The Ministry of Law has introduced new laws regarding insolvency and restructuring, including an increase in the maximum debt threshold in personal bankruptcy cases and new regulations for insolvency practitioners. The new legislation will come into effect on July 30, 2020.
The Insolvency, Restructuring and Dissolution Act consolidates Singapore’s personal and corporate insolvency and debt restructuring laws into a single piece of legislation, says the ministry in a July 23 release.
The act ensures Singapore’s insolvency and restructuring laws remain progressive and modern, while balancing the interests of debtors, creditors and other stakeholders, says the ministry.
On personal bankruptcy, the act retains much of the repealed Bankruptcy Act, which underwent significant amendments in 2015. One noteworthy change is the increase of the maximum debt threshold for the Debt Repayment Scheme from $100,000 to $150,000.
In April, the Covid-19 (Temporary Measures) Act increased monetary thresholds for insolvency from Apr 20 to Oct 19, with the date subject to further extension. The monetary threshold for a creditor to commence bankruptcy proceedings against a debtor was increased from $15,000 to $60,000.
The new Act also introduces new features on corporate debt restructuring and insolvency. These include restrictions on certain contractual rights that are triggered upon the commencement of restructuring proceedings, which facilitate the restructuring of a distressed company’s business.
Other features include the 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; and a summary procedure to dissolve companies that have insufficient assets to pay for the administration of the winding-up.
The Act also establishes a new licensing and regulatory regime for insolvency practitioners.
Starting July 30, a person must hold a valid insolvency practitioner’s licence with the Ministry of Law in order to undertake insolvency officeholder appointments in winding up, judicial management, receivership, bankruptcy and voluntary arrangement cases commencing on or after that date.
A six-month transitional period from Jul 30, 2020, to Jan 30, 2021, will be provided for a person to perform such work without an insolvency practitioner’s licence, “whilst his or her application for an insolvency practitioner’s licence is being considered by the Licensing Officer”.
“This is provided that he or she possesses the necessary qualifications to do the same under the Bankruptcy Act and/or the Companies Act. In the event the application for a licence is not successful, any appointments undertaken during this period will have to cease,” says MinLaw.
Persons intending to undertake insolvency officeholder appointments are advised to submit his or her licence application early and within the transitional period, says the ministry.
“The Ministry of Law is considering further temporary measures, in addition to the processes in the Act, 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,” notes the Ministry.
The new legislation was first mooted in October 2013 by the Insolvency Law Review Committee, which recommended a holistic update of Singapore’s personal and corporate insolvency and debt restructuring laws. A restructuring committee was formed in 2015, and changes were implemented in phases starting that year.
Public and closed group consultations were carried out for the novel pieces of subsidiary legislation as part of the drafting process. The latest act was passed in Parliament on Oct 1, 2018.
Further details relating to the requirements to be an approved insolvency practitioner can be found on MinLaw’s website at lripd.mlaw.gov.sg
