewise, it is inadequate and unresponsive to the modern business trends and it is 
generally unable to provide quick resolution of financial dilemmas. This inadequacy and 
unresponsiveness of the insolvency proceedings were deeply felt during the economic 
crisis of 1997 and 1998 when long-drawn out proceedings following corporate failures 
caused immense waste of resources. I n  some cases, the proceedings drag on to the 
extent of seriously threatening the survival of the subject companies. 
This bill seeks to establish a more systematic framework for insolvency 
proceedings and provide equitable treatment to all parties involved in a financial 
restructuring or rehabilitation, Moreover, it seeks to maximize the chances for the 
survival of the company concerned by providing an ailing enterprise four different 
remedies, to wit: 
(1) fast-track rehabilitation; (2) court-supervised rehabilitation; (3) 
pre-negotiated rehabilitation; and (4) dissolution-liquidation. 
With the aforementioned premises, approval of this bill is earnestly sought. 
EDG q'fi 
RDO 3. ANGARA 


A- 
13TH CONGRESS OF THE REPUBLIC 
) 
1 
first Regular Session 
1 
'04 
IiiOV 1 fJ 1'4 :1j3 
OF THE PHILIPPINES 
Introduced by 
Senator Edgardo J. Angara 
AN ACT 
PROVIDING FOR THE RECOVERY OF FINANCIALLY DISTRESSED 
ENTERPRISES 
AND THE RESOLUTION OF THEIR INDEBTEDNESS 
Be it enacted in the Senate and House of Representatives of the Philippines in 
Congres assembled: 
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CHAPTER I -- GENERAL PROVISIONS 
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the extent possible. 
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Section 3. Definitions of Terms-As used in this Act the term: 
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(a) "Administrative expense" shall refer those expenses incurred after 
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commencement of proceedings that are in the ordinary course of business or that are 
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authorized or mandated under this Act. 
Section 1. Etle --This Act shall be known as the "Corporate Recovery Act." 
Section 2. 
Declaration of Policy -- It shall be the policy of the State to 
encourage a juridical debtor and its creditors to collectively and realistically resolve and 
adjust competing claims and property rights under the supervision and approval of a 
court when the debtor can no longer pay its debts as they come due or when the debtor 
has become insolvent, Such resolutions shall respect the differing priorities amongst 
claims, and where possible, attempt to maintain the debtor's operations, even though it 
may come under different ownership or a different corporate entity as part of the 
resolution. When such resolutions are not feasible, it is in the interest of the State to 
allow a speedy liquidation of the juridical debtor's assets and the payoff of its debts to 


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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 
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed or undisputed. 
(c) “Commencement of proceedings” shall refer to the date on which the Court 
issued the order commencing the proceedings. 
(d) “Creditor” shall refer to a juridical entity or physical person holding a claim 
against the debtor. 
(e) “Debtor“ shall refer to a juridicai entity organized in the Philippines unless 
specifically excluded by a provision in this Act. 
(0 “Encumbered property” shall refer to property securing the payment of a 
claim, regardless of whether the property is classified as movable or immovable or 
whether the lien against the property is statutory or consensual. 
(8) “General unsecured creditor” shall refer to a creditor whose claim or a portion 
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 of appearance in 
accordance with this Act. 
(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 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 affiiiate of the juridical 
entity in question. 
(i) “Involuntary proceedings” shall refer to proceedings initiated by creditors. 
(k) “Proceedings“ shall refer to judicial proceedings commenced by the Court’s 
acceptance of a petition filed under this Act. 
(1) “Publication notice” shall refer to notice through publication in a newspaper 
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of general circulation for two consecutive weeks. 
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(m) 
“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 a mortgage registered with the appropriate registry of 
property when the property is in the possession of the debtor. 
(n) “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. 
(0) “Voluntary proceedings” shall refer to proceedings initiated by the debtor. 
Section 4. 
€xc/usions -- 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. 
Section 5. 
Court -- The Court or Courts for hearing and resolving cases 
brought under this Act shall be designated by the Supreme Court. 
Section 6. 
Power of Court -- Upon motion or motu proprio 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. 
