Public Consultation on Proposed Amendments to the Companies Act to Strengthen Singapore as an International Centre for Debt Restructuring

21 OCT 2016

Public Consultation on Proposed Amendments to the Companies Act to Strengthen Singapore as an International Centre for Debt Restructuring

Consultation Period:
21 Oct 2016 to 2 Dec 2016

  1. The Ministry of Law and the Ministry of Finance plan to introduce various amendments to the Companies Act in 2017. This public consultation seeks feedback on amendments specifically concerned with reforms to Singapore’s debt restructuring and corporate rescue framework. The Ministry of Finance will be seeking public feedback on other reforms to the Companies Act in due course.

Background

  1. In 2013, the Insolvency Law Review Committee (“ILRC”) made recommendations to holistically update Singapore’s corporate insolvency and bankruptcy laws. Public consultation was held on the ILRC’s report in Dec 2013, and the Government has welcomed its recommendations.

  2. In May 2015, building on the ILRC’s recommendations, the Minister for Law set up the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (“Restructuring Committee”) to consider how to enhance Singapore’s effectiveness as a centre for international debt restructuring. After public consultation which lasted from April to May 2016, the Government broadly accepted the Restructuring Committee’s recommendations, which include proposed enhancements to our legal framework for restructuring.

  3. In view of the complexity and volume of legislative amendments required to fully implement the relevant recommendations of both the ILRC and the Restructuring Committee, the Ministry of Law is taking a phased approach to implementation. The first phase will comprise legislative amendments which are key to enhancing Singapore’s corporate rescue and restructuring framework. The relevant provisions of the proposed Companies (Amendment) Bill is enclosed at Annex A(241KB).

Summary of Bill’s provisions

  1. A summary of the proposed changes is as follows:
  1. Schemes of arrangement: A new set of provisions will be introduced to specifically support creditor schemes of arrangements that implement debt restructuring proposals (see Clause 2, Section 211A),:
    1. Enhanced moratoriums against creditor action, aimed at conferring a greater protection to a debtor during a restructuring. The changes include:
      • allowing the Court to grant a moratorium when the company has made the application to call a meeting of its creditors or intends to make such an application (see Clause 2, Section 211B(1)).
      • an expansion in the scope of the moratorium available to be similar to what is available in judicial management (see Clause 2, Section 211B(4)).
      • allowing for an automatic 30 day moratorium, subject to safeguards for creditor interests (see Clause 2, Section 211B(2), (3) and (8)).
      • moratoriums with in personam worldwide effect, i.e. the court may restrain creditor action overseas, if the creditor is within Singapore’s jurisdiction (see Clause 2, Section 211B(5)(b)).
      • allowing extension of moratorium to related entities to the debtor (see Clause 2, Section 211C).
    2. Rescue finance provisions, to enable the Court to grant new financing, which is provided to assist the restructuring, priority over other creditor claims. The court will be able to grant four levels of priority, specifically for the rescue financing to be (i) treated as an administrative expense, (ii) have super priority over preferential debts, (iii) secured by a security interest that is subordinate to existing security, or (iv) secured by a super priority security interest. The granting of a super priority security interest will be subject to safeguards, to ensure existing secured creditors are not unfairly prejudiced. (see Clause 2, Section 211E)
    3. Cram-down provisions, to allow a scheme to be approved even if a class of creditors oppose the scheme, if such creditors will not be unfairly prejudiced by the scheme (see Clause 2, Section 211H).
    4. Enhanced creditor protection, by
      • including debtor disclosure requirements, to allow creditors to make informed decisions in the restructuring (see Clause 2, Section 211B(6)); and
      • introducing provisions to safeguard against debtors dissipating assets during a moratorium (see Clause 2, Section 211D).
    5. Pre-packaged provisions, which will fast-track pre-negotiated schemes of arrangements between debtors and their major creditors (see Clause 2, Section 211I).
    6. Procedural enhancements, including:
      • rules relating to the filing, inspection and adjudication of proofs of debt and to allow the appointment of independent assessors, to resolve disputes when proofs of debt are adjudicated (see Clause 2, Section 211F);
      • giving the court the express power to order a re-vote (see Clause 2, Section 211G); and
      • allowing the company, scheme manager or creditors to apply to the Court (i) to review the company’s or scheme manager’s acts, or (ii) for directions, after the scheme is sanctioned (see Clause 2, Section 211J).
  2. Judicial management:Amendments will be made to:
    1. enable companies to apply for a judicial management order more easily (see Clause 4(a) and (c)).
    2. introduce provisions for super-priority for rescue financing in judicial management (see Clause 5).
  3. Cross-border insolvency: Various reforms will also be enacted to facilitate the resolution of cross-border insolvencies:
    1. judicial management will be made available to foreign companies (see Clause 3).
    2. specific criteria will be set out to guide the Court on when it may exercise discretion to take jurisdiction over foreign debtors (See Clause 6).
    3. the adoption of the UNCITRAL Model Law on Cross-Border Insolvency (see Clauses 7 & 9)
    4. the abolition of the general ring-fencing rule in the winding up of foreign companies. Ring-fencing however will be retained for specific financial institutions, such as banks and insurance companies (see Clause 8).

Public Consultation

  1. The Ministry of Law invites interested parties to provide their views and feedback on the Companies (Amendment) Bill (see Annex A). The consultation period is from 21 October 2016 to 2 December 2016. All views and feedback may be sent in electronic form or hard copy form to the address below:

Ministry of Law
Policy Advisory Division
100 High Street
#08-02, The Treasury
Singapore 179434
Fax: 6332 8842
E-mail: MLAW_Consultation@mlaw.gov.sg

Last updated on 17 Nov 2016