First, the petition to set up a management committee is filed in the RTC which has jurisdiction over the principal

office of the corporation, partnership, or association concerned. Section 5.2 of RA 8799 (Securities Regulation Code) provides that: The Commissions jurisdiction over all cases enumerated under section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court Section 5 of the Interim Rules of Procedure for Intra-Corporate Controversies, consistent with the SRC, provides: All actions covered by these Rules shall be commenced and tried in the Regional Trial Court which has jurisdiction over the principal office of the corporation, partnership, or association concerned. Where the principal office of the corporation, partnership or association is registered in the Securities and Exchange Commission as Metro Manila, the action must be filed in the city or municipality where the head office is located. Second, the petition to set up a management committee cannot be filed as an original action with the RTC. The creation of a management committee is an incident to a case already pending with the RTC. Section 5 (d) of PD 902-A, as amended, gives the SEC the jurisdiction to hear, among others: "Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree." Related to this is Section 6 of the same law, which provides that: In order to effectively exercise such jurisdiction, the Commission shall have the following powers: "(d) To create and appoint a management committee, board, or body upon petition or motu propriety to undertake the management of corporations, partnerships or other associations not supervised or regulated by other government agencies (emphasis supplied)

The Supreme Court in the case of Barotac Sugar Mills vs. CA (G.R. No. 123379. July 15, 1997) ruled that: The appointment of a management committee or rehabilitation receiver may only take place after the filing with the SEC of an appropriate petition for suspension of payments. This is clear from a reading of sub-paragraph (d) of Section 5 and sub-paragraph (d) of Section 6 of P.D. No. 902-A, as amended by P.D. Nos. 1653 and 1758. Furthermore, the power to create a management committee can only be exercised by the SEC once it has acquired jurisdiction over cases it can hear.

The Interim Rules of Procedure for Intra-Corporate Controversies also supports this. Section 1 enumerates the civil cases which are governed by the Interim Rules, to wit: (1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association; (2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or association of which they are stockholders, members, or associates, respectively; (3) Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations; (4) Derivative suits; and (5) Inspection of corporate books. Section 1, Rule 9 of the same rules provides that: Creation of a management committee. - As an incident to any of the cases filed under these Rules or the Interim Rules Corporate Rehabilitation, a party may apply for the appointment of a management committee for the corporation, partnership or association Since, in the case at hand, the company has cash and assets but may be insufficient to pay its creditors, the remedy is to first file a petition for rehabilitation with the RTC. The debtor corporation, through its board of directors, or its creditors may file it as provided in Section 1 of the Interim Rules of Corporate Rehabilitation: Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, or any creditor or creditors holding at least twenty-five percent (25%) of the debtor's total liabilities, may petition the proper Regional Trial Court to have the debtor placed under rehabilitation. During the pendency of this case, any party can then apply for the appointment of a management committee for the corporation. Third, the grounds for the appointment of a management committee are provided in PD 902-A, as amended, and in the Interim Rules of Procedure for Intra-Corporate Controversies. Section 6 of PD 902-A provides that: "To create and appoint a management committee, board, or body upon petition or motu propriety to undertake the management of corporations, partnerships or other associations not supervised or regulated by other government agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties of paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority

stockholders, parties-litigants or the general public Section 1, Rule 9 of the Interim Rules provides that: As an incident to any of the cases filed under these Rules or the Interim Rules Corporate Rehabilitation, a party may apply for the appointment of a management committee for the corporation, partnership or association, when there is imminent danger of: (1) Dissipation, loss, wastage or destruction of assets or other properties; and (2) Paralyzation of its business operations which may be prejudicial to the interest of the minority stockholders, parties-litigants or the general public.

These grounds must concurrently exist. In the case of Sy Chim et. al. vs. Sy Siy Ho & Sons, Inc, the Highest Tribunal ruled that: We do not agree with petitioners' contention that the word "and" in Section 1, Rule 9 of the Interim Rules should be interpreted to mean "or." While it is true that in Section 6(d) of Presidential Decree No. 902-A, an applicant for the appointment of a management committee is mandated to prove only one of the two requisites provided therein, the Court, in Jacinto v. First Women's Credit Corporation, ruled that the two requisites should be present before a management committee may be created and a receiver appointed by the RTC: A reading of the aforecited legal provision reveals that for a minority stockholder to obtain the appointment of an interim management committee, he must do more than merely make a prima facie showing of a denial of his right to share in the concerns of the corporation; he must show that the corporate property is in danger of being wasted and destroyed; that the business of the corporation is being diverted from the purpose for which it has been organized; and that there is serious paralyzation of operations all to his detriment. . . .

Sections 4 and 5 of the Interim Rules laid down the procedure for the appointment: After due notice and hearing, the court may appoint a management committee composed of three (3) members chosen by the court Upon assumption to office of the management committee, the receiver shall immediately render a report and turn over the management and control of the entity under his receivership to the management committee. The management committee shall have the power to take custody of and control all assets and properties owned or possessed by the entity under management. It shall take the place of the management and board of directors of the entity under management, assume their rights and responsibilities, and preserve the entity's assets and properties in its possession.