Distressed micro and small companies will be able to restructure their debts quickly to deal with the economic impact from the pandemic, with help from a new scheme.

The Simplified Insolvency Programme (SIP), which also includes processes to help companies which are no longer viable to wind up efficiently while maximising returns to creditors and company stakeholders, was introduced as part of changes to the Insolvency, Restructuring and Dissolution Act yesterday.

Presenting the Bill for debate in Parliament, Second Minister for Law Edwin Tong said the proposed amendments provide temporary processes that benefit company stakeholders such as employees, creditors and shareholders by reducing the time needed for both restructuring and liquidation.

The programmes under the SIP will better suit the needs of micro and small companies, which may find it financially challenging to apply the current Act's provisions, he added.

Micro and small companies are defined as having annual revenue of less than $1 million and $10 million respectively, and they account for about 95 per cent of enterprises in Singapore.

Mr Tong highlighted that a successful restructuring will allow a company to continue operating, thereby saving jobs, and result in better outcomes for employees, creditors and investors as a whole.

An effective liquidation process also enables the reallocation of resources to more productive business activities, and maximises the returns to company stakeholders.

For instance, civil engineering contracting firm Swee Hong was granted an order by the High Court to give super-priority status to over US$2 million (S$2.7 million) of rescue financing in February.

This allowed the company to continue operating while attempting to restructure, with its proposed scheme of arrangement approved around seven months later.

"If sanctioned by the court, the restructuring would allow Swee Hong, which was insolvent, to continue as a going concern and avert a winding-up.

"This in turn helps to save the business (and) keeps jobs, not only for Swee Hong but also for many of its counterparties and subcontractors," Mr Tong said.

But while the current Act has facilitated positive results such as for Swee Hong, Mr Tong said it was not designed with the effects of a global pandemic in mind.

The SIP seeks to fill this gap by addressing the needs of micro and small companies, which are likely to be badly hit by the pandemic.

The simplified debt restructuring programme includes several measures to help troubled firms save costs and time, such as allowing an authorised officer of the company to represent it in court proceedings instead of having to engage legal counsel.

A restructuring adviser will also be appointed to assist the firm in the process.

Firms will need to make only one court application, compared with at least three typically.

For non-viable firms looking to dissolve operations, the simplified winding-up programme will be a more streamlined process, commenced through an application to the Official Receiver without having to nominate a liquidator, which creditors may disagree with. Under the simplified process, the Official Receiver steps in to be the liquidator.

The SIP and the Re-Align Framework, introduced on Monday, are a necessary part of the suite of measures that the Government is providing to help businesses and the workforce emerge stronger from the pandemic, Mr Tong said.

In addition, the Bill also introduced an amendment which will empower the minister to allow individuals to hold an insolvency practitioner's licence without being a "qualified person", such as for professionals who act for companies or creditors in cross-border transactions or restructuring.

Participating in the debate yesterday, Mr Vikram Nair (Sembawang GRC) said that while the simplified insolvency processes may seem "rough and ready" compared with the current processes in court, it is a fair trade-off for lower costs and improved efficiency.

Noting that the main driver for the changes to the Act is the Covid-19 crisis and the need for urgent measures to help firms survive this period, he suggested that these amendments could be made a permanent feature of Singapore's legislation should the simplified processes prove effective.