In its recent judgment in Ting Shwu Ping (Administrator of the estate of Chng Koon Seng, Deceased) v Scanone Pte Ltd and another appeal [2016] SGCA 65, the Singapore Court of Appeal set out the test to be applied in deciding whether to exercise its discretion under section 254(2A) of the Companies Act to order a buy-out instead of a winding-up where a party has applied to wind up the company under section 254(1)(f) (where the directors have acted in the affairs of the company in their own interest rather than the interests of members as a whole) or section 254(1)(i) (where it is ju

Singapore’s Ministry of Law has unveiled proposed amendments to the Singapore Companies Act to be made in 2017 to strengthen Singapore as an International Centre for Debt Restructuring (“the proposed amendments”). The Ministry of Law released the proposed amendments for public consultation from 21 October 2016 to 2 December 2016.

When a secured creditor appoints a receiver it is usual for them to sign an agreement setting out the terms of the receiver’s appointment, including payment of the receiver’s remuneration, costs and expenses. Appointment documents commonly contain indemnity clauses in which the secured creditor agrees to indemnify the receiver in specified circumstances.

In our previous bulletin we discussed the ‘safe harbour’ model in the Government’s suggested reforms to the current insolvency laws.

This bulletin considers another of the focus questions in the Proposal Paper: the voiding of ipso facto clauses relating to insolvency events.

Background

On 29 April 2016, the Federal Government released a Proposals Paper titled ‘Improving bankruptcy and insolvency laws’.

The Government is proposing these reforms to encourage entrepreneurship and investment. It hopes to reduce the stigma and detriment around failed business ventures, while still balancing the need to protect creditors.

The acceptance of the Committee’s recommendation is a boost in Singapore’s bid to become a debt restructuring hub, and it is likely to be exciting to see how and when these recommendations will be implemented.

On 20 July 2016, Singapore’s Ministry of Law accepted the recommendations of the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (the “Committee”).

Where a court has ordered the winding-up of a company, a shareholder may be able to have the winding up terminated under section 482 of the Corporations Act 2001.

Relevant factors

The power of the court to terminate a winding-up is discretionary. Relevant factors to be considered, which are not exhaustive, include the following:

In the latest decision in Kao Chai-Chau Linda v Fong Wai Lyn Carolyn and others [2015] SGHC 260, the Singapore courts have taken another step toward controlling the costs involved in insolvency and restructuring situations. In Kao, an application was made to the Singapore High Court to tax the fees of court-appointed receivers and managers. The application was heard before the learned Justice Steven Chong.

If a director can exercise a right of set-off against a company in liquidation for a debt owed to the director or for a liability of the company to the director (which may be unascertained in amount or contingent), it may help to cancel out or significantly reduce the director’s liability to the company for insolvent trading.

In Allco Funds Management Limited v Trust Co (Re Services) Ltd [2014] NSWSC 1251, an inter-company loan transaction was challenged by a receiver appointed by the secured creditor to one of the companies. Common directors were involved in the transaction. The issue was whether the directors breached their fiduciary duties entitling the company via the receiver to have the transaction set aside.

The background to the case