Recent changes to Singapore’s restructuring and insolvency law framework mean that the international insolvency landscape has shifted dramatically, opening up further options and possibilities for Singapore-incorporated and foreign debtors seeking to restructure their indebtedness. in particular, the changes to the Singapore Companies Act (Cap. 50) (the Companies Act) (which, in part, incorporate into Singapore law certain features of Chapter 11 of the United States Bankruptcy Code), which came into force on 23 May 2017, have enhanced Singapore’s restructuring and insolvency law framework and improve significantly its potential to become a restructuring hub. The ultimate aims of these changes are to improve the Singapore Court’s ability to deal with cross-border insolvencies and restructurings and to transform Singapore into a regional and international forum of choice for international debt restructurings.
The amendments to the Companies Act are positive and provide a framework unique to Singapore for implementing debt restructurings, rather than adopting wholesale restructuring tools from other jurisdictions. It is hoped that by providing a debtor with the legal protection necessary to give it the opportunity to reorganize, more value will be preserved for all creditors than would be achievable in a liquidation.
The most important change is Singapore opening up its doors to foreign companies – clarifying the circumstances in which foreign companies can be wound up in Singapore and allowing them to avail themselves of the restructuring regime under the Companies Act. As previously, a foreign company can be wound up in Singapore or promulgate a scheme of arrangement in Singapore if it has a substantial connection with Singapore. However, the amendments to the Companies Act have clarified the meaning of “substantial connection”, which now expressly includes carrying on business in Singapore, having substantial assets in Singapore or having Singapore law-governed finance documents. This increases the options available to foreign companies wishing to restructure their indebtedness and, in light of the relative ease with which foreign companies and their financial creditors will be able to establish a substantial connection with Singapore (for example, by changing the governing law of the relevant financing documents).
As part of the amendments to the Companies Act, the UNCITRAL Model Law on Cross-Border Insolvency Law has been adopted in Singapore. This is a positive development from the perspective of foreign debtors and insolvency office-holders seeking assistance from the Singapore Court and insolvency office-holders in Singapore, and mirrors the approach taken in certain other key jurisdictions in recent years, including the United States, the United Kingdom, the Republic of Korea and Japan. The new Companies Act provisions adhere closely to the text of the Model Law itself (and, for example, do not seek to impose any additional conditions to the recognition of foreign insolvency proceedings in Singapore); a commendable approach which promotes certain and predictability in cross-border insolvency matters and helps to create a level playing-field for foreign insolvency office-holders seeking recognition of insolvency proceedings in multiple jurisdictions which have enacted the Model Law.