New Omnibus Bill Introduced to Update and Strengthen Singapore’s Insolvency and Debt Restructuring Laws
11 Sep 2018 Posted in Press releases
- The Ministry of Law (“MinLaw”) has submitted the Insolvency, Restructuring and Dissolution Bill (“the Bill”) for First Reading in Parliament today.
- The Bill ensures that Singapore’s insolvency and debt restructuring laws remain progressive and modern. This supports Singapore’s position as an international commercial, financial and business hub.
- The proposed enactment of the Bill arises from the Insolvency Law Review Committee’s (“ILRC”) recommendations in October 2013 for a holistic update of Singapore’s insolvency and restructuring laws through an omnibus legislation.
- Subsequently, the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (“Restructuring Committee”) made further recommendations in April 2016. These recommendations focused on strengthening Singapore’s debt restructuring ecosystem.
- Due to the large number of recommendations of the two Committees, a phased approach was taken to implement the recommendations, and other reforms to modernise and strengthen our laws:
- The first phase involved amendments to the Bankruptcy Act in July 2015 to create a more rehabilitative discharge framework for bankrupts, and to encourage institutional creditors to exercise financial prudence when granting credit;
- The second phase involved amendments to the Companies Act in March 2017, to enhance our corporate rescue and restructuring processes, and to position Singapore as a forum of choice for debt restructuring; and
- The final phase, which is the Bill submitted for First Reading in Parliament today, implements the remaining recommendations of the ILRC and Restructuring Committee.
- In addition, the Bill includes further reforms to our debt restructuring regime, pursuant to industry feedback.
- See Annex for more background information.
Objectives of the Bill
- The main objectives of the Bill are to:
- Introduce a new omnibus legislation that consolidates the personal and corporate insolvency and restructuring laws.
- Establish a regulatory regime for insolvency practitioners.
- Enhance Singapore’s insolvency and restructuring laws, in particular to strengthen our debt restructuring regimes.
(A) New omnibus legislation
- The Bill will consolidate our personal and corporate insolvency and debt restructuring laws, currently in two separate statutes (Bankruptcy Act and Companies Act) into a new omnibus Act.
- When the Bill comes into force, the Bankruptcy Act will be repealed, and the provisions in the Companies Act relating to corporate insolvency and restructuring will be deleted.
(B) Regulatory regime for insolvency practitioners
- A new regulatory regime for practitioners acting as officeholders in the various types of restructuring and insolvency proceedings will be established. The Bill will:
- Impose minimum qualifications, and conditions for the grant and renewal of licences; and
- Put in place a disciplinary framework for errant officeholders in respect of breaches in their conduct as insolvency practitioners.
- The Insolvency and Public Trustee’s Office under MinLaw will administer this new regulatory regime.
(C) Enhancing the law
- Personal bankruptcy: The provisions on personal bankruptcy in the Bill largely follow the provisions in the Bankruptcy Act, following the last amendment in 2015.
- The most significant change concerns secured creditors. The Bill will require secured creditors to notify the trustee administering the bankruptcy, within 30 days after the bankruptcy order, if they intend to claim interest on the debt for the period between the order and enforcement of the security. The change allows the bankrupt’s assets and liabilities to be ascertained early, for more efficient administration of the bankruptcy.
- Corporate insolvency: Miscellaneous amendments to existing provisions in the Companies Act will be made to modernise the law, and to facilitate more effective use of resources in the administration of liquidation cases.
- Corporate debt restructuring: The Bill further strengthens our debt restructuring regimes to provide greater opportunity for rehabilitation of companies in financial distress. This supports amendments to the Companies Act in 2017 that enhanced Singapore as a centre for debt restructuring.
- The Bill will introduce a new restriction on ipso facto clauses. Ipso facto clauses in contracts permit the termination or modification of the contract upon the occurrence of a specified trigger event, such as insolvency or restructuring of the company. There is currently no restriction on the application of such clauses. This poses difficulties for a company to restructure, because of the risk that the other party to the contract would be able to terminate that contract. The new provision will restrict ipso facto clauses that are triggered upon the commencement of restructuring proceedings. This is intended to facilitate restructuring where a distressed company’s business relies on contracts that contain such ipso facto clauses.
Impact of the Bill
- Consolidating our corporate and personal insolvency and restructuring laws into an omnibus legislation brings benefits, which include:
- Setting out common principles and procedures;
- Addressing inconsistencies and uncertainty in current practice arising from cross-referencing of concepts across various pieces of insolvency legislation;
- Ehancing clarity, consistency and access to our laws by businesses; and
- Assisting restructuring and insolvency practitioners, who currently have to navigate multiple primary and subsidiary legislation to advise their clients and carry out their functions.
- Establishing a new regulatory framework for insolvency practitioners will professionalise and raise the quality of insolvency practitioners
- The Bill also continues the enhancement of Singapore’s corporate rescue and restructuring processes that commenced under the Companies Act amendments in 2017. Taken as a whole, these reforms will benefit local businesses experiencing financial difficulties, position Singapore as a location of choice for foreign debtors to restructure; and create new opportunities for insolvency professionals (including lawyers and accountants), distressed debt funds and financial institutions.
- In 2013, the Insolvency Law Review Committee (“ILRC”) made recommendations to holistically update Singapore’s personal and corporate insolvency and debt restructuring laws:
- The recommendations included the enactment of a new omnibus legislation. The omnibus legislation would consolidate the personal and corporate regimes, which are presently in two separate statutes, into a single piece of legislation.
- Public consultation was held on the ILRC’s report in December 2013, and the Government broadly accepted the ILRC’s recommendations on 6 May 2014.
Further information on the ILRC’s recommendations, as well as the report, can be found here and here.
- In May 2015, the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (“Restructuring Committee”) was formed.
- Building on the ILRC’s recommendations, which noted growing demand for debt restructuring in Asia, the recommendations focused on strengthening the debt restructuring ecosystem in Singapore.
- Public consultation was held on the Restructuring Committee’s report in May 2016, and the Government broadly accepted the Restructuring Committee’s recommendations on 20 July 2016.
Further information on the Restructuring Committee’s recommendations, as well as the report itself, can be found here and here.
- A phased approach was taken to implement the recommendations of the two Committees.’
- First phase: In July 2015, amendments were made to the Bankruptcy Act to create a more rehabilitative discharge framework for bankrupts, and to encourage institutional creditors to exercise financial prudence when granting credit (“BA Reforms”).
- Second phase: In March 2017, amendments to the Companies Act enhanced Singapore’s corporate rescue and restructuring processes, positioning Singapore as a forum of choice for debt restructuring (“CA Reforms”).
- Final phase: The Insolvency, Restructuring and Dissolution Bill (first read in Parliament on 10 September 2018) implements the remaining recommendations of the ILRC and Restructuring Committee, which were not enacted in the BA Reforms and CA Reforms, together with further reforms to the debt restructuring regime, pursuant to industry feedback.
- In addition to the public consultations on the reports of the ILRC and Debt Restructuring Committee conducted in 2013 and 2016 respectively, the proposed changes and the provisions in the Bill were finalised after consultation with industry bodies and leading practitioners. Respondents generally agreed with the proposed changes and supported the Bill. Suggestions by the respondents were considered in detail, several of which have been incorporated into the Bill.
Last updated on 18 Sep 2018