27 September 2018
On 10 September 2018, the Insolvency, Restructuring and Dissolution Bill (“Bill”) was tabled for first reading. The Bill will introduce a new omnibus Act that consolidates the personal and corporate insolvency laws, and the laws relating to debt restructuring by individuals and companies, currently found in the Bankruptcy Act and the Companies Act, into a single statute. When in force, the Bankruptcy Act will be repealed and the relevant provisions in the Companies Act will be deleted.
The proposed consolidation of Singapore’s personal and corporate insolvency laws into a single statute was recommended in the report of the Company Legislative and Regulatory Framework Committee released in October 2002 and the report of the Insolvency Law Review Committee dated 4 October 2013 (“Insolvency Law Review Committee Report”). The Bill also seeks to implement changes that are related to the recommendations in the Insolvency Law Review Committee Report and the report of the Committee to Strengthen Singapore as an International Centre for Debt Restructuring dated 20 April 2016.
Set out below are the key highlights of the Bill.
Limitation on certain contractual rights
- Restriction of ipso facto clauses: There will be a new provision that limits the exercise of certain contractual rights by reason only that certain proceedings in respect of a company have commenced or that the company is insolvent. This does not prevent those contractual rights from being exercised by reason of other grounds provided in the contract such as non-payment of money owed by the company. There would also be carve-outs to be worked out subsequently in regulations.
- Holder of a capital markets services licence must appoint a private trustee to administer the bankruptcy when applying to make a debtor bankrupt: The definition of “institutional creditor” currently in section 33(3) of the Bankruptcy Act will be expanded to include a holder of a capital markets services licence granted under section 86 of the Securities and Futures Act. This means that a holder of a capital markets services licence will be required to appoint a private trustee to administer the bankruptcy when applying to make a debtor bankrupt.
- Secured creditor must notify of intention to claim interest on debt within 30 days after the making of a bankruptcy order: A secured creditor who intends to claim interest in respect of a debt must notify the Official Assignee of its intention within 30 days after the making of a bankruptcy order.
- New licensing and regulatory regime applicable to insolvency and debt restructuring officeholders: The Bill will establish a licensing and regulatory regime that is applicable to insolvency and debt restructuring officeholders undertaking specific types of work, thereby setting a common and consistent standard of professional regulation.
- Receiver or manager will be personally liable on contract entered into and contract of employment adopted unless he contracts out, also entitled to indemnity: A receiver or manager will be personally liable on any contract entered into by him in the performance of his function as a receiver or manager (except insofar as the contract otherwise provides) and, to the extent of any qualifying liability, on any contract of employment adopted. A receiver or manager is entitled to an indemnity out of the property of the company or corporation.
- A company may place itself into judicial management without court order: A company may obtain a resolution of its creditors to place itself into judicial management where the company considers that it is, or is likely to become, unable to pay its debts, and there is a reasonable probability of achieving one or more of the purposes of judicial management.
- Judicial manager expressly empowered to seek third-party funding: To facilitate third-party funding, a judicial manager will be expressly empowered to assign proceeds of actions relating to transactions at an undervalue, unfair preferences, extortionate credit transactions, fraudulent trading, wrongful trading and delinquent officers.
- No personal liability will be imposed on a judicial manager of a company: A new provision under the Bill provides that the judicial manager of a company is deemed to be the agent of the company, but omits the personal liability provision in section 227I(1)(b) of the Companies Act.
- New grounds for creditor or member to seek court order to protect interests: A creditor or member of the company will be able to apply to court for an order to protect the interests of the creditors or members on new grounds such as where the judicial management should not have been commenced at all, that there are no proper grounds for continuing the judicial management, or that the judicial manager is not managing the company according with the approved proposals.
- Liquidator in court winding up must seek permission from court or committee of inspection to bring or defend any action or other legal proceeding or appoint a solicitor: In a court winding up, the liquidator will be required to seek prior authorisation by either the court or the committee of inspection before bringing or defending any action or other legal proceeding in the name and on behalf of the company, or before appointing a solicitor for that purpose. This is a change from the existing position in section 272(2)(a) of the Companies Act where such prior authorisation is not required.
- Liquidator expressly empowered to seek third-party funding: To facilitate third-party funding, the liquidator will be expressly empowered to assign proceeds of actions relating to transactions at an undervalue, unfair preferences, extortionate credit transactions, fraudulent trading, wrongful trading and delinquent officers.
- Court expressly empowered to terminate winding up and direct resumption of management and control of company by its officers: Under the Bill, the court is expressly empowered to stay or terminate the winding up of a company. In this connection, the courts are given the express powers to direct, upon the termination of a winding up, the resumption of management and control of the company by its officers. Under the current section 279 of the Companies Act, the court only has the power to stay a winding up and where the court grants a permanent stay, its effect is similar to a termination of the winding up.
- An arrangement, entered into between a company about to be or being wound up and its creditors, is binding on the company and its creditors for every mode of winding up: Under the Bill, when an arrangement entered into between a company about to be or being wound up and its creditors is binding on the company and its creditors, such an arrangement will be applicable to every mode of winding up. Currently, section 309 of the Companies Act is applicable only to a company in voluntary winding up.
- Liquidator may give notice to strike off name of company and company will dissolve within 30 days: A liquidator who believes that the realisable assets of the company are insufficient to cover the expenses of the winding up and that the affairs of the company do not require further investigation, may give notice to the creditors and contributories that the name of the company will be struck off the register, and the company will be dissolved after 30 days unless the creditors or contributories appoint another liquidator or an order of court under the relevant provision is obtained.
Applicable in winding up and judicial management
- New wrongful trading provision: In a new provision relating to wrongful trading, the court will be empowered to make a declaration that any person who was a knowing party to the company trading wrongfully is personally responsible for debts or liabilities of the company. A company or any person party to, or interested in becoming party to, the carrying on of business with a company, may apply to the court for a declaration that a particular course of conduct, transaction or series of transactions would not constitute wrongful trading. A company trades wrongfully if the company incurs debt or liabilities without reasonable prospect of meeting them in full when the company is insolvent, or becomes insolvent as a result of the incurrence of such debt or liability.
- Insolvency, Restructuring and Dissolution Bill
- Ministry of Law press release titled “New Omnibus Bill Introduced to Update and Strengthen Singapore’s Insolvency and Debt Restructuring Laws”