Singapore may soon consolidate its corporate insolvency and bankruptcy laws into a single piece of legislation. In a move that is set to have a greater impact on foreign companies registered in Singapore, the Insolvency Law Review Committee seeks to modernize the city state’s bankruptcy and corporate insolvency laws as well as adopt practices that are best suited to Singapore.
This is due to Singapore’s growing status as a regional financial and business hub as well as the increased instances of complex credit and financing transactions in the economy. According to the Committee, Singapore’s insolvency regime has not yet been fully developed to deal with cross-border insolvencies and the Companies Act only provides for how foreign companies in Singapore may be wound up. To attract greater foreign capital and investments, this aspect must be given greater legislative clarity.
Singapore’s insolvency regime has not yet been fully developed to deal with cross-border insolvencies and the Companies Act only provides for how foreign companies in Singapore may be wound up. To attract greater foreign capital and investments, this aspect must be given greater legislative clarity.
Among the recommendations are tweaks which will help enhance Singapore’s attractiveness as a corporate debt restructuring hub. For example, foreign companies will have the same access to judicial management options as local companies to avoid liquidation.
According to a report by Today Online, titled Panel recommends insolvency laws be consolidated into Act, companies can also enter judicial management without making formal applications to the courts. The court can also place a company into judicial management when it is deemed unlikely to be able to pay its debt, instead of only when it is insolvent.
Further, courts also have the power to appoint a judicial manager in the face of objections by the creditor who holds a floating charge so that the interest of all creditors are protected.
The concept of ring-fencing, which requires foreign companies to pay local creditors before international ones, may also be abolished. In ring-fencing, all local debts incurred by a Singapore registered company must be paid in priority to debts owed to other international creditors.
Senior Counsel Lee Eng Beng, a spokesperson for the review committee, said it is crucial that Singapore’s insolvency regime remains robust and keeps up with the increasingly complex and transnational nature of modern businesses.
The consultation period ends on 2 December 2013. Until then, interested parties are welcome to provide their feedback to the Ministry of Law.
To learn more about how to strike off a company in Singapore, please visit our Singapore Company Liquidation page.