MinLaw looking into making Simplified Insolvency Programme for micro, small firms permanent
Paige Lim
THE Ministry of Law (MinLaw) plans to make permanent a programme that helps micro and small companies restructure and wind up their business, Second Minister for Law Edwin Tong said on Wednesday (Nov 22).
In his keynote address at the Singapore Insolvency Conference 2023, he said of the Simplified Insolvency Programme (SIP): “[We] are looking at potential changes to make this simplified insolvency process permanent in our system, and tailored for micro and small companies.”
The ministry has since obtained feedback from practitioners and businesses that have gone through the programme, and conducted straw polls, he added.
The SIP was introduced in January 2021 to help micro and small companies hard-hit by the Covid-19 pandemic. It sought to provide simpler, faster, and lower-cost proceedings to these businesses, which may lack the resources to wind up or restructure their debts on their own.
The programme, originally intended to run for six months till July 2021, was at first extended by a year, followed by another 18 months. The application period has been extended for another two more years to Jan 28, 2026. (see *Amendment note)
The SIP comprises two separate pillars. The first is the Simplified Debt Restructuring Programme for the restructuring of debts and the potential rehabilitation of viable businesses; the second is the Simplified Winding Up Programme for the orderly winding up of non-viable businesses.
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As at Oct 31, 44 out of 57 businesses had been wound up by the official receiver, noted Tong. Applications under these simplified processes were completed within an average of nine months; some processes were over in “as quickly as a few months”, he said.
A typical liquidation process, on the other hand, can take three to four years on average, especially when there is a longer chain of transactions and contracts to resolve.
“This shorter process allows non-viable companies to be liquidated quickly – in fact, expedited, not just in terms of time savings, but also cost savings, and the impact on the principals behind the business,” he said.
While there were fewer cases of simplified debt restructuring than cases of simplified winding up, Tong highlighted the successful restructuring of Axis Group Asia as an example. “This was done with court sanction in under six months, which was very quick in the context,” he said.
Providing businesses with a simpler, faster and more cost-effective process to navigate financial distress could also mitigate – if not remove – the stigma of a failed business, he said.
“If we are able to resolve this expeditiously, it frees up this entity or the individual to find shape or form in another business more expeditiously, and also preserve the value of the insolvency estate for distribution to creditors.”
The Nov 22 to 23 conference, organised by the Insolvency Practitioners Association of Singapore, is being held in the Marina One West Tower. Its participants are mostly insolvency practitioners.
* Amendment note: MinLaw previously said in a statement that the application period for SIP was extended for a final time to Jan 28, 2024. It was later extended again to Jan 28, 2026.
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