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
Last Friday, in response to the outbreak of the coronavirus pandemic (COVID-19), the German government announced various measures described as a big "bazooka" to avert a crisis in the Eurozone's largest economy. The German development bank KfW will play a key role in the context of the announced measures and has been tasked to provide liquidity assistance to German companies hit by the pandemic.
Presented as a major measure of the five-year French presidential term, the law “on growth and business transformation”, also known as the PACTE Act, came into force on May 24th, 2019. Amongst the changes that were brought, some of them deserve a particular focus.
Two phases of the reform. The PACTE Act revises the insolvency legal framework and mainly empowers the executive to directly implement the EU insolvency directive and to reform the law on security interests within a period of two years.
The first phase of the reform
A Singaporean construction company in liquidation has successfully sued one of its former directors for failing to act in the best interests of the company, highlighting the importance of directors being aware of, and protecting against, potential personal liability for breach of duty.
Directors’ liability – the risk
The High Court of England & Wales considered, in respect of the delayed completion of a solar project, the appropriate end date for liquidated damages under a terminated construction contract.
It is usual and standard for a construction contract to contain a liquidated damages clause. It is also common for a termination clause to be included and it is not unusual for it to be exercised. Strangely, however, it is not clear under English law how these two concepts interact.
In a noteworthy decision to participants in the energy industry, the High Court of England & Wales examined what constitutes a valid liquidated damages clause in the event of delayed completion of a solar project. And last week in Singapore, the High Court considered the enforceability of liquidated damages provisions on termination of power purchase agreements.
An extract from GRR The European, Middle Eastern and African Restructuring Review 2018
Brief overview of insolvency proceedings
Enhanced by no less than five reforms over the past 10 years, French insolvency law now provides a comprehensive set of tools designed to efficiently handle the legal, economic and financial difficulties that companies are facing. The whole insolvency architecture hinges on the key concept of cessation of payments (ie, inability of the debtor to pay its debts as they fall due with its available assets).
In Levin v. Verizon Bus. Global, LLC (In re OneStar Long Distance, Inc.), 2017 U.S. App. LEXIS 18374 (7th Cir. Sept. 22, 2017), the Seventh Circuit recently addressed a situation where a debtor sought to reduce a creditor’s new value defense in a preference avoidance action.
A bankruptcy judge in New York court recently dismissed a case filed under chapter 15 of the U.S. Bankruptcy Code because the debtors did not have their center of main interests or business operations in the jurisdiction where the initial, foreign case was filed, the British Virgin Islands (BVI). In re Creative Finance Ltd. (In Liquidation), No. 14-10358, 2016 WL 156299 (Bankr. S.D.N.Y. Jan. 13, 2016).
Our February 22 post reported that the Franchise Services of North America, Inc. decision of Bankruptcy Judge Edward Ellington of the Southern District of Mississippi dismissing a Chapter 11 petition because a holder of “golden share” stock had not approved the petition as required by the debtor’s charter was going directly to the U.S. Court of Appeals for the Fifth Circuit on an expedited basis. It is the first case concerning the merits of contractual or structural bankruptcy-remoteness in my memory to reach a Court of Appeals since the adoption of the Bankruptcy Code in 1978.