Simplified Insolvency Programme to be Revamped and Made Permanent to Support Financially Distressed Companies
11 November 2024 Posted in Press releases
1. The Ministry of Law (“MinLaw”) introduced the Insolvency, Restructuring and Dissolution (Amendment) Bill (“Bill”) in Parliament today, to revamp the Simplified Insolvency Programme (“SIP”) and make it a permanent feature of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”). This is part of MinLaw’s efforts to bolster Singapore’s insolvency framework and support for financially distressed companies.1
Background
2. The SIP was introduced in 2021 as a temporary measure to support eligible micro and small companies (“MSCs”) facing financial difficulties during the COVID-19 pandemic, by helping them restructure their debts to rehabilitate their business or wind up via a simpler, faster and lower cost insolvency process. As at 25 October 2024, a total of 116 applications for the existing SIP were submitted, and 77 of these were accepted. Of these, 60 MSCs in severe financial distress were successfully assisted. The existing SIP is set to cease on 28 January 2026.2
3. In its place, the revamped, permanent programme will facilitate better access to insolvency processes by providing a simpler and more cost-effective process, which will benefit more companies going forward.
Key Amendments
4. The Bill will modify two processes under the SIP, namely the Simplified Debt Restructuring Programme (“SDRP”) and the Simplified Winding Up Programme (“SWUP”).3
5. The key changes to the two processes will be administered by licensed Insolvency Practitioners (“IPs”) in the private sector who are experienced and have the relevant expertise. They are as follows:
a) Simpler eligibility criteria: The new SDRP and SWUP will have only one general eligibility criterion i.e. the company’s total liabilities must not exceed $2 million. This will allow companies that are not MSCs to also benefit from the SIP.
b) Simpler application process: Only key supporting documents will be required when a company applies for the SDRP. The IPs, when assessing whether the company meets the requirements for entry into the SDRP, may request more documents. For the SWUP, if the company has incomplete records, the company may submit a Directors’ declaration that the eligibility criterion is met. To prevent abuse, enforcement provisions will target false declarations.
c) More effective administration: In the new SDRP, only one class of creditors will vote on the debt repayment plan, instead of up to three in the current SDRP. Court involvement will also be limited to situations where approval of a debt repayment plan is disputed and only on specified grounds. The SDRP may transit to other liquidation processes so that unviable companies can be liquidated and dissolved efficiently.
Costs of the new SWUP are reduced by removing the need to publish notifications in the Government e-Gazette and Newspapers, and requiring publication on MinLaw’s website only. Lodgments will still be on the Accounting and Corporate Regulatory Authority’s Bizfile for permanent record. In situations where no creditor funding is given to the IP to conduct investigations to recover assets, the IP will not be required to take any further investigative action, and may proceed to complete the liquidation and thereafter dissolve the company.
d) Strengthened creditor protection: In the new SDRP, the initial moratorium period during which creditors are unable to enforce their rights is shortened from 90 to 30 days, and a black-out period of five years also applies (i.e. a company which fails to successfully complete the SDRP cannot apply for the SDRP again until at least 5 years have elapsed).4
6. The detailed list of the differences between the features of the existing and current SIP can be found in the Annex.
7. MinLaw will continue to review processes and work closely with industry stakeholders to strengthen Singapore’s restructuring and insolvency framework and ecosystem.
MINISTRY OF LAW
11 NOVEMBER 2024
1. Information about the SIP can be found at https://go.gov.sg/sip-faq.↩
2. Refer to MinLaw’s press release, “Extension of Application Period for the Simplified Insolvency Programme” (https://go.gov.sg/btleoz).↩
3. The SDRP is for the restructuring of debts and rehabilitation of viable businesses while the SWUP is for the orderly winding up of non-viable businesses.↩
4. A moratorium period is given to the company on the SIP time to work out a scheme with the Restructuring Advisor for the creditors.↩
Last updated on 11 November 2024
Table 1: Summary of Changes from the Current SDRP
| Current SDRP | Revamped SDRP |
|---|---|
| 4 general eligibility criteria Thresholds on revenue, liabilities, number of creditors, and employees. |
1 general eligibility criterion A $2 million liability threshold. |
| No restrictions on repeated applications for SDRP | [Creditor protection] Restriction on SDRP usage Includes a black-out period of 5 years i.e. company previously accepted into the SDRP but failed to successfully complete the programme cannot apply for SDRP again until at least 5 years have elapsed. |
| Many supporting documents Prescriptive list of documents, e.g. business proposal, list of creditors, cash-flow statement, 90-day cashflow projection, the latest financial statements, and profit and loss projections for the following 2 years. |
Fewer prescribed documents Only key supporting documents will be required when a company applies for the SDRP. The Insolvency Practitioners (“IPs”), when assessing whether the company meets the requirements for entry into the SDRP, may request for more documents, if required. |
| Moratorium period 90 days from date of acceptance into SDRP, extendable once by the Official Receiver (“OR”). |
[Creditor protection] Shorter moratorium period 30 days from date of IP’s appointment, extendable once by OR by up to 30 days. |
| 3 voting classes Secured, preferential and ordinary, unsecured creditors. |
Single voting class |
| Court sanction required Approved debt repayment plan (“DRP”) is sanctioned by the Court and made binding on all creditors (including dissenting creditors). |
Out-of-Court process DRP binding on all creditors if majority of at least two-thirds in value of creditors present and voting, approve the DRP. Court’s sanction needed only if creditors object to the DRP on specified grounds. |
| Termination of SDRP If no DRP approved, a discharge from SDRP after 30 days or beyond extension period. |
Conversion to liquidation SDRP may transit to other liquidation processes so that unviable companies can be liquidated and dissolved efficiently. |
Table 2: Summary of Changes from the Current SWUP
| Current SWUP | Revamped SWUP |
|---|---|
| 5 general eligibility criteria Thresholds on revenue, liabilities, number of creditors, employees and estimated realisable asset value. |
1 general eligibility criterion A $2m liability threshold. |
| Many supporting documents Applicant company must submit statement of affairs and latest financial statements. |
Fewer required documents Company to complement incomplete financial records with Directors’ declaration that eligibility criterion is met. |
| Requires a special resolution By members of the company. |
Exception to special resolution Directors’ resolution accepted for companies with uncontactable members. |
Publishing notifications on 4 platforms:
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Publishing notifications on 2 platforms:
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| Not applicable. | Ability to dissolve company Liquidator to dissolve unviable company if not put in funds for further investigation required. |
| Availability of conversion process SWUP may transit to other liquidation processes such as court-ordered winding up or creditors’ voluntary liquidation so that unviable companies can be liquidated and dissolved efficiently. |