SINGAPORE Law and Practice Contributed by: Lee Xin Mei, Cheryl Tan, Eugene Lee and Benjamin Liew, Rajah & Tann Singapore LLP
Substantive Consolidation Under Singapore law, SPEs are treated as hav - ing their own separate legal personality. In other words, their rights, obligations, assets and liabili - ties will not be consolidated with those of the originator. The Singapore courts have been slow to disregard a company’s separate legal person - ality, and are only willing to pierce the corporate veil in limited circumstances, such as fraud. 6.3 Transfer of Financial Assets Transfer of Assets In the context of a Singapore securitisation transaction, the originator and the SPE will typi - cally enter into an asset purchase agreement which sets out details of the underlying assets being transferred to the SPE, the consideration for the transfer, and other key terms relating to the sale of such assets to the SPE. The transfer is most commonly effected by way of assignment (which can be legal or equitable), and can also be effected by way of novation or a declaration of trust under Singapore law. Whether an assignment is structured as a legal or equitable assignment ultimately depends on the transaction in question. In the context of a securitisation transaction involving receivables, transfers are effective only in equity and will not take effect as a legal assignment if written notice of such assignment is not given to each of the underlying debtors. The absence of such notice to underlying debt - ors will have (non-exhaustively) the following consequences: • each underlying debtor is entitled, by virtue of his lack of knowledge of the receivables purchase agreement and the transactions contemplated therein, to continue to make
that the creditors/liquidators of the originator/ seller of the assets will not have recourse to the assets. 6.2 SPEs Aspects of an SPE For Singapore securitisation transactions, the SPE will purchase assets from the originator and issue notes to the investors. The SPE is usually established as a bankruptcy remote entity, to prevent the originator’s credi - tors from bringing claims against the SPE, in the event of the originator’s insolvency. This is typically achieved by structuring the SPE as an orphan vehicle (whose shares are held by a trust company for charitable beneficiaries), so that the SPE falls outside the corporate groups of other parties to the transaction (in particular the origi - nator). The other usual characteristics of an SPE are as follows. • Appointment of a third-party corporate administrator, whose directors are placed on the board of the SPE. • Imposing restrictions on the activities that the SPE can undertake, by ring-fencing its activi - ties in the constitution of the company as well as subjecting it to restrictive covenants in the transaction documents. • Including limited recourse and non-petition provisions in the transaction documents so that secured creditors have limited recourse to the SPE’s assets and that none of the secured creditors are able to bring claims against the SPE or petition its insolvency. • Providing the assets and cashflow generated from the assets as security for the securitisa - tion transaction.
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