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Singapore's New Corporate Insolvency Regime
In May 2017, significant changes were made to Singapore’s insolvency and debt restructuring laws via amendments to the Companies Act, where it included new features such as super-priority rescue financing and enhanced moratorium against creditor action.
Companies in Singapore have benefitted from this new regime.
Hoe Leong Corporation Ltd managed to restructure its debts under s 211I of the Companies Act. Under s 211I, the court may, on application made by the company, make an order approving the compromise or arrangement, even though no meeting of the creditors or class of creditors has been ordered under s 210(1) or held. This allows fast-tracking of pre-negotiated schemes. In Hoe Leong’s case, the scheme documents were sent to the relevant creditors on 17 November 2017, and approved by the court, two months later, on 22 January 2018.
EMAS Offshore Limited, with its subsidiaries (Emas Offshore Pte Ltd and Emas Offshore Services Pte Ltd), successfully applied for a moratorium under s 211B of the Companies Act. It provided breathing space which makes it more conducive for the company to achieve its restructuring goals. It was reported “The Board believes that the Automatic Moratorium and the Moratorium, if granted, will provide stability for the day-to day operations of the Group to continue with support of its key trade suppliers and allow the Singapore Filing Entities an opportunity and adequate time to pursue the Restructuring.”
However, not all are successful in utilising the mechanisms under this new regime.
Re: Attilan Group Ltd is the first case which provided the High Court with the opportunity to hear arguments on s 211E of the Companies Act on super-priority for rescue financing.
Under s 211E, the court is permitted to make certain orders, essentially giving priority to rescue-financing in the event of the company’s winding up. When a company is facing severe financial difficulties, it is a necessary component of the scheme proposal to inject fresh funds into the company in the form of either equity or debt. Few would be willing to lend or provide private debt financing to a company in such a situation, especially if they may end up being last in line to the company’s assets if the corporate rescue attempt fails. To deal with this challenge, s 211E allows the court to give creditors who are willing to provide rescue-financing “super-priority” to repayment.
Attilan Group Ltd had applied for super priority status to be granted to the proposed rescue financing from an existing creditor of the company. The Singapore High Court declined to grant priority rescue funding status as it was of view the company did not exercise “reasonable efforts” as the attempt at securing alternative funding should have been made before any formal application for super-priority.
It appears that the enhancement of Singapore’s insolvency and debt restructuring laws have been beneficial for companies. It is worth pointing out that the omnibus Insolvency Bill, a new law to consolidate Singapore's personal bankruptcy and corporate insolvency regimes, is expected to be released by the end of 2018. The new laws should further boost Singapore’s status as a centre for international debt restructuring.
Commercial Applications of Company Law in Singapore
Commercial Applications of Company Law in Singapore (6th Edition) explains the law in a practical manner that is accessible and relevant to business users. The book reconceptualises traditional approaches to the subject in a manner that puts the law clearly into context, and demonstrates the way in which company law shapes and impacts business planning and decision-making.