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The COVID-19 pandemic is posing the biggest existential threat to commercial entities in a generation. Companies across the globe are getting to grips with multiple operational challenges and many are rightly concerned about their business continuity and restructuring options should the pressure begin to become insurmountable.
Introduction
Introduction
In part 1 of our multi-part series on Corporate Insolvency, Restructuring and Recovery in the COVID-19 world,[1] we outlined two major changes introduced by the long-awaited Insolvency, Restructuring and Dissolution Act 2018 (“Act”). The Act officially came into force two days later, on 30 July 2020. Here in part 2, we explore the manner in which a company may seek to restructure its debts under the Act.
A. What is debt restructuring and in what circumstances would a company apply for one?
The Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”) consolidates Singapore’s personal and corporate insolvency, restructuring and dissolution laws into one omnibus legislation. Prior to this, the provisions pertaining to personal insolvency were contained in the Bankruptcy Act, while provisions related to corporate insolvency were contained in the Companies Act. The Bankruptcy Act and the relevant provisions in the Companies Act have since been repealed with the IRDA coming into force on 30 July 2020.
As part of the Singapore Budget 2013, the Ministry of Law has proposed a major review of Singapore's bankruptcy and insolvency regime, with a particular focus on making it easier to discharge personal bankruptcies due to business failure or unsecured consumer credit.
The Insolvency Law Reform Committee will also be finalizing its report on the Omnibus Insolvency Bill soon. This Bill is intended to address certain perceived weaknesses in the existing personal bankruptcy and corporate insolvency mechanisms, resulting in a better and more efficient regime.
In March this year, the High Court in Beluga Chartering1 addressed a unique provision of Singapore's Companies Act that requires local liquidators to ring-fence a foreign company's assets for the settlement of the debts it incurred in Singapore before they transmit its assets to overseas liquidators and creditors. This decision exploring the implications of section 377 on Singapore's cross-border insolvency legal framework is timely considering the ongoing review of Singapore's insolvency laws.
A summary of the factual background