Insolvency programme for micro, small companies to be revamped with simpler criteria, streamlined processes

[SINGAPORE] An insolvency programme for micro and small companies will be revamped to make debt restructuring and winding up more accessible, with simpler eligibility criteria and streamlined processes.

The initiative will commence from Jan 29.

This new programme “aims to facilitate the orderly winding up of non-viable or dormant businesses to have better recovery outcomes for viable ones”, said the Ministry of Law in a statement on Wednesday (Jan 28).

With this move, the Simplified Insolvency Programme, also known as SIP 2.0, will become a permanent feature of the Insolvency, Restructuring and Dissolution Act 2018.

It enhances two programmes originally introduced by the existing Simplified Insolvency Programme: the Simplified Debt Restructuring Programme, which assist companies in the restructuring of debts and potential rehabilitation of businesses, and the Simplified Winding Up Programme, which helps with winding up non-viable businesses and eligible dormant companies. 

SIP 2.0 will be administered by licensed insolvency practitioners and have a “simpler entry criteria to benefit more companies”.

Under SIP 2.0, the general eligibility criterion for the two programmes will be simplified into one criterion, which is that the company’s liabilities do not exceed S$2 million. This means that previous limits to annual sales revenue, employees and creditors will be removed.

Companies must also be free of circumstances which make it unsuitable for the programme, including not being involved or commencing other insolvency proceedings, said the Ministry of Law.

Separately, restructuring processes under the Simplified Debt Restructuring Programme and the winding up processes under the Simplified Winding Up Programme will take place out-of-court. 

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If companies are found unsuitable for simplified processes after entering SIP 2.0, companies may transit to other liquidation processes through conversion procedures, the ministry added. 

For potential claims requiring further investigative work, insolvency practitioners are to inform creditors of funding needed to pursue the claims, and can proceed with the liquidation and dissolution of the company if no funding is provided, said MinLaw. 

Lastly, a one-time final extension of 30 days will be granted if creditors owed at least two-thirds in value of the company’s debts, after the default moratorium period of 30 days in the Simplified Debt Restructuring Programme is passed. 

Companies which fail to successfully complete the programme cannot enter again within 60 months, said the ministry.