Enhancements proposed to Singapore’s Corporate Restructuring and Insolvency Regime

Introduction

On 11 March 2025, the Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime (the Committee) released its long-awaited report (the Report) on additional reforms to Singapore’s corporate restructuring and insolvency (R&I) landscape. The Report surveys Singapore’s R&I legislative framework, which came into effect in 2018, identifies challenges to its operation and proposes a number of enhancements to bolster Singapore’s attractiveness as a regional and global financial restructuring hub.

This article sets out the background to the Committee and to the Report before exploring each of the reform proposals in detail. It concludes with a reflection on the Report’s significance in the context of broader regional trends in the ASEAN and Oceana R&I space.

Background

The Report comes some eight years after significant amendments were made to Singapore’s insolvency regime in 2017 and the passing into law of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), which took effect on 30 July 2020. The IRDA remains the chief legislative instrument governing R&I practice in Singapore. The IRDA consolidated the previously separate personal and corporate insolvency regimes, including features from foreign and international instruments, such as Chapter 11 of the United States Bankruptcy Code and the UNCITRAL Model Law on Cross Border Insolvency. Concurrently, steps have also been taken to clarify the jurisdiction of the Singapore International Commercial Court (SICC) to hear cross-border restructuring matters, under Order 23A of the SICC Rules.

The passage of a near decade since these amendments took effect warranted a review of their successes and challenges. To this end, the Committee was convened by Singapore’s Ministry of Law and was populated by experts from private practice, government and academia.¹ The Committee intended for its proposals to supplement the existing framework and to ensure that the effective functions of the IRDA are maintained. In particular, its Report is concerned with how corporate R&I could be further enhanced in order to attract corporate stakeholders to utilise the R&I structures in Singapore.

It is also noteworthy that the Report was preceded by the passage of the Insolvency, Restructuring and Dissolution (Amendment) Bill 2024 by the Singapore Parliament on 7 January 2025, a law which amends the Simplified Insolvency Program that was first introduced as a temporary measure during the COVID-19 pandemic and makes it a permanent feature of the Insolvency, Restructuring and Dissolution Act (2018).

Key proposals

The Report sets out nine key proposals, which are grouped into four categories relating to different aspects of Singapore’s R&I framework. The four categories are:

1. strengthening the Judicial Management regime;
2. refining cross-class cramdown in schemes of arrangement;
3. refining the framework and tools for efficient debt restructurings; and
4. adopting two UNCITRAL Model Laws relating to insolvency.

Strengthening the Judicial Management regime

Singapore’s Judicial Management regime was introduced in 1987. Modelled on the administration regime in the United Kingdom, it allows debtors and creditors alike to apply to the Court to take possession of and to administer the debtor’s operations. While Judicial Management is underway, a moratorium remains in place to allow the judicial manager breathing space to craft a restructuring proposal to achieve one of the statutory objectives of the process, namely:

1. the survival of the company or the whole or part of its undertaking, as a going concern;
2. the approval of a scheme of arrangement; and/or
3. a more advantageous realisation of the company’s assets or property than on a winding up.

The debtor company exits Judicial Management where the approved restructuring proposal is achieved, or the statutory goals of Judicial Management can no longer be accomplished.

While the multifunctionality of the Judicial Management framework was initially praised as its strength, in practice, its divergent purposes have clouded its successes. By way of illustration, a review by the Committee Secretariat notes that between the period of 23 May 2017 to 31 December 2021, 117 applications to have companies placed under Judicial Management pursuant to Part VII of the IRDA were made. Ninety-nine of those cases were ultimately reviewed, with slightly less than half being treated as having a successful outcome. Of the remaining cases, about 45% were treated as unsuccessful and 33% were dismissed or withdrawn. 

