Amendments to Companies Act Aim to Transform Singapore into Debt Restructuring Hub

by Morgan Lewis

Morgan Lewis

Singapore’s firm trajectory towards becoming an international hub for debt restructuring received a boost with the Companies (Amendment) Act 2017 coming into force on 23 May 2017.

The Companies Act was updated to address perceived weaknesses in the existing legislation which impeded efforts to make Singapore a more attractive forum for restructuring. These amendments—which take cues from the US Chapter 11 regime—are the first in a series of legal reforms in line with the recommendations made by the Insolvency Law Review Committee and the Committee to Strengthen Singapore as an International Centre for Debt Restructuring.

This LawFlash discusses the amendments, which focus on four main areas of insolvency—schemes of arrangements, judicial management, winding up, and cross-border insolvency.

Schemes of Arrangement

A scheme of arrangement is a company-controlled, court-supervised debt restructuring regime, which is similar to schemes of arrangement available in other Commonwealth jurisdictions where—unlike a full insolvency—not all classes of creditors are affected.

Under a scheme of arrangement, the rights of the company and its creditors (or class of creditors) and shareholders are proposed to be restructured to allow the company to survive a period of distress and to emerge as a going concern. A majority in number representing at least three-fourths in value of each class of creditors must provide consent to a scheme at a specially convened meeting. If such majority is obtained and the approved scheme is subsequently sanctioned by the Singapore court, the scheme and its terms bind all scheme creditors. The operation of the scheme is administered by a court-appointed scheme manager and is supervised by the court.

Under the new rules, foreign companies that have a substantial connection with Singapore are now able to avail themselves of the scheme of arrangement regime. The amendments also introduce provisions that allow the court to grant a worldwide moratorium (including against enforcement of secured rights and interests), prioritize rescue funding to the level of a “super security”, and allow for the “cram down” of certain dissenting classes of creditors (i.e., the court may approve a scheme with multiple classes of creditors even if a class of creditors objected to the scheme, if certain conditions are met). These are in part similar to the worldwide stay, prioritization of post-filing credit, and cram down provisions available to debtors under the US Chapter 11 regime.

The amendments also will provide for a fast-track negotiation scheme that will allow the court to approve a scheme of arrangement without holding a meeting of creditors, and for a different and more detailed and transparent process by which creditors should establish their claims for purposes of voting in a scheme.

Judicial Management

Judicial management is an insolvency regime under which judicial managers are appointed by the court (thereby replacing the company’s management) to manage and resuscitate an ailing Singapore company. The company is given respite from creditors through a moratorium to allow the judicial managers breathing room to reorganize the company’s affairs with the aim of restoring the company to a going concern. The judicial managers are required to present, for approval at a creditors’ meeting, a statement of proposal for achieving the objectives of the judicial management, and also can establish a committee of creditors to assist the judicial managers in the discharge of their functions. With the moratorium, the company may then trade out of its financial difficulties and repay its creditors in full over time; a scheme of arrangement also can be applied for during the judicial management period should the judicial managers deem it necessary to compromise and restructure certain debts.

As with the changes to the scheme of arrangement regime, the amendments now allow judicial management to be made available to foreign companies and provide for the prioritization of rescue funding ahead of all other secured debt.

With the changes, a company will be able to apply for judicial management more easily, as it will only need to show that it is likely to become unable to pay its debts as they become due in the future; the company no longer needs to show that it is actually and currently unable to pay its debts.

Winding Up

The primary change in respect of winding up proceedings (liquidation of a company where a court-appointed liquidator administers the preservation and sale of the company’s business and assets and distributes its proceeds to creditors) is that it is now clarified that the court will be able to assume winding up jurisdiction over foreign companies that can demonstrate a “substantial connection with Singapore”.

The previous ring-fencing rule in the winding up of foreign companies—that a Singapore liquidator could only remit funds to the foreign jurisdiction after all Singapore debts had been paid—is abolished by the new amendments.

Cross-Border Insolvency

Singapore has adopted the UNCITRAL Model Law on Cross-Border Insolvency to mutually recognise insolvency orders and render reciprocal aid in insolvency proceedings. Singapore is the most recent addition to the list of 42 signatory countries, including the United States, United Kingdom, and Japan, which have already adopted this Model Law.


These amendments are a quantum leap in the evolution of Singapore’s insolvency laws and regime, bringing the country more in line with the US Chapter 11 bankruptcy regime. This is a key step in Singapore’s vision to be at the forefront of developments in insolvency laws and to become a choice forum in handling cross-border insolvency issues.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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