Section 7. 
Procedural Rules -The Supreme Court may promulgate rules of 
practice, pleading, and procedure to substitute for or adopt any provisions in this Act 
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. 
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Section 8. 
Substantive and Procedural Consolidation -- 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. 
Section 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 or 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. 
Section 10. Collective Decision-Making of Creditors 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 thereof) shall refer to the results of a 
process by which at least half of the creditors (or a class or a 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 the 
Corporation Code or Civil Code provisions on partnership that are not inconsistent with 
this Act. 
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Section 11. Creditors’ 
Representatives -- 
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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unpaid after the distribution. 
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Section 12. Liability of Directors and Oficers - Directors and officers of a 
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 
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CHAPTER I1 -- INITIATION OF PROCEEDINGS 
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Sub-chapter 1. 
Voluntary Proceedings 
Section 13. Petition to Initate 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 principle activities, and its addresses; 
(b) state the fact of and the cause of the debtor‘s insolvency or inability to pay 
its obligations as they become due; 
(c) specifically state the relief sought pursuant to Chapter I V  of this Act. 
(d) include the attachments required by this Act. 
Section 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 for the three-year 
period prior to the filing of the petition; 
(c) the interim financial statement as of the end of the month prior to the filing 
of the petition; 
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(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; 
(f) coples of certificates of title to the debtor's property; 
(g) 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 of the petition if 
the counter-party is an insider of the debtor and ninety (90) 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) day 
period prior to the filing of the petition; 
(i) a detailed projection of cash flows of the debtor for at least 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; 
(k) other documents that may be required under this Act depending on the form 
of relief requested. 
Section 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 24 of this Act. It shall also, where applicable, require that the debtor 
provide documents not included with its petition within a reasonable time period. 
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Sub-chapter 2. 
Involuntary Proceedings 
Section 16. Orcumstances Necessary to Initiate Involuntary Proceedings -- A 
creditor shall be entitled to initiate involuntary proceedings against a debtor if: 
(a) he and at least two other creditors of the debtor have undisputed or 
adjudicated claims, the required payments on which have remained unpaid 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. 
Section 17. Petition to Initiate 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; 
Section 18. Prelimhary Proceedings on the Suficiency of a Petjtion -- 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. 
Section 19. Basis for Initiating 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 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 I11 -- ADMINISTRATION OF THE PROCEEDINGS 
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Sub-chapter 1. 
The Debtor Under Proceedings 
Section 20. Effect of Commencement of Proceedings -- The Court‘s issuance 
of an order commencing proceedings (either voluntary or involuntary) shall: 
(a) vest in the conservator the right to manage and control the debtor and to 
exercise all rights of the debtor’s board of directors and management to manage the 
debtor; 
(b) 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; 
(c) 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; 
(d) suspend all legal proceedings against the debtor in other courts on grounds 
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of lis pendens; 
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(e) suspend all actions to enforce any judgments against the debtor; 
(9 render null and void the results of any extra-judicial activity to seize property, 
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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; 
(g) render null and void any setoff after commencement of proceedings of any 
debt owed to the debtor by any of the debtor’s creditors; 
(h) render null and void the perfection of any lien against the debtor‘s property 
after the commencement of proceedings; 
(i) consolidate the resolution of ail 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. 
The Court may order, through its injunctive and contempt powers, the transfer of 
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documents, return of property, the annotation of titles and other relevant documents, or 
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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 requests 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. 
Section 21. Exception to Prohibition ofActions against the Debtor with regard 
to 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. 
Section 22. Ion-Appliabiilily of Suspension Order to Appeals and Specialked 
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 quasi-judicial agency when it determines that the court or agency is 
capable of resolving the claim more quickly, fairly, and efficiently than the Court: 
Provided, That the execution of any judgment of such court or agency shall be referred 
to the Court and shall be treated as a non-disputed claim. 
Section 23. Application of Suspension to Government Financial Institutions - 
The provisions in the preceding Section shall apply to government financial institutions 
as creditors, notwithstanding provisions in their charters to the contrary. 
