It proposes a new regulatory regime for said schemes.
The Ministry of Law submitted a bill to update insolvency and debt restructuring laws for first reading in the Parliament, an announcement revealed.
Upon the bill’s passage, the Bankruptcy Act will be repealed whilst the provisions in the Companies Act relating to corporate insolvency and restructuring will be removed.
The proposed bill will also launch a new regulatory regime for practitioners acting as officeholders in the various types of restructuring and insolvency proceedings that will impose minimum qualifications and conditions for the grant and renewal of licences.
Set to be under the MinLaw’s Insolvency and Public Trustee’s Office, the regulatory regime will administer this new regulatory regime.will also be in charge of moulding a framework for errant officeholders that commit breaches as insolvency practitioners.
To address bankruptcy, the bill proposes to require secured creditors to notify the trustee administering the bankruptcy, within 30 days after the bankruptcy order. This is if they intend to claim interest on the debt for the period between the order and enforcement of the security.
“The change allows the bankrupt’s assets and liabilities to be ascertained early, for more efficient administration of the bankruptcy,” MinLaw noted.
For corporate insolvency, miscellaneous amendments to existing provisions in the Companies Act will be made to modernise the law. This will also be done to facilitate better use of resources in the administration of liquidation cases.
“The bill further strengthens our debt restructuring regimes to provide greater opportunity for rehabilitation of companies in financial distress,” MinLaw said. “This supports amendments to the Companies Act in 2017 that enhanced Singapore as a centre for debt restructuring.”
Moreover, the Bill will introduce a new restriction on ipso facto clauses that are triggered upon the commencement of restructuring proceedings, as there is no current restriction on it.
“Ipso facto clauses in contracts permit the termination or modification of the contract upon the occurrence of a specified trigger event, such as insolvency or restructuring of the company,” MinLaw explained.
With this, the ipso clauses, according to MinLaw, could make restructuring difficult for a firm due to the risk that the other party to the contract would be able to terminate that contract.
The bill came after the Insolvency Law Review Committee’s (ILRC) recommendation in October 2013 for ‘a holistic upgrade of Singapore’s insolvency and restructuring laws through an omnibus legislation’.
Meanwhile, the committee to strengthen Singapore as an International Centre for Debt Restructuring (Restructuring Committee) also passed their recommendations in April 2016 which eyed to strengthen Singapore’s debt restructuring ecosystem.
According to MinLaw, several measures and a phased approach was taken in response to the recommendation, which was initiated by amending the Bankruptcy Act in July 2015 to create a more rehabilitative discharge framework for bankrupts and to motivate institutional creditors to ‘exercise financial prudence when granting credit’.
In 2017, the Companies Act was amended to enrich the corporate rescue and restructuring processes.
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