(a) In relation to each type of insolvency procedure available in the legal system of this economy, what are the administrative organs/entities involved in the implementation and management of that procedure? (For example a trustee, liquidator, receiver, government official.)

 

Under the Insolvency Law, the trial courts, the assignee, the receiver and the sheriff are the organs and entities involved in the insolvency procedure.

Under PD 902-A, the SEC, the SEC appointed Hearing Panel, the interim receivers, the rehabilitation receiver and the management committee are the organs and entities involved in the proceedings.

(b) What qualifications must each type of administrator of insolvency procedures possess? Is there a system of regulation of insolvency administrators in this economy?

 

There are no rules specifying the qualifications of administrators. At present, it is the SEC, even without the consent of the creditors or the debtors should the situation require it to do so, which determines the persons to be appointed members of a management committee or the persons who will act as the rehabilitation receivers.

(c) Are the creditors of a corporate debtor permitted to participate in the administration of the relevant insolvency procedure, and if so, how? (For example are the creditors permitted to assist the administrator, or supervise or dictate the conduct of the administration?)

 

Yes. Although the final decisions are eventually made by the SEC, the creditors, as a matter of practice, are consulted by the SEC before any such decision is made. Also, the SEC allows the creditors to normally have a representative in the management committee. PD 902-A does not impose any requirement that the creditors be represented in the management committee nor does PD 902-A prescribe any minimum vote of the creditors to approve a rehabilitation plan.

Under the Insolvency Law, the creditors elect the assignee to whom an insolvent debtor makes an assignment of all his property for the benefit of his creditors.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what are the powers given to each type of administrator by statute, at general law or pursuant to the terms of the appointment? (for example power to carry on the business of the organization, to pay creditors, to compromise claims of or against the debtor, to issue or defend legal proceedings, to obtain credit, to sell property, to execute documents on behalf of the debtor.)

 

Under PD 902-A, the rehabilitation receiver shall have the powers of a regular receiver under the Rules of Court which are as follows:

"SEC. 6. General powers of receiver. - Subject to the control of the court in which the action or proceeding is pending, a receiver shall have the power to bring and defend, in such property in controversy; to receive rents; to collect debts due to himself as receiver or to the fund, property, estate, person, or corporation of which he is the receiver; to compound for and compromise the same; to make transfers; to pay outstanding debts; to divide the money and other property that shall remain among the persons legally entitled to receive the same; and generally to do such acts respecting the property as the court may authorize. However, funds in the hands of a receiver may be invested only by order of the court upon the written consent of all the parties to the action.

"No action may be filed by or against a receiver without leave of the court which appointed him." (Rule 59, Rules of Court)

The management committee rehabilitation receiver shall have the following powers under PD 902-A: (1) to take custody of, and control over, all the existing assets and property of such entities under management; (2) to evaluate the existing assets and liabilities, earnings and operations of such corporations, partnerships or other associations; (3) to determine the best way to salvage and protect the interest of the investors and creditors; (4) to study, review and evaluate the feasibility of continuing operations and restructure and rehabilitate such entities if determined to be feasible by the SEC; (5) to report and be responsible to the SEC until dissolved by the Commission; and (6) It may overrule or revoke the actions of the previous management and board of directors of the entity or entities under the management notwithstanding any provision of law, articles of incorporation or by-laws to the contrary. (Sec. 6 (c) & (d), PD 902-A)

The assignee under the Insolvency Law shall have the power to: (1) sue and recover all the estate, debts and claims belonging to or due to the debtor; (2) take into his possession all the estate of the debtor except property exempt from execution; (3) in case of a non-resident or absconding or concealed debtor, to demand and receive of every sheriff all the property and moneys in his possession belonging to the debtor; (4) sell, upon order of the court, any estate of the debtor which has come into his possession; (5) redeem all mortgages and pledges and to satisfy any judgment which may be an encumbrance on any property sold by him; (6) settle all accounts between the debtor and his debtors, subject to the approval of the court; (7) compound, under the order of the court, with any person indebted to such debtor; and (8) recover any property fraudulently conveyed by the debtor.

(b) To what extent and in what circumstances may each type of insolvency administrator seek assistance, advice or direction in the conduct of the administration, and from what sources? (for example the Court, his appointor, the creditors of the debtor, a solicitor, accountant or other relevant person.)

 

PD 902-A gives the SEC wide powers on the rehabilitation, receivership and liquidation of corporations. As a matter of practice, the SEC eventually makes the final decisions affecting the rehabilitation or liquidation of the debtor.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what are the duties imposed upon each type of administrator by statute and at general law? (for example a duty to take possession of assets of the debtor, to realise those assets, to discharge the debt owed to his appointor, to call for proofs of debts owed to creditors, to adjudicate upon claims of creditors, to apply available assets in discharge of those claims, to report on the conduct of the debtor by the proprietors.)

 

The assignee in insolvency shall have the duty to: (1) register the assignment to him of the real estate of the debtor (Sec. 34); (2) file the schedule and inventory of the property of the debtor (Ibid.); (3) convert, as speedily as possible, the estate, real and personal, into money (Sec. 39); (4)To keep a regular account of all moneys received by him as assignee (Ibid.); (5) petition the court to allow the private sale of the debtor's property if it appears that it is for the best interest of the estate (Ibid.); (6) file a just and true accounts of all receipts and payments (Sec. 42); (7) file accounts upon order of the court on motion of two or more creditors (Sec. 44); (8) distribute such dividends as he may be required (Ibid.); and (9) file his final account within one year from the date of order of adjudication.or the receiver's bond is found to be insufficient (Sec. 43).

PD 902-A does not spell out the duties of the rehabilitation receiver or the management committee.

(a) What remedies and/or sanctions are available in the legal system of this economy in respect of breaches of duty or transgressions committed by each type of insolvency administrator?

 

They may be sued for damages.

(b) Have there been actual instances of breach of duty or transgressions committed by insolvency administrators?

 

yes.

(c) If so, give the details of any major cases and a summary of the action taken and the results.

 

After what appeared to be a successful rehabilitation of a corporation (B.F. Homes), the stockholders based, upon the SEC audit of the receiver's administration, are presently attempting to recover from the rehabilitation receiver a very substantial amount, alleging that the receiver grosslyoverstated the amounts due to him for the recovery of properties.