SINGAPORE Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Janelene Chen and Pieter de Ridder, Mayer Brown
5.7 Rules Governing the Priority of Competing Security Interests and/or Claims Under Singapore law, it is possible for chargors to grant multiple charges over the same asset. The rules governing priority of competing securi - ty interests are complex, but some general rules are set out below. • As between two fixed charges, the fixed charge which has been granted earlier in time takes priority over the other, provided that if they are registrable, both fixed charges have been registered within any applicable time limits. • A floating charge becomes a fixed charge only upon crystallisation and ranks behind other fixed charges even if such fixed charges were created after the floating charge (but before it crystallises). • In respect of assignments and charges over the same chose in action, the starting point is that priority is determined by the creditor that serves notice first on the contract counterpar - ty, provided that at the time of the assignment or the creation of the charge, that creditor did not have any notice of any earlier assign - ment or charge over that chose in action to any other assignee or chargee and was acting in good faith and gave good value for that assignment/charge. Where multiple charges are granted over the same asset, the parties should enter into an intercreditor or subordination agreement. As of the time of writing, there is no direct case law on whether such arrangements would survive insol - vency, but the market practice is to operate on the basis that they do (there are some helpful English law decisions in this area which may be persuasive).
While, by definition, such form of subordination means there will not be any competing claims, structural subordination is also often employed. 5.8 Priming Liens and/or Claims The concept of a priming lien is very new in Sin - gapore. It is rarely granted, and, as of the time writing, has not been granted to any creditor. This is discussed in more detail in relation to Debtor-in-Possession (DIP) Financing, below. Priming liens do not have the same prevalence in Singapore as they do in the US. In practice, Asian creditors rely on ranking of security inter - ests at law and ICAs. ICA terms for regulating second ranking security will include the following with exceptions and standstill periods negotiated on a case-by-case basis: • restrictions on payments; • restrictions on enforcement action; • provision regulating voting on an insolvency; and • provisions regulating amendments to the first- ranking and second-ranking documentation. A key area of focus for the second lien will be when it can instigate enforcement, independent - ly of the first lien, and the extent to which it can influence the manner and terms of enforcement. 5.9 Cash Pooling and Hedging/Cash Management Obligations Cash-pooling arrangements exist. Private credit lenders (and indeed bank lenders) will usually accept that the account bank with whom oper - ating accounts are maintained will, by virtue of their status as account bank, have priority for any unpaid bank account fees, etc. Cash pool - ing in itself will not necessarily be problematic if, for example, security has been taken over
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