The Philippine Congress approved a new act to deal with bankruptcies and corporate rehabilitation after deliberating over it for nearly a decade.
The Financial Rehabilitation and Insolvency Act, or FRIA, which seeks to replace the 1909 Insolvency Act, may help attract fresh investments given that the current provisions don’t have enough safeguards to protect investors and their funds.
“This is one piece of legislation that the capital market has been waiting for,” Francis Lim, president of Philippine Stock Exchange, said in a statement Wednesday. “Investors are reluctant to invest in financially-distressed companies because there’s no adequate protection for the money that they put in to rehabilitate the company.”
The provisions of the new act include court-supervised rehabilitation, prenegotiated rehabilitation, out-of-court rehabilitation proceedings. The proposed measure was filed before Congress way back in July 2000.
“Congress’ approval of the bill is a significant leap forward in our goal to recover the value for shareholders of listed firms that may have gone underwater because our vintage 1909 insolvency law was simply obsolete,” Lim added.