Section 24. Order Commencing Proceedings -- The order commencing 
proceedings (either voluntary or involuntary) shall: 
(a) Identify the debtor, its principle activities, and its address; 
01) state the grounds for initiating the proceedings; 
(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; 
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(0 summarize the requirements and deadlines for creditors to establish their 
claims against the debtor; 
(g) 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 consecutive weeks, the date of the first publication to be no later than five business 
days after issuance of the order. 
Section 25. Propeq of the Debtor under the Control or 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 mechanics‘ liens, such third parties shall transfer 
possession or control of such to the latter: Provided, howeve6 That the conservator 
may arrange to have the third party continue to possess, manage, or dispose of 
property if such an arrangement 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. 
Section 26. Unencumbered Propetty that may be Sold or otherwise Transferred 
durfng 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: 
(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; 
@) 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 of property in order to provide a substitute lien under 
Sections 28 and 29 of this Act; 
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(d) payments made to repurchase property of the debtor that is auctioned off in 
a judicial or extra-judicial sale under Section 27 of this Act; or 
(e) payments made to reclaim property of the debtor held pursuant to a 
possessory pledge or mechanic's lien. 
Section 27. Foreclosures on Encumbered Assets of the Debtor -- The Court, 
after notice and hearing, may allow a foreclosure on encumbered property of the debtor 
and its 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. 
Section 28. Sale or Disposaj of Encumbered Propeq or Propem 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 of security for the counter-party's claim or 
right; and 
(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. 
Section 29. Treatment of Rapidly Depreciating Encumbered Propeify owned 
by the 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, or, if such is not available, 
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(c) convey to the secured creditor a lien on the residual funds from the sale of 
any encumbered property during the proceedings. 
Section 30. Rescission of Pre-Commencement Transactions -- Transactions 
that have occurred prior to commencement of proceedings may be rescinded by the 
Court on grounds that they were executed with an intent to defraud creditors 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) provides 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 an insider of the debtor, and ninety (90) days prior to 
the Commencement of proceedings if the third patty 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 proceeding if the 
creditor is not an insider of the debtor; 
(d) provides security or additional security for a pre-existing debt executed 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. 
Provided, however, That nothing in this Section shall prohibit the Court from 
rescinding a transaction on other grounds provided by relevant legislation and 
jurisprudence: and Provided further, That the provisions of the Civil Code on rescission 
shall apply to these transactions in a suppletory manner. 
Section 31. Post-Commencement Interest -- Interest on claims owed by the 
debtor as of commencement of proceedings shall accrue at the pre-default rates 
established in the debtor's contracts: Provided, however, That secured creditors may 
elect instead to freeze their claims as of the date of the commencement of proceedings 
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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 (days) shall be deemed a waiver of this right. 
Section 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 unencumbered property. 
Section 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. 
Section 34. Treatment of Lessors and other Counter-Patties in Contract -- 
Unless specifically cancelled by a court decree prior to issuance of the order 
commencing proceedings, all contracts of the debtor with creditors and other third 
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 and goods 
that are provided after commencement of proceedings. 
Within sixty (60) days following commencement of the proceedings, the 
conservator shall notify each contractual counter-party of whether the debtor is 
confirming or breaching the particular contract. Contractual obligations of the debtor 
arising during this period, and afterwards for confirmed contracts shall be an 
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administrative expense. Contracts not confirmed by the required deadline shall be 
considered breached. Obligations of the debtor for damages and other penalties 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. 
Section 35. Opportuni& for Counter-Party in Contract to Cure after receiving 
Notice of Confirmation by the Conservator -- Any counter-patty in a 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 proceedings upon 
receiving notice of the conservator's confirmation of the contract. 
Sub-chapter 2. 
Determination of Claims 
Section 36. Determination of Tax Liabilities -- The debtor shall, as soon as 
reasonably possible, file a tax return for determination of tax liabilities as of 
commencement of proceedings. 
Section 37. Establishment of a Preliminary Registry of Claims -- Within twenty 
days of appointment, the conservator shall establish a preliminary registry of claims. 
