SINGAPORE Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Janelene Chen and Pieter de Ridder, Mayer Brown
the creditor and the debtor company. Insolvency set of is mandatory where there are mutual cred - its, debts or other dealings between the creditor and the company. Any balance remaining after set-off is a debt provable in restructuring and insolvency proceedings. 7.8 Out-of-Court v In-Court Enforcement There is no typical format for a private credit out of court restructuring. An out-of-court restruc - turing is an often favoured option for the reasons mentioned in 6.6 Practical Considerations/Lim- itations on Enforcement and also where there is alignment amongst creditors holding a control - ling, or otherwise significant, debt participation. A coordinated group of creditors will have more leverage to negotiate a better position for itself in an out-of-court restructuring than an uncoor - dinated or fractured group of creditors. The significance of equity holders and other con - stituencies varies. However, the equity holders and guarantors are often looked to for the provi - sion of new capital and improvements in credit support. The consensual nature of an out-of-court restructuring means that there is a need for a certain level of co-operation to be achieved among all stakeholders in order for the consen - sual restructuring to occur. The primary advantage of an in-court process (in Singapore) is the ability to use the coercive powers of the court to establish a moratorium to create breathing space and to compromise existing debt and create new security in a man - ner which facilitates a more broad-based debt (and corporate) restructuring of the debtor. As mentioned above, the attractiveness of a court process is not uniform across South-East
Asia, which could erode its perceived advan - tages. 7.9 Dissenting Lenders and Non- Consensual Restructurings Where a company faces dissenting lenders, it may need to rely on an in-court proceeding to effect a restructuring. A scheme of arrangement is the most usual choice. In order for a scheme of arrangement to be passed at a scheme meeting, a major - ity in number of creditors representing 75% in value of each class of scheme creditors, and who were present and voting at the relevant scheme meeting, must approve the terms of the scheme. Unanimous agreement, which is often not possible to achieve, is not required, and the dissenting minority becomes bound by the scheme. Assuming that the scheme is passed, an application must be made for the court to approve the terms of the scheme. Once a court order is made, the order must be lodged with the Registrar of Companies. Any scheme passed by creditors and approved by the court will become binding on all creditors, including the dissenting minority. Cram-Down Singapore has adopted the cram-down feature which gives the Singapore courts power to order that a dissenting class of creditors be bound by the scheme. This means that, if there are two or more different classes of creditors or mem - bers to be bound by the scheme, and approval is not obtained from one or more of the classes (referred to as the dissenting class), the court may nonetheless sanction the scheme such that it also becomes binding on the dissenting class(es).
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