Bankruptcy PDF - Singapore Institute of Legal Education

Corporate and Commercial Practice Insolvency Law and Practice Bankruptcy Copyright © 2024, Singapore Institute of Legal Education 1 Introduction 1. Bankruptcy applications and the consequences of a bankruptcy order 2. Alternatives to bankruptcy 3. Ban...

Corporate and Commercial Practice Insolvency Law and Practice Bankruptcy Copyright © 2024, Singapore Institute of Legal Education 1 Introduction 1. Bankruptcy applications and the consequences of a bankruptcy order 2. Alternatives to bankruptcy 3. Bankruptcy administration 4. Discharge and annulment  Relevant Legislation Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”) Insolvency, Restructuring and Dissolution (Personal Insolvency) Rules 2020 (“IRDA Rules”)  Jurisdiction of the Court Singapore court will have jurisdiction over a debtor, if the debtor is: a) domiciled in Singapore; b) has property in Singapore; c) ordinarily resident or has a place of residence in Singapore 1 year before bankruptcy application; or d) has carried on business in Singapore 1 year before the bankruptcy application was made. Bankruptcy Application Application for bankruptcy order may be made by either the creditor or the debtor. Creditor’s application - s307 IRDA Debtor’s application - s308 IRDA  Grounds of Application s311 IRDA 1. The amount of the debt, or the aggregate amount of the debt must not be less than S$15,000. 2. The debt must be for a liquidated sum payable to the applicant creditor immediately. 3. The debtor must be unable to pay his debts.  “Unable to pay debts” s311(1)(c) & s312 IRDA - presumption of inability to pay debts upon non-compliance of a statutory demand. Presumption arises where the debtor fails to make payment within 21 days of receipt of the statutory demand. Form of the statutory demand and the requisite particulars and information can be found in IRDA Rule 73, 64 and 65, Manner of service is found in IRDA Rule 66 Procedure for making an application to set aside a statutory demand is found in IRDA Rule 67  Grounds of Application s311 IRDA 1. The amount of the debt, or the aggregate amount of the debt must not be less than S$15,000. 2. The debt must be for a liquidated sum payable to the applicant creditor immediately. 3. The debtor must be unable to pay his debts. 4. Where the debt or each of the debts is incurred outside Singapore, such debt must be payable by the debtor to the applicant creditor by virtue of a judgment or award which is enforceable in Singapore Expedited Procedure s314 IRDA Creditor may file bankruptcy application before expiry of the 21-day statutory demand period if:- A. Serious possibility that the debtor’s property or value of all or any of his property will be significantly diminished during that period B. The application contains a statement to that effect A bankruptcy order will be advertised and published in the Gazette. This is stated in Rules 109 and 110. Pursuant to section 326, the commencement date of bankruptcy is the date the bankruptcy order is made against the debtor and continues until he is discharged. Effects of bankruptcy order Bankruptcy order will be advertised and published in Gazette s327 IRDA sets out effects of bankruptcy order Property of bankrupt vests in the Official Assignee Deadline for filing Proof of Debt – 4 months Bankrupt’s duties General duty to assist the Official Assignee in identifying and recovering the property of the bankrupt’s estate - s399 IRDA File Statement of Affairs – s332(1) IRDA Submit accounts as and when directed by OA – s333 IRDA Bankrupt’s restrictions Bankrupt’s statutory restrictions: s400 IRDA s401(1)(a) IRDA s401(1)(b) IRDA s412(1)(a) IRDA s148(1) Companies Act  Alternatives to Bankruptcy - IVA Individual Voluntary Arrangement - Part 14 IRDA Allows debtors to enter into binding, voluntary arrangements with creditors in respect of debt repayment Avoids bankruptcy proceedings s275 IRDA – IVA is not available to undischarged bankrupts Alternatives to Bankruptcy - IVA Application to Court by Originating Summons s276-279 IRDA - Interim Order may be granted if: 1. The debtor intends to make a proposal for a Voluntary Arrangement; 2. The nominee appointed by the debtor to supervise the Voluntary Arrangement is qualified and willing to act; and 3. It would be appropriate to do so to facilitate the consideration and implementation of the debtor’s proposal. Alternatives to Bankruptcy - IVA