Singapore: Singapore Enacts New Corporate Bankruptcy Law In Bid To Become Center For International Debt Restructuring

On March 10, 2017, Singapore's Parliament approved the Companies (Amendment) Bill 2017 (the "Act") to enhance the country's corporate debt restructuring framework. The Act, a copy of which is available here, was assented to by President Tony Tan Keng Yam on March 29, 2017, and is expected to become effective later this year.

The Act is a groundbreaking development in Singapore's corporate rescue laws and includes major changes to the rules governing schemes of arrangement, judicial management, and cross-border insolvency. The Act also incorporates several features of chapter 11 of the U.S. Bankruptcy Code, including super-priority rescue financing, cram-down powers, and prepackaged restructuring plans. The legislation may portend Singapore's emergence as a center for international debt restructuring. Its enactment is the initial phase in a series of law reforms intended to implement recommendations made by the Insolvency Law Review Committee and the Committee to Strengthen Singapore as an International Centre for Debt Restructuring.

Key provisions of the Act include the following:

Easier Access to Judicial Management. Singapore's judicial management procedure is similar to the administration regimes enacted in the U.K. and Australia, which provide for the appointment of an independent manager to operate and run the company instead of a liquidator to wind it up. In Singapore, a judicial manager's mandates are rescuing the company, obtaining approval of a scheme of arrangement, and achieving a realization of the company's assets more advantageous than what would have been realized in a winding-up proceeding.

The Act makes it easier for companies (other than certain excluded entities, such as banks) or creditors to obtain a judicial management order by lowering the threshold requirements for court approval. Previously, a company could apply for a judicial management order if it "is or will be" unable to pay its debts. Under the Act, the standard has been modified to require that the company "is or is likely to become" unable to pay its debts. In addition, under previous law, a party with the ability to appoint a receiver for the company had the absolute power to prevent the appointment of a judicial manager. The Act now obligates any such party to demonstrate that the appointment of a judicial administrator would cause prejudice disproportionately greater than that to the unsecured creditors if judicial management were denied.

Schemes of Arrangement. The Act modifies the rules and procedures governing schemes of arrangement proposed by the judicial manager of a debtor-company pursuant to section 210 of the Singapore Companies Act (the "CA") to incorporate many of the features of chapter 11, including super-priority debtor-in-possession financing, a "world-wide" moratorium on debt collection efforts akin to the U.S. Bankruptcy Code's automatic stay, a mechanism permitting approval of nonconsensual ("cram-down") schemes of arrangement, and procedures for court approval of prepackaged schemes.

The Act introduces rescue financing provisions for schemes of arrangement similar to "debtor-in-possession" financing under section 364 of the U.S. Bankruptcy Code. The court may, under certain conditions, including the unavailability of credit on less favorable terms and adequate protection of the interests of existing secured creditors, authorize the debtor to incur priority unsecured, secured, or super-priority secured financing, provided that such financing is deemed necessary to enable the debtor to continue as a going concern. The rescue financing provisions do not preclude a debtor from obtaining secured or unsecured financing or credit in the ordinary course of business.

The Act introduces provisions authorizing the court to approve a scheme of arrangement over the objection of a class of dissenting creditors, provided that: (i) creditors representing a majority in number and holding at least 75 percent in value of the claims in a class for which votes are actually cast vote in favor of a proposed scheme; (ii) creditors representing a majority in number and holding at least 75 percent in value of the total claims against the debtor for which votes are actually cast vote in favor of a proposed scheme; and (iii) the court is satisfied that the scheme is "fair and equitable" to dissenting creditors and does not "discriminate unfairly" between two or more classes of creditors. The Act provides guidance as to the meaning of "fair and equitable" (including the requirement that a dissenting creditor must receive at least as much under a scheme of arrangement as it would have received had the scheme not been approved). The Act does not explain unfair discrimination. Both concepts, however, are based upon the cram-down provisions set forth in section 1129(b) of the U.S. Bankruptcy Code, for which there is a wealth of interpretive jurisprudence that can offer guidance as to their meaning and application.

