Singapore: Singapore Implements The UNCITRAL Model Law On Cross-Border Insolvency

Globalisation has been described as an evolving set of consequences – some good, some bad and some unintended. In this regard, when companies go global, insolvency is perhaps the furthest thing from their minds. Yet, while business failure may be unintended, when a global company becomes insolvent or attempts debt restructuring, its insolvency representative e.g. liquidator or manager, will often have to deal with assets and creditors across the globe.

In this regard, to maximise the value of those assets and to prevent a "free-for all, catch-as-catch-can situation"1 as creditors scramble to enforce their claims, an insolvency representative must first procure access to the domestic courts of all the jurisdictions in which the debtor has assets, usually either by an application to recognise the foreign insolvency or by commencing local insolvency proceedings. Even with such recognition, the insolvency representative may have to separately apply to stay legal proceedings in each jurisdiction and then start pursuing claims to recover the debtor's assets.

Cross-border insolvency issues also affect creditors. For example, a creditor would want to know if it can sue the debtor or execute against the debtor's assets in jurisdictions where formal insolvency proceedings have not yet commenced. A creditor would also understandably be concerned about a debtor which is insolvent in one jurisdiction but continuing to trade (or worse, disposing of assets) in another.

It is these issues, amongst others, that the UNCITRAL Model Law on Cross‑Border Insolvency ("the Model Law"), seeks to address. The Model Law's stated purpose is to assist states to equip their insolvency laws with a modern, harmonised and fair framework to address more effectively instances of cross-border insolvency proceedings.2Introduced in 1997 and since adopted by 43 states in 45 jurisdictions,3 the Model Law has finally been implemented in Singapore on 23 May 2017, through the Companies (Amendment) Act 2017 ("the Amendment Act").

Singapore law prior to the amendment

Prior to the Amendment Act and the implementation of the Model Law, the position in Singapore was articulated by the Court of Appeal in Beluga Chartering GmbH (in liquidation).4 In that case, the Court of Appeal observed that (a) Singapore courts were not bound to recognise any foreign insolvency proceedings; and (b) whether or not a Singapore court would exercise its inherent jurisdiction to render assistance to foreign insolvency proceedings through regulation of its own proceedings would depend on the particular circumstances before it. In other words, each application to recognise a foreign insolvency proceeding would be dealt with on an ad-hoc, case-by-case basis.

The subsequent High Court decision in Re Taisoo Suk5 was the first case where a Singapore court exercised its inherent jurisdiction and recognised foreign insolvency proceedings. This case concerned an ex-parte application by a foreign representative of Hanjin Shipping for the Singapore courts to recognise the South Korean rehabilitation proceedings and grant a stay and moratorium of all proceedings against Hanjin's subsidiaries and vessels in Singapore. The High Court applied various considerations in deciding to grant the orders sought, including the foreign proceedings' impact on domestic creditors and whether it was fair and equitable in the circumstances to give recognition. Ultimately, the High Court granted the orders sought, on an interim basis, after a single ex-parte hearing.

In the more recent February 2017 applications by member companies of the EMAS group for recognition of the group's US Bankruptcy Code Chapter 11 proceedings in Singapore, the Singapore High Court ultimately recognised the Chapter 11 proceedings to the extent of allowing a limited stay and moratorium against proceedings in Singapore. No grounds of decision were issued for the EMAS applications and therefore, it is not apparent what considerations the High Court applied. However, it is noted that the High Court allowed the stay and moratorium only after seven hearings and only upon (arguably) onerous undertakings being given by the applicant companies to keep interested parties continuously notified of all developments in the Chapter 11 proceedings.

The two High Court decisions above, while ultimately recognising the foreign insolvency proceedings, showcase the issues with an ad-hoc approach. In one case, the court granted the recognition, without undertakings, after a single hearing but in the other, it took several hearings and substantive undertakings being given before recognition was granted. Against the backdrop of these cases, a foreign insolvency representative would be understandably uncertain about the approach he should take to procure recognition. Uncertainty inevitably increases the cost of insolvency administration and reduces the assets available to the creditors. There is therefore a clear need for certainty and predictability in the law regarding recognition of foreign insolvency proceedings.

