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 main recommendation in the final report is to enact a new omnibus Insolvency Act which will consolidate and update the core areas of Singapore's personal and corporate insolvency regime, as well as set out common principles and procedures. The public consultation was conducted from 7 October 2013 to 2 December 2013.
Although some feedback disagreed with certain proposed recommendations, there was general support for the proposed recommendations in the final report. There were also suggestions to fine-tune some of the proposed recommendations as well as comments on issues which were not raised in the final report. MinLaw will, where accepted, incorporate the feedback in the drafting of the omnibus Insolvency Act.
For ease of reference, MinLaw has released a summary table of the feedback received and its corresponding response. MinLaw only highlighted the proposed recommendations for which feedback has been received and response issued, including those concerning issues not raised in the final report. The key points of MinLaw's response to the feedback cover issues such as the following:
- The abolition of ring-fencing of assets of foreign companies will not affect the promulgation or continued operation of any other ring-fencing legislation which is applicable to certain regulated companies or industries.
- While the UNCITRAL Model Law on Cross-Border Insolvency will be adopted, it will be inappropriate to limit its application to selected entities.
- There will be a separate public consultation on an automatic bankruptcy discharge regime.
- Secured creditors have no absolute veto rights against a grant of judicial management order.
- In self-imposed judicial management, a breach of a director's personal undertaking that the company will apply its assets and incur liabilities only in the ordinary course of business will attract personal liability.
- The threshold requirement for the appointment of an interim judicial manager should be that of "good prima facie case".
- An unregistered charge will be unenforceable against a judicial manager, but it will cease to be so upon the discharge of the judicial management. However this does not cure any defects in the validity of a charge due to the lack of registration.
- In the context of liquidation, the default period within which the secured creditor has to realise his security may be extended by the Official Receiver or liquidator or upon application to court.
- The scope of moratorium in schemes of arrangement will be expanded with appropriate safeguards to prevent abuse.
- In relation to cram-down provisions to allow a scheme of arrangement to be passed over the objections of a dissenting class of creditors, where the overall requisite majorities in number and value of creditors have been obtained, the company and/or the classes of creditors in favour of the scheme would have the burden of proof in establishing that the dissenting class is not prejudiced.
The following materials are available from the MinLaw website www.mlaw.gov.sg: