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IBL Reviewer

Conservatorship v. Receivership v. Liquidation Anj Dela Cruz

CONSERVATORSHIP

RECEIVERSHIP

LIQUIDATION

DEFINITION

Attempt to save the bank from bankruptcy and ultimate liquidation; It is a step short of liquidation; Manner of helping a bank by effective management reforms and/or infusion of additional capital

Summary closure of the Bank by the BSP without prior notice and hearing after a finding that continuance in business will involve probable loss to its depositors and creditors

No hope in rehabilitating the bank; At this point, it determines and pays the claims of the bank’s creditors

INSTANCES WHEN PLACED UNDER SUCH

Based on report of MB that bank is in a state of inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of its depositors and creditors

Upon finding of the MB that: a) Unable to pay liabilities b) Insufficient realizable assets to meet its liabilities c) Cannot continue business without involving probable loss to depositors and creditors d) Willfully violated cease and desist order under Sec. 37 of NCBA that has become final involving acts or transactions which amount to fraud or dissipation of assets of institution e) Notifies BSP or publicly announces Bank Holiday 90 days, no extensions

Voluntary liquidation under Sec 68 pf GBL or upon finding that bank can no longer be rehabilitated and cannot continue business after the 90 day receivership period

1 year, no extensions DURATION

No period stated in the law. May take some time depending on the determination and payment of claims to creditors

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Not allowed to pay or commit any act that will involve the transfer or disposition of any asset of the bank except the payment of administrative expenditures and the deposit or placement of funds in non-speculative investments n/a 2 .IBL Reviewer Conservatorship v. if the bank may be rehabilitated or permitted to resume its business subject to the approval of the MB To assist the BSP in determining the claims of creditors against the bank LIMITATIONS TO POWER May not revoke perfected and enforceable contracts – will result to an infringement of the non-impairment clause guaranteed by the Constitution May not dispose or sell any assets of the bank. administer and dispose properties in litigation deposit or place the funds of the institution in non-speculative investments determine as soon as possible. but not later than 90 days. liabilities and management of the bank reorganize the management of the bank collect all monies and debts due to the bank/quasi-bank exercise all powers necessary to restore the viability of the bank/quasibank  power to overrule or revoke the actions of the previous management and board of directors  rescind contracts that are to be enforced and not yet perfected a) b) c) d) e) immediately gather and take charge of all assets and liabilities of the bank administer the assets and liabilities of the bank for the benefit of creditors exercise general powers of the receiver under Revised Rules of Court – preserve. Liquidation Anj Dela Cruz PERSON-IN-CHARGE Conservator  person appointed to take over the management of the bank and shall assume exclusive powers to oversee every aspect of the bank’s operations and affairs Receiver Liquidator a) POWERS OF PERSON-IN-CHARGE b) c) d) take charge of assets. Receivership v.

Retain their corporate personality – can sue and be sued but any case should be initiated and prosecuted through the liquidator Assets of the bank deemed in custodia l egis in the hands of receiver and shall be exempt from any order of garnishment. conservatorship will be terminated and bank will be placed under receivership a) b) c) d) e) f) g) Bank’s assets pass beyond its control into the possession and control of the receiver. based on report of conservator. and the appointment of the receiver operates to suspend the authority of the bank and its directors and officers over its property and effects – equivalent to injunction to restrain the bank officers from intermeddling with the property of the bank in any way Officers are no longer authorized to transact business in connection with the bank’s assets and properties Does not dissolve the bank as a corporation nor does it interfere with the exercise of corporate rights. levy. petition for assistance in the liquidation of bank b) Convert assets of bank to money. (d) of receivership TERMINATION After 1 year period of upon finding of MB that: a) Bank can continue to operate on its own b) When continuance of the business of the bank. would involve probable loss to depositors and creditors. The conservator merely takes the place of the bank’s management and board of directors If found that the continuance in operation of the bank or quasi bank would involve probable loss to depositors and creditors. attachment or execution Forbidden by BSP to continue doing business  fuerza mayor May not grant new loans or accept deposits BUT is still obliged to collect debts owing to the bank and foreclose mortgages Will not pay interest on deposits but may still collect interest and charge on all loans Bank ceases to exist. without need for prior notice or any other action. dispose to creditors and other parties for the purpose of paying the debts of the bank c) Institute actions to collect and recover accounts and assets and defend any action against the bank 3 .IBL Reviewer Conservatorship v. Receivership v. Liquidation Anj Dela Cruz a) EFFECTS b) Bank still continues to operate as a banking institution. in such event bank placed under receivership or liquidation After 90 day period and upon determination that bank cannot be rehabilitated: a) File ex-parte with RTC.

Judicial action must be filed within 10 days from receipt of notice of Bank’s closure in a petition for certiorari by stockholders of record representing the majority of the capital stock in RTC where head office of Bank is located and appealed to the CA under petition for review a) b) Wait for bank to be viable Participate in receivership a) Intervene in the liquidation proceedings. Liquidation Anj Dela Cruz REMEDY Judicial review will come later (based on “Close now. Receivership v.IBL Reviewer Conservatorship v. There will be no preference of claims 4 . Hear later”) upon finding of grave abuse of discretion or bad faith.