Creditors involved in cross-border restructuring or insolvency proceedings of corporate groups will find that the approach of the Singapore courts to questions of cross-border insolvency provides the assurance of an orderly restructuring or liquidation that is consistent across the various jurisdictions involved.

This note considers the recent Singapore cases that demonstrate this approach and highlights how this approach is reflected in the courts' decisions.

Creditors involved in cross-border restructuring or insolvency proceedings of corporate groups will find that the approach of the Singapore courts to questions of cross-border insolvency provides the assurance of an orderly restructuring or liquidation that is consistent across the various jurisdictions involved. Recent cases have demonstrated a clear trend in the courts' approach that seeks to give effect to the international dimension of cross-border insolvencies and the importance of construing the Singapore Model Law on Cross-Border Insolvency (SG Model Law) in a way that is consistent with the approach in other jurisdictions.

When considering issues arising from the application of the SG Model Law, Singapore courts will take into account the 1997 and 2013 editions of the Cross-Border Insolvency: Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency (1997 Guide or 2013 Guide, as applicable), and consider as well the approach of courts in other jurisdictions to this issue. The Singapore courts have also demonstrated an approach that emphasises the involvement and role of the court is steering the cross-border proceedings using practical approaches to issues rather than a legalistic one that shuts the door on companies seeking to rely on the SG Model Law.

This note considers the recent Singapore cases that demonstrate this approach and highlights how these approaches are reflected in the courts' decisions.

Ascentra Holdings, Inc v SPGK Pte Ltd

In Ascentra Holdings, Inc v SPGK Pte Ltd [2023] SGCA 32 (18 October 2023), the Singapore Court of Appeal held that the SG Model Law applied to a voluntary winding-up of a solvent company in the Cayman Islands. It upheld the appeal against the decision of the High Court which had held that the SG Model Law applied only to proceedings of insolvent companies, and not solvent ones.

The issue before the court was the definition of the term “foreign proceeding” in article 2(h) of the SG Model Law. The Court noted that the various limbs of the definition set out the following requirements for a proceeding to qualify as a “foreign proceeding”:

• It must be collective in nature.
• It must be a judicial or administrative proceeding in a foreign State.
• It must be conducted under a law relating to insolvency or adjustment of debt.
• The property and affairs of the debtor company must be subject to control or supervision by a foreign court in that proceeding.
• It must be for the purpose of reorganisation or liquidation.

In this case, the key issue was whether the voluntary winding up proceedings of Ascentra Holdings, Inc were proceedings that were “conducted under a law relating to insolvency or adjustment of debt”. The High Court had ruled that they were not. However, the Court of Appeal disagreed.

In particular, the Court of Appeal ruled that the requirement that a proceeding be conducted “under a law relating to insolvency or adjustment of debt” would be satisfied as long as the law or the relevant part of the law under which the relevant proceeding is conducted includes provisions dealing with the insolvency of a company or the adjustment of its debts. Furthermore, it would generally be irrelevant that the company concerned in the relevant proceeding is not insolvent or in severe financial distress.

The Court’s reasons for its conclusion include the following key points:

• The regimes of various countries allow for proceedings for dealing with winding up of companies to move between solvent and insolvent regimes: a winding up commenced under a mode of solvent winding up might transition over to a mode of insolvent winding up. In view of this possibility, a wider reading of the phrase should be adopted, and a proceeding should be regarded as one being conducted under a law relating to insolvency or adjustment of debt as long as the relevant law contains provisions dealing with insolvency or adjustment of debt.
• The predominant majority of cases in other jurisdictions such as the U.S., UK, Australia and New Zealand have held that that their respective equivalents of the UNCITRAL Model Law on Cross-Border Insolvency (UNCITRAL Model Law) enable the recognition of proceedings concerning solvent companies as foreign main proceedings. As the SG Model Law mandates that in its interpretation regard is to be had to its international origin and the need to promote uniformity in its application, it should be therefore construed in a manner consonant with the cases in these other jurisdictions.
• A review of the UNCITRAL Model Law and the preparatory material did not show that the drafters of the UNCITRAL Model Law had intended to exclude solvent companies from the scope of the UNCITRAL Model Law for the purposes of recognition.
• Concerns that a wider reading of the phrase “under a law relating to insolvency or adjustment of debt” would open the way to allow proceedings such as private liquidations or restructurings commenced by individual creditors in respect of only part of a company’s assets or simple proceedings such as striking a company off the register to be given recognition under the SG Model Law were overstated. The other limbs of the definition of “foreign proceeding”, such as the requirement that the proceeding had to be collective in nature, would mean that such proceedings would not fall under the definition.

