Counterparties of Swiber Holdings Limited ("Swiber") and its group companies would do well to keep a close tab on any debts outstanding from the group.
Swiber, an SGX-listed company in the oil fields services sector, issued an announcement in the early hours of Thursday 28 July 2016 stating that it filed an application in the Singapore High Court for a voluntary winding up on Wednesday afternoon, together with an application to place the company under provisional liquidation.
According to the same announcement, provisional liquidators (Cameron Lindsay Duncan and Muk Siew Peng of KordaMentha Pte Ltd) have been appointed by the court. Swiber also announced that three of their directors have resigned from the board as of 28 July 2016. The hearing of the winding up application will take place on 19 August 2016 in the High Court.
In these circumstances, any parties who have been or are presently dealing with Swiber or any of its group companies should note the following:
- Moratorium on legal proceedings. From the time that a winding up application is made, pending proceedings against the company can be stayed upon application by the company or the provisional liquidators. Once the winding-up order is made, no action or proceeding shall be proceeded with or commenced against the company except with the court's leave.
- Swiber's subsidiaries have not yet applied to be placed into liquidation. At this time, Swiber's subsidiaries e.g. Swiber Offshore Construction Pte Ltd do not appear to have yet commenced liquidation. Therefore, it is still open for creditors of Swiber's subsidiaries to pursue their claims against these subsidiaries. However, if the subsidiaries follow their parent into liquidation proceedings, then any proceedings will be similarly stayed.
- Know your right of set-off. Singapore law allows for mutual debts i.e. debts owedto and by an insolvent company, to be automatically set off against each other on the commencement of liquidation. This self-help remedy is particularly significant for counterparties of Swiber's subsidiaries which have not yet commenced liquidation. It is still possible for a company (A) to assign a debt owed from a Swiber subsidiary to another company (B) that has a debt owed to that subsidiary so as to allow Company B to avail itself of insolvency set-off. Note that any purported assignment after the commencement of liquidation will be void.
- Account for all debts. Given the moratorium against legal proceedings, if you are an unsecured creditor of Swiber, your likely recourse is to file a Proof of Debt with the liquidators after a winding up order is made. It is important to ensure that all outstanding amounts are properly accounted for with supporting documentation to avoid the risk of a Proof of Debt being rejected by the liquidators.
- Beware of voidable transactions. The liquidation process is aimed at realising as much of the company's assets as possible and distributing them in accordance with the priorities under the Companies Act. A transaction which unfairly evades such priorities may be voidable. For example, an unsecured creditor who obtained a more favourable debt repayment arrangement within the last six months, may risk being found to have received an unfair preference which is voidable under the law, and may wish to seek legal advice on the same.