Such registry shall state for each claim: 
(a) the name and reasonable contact details of the creditors; 
(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 proceedings; 
(d) its preference classification among those established by Sub-chapter 4 of 
Chapter 4 of this Act; 
(e) whether it is undisputed, disputed, contingent or unliquidated; 
(f) the basis of the claim and a reference to the underlying documents 
supporting the claim or 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 proceedings. Records of 
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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 or claims into 
secured and unsecured classes depending on the estimated value of the encumbered 
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. 
Section 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 days after the second date of publication notice that the 
preliminary registry of claims has become available. 
Section 39. Procedure for Determining Disputed and Undisputed Claims -- 
Within thirty days from the expiration date for supplementing the preliminary registry of 
claims, creditors, shareholders and other interested parties may submit a challenge of a 
claim or claims to the Court, serving a certified copy on the conservator and the 
challenged creditor. Such challenge shall set forth with reasonable specificity the basis 
therefor. Upon the expiration of the thirty-day challenge period, the Conservator 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 40. Procedure for Adjr/dicathg Disputed, Challenged and Unliquidated 
Claims -Decisions of the conservator regarding a claim may be appealed to the Court. 
I n  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, howeve6 
That any creditor or other party who might be prejudiced by the allowance or 
disallowance of the claim may intervene in the proceeding. 
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Section 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. 
Section 42. Estoppei o f  Secured Creditors Regarding Overvaiuation of their 
Encumbered Propem -- 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 106 of this Act. 
Section 43. Estimation of Claims for Purposes o f  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. I n  such disputes, the parties shall be the conservator and the disputing 
creditor: 
Provided, however, That any creditor who might be prejudiced by the 
estimation of the claim may, participate in the proceedings. 
Sub-chapter 3. 
The Conservator and the Unsecured Creditors’ Committee 
Section44. 
Who may serve as a Conservator -- 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 rehabilitationt 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. 
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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. 
Section 45. Conflicts oflnterest -- No individual may serve as a 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; 
(c) he is, or was within two (2) years prior to the filing of the petition, a director, 
officer or employee of the debtor or any of its present creditors, o 
(d) he is, or was within two (2) years prior to the filing of the petition, the 
auditor or 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 or employee 
thereof; 
(Q he is related by consanguinity or affinity within the fourth civil degree to the 
individuals enumerated in this Section; or 
(8) he has any other direct or indirect material interest in the debtor or any 
creditor sufficient to cause reasonably based concern that that such interest would 
compromise impartiality or diligence in performing conservatorship duties. 
Section46. Appointment of a Conservator -- The conservator shall be 
appointed by the Court: Provided, however, That the Court shall appoint as conservator 
any qualified individual whose nomination is supported by more than fifty (50) percent 
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of the secured creditors and general unsecured creditors, if evidence of such is 
submitted with the petition or by a manifestation to the Court prior to the conservator’s 
appointment. 
Section 47. Rights and Dulies of a Conservator -- Subject to the control of the 
Court, the conservator shaii administer and preserve the property of the debtor during 
the pendency of the proceedings, for purposes of protecting the interests of the 
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, however, 
That, absent evidence of circumstances justifying more direct management, the rights 
and responsibilities of administering and preserving the assets of the debtor 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. 
The conservator shall not be subject to 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. 
Section 48. Duty to Report on Steps taken to Protect the Value of 
Encumbered Property and Propem of Others - 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. 
Section 49. Du& to act as Setvice 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 an affidavit of service to this effect. The conservator may charge a 
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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 address as part of its notice 
of appearance. 
Section 50. Suspension of Cases in other 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. 
Section 51. Recording of Pending Proceedings at Propetiy Registration Oftices 
-- 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 or otherwise 
compromise the rights of claimants with valid, prior-registered liens against such 
property. 
Section 52. Removal of 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. 
Section 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. 
Section 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 
meruit. Such costs shall be an administrative expense. 
Section 55. General Unsecured Creditors’ Committee-Unless otherwise 
provided for in this Act, the Court shall appoint a committee of seven general unsecured 
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creditors that have the largest such claims against the debtor and that are willing to 
serve in such capacity, 
Section 56. Rights o f  the General Unsecured Creditors’ Committee-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 
(e) appoint one attorney to represent the legal interests of the general 
unsecured creditors, the reasonable costs of which shall be reimbursable from the 
debtor as an administrative expense. 
