On 30 July 2020, the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) came into operation. The IRDA is an omnibus legislation housing all of Singapore’s insolvency and restructuring laws in one single piece of legislation.
The general framework of the IRDA has been discussed in the first article in our series of articles covering the various aspects of IRDA and can be found here.
On 30 July 2020, the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) came into operation. The IRDA is an omnibus legislation housing all of Singapore’s insolvency and restructuring laws in one single piece of legislation.
The general framework of the IRDA has been discussed in the first article in our series of articles covering the various aspects of IRDA and can be found here.
The Insolvency, Restructuring and Dissolution Bill was passed in the Parliament on 1 October 2018 and assented to by the President on 31 October 2018. Today, i.e. 30 July 2020, the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) will finally come into effect. In this article, which is the first of five in a series of articles covering various aspects of IRDA, we will provide an overview of its main features.
History of Singapore’s insolvency regime
Winding up a company – liquidation – applies in circumstances where a company is unable to pay its debts. In that situation, the company's directors, creditors or contributories can present a winding up petition. (This can be found in sections 122, 123 and 124 of the Insolvency Act 1986.)
A company is deemed unable to pay its debts if:
In recent years, there has been an increased interest in obtaining third-party funding to commence legal proceedings. The insolvency sector in particular has seen an increase in applications to court for approval of third-party funding agreements. In this article, we discuss how an insolvent entity may seek approval from the court for third-party funding to pursue legitimate claims.
Third-party funding an important resource for insolvent companies
The interaction between the principles of insolvency law and the Coronavirus Job Retention Scheme (JRS) have come into sharp focus in recent weeks, with the administrators of Carluccio's and Debenhams seeking guidance from the English courts about how the scheme impacts on their obligations to employees.
As part of its response to the COVID-19 situation, Companies House has announced that it will accept the filing of statutory insolvency documents via emailed PDF attachments.
This measure applies to companies registered in Scotland, as well as England & Wales and is yet another practical example of the steps being taken to try and alleviate the administrative burden on insolvency practitioners.
It is perhaps not as well-known as it should be that the Bankruptcy (Scotland) Act 2016 sections 195 – 198 provides a six-week moratorium – effectively a postponement or period of protection from action to recover debts - to individuals, partnerships and trusts facing financial distress or liquidity issues.
The moratorium provides breathing space to allow parties to be protected from their creditors while they take advice and consider what debt relief options might be available to them.
A party can normally apply for the moratorium once in any 12-month period.
The Act is meant to give temporary relief to financially distressed individuals, firms and businesses who are facing challenges imposed by COVID-19 but who are otherwise viable and profitable.
It is unsurprising that many of the Act’s sections expressly refer to the relevant provisions of the personal and corporate insolvency legislation applicable in Singapore. In this regard, it is noteworthy that the Act refers expressly to the Insolvency, Restructuring and Dissolution Act (“IRDA”). This warrants some explanation.
Wrongful trading rules, which can result in directors being personally liable for losses incurred as a result of continued trading, are being temporarily suspended in recognition of the large number of businesses being impacted by COVID-19. While this news will be welcomed by businesses across the UK, directors should not be complacent about their responsibilities.