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January 5, 2009

Philippines: New rehab rules takes effect Jan 16
The Philippine Stock Exchange (PSE) said on Sunday improved corporate rehabilitation rules that aim to avoid delays in rebuilding insolvent firms will take effect on January 16, a move seen as timely in light of the growing number of bankruptcies worldwide, reported Reuters.

The rules, approved by the Supreme Court and which replace a 2000 interim version, also recognise reorganisations or rehabilitations of foreign firms with local subsidiaries or units, a new provision aimed at making the Philippines more attractive to foreign investors.

"The passage of the new rules is perfectly timed as some of our companies may encounter financial difficulties as a result of the ongoing global recession," Francis Lim, PSE president, said in a statement.

"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," he said.

There have been no bankruptcies among listed Philippine firms so far since the global credit crisis erupted in September, but a few unlisted rural banks have been declared insolvent by authorities.

Lim said the new rules, which serve as the counterpart of Chapter 11 proceedings in the United States pending passage by Congress of a more comprehensive bankruptcy law, would align Philippine procedures to international best practices standards.

"A modern set of bankruptcy laws is a big factor being considered by foreign investors when making investment decisions," Lim said.

"This was amply demonstrated by our Calpers experience where the Philippines was almost delisted as an investment-grade country partly because of our archaic and outmoded bankruptcy law," he said.

The California Public Employees' Retirement System (Calpers), the biggest US pension fund, has Philippine equity investments.

Under the new rules, local courts are given a maximum of one year to approve or reject ordinary petitions for corporate rehabilitation.

For pre-negotiated rehabilitation plans endorsed by the company's secured and unsecured creditors holding a total of at least two-thirds of the firm's total liabilities, the court is given 120 calendar days at most to decide on the rehabilitation petition or the plan would automatically be deemed approved.

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