RULES OF PROCEDURE ON CORPORATE REHABILITATION RESOLUTION
Acting on the recommendation of The Subcommittee on Special Rules for Special Commercial Courts, submitting for the consideration and approval of the Court the proposed “Rules of Procedure on Corporate Rehabilitation (2008),” the Court Resolved to APPROVE the same. The Rule shall take effect on January 16, 2009 following its publication in two (2) newspapers of general circulation.
RULES OF PROCEDURE ON CORPORATE REHABILITATION (2008)
RULE 1 COVERAGE
SECTION 1. Scope.—These Rules shall apply to petitions for rehabilitation of corporations, partnerships and associations pursuant to Presidential Decree No. 902-A, as amended.
SEC. 2. Applicability to Rehabilitation Cases Transferred from the Securities and Exchange Commission.—Cases for rehabilitation transferred from the Securities and Exchange Commission to the Regional Trial Courts pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, shall likewise be governed by these Rules.
DEFINITION OF TERMS AND CONSTRUCTION
SEC. 1. Definition of Terms.—For purposes of these Rules:
“Administrative Expenses” shall refer to (a) reasonable and necessary expenses that are incurred in connection with the filing of the petition; (b) expenses incurred in the ordinary course of business after the issuance of the stay order, excluding interest payable to the creditors for loans and credit accommodations existing at the time of the issuance of the stay order; and (c) other expenses that are authorized under these Rules.
“Affidavit of General Financial Condition” shall refer to a verified statement on the general financial condition of the debtor required in Section 2, Rule 4 of these Rules.
“Affiliate” is a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation, which thereby becomes its parent corporation.
“Asset” is anything of value that can be in the form of money, such as cash at the bank or amounts owed; fixed assets such as property or equipment; or intangibles including intellectual property, the book value of which is shown in the last three audited financial statements immediately preceding the filing of the petition. In case the debtor is less than three years in operation, it is sufficient that the book value is based on the audited financial statement/s for the two years or year immediately preceding the filing of the petition, as the case may be.
“Board of Directors” shall include the executive committee or the management of a partnership or association.
“Claim” shall include all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise.
“Control” is the power of a parent corporation to direct or govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one–half (1/2) of the voting power of an enterprise unless, in exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. Control also exists even when the parent owns one-half (1/2) or less of the voting power of an enterprise when there is power:
(a) Over more than one-half (1/2) of the voting rights by virtue of an agreement with investors;
(b) To direct or govern the financial and operating policies of the enterprise under a statute or an agreement;
(c) To appoint or remove the majority of the members of the board of directors or equivalent governing body; or
(d) To cast the majority votes at meetings of the board of directors or equivalent governing body.
“Creditor” shall mean any holder of a Claim.
“Court” shall refer to the proper Regional Trial Court designated to hear and decide the cases contemplated under these Rules.
“Days” shall refer to calendar days unless otherwise provided in these Rules.
“Debtor” shall mean any corporation, partnership or association or a group of companies, whether supervised or regulated by the Securities and Exchange Commission or other government agencies, on whose behalf a petition for rehabilitation has been filed under these Rules.
“Foreign court” means a judicial or other authority competent to control or supervise a foreign proceeding.
“Foreign proceeding” means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of rehabilitation or re-organization.
“Foreign representative” means a person or entity, including one appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or rehabilitation of the debtor or to act as a representative of the foreign proceeding.
“Group of companies” refers to, and can cover only, corporations that are financially related to one another as parent corporations, subsidiaries and affiliates. When the petition covers a group of companies, all reference under
these Rules to “debtor” shall include and apply to the group of companies.
“Liabilities” shall refer to monetary claims against the debtor, including stockholder’s advances that have been recorded in the debtor’s audited financial statements as advances for future subscriptions.
“Parent” is a corporation which has control over another corporation directly or indirectly through one or more intermediaries.
