SINGAPORE Law and Practice Contributed by: Renu Menon, May Ng, Blossom Hing, SC and Ong Ken Loon, Drew & Napier LLC
5.6 Release of Typical Forms of Security Securities are typically released in the form of a dis- charge deed, which would where applicable include reassignment of the security assets to the security provider. Additional steps may be required to remove security registration in a public registry. Some types of security may necessitate additional procedures. For instance, discharging a mortgage over land under the LTA requires registration with SLA of a discharge instrument in the statutorily prescribed form. 5.7 Rules Governing the Priority of Competing Security Interests Priority of competing common law security interests is governed by common law rules, which involves com- plex technical issues (a discussion of which would be outside the scope of this chapter) but generally, prior- ity will be governed by the time of security creation, subject to compliance with other perfection require- ments. For instance, failure to register a charge with ACRA within the statutory deadline would render the security void against the chargor’s liquidator and other creditors. In Singapore, subordination is typically effected by way of a subordination agreement or contractual sub- ordination clauses in other financing documents. Pri- ority among different lenders can also be contractually varied by way of a priority deed or inter-creditor agree- ment, facilitating debt restructuring and prioritising claims based on contract terms. In Singapore, these contractual variations are legally recognised, allowing lenders to establish their desired priority framework within the lender group or between different lender groups, provided they are not in contravention of statutory provisions or public policy. While subordination agreements generally are enforce- able under Singapore law, the enforcement of such agreements in a Singapore court may be affected by bankruptcy, insolvency, liquidation, juridical manage- ment, reorganisation, reconstruction or similar laws affecting creditors’ rights. Certain contractual provisions as to subordination might be ineffective in the event of the winding up of
a subordinated creditor under Singapore law if they conflict with the statutory rule that the property of a company in winding up is to be applied in satisfaction of its liabilities pari passu. 5.8 Priming Liens Material security interests that can prime a lender’s interest by operation of law include liens granted for emergency financing and maritime liens. Under the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), companies undergoing restructuring can apply for court orders to obtain priority financing, often necessary to continue operations, with the financing secured through a “priming lien” on existing security. To structure around these liens, lenders seek subor- dination agreements that set terms for priority financ- ing under specific conditions. Where restructuring is anticipated, lenders may also engage in contractual arrangements with the borrower and emergency cred- itors to minimise exposure to priming liens. 6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders Circumstances under which a secured lender may enforce its collateral will depend primarily on the terms of the security documents. The circumstances typically include events of default such as the non- payment of the loan. Enforcement methods a secured lender may employ include seizing and/or selling the collateral (whether through private or court processes), and appointing a receiver over the collateral. When seeking to enforce collateral, secured lenders will have to consider, among other things, whether the value of the collateral is sufficient to cover the loan provided; there are competing claims over the collateral; and there are any other prohibitions to enforcement, such as those which may arise when the debtor company is being wound up or placed in judicial management.
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