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Bankruptcy Law
The Philippines’ legislation on bankruptcy (the Insolvency Act) provides debt resolution mechanisms for both natural persons and legal entities. The 1909 act, however, it is perceived as being obsolete in approach and outmoded in style. It is rarely applied to corporations and almost never to individuals. To more fully address the needs of enterprises in financial distress, the Philippines has established an entirely separate set of proceedings for corporate rehabilitation. Based on a bare-bones Marcos-era decree, corporate rehabilitation proceedings are governed by a set of interim rules that were promulgated by the Supreme Court in 2000. Petitions for corporate rehabilitation are heard by approximately 60 Regional Trial Courts specifically designated to hear commercial cases.
The current bankruptcy regime is widely seen as a suboptimal arrangement badly in need of reform through the passage of a comprehensive law encompassing international best practices in both liquidation and rehabilitation. Numerous obstacles, however, reduce the chances for passage of a new bankruptcy law in the coming years. Under these circumstances, the most realistic approach may be to look for second-best solutions that are more likely to be successfully implemented in the nearer term.
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