SINGAPORE - The success of a simplified legal process introduced temporarily to help micro and small companies restructure their debts or wind up their businesses may lead to permanent adoption of some aspects, said Second Minister for Law Edwin Tong.
The Simplified Insolvency Programme (SIP) was introduced in January in response to concerns that smaller businesses would be hardest hit amid the Covid-19 pandemic.
While the Ministry of Law initially decided to accept applications for the SIP until July, the period was extended to July next year.
Speaking at the Singapore Insolvency Conference 2021 held virtually on Wednesday (Oct 13), Mr Tong said the relatively simpler, faster and lower cost proceedings offered by the SIP garnered 31 applications.
So far, 15 of these applications have been accepted, while 11 are pending and five were rejected as they did not meet eligibility requirements.
To qualify for the SIP, micro and small firms must have an annual sales turnover not exceeding $10 million. The number of creditors cannot exceed 50, and the number of employees must not be more than 30.
Company liabilities - including contingent and prospective - must not exceed $2 million.
Mr Tong said the estimated time for conclusion of legal proceedings under SIP is about nine months, faster than a standard wind-up that usually takes a year or longer.
"We will consider in the future whether some features of this simplified process could be refined and retained on a more permanent basis."
An efficient, effective and balanced restructuring and insolvency framework is in general important to assist local businesses experiencing financial difficulties, and benefits creditors and other stakeholders as better outcomes may be achieved, he added.
But Mr Tong, who is also Minister for Culture, Community and Youth, noted that the financial stability of smaller businesses is critical for livelihoods and the economy.
These businesses make up about 95 per cent of Singapore's enterprise landscape.
As economic conditions remain fluid and the economy pivots and transits into a new endemic normal, the SIP will assist smaller companies that may become financially distressed in the coming months, he said.
Various Government agencies and ministries have launched or extended several initiatives under the Covid-19 (Temporary Measures) Act 2020 to offer temporary relief to small businesses.
The Monetary Authority of Singapore rolled out in June this year the Extended Support Scheme to help individuals and small and medium-sized enterprises (SMEs) with cash-flow difficulties and move gradually to resuming full loan repayments.
SMEs intending to restructure their credit facilities across multiple financial institutions can also apply for the Extended Support Scheme - Customised until Dec 31.
Earlier this month, the Ministry of Law launched the Rental Waiver Framework, under which commercial landlords are required to provide two weeks of rental waiver to eligible SMEs and non-profit organisation tenants.
The Singapore Insolvency Conference is organised by the Insolvency Practitioners Association of Singapore and supported by the Law Society of Singapore.