Press Release
July 29, 2009

ANGARA DEFENDS UPDATED LENDING AND CREDIT LAW
IN SENATE TODAY

Sen. Edgardo J. Angara today is presenting his "Corporate Recovery and Insolvency Act of 2009" at the Senate hearing with the aim of enacting it into law. He seeks to provide for more comprehensive proceedings for rehabilitation and liquidation schemes for financially distressed enterprises.

In his speech, Sen. Angara, former Chair of the Senate Committee on Finance, asserts, "It pains me to say that in our country the rate at which claimants could recover their investments from an insolvent firm stands at only a nightmarish 4.4 percent--a far cry from the 92.5 percent recovery rate in Japan."

Under existing laws, the framework of insolvency and rehabilitation proceedings is inadequate and unresponsive to the modern trends in business, such that it is unable to quickly resolve modern financial issues. This flaw is mostly felt against the backdrop of an economic crisis, wherein the present insolvency regime provides only limited solutions to business entities and is thus unable to salvage enterprises from financial turmoil, as well as to safeguard the rights to claim of many clients.

"In this time of global financial crisis, the call for investor protection and the renewal of investor confidence rings louder than ever in the face of mounting debts, dormant corporate rehabilitation filings before our local courts, and shareholders mired in soured investments. This means that in the Philippines, the chances that Mr. Juan de la Cruz could receive his claims from a firm that that has run bankrupt seem almost nil, if not next to impossible," Sen. Angara stresses.

Senate Bill no. 61 seeks to establish a more systematic framework for insolvency proceedings and provide equitable treatment to all parties involved in a financial restructuring or rehabilitation. The bill states that an insolvent debtor may apply for rehabilitation. If the court finds the petition to be sufficient in form and substance, it shall issue a Commencement Order. It will then fall for suspension or stay order.

Sen. Angara believes that "the State should empower a debtor and its creditors to collectively and realistically resolve and adjust competing claims and property rights when the debtor can no longer pay its debts as they become due. When rehabilitation is not feasible, it is the bounden duty of the State to facilitate a speedy and orderly liquidation of the debtor's assets and the settlement of its obligations to the fullest extent possible."

Business entities today face limited remedies and are, therefore, ill-equipped to salvage enterprises from financial distress. Financial market experts are in agreement that a modern set of bankruptcy laws is always a prime factor that foreign investors consider when deciding where to invest.

Sen. Angara concludes, "The Corporate Recovery and Insolvency Act shall provide the remedies that have already proven to be effective in other jurisdictions. Why should we wait, then, for things to turn out for the worst before we ever decide to strengthen and update our legal pillars? The time to act is now, more than ever."

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