The Singapore Parliament has on March 10, 2017 approved the Companies (Amendment) Bill 2017 with the objective of increasing the debt restructuring framework in the Country and is effective from March 30, 2017.
The act is one of the crucial reforms in Singapore’s Corporate law as it contains provisions as to cross border insolvency, schemes of arrangement and in the initial phase was reforms intended to implement recommendations made by the Insolvency Law Review Committee. Further, it is important to note that the act has adapted many points of the U.S. Bankruptcy Code, like cram-down powers, prepackaged restructuring plan.
Highlights:
- The scope of moratoriums available extended to holding companies (in appropriate circumstances) of the scheme company in addition to subsidiaries
- Exclusion of certain types of companies, and arrangements like netting or set-off
- Flexible new proof of debt procedure for schemes
- Requirement for the initial creditor support for a company to obtain a moratorium at the time of the new scheme or arrangement
- Priority status for rescue funding necessary for business to operate as a going concern
Before the enactment of the law, a company was able to apply for a judicial management order only in the circumstance of inability to pay its debts. However, under the new amendment a company can apply for judicial management even “is or is likely to become” unable to pay its debts. Also, the Act puts an obligation of the parties to explain as to appointment of judicial administrator would cause prejudice.
The Act provides for different procedure for submission, objection, and adjudication of creditor claims – which includes:
- filing of proof of creditor debts;
- permission to creditors who have filed proof of their debts to inspect and object to claims filed by other creditors;
- an adjudicator’s appointment nominated by the company to adjudicate the validity of every proof of debt;
- procedure for dispute adjudication 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.
The Act has modified the rules and the process to be followed for schemes of arrangement – and for the same many of the features prescribed in U.S. Bankruptcy Code’s has been adapted like the introduction of rescue financing provisions for schemes of arrangement. Also, the Act provides for procedures in reference to prepackaged schemes of arrangement.
The Act has adopted the UNCITRAL Model Law on Cross-Border Insolvency. The same provides for rules and procedures governing cross-border bankruptcy and insolvency cases that has now been enacted in 42 countries. Under the old law only Singapore Companies were allowed to make application for Judicial Management proceeding. A foreign company can apply for judicial management proceedings it has:
- its main interests in Singapore;
- substantial assets in Singapore and
- carries on business in Singapore or has a place of business there
Under the provisions of the Act,the court is authorised to approve a scheme of arrangement even in case of objection of creditors in following cases:
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- The creditors represent the majority and holds at least 75 percent in value of the claims in a class for which votes are actually cast votes in favor of a proposed scheme;
- The creditors represent the majority and holds at least 75 percent in value of the total claims against the debtor for which votes are actually cast votes in favor of a proposed scheme; and
- the scheme is “fair and equitable” and does not “discriminate unfairly” between two or more classes of creditors.
In conclusion:
The New Law reform is crucial as it will make Singapore as one of the international debt restructuring hubs. Due to easier procedure, the act will allow foreign companies to file management for judicial management in Singapore. Thus, the stakeholder needs to become familiar with Singapore’ new debt restructuring law to take advantage of the same.
