[ Manila Bulletin Online ] January 14, 2009
By JAMES A. LOYOLA
The Supreme Court will implement the new rules on corporate rehabilitation on January 16, helping make the Philippines an attractive investment haven for foreign investors.
The 2008 Rules of Procedure on Corporate Rehabilitation, which is now at par with the international best practices, seek to improve and expedite the court procedures for petitions for rehabilitation or re-organizations of corporations, partnerships and associations to help debtors recover from financial difficulties while at the same time attempting to ensure fair treatment of creditors.
PSE President Francis Lim said: "The newly-enacted rules is a concrete contribution of the Supreme Court to our Government’s continuing effort to put our practices at par with international standards in order to make the Philippines attractive to foreign investors."
Lim said the new rules would be the counterpart of Chapter 11 proceedings in the United States pending passage by Congress of a more comprehensive bankruptcy law to replace our 1909 Insolvency Act.
"We recognize the fact that a modern and internationally accepted set of bankruptcy law is a big factor considered by foreign investors when making investment decisions," he said.
Lim noted that this was amply demonstrated by the country’s CaLPERS experience a few years ago where the Philippines was almost delisted as an investment-grade country partly because of our archaic and outmoded bankruptcy law, which was enacted way back in 1909.
The Supreme Court has introduced a new rule governing recognition of foreign re-organization or rehabilitation proceedings which covers cases whereby assistance is sought in a Philippine court by a foreign court or representative.
It also covers cases where assistance is sought in a foreign state in connection with a domestic proceeding, or a foreign proceeding and a domestic proceedings are concurrently taking place.
The new rule on foreign proceedings is substantially taken from the UNCITRAL model rules on recognition of foreign insolvency proceedings.
"Of course, before I invest in a company domiciled in a foreign country, I want to make sure first that the bankruptcy system of the country is responsive enough in case something goes wrong with the company," Lim said.
He said that’s part of the due diligence conducted by foreign institutional investors like CaLPERS adding that it is therefore important for a country to upgrade its bankruptcy framework to global standards to stay competitive which is what our Supreme Court precisely did in this particular case.
The PSE has actively supported the Supreme Court in drafting the rules along with other private sector representatives.