Bill tabled to integrate insolvency, bankruptcy and debt revamp laws

Singapore

AN omnibus Bill that consolidates personal and corporate insolvency and debt restructuring laws into a single piece of legislation was tabled for first reading in Parliament on Monday.

The Insolvency, Restructuring and Dissolution Bill introduced by Senior Minister of State for Law Edwin Tong, seeks to unify personal and corporate bankruptcy and debt restructuring laws, enhance the law to further strengthen the debt restructuring regimes, as well as regulate insolvency practitioners.

Currently, personal and corporate bankruptcies are governed respectively by two separate statutes - Bankruptcy Act and Companies Act.

If the Bill is passed, the Bankruptcy Act will be repealed, and the provisions in the Companies Act pertaining to corporate insolvency and restructuring will be removed.

The provisions on personal bankruptcy in the Bill will largely follow those in the Bankruptcy Act, which was last updated in 2015.

However, there would be a most significant change - concerning secured creditors. The Bill will require secured creditors to notify the trustee administering the bankruptcy, within 30 days after the bankruptcy order, if they intend to claim interest on the debt for the period between the order and enforcement of the security.

This requirement allows the bankrupt's assets and liabilities to be determined early, for more efficient administration of the bankruptcy.

As for provisions in the Companies Act, miscellaneous amendments will be made to modernise the law, and to facilitate more effective use of resources in the administration of liquidation cases.

In addition, amendments will be made to strengthen debt restructuring regimes. Among the key changes, at least two will impact judicial management.

One is that a court order is not needed to place a company into judicial management, if creditors can come to a consensus. Second, judicial managers will be able to seek third-party funding to bring legal claims against persons who have misappropriated the company's assets. In return, the financier will get part of the potential proceeds from a successful recovery.

Another amendment under the Bill offers a company undergoing restructuring proceedings much-needed protection by restricting counter-parties to key contracts from terminating or modifying the contracts - triggered by the company's restructuring. With the temporary relief, a company would be able to continue with the key contracts and generate revenue as it nurses itself back to financial health.

Should a company have to be dissolved, the Bill also allows for a summary procedure, provided that the company's assets are insufficient to pay for winding-up expenses, and its affairs do not require further investigation. As at Aug 31, there were over 100 companies being wound up by the Official Receiver (OR), and these companies each have estimated realisable assets of under S$1,000.

Besides enhancing the law, the Bill will establish a regulatory regime for insolvency practitioners.

The Bill arises from the Insolvency Law Review Committee's recommendations in October 2013 for a holistic update of Singapore's insolvency and restructuring laws. Subsequently, the Committee to Strengthen Singapore as an International Centre for Debt Restructuring made further recommendations in April 2016.

The Law Ministry took a phased approach to implementing the massive recommendations.

Amendments to the Bankruptcy Act in July 2015 were made in the first phase, followed by changes to the Companies Act in March 2017 in the second phase. It is understood that the courts have received almost 100 applications under the amended Companies Act.