4.4.

2 Conversion by the Court into Liquidation Proceedings

During the course of court-supervised or pre-negotiated rehabilitation proceedings, the court may
decide to convert these proceedings into liquidation. This decision can be made if it is clear that
the debtor is insolvent and there is no substantial likelihood of successful rehabilitation.
Additionally, if no rehabilitation plan is confirmed within a year, or if the rehabilitation effort
fails or is dismissed on technical grounds, the court can order a conversion. The debtor can also
file a verified motion for conversion during the proceedings. When these conditions are met, the
court will issue a Liquidation Order, effectively starting the process of liquidating the debtor's
assets. This step is taken to ensure that the debtor's remaining assets are distributed in an orderly
manner to satisfy outstanding obligations. The court's decision to convert to liquidation is aimed
at maximizing the value of the debtor's assets for the benefit of the creditors. This process
provides a clear and structured approach to resolving insolvency issues. It also ensures that all
stakeholders have a clear understanding of their rights and the next steps in the proceedings.

4.4.3 Liquidation Order

A Liquidation Order issued by the court includes several important directives. Firstly, it declares
the debtor insolvent and orders the liquidation of the debtor's assets. For juridical debtors, this
also means declaring the entity dissolved. The order instructs the sheriff to take possession and
control of the debtor's property, except for items that are exempt from execution. It mandates the
publication of the petition or motion in a newspaper of general circulation for two consecutive
weeks. The order also directs that payments due to the debtor should be made to the liquidator
and prohibits the debtor from making payments or transferring property. Additionally, all
creditors are instructed to file their claims with the liquidator within a specified period. The order
authorizes the payment of administrative expenses as they become due. It also allows for the
submission of other nominees for the position of liquidator. Finally, a hearing is set for the
election and appointment of the liquidator, ensuring transparency and fairness in the process.

4.4.4 Rights of Secured Creditors

The rights of secured creditors remain protected even after a Liquidation Order is issued.
Secured creditors can choose to enforce their lien according to the contract or law. Alternatively,
they can waive their security or lien and prove their claim in the liquidation proceedings to share
in the distribution of the debtor's assets. If the secured creditor decides to maintain their rights
under the lien, several options are available. The value of the secured property can be fixed by
agreement between the creditor and the liquidator. If the property's value is less than the claim,
the liquidator may convey the property to the creditor, who then participates as a creditor for the
balance. If the value exceeds the claim, the creditor must pay the excess to the liquidator to
obtain the property. The liquidator may also sell the property to satisfy the creditor's entire claim.
Lastly, the creditor can enforce the lien and foreclose on the property according to applicable
laws. These provisions ensure that secured creditors have multiple avenues to protect their
interests.

4.4.5 Liquidator
The election and appointment of a liquidator are critical steps in the liquidation process.
Creditors who have timely filed their claims and are not barred by the statute of limitations can
vote in the election of the liquidator. Secured creditors can only vote if they waive their security
or have the value of their secured property fixed by agreement with the liquidator. The liquidator
is elected in open court, with the nominee receiving the highest number of votes being appointed.
If creditors fail to attend the election or refuse to elect a liquidator, the court may appoint one.
The liquidator's role is to manage the debtor's assets and oversee the liquidation process. This
includes taking control of the debtor's property, selling assets, and distributing proceeds to
creditors. The liquidator must act in the best interests of all creditors and ensure a fair and
orderly liquidation. The process of electing or appointing a liquidator ensures that the person
responsible for managing the liquidation is chosen transparently and fairly.

4.4.6 Determination of Claims

Determining the claims of creditors is a crucial part of the liquidation process. Within 20 days of
assuming office, the liquidator prepares a preliminary registry of claims, listing both secured and
unsecured creditors. Secured creditors who waive their security or fix the property's value are
considered unsecured creditors. The registry is made available for public inspection, and notice
is provided to creditors and interested parties. All claims must be proven before they are paid.
Mutual debts between the debtor and a creditor are set off against each other, with only the
balance allowed in the liquidation proceedings. Creditors and other interested parties have 30
days to challenge any claims in the registry. The liquidator resolves disputed claims and submits
findings to the court for final approval. The liquidator also has the authority to disallow claims
that are not valid. This thorough process ensures that all claims are fairly and accurately
determined, protecting the interests of both the debtor and the creditors.

4.4.7 LIQUIDATION PLAN

The Liquidator, upon taking office, must present a Liquidation Plan to the court within three months. This
plan should list all the debtor's assets, outline a timeline for liquidating these assets, and describe how
claims will be paid. The court is responsible for setting apart certain exempt properties for the benefit of
the insolvent debtor after a petition and hearing. This includes properties exempt from execution and a
homestead. Before such petitions are heard, notice of the hearing must be posted in at least three public
places in the province or city ten days prior. The notice must include the debtor's name and the time and
place of the hearing. The court decree must show that this notice was satisfactorily posted. The
liquidator is permitted to sell the debtor's unencumbered assets and convert them into money, typically
through a public auction. This process ensures an orderly and legal liquidation of the debtor's assets.

