After months of public consultations and revision, the Singapore parliament passed the Companies (Amendment) Bill (the "Bill") on 10 March 2017 amending the Singapore Companies Act (the "Companies Act"). The Bill contains, among others, significant and novel changes to Singapore's insolvency laws. This is no doubt a giant step towards positioning Singapore as Asia Pacific's Debt Restructuring Hub with cross-border restructuring capabilities.

Introduction - The Bill

According to a recent decision by the United States District Court for the Southern District of New York,1 a claim sold post-petition is not subject to equitable subordination based solely on the original claimholder's conduct. Likewise, a claim sold post-petition cannot be disallowed based on the original claimholder's receipt of (and failure to repay) an avoidable transfer.

Background

On August 2, 2010, Maru E. Johansen, in her capacity as the foreign representative (the “Foreign Representative”)1 in respect of Mexican insolvency proceedings regarding Compania Mexicana de Aviacion, S.A. de C.V. (“Mexicana”), filed a petition for recognition in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), commencing a case under Chapter 15 of the United States Bankruptcy Code.2 Mexicana and its affiliates operate Mexicana Airlines, Mexico’s largest airline.

In Official Committee of Unsecured Creditors v. Halifax Fund, L.P. (In re Applied Theory Corp.),1 the Second Circuit, in a per curiam opinion, held that an official committee of unsecured creditors (the "Committee"), under the circumstances, did not have the right to commence an adversary proceeding seeking the equitable subordination of claims held by insiders of a Chapter 11 debtor. The Applied Theory court rebuffed the Committee's characterization of its claim as a direct claim that the Committee could prosecute without the bankruptcy court's permission.

On September 15, 2009, the United States Bankruptcy Court of the Southern District of New York ordered Metavante Corporation (“Metavante”) to make payments to Lehman Brothers Special Financing Inc. (“LBSF”) under a prepetition interest rate swap agreement guaranteed by Lehman Brothers Holdings Inc. (“LBHI” and, together with LBSF, “Lehman”) after Metavante had suspended ordinary course settlement payments under the swap.1 Metavante claimed a contractual right to withhold payment under Section 2(a)(iii) of the 1992 ISDA Master Agreement as a result of Lehman’s bankruptcy.

On April 18, 2007, in Fla. Dep’t. of Rev. v. Piccadilly Cafeterias, Inc. (In re Piccadilly Cafeterias, Inc.),1 the United States Court of Appeals for the Eleventh Circuit held that the stamp tax exemption of 11 USC § 1146(c)2 may apply to transfers of assets that were necessary to the consummation of a bankruptcy plan of reorganization and were made prior to confirmation of the plan. In reaching this decision, the Eleventh Circuit declined to follow decisions of the Third and Fourth Circuits to the contrary and thus created a split among the circuits on this issue.

On February 11, 2009, the United States Court of Appeals for the Fourth Circuit, addressing an apparent issue of first impression, ruled that a series of gas supply contracts might constitute “commodity forward agreements” and, in turn, “swap agreements,” exempt from the court-appointed trustee’s avoidance actions.1 The Court reversed and remanded the decision from the United States Bankruptcy Court for the Eastern District of North Carolina, which had held that the commodity supply contracts at issue were insufficiently tied to financial markets to be considered protected “commodity forwar

In a recent decision, Marrama v. Citizens Bank of Massachusetts1, the United States Supreme Court considered whether a debtor has an absolute right under Section 706(a) of the Bankruptcy Code to convert a case to Chapter 13, clarifying a growing split among circuits as to whether the debtor’s bad faith conduct prior to his proposed conversion results in the forfeiture of the debtor’s right to convert.

A recent decision of the Court of Appeals for the Seventh Circuit appears to have further raised the hurdle to equitably subordinate claims. Continuing what appears to be a move toward a narrower interpretation of equitable subordination, the Seventh Circuit held that misconduct alone does not provide sufficient justification to equitably subordinate a claim; injury to the interests of other creditors is required as well.

In Official Committee of Unsecured Creditors v. Whalen (In re Enron Corp.), the Bankruptcy Court for the Southern District of New York considered whether the debtor’s pre-bankruptcy payment of an employment bonus one day before it became due was “for or on account of an antecedent debt owed by the debtor before such transfer was made” for purposes of determining whether section 547(b) of the Bankruptcy Code made the payment avoidable as a preferential transfer.