Earlier, the corporate insolvency and restructuring framework in Singapore consisted of composite patchwork under the Companies Act, and it also involved certain procedures for Bankruptcy that were imported into the Companies Act with few essential modifications. With the implementation of IRDA now, the main source of legislation for corporate restructuring in Singapore is likely to be IRDA only. It will monitor both insolvency and restructuring procedures as required in the business industry.
Under the newly created framework, there are three main areas to focus upon: schemes of arrangement, liquidation, and judicial management. Below you will find a few tips from a financial restructuring advisory about each one of these procedures to boost your understanding.
Financial Restructuring Advisory and Turnaround and Restructuring Consulting 101 – Schemes of Arrangement
The experts have involved several compromise agreements under Schemes of Arrangement to ease the connection between creditors and the companies. For instance, the creditors need to accept a “haircut” for debt repayment as well as for agreeing to a specific set of repayment plans that provide breathing space to the company. Such types of agreements and arrangements can be established privately among creditors and the company involved.
In case it is not possible to receive the agreement of all involved creditors, the company needs to approach the high court to get court-sanctioned approval for the scheme of arrangement. In such proceedings, the court may serve two main functions:
- Court’s responsibility is to ensure that relevant procedures are implemented and complied with as per the Companies Act.
- The court determines that the proposed scheme is reasonable and fair.
All the terms and conditions are evaluated by the court to ensure reliable commencements of the arrangement. However, involved parties can also avail of assistance from turnaround and restructuring consulting to proceed ahead safely.
Financial Restructuring Advisory and Turnaround and Restructuring Consulting 101 – Judicial Management
Here comes a temporary rescue plan sanctioned by the court where the judicial manager is required to take charge of the management of the company, and this person also takes care of the company’s rehabilitation requirements. As per Section 227A, the Companies Act ensures that applications are submitted to the High Court as per Section 227B to ensure that company is being managed by a dedicated judicial manager to meet all essential requirements.
The court is likely to grant judicial management if they get satisfactory reasons describing that the company will be or is unable to repay pending debts. The judicial management, in this case, may be responsible for ensuring the survival of the company, approval of the relevant scheme of arrangement with reference to section 210, or some fruitful realization solution for company assets. The professionals at turnaround and restructuring consulting can also help you better with corporate rescue Singapore.
Financial Restructuring Advisory and Turnaround and Restructuring Consulting 101 – Liquidation
As per financial restructuring advisory, a non-performing company in Singapore can be wound up either by a court or with voluntary procedures. If they consider voluntary winding up, it can further have two options: creditor’s voluntary winding up or member’s voluntary winding up. The involved parties may need to hire a liquidator to handle the liquidation procedure as per legal terms. This method can be utilized when the company is no longer able to repay its debts, the inspector appointed as per the Companies Act has already reported that the company should be wound up due to its inability to repay debts, or the court has decided that the company must be wound up. After liquidation, the available assets will be used to repay the debts of the creditors.