27 September 2018

On 6 August 2018, the Companies (Amendment) Bill 2018 (“Bill”) was passed. The Bill seeks 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 under section 131 of the Companies Act (“CA”). Currently, if a shipowner’s lien is not duly registered under section 131 of the CA, it will be void against the liquidator and creditors of the company.

The Companies (Amendment) Act 2018 has since been gazetted on 10 September 2018. It will take effect on a date to be appointed.

As highlighted in the Second Reading Speech by Ms Indranee Rajah, Minister, Prime Minister’s Office and Second Minister for Finance and Education, on the Bill, the amendment aims to preserve the ease of doing 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 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, 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.

The Diablo case gave rise to several practical difficulties for the shipping industry as highlighted in a Note by Minister Indranee Rajah issued on 14 August 2018:

  • Registering shipowners’ liens is difficult from a practical perspective because vessels are typically subject to a continual series of charterparties, each entered into as quickly as possible to ensure the vessel is gainfully employed. As charter periods can be short (e.g. a few days), it would mean that the charterparty could be completed even before the 30-day registration period is up.
  • Given the large number of charterparties concluded every day, imposing a registration requirement will mean significant administrative burden and additional costs for shipping companies.
  • It is also a long-standing industry custom not to register shipowners’ liens as charges.

In light of the industry concerns and feedback, the Ministry of Law then proposed to amend section 131 of the CA to exempt shipowners’ liens from registration and conducted a public consultation to seek feedback from 23 May 2018 to 13 June 2018.

Reference materials

The following reference materials are available on the Ministry of Finance website www.mof.gov.sg, Ministry of Law website www.mlaw.gov.sg and the Parliament website www.parliament.gov.sg:


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