“Rehabilitation” shall mean the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan, more if the corporation continues as a going concern than if it is immediately liquidated.
“Secured claim” shall refer to any claim whose payment or fulfillment is secured by contract or by law, including any claim or credit enumerated under Articles 2241 and 2242 of the Civil Code and Article 110, as amended, of the Labor Code of the Philippines.
“Subsidiary” means a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled directly or indirectly through one or more intermediaries by another corporation, which thereby becomes its parent corporation.
“Unsecured claim” shall mean any claim other than a secured claim.
SEC. 2. Construction.—These Rules shall be liberally construed to carry out the objectives of Sections 5(d), 6(c) and 6(d) of Presidential Decree No. 902-A, as amended, and to assist the parties in obtaining a just, expeditious and inexpensive determination of cases. Where applicable, the Rules of Court shall apply suppletorily to proceedings under these Rules.
SEC. 1. Nature of Proceedings.—Any proceeding initiated under these Rules shall be considered in rem. Jurisdiction over all persons affected by the proceedings shall be considered as acquired upon publication of the notice of the commencement of the proceedings in any newspaper of general circulation in the Philippines in the manner prescribed by these Rules. The proceedings shall also be summary and non-adversarial in nature. The following pleadings are prohibited:
(a) Motion to dismiss;
(b) Motion for a bill of particulars;
(c) Petition for relief;
(d) Motion for extension;
(e) Motion for postponement;
(f) Third-party complaint;
(h) Motion to hear affirmative defenses; and
(i) Any pleading or motion which is similar to or of like effect as any of the foregoing. Any pleading, motion, opposition, defense or claim filed by any interested party shall be supported by verified statements that the affiant has read the same and that the factual allegations therein are true and correct of his personal knowledge or based on authentic records, and shall contain as annexes such documents as may be deemed by the party submitting the same as supportive of the allegations in the affidavits. The court may decide matters on the basis of affidavits and other documentary evidence. Where necessary, the court shall conduct clarificatory hearings before resolving any matter submitted to it for resolution.
SEC. 2. Venue.—Petitions for rehabilitation pursuant to these Rules shall be filed in the regional trial court which has jurisdiction over the principal office of the debtor as specified in its articles of incorporation or partnership. Where the principal office of the corporation, partnership or association is registered in the Securities and Exchange Commission as Metro Manila, the action must be filed in the regional trial court of the city or municipality where the head office is located. A joint petition by a group of companies shall be filed in the Regional Trial Court which has jurisdiction over the principal office of the parent company, as specified in its Articles of Incorporation.
SEC. 3. Service of Pleadings and Documents.—When so authorized by the court, any pleading and/or document required by these Rules may be filed with the court and/or served upon the other parties by facsimile transmission (fax) or electronic mail (e-mail). In such cases, the date of transmission shall be deemed to be the date of service. Where the pleading or document is voluminous, the court may, upon motion, waive the requirement of service; provided that a copy thereof together with all its attachments is duly filed with the court and is made available for examination and reproduction by any party, and provided, further, that a notice of such filing and availability is duly served on the parties.
SEC. 4. Trade Secrets and Other Confidential Information.—Upon motion, the court may issue an order to protect trade secrets or other confidential research, development or commercial information belonging to the debtor.
SEC. 5. Executory Nature of Orders.—Any order issued by the court under these Rules is immediately executory. A petition to review the order shall not stay the execution of the order unless restrained or enjoined by the appellate court. Unless otherwise provided in these Rules, the review of any order or decision of the court or an appeal therefrom shall be in accordance with the Rules of Court; provided, however, that the reliefs ordered by the trial or appellate courts shall take into account the need for resolution of proceedings in a just, equitable and speedy manner.
SEC. 6. Nullification of Illegal Transfers and Preferences.—Upon motion the court may nullify any transfer of property or any other conveyance, sale, payment or agreement made in violation of its stay order or in violation of these Rules.