New measure simplifies insolvency process for more companies

This will be a permanent feature of the corporate debt restructuring and insolvency regime.

A new law passed aims to simplify the existing Simplified Insolvency Programme (SIP) and provide a more cost-effective insolvency process for more companies, specifically those whose total liabilities do not exceed $2m.

In a speech, Second Minister for Law Edwin Tong told the Parliament that the new measure, dubbed as SIP 2.0, “will therefore modify two existing processes under the SIP, namely the Simplified Debt Restructuring Programme (SDRP) and the Simplified Winding Up Programme (SWUP).”

Building on the success of the initial SIP, SIP 2.0 will be permanently incorporated into the Insolvency, Restructuring and Dissolution Act 2018 as a key component of the corporate debt restructuring and insolvency regime, Tong said.

One of the changes to the SIP is a simpler eligibility criteria. The current list of five criteria will be streamlined to one, which is the general eligibility requirement that the company’s total liabilities must not exceed $2m.

Meanwhile, amongst the changes in the updated SDRP is in terms of the number of documents accompanying the application. This will be reduced to require only key supporting documents.

As for the modified SWUP, Clause 30 states that if the company resolves to enter into the programme but has incomplete financial records, it may submit a Directors’ statement to the nominated liquidator that the eligibility criterion has been met. This simplifies the application process, and encourages non-viable companies to be wound up instead of remaining dormant.

“This will make the SIP permanent, or the SIP 2.0, one which is simpler, more cost effective, and will also facilitate better access to insolvency processes, and with these changes benefit a larger group of companies,” said Tong.