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The Singapore Government has just passed the Companies (Amendment) Bill 13/2017 (the Bill), which contains major changes to Singapore’s restructuring and insolvency laws. As planned, these changes are expected to come into effect at the latest by the second quarter of 2017,1 and will be a major shake-up to the restructuring landscape of the region.
The reforms are a crucial part of Singapore’s push to become an international debt restructuring hub. We discussed a number of the key changes in our earlier note2 ‘Singapore unveils major debt restructuring law reforms’ released in November last year.
The Bill that has been passed incorporates changes as a result of the Ministry of Law’s public consultation on draft legislation which closed in December 2016 (Public Consultation). The Ministry received feedback from local and international respondents who largely welcomed the proposed amendments as helpful in modernising Singapore’s restructuring and insolvency laws.
The Ministry of Law also published the Ministry’s Response to Feedback from Public Consultation on the Draft Companies (Amendment) Bill 2017 to Strengthen Singapore as an International Centre for Debt Restructuring (Response Paper) at the same time as introducing the Bill to Parliament, summarising the more substantive comments received on the draft legislation and the reasoning for adopting or rejecting those suggestions. The Response Paper is expected to be a helpful aid in the interpretation of the provisions in the Bill.
The Bill is largely similar to the previous draft legislation. However, some of the significant new changes include:
The changes are timely given the expected continued slump in Singapore’s offshore and marine sector and the expectation of increased bond defaults in the region in coming months.
This update:
The Bill is a key aspect of a broader project to both modernise Singapore’s restructuring and insolvency law procedures and to position Singapore as a venue of choice for undertaking cross border restructurings of troubled companies.
In April 2016, the Committee to Strengthen Singapore as an International Centre for Debt Restructuring issued its report on achieving these goals (the 2016 Report). The 2016 Report made 17 recommendations to improve Singapore’s attractiveness in this regard, which covered a range of both legal and broader institutional changes, in three broad categories:
The Ministry of Law released draft legislation for public consultation on 21 October 2016, which addressed many of the legislative changes recommended either in the 2016 report or an earlier, more detailed report issued by Singapore’s Insolvency Law Review Committee (the 2013 Report). The Singapore Ministry of Law sought public feedback on this draft legislation by 2 December 2016.3
A key aspect of these law reforms is to ‘supercharge’ the scheme of arrangement procedure with a number of provisions introduced to broaden its availability and make it more powerful and flexible as a general ‘debtor-in-possession’ debt restructuring regime. It does this by incorporating a number of additional concepts, many of which were adopted from the US Chapter 11 process. These include:
Further changes include:
Following the Public Consultation process, the draft legislation was incorporated into the Bill, which had its first reading on 28 February 2017. The Bill changed from the 2016 draft legislation in two substantial ways:
Broadly speaking, the majority of substantive policy submissions arising from the Public Consultation were not accepted by the Ministry. However, there were some substantive points that were adopted, as well as various adjustments relating to more technical details. As a whole, the Bill generally continues to reflect the measures referred to in our recap above (and as described in our previous note).4
We summarise below the most significant changes made in the Bill in respect of the restructuring and insolvency aspects from the previous draft legislation, and some of the more significant submissions that were not accepted.
Some of the more significant changes in the Bill (from the December draft legislation) include:
Some of the more significant submissions that were not adopted in the Bill included:
Hopefully there will be an opportunity for some of these suggestions to be considered further at a later date.
The Response Paper also provided some useful statements as to the intention behind certain provisions in the Bill, including:
Whilst these statements are not legally binding, they will nonetheless provide useful guidance to courts when interpreting the relevant provisions of the Bill.
The Bill has been passed by the Singapore Parliament, but still (as of the date of this note) requires presidential assent before passing into law. The date of commencement of the law changes will be notified in the Gazette, but the expectation is that the Bill will come into effect at the latest by the second quarter of 2017.
This Bill is the first in a series of law reforms intended to overhaul Singapore's insolvency framework, and increase the attractiveness of Singapore as an international hub for restructuring.
These reforms are especially timely given the continued slump in the offshore and marine and other key sectors which are expected to lead to increased defaults in the coming months. However, it remains to be seen if they increase Singapore’s competitiveness as a forum for cross border insolvency and restructuring. There is some ‘devil in the detail’ with a number of the provisions needing to be worked through in practice and tested by the courts. As recognised in the 2016 Report, there are also broader factors that will affect Singapore’s success in attracting cross-border restructurings, including whether Singapore has the right professional and financial ecosystem, and the extent to which foreign courts will recognise Singapore schemes.
There is also more restructuring and insolvency law reform to come. In addition to the subsidiary legislation and regulations that are expected to be enacted shortly to support and give effect to these amendments, the 2013 Report contained a number of other law reform recommendations, including the consolidation of Singapore’s personal bankruptcy and corporate insolvency laws into one Act. These further reforms may provide an opportunity to fine tune the regime introduced by the Bill.
In the meantime, stakeholders across the region will need to rapidly become familiar with Singapore’s new debt restructuring regime which will likely come into effect shortly.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
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