The Act includes procedures to govern prepackaged schemes of arrangement, but only in cases involving consensual, as distinguished from cram-down, schemes. The court may approve a scheme of arrangement without any meeting of creditors if, among other things: (i) the debtor-company has provided creditors with a statement, accompanied by adequate information, explaining the effects of the scheme, the impact of the scheme on any material interest of the directors or indenture trustees, and the effect of the scheme on such interests; (ii) notice of the application seeking approval of the scheme is provided to every affected creditor and properly published; and (iii) the court is satisfied that, had a meeting of creditors been convened, the scheme would have been approved by the required majorities at the meeting.

Enhanced Moratoriums. The Act introduces a series of "enhanced moratorium" provisions to augment the limited moratorium provisions contained in section 210(10) of the CA. Upon application of the debtor or a creditor and notice to, among others, each known creditor to be bound, the court may order a moratorium, provided that the debtor has filed an application for court authority to call a meeting of creditors or represents that it intends to do so as soon as practicable. The application must be supported by evidence that a proposed compromise or arrangement is supported by: (i) affected creditors holding not less than one-third in value of claims against the debtor; or (ii) creditors whose support for the proposed compromise or arrangement is important for its prospects for successful implementation.

A moratorium order may be entered by the court to preclude, among other things: (i) commencement or continuation of proceedings against the company or its assets; (ii) appointment of a receiver or manager; (iii) repossession of goods under leases, hire purchases, or retention of title arrangements; (iv) re-entry or forfeiture under any lease; or (v) the winding up of the company. The moratorium can apply extraterritorially, provided that the court has jurisdiction over affected creditors or their assets. A moratorium order may be extended to include a debtor-company's domestic and foreign subsidiaries as well as holding companies if they play a "necessary and integral role" in the debtor's scheme of arrangement. Certain financial market transactions (e.g., certain setoff and netting arrangements) are also excluded from the scope of the moratorium.

Upon the filing of an application for a moratorium order, an automatic 30-day interim moratorium comes into effect with respect to creditor collection actions in Singapore. The automatic moratorium is available only once in a 12-month period, to prevent abuse through repeated filings.

If the court grants a moratorium order, the Act provides that the debtor-company must provide certain financial information to creditors to allow them to assess the feasibility of a proposed scheme. A creditor may seek an order of the court modifying the scope of a moratorium order. A creditor may also apply to the court during the pendency of the moratorium for an order preventing the company from: (i) disposing of assets other than in good faith and inside the ordinary course of business; (ii) engaging in conduct in the ordinary course of business that materially prejudices creditors or significantly diminishes the company's assets; or (iii) changing the composition of the debtor-company's shareholders or members.

Claims Resolution Procedures. The Act establishes procedures governing the submission, objection to, and adjudication of creditor claims. The provisions include: (i) procedures for the filing of proof of creditor debts; (ii) permission for creditors who have filed proof of their debts to inspect and object to claims filed by other creditors; (iii) the appointment of an adjudicator nominated by the company to adjudicate the validity of every proof of debt; and (iv) the adjudication of disputes relating to claims by an independent assessor agreed to by the parties or appointed by the court following the application of a party to the dispute.

Cross-Border Insolvencies. Under previous law, only a company incorporated under Singapore law could apply for judicial management proceedings. The Act provides that "any corporation liable to be wound up under this Act" may apply for judicial management and expands the scope of the "liable to be wound up" test to include foreign companies with a "substantial connection" to Singapore because, among other things, the company in question: (i) has its center of main interests (COMI) in Singapore; (ii) carries on business in Singapore or has a place of business there; (iii) has substantial assets in Singapore; or (iv) has a Singapore choice of law provision or forum selection clause in a loan agreement or contract.

The Act formally adopts the UNCITRAL Model Law on Cross-Border Insolvency, a framework of rules and procedures governing cross-border bankruptcy and insolvency cases that has now been enacted in 43 countries. Its implementation is expected to make it significantly easier for foreign companies subject to bankruptcy or insolvency proceedings in other countries that have assets or operations in Singapore to obtain the assistance and cooperation of Singapore courts in administering their assets.

The Act abolishes the "ring-fencing rule," whereby the Singapore liquidator of a foreign company with assets in Singapore was obligated to pay the claims of local creditors before any of the debtor's assets could be turned over to be administered in the debtor's foreign bankruptcy or insolvency proceeding.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions