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Questions and Answers
Under Singapore's IRDA, which of the following scenarios would most definitively trigger the presumption that an insolvent company was influenced by a desire to prefer a certain creditor?
Under Singapore's IRDA, which of the following scenarios would most definitively trigger the presumption that an insolvent company was influenced by a desire to prefer a certain creditor?
- The insolvent company made a payment to a creditor within 1 year prior to liquidation, substantiated by documented commercial considerations and approved by an independent board committee.
- The insolvent company made a payment to a creditor based on a court order compelling the payment, following a protracted legal dispute over a contract that significantly predates solvency concerns.
- The insolvent company made a payment to a creditor within 2 years prior to liquidation, where the creditor is an unrelated third party dealing at arm's length.
- The insolvent company made a payment to a creditor within 2 years prior to liquidation, where the creditor is a director of the company's subsidiary and also a guarantor for the company's debts. (correct)
Under Singapore insolvency law, a floating charge created within one year of the commencement of winding up in favor of an unconnected person is automatically invalid regardless of the company's solvency at the time the charge was created.
Under Singapore insolvency law, a floating charge created within one year of the commencement of winding up in favor of an unconnected person is automatically invalid regardless of the company's solvency at the time the charge was created.
False (B)
In the context of avoidance provisions under Singapore's IRDA, what seminal case established that a transaction's susceptibility to being deemed an unfair preference hinges not on the dominant intention, but rather on whether the debtor's decision was merely influenced by a desire to favor the creditor?
In the context of avoidance provisions under Singapore's IRDA, what seminal case established that a transaction's susceptibility to being deemed an unfair preference hinges not on the dominant intention, but rather on whether the debtor's decision was merely influenced by a desire to favor the creditor?
DBS Bank v Tam Chee Chong
In instances where a company is deemed to have engaged in wrongful trading, Section 239(2) of the IRDA provides a potential defense predicated on demonstrating ______.
In instances where a company is deemed to have engaged in wrongful trading, Section 239(2) of the IRDA provides a potential defense predicated on demonstrating ______.
Match the following scenarios with the relevant section of Singapore's Insolvency, Restructuring and Dissolution Act (IRDA):
Match the following scenarios with the relevant section of Singapore's Insolvency, Restructuring and Dissolution Act (IRDA):
Under what conditions, according to Section 224(4) of Singapore's IRDA, can a court not issue an order in respect of a transaction at an undervalue?
Under what conditions, according to Section 224(4) of Singapore's IRDA, can a court not issue an order in respect of a transaction at an undervalue?
A mistaken payment by an insolvent company to an unintended recipient can be classified as an undervalue transaction under Singapore's IRDA.
A mistaken payment by an insolvent company to an unintended recipient can be classified as an undervalue transaction under Singapore's IRDA.
What is the legal test employed in Singaporean courts, as established in DBS Bank v Tam Chee Chong, to ascertain the existence of 'desire to prefer' in the context of unfair preference claims?
What is the legal test employed in Singaporean courts, as established in DBS Bank v Tam Chee Chong, to ascertain the existence of 'desire to prefer' in the context of unfair preference claims?
Pursuant to Section 130 of Singapore's IRDA, any disposition of company property occurring _______ the commencement of winding up by the Court is deemed _______, unless the Court orders otherwise.
Pursuant to Section 130 of Singapore's IRDA, any disposition of company property occurring _______ the commencement of winding up by the Court is deemed _______, unless the Court orders otherwise.
Match the scenario with the corresponding avoidance provision under Singapore's IRDA.
Match the scenario with the corresponding avoidance provision under Singapore's IRDA.
When might a disposition of property by a bankrupt to their former spouse NOT be void under Section 328 of Singapore's IRDA, notwithstanding that it occurred post-bankruptcy application?
When might a disposition of property by a bankrupt to their former spouse NOT be void under Section 328 of Singapore's IRDA, notwithstanding that it occurred post-bankruptcy application?
Under Singapore law, demonstrating that the company received some commercial consideration—however objectively unsustainable—is always a sufficient defense against claims of unfair preference.
Under Singapore law, demonstrating that the company received some commercial consideration—however objectively unsustainable—is always a sufficient defense against claims of unfair preference.
According to the precedent set in Mercator & Noordstar NV v Velstra Pte Ltd, what characteristic of a transaction negates any requirement for mutuality in the context of avoidance provisions in insolvency?
According to the precedent set in Mercator & Noordstar NV v Velstra Pte Ltd, what characteristic of a transaction negates any requirement for mutuality in the context of avoidance provisions in insolvency?
For floating charges in favour of ________ persons, the applicable time period under s 229 IRDA is two years before commencement of winding up, where the company must be insolvent or became insolvent as a result.
For floating charges in favour of ________ persons, the applicable time period under s 229 IRDA is two years before commencement of winding up, where the company must be insolvent or became insolvent as a result.
Match the example situation with the category of officer’s liability:
Match the example situation with the category of officer’s liability:
In determining whether a transaction falls under the purview of 'transaction at undervalue', which criterion established in Buildspeed Construction Pte Ltd v Theme Corp Pte Ltd should be considered?
In determining whether a transaction falls under the purview of 'transaction at undervalue', which criterion established in Buildspeed Construction Pte Ltd v Theme Corp Pte Ltd should be considered?
Pursuant to Singapore law, proving criminal conviction is a prerequisite to establish 'wrongful trading' under Section 239 IRDA.
Pursuant to Singapore law, proving criminal conviction is a prerequisite to establish 'wrongful trading' under Section 239 IRDA.
In what specific timeframe does Section 363(1)(a)(ii) of the IRDA deem a transaction potentially liable as an 'undervalue transaction' relative to the act of an individual being adjudged bankrupt?
In what specific timeframe does Section 363(1)(a)(ii) of the IRDA deem a transaction potentially liable as an 'undervalue transaction' relative to the act of an individual being adjudged bankrupt?
The case of Rabobank v Jurong Technologies Industrial Corp Ltd affirms that even amidst the presence of pressure exerted for repayment, the decisive factor remains whether the debtor held a _______ to prefer the creditor.
The case of Rabobank v Jurong Technologies Industrial Corp Ltd affirms that even amidst the presence of pressure exerted for repayment, the decisive factor remains whether the debtor held a _______ to prefer the creditor.
Match the cited section with the definition of those considered ‘connected’ for purposes of determining an unfair preference:
Match the cited section with the definition of those considered ‘connected’ for purposes of determining an unfair preference:
Under Singapore’s IRDA, what constitutes the critical distinction between ‘fraudulent trading’ and ‘wrongful trading’ concerning the personal liability of officers?
Under Singapore’s IRDA, what constitutes the critical distinction between ‘fraudulent trading’ and ‘wrongful trading’ concerning the personal liability of officers?
According to Singapore jurisprudence, a presumption of preference triggered by a payment made to a related party is irrebuttable and conclusive.
According to Singapore jurisprudence, a presumption of preference triggered by a payment made to a related party is irrebuttable and conclusive.
What case clarified that the word ‘disposition’ doesn’t include the process by which a person with a beneficial interest in the property obtains that property?
What case clarified that the word ‘disposition’ doesn’t include the process by which a person with a beneficial interest in the property obtains that property?
Under s 238 IRDA, ‘defraud’ and ‘fraudulent purpose’ connote actual dishonesty involving, according to current notions of fair trading among commercial men, real ______.
Under s 238 IRDA, ‘defraud’ and ‘fraudulent purpose’ connote actual dishonesty involving, according to current notions of fair trading among commercial men, real ______.
Match the category of avoidance actions during insolvency with the corresponding IRDA section that addresses their governing principles::
Match the category of avoidance actions during insolvency with the corresponding IRDA section that addresses their governing principles::
According to stipulations within IRDA, an insolvent party’s payment to a non-related creditor will be presumed to be an unfair preference if it took place within what timeframe leading up to actions associated to bankruptcy, insolvent winding up or judicial management?
According to stipulations within IRDA, an insolvent party’s payment to a non-related creditor will be presumed to be an unfair preference if it took place within what timeframe leading up to actions associated to bankruptcy, insolvent winding up or judicial management?
In accordance with Rabobank v Jurong Technologies Industrial Corp Ltd, the need for commercial motivation negates the desire to prefer when reviewing unfairly preferential payment.
In accordance with Rabobank v Jurong Technologies Industrial Corp Ltd, the need for commercial motivation negates the desire to prefer when reviewing unfairly preferential payment.
Under s 239(5) IRDA, who is permitted to apply for cases dealing with both winding up, and judicial management?
Under s 239(5) IRDA, who is permitted to apply for cases dealing with both winding up, and judicial management?
In accordance to Section _________ IRDA, the officer of a company may be personally liable if business had carried out with intent to defraud creditors?
In accordance to Section _________ IRDA, the officer of a company may be personally liable if business had carried out with intent to defraud creditors?
Match what circumstances negate a court making an order under section 224(4) IRDA
Match what circumstances negate a court making an order under section 224(4) IRDA
Which assertion would not be accurate on actions that consist of an unfair or undue preference during winding up?
