The Interim Rules shall take effect on December 15, 2000 following its publication in two (2) newspapers of general circulation not later than November 26, 2000. 

November 21, 2000, Manila. 

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago and De Leon, Jr., JJ., concur. 
    
    

Sec. 2. Applicability to Rehabilitation Cases Transferred from the Securities and Exchange Commission. - Cases for rehabilitation transferred from the Securities and Exchange Commission to the Regional Trial Courts pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, shall likewise be governed by these Rules. 
    

"Administrative expenses" shall refer to those expenses incurred in the ordinary course of business of the debtor after the issuance of the stay order, excluding interest payable to creditors. 

"Affidavit of General Financial Condition" shall refer to a verified statement on the general financial condition of the debtor required in Section 2, Rule 4 of these Rules. 

"Board of Directors" shall include the executive committee or the management of a partnership or association. 

"Claim" shall include all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise. 

"Creditor" shall mean any holder of a Claim. 

"Court" shall refer to the proper Regional Trial Court designated to hear and decide the cases contemplated under these Rules. 

"Debtor" shall mean any corporation, partnership, or association, whether supervised or regulated by the Securities and Exchange Commission or other government agencies, on whose behalf a petition for rehabilitation has been filed under these Rules. 

"Stockholder" shall include a member of a non-stock corporation or association, in a partnership. 

The proceedings shall also be summary and non-adversarial in nature. The following pleadings are prohibited: 

a. Motion to dismiss; 
b. Motion for a bill of particulars; 
c. Motion for new trial or for reconsideration; 
d. Petition for relief; 
e. Motion for extension; 
f. Memorandum; 
g. Motion for postponement; 
h. Reply or Rejoinder; 
i. Third party complaint; and 
j. Intervention. 

Sec. 2. Venue. - Petitions for rehabilitation pursuant to these Rules shall be filed in the Regional Trial Court having jurisdiction over the territory where the debtor's principal office is located. 

Sec. 3. Service of Pleadings and Documents. - When so authorized by the Court, any pleading and/or document required by these Rules may be filed with the Court and/or served upon the other parties by facsimile transmission (fax) or electronic mail (e-mail). In such cases, the date of transmission shall be deemed to be the date of service. In case of a voluminous pleading or document, the Court may motu proprio or upon motion, waive the requirement of service, provided, a copy thereof together with all its attachments is duly filed with the court and is made available for examination and reproduction by any party, and provided, further, that a notice of such filing and availability is duly served on the parties. 

Sec. 4. Trade Secrets and Other Confidential Information. - On motion or on its own initiative, the court may issue an order to protect trade secrets or other confidential research, development, or commercial information belongings to the debtor. 

Sec. 5. Executory Nature of Orders. - Any order issued by the court under these Rules is immediately executory. A petition for review or an appeal therefrom shall not stay the execution of the order unless restrained or enjoined by the appellate court. The review of any order or decision of the court or an appeal therefrom shall be in accordance with the Rules of Court: Provided, however, that the reliefs ordered by the trial or appellate courts shall take into account the need for resolution of proceedings in a just, equitable, and speedy manner. 
         

Sec. 2. Contents of the Petition. - The petition filed by the debtor must be verified and must set forth with sufficient particularly all the following material facts: (a) the name and business of the debtor; (b) the nature of the business of the debtor; (c) the history of the debtor; (d) the cause of its inability to pay its debts; (e) all the pending actions or proceedings known to the debtor and the courts or tribunals where they are pending; (f) threats or demands to enforce claims or liens against the debtor; and (g) the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors, employees, and stockholders. 

The petition shall be accompanied by the following documents:

a. An audited financial statement of the debtor at the end of its last fiscal year; 
    
b. Interim financial statements as of the end of the month prior to the filing of the petition; 
   
c. Schedule of Debts and Liabilities which lists all the creditors of the debtor indicating the name and address of each creditor, the amount of each claim as to principal, interest, or penalties due as of the date of filing, the nature of the claim, and any pledge, lien, mortgage judgment, or other security given for the payment thereof; 
    
d. Any Inventory of Assets which must list with reasonable specificity all the assets of the debtor, stating the nature of each asset, the location and condition thereof, the book value or market value of the assets, and attaching the corresponding certificate of title therefor in case of real property, or the evidence of title or ownership in case of movable property, the encumbrances, liens or claims thereon, if any, and the identifies and addresses of the lienholders and claimants. The Inventory shall include a Schedule of Accounts Receivable which must indicate the amount of each, the persons from whom due, the date of maturity, and the degree of collectibility categorizing them as highly collectible to remotely collectible; 
   