5.2

This Act will be applicable to any individual or organization involved in any

commerce, industry, and trade within the Philippine Republic. It will also apply to international
trade that has direct, significant, and reasonably foreseeable effects on Philippine trade, industry,
or commerce, including those resulting from actions taken outside the country. This Act shall not
apply to the combinations or activities of workers or employees nor to agreements or
arrangements with their employers when such combinations, activities, agreements, or
arrangements are designed solely to facilitate collective bargaining in respect of conditions of
employment.

5.3 PROHIBITED ACTS

Prohibited Acts under the Philippine Competition Act includes:

1. Anti-Competitive Agreements

2. Abuse of Dominant Position

3. Prohibited Mergers

5.3.1 ANTI-COMPETITIVE AGREEMENT

Section 5.3.1 addresses anti-competitive agreements among competitors and prohibits specific practices
that restrict competition. It explicitly bans agreements that manipulate pricing or bidding processes, as
well as those that set production limits or divide markets. Any agreement with the intent or effect of
significantly reducing competition is also forbidden. However, the Act allows exceptions for agreements
that enhance the production or distribution of goods and services or promote technical or economic
progress, provided consumers benefit fairly. Entities under common control or with shared economic
interests are excluded from being considered competitors. The Act emphasizes fostering fair competition
by targeting actions that undermine market dynamics. The defense provisions highlight that not all
restrictive agreements are violations, focusing on the transaction's contribution to market improvement.
This section ensures market participants operate independently without collusion, ensuring a fair playing
field. By preventing unfair competitive practices, the Act aims to protect consumer interests and
promote market efficiency. Overall, Section 5.3.1 seeks to maintain competitive integrity within the
market.

5.3.2 ABUSE OF DOMINANT POSITION

Section 5.3.2 aims to prevent entities from abusing their dominant market position to hinder
competition. It prohibits selling goods below cost to drive out competitors, creating unfair entry barriers,
and tying unrelated obligations to transactions. The Act also bans unreasonable price discrimination
between customers or sellers and imposes restrictions on where and to whom goods or services can be
sold. Permissible price differentials include socialized pricing, cost-based variations, competitive
responses, and adjustments to market conditions. The Act allows legitimate franchising, licensing, and
agreements protecting intellectual property. Entities must not make the supply of goods dependent on
unrelated purchases or impose unfair prices on marginalized producers. Limiting production or market
growth to the detriment of consumers is also prohibited unless it results from superior products or
business acumen. The Act acknowledges the legitimacy of holding a dominant position but aims to
prevent anti-competitive conduct. It also allows for conduct that improves production, distribution, or
promotes progress, provided consumers benefit fairly, ensuring market efficiency and innovation.

5.3.3 PROHIBITED MERGERS

Merger or acquisition agreements that substantially prevent, restrict or lessen competition in the
relevant market or in the market for goods or services as may be determined by the Commission shall be
prohibited.

5.3.4 EXCEPTIONS:

Section 5.3.4 outlines exceptions to the prohibition of merger or acquisition agreements that might
otherwise hinder competition. The Commission may exempt such agreements if they result in significant
efficiency gains or if a party is facing imminent financial failure and the agreement is the least anti-
competitive option. Entities are allowed to retain stocks or assets acquired before the Act's approval and
maintain market share without violating the Act. The acquisition of stock solely for investment purposes,
without voting or control intentions, is not prohibited. The burden of proof for these exemptions lies
with the parties seeking approval. They must demonstrate that efficiency gains would not be realized if
the agreement were not implemented. Final rulings by the Commission on mergers and acquisitions are
generally binding unless obtained through fraud or false information. This section ensures that beneficial
mergers or acquisitions can proceed while safeguarding competition. It balances the need for market
efficiency with the protection of competitive practices. Overall, Section 5.3.4 provides a framework for
evaluating and allowing certain merger and acquisition activities under specific conditions.

 Thresholds for compulsory notification: Parties to a merger or acquisition agreement with a

transaction value exceeding one billion pesos (P1,000,000,000.00) must notify the Commission
and are prohibited from completing their agreement until thirty (30) days after providing such
notification. The Commission may also set additional criteria, such as increased market share, for
determining the necessity of notification.

 Notifying entity: The parties involved in the merger or acquisition agreement are responsible
for notifying the Commission. Failure to notify results in the agreement being considered void
and subjects the parties to an administrative fine of 1% to 5% of the transaction value.

 Period of notification: The notification period extends thirty (30) days from the initial
notification. If further information is requested by the Commission, the period is extended by an
additional sixty (60) days, not to exceed ninety (90) days in total. If no decision is made within
this period, the merger or acquisition is deemed approved.

 Exceptions: All notices, documents, and information provided to the Commission are
confidential unless disclosure is required by law, court order, or governmental agency. In cases
of mergers or acquisitions involving special corporations governed by special laws, a favorable
recommendation by the Commission does not replace the need for a favorable recommendation
from the appropriate government agency. Additionally, the Commission's regulations may
specify transaction value thresholds, required information, exceptions from notification, and
other notification procedures.