The Insolvency, Restructuring and Dissolution Bill
The Insolvency, Restructuring and Dissolution Bill, was introduced on 1 October 2018, to consolidate Singapore’s personal and corporate insolvency regimes. Currently, the personal insolvency regime, also known as Personal Bankruptcy Singapore, is governed by the Bankruptcy Act (Cap 20), while the corporate insolvency regime is governed by specific provisions in the Companies Act (Cap 50).
With the passing of the Insolvency, Restructuring and Dissolution Bill, the Bankruptcy Act will be abolished, and the provisions in the Companies Act pertaining to corporate insolvency and restructuring will be excised.
The changes to the regimes and the consolidation of the legislation brought about by the Insolvency, Restructuring and Dissolution Bill serve to develop the law for strengthening the debt restructuring regimes further and control insolvency practitioners.
This article discusses some of the significant changes brought by the new Bill, both in the individual and corporate regimes.
Under the new Insolvency, Restructuring and Dissolution Bill, secured creditors are required to notify the bankruptcy trustee if they intend to claim interest on the debt for the period between the order and enforcement of the security within 30 days of the bankruptcy order.
This enables the bankrupt’s assets and liabilities to be determined at an earlier stage for more efficient administration of the personal bankruptcy.
Apart from the above, the provisions on personal bankruptcy as set out in the new Bill are mostly similar to the provisions in the current Bankruptcy Act.
Foreign Companies undergoing liquidation
The new Insolvency, Restructuring and Dissolution Bill grants the Court power to appoint a liquidator of the foreign company for Singapore on the application of the actual foreign liquidator in the company’s place of incorporation. However, this can only be done where the Singapore liquidator is satisfied that the interests of creditors in Singapore are sufficiently protected before making payments to the foreign liquidator. This aspect represents an important change in the corporate insolvency landscape.
In the past, under the Companies Act, there was no restriction on the exercise of contractual clauses which permitted the termination or modification of the contract upon the occurrence of a specified trigger event, such as insolvency or restructuring of the company. This has been altered under the Insolvency, Restructuring and Dissolution Bill.
Usually, the practical effect of the exercise of these clauses would make it much more difficult for a company to restructure its debt because of the immediate manner in which the clauses operate to terminate or modify the existing contracts.
Frequently, the exercise of such clauses by one creditor creates a cascading domino effect and entirely destroys the value of the distressed company, which otherwise would not have happened had there been an opportunity to conduct the restructuring in an organised manner.
Under the new Insolvency, Restructuring and Dissolution Bill, there will be restrictions placed on the exercise of such clauses.
The new Bill, however, will not affect existing cases and pending applications commenced under the Bankruptcy Act and Companies Act before the date of commencement of the Bill. In those cases and applications, the relevant provisions of the Bankruptcy Act and Companies Act will continue to apply.
The Insolvency, Restructuring and Dissolution Bill is presented to ensure that Singapore’s insolvency and debt restructuring laws remain progressive and up to date with the needs of individuals and companies in the modern world.
The competing concern naturally that the parties had entered into contractual arrangements precisely on the basis that they would be entitled to exercise these rights precisely in the event of financial difficulty of that party. The legislation would effectively curtail a freely negotiated contractual bargain. Speak to our bankruptcy and insolvency lawyers today to see how you can protect your interests in such circumstances.