e. A rehabilitation plan which conforms to the minimal requirements set out in the Section 5, Rule 4 of these Rules; 
    
f. A Schedule of Payments and disposition of assets which the debtor may have effected within three (3) months immediately preceding the filing of the petition; 
          
g. A Schedule of the Cash Flow of the debtor for three (3) months immediately preceding the filing of the petition, and a detailed schedule of the projected cash flow for the succeeding three (3) months; 
     
h. A Statement of Possible Claims by or against the debtor which must contain a brief statement of the facts which might give rise to the claim and an estimate of the probable amount thereof; 
   
i. An Affidavit of General Financial Condition which shall contain answers to the questions or matters prescribed in Annex "A" hereof; 
      
j. At least three (3) nominees for the position of Rehabilitation Receiver as well as their qualifications and addresses, including, but not limited to their telephone numbers, fax number and e-mail address; and 
       
k. A Certificate attesting, under oath, that the (a) filing of the petition has been duly authorized; and (b) the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness; alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholders' rights. 

Sec. 3. Verification by Debtor. - The petition filed by the debtor must be verified by an affidavit of a responsible officer of the debtor and shall be in a form substantially as follows: 

I, ___________________________, (position) of (name of petitioner), do solemnly swear that the petitioner has been duly authorized to file the petition and that the stockholders and board of directors (or governing body) have approved and/or consented to, in accordance with law, all actions or matters necessary or desirable to rehabilitate the debtor. There is no petition for insolvency filed with any other body, court, or tribunal affecting the petitioner. The Inventory of Assets and the Schedule of Debts and Liabilities contains a full, correct, and true description of all debts and liabilities and of all goods, effects, estate, and property of whatever kind or class belonging to petitioner. The Inventory also contains a full, correct, and true statement of all debts owing or due to petitioner, or to any person or persons in trust for petitioner and of all securities and contracts whereby any money may hereafter become due or payable to petitioner or by or through which any benefit or advantage may accrue to petitioner. The petition contains a concise statement of the facts giving rise, or which might give rise, to any cause of action in favor of petitioner. Petitioner has no land, money, stock, expectancy, or property of any kind, except those set forth in the Inventory of Assets. Petitioner has, in no instance, created or acknowledged a debt for a greater sum than the true and correct amount. Petitioner, its officers, directors, and stockholders have not, directly or indirectly, concealed, fraudulently sold or otherwise fraudulently disposed of, any part of petitioner's real or personal property, estate, effects, or rights of action, and petitioner, its officers, directors, and stockholders have not in any way compounded with any of its creditors in order to give preference to such creditors, or to receive or to accept any profit or advantage therefrom, or to defraud or deceive in any manner any creditor to whom petitioner is indebted. Petitioner, its officers, directors, and stockholders have been acting in good faith and with due diligence. 

Sec. 4. Creditor-initiated Petitions. - Where the petition is filed by a creditor or creditors, it is sufficient that the petition is accompanied by a rehabilitation plan and a list of nominees to the position of Rehabilitation Receiver and verified by a sworn statement that the affiant has read the petition and that its contents are true and correct of his personal knowledge or based on authentic records obtained from the debtor. 

Sec. 5. Rehabilitation Plan. - The rehabilitation plan shall include (a) the desired business targets or goals and the duration and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include the manner of its implementation, giving due regard to the interests of secured creditors; (c) the material financial commitments to support the rehabilitation plan; (d) the means for the execution of the rehabilitation plan, which may include conversion of the debts or any portion thereof to equity, restructuring of the debts, dacion en pago, or sale of assets or of the controlling interest; (e) a liquidation analysis that estimates the proportion of the claims that the creditors and shareholders would receive if the debtor's properties were liquidated; and (f) such other relevant information to enable a reasonable investor to make an informed decision on the feasibility of the rehabilitation plan. 

Sec. 6. Stay Order. - If the court finds the petition to be sufficient in form and substance, it shall, not later than five (5) days from the filing of the petition, issue an Order (a) appointing a Rehabilitation Receiver and fixing his bond; (b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtor, its guarantors and sureties not solidarily liable with the debtor; (c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d) prohibiting the debtor from making any payment of its liabilities outstanding as at the date of filing of the petition; (e) prohibiting the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (f) directing the payment in full of all administrative expenses incurred after the issuance of the stay order; (g) fixing the initial hearing on the petition not earlier than forty five (45) days but not later than sixty (60) days from the filing thereof; (h) directing the petitioner to publish the Order in a newspaper of general of general circulation in the Philippines once a week for two (2) consecutive weeks; (i) directing all creditors and all interested parties (including the Securities and Exchange Commission) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits and documents, not later than ten (10) days before the date of the initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings; and (j) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition. 

