S210(1) of the Companies Act allows the Court to order a meeting between a company and its creditors to consider compromises or arrangements. In Re Sembawang Engineers and Constructors Pte Ltd [2015] SGHC 20, the Singapore High Court granted an application by Sembawang Engineers and Constructors Pte Ltd (the “Company”) for a s210(1) order. The applicant Company was successfully represented by Patrick Ang, Low Poh Ling and Chew Xiang from Rajah & Tann Singapore LLP.

A scheme of arrangement is an important avenue for a company under financial stress to compromise debts owed to specified categories of creditors. In broad terms, there are four steps to a scheme. The first step is to determine which creditors are to be covered under the scheme, categorize them, and to seek leave from the High Court to convene a meeting of each category of creditors. The second step is to hold and pass the appropriate resolutions at the meeting(s) of creditors. The third step is to obtain the sanction of the High Court of the scheme.

Introduction

On 14 July 2015, the Singapore Parliament passed the Bankruptcy Amendment Bill, which seeks to establish certain reforms in Singapore’s bankruptcy regime.

Senior Minister of State for Law Indranee Rajah said in Parliament that the changes address the striking of a balance between the need to hold bankrupts accountable and allowing them to have the opportunity to make a fresh start in their financial affairs after a reasonable period of time.

In this Update, we highlight key aspects of these reforms, which include:

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 issue in The Royal Bank of Scotland NV v TT International Ltd [2012] SGCA 53 centered on whether a success-based professional fee arrangement should have been disclosed to the scheme creditors and the Court prior to the sanction of a scheme of arrangement.

During bankruptcy proceedings, much like in corporate insolvency, there is always the concern that the debtor will dispose or transfer away his property so as to keep it out of reach of his creditors.

Introduction

An unfair preference transaction will only be voided under the Companies Act if it is influenced by a desire to prefer the receiving party in the event of insolvency, and not if it is motivated by proper commercial considerations. In Tam Chee Chong and another v DBS Bank Ltd [2010] SGHC 331, the Singapore High Court had the opportunity to consider what constitutes proper commercial considerations.

A winding up application may be resisted by reason of a cross-claim against the petitioning creditor.

"Subject to contract" clauses are often used in commercial transactions to indicate that an agreement is incomplete until the terms of a formal contract have been settled

When a company enters financial difficulty, it faces conflicting interests. On the one hand, it must continue with commercial transactions to preserve and hopefully rehabilitate the company; on the other, it must respect its creditors’ rights by not making payments which may be seen as preferring certain creditors.