Senator Edgardo J. Angara led the Senate in passing the Corporate Recovery and Insolvency Act of 2009, which provides for a comprehensive framework on the proceedings for rehabilitation and liquidation of financially distressed companies, and encouraging creditors to collectively resolve and adjust competing claims and property rights.

“In the absence of such mechanisms, we are stuck with old-fashioned liquidation processes, killing any possibility for companies to recover from financial trouble. What we need to provide now is a second chance at life for enterprises rather than killing them through liquidation,” Angara said in his interpellation.

The law will update the country’s archaic, 100-year old insolvency laws to make it more attuned to the present conditions of corporate and investment laws.

“Laws, along with man’s critical thinking attitude, will have to somehow evolve in response to the changing of the times,” said Angara.

Under existing laws, the framework of insolvency and rehabilitation proceedings is inadequate and unresponsive to the modern trends in business, such that it is unable to quickly resolve modern financial issues. This flaw is mostly felt against the backdrop of an economic crisis, wherein the present insolvency regime provides only limited solutions to business entities and is thus unable to salvage enterprises from financial turmoil, as well as to safeguard the rights to claim of many clients.

“In protecting clients’ interests, the core premise is that liquidation should not be used as a way for companies to avoid obligations. On the other hand, financially distressed institutions should be given as much stake in resolving rehabilitative issues rather than taking the case directly to the courts,” contended Angara, chair of the Senate committee on finance.

Senate Bill 61 states that an insolvent debtor may apply for and seek rehabilitation. If the court finds the petition to be sufficient in form and substance, it shall issue a commencement order. According to Angara, the first crack at solving the problem should be given to primary parties concerned. Courts can come in later to supervise or manifest its decisions on the case.

Senate Bill 61 was approved Thursday on third reading in the Senate. To also cover small-and medium-scale businesses in the proposed legislation, it’s as also been proposed to use the title Business Recovery and Insolvency Act.

Meanwhile, Angara told Senate reporters at the Kapihan sa Senado on Thursday that the Congress and Senate will be able to able to pass the 2010 national budget as scheduled this year.

He said that they are in fact in a very early stage of budget deliberation to ensure its passage before the Senate adjournment this year.