Sec. 7. Service of Stay Order on Rehabilitation Receiver. - The petitioner shall immediately serve a copy of the stay order on the Rehabilitation Receiver appointed by the court, who shall manifest his acceptance or non-acceptance of his appointment not later than ten (10) days from receipt of the order. 

Sec. 8. Voidability of Illegal Transfers and Preferences. - Upon motion or motu proprio, the court may declare void any transfer of property or any other conveyance, sale, payment, or agreement made in violation of its stay order or in violation of these Rules. 

Sec. 9. Initial Hearing. - On or before the initial hearing, the petitioner shall file the publisher's affidavit showing that the publication requirements specified above had been complied with. If the court is satisfied that said jurisdictional requirement had been complied with, it shall summarily hear the parties on any matter relating to the petition as well as any comment and/or opposition filed in connection therewith. The court may hold additional clarificatory hearings where there is need to further clarify matters but in no event shall such additional hearings be held beyond one hundred eighty (180) days from the date of the initial hearing. 
      
If, after the initial hearing, the court is satisfied that there is merit in the petition, it shall give due course to the petition and immediately refer the petition and its annexes to the Rehabilitation Receiver who shall evaluate the rehabilitation plan and submit his recommendations to the court not later than one hundred twenty (120) days from the date of the initial hearing. 

Sec. 10. Opposition to or Comment on the Petition. - Every creditor of the debtor or any interested party shall file his verified opposition to or comment on the petition not later than ten (10) days before the date of the initial hearing. After such time, no creditor or interested party shall be allowed to file any comment or opposition thereto without leave of court. 
If the Schedule of Debts and Liabilities omits a claim or liability, the creditor concerned shall attach a verified statement of the obligations allegedly due it to its comment or opposition. 
The court shall likewise require the Securities and Exchange Commission to comment on the petition. The Commission shall coordinate with the government agency concerned in appropriate cases for purposes of filing its comment. 

Sec. 11. Period of the Stay Order. - The stay order shall be effective from the date of its issuance until the dismissal of the petition or the termination of the rehabilitation proceedings. 
The petition shall be dismissal if no rehabilitation plan is approved by the court upon the lapse of one hundred eighty (180) days from the date of the initial hearing. The court may grant an extension beyond this period only if it appears by convincing and compelling evidence that the debtor may successfully be rehabilitated. In no instance, however, shall the period for approving or disapproving a rehabilitation plan exceed eighteen (18) months from the date of filing of the petition. 
    
Sec. 12. Relief from, Modification, or Termination of Stay Order. - The court may, on motion or motu proprio, terminate, modify, or set conditions for the continuance of the stay order, or relieve a claim from the coverage thereof upon showing that (a) any of the allegations in the petition, or any of the contents of any attachment, or the verification thereof has ceased to be true; (b) a creditor does not have adequate protection over property securing its claim; or (c) the debtor's secured obligation is more than the fair market value of the property subject of the stay and such property is not necessary for the rehabilitation of the debtor. 

For purposes of this section, the creditor shall lack adequate protection if it can be shown that: 

a. the debtor fails or refuses to honor a pre-existing agreement with the creditor to keep the property insured; 
    
b. the debtor fails or refuses to take commercially reasonable steps to maintain the property; or 
      
c. the property has depreciated to an extent that the creditor is undersecured. 

a. Expertise and acumen to manage and operate a business similar in size and complexity to that of the debtor; 
     
b. Knowledge in management, finance, and rehabilitation of distressed companies; 
     
c. General familiarity with the rights of creditors in suspension of payments or rehabilitation and general understanding of the duties and obligations of a Rehabilitation Receiver; 
    
d. Good moral character, independence, and integrity; 
     
e. Lack of a conflict of interest as defined in these Rule; and 
     
f. Willingness and ability to file a bond in such amount as may be determined by the court. 

a. He is a creditor or stockholder of the debtor; 
    
b. He is engaged in a line of business which competes with the debtor; 
   
c. He is, or was within two (2) years from the filing of the petition, a director, officer, or employee of the debtor or any of its present creditors, or the auditor or accountant of the debtor; 
   
d. He is, or was within two (2) years from the filing of the petition, an underwriter of the outstanding securities of the debtor; 
    
e. He is related by consanguinity or affinity within the fourth civil degree to any creditor, stockholder, director, officer, employee, or underwriter of the debtor; or 
     
f. He has any other direct or indirect material interest in the debtor or any creditor. 

