26 July 2018

On 9 July 2018, the Companies (Amendment) Bill (“Bill”) was introduced for first reading in Parliament. The key proposed amendment under the Bill is 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 of the company, from the requirement for registration 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.

A shipowner’s lien created prior to the commencement date of the proposed amendment is subject to the registration requirement and the consequences of non-registration only if, as at that date, there is:

  • 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 Bill proposes to define a “shipowner’s lien” 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.

Background

The proposed amendments to section 131 of the CA follow the High Court decision in Duncan, Cameron Lindsay v Diablo Fortune Inc [2017] SGHC 172, which was recently affirmed by the Court of Appeal in Diablo Fortune Inc v Duncan, Cameron Lindsay [2018] SGCA 26. The Court of Appeal largely agreed with and upheld the reasoning of the High Court, and held that a shipowner’s lien should be characterised as a floating charge that is registrable under section 131(3)(g) of the CA. Accordingly, a shipowner’s lien is void against the liquidator and creditors of the company if the lien was not duly registered under section 131 of the CA. However, the Court of Appeal acknowledged the commercial inconvenience of requiring registration, especially if the charter is for a short duration or for a single voyage, and if registration may in some situations be required even after the charter has come to an end (e.g. when there are further sub-freights yet to fall due).

In light of the above case developments, the Ministry of Law (“MinLaw”) conducted a public consultation from 23 May 2018 to 13 June 2018 and sought feedback on proposed amendments to section 131 of the CA.

Reference materials

The Companies (Amendment) Bill is available on the Parliament website www.parliament.gov.sg, or by clicking here.

 

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