SINGAPORE Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Janelene Chen and Pieter de Ridder, Mayer Brown
rights under the relevant finance documents and security by virtue of the statutory moratoriums. Lenders should always seek advice in the first instance on steps they can take to safeguard their existing security and rights under any relat - ed finance document. Taking early advice will also confirm the scope of any moratoriums and any opportunities that may arise for enforcement action with the passage of time. It is important for the lender to take prompt action to definitively ascertain the legal of sta - tus of the debtors, ensure that their claims are recorded in the appropriate insolvency proceed - ings and take steps to ensure that they are rep - The following transactions may be voidable upon insolvency and are subject to clawback risk. • Transactions at an undervalue (Section 224 of the IRDA) – a liquidator may petition the court for the avoidance of transactions entered into in the period of three years prior to the com - mencement of the liquidation proceedings, and the company is insolvent at the time the transaction was entered into or subsequently became insolvent as a result of entry into that transaction. A transaction at an undervalue is a gift for which no consideration was received or a transaction for which the consideration received is significantly less than the consid - eration given by the company. • Unfairly preferential transactions (Section 255 of the IRDA) – an unfairly preferential transaction may be set aside by the court at the request of a liquidator if that transac - tion occurred, in the case of a connected person, within two years of the commence - resented in any ensuing proceedings. 7.6 Transactions Voidable Upon Insolvency
ment of the liquidation; and, in the case of an unconnected person, within one year of the commencement of the insolvency. A trans - action is unfairly preferential if the company does anything or allows to be done anything to or for the benefit of a creditor, guarantor or surety that has the effect of putting that person in a better position than it would be in the winding up of that company if that action or thing had not been done. It is also neces - sary for the company to have sought to bring about the preferential effect and was insol - vent or became insolvent as a result of this preference. • Extortionate credit transactions (Section 228 of the IRDA) – an extortionate credit transac - tion is a transaction for the provision of credit to the company which is provided on exor - bitant terms or is substantially unfair having regard to the risk to the credit provider. A liquidator can petition the court for the avoid - ance of such transactions if they occurred within the period ending three years before the commencement of liquidation proceed - ings. • Avoidance of certain floating charges (Section 228 of the IRDA) – a floating charge created within the period of two years prior to the commencement of insolvency proceedings in the case of a connected person and one year in the case of an unconnected person may be set aside by the court at the request of a liqui - dator. A floating charge created within this look-back period is vulnerable if the company was unable to pay its debts at the time when it was insolvent or subsequently became insolvent as a result of the creation of that floating charge. 7.7 Set-Off Rights Yes, a creditor may exercise its rights of set-off if there are mutual debits and credits between
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