The Rehabilitation Receiver shall be considered as an officer of the court. He shall be primarily tasked to study the best way to rehabilitate the debtor and to ensure that the value of the debtor's property is reasonably maintained pending the determination of whether or not the debtor should be rehabilitated, as well as implement the rehabilitation plan after its approval. Accordingly, he shall have the following powers and functions: 

(a) To verify the accuracy of the petition, including its annexes such as the Schedule of Debts and Liabilities and the Inventory of Assets submitted in support of the petition; 
   
(b) To accept and incorporate, when justified, amendments to the Schedule of Debts and Liabilities; 
   
(c) To recommend to the court the disallowance of claims and rejection of amendments to the Schedule of Debts and Liabilities that lack sufficient proof and justification; 
   
(d) To submit to the court and make available for review by the creditors, a revised Schedule of Debts and Liabilities; 
   
(e) To investigate the acts, conduct, properties, liabilities, and financial condition of the debtor, the operation of its business and the desirability of the continuance thereof; and, any other matter relevant to the proceeding or to the formulation of a rehabilitation plan; 
   
(f) To examine under oath the directors and officers of the debtor and any other witnesses that he may deem appropriate; 
    
(g) To make available to the creditors documents and notices necessary for them to follow and participate in the proceedings; 
    
(h) To report to the court any fact ascertained by him pertaining to the causes of the debtors' problems, fraud, preferences, dispositions, encumbrances, misconduct, mismanagement, and irregularities, committed by the stockholders, directors, management, or any other person against the debtor; 
   
(i) To employ such person or persons against such as lawyers, accountants, appraisers, an staff as are necessary in performing his functions and duties as Rehabilitation Receiver; 
    
(j) To monitor the operations of the debtor and to immediately report to the court any material adverse change in the debtor's business; 
    
(k) To evaluate the existing assets and liabilities, earnings and operations of the debtor; 
   
(l) To determine and recommend to the court the best way to salvage and protect the interests of the creditors, stockholders, and the general public; 
    
(m) To study the rehabilitation plan proposed by the debtor or any rehabilitation plan submitted during the proceedings, together with any comments made thereon; 
     
(n) To prohibit and report to the court any encumbrance, transfer, or disposition of the debtor's property outside of the ordinary course of business or what is allowed by the court; 
     
(o) To prohibit and report to the court any payments outside of the ordinary course of business;
     
(p) To have unlimited access to the debtor's employees, premises, books, records, and financial documents during business hours; 
      
(q) To inspect, copy, photocopy, or photograph any document, paper, book, account, or letter, whether in the possession of the debtor or other persons; 
    
(r) To gain entry into any property for the purpose of inspecting, measuring, surveying, or photographing it or any designated relevant object or operation thereon; 
    
(s) To take possession, control, and custody of the debtor's assets; 
   
(t) To notify counterparties and the court as to contracts that the debtor has decided to continue to perform or breach; 
   
(u) To be notified of, and to attend all meetings of the board of directors and stockholders of the debtor; 
    
(v) To recommend any modification of an approved rehabilitation plan as he may deem appropriate; 
     
(w) To bring to the attention of the court any material change affecting the debtor's ability to meet the obligations under the rehabilitation plan; 
    
(x) To recommend the appointment of a management committee in the cases provided for under Presidential Decree No. 902-A, as amended; 
    
(y) To recommend the termination of the proceedings and the dissolution of the debtor if he determines that the continuance in business of such entity is no longer feasible or profitable or no longer works to the best interest of the stockholders, parties-litigants, creditors, or the general public; 
      
(z) To apply to the court for any order or directive that he may deem necessary or desirable to aid him in the exercise of his powers and performance of his duties and functions; and 
     
(aa) To exercise such other powers as may from time to time be conferred upon him by the court. 

Sec. 16. Fees and Expenses. - The Rehabilitation Receiver and the persons hired by him shall be entitled to reasonable professional fees and reimbursement of expenses which shall be considered as administrative expenses. 

