Legal Update:

Introduction

Introduction

In part 1 of our multi-part series on Corporate Insolvency, Restructuring and Recovery in the COVID-19 world,[1] we outlined two major changes introduced by the long-awaited Insolvency, Restructuring and Dissolution Act 2018 (“Act”). The Act officially came into force two days later, on 30 July 2020. Here in part 2, we explore the manner in which a company may seek to restructure its debts under the Act.

A. What is debt restructuring and in what circumstances would a company apply for one?

As in most countries around the globe, businesses and individuals in Singapore are grappling with the financial fallout from the COVID-19 pandemic.

Although not drafted with the effects of a pandemic in mind, new insolvency and restructuring laws in Singapore are timely and should provide valuable assistance in some circumstances.

The Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”) consolidates Singapore’s personal and corporate insolvency, restructuring and dissolution laws into one omnibus legislation. Prior to this, the provisions pertaining to personal insolvency were contained in the Bankruptcy Act, while provisions related to corporate insolvency were contained in the Companies Act. The Bankruptcy Act and the relevant provisions in the Companies Act have since been repealed with the IRDA coming into force on 30 July 2020.

The Insolvency, Restructuring and Dissolution Act 2018, (Act No.40 of 2018, the "Act") , which came into force on 30 July, marks, for now at least, the final stage in what has been a far-reaching overhaul of Singapore's insolvency and debt restructuring regime.

Singapore confirms further widening of third-party funding options

In the recent case – Paulus Tannos v Heince Tombak Simanjuntak and others and another appeal [2020] SGCA 85 (‘Paulus Tannos’), the Singapore Court of Appeal held that in determining whether to recognise a foreign bankruptcy order, the Singapore Courts could decline to recognise the foreign bankruptcy order (‘BO’) if there was, according to Singapore law, a breach of natural justice in obtaining the foreign BO.

Facts

Insolvency Case Update: Paulus Tannos v Heince Tombak Simanjuntak and others [2020] SGCA 85

In split decision, Singapore Court of Appeal refuses recognition of Indonesian bankruptcy orders for breach of natural justice

Significant holdings:-

a. The question of whether there has been a breach of natural justice in a foreign court is one which the Singapore court alone can decide.

The Situation in Hong Kong

COVID-19 has created unforeseen challenges to businesses all over the world, resulting in many companies being unable to survive the pandemic. Hong Kong has been no exception. In Hong Kong, according to data published by the Hong Kong Government’s Official Receiver’s Office, in the first seven months of the year, 5219 compulsory bankruptcy petitions and 247 compulsory winding-up petitions were presented, representing 13.7% and 5.1% year-on-year increase respectively. The effect of COVID-19 may yet be fully reflected by these figures.

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 certain key changes effected by the IRDA that are relevant to loan market participants.

Restrictions on ipso facto clauses