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CHAPTER IV -- REMEDIES 
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Sub-chapter 1. 
Fast-Track Rehabilitation 
Section 57. Default Relief - The debtor and creditors shall be limited to relief 
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. 
Section 58. Presentation and Approval of Plan -- Within thirty 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. 
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The Court shall set a hearing on the plan no later than thirty days from the date 
of notice of its submission. The plan shall be approved by the Court no later than ten 
(10) 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. 
Section 59. Establishment and Capitalization of a Subsidiary of the Debtor -- 
The conservator shall establish a subsidiary corporation whose shares shall be issued to 
the debtor in the form of a single class of common stock: Provided, however, That five 
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 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 shaii be deemed null and void: Provided, That 
encumbered property shaii be transferred to the subsidiary corporation subject to 
existing liens. 
Section 60. Non-Requirement of Approval of Shareholders - Notwithstanding 
the provisions in the Corporate Code, the debtor, through, the conservator, may transfer 
all or substantially all of the assets of the debtor to the subsidiary corporation without 
the approval of the debtor’s shareholders. 
Section 61. Issuance of Bonds - The conservator may also arrange for the 
issuance of bonds by the subsidiary corporation to the debtor: Provided, That the total 
nominal value of such bonds shall not exceed twenty percent of the debt of the debtor 
and the monthly payments on which shall not exceed twenty percent of the monthly 
payment obligations of the debtor at the time of commencement of the proceedings: 
Such bonds may be secured by liens on property of the subsidiary corporation. 
Notwithstanding any contractual prohibitions or regulations to the contrary, the 
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conservator may establish and register liens on encumbered property of the subsidiary 
corporation: Provided That such liens are junior to pre-existing liens. 
Section 62. Offer to Curreflt Shareholders -- I n  cases where the debtor had 
initiated voluntary proceedings, the shareholders of the debtor shall have the option of 
purchasing up to twenty (20) percent of the shares of the subsidiary corporation, prior 
to their public sale. The purchase price of the shares shall be equal to twenty (20) 
percent of the total disputed and undisputed claims. The expiration date for receiving 
offers shall be no later than sixty days from approval of the plan. Each purchase offer 
shall be combined with the offer to tender at least twenty percent of the shares of the 
debtor. In cases where more than one offer is tendered, the winner of the tender shall 
be the offer or submitting the greatest number of the debtor’s shares. The funds 
tendered by the purchaser 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. 
Section 63. Auc~ofl of Shares - The shares and bonds of the subsidiary 
corporation 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 proceeding, less the amount raised from any initial offering to 
shareholders. 
Section 64. Creditor Claim Certificates -- In order to facilitate the liquidity of 
claims and increase demand for the shares of the subsidiary corporation, 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. 
Section 65. Tramferring Creditor Claim Certificates -- 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 the subsidiary 
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corporation. 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. 
Section 66. Use of Creditor claim Certificates in Biddig -- 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. 
Section 67. Va/uation of Creditor Claim Certificates submitted 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. 
Section 68. Etject of FaiJure to meet Reserve Price for controlling Block of 
Shares -- A failure of the auction to garner an amount of cash and secured creditor 
claim certificates, which, when added to the amount raised by the offer to current 
shareholders, equals the amount of the secured claims and estimated administrative 
costs shall result in a conversion to liquidation procedures under this Act. I n  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 the subsidiary corporation shall 
be rescinded, and any liens created to secure bonds of the subsidiary corporation shall 
be cancelled. 
Section 69. Calling of Shareho/ders’ Meeting -- The conservator shall call an 
extraordinary shareholders’ meeting no later than thirty days after the finalization of the 
sale of the shares of the subsidiary corporation. The meeting shall call for, among other 
things, the election of new members of the board of directors of the subsidiary 
corporation. 
Section 70. Disso/ution of the Debtor - After distribution of the proceeds from 
the sale of the shares of the subsidiary corporation, the conservator shall assume the 
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rights and duties of a liquidator of the debtor and finalize its dissolution according to 
procedures described in Sub-chapter 4 of this Chapter. 