Legal position under the amended Act

The Model Law aims to provide such certainty by providing a transparent, globally-accepted legislative framework for (a) access to local courts for foreign insolvency representatives; (b) recognition of certain orders issued by foreign courts; (c) relief to assist foreign insolvency proceedings; and (d) cooperation among the courts of states where the debtor's assets are located.

In 2013, the Insolvency Law Review Committee recommended the adoption of the Model Law. It has taken three years for the Model Law to be finally implemented in Singapore. Now, at last, Section 41 of the Amendment Act implements the Model Law and gives it the force of law in Singapore.

Under the Model Law, a foreign representative6 can apply to the Singapore High Court for recognition of foreign insolvency proceedings. The application must be accompanied by (a) a certified copy of the decision commencing the foreign insolvency proceedings and appointing the foreign representative; and (b) a statement identifying all insolvency proceedings in respect of the debtor that are known to the foreign representative.

Recognition is largely a formalistic process and generally, upon an application being made by a foreign representative in the proper form, foreign insolvency proceedings will be mandatorily recognised. However, the Model Law does make a distinction between recognition of the foreign insolvency proceedings as either a main proceeding or a non-main proceeding, with each engendering different reliefs and consequences.

A main proceeding is one taking place where the debtor had its centre of main interests ("COMI"). This is presumed to be the registered office or habitual residence of the debtor. However this is a rebuttable presumption and the debtor's COMI does not always coincide with its place of registration.7   The effect of a foreign insolvency being recognised as a main proceeding includes (a) stays of actions or enforcement proceedings by individual creditors against the debtor or its assets; and (b) a suspension of the debtor's right to transfer or encumber its assets. These reliefs flow automatically upon recognition of foreign insolvency proceedings as a main proceeding.

In contrast, a non-main proceeding is one taking place where the debtor has an "establishment", defined as "any place of operation where the debtor carries out non-transitory economic activity with human means and goods or services." When foreign insolvency proceedings are recognised as a non-main proceeding, separate applications must be made to a Singapore court for appropriate relief. In such cases, relief would only be granted if the court is satisfied that the interests of the creditors and other interested persons are adequately protected.

The reason for the distinction between main and non-main proceedings is obvious. In principle, a main proceeding (of which there can be only one) is expected to have principal responsibility for managing the insolvency of the debtor. Therefore, the Model Law accords proceedings commenced in that location greater deference and more immediate, automatic relief. Other states in which the debtor has assets are expected to recognise and support the main proceedings.

Conclusion

In the short term, the implementation of the Model Law will streamline the process of recognising foreign insolvency proceedings in Singapore, thereby reducing the cost in insolvency administration and increasing asset recovery for creditors. In the longer term, with the assurance of more certain and efficient cross-border recognition, companies may be incentivised to site their restructuring in Singapore and in this regard, structure their business such that their COMI becomes Singapore. In turn, this should lead to increased foreign investment into Singapore. 

It is well publicised that Singapore seeks to become a regional hub for restructuring and insolvency administration. Amongst other benefits, this will allow Singapore to supplement and leverage its existing strengths, particularly in dispute resolution, which is frequently insolvency's handmaiden. To this end, the implementation of the Model Law is a big step in the right direction.

Footnotes

1 Re Taisoo Suk (as foreign representative of Hanjin Shipping Co Ltd) [2016] 5 SLR 787

2 Details can be found in the UNCITRAL's Guide to Enactment and Interpretation of the UNICTRAL Model Law on Cross-Border Insolvency.

3 The full list can be found at http://www.uncitral.org/uncitral/en/uncitral_texts/insolvency/1997Model_status.html

4 Beluga Chartering GmbH (in liquidation) and others v Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (deugro (Singapore) Pte Ltd, non-party) [2014] 2 SLR 815

5 Re Taisoo Suk (as foreign representative of Hanjin Shipping Co Ltd) [2016]5 SLR 787

6 A 'foreign representative' is defined under the Model Law as 'a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's property or affairs or to act as a representative of the foreign proceeding'.

7 The determination of COMI has spawned a substantive body of case law and it is not the subject of this article to discuss the various considerations to be applied.

Singapore Implements The UNCITRAL Model Law On Cross-Border Insolvency

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
 
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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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