The Committee also identified the key value propositions of Judicial Management as its turnaround and restructuring functions. As a judicially administered regime, Judicial Management allows creditors and debtors to access information and to change management with a view to resolving the debtor’s immediate financial distress. Noting this, the Committee recommends narrowing the ambit of the Judicial Management regime to retain only the restructuring and turnaround capabilities. A more focussed Judicial Management regime would allow positive outcomes to be reached more expeditiously and at a lower cost. The Committee also notes that, as a result of this recalibration of the function of Judicial Management, parties will be obliged to rely on other processes for value recovery, including receivership and liquidation.

Concomitantly, the Committee suggested that a multi-stage remuneration model incorporating “success fees” would best serve all parties’ interests and facilitate faster resolution of Judicial Management cases, while also maintaining the integrity of the Judicial Management process as a whole. In circumstances where Judicial Management continues for an extended period of time, participants are unlikely to derive much financial benefit because of the continued costs of administering the Judicial Management. The Committee considered several renumeration models to address this, and ultimately recommended a template, multi-stage renumeration model incorporating a “success fee”, which judicial managers may charge if the restructure achieves its pre-determined objectives. The Committee emphasised that rather than prescribing a specific remuneration model (whether a figure, percentage or formula), it would be more commercially desirable for the conditions of “success” for the conditional payment to be mutually agreed between the judicial manager and the creditors.

The Committee has supported the continuing ability of Judicial Managers to recover costs via “clawback” actions under the reconceptualised Judicial Management framework. While traditionally considered a step in the liquidation of a company, the Committee considered that it was appropriate for judicial managers to commence clawback actions where the same supports the restructuring or turnaround objective in order to avoid the unnecessary destruction of value.

Cross-class cramdown in schemes of arrangement

The IRDA provides a tool to manage conflicts between classes of creditors at the time that a scheme of arrangement is negotiated. This mechanism is known as the “cross-class cramdown”. Through cross-class cramdown, the Court is empowered to approve a scheme of arrangement which has a dissenting creditor class, provided that a majority of number in creditors representing three-quarter in value of the entire body of creditors (regardless of class) present at any meeting vote in favour of the scheme. The Court must also be satisfied that there is no manifest unfairness to the dissenting class.

While the Committee notes that the cross-class cramdown mechanism is utilised rarely, they raise a concern that the three-quarter majority threshold is too high. The Committee therefore recommends refining the cross-class cramdown tool by lowering the approval thresholds.

The Committee also recommends that the provisions be expanded to encompass shareholders in appropriate circumstances, as this would reflect the economic reality of a debtor’s capital structure when financially distressed. Where shareholders are included within the scope of a cross-class cramdown, shareholders should be given the opportunity to retain an interest in the debtor if they contribute new value. In this way, the shareholder is permitted to continue its support for the debtor. Furthermore, the Committee flags additional adaptions from the US Bankruptcy Code which might be appropriate in the future, including allowing for meetings of and voting by shareholders and creditors whose claims or interests do not entitle them to receive or retain any property under a restructuring plan to be dispensed with.

Refining the framework and tools for efficient debt restructurings

In Singapore, where a company seeks to dispose of the whole or substantially the whole of its undertaking or property or issue shares in connection with a restructuring, sections 160 and 161 of Singapore’s Companies Act 1967 require the approval of the company in a general meeting. As insolvency approaches however, it is the creditors’ interests that are more critical and this requirement inadvertently provides shareholders with a de facto veto power at a time where creditors’ interests should take primacy.

The Committee explored the history of this requirement and noted that it appeared to be directed towards company dealings in a general business scenario, rather than in an insolvency scenario. The Committee thus recommends streamlining the approvals required by the company in general meeting for certain actions to be undertaken in a restructuring plan. This would accurately reflect the rights of the various stakeholders with respect to a financially distressed debtor and prevent the company’s shareholders from possibly frustrating the restructuring plans negotiated between the company and its creditors.

