New Rules on Corporate Rehabilitation

SC AMENDS RULES ON CORPORATE REHABILITATION

To expedite court procedures for the rehabilitation of corporations, partnerships and associations, the Supreme Court, on December 2, 2008, approved the new Rules of Procedure on Corporate Rehabilitation (A.M. No. 00-8-10-SC), The said rules, drafted by a committee of the Supreme Court with the assistance of private sector representatives, took effect last January 16, 2009, replacing the 2000 Interim Rules of Procedure on Corporate Rehabilitation.

The major amendments to the new Rules of Procedure on Corporate Rehabilitation include:

• Pre-Negotiated Rehabilitation Plans. Under the new Rules, if the proposed rehabilitation plan is approved by creditors holding at least two thirds (2/3) of the total liabilities of the debtor, which should be inclusive of (i) secured creditors holding more than half of the total secured claims and (ii) unsecured creditors holding more than half of the unsecured claims, then the parties can go to court for approval of the rehabilitation plan. From the filing of such petition, the court, in turn, is given a maximum of one hundred twenty (120) days to decide on the petition. Should it fail to do so within the said period, the rehabilitation plan shall then be deemed approved.

As regards other ordinary petitions for rehabilitation, the the court is given a maximum of one year to act on the petition. The new deadline set by the Supreme Court is expected to prevent delay in the resolution of rehabilitation cases, which has proven to be awfully detrimental to all the parties.

• Foreign Rehabilitation Proceedings. Another salient feature introduced by the Supreme Court is the recognition of foreign rehabilitation proceedings. This covers: (i) assistance sought by a foreign court or representatives in a Philippine court; (ii) assistance sought in a foreign state relative to a domestic rehabilitation proceeding; or, (iii) both pertaining to foreign and domestic proceedings.

With the new Rules of Procedure on Corporate Rehabilitation, debt-ridden companies and those encountering financial difficulties can look forward to some relief more than ever in view of the present global recession. ☺