Sub-chapter 2. 
Court-Supervised Rehabilitation 
Section 71. Who is €/@ible - Relief under this Sub-chapter is available to the 
following debtors: 
(a) stock corporations, the majority of the secured creditors of which have 
sought relief under this Sub-chapter, either through a motion submitted to the Court, or 
in a affidavit attached to the petition; or 
(b) non-stock corporations, partnerships and associations. 
Section 72. Initial Meeting of Debtor and Credltoors -- Within thirty days of 
commencement of proceedings, the conservator shall hold a meeting of creditors, the 
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. 
Section 73. Preparation of a Rehabilitation Plan -- The debtor, through its 
board of directors, shall prepare a plan for initial submission to the conservator and the 
Court for distribution to the creditors and shareholders by no later than ninety (90) days 
after commencement of proceedings. The board of directors of the debtor may act on 
behalf of the shareholders to hire an individual or 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. 
Section 74. Compensation of a Rehabilitation Planner -- The compensation of 
a rehabilitation planner shall not be considered an administrative expense. 
Section 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. 
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Provided, That the Court may allow an extension of time if approved by a majority of 
the secured creditors and general unsecured creditors. 
Section 76. Minimal Contents of a Plan -- I n  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 debtor; 
(b) establish classes of creditors and shareholders based on, at a minimum, the 
classes of priority claims established in sub-chapter 4 of this Chapter; 
(c) specify the treatment of each class described in sub-section (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; 
(f) describe the claims against the debtor still subject to dispute and the 
provisioning of funds to account for appropriate payments should the claim be ruled 
valid or its amount adjusted; 
(g) 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 ail 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 
contemplates an additional issuance of shares by the debtor; 
(j) include opinion letters of attorneys of the rehabilitation planner certifying that 
the transactions and arrangements of the plan are consistent with the law. 
Section 77. Disclosure to Credtors and Sbarebolders -- Upon its completion, 
the plan shall be submitted to the conservator and Court. The conservator shall make 
copies of the plan available to the creditors and shareholders for review and copying and 
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shall within five days from 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 days from receipt of notice that the plan is 
available for review. 
Section 78. Submission of Plan for Approval -- If the majority of a creditor or 
shareholder class has not submitted a manifestation of opposition to the plan after forty- 
five days from the time it was distributed to the creditors and shareholders, the 
conservator shall submit the plan to the Court for approval along with a manifestation of 
no opposition. If a majority of a class of creditors or shareholders opposes the plan, the 
conservator shall submit a manifestation of such to the Court instead of a plan for 
approval. 
Section 79. Conversion to Liquidation Proceedings upon Rejection of the 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. 
Section 80. Minimal 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 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, it shall order the return of the plan to its authors for 
correction and resubmission to the creditors or shareholders for review, if it determines 
that such non-conformity was not in bad faith and is reasonably curable. 
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Section 81. Approval of Plan notwithstanding Disputes over Claims-The 
Court 
may approve a plan notwithstanding unresolved disputes over claims so long as the 
required support of the plan is maintained regardless of the outcome of the disputes and 
the plan can accommodate payment of the claims regardless of the outcome of the 
disputes. 
Section 82. EEect 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 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 revert 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. 
Section 83. Liabi/ity 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. 
Section 84. Treatment of Income derived from Forgiveness of Debt -- Income 
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. 
Section 85. Effect of Failure to 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. 
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Section 86. Revocation of Plan on Grounds of Fraud -- Within ninety (90) 
days from the approval of the rehabilitation pian, and after notice and hearing, the Court 
may revoke the approval thereof on the grounds of fraudulent inducement. In such 
case, the debtor shall come under the proceedings described in Sub-chapter 4 of this 
Chapter. 
Section 87. Discharge of the 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 
Section 88. Requirements --Any debtor as defined under this Act may file a 
The petition, in 
petition seeking pre-negotiated rehabilitation as a form of relief. 
addition to the requirements under Sub-chapter 2 of this Chapter shall include: 
(a) five copies of a rehabilitation pian 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. 