Also of note is the Court’s explanation as to how the risk of a moratorium being granted to a solvent company should be dealt with. The Court noted that article 20(6) of the SG Model Law allowed it to modify or terminate the application of any such moratorium. Accordingly, Singapore courts could recognise a foreign proceeding as a foreign main proceeding without an accompanying moratorium necessarily being maintained. This would prevent the legitimate claims of creditors against a solvent company from being unfairly stymied.

As the Court found that all the other parts of the definition of “foreign proceeding” were satisfied, it granted recognition of the voluntary winding up proceedings over Ascentra Holdings, Inc as foreign main proceedings.

A further example of promoting a uniform approach

The approach of the Singapore courts in interpreting the SG Model Law in a manner which promotes uniformity with how other jurisdictions have interpreted their equivalents of the UNCITRAL Model Law can also be seen in another recent case, Re Genesis Asia Pacific Pte Ltd [2023] SGHC 240 (31 August 2023).

That case involved three corporations which had been put under Chapter 11 proceedings in the US:

• Genesis Asia Pacific Pte Ltd, a Singapore incorporated company;
• Genesis Global Holdco, LLC, a Delaware incorporated corporation; and
• Genesis Global Capital, LLC, a Delaware incorporated corporation.

The Singapore High Court in that case granted recognition of the Chapter 11 proceedings. It also ruled that Genesis Asia Pacific Pte Ltd could be recognised by the Singapore courts as a foreign representative in respect of the Chapter 11 proceedings for each of the three corporations, including itself. This was because the SG Model Law:

• Allowed for corporations (and not just individuals) to be recognized as foreign representatives; and
• Allowed for debtors to be recognized as foreign representatives in respect of their own insolvency proceedings.

In respect of recognition of a corporation as a foreign representative, the Court noted that the definition of a “foreign representative” in the SG Model Law was not confined to individuals. The definition referred to a “person or body”, and the term “person” in Singapore law includes a company. Furthermore, this was consistent with the position internationally as case law from the U.S. showed that the courts there had recognised corporations as foreign representatives.

In respect of recognition of a debtor to be recognised as a foreign representative in respect of its own insolvency proceedings (or those of its holding company), the Court noted that the 2013 Guide clearly stated that the definition of “foreign representative” in the UNCITRAL Model Law was “sufficiently broad to include debtors who remain in possession after the commencement of insolvency proceedings”.

As was the case in Ascentra Holdings, Inc v SPGK Pte Ltd, the Court observed that any difficulties in practice arising from this approach could be dealt with by practical measures:

• Effective accountability where the foreign representative is a corporation may be addressed by close monitoring by the court and a readiness to intervene, in accordance to the circumstances of each case.
• The risk of conflict of interests where the foreign representative is the debtor itself could also be similarly dealt with.

In this case, therefore, the Court required a reporting regime by letter under which the foreign representative would be required to periodically update the court on the progress of its restructuring activities.

Singapore has adopted a more expansive version of the Model Law

In Ascentra Holdings, Inc v SPGK Pte Ltd, the court noted that Parliament’s inclusion of the words “or adjustment of debt” was not in the original form of the UNCITRAL Model Law but was taken from the more expansive approach of the US in their adoption of the UNCITRAL Model Law in the U.S. Bankruptcy Code. This more expansive approach was intended to allow for recognition of proceedings akin to Chapter 11 and Chapter 15 proceedings in the U.S. Bankruptcy Code under the ambit of the SG Model Law. This is significant because neither of the aforementioned categories of proceedings require insolvency or financial distress as a prerequisite for commencement and therefore was one of the grounds that reinforced the Singapore Court’s view that the SG Model Law was not intended to be confined to proceedings involving insolvent companies. This Singapore Court also suggested that the expansive approach could facilitate the recognition of schemes of arrangement under the SG Model Law.

Another example of this is the case of Re Alan Tantleff (2022). There the High Court observed that the Singapore government had expressly adopted language in the SG Model Law that would allow the court to grant any additional relief, regardless of whether it was available under Singapore law or not. This was wider than the original language of the UNCITRAL Model Law, and in view of this change, the High Court held that it was empowered under the SG Model Law to recognise US Chapter 11 court orders that had been made. (Read our earlier case note on Re Alan Tantleff)