After reading Conservatorship and Proceedings upon Insolvency of Pre-Need Companies, read also On Annual Pre-Need Reserve Valuation Report of Pre-Need Companies
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A conservator may be appointed to take charge of the assets, liabilities, and the management of a pre-need company
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The conservator has the power to overrule or revoke the actions of the previous management of a pre-need company
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Insolvency refers to the financial condition of a pre-need company that is generally unable to pay its liabilities as they fall due
If at any time before or after the suspension or revocation of the license of a pre-need company, the Insurance Commission (Commission) finds that such company is in a state of continuing inability or unwillingness to comply with the requirements under the Pre-need Code of the Philippines and/or orders of the Commission, a conservator may be appointed.
What are the powers of a conservator under the Pre-need Code of the Philippines?
The law says:
A conservator is to take charge of the assets, liabilities, and the management of a pre-need company, collect all moneys and debts due the company and exercise all powers necessary to preserve the assets of said company, reorganize its management, and restore its viability.
The conservator shall have the power to overrule or revoke the actions of the previous management and board of directors of the said company, any provision of law, or of the articles of incorporation or bylaws of the company, and such other powers as the Commission shall deem necessary.
The conservator appointed shall report and be responsible to the Commission until such time as the Commission is satisfied that the pre-need company can continue to operate on its own and the conservatorship shall likewise be terminated should the Commission, on the basis of the report of the conservator or of his own findings, determine that the continuance in business of the pre-need company would be hazardous to planholders and creditors.
What is the effect if it was found out that the continuance of business of a pre-need company would be hazardous to its planholders and creditors?
The law says:
Whenever, upon examination or other evidence, it shall be disclosed that the condition of any pre-need company is one of insolvency, or that its continuance in business would be hazardous to its planholders and creditors, the Commission shall order the company to cease and desist from transacting business and shall designate a receiver to immediately take charge of its trust fund, assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its planholders and creditors, and exercise all the powers necessary for these purposes.
Do note that the term “insolvency” refers to the financial condition of a pre-need company that is generally unable to pay its liabilities as they fall due in the ordinary course of business or that has liabilities that age greater than its assets.
The Commission shall determine within thirty (30) days whether the pre-need company may be reorganized or otherwise placed in such condition so that it may be permitted to resume business with safety to its planholders and creditors and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions.
In such case, the expenses and fees in the collection and administration of the pre-need company shall be determined by the Commission and shall be paid out of the assets of such company. If the Commission shall determine and confirm within the said period that the pre-need company is insolvent, it shall, if the public interest so requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan and implement it immediately.
Furthermore, the Commission shall designate a competent and qualified person as liquidator who shall take over the functions of the receiver previously designated and, with all convenient speed, distribute the trust fund exclusively to the planholders in proportion to termination values of their respective pre-need plans, convert the assets of the pre-need company to cash, or sell, assign or otherwise dispose of the same to the planholders, creditors and other parties for the purpose of settling the liabilities or paying the debts of such company and he may, in the name of the company, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the pre-need company, and to do such other acts as may be necessary to complete the liquidation as ordered by the Commission.
Please take note that said actions of the Commission shall be final and executory, and can be set aside by the court upon petition by the company and only if there is convincing proof that the action is plainly arbitrary and made in bad faith.
In case of violation of the Pre-need Code of the Philippines, what are the administrative sanctions and criminal penalties provided for by law? A related article will be posted in few days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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