The Federation of Philippine Industries (FPI) has called for review of the corporate rehabilitation law as it welcomed moves by Congress to revisit the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 for possible improvements in light of more companies likely to seek rehabilitation as they grapple with the impact of the pandemic.
FPI Chairman Dr. Jesus L. Arranza said the congressional inquiry into the successes and failures of previous corporate rehabs under the current law shows the foresight of the lawmakers.
“We need this review of the efficacy of the country’s corporate rehab law to see the intricacies and learn from actual cases of how companies were successfully resuscitated or not. We need new investments but we also need a better batting average on rehabilitation cases because this will save us a lot of economic wastage,” Arranza stressed.
House Committee on Banks and Financial Intermediaries chairman Rep. Irwin C. Tieng, launched the inquiry last March 23 based on House Resolution (HR) No. 797 authored by Rep. Rodante D. Marcoleta titled: “A resolution directing the proper committee/s of the House of Representatives to conduct an inquiry, in aid of legislation, on whether the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 has adequately or effectively assisted financially distressed persons or entities to recover their businesses, especially in the recent past when the country experienced the Covid-19 pandemic.”
Arranza noted that previous rehabilitation programs of distressed and bankrupt companies under receivership were handled by the Security and Exchange Commission with the appointment of a receiver, but is now handled by the regular courts.
Under the planned review, lawmakers will seek to know the outcomes of rehabilitation proceedings filed during the recent past with the Securities and Exchange Commission (SEC) and regular courts; the actual length of time that transpired or was required in the disposition of such proceedings and reasons for delays, if any; the reasons and causes for failed petitions for rehabilitation, i.e. denial of petitions and/or liquidation of the persons or entities involved; and new legislation that needs to be introduced and passed to further assist and facilitate the resolution of such proceedings as well as address problems or issues encountered by financially stressed persons or entities.
Also to be scrutinized are successful and failed corporate rehabs under the guidance of the SEC and courts to determine how the lapses in the existing law can be corrected and how the good provisions can be improved further, said Arranza, who was invited as one of the resource persons in the inquiry.
Arranza said that actual cases of companies under receivership to be reviewed include the failed rehabilitation of Uniwide Group of Companies under the supervision of SEC-appointed receiver Monico Jacob; the successful rehabilitation of Hanjin Heavy Industries overseen by the Regional Trial Court of Zambales; and the success story of Victoria Milling under the guidance of the Banko Sentral ng Pilipinas.
Arranza said he is hoping the lawmakers will dig deeper into the Uniwide experience as it will detail the interplay among the regulator, the creditor banks, and the officials of the former retail giant led by its then-CFO Jaime Cabangis. “I believe the Uniwide will be a very good case study and will provide Congress a wealth of information that they will need in introducing revisions to the FRIA, including the restructuring of bank loans and valuation of properties subjected to dacion en pago.”
He added that the FPI and its member companies and industries are ready to help Congress in preparing a well-crafted law that will hopefully perfect the system and speed up rehabilitation proceedings so as not to prevent further bleeding on the part of troubled companies.
“The FPI members share the view of the lawmakers that there shouldn’t be more failed rehab cases to prevent economic wastages and the loss of jobs due to the closure of businesses. No business is immune to the impact of the pandemic so this inquiry is really timely,” Arranza said.