In Re PT MNC Investama TBK [2020] SGHC 149, the Singapore High Court provided guidance as to what is sufficient for a foreign company to establish standing to avail itself to the Singapore restructuring regime. Specifically, the factors expressed in the "substantial connection" test under the IRDA¹ are non-exhaustive and courts will consider other factors involving "some permanence" to permit foreign companies to restructure in Singapore.

Establishing a "substantial connection"

1. Introduction 

The Insolvency, Restructuring and Dissolution Act 2018 (the "IRDA") came into force on 30 July 2020. The consolidation of all personal and corporate insolvency and debt restructuring legislation into a single statute, along with other legislative changes, seeks to further strengthen Singapore's position as an international debt restructuring hub. This note highlights the new restrictions on ipso facto provisions effected by the IRDA, which will be of particular interest to loan market participants.

Restrictions on ipso facto clauses

The landmark decision in Design Studio¹ introduces the US rescue financing concept of "roll-ups" to Singapore. This is the first case to consider the appropriateness of the roll-up feature in Singapore and is a pragmatic decision that is guided by a careful balance between the protection of creditors' interests and the rehabilitation of the debtor. This case also clarifies that super priority is not solely for new money financings.

The Design Studio case and the super priority regime

The long-running saga between Shandong Chenming Paper Holdings (“Shandong Chenming“) and Arjowiggins HKK2 Ltd (“Arjowiggins“) has continued with the Court of Appeal handing down its judgment on an appeal against a lower court judgment which had dismissed Shandong Chenming’s application to injunct Arjowiggins from presenting a winding-up petition against Shandong Chenming (Shandong Chenming Paper Holdings Limited v. Arjowiggins HKK2 Limited [2020] HKCA 670).

The High Court has expedited a trial at which it would be determined whether luxury car manufacturer McLaren Group could obtain the release of certain security for the benefit of its senior noteholders, failing which a financial restructuring which was contingent on that release could not be implemented: McLaren Holdings Ltd v US Bank Trustees Ltd [2020] EWHC 1892 (Ch). The court concluded that, absent determination of the proceedings within one month, McLaren Group would have no choice but to enter an insolvency process and that this justified expedition in this case.

Singapore’s Insolvency, Restructuring and Dissolution Act (the “IRDA“), together with 48 pieces of subsidiary legislation, comes into force today, 30 July 2020 (available here).

The Corporate Insolvency and Governance Act 2020 introduces sweeping insolvency reforms in response to the business impacts of Covid-19, designed “to give companies breathing space and keep trading while they explore options for rescue”. Our UK Restructuring, Turnaround and Insolvency team have published an article in International Corporate Rescue which considers the key elements of the reforms.

In what is likely to be one of this year’s landmark insolvency decisions, the Supreme Court in Bresco v Lonsdale has considered the interaction between insolvency set-off and adjudication, though the judgment is likely to have application to other dispute resolution processes including litigation and arbitration. The Supreme Court, unlike the High Court and Court of Appeal, permitted the adjudication to continue and, in doing so, dismissed the suggestion that insolvency set-off always results in the extinction of cross-claims to be replaced by a single claim for the balance.

In what is likely to be one of this year’s landmark insolvency decisions, the Supreme Court in Bresco v Lonsdale has considered the interaction between insolvency set-off and adjudication, though the judgment is likely to have application to other dispute resolution processes including litigation and arbitration.