The Philippine Stock Exchange is hopeful that the proposed Financial Rehabilitation and Insolvency Law will be passed before Congress adjourns this year but will have to wait for the next Congress for the passage of two other financial reform laws it is lobbying for.

PSE president Francis Lim said the Financial Rehabilitation and Insolvency Law, which will replace the antiquated Insolvency Law of 1909, is needed to make the local capital market attractive and competitive.

“When they (companies) encounter financial trouble, our bankruptcy code is not really responsive to their needs. In other words, they did not get rehabilitated…that is why we need this new insolvency law,” said Lim.

Among the features of the bill is that, if a debtor gets the approval of 85 percent of its creditors, it does not need to go to court to start implementing its corporate restructuring or rehabilitation plan.

Lim explained that the new law will cram the rehabilitation on the 15 percent dissenting forces “because what we have seen in the past is that what we call the tyranny of the minority.”

“For example, even if 95 percent of the creditors have already approved the restructuring plan, but creditors representing 5 percent of total debt can hold it back and the company does not get rehabilitated and that is bad for the economy in the long term,” he said.