This content is from: Local Insights

Foreign insolvency recognition

The Supreme Court of the Philippines promulgated the Rules of Procedure on Corporate Rehabilitation, superseding the interim rules issued in 2000.

Significantly, the new rules contain several provisions on the recognition of foreign proceedings, defined as judicial or administrative proceedings outside the Philippines pursuant to an insolvency law in which the assets and affairs of a debtor are subjected to control or supervision by a foreign court for the purpose of rehabilitation or reorganisation. Under Rule 7, a foreign representative (or a person authorised in foreign proceedings to administer the reorganisation or rehabilitation of the debtor, or to act as a representative of the foreign proceeding) can petition the Regional Trial Court, where a Philippine debtor resides or is domiciled, for the recognition of the foreign proceeding. The court must decide the petition within 30 days of its filing.

If the court determines that relief is urgently needed to protect the assets of the debtor or the interests of the creditors, it can stay execution against the debtor's assets in the Philippines, as well as entrust the administration or realisation of these assets to the foreign representative or another person designated by the court. The court can also stay the commencement or continuation of actions or proceedings in the Philippines concerning the debtor's assets, rights, obligations or liabilities. Even the distribution of the Philippine assets can be entrusted by the court to the foreign representative. Furthermore, the foreign representative may intervene in any action or proceeding in the Philippines in which the debtor is a party.

The rules clarify that the filing of a petition by a foreign representative does not subject him or the foreign assets or affairs of the debtor to the jurisdiction of the Philippine court. However, the court may refuse recognition of a foreign proceeding if to do so would be manifestly contrary to the public policy of the Philippines or if the court finds that the country in which the petitioner is a national does not grant recognition to a Philippine rehabilitation proceeding.

Rafael A Morales

Instant access to all of our content. Membership Options | One Week Trial