Key amendments to the debt restructuring regime in … by Calvin Tan, Simmons & Simmons JWS,...
2
1 by Calvin Tan, Simmons & Simmons JWS, Mohammed Reza, Simmons & Simmons JWS, and Justin Kwek, JWS Asia Law Corporation * In a bid to promote Singapore as an international debt restructuring hub, the Singapore Companies Act has been amended. Some of these amendments introduce features drawn from Chapter Eleven of the United States Bankruptcy Code - for instance, the introduction of rescue financing provisions and cram down provisions for dissenting classes of creditors in Schemes of Arrangements. These amendments came into operation on May 23, 2017, and are expected to change the debt restructuring landscape in Singapore. This article discusses some of the key amendments. In recent years, concerted efforts have been made to promote Singapore as the choice jurisdiction for insolvencies and restructurings in the region. Those efforts are long overdue and welcome. Singapore's status as a leading global financial hub has meant that it has seen a wave of cross-border restructurings in recent years given the slowdown in economic growth. Indeed, the Singapore High Court has noted in a recent judgment that cross-border restructurings are increasingly becoming common given the proliferation of cross-border investments and trade. An important prong of the efforts to promote Singapore as an international debt restructuring hub has been the reform of the debt restructuring provisions in the Singapore Companies Act. These reforms came into operation on May 23, 2017, and are expected to change the debt restructuring landscape in Singapore. We provide a brief overview of the more significant amendments. Schemes of Arrangement The Scheme of Arrangement regime will adapt parts of Chapter 11 of the United States Bankruptcy Code: Broader moratorium: An interim moratorium for a period of up to 30 days will come into force automatically when the company makes an application for a moratorium order under the new Section * JWS Asia Law Corporation is the constituent Singapore law practice of Simmons & Simmons JWS. All Singapore court litigation and related advice is provided through JWS Asia Law Corporation. 2116(1) of the Companies Act. The moratorium order made under Section 211B(1) may also extend to related entities of the company. Enhanced cram down provisions: The Court may order that a compromise under a scheme of arrangement bind all creditors even if there are dissenting classes. Rescue financing: Rescue financing provisions have been introduced, where the Court could confer super-priority on fresh financing which is necessary for the survival of a company, or to achieve a more advantageous realisation of the assets of a company that obtains the financing. Pre-pack restructurings: The Court may approve pre-negotiated restructurings between the company and its creditors, dispensing with the requirement for creditor meetings. Subsidiary legislation has been passed to provide for carve outs from the moratorium - for instance, in respect of certain set-off and netting arrangements. Judicial Management Enhancements have been made, with a view to making the Judicial Management process a more attractive regime for debt restructuring: Near insolvent companies: A judicial management order may be made even when a company is "likely to become unable to pay its debts", as opposed to the previous requirement which required proof that the company "is or will be unable to pay its debts". Consideration of unsecured creditors' interests: Previously, the Court had to dismiss an application for a judicial management order if it was satisfied that the making of the judicial management order was opposed by a person who had appointed or had been entitled to appoint a receiver and manager of the whole (or substantially the whole) of a company's property under the terms of any debentures of the company secured by a floating charge, or by a floating charge and one or more fixed charges (Qualifying Debenture Holder). Under the amended judicial management provisions, a more measured approach will be taken. The Court must dismiss an application for a judicial management order if the prejudice which would be caused to a Qualifying Debenture Holder if the order is made is disproportionately greater than the prejudice that would be caused to the unsecured creditors of the company if the application is dismissed. Key amendments to the debt restructuring regime in Singapore
Transcript of Key amendments to the debt restructuring regime in … by Calvin Tan, Simmons & Simmons JWS,...
1
by Calvin Tan, Simmons & Simmons JWS, Mohammed Reza, Simmons &
Simmons JWS, and Justin Kwek, JWS Asia Law Corporation*
In a bid to promote Singapore as an international debt restructuring hub,
the Singapore Companies Act has been amended. Some of these
amendments introduce features drawn from Chapter Eleven of the
United States Bankruptcy Code - for instance, the introduction of rescue
financing provisions and cram down provisions for dissenting classes of
creditors in Schemes of Arrangements. These amendments came into
operation on May 23, 2017, and are expected to change the debt
restructuring landscape in Singapore. This article discusses some of the
key amendments.
In recent years, concerted efforts have been made to promote Singapore
as the choice jurisdiction for insolvencies and restructurings in the region.
Those efforts are long overdue and welcome.
Singapore's status as a leading global financial hub has meant that it has
seen a wave of cross-border restructurings in recent years given the
slowdown in economic growth. Indeed, the Singapore High Court has
noted in a recent judgment that cross-border restructurings are
increasingly becoming common given the proliferation of cross-border
investments and trade.
An important prong of the efforts to promote Singapore as an
international debt restructuring hub has been the reform of the debt
restructuring provisions in the Singapore Companies Act. These reforms
came into operation on May 23, 2017, and are expected to change the
debt restructuring landscape in Singapore.
We provide a brief overview of the more significant amendments.
