SINGAPORE Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Janelene Chen and Pieter de Ridder, Mayer Brown
7.2 Waterfall of Payments Creditors will have their claims ranked in the fol - lowing order and pari passu vis-à-vis the other creditors in the same class: • statutorily preferred creditors (specified credi - tors entitled to receive payments in priority, eg, employees); • secured creditors (creditors benefiting from a form of security, eg, a mortgage or a charge) in respect of recoveries from the secured asset; • unsecured creditors (all other creditors, eg, trade creditors); and • shareholders. Preferential claims, which are to be paid in pri - ority to all other secured and unsecured debts, include the following: • the costs and expenses of winding-up (including remuneration of the liquidator and other winding up costs); • wages or salary payable to any employees of the debtor, employee retrenchment benefits, etc; and • any tax or goods and services tax due. 7.3 Length of Insolvency Process and Recoveries The length of an insolvency process and time taken to generate recoveries can vary signifi - cantly and will depend on a host of factors, including the complexity of the insolvency, the number of creditors, the presence of dissenting or otherwise uncooperative creditors, the loca - tion of the assets, the type of assets and related factors. A typical, straightforward insolvency process of a company with minimal to no meaningful assets (for example, a shell company or holding com -
pany with no funds or property of its own), could take as little as six to eight weeks, whereas a complex insolvency process involving a large creditor base and a varied asset pool could take over 12 months. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Singapore is uniquely placed as one of only two jurisdictions in the APAC region offering a DIP financing regime. The DIP financing regime bears similarities to that of its US counterpart, and allows certain new money investments to be secured over assets (both encumbered and unencumbered) and/or prioritised over other debts and obligations of the company in the event of a liquidation. This can be a useful tool for companies to incen - tivise creditors (existing or new) to inject fresh funds into the company, and there is now prec - edent of the court granting an application for a roll-up financing (see Re Design Studio Group Ltd and other matters [2020] SGHC 148). There is also flexibility for creditors and debtors to agree turnaround arrangements on a consen - sual and out-of-court basis. It is not unusual for such consensual arrangements to be employed instead of formal restructuring and insolvency proceedings. The choice will often depend on the commercial considerations of the parties, and whether a successful re-organisation can be achieved without resorting to the coercive pow - ers of the court, the need to remove the manage - ment of the company or the reliance on statu - tory moratoriums to create the breathing space needed to implement a scheme of arrangement. 7.5 Risk Areas for Lenders Where an obligor becomes insolvent, lenders are typically prevented from enforcing on their
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