Alerts and Updates

Singapore Unveils New Proposed Debt Restructuring Legislation

December 16, 2016

The proposed amendments to the Companies Act are among the most significant changes to Singapore’s restructuring law, and they are intended to make Singapore a forum of choice for cross-border restructuring.

Singapore’s Ministry of Law has unveiled proposed amendments to the Singapore Companies Act to be made in 2017 to strengthen Singapore as an International Centre for Debt Restructuring (“the proposed amendments”). The Ministry of Law released the proposed amendments for public consultation from 21 October 2016 to 2 December 2016.

This is the first phase of the Ministry of Law’s efforts to strengthen Singapore as an International Centre for Debt Restructuring pursuant to the recommendations of the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (“the Committee”), which the Ministry of Law has broadly accepted.

Key Proposed Amendments to the Singapore Companies Act

Schemes of Arrangement

Insertion of new provisions in Sections 211A to 211J to support creditor schemes of arrangements that implement debt restructuring proposals. In particular:

Enhanced Moratoriums

They are aimed at granting greater protection to the debtor while it undergoes restructuring. These provisions include:

  • Expressly allowing the debtor to apply for a moratorium either: (a) when the debtor applies to call a meeting of its creditors for a scheme of arrangement; or (b) intends to do so. (Section 211B(1))
  • Expanding the scope of the moratorium granted to be similar to what is available under Judicial Management. (Section 211B(4))
  • An automatic 30-day moratorium upon making an application to court. (Section 211B(8))
  • Moratoriums to have “world-wide” effect by giving the courts the power to restrain creditors within Singapore’s jurisdiction from carrying out acts overseas. (Section 211B(5)(b))
  • Allowing the moratorium granted to be extended to subsidiaries of the debtor pursuant to certain conditions. (Section 211C)

Super-Priority for Rescue Financing

The courts can grant super-priority for rescue financing. The four levels of super-priority that can be granted are (Section 211E):

  • First, if the debtor is subsequently wound up, the financing can be treated as an administrative expense of the winding up.
  • Second, the financing will be given priority over all preferential debts and other unsecured debts in a winding up.
  • Third, the financing will be secured by a security interest over property of the debtor that is not otherwise subject to any security interest, or a subordinate security on property that is already subject to a security interest.
  • Fourth, the financing will be secured on property of the debtor by a security interest that has an equal or higher priority than any existing security interest.


The court will have the power to approve a scheme even if it is opposed by a class of creditors, as long as the creditors are not unfairly prejudiced. (Section 211H)

Creditor Protection

Creditor protections have been enhanced in the following manner:

  • Debtor disclosure requirements. (Section 211B(6))
  • Restraining the debtor from dissipating its assets during the moratorium period. (Section 211D)

Pre-Packaged Schemes

The court can approve schemes without the need for a creditors’ meeting if they meet certain conditions. This is meant to cover pre-negotiated schemes between the debtor and its major creditors.

Procedural Changes

They include:

  • Rules for filing, inspection and adjudication of proofs of debt. Appointment of an independent assessor to adjudicate on proofs of debt. (Section 211F)
  • The court may order a re-vote of a compromise or arrangement. (Section 211G)
  • The debtor, scheme manager or any creditor may apply to the court to (i) reverse or modify any act or decision of the debtor or scheme manager; or (ii) give any directions to rectify any omissions of the debtor or scheme manager. (Section 211J)

Judicial Management

Amendments to the current judicial management regime to allow the following:

  • Changing the test in Section 227B(1)(a) of the Companies Act from whether a company “will be” unable to pay its debts to “is likely to become” unable to pay its debts.
  • Amending Section 227B(5)(b) of the Companies Act to allow the court to dismiss an application for judicial management if granting the application for judicial management would cause more prejudice to a person entitled to appoint a receiver and manager than the prejudice that would be suffered by unsecured creditors if the judicial management order is dismissed.
  • Adding in new sections 227HA and 227HB for super-priority of rescue financing during judicial managements.

Facilitation of Cross-Border Insolvency

Several provisions have been added to extend the reach of the Singapore courts in insolvency situations outside of Singapore.

  • The addition of Section 227AA to the Companies Act to allow judicial management to be applied to foreign companies in addition to Singapore companies.
  • Amending Section 351(1) of the Companies Act to allow the Singapore courts to wind up an unregistered (e., foreign) company if it has a substantial connection with Singapore (factors to be considered include: whether the company carries on business in Singapore or whether the company has substantial assets in Singapore, etc.).
  • The addition of Sections 354A to 354C to the Companies Act to adopt the UNCITRAL Model Law on Cross-Border Insolvency.
  • Amending Section 377 of the Companies Act to abolish the ring-fencing rule in respect of the winding up of foreign companies, save for certain companies, such as banks, insurers and certain other financial institutions.

The above proposed amendments to the Companies Act are among the most significant changes to Singapore’s restructuring law, and they are intended to make Singapore a forum of choice for cross-border restructuring.

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