PHILIPPINES Law and Practice Contributed by: Kerwin Tan, Eugene Kaw and Veronica Balbin, Tan Hassani and Counsels
2.9.4 Effect of Lessee’s Insolvency on a Deregistration Power of Attorney
than 50% of the total secured claims of the debtor and unsecured creditors holding more than 50% of the total unsecured claims of the debtor. Out-of-Court Rehabilitation This involves an informal restructuring agreement or rehabilitation plan that meets the following require - ments: • the debtor must agree to the out-of-court or infor - mal restructuring/workout agreement or rehabilita - tion plan; • it must be approved by creditors representing at least 67% of the secured obligations of the debtor; • it must be approved by creditors representing at least 75% of the unsecured obligations of the debtor; and • it must be approved by creditors holding at least 85% of the total liabilities, secured and unsecured, of the debtor. 2.9.3 Co-Ordination, Recognition or Relief in Connection With Overseas Proceedings The FRIA specifically provides for the adoption of the UNCITRAL Model Law on Cross-Border Insolvency (“UNCITRAL Model”), which shall apply if: • assistance is sought in a Philippine court by a foreign court or representative in connection with a foreign proceeding; • assistance is sought in a foreign state in connec - tion with a proceeding governed by the FRIA and by the UNCITRAL Model; • a foreign proceeding and a proceeding governed by the FRIA and the UNCITRAL Model are taking place concurrently; or • creditors in a foreign state have an interest in requesting the commencement of or participating in a court-supervised rehabilitation, pre-negotiated rehabilitation or out-of-court rehabilitation. The “co-operation” and ”co-ordination” principle under the UNICTRAL Model is also adopted under the FRIA. This principle places obligations on courts and insolvency representatives in different states to communicate and co-operate to the maximum extent possible.
The deregistration power of attorney will still be valid despite the lessee’s insolvency, regardless of whether or not it is irrevocable. The aircraft is only leased to the insolvent lessee; the lessor is still the owner of the aircraft. Generally, the liquidation of the lessee would termi - nate the power of attorney at the point in time it is declared dissolved as an entity, unless it is validly con - stituted as being coupled with interest. 2.9.5 Other Effects of a Lessee’s Insolvency Contracts will not be automatically set aside during insolvency proceedings. However, once a liquidation order is issued, the lessee’s juridical existence will be dissolved and all its contracts shall be deemed termi - nated and/or breached, unless the liquidator declares otherwise and the contracting party agrees, within 90 days from the date of assumption of office. The aircraft will not be deemed part of the lessee’s property. The lessor will not be prevented from repos - sessing the aircraft upon the termination of the lease: as the aircraft owner, the lessor is entitled to recover the aircraft from the lessee upon termination of the lease agreement. The FRIA expressly provides that the preference of credits under the Philippine Civil Code shall be observed. Therefore, duties, taxes and fees due to the state shall take priority over a lessor’s rights, including taxes due under the Philippine tax and customs code, and any liens imposed by the CAAP Director-General. 2.9.6 Risks for a Lender if a Borrower, Guarantor or Security Provider Becomes Insolvent Generally, if a borrower, a guarantor or an entity pro - viding security becomes insolvent, lenders run the risk of not being able to fully recover the amount lent. There may also be a delay in the payments as the debtor needs to first satisfy the claims by third parties that are preferred over the claims of the lender.
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