LEGAL - Insolvency, Restructuring and Dissolution Act to commence on 30 July 2020
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Insolvency, Restructuring and Dissolution Act to commence on 30 July 2020 27 July 2020 LEGAL UPDATE
In this
03
Update 03
INTRODUCTION
The Insolvency,
Restructuring and
Dissolution Act (“IRDA”) 03
will commence on 30 July BACKGROUND
2020. Together with new
pieces of subsidiary
legislation, the IRDA
04
ensures that Singapore’s KEY FEATURES OF THE
insolvency and IRDA
restructuring laws remain
progressive and modern,
whilst balancing the
05
interests of debtors, GOING FORWARD
creditors and other
stakeholders.
This article highlights the
key features of the IDRA.
INTRODUCTION
The IRDA is an omnibus legislation that
KEYPOINT consolidates Singapore’s personal and corporate
insolvency and debt restructuring laws into a
single piece of legislation and updates relevant
laws to be aligned with international best
practices.
The IRDA, together with its 48 related pieces of subsidiary legislation, will
commence on 30 July 2020.
Building on the Companies Act amendments in 2017 which enhanced
Singapore’s corporate rescue and restructuring framework, this legislation
will benefit businesses experiencing financial difficulties as well as their
creditors, create new opportunities for insolvency professionals, distressed
debt funds and financial institutions, and further strengthen Singapore as
an international centre for debt restructuring.
BACKGROUND
The IRDA was passed in Parliament on 1 October 2018, and assented to
by the President on 31 October 2018.
The enactment of the IRDA arose from the Insolvency Law Review
Committee’s (“ILRC”) recommendations in October 2013 for a holistic
update of Singapore’s personal and corporate insolvency and debt
restructuring laws. The recommendations included the enactment of a
new omnibus legislation. The omnibus legislation consolidates the
personal and corporate regimes, which are presently in two separate
statutes, into a single piece of legislation.
In May 2015, the Committee to Strengthen Singapore as an International
Centre for Debt Restructuring (“Restructuring Committee”) was formed.
The Restructuring Committee built on the ILRC’s recommendations, made
further recommendations focused on strengthening the debt restructuring
ecosystem in Singapore.
Due to the large number of recommendations of the two Committees, a
phased approach was taken to implement the recommendations of the
two Committees:
3
(a) First phase: In July 2015, amendments were made to the Bankruptcy
Act to create a more rehabilitative discharge framework for bankrupts,
and to encourage institutional creditors to exercise financial prudence
when granting credit (“BA Reforms”).
(b) Second phase: In March 2017, amendments to the Companies Act
enhanced Singapore’s corporate rescue and restructuring processes
as well as positioned Singapore as a regional forum of choice for debt
restructuring (“CA Reforms”).
(c) Final phase: The IRDA implemented the remaining recommendations
of the ILRC and Restructuring Committee, which were not enacted in
the BA Reforms and CA Reforms, and further reforms to the debt
restructuring regime, pursuant to industry feedback
Since the passing of the IRDA, extensive work has been undertaken to
draft the 48 related pieces of subsidiary legislation for the IRDA, and effect
the necessary updates to bring the IRDA into force:
(a) A significant number of subsidiary legislation are entirely new pieces
(including two new standalone Rules of Court setting out court
procedure for corporate and personal restructuring and insolvency
proceedings).
(b) In addition, a root and branch review had been undertaken in respect
of all the related subsidiary legislation to update the relevant
provisions.
(c) Public and closed group consultations were also carried out for the
novel pieces of subsidiary legislation as part of the drafting process.
KEY FEATURES OF THE IRDA
On personal bankruptcy, the provisions largely retain the repealed
Bankruptcy Act, following significant amendments to the latter in 2015. One
noteworthy change is the increase of the maximum debt threshold for the
Debt Repayment Scheme from $100,000 to $150,000.
On corporate debt restructuring and insolvency, the IRDA introduces new
features, including:
(a) Restriction on certain contractual rights that are triggered upon the
commencement of restructuring proceedings (i.e. ipso facto clauses).
This facilitates restructuring of a distressed company’s business, where
its contracts contain such clauses.
4(b) Enlarging the range of causes of action which may be funded by third
parties, specifically certain officeholder avoidance actions, which may
otherwise not be pursued due to lack of funds.
(c) Summary procedure to dissolve companies that have insufficient
assets to pay for the administration of the winding up.
The IRDA also establishes a new licensing and regulatory regime for
insolvency practitioners. This regime requires insolvency practitioners to
uphold professional standards when performing insolvency and debt
restructuring work in Singapore.
GOING FORWARD
The unprecedented spread and severity of the COVID-19 pandemic,
together with closures and restrictions imposed by the safe distancing
measures, has resulted in significant impact on businesses.
The COVID-19 (Temporary Measures) Act has increased monetary
thresholds for insolvency from 20 April 2020 to 19 October 2020 (subject to
further extension).
The Ministry of Law is considering further temporary measures, in addition
to the processes in the IRDA, to assist micro and small companies which,
as a result of the COVID-19 pandemic, may require support to either
restructure their debts or wind down their businesses.
The content of this article does not constitute legal advice and should not be relied on as such.
Specific advice should be sought about your specific circumstances. Copyright in this
publication is owned by Drew & Napier LLC. This publication may not be reproduced or
transmitted in any form or by any means, in whole or in part, without prior written approval.
5If you have any questions or
comments on this article, please
contact:
Chan Wei Meng
Director, Corporate Restructuring &
Workouts
T: +65 6531 2421
E: weimeng.chan@drewnapier.com
Drew & Napier LLC
10 Collyer Quay
#10-01 Ocean Financial Centre
Singapore 049315
www.drewnapier.com
T : +65 6535 0733
T : +65 9726 0573 (After Hours)
F : +65 6535 4906
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