What is meant by “Serious Situation Test”?


It merely provides that receivers may be appointed whenever: (1) necessary in order to preserve the rights of the parties-litigants; and/or (2) protect the interest of the investing public and creditors. The situations contemplated in there instances are serious in nature. There must exist a clear and imminent danger of losing the corporate assets if a receiver is not appointed. Absent such danger, such as where there are sufficient assets to sustain the rehabilitation plan and both investors and creditors are amply protected, the need for appointing a receiver does not exist. Simply put, the purpose of the law in directing the appointment of receivers is to protect the interests of the corporate investors and creditors. (Pryce Corporation vs. Court of Appeals and China Banking Corporation, G.R. No. 172302, February 4, 2008 [Sandoval-Gutierrez, J.], citing Rizal Banking Corporation vs. Intermediate Appellate Court)