This is a follow-up to our previous client update on Swiber
Holdings Limited written on 29 July 2016. To view our previous
update, please click
In a sudden about-turn, Swiber Holdings Limited
("Swiber") issued an announcement late
on Friday night (29 July 2016) that it and its major subsidiary,
Swiber Offshore Construction Pte Ltd
("SOC") have applied for to be placed
under judicial management ("JM"). At the
same time, Swiber and SOC have applied for an interim JM order to
be made, and for the discharge of the provisional liquidators and
withdrawal of Swiber's earlier winding up application
("the withdrawal applications").
At the moment, the JM applications are pending before the High
Court. The interim JM applications are due to be heard at 5pm
on Tuesday, 2 August 2016. A pre-trial conference for the main JM
applications is fixed for Friday 5 August 2016. The
Singapore High Court's hearing lists shows that the
applications to withdraw the winding up application and to
discharge the Provisional Liquidators will also be heard on 5
According to Swiber's announcement, the change of plans were
made after Swiber's Board of Directors and Provisional
Liquidators met with a "major financial
creditor" who indicated support for Swiber to place
itself in JM instead of liquidation.
At this stage, it is not clear how (or if) a JM will prove to be
more advantageous to the creditors of Swiber and SOC, as compared
to a straightforward liquidation scenario. However, in this update,
we cover what a typical unsecured creditor can expect in the JM of
Swiber and SOC.
(1) What is judicial management?
Unlike liquidation, JM is generally viewed as a rehabilitative
process. Essentially, it is a temporary, court-supervised
rescue plan aimed at giving a financially troubled company time and
space to rehabilitate itself and continue
For the court to approve placing a company into JM, the company
must be unable to pay its debts and there must be a real prospect
that one or more of the following statutory objectives will be
The survival of the company (or any part of its undertaking) as
a going concern;
The approval of a Scheme of Arrangement (under section 210 of
the Companies Act); and/or
A more advantageous realisation of the company's assets
than in a winding up.
If the JM order is granted, a judicial manager (who shall be an
approved company auditor) will be appointed, who will take over
conduct of the affairs of the company from the directors.
Operating under a JM, Swiber and SOC would essentially be able
to continue operations, albeit under the purview of a third party
judicial manager rather than the company's directors. This
provides a balance between protecting the interests of the
creditors and allowing the company to continue trading.
(2) After the judicial management order, what next?
From the time the JM orders are made, the judicial manager has
60 days to issue a statement of proposals, which sets out how the
judicial managers propose to achieve one or more of the
abovementioned statutory objectives. That 60-day period
can be extended by the court.
The statement of proposals, once issued, must be placed before
the creditors at a general meeting of the creditors. A creditor
must first lodge a proof of debt to be able to vote at the
At the creditors' meeting, a majority in number and value of
the creditors, present and voting, may approve the statement of
proposals, with or without modifications. The judicial manager will
then report the results of the meeting to the Court, which has the
power to discharge the JM order if the statement of proposals was
not duly approved.
Once approved, the judicial manager is under a duty to manage
the affairs, business and property of the company in accordance
with the proposals.
(3) What does all this mean for an unsecured creditor?
The JM applications for Swiber and SOC are, at the moment,
pending before the High Court. If they are granted, it would mean
that the High Court had found that there was a real prospect that
one or more of the statutory objectives would be met.
Therefore, it would not be wrong to assume that all things being
equal, a JM of Swiber and SOC should give the creditors a
better recovery than a straightforward liquidation.
However, this is by no means guaranteed. Even if the statement
of proposals is approved by the creditors, the
implementation of those proposals remains fraught with
uncertainty. Swiber's ability to continue trading and repay its
creditors depends in part on factors outside the judicial
manager's control e.g. the health of the particular industry
sector or the economy at large.
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