SINGAPORE Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Janelene Chen and Pieter de Ridder, Mayer Brown
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes In-Court Insolvency and Restructuring Processes There are a range of in-court insolvency or restructuring processes available in Singapore, including liquidation (voluntary or court-ordered), judicial management and schemes of arrange - ment. Voluntary Liquidation There are two types of voluntary liquidation – members’ voluntary liquidation and creditors’ voluntary liquidation. The former relates to the liquidation of a solvent company initiated by its own directors, whereas the latter relates to liq - uidation of a company that is likely to become insolvent as decided by a meeting of its credi - tors. Involuntary Liquidation An involuntary liquidation, or court-ordered liq - uidation, is commenced by filing an application in court for the company to be placed in liqui - dation. An application may be made by a direc - tor of the company, a creditor of the company, a contributory, a liquidator, a judicial manager, government ministers, or the Monetary Authority of Singapore, as appropriate. The court must be satisfied that one or more of the grounds set out in Section 125(1) of the Insolvency, Restructuring and Dissolution Act (IRDA) have been met. Pre - dictably, the most common ground put forward for involuntary liquidation is that the company is
the success of a court-sanctioned compromise or arrangement, or otherwise ensuring a more advantageous realisation of the company’s assets than in a winding-up scenario. A com - pany, its directors or a creditor of the company may apply for judicial management. Scheme of Arrangement A scheme of arrangement, which may be applied for under Section 71 of the IRDA is a DIP process that grants the company the power to propose a compromise or arrangement with its credi - tors. The proposed scheme must obtain credi - tor approval at the levels mandated by statute and be sanctioned by the court in order to pass. A scheme of arrangement cannot be effected without the requisite creditor approvals and the sanction of the court. Once a company enters any of the above pro - cesses, a lender’s enforcement rights may be (and typically are) stayed (with the exception of certain proceedings, for example, arbitration proceedings already commenced). Additionally, companies may make a separate moratorium application under Section 64(1) of the IRDA even before a formal process, such as the scheme of arrangement, has been launched. An automatic moratorium will be granted for up to 30 days from the date of such application. The key take- away for private credit lenders is that once a for - mal rehabilitation process or insolvency process is commenced in Singapore, a degree of care needs to be exercised to ensure that applicable moratoriums are complied with and full advan - tage is taken of any windows for the enforce - ment of security eg, enforcement of security with the permission of the court.
unable to pay its debts. Judicial Management
Judicial management allows a company to be placed in the control of a third-party insolvency practitioner with the goal of ensuring the survival of the company as a going concern, procuring
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