Section 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. 
Section 90. Exemption from Determination of Claims -- The requirements of 
Sub-chapter 2 of Chapter 3 shall not apply to proceedings under this Sub-chapter. 
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Section 91. Inspection and Review of Rehabilitation Plan -- Upon 
commencement of the proceedings, the conservator shall make available for review and 
copying the rehabilitation plan by any interested party. 
Section 92. Approval by the 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. 
Section 93. Objection -- 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 
conservator, and the largest seven secured creditors and largest seven general 
unsecured creditors who support the plan. 
Section 94. Hearing on Objection -- 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 or 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. 
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Section 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. 
Sub-chapter 4. 
Dissolution and Liquidation 
Section 96. Requirements for Initiation - 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. 
Section 97. Appointment of a Liquidator -- The order commencing liquidation 
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Section 98. Consequences of Initiating Liquidation Proceedings -- The 
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commencement of liquidation proceedings shall either initiate or continue the 
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administration of the debtor in accordance with Chapter 111 of this Act subject to the 
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particular provisions under this Sub-chapter: Provided, however, That upon an initiation 
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of liquidation proceedings, the debtor shall be declared dissolved and ail contracts and 
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agreements of the debtor shall be deemed breached as of the date of commencement 
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of proceedings. 
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proceedings shall name a liquidator, who may be the conservator administering the 
debtor prior to the commencement of the liquidation portion of the proceedings. 
Section 99. Specific Rights and Duties o f a  Liquidator -- I n  addition to the 
rights and duties of a conservator, the liquidator shall have the following rights and 
(a) to file a notice with the Securities and Exchange Commission that the 
dissolution of the debtor has commenced; 
(b) in cases when the there has been an the order converting the proceedings 
from other proceedings in this Chapter, to publish the order in a newspaper of general 
circulation for two consecutive weeks, the date of the first publication to be no later 
than five 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 requirements of any applicable trust arrangement; 
(0 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; 
(g) 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 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 or the 
Bangko Sentral ng Pilipinas; 
(k) to perform such other duties and functions as the Court may from time to 
time impose on him. 
Section 100. Compensation of the Liquidator -- The compensation scheme for 
the liquidator shall be established with a view towards providing the liquidator with 
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reasonable incentives to maximize the amount of money paid out to creditors and 
shareholders for legitimate claims. 
Section 101. Requirements ofa Liquidation Plan -- The liquidation plan shall 
(a) describe with reasonable detail the assets of the debtor including any readily 
ascertainable values; 
(b) disclose the details of any sales, abandonment, or other dispositions of the 
debtor's assets by the liquidator prior to the submission of the plan; 
(c) describe the manner for selling the debtor's assets and how this manner is 
superior to other methods in terms of the likelihood of obtaining the greatest recovery 
for the creditors and shareholders; 
(d) specifically describe the treatment of encumbered assets of the debtor 
(abandonment, dacion en pago, sales bundled with other assets); 
(e) specifically describe the treatment of causes of action, receivable and other 
claims held by the debtor (action by the liquidator, or assignment); 
(f) state the amount of undisputed indebtedness of the debtor for each 
preference class; 
(8) describe the amount of disputed or contingent liabilities and their likelihood 
of maturity and impact on the undisputed creditors and shareholders. 
Section 102. Hearing and Approval of Plan -- Upon receipt of the liquidation 
plan, the Court shall issue an order setting a hearing thereon, informing the creditors 
that the Plan has been submitted and is available for examination and copying, and 
directing all creditors of record to submit their comment or opposition thereto not later 
than fifteen (15) days before the date of the hearing. 
Section 103. Disposition of Encumbered Propew held by the Debtor -- The 
liquidator may arrange to dispose of encumbered property of the debtor through any 
means allowed by law in order to maximize the liquidation dividend for the creditors and 
shareholders: Provided, howeve, That the liquidator may not sell encumbered property 
bundled with other property if the amount offered or bid is not sufficient to cover the 
amount of the claims of the creditors holding liens on the property offered for sale: 
Provided further, That the restrictions on the rights of secured creditors to foreclose on 
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and sell encumbered immovable property shall not extend beyond sixty (60) days from 
the date of the approval of the liquidation plan and thirty (30) days from such date with 
regard to all other encumbered property. 
