Reports reveal that thousands of new businesses are registered every day, but not all of them work as expected. There can be so many reasons for the failure of a business and if it happens, there is no meaning in keeping the company active. Some of the most common reasons behind company closure can be criminal cases against the organization, no demand for the product, potential change in market scenarios, old age of company owner, conflicts between owners, unsuccessful business plan, financial struggles, and indebtedness. In such conditions, the best way out is to close the venture by following the necessary liquidation process Singapore.
Liquidation is better defined as the process of realizing or seizing company assets so that the received amount can be used to pay off debts, and liabilities. When a company is in the liquidation stage, it means it is shutting down operations or has already terminated its operations.
Singapore’s Insolvency, Restructuring and Dissolution Act (IRDA) was announced on 30th July 2020. Note that IRDA offers omnibus legislation regarding personal insolvency, debt restructuring, and corporate insolvency. This new act is expected to replace the old Bankruptcy Act along with corporate insolvency as well as restructuring provisions. IRDA is likely to introduce several amendments to Singapore’s insolvency framework.
Liquidation Process Singapore – Key Changes Applied to Singapore Insolvency Framework:
The professionals have followed a phased approach to handle changes in personal insolvency, debt restructuring, and corporate insolvency laws in Singapore. The key points for liquidation process Singapore are listed below:
Phase 1: The Bankruptcy Act in Singapore was amended in July 2015 to create a rehabilitative discharge framework to assist bankrupts. It also encouraged institutional creditors to follow financial prudence while granting credit.
Phase 2: The Companies Act was further amended in May 2017 to enhance corporate rescue as well as restructuring processes. The main goal was to position Singapore as a favourable place for debt restructuring. The major changes introduced during this phase for Singapore Company Liquidation involve:
Schemes of arrangements
- It introduced an automatic moratorium with an estimated period of 30 days for submitting an application. This moratorium can be extended to lead to a worldwide effect.
- It introduced the ability to cram down creditor classes.
- Allowed pre-negotiated restructuring option between the company and the key creditors.
- Companies were allowed to develop judicial management at an early stage to demonstrate the organization is likely to fail to pay off its pending debts, before stating that the company will be unable to pay off debts.
- Extended availability of judicial management for the companies run by foreign owners.
Cross border insolvency
- As per this amendment, ring-fencing will be needed only for specific financial institutions like insurance companies and banks.
- The adoption of the UNCITRAL model law was also permitted for cross-border insolvency.
Final Phase: In the last phase, IRDA replaced Bankruptcy Act fully along with the restructuring provisions and corporate insolvency in the companies act. The country has now set up new norms for personal bankruptcy and corporate debt restructuring as well. You may need to hire professionals to handle the Singapore Company Liquidation process with all these latest amendments.