SINGAPORE - A number of new provisions will be added into the Companies Act to make it easier for troubled firms to restructure.
This will give businesses in financial difficulties greater flexibility to survive, Senior Minister of State for Finance and Law Indranee Rajah said at the Parliament on Friday (March 10) as she presented the Companies Act Amendment Bill for second reading.
The latest changes will see Clause 22 of the Act adopt various elements of the United States' bankruptcy code, more commonly known as Chapter 11.
When the new provisions kick in, the Court will be able to order a moratorium in favour of a company proposing or planning to propose a scheme of arrangement for debt restructuring.
In a scheme of arrangement, a debt restructuring proposal is approved in a meeting by majority creditors that together hold 75 per cent of the company's debt.
"The moratorium prevents creditors from taking action against the company, such as commencing legal proceedings or enforcing security rights, and gives the company breathing room to put forward the restructuring proposal," Ms Rajah said.
To this end, the new provisions will provide an automatic moratorium on application, for a period of up to 30 days. The court will also give the moratorium a worldwide effect, which will prohibit the company's overseas assets from being seized by creditors in the process.
Another aspect of the amendments will empower the court to order that rescue financing be given "super priority" overall other debts, and to approve a scheme of arrangement even if there are dissenting creditor classes.
At the same time, the amended Companies Act will allow the court to make a judicial management order for a company that is "likely to be become unable to pay its debts", so that the judicial management process can commence earlier to give companies a better chance to be saved.
Rules around cross-border insolvency will also receive a treatment, including the adoption of the Uncitral Model Law on Cross-Border Insolvency, "which is a well understood and internationally respected framework", Ms Rajah said.
Meanwhile, a separate range of changes will kick in by the end of this month to ensure better corporate transparency.
These changes, first tabled for the public consultation in December, include the new requirement for companies registered here to maintain registers of their beneficial owner, which is a person or entity that has a significant interest or control over a company.
Locally incorporated companies will also be asked to maintain the register of nominee directors, who must in turn disclose the particulars of their nominators.
The transparency related amendments are expected to kick in by March 31, Ms Rajah said, but a transitional period of 60 days from this date will be given.