A new Insolvency Act has been proposed in a bid to modernise the bankruptcy and corporate insolvency regimes in Singapore.
The new Act aims to unify the Bankruptcy Act which covers individual debtors and the corporate insolvency regime in a single piece of legislation.
A 16-member committee chaired by managing partner of law firm Rajah & Tann, Senior Counsel Lee Eng Beng, submitted close to 100 proposed changes to insolvency laws in a report to the Law Ministry last Friday. The proposals were released for public consultation yesterday.
Among the proposals are those aimed at making Singapore more attractive as a debt restructuring centre. Others included making it easier for an ailing business to appoint judicial managers to try to trade its way out of trouble.
The Insolvency Law Review Committee, appointed by Law Minister K. Shanmugam in Dec 2010, spent nearly three years working on the recommendations.
Mr Lee said: "It is important that our insolvency regime keeps pace with the increasing scale, complexity and cross-border nature of modern businesses."
Much of the 244-page report - not including annexes - included proposals to revise the recovery options for businesses.
One proposed change is to speed up the liquidation process. Firms whose assets are unable to fund the costs of winding-up can apply to the court for an early dissolution if no further investigation is required.
Another proposal hopes to make judicial management, a corporate rescue regime that gives firms breathing space from creditors, more effective.
The report noted that current practice allows secured creditors to veto a judicial management application. These creditors can then appoint receivers to manage the distressed assets and act in their interest. The role of judicial managers, however, is to act in the interests of all creditors.
Therefore, the committee suggested that courts be given the overriding discretion to grant a judicial management order to protect unsecured creditors.
Mr Tam Chee Chong, regional managing partner for financial advisory services at Deloitte & Touche, said the proposed changes in the report are largely welcomed by insolvency practitioners.
But Mr Tam, who has been appointed many times as a judicial manager, said there appears to be no oversight or regulation over scheme managers involved in restructuring and schemes of arrangements.
"The growing importance of restructuring and schemes in the insolvency space calls for this to be relooked," he pointed out.
The conduct of insolvency office-holders, like judicial managers, public accountants and liquidators, are supervised by agencies such as the Official Assignee or the Official Receiver.
Proposals were also made to improve cross-border insolvency laws. This includes allowing registered foreign firms to be placed under judicial management.
The committee also proposed abolishing ring-fencing, in line with international practice. This requires foreign firms to repay their debt obligations incurred in Singapore to local creditors first.
Mr Ashok Kumar, director and head of corporate restructuring and insolvency at TSMP Law Corporation, said: "The cross-border insolvency recommendations are particularly important and progressive, and will benefit Singapore by aiding it to be a centre for regional restructuring."
The committee also proposed coming up with unified principles and rules on proofs of debt for creditors to file their claims. This can be applied to both individual bankrupts as well as firms with financial problems.
An area that was not covered in the report relates to the discharge of bankrupt individuals as there are societal and public policy considerations which have to be taken into account, said Mr Lee.
The recommendations are open for public consultation till Dec 2, and the public can send in their feedback to the Ministry of Law.
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