The Committee has also proposed the introduction of judicial discretion to appoint a neutral, professional party to oversee the restructuring process, known as a “Restructuring Officer”. The Committee envisages the role of Restructuring Officer to mirror that of the role played by a “monitor” in Canada and the United Kingdom in independently updating the Court and providing creditors with the oversight to address concerns relating to lack of transparency. Presently, parties have the capacity to appoint a neutral third-party without a Court order. However, appointing such an additional party entails additional costs and delays. As such, commercial considerations of the parties about how the additional appointment is financed may override thoughtful discussions about a Restructuring Officer’s possible utility. The Committee notes that placing the decision in the hands of the judiciary will allow the Court to make an independent assessment about the merits (including consideration of costs) of a Restructuring Officer appointment and to minimise potential disputes among creditors.

Adopting UNCITRAL Model Laws

Singapore had, in 2017, adopted the UNCITRAL Model Law on Cross-Border Insolvency in 2017. This attracted numerous high-profile restructurings and furthered Singapore’s aim of becoming a cross-border restructuring hub. Following that success, the Committee proposes the adoption of two UNCITRAL Model Laws related to insolvency in Singapore:

• The Model Law on Enterprise Group Insolvency: This Model Law outlines provisions for coordinating and cooperating in cross-border insolvency cases involving enterprise groups. It enables the development of a group insolvency solution through a single insolvency proceeding, typically at the location of a group member’s centre of main interests, with voluntary participation from multiple group members. A group representative may be appointed to oversee this process, which includes approval for post-commencement finance arrangements and facilitating foreign court access. The law also supports the cross-border recognition of these proceedings, minimizes non-main insolvency filings for participating members, and ensures the fair treatment of creditor claims, including foreign claims, within the main proceeding.
• The Model Law of Recognition and Enforcement of Insolvency-Related Judgments (MLIJ): The MLIJ provides a streamlined framework for the recognition and enforcement of insolvency-related judgments, facilitating the recovery of value for financially distressed businesses with assets across multiple states. An insolvency-related judgment is defined as one associated with an insolvency proceeding, issued after its commencement, excluding judgments that initiate the proceeding. The MLIJ outlines procedures for recognition and enforcement, including provisional relief, and specifies grounds for refusal, enforceability, and the impact of reviews in the originating state. It also addresses the equivalent effect of judgments in the recognising state and the severability of judgment parts for enforcement. Recognition can be sought directly or as part of a defence or incidental matter, and the MLIJ also clarifies its relationship with the Model Law on Cross-Border Insolvency.
• The Committee notes that, if enacted, Singapore will be one of the first states to implement these two Model Laws, demonstrating its commitment to mutual cooperation and innovation in international insolvency law.

Concluding reflections

The depth and breadth of the Committee’s proposals reflect Singapore’s continued leadership in the design of novel R&I frameworks. Indeed, the Committee’s use of empirical data and its review of international best practices in jurisdictions such as Canada, the United Kingdom and the United States is laudable and provides a paradigm example of regulatory design being informed by a comparative law perspective.

At the time of writing, the appetite for insolvency reform in ASEAN and Oceania is on the rise, with several of Singapore’s regional neighbours, including Australia and Malaysia, having recently conducted reviews of various aspects of their own insolvency regimes. Given the importance of cost-effective and predictable R&I frameworks for incentivising creditors to advance capital for domestic investment and innovation, the Committee’s proposals may serve as a springboard for similar innovations by those jurisdictions and others.

Additionally, the Committee’s proposal for Singapore to adopt the Model Law on Enterprise Group Insolvency and the Model Law of Recognition and Enforcement of Insolvency-Related Judgements is a welcome development given the sparse adoption of those Model Laws to date. As the Committee noted in the Report, Singapore’s adoption of those two Model Laws would send a signal about the importance of the Model Law regime, hopefully serving as a ‘nudge’ and inducing participation by other jurisdictions.

We look forward to the Committee’s proposals receiving the force of law in Singapore and paving the way for similar reforms in the Asia-Pacific region and across the world.

The authors gratefully acknowledge the support of Hasan Mohammad, an associate and Eibhlin Murrant, a lawyer, both based in our Sydney office, for their invaluable assistance in preparing this article.

1 Meiyen Tan, Head of our Singapore Restructuring practice, is a member of the Committee.