Sec. 17. Immunity from Suit. - The Rehabilitation Receiver shall not be subject to any action, claim, or demand in connection with any act done or omitted by him in good faith in the exercise of his functions and powers herein conferred. 

Sec. 18. Reports. - The Rehabilitation Receiver shall report every three months to the court or as often as the court may require on the general condition of the debtor. 

Sec. 19. Dismissal of Rehabilitation Receiver. - A Rehabilitation Receiver may be dismissed by the court, upon motion or motu proprio, on account of conflict of interest, or on any of the grounds for removing a trustee under the general principles of trusts. 

Sec. 20. Comments on or Opposition to the Rehabilitation Plan. - Any creditor or interested party or record may file comments on or opposition to the proposed rehabilitation plan, with a copy given to the Rehabilitation Receiver, not later than one hundred twenty (120) days from the date of the initial hearing. The court shall conduct summary and non-adversarial proceedings to receive evidence, if necessary, in hearing the comments and opposition to the plan. 

Sec. 21. Creditors' Meetings. - At any time before he submits his evaluation on the rehabilitation plan to the court as prescribed in section 9, Rule 4 of this Rule, the Rehabilitation Receiver may, either alone or with the debtor, meet with the creditors or any interested party to discuss the plan with a view to clarifying or resolving any matter connected therewith. 

Sec. 22. Modification of the Proposed Rehabilitation Plan. - The debtor may modify its rehabilitation plan in the light of the comments of the Rehabilitation Receiver and creditors or any interested party and submit a revised or substitute rehabilitation plan for the final approval of the court. Such rehabilitation plan must be submitted to the court not later than one (1) year from the date of the initial hearing. 

Sec. 23. Approval of the Rehabilitation Plan. - The court may approve a rehabilitation plan even over the opposition of creditors holding a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable. 
     
In determining whether or not the opposition of the creditors is manifestly unreasonable, the court shall consider the following: 

a. That the plan would likely provide the objecting class of creditors with compensation greater than that which they would have received if the assets of the debtor were sold by a liquidator within a three-month period; 
   
b. That the shareholders or owners of the debtor lose at least their controlling interest as a result of the plan; and 
   
c. The Rehabilitation Receiver has recommended approval of the plan. 

Sec. 24. Effects of the Rehabilitation Plan. - The approval of the rehabilitation plan by the court shall result in the following: 

a. The plan and its provisions shall be binding upon the debtor and all persons who may be affected by it, including the creditors, whether or not such persons have participated in the proceedings or opposed the plan or whether or not their claims have been scheduled; 
   
b. The debtor shall comply with the provisions of the plan and shall take all actions necessary to carry out the plan; 
   
c. Payments shall be made to the creditors in accordance with the provisions of the plan; 
    
d. Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the extent that they do not conflict with the provisions of the plan; and 
   
e. Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors regard less of whether or not the plan is successfully implemented. 

Sec. 26. Alteration or Modification of the Rehabilitation Plan. - An approved rehabilitation plan may, on motion, be altered or modified if, in the judgment of the court, such alteration or modification is necessary to achieve the desired targets or goals set forth therein. 

Sec. 27. Termination of Proceedings. - In case of the failure of the debtor to submit the rehabilitation plan, or the disapproval thereof by the court, or the failure of the rehabilitation of the debtor because of failure to achieve the desired targets or goals as set forth therein, or the failure of the said debtor to perform its obligations under the said plan, or a determination that the rehabilitation plan may no longer be implemented in accordance with its terms, conditions, restrictions, or assumptions, the court shall upon motion, motu proprio, or upon the recommendation of the Rehabilitation Receiver, terminate the proceedings. The proceedings shall also terminate upon the successful implementation of the rehabilitation plan. 

Sec. 28. Discharge of the Rehabilitation Receiver. - Upon termination of the rehabilitation proceedings, the Rehabilitation Receiver shall submit his final report and accounting within such period of time as the court will allow him. Upon approval of his report and accounting, the court shall order his discharge. 
     

(a) made any payments, returned any goods or delivered any property to any of its creditors, except in the normal course of business? 
(b) executed any mortgage, pledge, or security over any of its properties in favor of any creditor? 
(c) transferred or disposed of any of its properties in payment of any debt? 
(d) sold, disposed of, or removed any of its property except in the ordinary course of business? 
(e) sold any merchandise at less than fair market value or purchased merchandise or services at more than fair market value? 
(f) made or been a party to any settlement of property in favor of any person? 
If, so, give particulars.