Conservator Ship v. Receiver v. Liquidation

IBL Reviewer Conservatorship v. Receivership v. Liquidation Anj Dela Cruz

DEFINITION

INSTANCES WHEN PLACED UNDER SUCH

DURATION

1

CONSERVATORSHIP

RECEIVERSHIP

LIQUIDATION

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

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

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

90 days, no extensions

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

IBL Reviewer Conservatorship v. Receivership v. 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

a) POWERS OF PERSON-IN-CHARGE

b) c) d)

LIMITATIONS TO POWER

2

take charge of assets, 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

May not revoke perfected and enforceable contracts – will result to an infringement of the non-impairment clause guaranteed by the Constitution

Receiver

a) b) c)

d) e)

Liquidator

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, 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, if the bank may be rehabilitated or permitted to resume its business subject to the approval of the MB

May not dispose or sell any assets of the bank; 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

To assist the BSP in determining the claims of creditors against the bank

n/a

IBL Reviewer Conservatorship v. Receivership v. Liquidation Anj Dela Cruz

a) EFFECTS b)

Bank still continues to operate as a banking institution. 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, conservatorship will be terminated and bank will be placed under receivership

a)

b)

c)

d)

e) f)

g)

TERMINATION

3

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, based on report of conservator, would involve probable loss to depositors and creditors, in such event bank placed under receivership or liquidation

Bank’s assets pass beyond its control into the possession and control of the receiver, 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; 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, levy, 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

After 90 day period and upon determination that bank cannot be rehabilitated: a) File ex-parte with RTC, without need for prior notice or any other action, petition for assistance in the liquidation of bank b) Convert assets of bank to money, 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

Bank ceases to exist; (d) of receivership

IBL Reviewer Conservatorship v. Receivership v. Liquidation Anj Dela Cruz

REMEDY

Judicial review will come later (based on “Close now, Hear later”) upon finding of grave abuse of discretion or bad faith. 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)

4

Wait for bank to be viable Participate in receivership

a)

Intervene in the liquidation proceedings; There will be no preference of claims