Which assertion would not be accurate on actions that consist of an unfair or undue preference during winding up?
Section 225(5) only applies when the desire to prefer impacts an incorporated company.
Section 225(5) only applies when the desire to prefer impacts an incorporated company.
For floating charges in favour of an unconnected person, company must be insolvent or became insolvent as a result referring to what section in IRDA?
For floating charges in favour of an unconnected person, company must be insolvent or became insolvent as a result referring to what section in IRDA?
Flashcards
Unfair Preference
Unfair Preference
A category of avoidance provisions under insolvency law that involves giving an advantage to one creditor over others when the company is insolvent.
Elements of Unfair Preference
Elements of Unfair Preference
Elements include: preferred party is a creditor/guarantor, insolvent party was insolvent, creditor's position improves, and insolvent party desired to prefer the creditor.
Relevant Time Period (Unfair Preference)
Relevant Time Period (Unfair Preference)
The period during which an unfair preference can be challenged.
Connected person/associate
Connected person/associate
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Progen Engineering [2010] 4 SLR 1089
Progen Engineering [2010] 4 SLR 1089
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Desire to Prefer (Test)
Desire to Prefer (Test)
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Transaction at an Undervalue
Transaction at an Undervalue
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Relevant Time Period (Transaction at Undervalue)
Relevant Time Period (Transaction at Undervalue)
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Undervalue Transaction with Connected Person
Undervalue Transaction with Connected Person
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Meaning of Transaction
Meaning of Transaction
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Velstra Pte Ltd v Dexia Bank NV
Velstra Pte Ltd v Dexia Bank NV
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Defense (Transaction at Undervalue)
Defense (Transaction at Undervalue)
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Void Disposition
Void Disposition
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Floating Charges
Floating Charges
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Fraudulent Trading
Fraudulent Trading
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Wrongful Trading
Wrongful Trading
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S 239 IRDA
S 239 IRDA
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Tang Yoke Kheng v Lek Benedict
Tang Yoke Kheng v Lek Benedict
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Study Notes
Legislation related to Avoidance Provisions
- Listed under IRDA are sections 130, 229, 237, 238, 239, 224, 225, 226, 227, 361, 362, 363, and 364.
Categories of Avoidance Provisions
- Undue or unfair preference, transaction at an undervalue, void disposition of assets, and floating charges prior to winding up / JM are categories of avoidance provisions.
Personal Liability of Officers
- Fraudulent trading requires intent to defraud.
- Wrongful trading is covered under section 239 IRDA, there is no requirement for criminal conviction for wrongful trading.
- Wrongful trading describes a company incurring debts without a reasonable prospect of meeting them in full.
Unfair Preference
- These are defined in S 225, 226, 362 and 363 IRDA.
Elements of Unfair Preference
- The preferred party is a creditor, surety, or guarantor for the insolvent party's debts or liabilities.
- The insolvent party was insolvent or became insolvent due to entering into the transaction.
- The insolvent party's actions put the creditor in a better position than if the action had not occurred, in the event of bankruptcy or liquidation.
- The insolvent party was influenced by a desire to prefer the creditor.
Relevant Time Period for Unfair Preference
- Under S 226, 363 IRDA, the specified transactions are evaluated relative to a specific period.
- One year from the commencement of winding up or JM, or making a bankruptcy application for unrelated parties.
- Two years from winding up or JM commencement, or making a bankruptcy application, for connected or associated persons.
- The party must be insolvent at the time of providing preference.
Meaning of “Connected”, “Associate”
- Definitions found in S 217(2)(b), (3)-(15) & 364 IRDA.
- Examples for companies include a director and their associates, and a person who is an associate of the company.
- Examples for individuals include a spouse, and relatives such as a brother, sister, uncle, aunt, nephew, and niece.
Presumption of "Influenced by Desire to Prefer"
- Governed by S 225(5), 362(5) IRDA related to persons connected with the company.
- Key case: Progen Engineering [2010] 4 SLR 1089.
- A payment to a party within two years of liquidation triggers a presumption.
- The payee has the burden to prove that the payment was not influenced by the company's desire to prefer them.
Desire to Prefer
- Key case law: DBS Bank v Tam Chee Chong and another (judicial managers of Jurong Hi-Tech Industries Pte Ltd (under judicial management) [2011] 4 SLR 948.
- The key test is determining whether the debtor’s decision was influenced by a desire to prefer the creditor.
- There must be a focus on the debtor's intent to improve the creditor's position in the event of liquidation.
