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Questions and Answers
What is the primary condition under which the Court can still appoint a judicial manager despite the opposition from a floating charge holder?
In the case of Re Cosmotron Electronics (Singapore) Pte Ltd, what was the Court's finding regarding the public interest?
Who can initiate a court-ordered judicial management application according to Section 90 IRDA?
What was the main clarification provided by the High Court in the case of Re Bintan Lagoon Resort Ltd regarding public interest?
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How can a company be placed into judicial management voluntarily?
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What is a primary aim of judicial management under the Insolvency, Restructuring and Dissolution Act?
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Which of the following statements is true regarding the moratorium in judicial management?
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What happens to directors’ powers during judicial management?
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Under what condition would a court dismiss a judicial management application?
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Which statement best describes the statutory purposes of judicial management?
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Which legislation governs the judicial management process?
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What was a notable reason for the introduction of judicial management in 1987?
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What advantage does judicial management offer to creditors compared to winding up?
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What must be true for a judicial manager to be appointed under the IRDA?
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Which of the following actions is prohibited during the statutory moratorium of a company under judicial management?
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Which condition allows for the extension of a judicial management order without requiring a court order?
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Under what circumstances is the judicial manager required to apply for discharge of the judicial management order?
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What is the maximum duration a judicial management order can remain in force before needing to be discharged?
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Which statutory provision protects creditors if a judicial manager is deemed to have mismanaged the company?
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Which of the following is NOT required as per the statutory requirements following a judicial management order?
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How does the moratorium imposed by a judicial management order affect the right of re-entry under a lease?
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Study Notes
### Judicial Management
- Judicial management is covered under Part 7 of the Insolvency, Restructuring and Dissolution Act (IRDA).
- The IRDA allows the courts to place a company under judicial management if it is liable to be wound up under the IRDA.
- It was introduced in 1987 after the Pan-El financial crisis in Singapore.
- It is modelled after UK's administration regime.
- Its aim is to rehabilitate companies and/or preserve the business as a going concern.
### Objectives
- It aims to preserve the interests of creditors, as they are likely to receive more under judicial management than in a winding-up scenario.
- This makes judicial management preferable to winding-up, which is a measure of last resort.
- A key feature is the moratorium, where proceedings and enforcement against the company are prohibited, giving it time to restructure or recover.
- Directors are replaced by independent professionals (judicial managers) who take over all of the directors' powers.
### Insolvency Threshold
- A company must be insolvent or likely to become insolvent to be placed under judicial management.
### Statutory Test
- The applicant must demonstrate that the order would likely achieve one or more of the following statutory purposes:
- Survival of the company or its undertaking as a going concern.
- Approval of a compromise or arrangement under Sections 210 or 71.
- A more advantageous realisation of the company's assets than in a winding-up.
### Opposition to Judicial Management
- An application for judicial management can be opposed by a person entitled to appoint a receiver and manager under a debenture secured by a floating charge, if the prejudice to the opponent is "disproportionately greater" than the prejudice to unsecured creditors.
- The court still has discretion to appoint judicial managers if it is in the public interest.
### Public Interest Exception
- The court has the power to appoint judicial managers even when opposed by a floating charge holder if it is in the public interest.
### Local Cases
-
Re Cosmotron Electronics (Singapore) Pte Ltd
- The company sought a judicial management order to facilitate relocation of its manufacturing assets.
- Five creditors holding >50% of the company's total debt opposed the application.
- The High Court found no public interest for a judicial management order to be made.
- The court found that it had overriding power to make a judicial management order even when the statutory purposes had not been met, due to public interest.
-
Re Bintan Lagoon Resort Ltd
- The High Court clarified that the test was not merely whether it was in the public interest to appoint a judicial manager, but whether the court considered that the public interest in the circumstances required the appointment.
### Judicial Management Orders
- A judicial management order can be obtained through an application by:
- the company itself.
- the company's directors.
- a creditor of the company.
### Voluntary Judicial Management
- Companies can also be placed under judicial management by a creditors' resolution, without a court order.
### Appointment of a Judicial Manager
- The judicial manager must be a licensed insolvency practitioner.
- The company can nominate their own judicial manager, which can be opposed by creditors.
### Effects of a Judicial Management Application
- A statutory moratorium is imposed when an application is made, which prohibits:
- Winding up resolutions.
- Enforcement of charges or security over the company's property.
- Legal proceedings unless with court leave.
### Moratorium after a Judicial Management Order
- The moratorium is expanded after a judicial management order is made.
- This prohibits:
- Lease re-entry and forfeiture.
- Appointment of receivers or managers.
- Receivers and managers from vacating the premises, and winding up applications are dismissed).
### Contractual Right of Set-Off
- The right of set-off is not affected by the moratorium.
### Period of Judicial Management
- A judicial management order remains in force for 180 days, unless it is discharged.
- This time can be extended by the court.
- The order can be extended by a majority of creditors (according to number and value) in writing or at a meeting, without a court order.
### Functions, Powers, and Duties of Judicial Managers
- Their responsibilities are outlined in Section 99 of the IRDA and the First Schedule.
- Immediate actions include:
- Taking possession of the company's records.
- Securing the company's premises.
- Reviewing company operations.
- Meeting with key employees.
### Restrictions
- They cannot deal with property held on trust.
- They cannot make payments towards debts incurred before the judicial management order, except as allowed under Section 99(6).
### Statement of Proposals
- Judicial managers must submit a statement of proposals outlining how they plan to achieve one or more of the statutory purposes.
- This document must be sent to creditors within 90 days of the judicial management order.
### Discharge
- The judicial manager must apply to the court for discharge if the statutory purposes have been achieved or cannot be achieved.
### Protection of Creditors
- The court can provide relief if a judicial manager has acted in a way that is unfairly prejudicial to:
- The creditors or members generally.
- Some part of the creditors or members.
- A single creditor representing at least one quarter in value of the company's debt.
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Description
This quiz covers the key aspects of judicial management as outlined in the Insolvency, Restructuring and Dissolution Act (IRDA). Learn about its objectives, the process of appointing judicial managers, and the implications for companies and creditors. Test your knowledge of how judicial management aims to rehabilitate businesses in financial distress.