Parliament: Bill to streamline insolvency framework introduced

When the Bill comes into force, the Bankruptcy Act will be repealed and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.
When the Bill comes into force, the Bankruptcy Act will be repealed and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.PHOTO: ST FILE

SINGAPORE - A new Bill that consolidates Singapore's personal and corporate insolvency regimes and restructuring laws was introduced on Monday (Sept 10) to augment its position as a global financial centre.

The Insolvency, Restructuring and Dissolution Bill, which was submitted by Marine Parade GRC MP and Senior Minister of State for Law and Health Edwin Tong for first reading in Parliament, will consolidate the provisions, currently in two separate statutes (Bankruptcy Act and Companies Act), into a single Act.

When the Bill comes into force, the Bankruptcy Act will be repealed and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.

The provisions on personal bankruptcy in the Bill largely follow the provisions in the Bankruptcy Act, following the last amendment in 2015.

The most significant change concerns secured creditors, the Ministry of Law said. The Bill will require secured creditors to notify the bankruptcy trustee, within 30 days of the bankruptcy order, if they intend to claim interest on the debt for the period between the order and enforcement of the security.

This allows the bankrupt's assets and liabilities to be ascertained early for more efficient administration of the bankruptcy.

Companies in financial distress will have greater chance of rehabilitation under the Bill. This supports amendments to Singapore's corporate insolvency framework last year following nearly US$1 billion (S$1.4 billion) of defaults in the Singapore bond market since November 2015. The changes, which incorporate elements of the US Chapter 11 system, were passed by Parliament in March 2017.

Courts here have seen close to 100 applications under the amended Companies Act provisions after just one year - many of them high-profile, high-value complex restructurings. For example, water treatment firm Hyflux filed for court protection against creditors' claims in May this year, and has been granted a six-month reprieve from creditors to work out a survival plan and reorganise its debts.

Other key changes include a new restriction of ipso facto clauses upon the commencement of restructuring proceedings.

Such clauses allow contracts to be terminated or modified when a specified trigger event such as insolvency or restructuring, occurs.

There is currently no restriction on the use of such clauses, which makes it difficult for a company to restructure because of the risk that the contract can be terminated.

"This is intended to facilitate restructuring where a distressed company's business relies on contracts that contain such ipso facto clauses."