Section 104. Rules for Payment of Claims Secured by Encumbered Propetty - 
The liquidator shall distribute the proceeds of the sale of encumbered property, after 
paying reasonable costs of sale, relevant property taxes, and the expenses necessary to 
extinguish any possessory liens, according to a priority established by the date of their 
registration in the appropriate registry. No subsequently registered lien holder shall 
receive payment unless all lien holders senior thereto are paid in full. 
Proceeds 
remaining after payment of claims secured by registered liens shall be applied to claims 
secured by statutory non-possessory liens on the property not registered with the 
appropriate registry: Provided, That portions of claims arising from imposition of a fine, 
penalty, forfeiture, or exemplary or punitive damages that are not compensatory for 
pecuniary loss suffered by the creditor shall be paid according to Section 106 of this Act. 
Where proceeds are insufficient to pay in full a claim secured by a registered 
lien, the portion remaining unpaid shall be paid according to Section 106 of this Act. 
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-rata 
basis. Portions of such claims not covered by the proceeds from the sale shall be paid 
according to Section 106 of this Act. 
Section 105. Rules for Payment of Unsecured Claims --The liquidator shall pay 
the undisputed unsecured claims of the debtor according to the order set forth in 
Section 106 of this Act. The liquidator shall not pay the claims of any particular class 
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 pro-rata basis. 
Section 106. Priori& of Unsecured Claims - The liquidator shall distribute the 
proceeds from the sale of unencumbered property and shall distribute surpluses from 
the sale of encumbered property according to the following order in accordance with the 
procedures established in Section 105 of this Act: 
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(c) claims of the Government for taxes and other mandatory contributions to 
federal and local budgetary agencies not otherwise treated in this Sub-chapter arising 
through the day before commencement of 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; 
(0 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 
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paid to shareholders of the debtor according to the priorities established in relevant 
Section 107. Contingency for Disputed Claims -- The liquidator shall set aside 
funds for paying all disputed claims. I n  the event that claims are denied and appeals on 
such decisions are exhausted, the liquidator shall distribute the funds to unpaid 
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undisputed creditors and shareholders according to the order of priority in Sections 104 
and 106 of this Act. 
Section 108. Submission and Review of Final Repon' 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 or the creditors or shareholders 
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concerning the liquidation of the debtor. 
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Section 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. 
Section 110. Terrninatfon of Procee&gs - 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. 
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CHAPTER V -- PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR 
REHABILITATION PROCEEDINGS 
Sub-chapter 5. 
Banks and other Financial Institutions under 
Receivership pursuant to a State-Funded or State-Mandated 
Insurance System 
Section 111. Provision of Assistance-The Court shall issue orders, adjudicate 
claims, and provide for other relief necessary to assist in the liquidation of a financial 
institution under receivership established by a state-funded or state-mandated insurance 
system. 
Section 112. Application of Relevant Legislation -- The liquidation of financial 
institutions shall be determined by the relevant legislation. The provisions in this Act 
shall apply in a suppletory manner. 
Sub-chapter 6. 
Foreign Registered Corporations with Assets in 
the Philippines 
Section 113. Initation of Proceedhgs -- 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. 
Section 114. Provision of Relief- 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; 
(b) requiring the surrender of property of the foreign entity to the foreign 
representative; 
(c) providing other necessary relief. 
Section 115. Factors determining Entitlement to 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 
rehabilitation 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 V I  -- MISCELANEOUS PROVISIONS 
Section 116. Separability Provisions - 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 117. Repeafing Clause -The specified sections 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. 
Section 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 manner. 
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Insolvency of physical persons shall be governed by special laws insofar as they are not 
inconsistent with this Code.” 
Section 119. Efective Date - This Act will take effect immediately upon 
approval. 
Section 120. Application to Pending Insolvency, Suspension of Payments and 
Rehabiftation Cases -- This Act shall govern all petitions filed after it takes effect, and 
also all further proceedings in insolvency, suspension of payments and rehabiiitation 
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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