Section 280 to 281 – nominees’ report and creditors’ meeting IF creditor’s meeting summoned, the interim order will be extended After the creditor’s meeting, the nominee will report to the Court on whether the debtor’s proposal is approved by the creditors If yes – implement If no – discharged and creditors can proceed Copyright © 2024, Singapore Institute of Legal Education 15 Alternatives to Bankruptcy - DRS Debt Repayment Scheme under Part 15 IRDA: Debtor’s total liabilities cannot exceed S$150,000.00 Debtor must not be bankrupt or under any voluntary arrangement within 5 years immediately preceding the date of the bankruptcy application Debtor must not be subject to any debt repayment scheme, or subject to one within 5 years immediately preceding the bankruptcy application Debtor must not be a sole proprietor, partner of a firm or limited liability partnership Alternatives to Bankruptcy - DRS Section 293 – moratorium shall apply during the period of implementation for a DRS The right of any secured creditor to realize or deal with his security is not affected by the moratorium. The debtor shall be issued a certificate of completion under section 301 if he repays his debts in accordance with the debt repayment plan. Copyright © 2024, Singapore Institute of Legal Education 17  OA & Private Trustee 1. OA shall be the receiver of the bankrupt’s property and shall administer the bankrupt’s affairs –s327(1)(b) IRDA 2. Private Trustee –s36 IRDA 3. Mandatory to appoint Private Trustee under s36(2) IRDA, in all cases unless the Official Assignee considers there is public interest and consents to be appointed as the trustee in bankruptcy.  Trustee’s remuneration IRDA Rule 47 lists 4 factors: 1. The complexity of the case 2. Whether the responsibility that the trustee was required to assume in the administration of the bankruptcy estate was of an exceptional kind or degree 3. The effectiveness of the trustee’s discharge of his duties 4. The value and nature of assets in the estate Bankruptcy Administration Property of bankrupt shall vest in the OA: s327(1)(a) IRDA Order of distribution among creditors: s352 Bankrupt’s property that is divisible among creditors: s329 IRDA See also avoidance provisions under s361 and 362 Dividend Distribution OA will declare and distribute dividends when sufficient funds – s385 IRDA OA may bring administration to an end when he has realized as much of the estate that he is able to without needlessly protracting bankruptcy Discharge and annulment 4 ways to cease being a bankrupt: 1. Annulment by the Court or OA where all debts & expenses have been paid or secured s392 IRDA for annulment by the Court s393 IRDA for annulment by the OA Discharge and annulment 2. Composition or scheme of arrangement: s357 IRDA Discharge and annulment 3. Subject to s394(4) & (5) IRDA the Court may: a) refuse to discharge the bankrupt from bankruptcy; b) make an order discharging him absolutely; or c) make an order discharging him subject to such conditions as it thinks fit to impose, including conditions with respect to i. any income which may be subsequently due to him; or ii. any property devolving upon him, or acquired by him, after his discharge as may be specified in the order. Discharge and annulment 4. Discharge by certificate of OA: s395 IRDA Differentiated discharge framework First-time bankrupts vs Repeat bankrupts Conditions eg. meeting Target Contribution Creditors’ objections Discharge and annulment 4. Discharge by certificate of OA: s395 IRDA Differentiated discharge framework First-time bankrupts vs Repeat bankrupts Conditions eg. meeting Target Contribution Creditors’ objections Section 396(1) See also Sections 395 and 396 Notice Copyright © 2024, Singapore Institute of Legal Education. All rights reserved. The Course materials are developed by the Singapore Institute of Legal Education, based on the content, syllabus, and guidance provided by the Chief and Principal Examiners and their teams. No direct or indirect reproduction, publication, communication to the public, adaptation or any other use (that is prohibited and/or proscribed by copyright laws) of the Course materials in whole or in part in any form or medium is allowed without the written permission of the Singapore Institute of Legal Education. Part B Candidates should refer to the Code of Conduct for more information, particularly, the sections on conduct and behaviour, and the use of SILE resources.