Schemes of Arrangement
The Scheme of Arrangement regime will adapt parts of Chapter 11 of the
United States Bankruptcy Code:
Broader moratorium: An interim moratorium for a period of up to
30 days will come into force automatically when the company
makes an application for a moratorium order under the new Section
*JWS Asia Law Corporation is the constituent Singapore law practice of Simmons
& Simmons JWS. All Singapore court litigation and related advice is providedthrough JWS Asia Law Corporation.
2116(1) of the Companies Act. The moratorium order made under
Section 211B(1) may also extend to related entities of the company.
Enhanced cram down provisions: The Court may order that a
compromise under a scheme of arrangement bind all creditors even
if there are dissenting classes.
Rescue financing: Rescue financing provisions have been
introduced, where the Court could confer super-priority on fresh
financing which is necessary for the survival of a company, or to
achieve a more advantageous realisation of the assets of a company
that obtains the financing.
Pre-pack restructurings: The Court may approve pre-negotiated
restructurings between the company and its creditors, dispensing
with the requirement for creditor meetings.
Subsidiary legislation has been passed to provide for carve outs from the
moratorium - for instance, in respect of certain set-off and netting
arrangements.
Judicial Management
Enhancements have been made, with a view to making the Judicial
Management process a more attractive regime for debt restructuring:
Near insolvent companies: A judicial management order may be
made even when a company is "likely to become unable to pay its
debts", as opposed to the previous requirement which required
proof that the company "is or will be unable to pay its debts".
Consideration of unsecured creditors' interests: Previously, the
Court had to dismiss an application for a judicial management order
if it was satisfied that the making of the judicial management order
was opposed by a person who had appointed or had been entitled
to appoint a receiver and manager of the whole (or substantially the
whole) of a company's property under the terms of any debentures
of the company secured by a floating charge, or by a floating charge
and one or more fixed charges (Qualifying Debenture Holder). Under
the amended judicial management provisions, a more measured
approach will be taken. The Court must dismiss an application for a
judicial management order if the prejudice which would be caused
to a Qualifying Debenture Holder if the order is made is
disproportionately greater than the prejudice that would be caused
to the unsecured creditors of the company if the application is
dismissed.
Key amendmentsto the debtrestructuringregime inSingapore
elexica.com is the award winning online legal resource of Simmons & Simmons© Simmons & Simmons LLP 2017. All rights reserved, and all moral rights are asserted and reserved.This document is for general guidance only. It does not contain definitive advice. SIMMONS & SIMMONS and S&S are registered trade marks of Simmons & Simmons LLP.Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated practices. Accordingly, references to Simmons & Simmons mean Simmons & Simmons LLP and the other partnershipsand other entities or practices authorised to use the name “Simmons & Simmons” or one or more of those practices as the context requires. The word “partner” refers to a member of Simmons & Simmons LLP or an employee orconsultant with equivalent standing and qualifications or to an individual with equivalent status in one of Simmons & Simmons LLP’s affiliated practices. For further information on the international entities and practices, refer tosimmons-simmons.com/legalresp
Simmons & Simmons LLP is a limited liability partnership registered in England & Wales with number OC352713 and with its registered office at CityPoint, One Ropemaker Street, London EC2Y 9SS. It is authorised and regulated bythe Solicitors Regulation Authority.
A list of members and other partners together with their professional qualifications is available for inspection at the above address.B_LIVE_EMEA1:4438945v1
Rescue financing: Rescue financing provisions broadly similar to
those applicable to Schemes of Arrangement have been introduced.
Cross-border restructurings Foreign companies: Guidelines have now been provided on what
the Court may rely on to find that a foreign company has a
substantial connection with Singapore, such that it may be wound
up, may make an application for a scheme of arrangement or be
placed in judicial management.
UNCITRAL Model Law: The UNCITRAL Model Law on Cross-Border
Insolvency with certain modifications to adapt it for application in
Singapore will be adopted.
No ring-fencing: The rule which previously required liquidators of
foreign companies to "ring fence" Singapore assets and pay off
debts incurred in Singapore first has been abolished generally in
relation to foreign companies, subject to carve outs for certain
regulated financial entities
These reforms to the Singapore Companies Act are aimed at enhancing
Singapore's ability to function as a platform for international debt
restructuring. We believe that these reforms would make Singapore a
more attractive option to distressed companies and their creditors.
Following from the sustained downturn in commodity prices over the last
two years or so, we expect financial institutions to face increased
borrower defaults in the coming months. Financial institutions with
exposure in Singapore and the region would do well to familiarise
themselves with the new restructuring landscape in Singapore.
AuthorsCalvin Tan,Partner,Simmons & Simmons JWST +65 6831 5631F +65 6831 5688E [email protected]
Mohammed Reza,Partner,Simmons & Simmons JWST +65 6831 5582F +65 6831 5688E [email protected]
Justin Kwek,Supervising Associate,JWS Asia Law CorporationT +65 6831 5598F +65 6831 5568E [email protected]
JWS Asia Law Corporation168 Robinson Road,#11-01, Capital Tower,Singapore (068912)
