Cross-Border Insolvency PDF

Corporate and Commercial Practice Insolvency Law and Practice Cross-Border Insolvency Copyright © 2024, Singapore Institute of Legal Education 1 Introduction – what is an “international insolvency or restructuring” Debtor’s business cond...

Corporate and Commercial Practice Insolvency Law and Practice Cross-Border Insolvency Copyright © 2024, Singapore Institute of Legal Education 1 Introduction – what is an “international insolvency or restructuring” Debtor’s business conducted in different countries Creditors situated in different countries Assets located in different countries Parallel proceedings in different countries Topics Powers of a foreign liquidator or insolvency office holder in Singapore; Jurisdiction of the Singapore Courts to make a winding up order against a foreign company; Administration of a foreign company’s assets (where that foreign company has been placed in liquidation in Singapore) by the Singapore liquidator; and Invocation of local restructuring legislation to aid a foreign insolvency process. UNCITRAL Model Law Came into effect 23 May 2017 (3rd Schedule, IRDA) Platform for: granting access to foreign insolvency office holders to the courts of the enacting state; recognition by the enacting state of the foreign insolvency proceedings; granting of relief to assist the foreign insolvency proceedings; cooperation and coordination between courts and insolvency appointment holders of different states. No requirement of reciprocity. UNCITRAL Model Law Model Law provides the platform for recognition of and assistance to foreign insolvency process. Nature and extent of recognition and assistance depends on whether foreign liquidator appointed in Centre of Main Interests (COMI). UNCITRAL Model Law Meaning of COMI – see Zetta Jet SGHC 53; Rooftop Group SGHC 280. Rebuttable presumption that debtor’s registered office is its COMI – Art 16(3) Significance of distinction between foreign main proceeding and foreign non-main proceeding. UNCITRAL Model Law Foreign main proceeding – recognition order provides automatic relief. Types of relief – eg, stay against proceedings and execution; no transfer of assets. UNCITRAL Model Law Stay and suspension do not affect steps taken to enforce security rights over the debtor’s property, re-possess goods under a hire purchase agreement, and a creditor’s rights of set-off (Article 20(3)). UNCITRAL Model Law foreign non-main proceeding - powers and reliefs are subject to discretion of the Singapore courts. whether foreign main or non-main proceeding - may seek other reliefs, eg, examination of witnesses, taking of evidence or delivery of information relating to debtor’s assets, affairs, rights or obligations. UNCITRAL Model Law In granting relief, courts must be satisfied that the interests of the creditors (including secured creditors), and other interested persons, including the debtor, are adequately protected – Art 22. Case Examples Application of common law eg, in Re Opti-Medix, Re Tai Soo Suk (Hanjin Shipping) and Beluga Shipping. Reasoning remains relevant in providing general principles. Jurisdiction of Singapore Courts to wind up foreign companies Section 246(1)(d) IRDA provides that a foreign company may be wound up in Singapore only if it has a substantial connection with Singapore. Factors in deciding whether there is substantial connection (s246(3) IRDA): Singapore is the centre of main interests of the company; The company is carrying on business in Singapore or has a place of business in Singapore; Factors in deciding whether there is substantial connection The company is a foreign company that is registered under Division 2 of Part XI Companies Act; The company has substantial assets in Singapore; The company has chosen Singapore law as the law governing a loan or other transaction, or the law governing the resolution of one or more disputes arising out of or in connection with a loan or other transaction; and The company has submitted to the jurisdiction of the Singapore courts for the resolution of one or more disputes relating to a loan or other transaction. Administration of a Liquidation of a Foreign Company which has been wound up or dissolved in its place of incorporation Issues include whether and how assets in Singapore may be transmitted to the principal liquidation in its place of incorporation. For certain types of foreign companies (relevant companies), Liquidator must first pay debts incurred in Singapore before the Company’s assets can be transmitted to the principal liquidation in its place of incorporation No “ring-fencing” of assets in Singapore, except for certain types of companies (s250(3)(c) IRDA). Invoking Singapore processes in conjunction with Cross-Border Restructuring The Model Law does not provide for the restructuring of the company’s debts and liabilities. To do so, a foreign company needs to initiate a scheme of arrangement or judicial management process. Invoking Singapore processes in conjunction with Cross-Border Restructuring A foreign company which seeks to initiate a scheme process in Singapore must be liable to be wound up in Singapore (s63(3) IRDA; s210(11) Companies Act). Invoking Singapore processes in conjunction with Cross-Border Restructuring A foreign company may also apply to be placed under judicial management (definition of “company” in s 88 IRDA – “any corporation liable to be wound up under this Act”). Invoking Singapore processes in conjunction with Cross-Border Restructuring In addition to requirement of connection with Singapore, Singapore courts may consider other factors in deciding whether to grant a judicial management order. Deutsche Bank v APP – JM application dismissed because, inter alia, it is uncertain if judicial managers will be able to control key foreign subsidiaries. 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.