Bill introduced to streamline insolvency framework

When the Bill comes into force, the Bankruptcy Act will be repealed and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.
When the Bill comes into force, the Bankruptcy Act will be repealed and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.PHOTO: ST FILE

New legislation to consolidate Singapore's personal and corporate insolvency regimes and restructuring laws was introduced yesterday to augment its position as a global financial centre.

The Insolvency, Restructuring and Dissolution Bill was tabled for first reading in Parliament, and will consolidate the provisions currently in two separate statutes - the 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When the Bill comes into force, the Bankruptcy Act will be repealed and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.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.

Firms in financial distress will have a greater chance of rehabilitation under the Bill. This supports amendments to the Companies Act last year following nearly US$1 billion (S$1.38 billion) of defaults in the Singapore bond market since November 2015.

The 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 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 like insolvency or restructuring occurs. There is currently no restriction on the use of such clauses, which makes it difficult for a firm 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."

Firms in financial distress will have a greater chance of rehabilitation under the Bill. This supports amendments to the Companies Act last year following nearly US$1 billion (S$1.38 billion) of defaults in the Singapore bond market since November 2015.

A new regulatory regime for insolvency practitioners acting as office holders in restructuring and insolvency proceedings will also be established and administered by the Insolvency and Public Trustee's Office.

Aimed at raising the quality of insolvency practitioners, the Bill will impose minimum qualifications and conditions for the grant and renewal of licences, and put in place a disciplinary framework for errant office holders.

A version of this article appeared in the print edition of The Straits Times on September 11, 2018, with the headline 'Bill introduced to streamline insolvency framework'. Print Edition | Subscribe