Corporate Insolvency Laws in Singapore: Restructuring and Reforms

Corporate Insolvency Laws in Singapore: Restructuring and Reforms

Amit Kumar Kashyap (Nirma University, India) and Karan Parihar (Nirma University, India)
DOI: 10.4018/978-1-5225-5541-4.ch010

Abstract

Corporate rescue mechanism in Singapore is based on colonial structure, wherein the companies in distress can go for informal workouts or judicial management and schemes of arrangement under Companies Act. Singapore has just amended the Company Act and incorporated the provisions relating to insolvency and bankruptcy. The chapter reviews the use of schemes of arrangement and judicial management in Singapore as a corporate rescue mechanism and address the reform legislation of 2017 for corporate insolvency.
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Informal Rehabilitation Procedures In Singapore

Informal debt restructuring or informal exercises are not unique to Singapore, but the reality is that sometimes that is the only realistic option available to creditors, as the formal

Court process would be worse in certain situations. The proceedings of Informal structuring are more noticeable among SMEs.

In an informal workout setup in order to ensure the short-term viability of the debtor company to get higher chance of their debts repaid in full, the major creditors will take the initiative to work together to. This is arranged through contractual arrangements. Corporate debt restructuring works best where all major creditors co-operate.

Any restructuring process requires that:

  • There is inherent value in the company concerned.

  • The company's medium to long-term business plan is sound.

  • The restructuring has the agreement of the company and its principal creditors.

Generally recognized principles for agreeing restructurings between lenders and borrowers under the London Approach and the International Federation of Insolvency Professionals (INSOL International) Global Principles for Multi-Creditor Workouts.

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Formal Insolvency Procedures

The main legislation dealing with the procedures is the Singapore Companies Act. This sets out the procedures for schemes of arrangement, judicial management and liquidation.

Company in Distress

Financial distress is a condition where a company cannot meet, or has difficulty paying off, its financial obligations to its creditors, typically due to high fixed costs, illiquid assets or revenues sensitive to economic downturns (Staff, 2018). There are several options for a company in financial distress in Singapore. In formal process the Companies Act has 2 main categories of formal debt restructuring: judicial management and schemes of arrangement.

Regulatory Authority

There is no separate bankruptcy court. Applications for the liquidation or reorganization of a Singapore company come under the sole purview of the Singapore High Court.

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