WE at the Federation of Philippine Industries (FPI) commend the House of Representatives for taking the initiative to review the country’s corporate rehabilitation law in view of the challenges posed by the pandemic to businesses in the country.
This is through 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.”
This congressional inquiry, started by the House Committee on Banks and Financial Intermediaries led by its Chair Rep. Irwin C. Tieng on March 23, displayed the foresight of our lawmakers, considering the pandemic-triggered economic difficulties that hurt the viability of many corporations in the country.
The lawmakers want 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.
The solons also want to know how corporate rehabs succeeded and failed under the guidance of the SEC and the courts, as well as the circumstances that led to such successes or failures. The goal is to determine how the lapses in the existing law can be corrected and how the good provisions can be improved further so that distressed companies will have a better chance of getting resuscitated once they enter rehabilitation.
This columnist was invited as one of the resource persons in my capacity as chairman of FPI, along with representatives of the SEC, Supreme Court (SC), Bangko Sentral ng Pilipinas, and other regulators and industry groups.
Of course, I conveyed the appreciation of the FPI to the lawmakers, who, despite the recess, still devoted time to launch the inquiry.
I took note of the questions raised by Rep. Marcoleta to the SEC on how likely the creditors could influence the appointed regulators and their appointed receivers, and how debtors could also influence the regulators. The congressman also sought to know what would be the liabilities of the receivers in failed rehabs and those who delayed the proceedings to a point where the distressed company could no longer get back on its feet. He likened these struggling firms to patients that need immediate care but instead of being taken to a hospital, they were brought straight to a funeral parlor with a ready tombstone.
In conducting the probe, the lawmakers are using the actual corporate rehab cases of, among others, Uniwide Group of Companies, which I consider a huge failure, and the successful rehabilitation of Hanjin Heavy Industries. Remember that Uniwide was a SEC-supervised rehab under appointed receiver Monico Jacob, while Hanjin’s was overseen by the Regional Trial Court of Zambales.
This brings us to the question: Are courts better than the SEC in supervising corporate rehabs in the future?
The inquiry was suspended and already I’m looking forward to the next hearings where I’m sure the congressmen will dig deeper into these actual cases to get a better idea of how the current law can be improved further as we brace for the possible rehab of struggling companies due to the pandemic.
I’m particularly interested in the experience of Uniwide, which everyone knows was way bigger than the SM Group before it was placed under the failed rehab then managed by its former chief financial officer, Jaime Cabangis.
When I was with Baguio Oil and Minola, Uniwide was the most sought-after retail channel. When your products were present in Uniwide, you were “made” already. Uniwide owner Jimmy Gow is also close to my heart because he is a nationalist. He supported my fight against the flooding of imported products via the duty-free shops back then.
Uniwide’s flagship branch was the Coastal Mall in Parañaque valued at P7.5 billion. This iconic mall, however, was just leveled to the ground later when it was turned over to a creditor of Uniwide without putting value to the building – such a big economic wastage indeed.
I’m sure the congressional inquiry will ferret out more facts from the Uniwide experience as well as other failed and successful rehab cases that would result in a much-improved corporate rehabilitation law.
Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.