MANILA, Philippines--The Supreme Court has approved the 2008 implementing rules on petitions for corporate rehabilitation, which would take effect on Jan. 16.

The Philippine Stock Exchange said in a statement that the new rules would give debt-ridden companies some relief in times of financial difficulty.

The new rules, which were drafted by a committee of the Supreme Court with the assistance of private sector representatives such as the PSE, would replace the interim rules of procedure on corporate rehabilitation approved by the Supreme Court in 2000.

The PSE said the new rules seek to improve court procedures for petitions for rehabilitation or re-organizations of corporations, partnerships and associations in order to help debtors recover from financial difficulties on one hand and treat creditors fairly on the other.

"The passage of the new rules is perfectly timed as some companies may encounter financial difficulties as a result of the ongoing global recession. It is therefore important that our bankruptcy system is ready to help our companies get back on their feet if they find themselves in such a situation," PSE president Francis Lim said.
One major change introduced by the Supreme Court governs negotiated rehabilitation plans.

Under the new rules, if the proposed rehabilitation plan is approved by creditors holding at least two-thirds of the total liabilities of the debtor--including secured creditors holding more than half of the total secured claims and unsecured creditors holding more than half of the unsecured claims--both parties can go to court for approval of the plan.

The court is then given a maximum of 120 calendar days from the date of filing of the petition to decide on the petition. If the court fails to do so within the period, the rehabilitation plan shall be deemed approved.

As for ordinary petitions for rehabilitation, the new rules give the court a maximum of one year to act on the petition. The new deadline is intended to avoid delay in the resolution of rehabilitation cases, which has proven detrimental to both debtors and creditors.

Another major improvement is the recognition of foreign rehabilitation proceedings.

This would cover cases where assistance is sought in a Philippine court by a foreign court or representative; assistance is sought in a foreign state in connection with a domestic rehabilitation proceeding; or both relating to foreign, domestic proceedings taking place at the same time.

The new corporate rehabilitation rules will be the counterpart of Chapter 11 bankruptcy laws in the United States, which will be supported by the passage of a more comprehensive bankruptcy law to replace the 1909 Insolvency Act.