Amendments to Singapore's corporate debt restructuring legislation were tabled in Parliament yesterday, as the Government pushes to update the insolvency framework to help a growing number of ailing companies work out their debts in a weak economic climate.
It is also part of efforts to position Singapore as a debt restructuring hub and augment its position as a global financial centre.
The Ministry of Law (MinLaw) also submitted the Trustees (Amendment) Bill for first reading in Parliament. The amendments to the Trustees Act are aimed at strengthening Singapore's trusts regime to ensure that trusts are not misused for money laundering, terrorism financing or tax evasion.
The amendments require trustees to maintain beneficial ownership information and proper accounting records of express trusts that are governed by Singapore law, administered in Singapore, or where the trustee is a resident in Singapore. This is to improve transparency of ownership and control structures of such trusts.
The amendments include provisions to empower the Law Minister to make rules to prescribe duties on trustees to maintain financial records and data on parties relevant to the trusts.
He is also empowered to prescribe specific groups of trusts that are exempted from the proposed amendments, designate any breach of such rules as an offence, and impose a fine not exceeding $1,000 for breaches.
"In a trust arrangement, the identities of the ultimate controller, or the ultimate beneficiary, may be kept confidential. That's why we need to impose an obligation on trustees to maintain that information. If the relevant authority needs to determine who the ultimate controller of the trust is, we can then do so quickly by checking with the trustee," MinLaw said.
The Companies (Amendment) Bill was tabled yesterday in Parliament to enhance Singapore's corporate rescue laws as debt restructuring work is expected to continue rising in the face of weak global growth, corporate debt defaults hitting their highest levels since the global financial crisis, market volatility, China's continuing slowdown and rising geopolitical uncertainty.
The two processes to achieve debt restructuring in Singapore are the scheme of arrangement and judicial management.
The scheme of arrangement involves calling a meeting of creditors, and if a significant majority of creditors approve, the ailing company can ask for the court to approve a restructuring plan that becomes binding on all creditors, including dissenting ones.
The amendments introduce elements of United States law, in particular the restructuring process under Chapter 11 of the US Bankruptcy Code, into the scheme of arrangement framework to make it a more effective restructuring tool.
The amendments include allowing the court to issue a protection order to prevent creditors from taking action against the debtor while it is formulating a restructuring plan. This protection will be given automatically for 30 days upon filing, and can be extended to the debtor's subsidiaries or holding companies.
Further, amendments will also be made to strengthen judicial management as a restructuring tool. This is a temporary court-supervised rescue procedure which gives a company, which is unable or is likely to become unable to pay its debts, a better chance of survival.
The amendments include allowing for judicial management applications to be made earlier when the company is starting to enter into financial difficulty, as opposed to when it is unable to pay its debts.
