This is a follow-up to our previous client update on Swiber Holdings Limited written on 29 July 2016. To view our previous update, please click here.
Introduction
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
Beluga Chartering GmbH (in liquidation) & Ors v Beluga Projects (Singapore) Pte Ltd (in liquidation) & Anor (deugro (Singapore) Pte Ltd, non-party) [2014] SGCA 14
The theory of universality in insolvency, along with globalisation, has gained much traction across many jurisdictions in recent years. Briefly, the universality theory proposes that an insolvency proceeding has worldwide effect over all the assets of the insolvent company, wherever they may be.
Introduction
When an unregistered foreign company becomes insolvent in both its place of incorporation and in Singapore, should its assets in Singapore be remitted to the foreign liquidator or be held in Singapore to satisfy locally incurred liabilities first? This was the question that the Singapore Court of Appeal faced in Beluga Chartering GmbH (in liquidation) and others v Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (deugro (Singapore) Pte Ltd, non-party) [2014] SGCA 14.
Facts
On 6 May 2014, the Ministry of Law ("MinLaw") issued its response to the feedback received from the public consultation on the final report (the "final report") of the Insolvency Law Review Committee (the "Committee") in relation to proposed recommendations affecting Singapore's personal and corporate insolvency regimes.
The Singapore High Court in Re Lehman Brothers Finance Asia Pte Ltd (in creditors' voluntary liquidation) [2012] SGHC 190 was confronted with the issue of whether debts of a company in a currency other than Singapore Dollars which are admitted in proof by its liquidators should be converted at the exchange rate prevailing on the date on which the company's statutory declaration was lodged, or on the date of the passing of the resolution placing the company in liquidation.
The recent Singapore case of Re Lehman Brothers Finance Asia Pte Ltd (in creditors' voluntary liquidation) determined that the debts of a company in foreign currency, which had been admitted in proof by the liquidators, were to be converted at the exchange rate prevailing at the "resolution date". In this context, resolution date means the day the resolution was passed placing the company into liquidation.
Introduction
The Singapore High Court has confirmed that it will recognize the status and powers of a foreign liquidator in the liquidation of an unregistered foreign company in Singapore.
Life cycle of a company
Statistics from the Accounting and Corporate Regulatory Authority ("ACRA") of Singapore reveal that the increasing number of companies formed in Singapore (2004:17,151; 2009:26,414) is matched by a corresponding increase in the number of companies ceasing operations (2004:5,882; 2009:22,388).