30 October 2018

With effect from 1 October 2018, section 131 of the Companies Act (“CA”) has been amended to exempt a shipowner’s lien created by a company, whether as a charge on book debts of the company or a floating charge on the undertaking or property of the company, from the requirement to register. Previously, if a shipowner’s lien was not duly registered under section 131 of the CA, it would have been void against the liquidator and creditors of the company.

Under the revised section 131 of the CA, a “shipowner’s lien” is defined as a contractual lien on sub-freights, sub-hires or bill of lading freight created under a charter (or sub-charter) of a ship for any amount due under the charter (or sub-charter). Such a lien may be given in favour of, amongst other persons, a registered owner of a ship, a disponent owner of a ship, or a bareboat charterer of a ship.

A shipowner’s lien created prior to 1 October 2018 will be subject to the registration requirement and the consequences of non-registration only if, as at 1 October 2018, there was:

  • a liquidator appointed for the company either by the High Court or by the company by way of a voluntary winding up resolution; or 
  • a creditor falling within the meaning of “creditor” in section 131(1) of the CA, as interpreted by the Court of Appeal in Media Development Authority of Singapore v Sculptor Finance (MD) Ireland Ltd [2014] 1 SLR 733. Section 131(1) of the CA invalidates an unregistered charge as against the liquidator and any creditor of the company. The Court of Appeal had held in the above case that “creditor” in section 131(1) meant a creditor who had acquired a proprietary right to or an interest in the subject matter of the unregistered charge.

The amendment to section 131 of the CA aims to preserve the ease of conducting shipping business in Singapore following the High Court decision in Duncan, Cameron Lindsay v Diablo Fortune Inc [2017] SGHC 172, which was affirmed by the Court of Appeal in Diablo Fortune Inc v Duncan, Cameron Lindsay [2018] SGCA 26 (“Diablo case”). Essentially, the courts had held that a shipowner’s lien should be characterised as a floating charge that is registrable under section 131 of the CA. As a consequence of non-registration under section 131 of the CA, the lien in the Diablo case was not enforceable against the liquidator of the charterer, and the shipowner who would otherwise have had the benefit of the lien ranked together with the unsecured creditors of the charterer instead.

Reference materials

The following materials are available on the Singapore Statutes Online website sso.agc.gov.sg:

 

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