- That desire can be inferred from direct or existing circumstances.
- It is enough that the desire to prefer is one influence, not the sole influence.
- A transaction with proper commercial consideration is not a voidable preference.
- A genuine belief in proper commercial consideration suffices, even if objectively unsustainable.
- Key case law: Rabobank v Jurong Technologies Industrial Corp Ltd [2011] 4 SLR 977.
- The Court of Appeal agreed with High Court's finding that even under pressure from Rabobank, the debtors still desired to prefer Rabobank.
Transaction at Undervalue (s224 & s361 IRDA)
- A person engages in a transaction at an undervalue in the following circumstances:
- When making a gift or entering into a transaction without receiving consideration (s224, s361 IRDA).
- Enters into a transaction in consideration of marriage (s361 IRDA).
- Enters into a transaction with consideration significantly less than the value provided by them (s224, s361 IRDA).
- The individual was/became insolvent as a result of that transaction (s224, s226 IRDA).
Relevant Time Period for Transaction at Undervalue
- 3 years from the commencement of winding up or JM (s 226(1)(a) IRDA).
- Within 3 years of the bankruptcy application where the individual is judged bankrupt (s 363(1)(a)(ii) IRDA).
Connected Persons related to Transaction at Undervalue
- Entering a transaction at an undervalue with a connected person/associate there is a presumption in law.
- There is a presumption that the company/individual was insolvent, or became insolvent because of the transaction (s226(3) IRDA; s363(3) IRDA).
Meaning of "Transaction"
- Key case law: Mercator & Noordstar NV v Velstra Pte Ltd [2003] 4 SLR(R) 667.
- Includes a unilateral act of payment, including a gift, and does not require mutuality.
- Key case law: Velstra Pte Ltd v Dexia Bank NV [2005] 1 SLR(R) 154.
- The insolvent party must intend to enter into a transaction with the counterparty.
- Mistaken payment to unintended recipient is not an undervalue transaction.
- Key case law: Buildspeed Construction Pte Ltd (in liq) v Theme Corp Pte Ltd [2000] 1 SLR(R) 287.
- Value from each party must be assessed relative to the transaction’s circumstances.
Defence against Transaction at Undervalue Claim
- According to Section 224(4) IRDA, the Court does not have to make an order for a transaction at an undervalue if:
- The company acted in good faith and to carry on its business.
- There were reasonable grounds to believe the transaction would benefit the company.
Void Disposition
- S 130 IRDA (s259 Companies Act).
- Includes disposition of company property, and share transfers or status changes.
- Made after winding up commencement, unless court orders otherwise.
- S 328 IRDA restricts disposition by bankrupts.
- Key case law: Cheo Sharon Andriesz v Official Assignee of the estate of Andriesz Paul Matthew [2013] 2 SLR 297.
- Disposition by bankrupt to former wife per divorce consent judgement.
- The disposition occurred after the bankruptcy application.
- Section 77 Bankruptcy Act (s328 IRDA) applied to property disposition pursuant to court order.
- It's important to conduct bankruptcy searches before commencing litigation.
- Key case law: QCD Sdn Bhd v Wah nam Plastic Industry Pte Ltd [1997] 1 SLR(R) 270.
- "Disposition" doesn't encompass when someone with a beneficial interest obtains the property, or realization proceeds from the company when entitled.
Floating Charges
- S 229 IRDA (cf s 330 Companies Act).
- Floating charges granted before winding up or JM may be invalid.
- Invalidity does not apply to the extent of fresh consideration and interest on fresh consideration.
Relevant Time Period for Floating Charges
- Two years for connected persons, and one year for unconnected persons.
- For floating charges favoring unconnected persons, the company must be insolvent or becomes insolvent as a result (s 229(3) IRDA).
Fraudulent Trading
- Directors or others dealing with the company have personal liability.
- S 238 IRDA defines this as business carried out with intent to defraud creditors.
- Applicable to both winding up and JM.
- Those involved in carrying on business in such a manner may be personally liable.
- Key case law: Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and others.
- Involves business carried out with intent to defraud company creditors or for any fraudulent purpose.
- Defendants must knowingly participate in carrying on the business.
- 'Defraud' and “fraudulent purpose" involve actual dishonesty and a real moral blame.
Wrongful Trading (s239 IRDA)
- Who can apply to the courts – s239(5).
- Applicable in both winding up and JM.
- Any person party to the company trading may be personally liable for company debts.
- The company incurs liabilities when insolvent, without reasonable prospect of meeting them.
- A possible honesty defense exists under s239(2) IRDA.
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