Singapore Liquidation (B24 INV) PDF

B24 INV 1\. LIQUIDATION \(a) Overview of Liquidation Part 8 of the IRDA Commencement of Winding Up: Sections 126 and 161(6) of the IRDA A winding up is usually a **[last resort]** because it ends up in the dissolution of a company. \(b) Winding Up by the Court (**[Compulsory]**) \[Odelia\...

B24 INV 1\. LIQUIDATION \(a) Overview of Liquidation Part 8 of the IRDA Commencement of Winding Up: Sections 126 and 161(6) of the IRDA A winding up is usually a **[last resort]** because it ends up in the dissolution of a company. \(b) Winding Up by the Court (**[Compulsory]**) \[Odelia\] Advantages/ Disadvantages of winding up Advantages Disadvantages - - - Locus Standi: **[Section 124 of the IRDA]** - - **[Who]** can apply? - - - - - - - - **[Procedure]** Court's discretion to decline to grant winding up order: Section 128 of the IRDA Grounds \(i) Inability to pay debts / Test for Insolvency **[3 ways]** to establish **[inability to pay debts]** Sections 125(1)(e) and 125(2) of the IRDA Judgement or decree Failur to meet Statutory demand: s125(2) IRDA \> 15,000 - - - Cashflow insolvency test vs Balance sheet insolvency test: Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd \[2021\] SGCA 60 a. b. c. d. e. f. g. h. \(ii) Presumption of Insolvency Section 125(2) of the IRDA - 3 weeks from service of statutory demand (**[not letter of demand]**) **[Was the option to compound provided?]** BNP Paribas v Jurong Shipyard Pte Ltd \[2009\] 2 SLR(R) 949 \(iii) Disputing a debt on substantial grounds BNP Paribas v Jurong Shipyard Pte Ltd \[2009\] 2 SLR(R) 949 Metalform Asia Pte Ltd v Holland Leedon Pte Ltd \[2007\] 2 SLR(R) 268 Mohd Zain bin Abdullah v Chimbusco International Petroleum (Singapore) Pte Ltd \[2014\] 2 SLR 446 **[Both types]** of voluntary liquidation are **[commenced by the company]**. \(c) **Members' Voluntary** Winding Up (Solvent liquidation) Sections 160 to 165 of the IRDA s160 - \>75% - - s161 - - s162 s163 \> 12 months after commencement of winding up s164 - at least one or more liquidator s165 - If the liquidator is of the view that the company is unable to pay its debts, then call creditor\'s meeting \(d) **Creditors' Voluntary** Winding Up Sections 160 to 163, and 166 to 170 of the IRDA s160 s161 s162 - To cease to carry on its business s163 - Members' voluntary winding up when company is still solvent s166 - 10 days notice of the meeting of creditors s167 - Company can choose the liquidator - - - - - - - - s168 - Director\'s affidavit to concurr in the statement of affairs s169- committee of inspection appointed to represent the interest of the creditor as a whole s170 - any disposal or disposition of property, post winding-up is void. \[Odelia\] Members v Creditors winding up - depends on whether the company is solvent or insolvent - - - - \(e) Effect of Winding Up \(i) Moratorium on legal and enforcement proceedings **[ Court Winding Up]**: Sections 129, 130, and 133 of the IRDA s129 - Court may stay or restriant proceedings against wuond up company s130 - Avoidance of dispositions by wound up company s133 - No action to be commenced against company - - Section 206 of the IRDA and Section 334 of the Companies **[creditors cannot retain the benefit of uncompleted execution]** Functus Officio The Liquidator and remuneration Statement of Affairs Members' Creditors' Voluntary Winding Up: Sections 162 and 170 of the IRDA s162 - restriction against share transfer and alteration in the member\'s status s170 - No enforcement against estate and no action against company \(i) Provable Debts Section 218(1) & (2) of the IRDA - - - s218(3)-(8) Insolvency set-off: Section 219 of the IRDA - - - - - Interest on debts: Section 222 of the IRDA - - Insolvency set-off: Law and Practice of Corporate Insolvency (2014, LexisNexis), Chapter VI \[1905 -- 2101\] What happens in a regular set-off? What happens in an insolvency set-off? conversion date for foreign currency claims \(h) The Pari Passu Principle of Distribution Section 172 of the IRDA - **[Pari Passu]** **[Preferential payments]** and priorities amongst **[unsecured debts]**: Section 203 of the IRDA 1. 2. 3. 4. 5. c. d. e. What happens if there are insufficient assets to pay everyone? Estate Costs Rule Halsbury's Laws of Singapore on Insolvency, Volume 13 (2013 Reissue, LexisNexis Singapore), \[150.456 - 150.472\] \[150.456\] Creditor\'s position prior to commencement of liquidation (Creditors to avoid claw back clauses) \[150.457\] The pari passu principle \[150.458\] Priority of payment \[150.459\] Estate costs rule \[150.460\] All costs and expenses of winding up (Top priority) \[150.461\] Payment for costs without the need for passing \[150.462\] Liquidator to bear costs proceedings \[150.463\] All wages and salaries (2nd) \[150.464\] All amounts due to an employee (3rd) \[150.465\] All amounts due in respect of workmen\'s compensation (4th) \[150.466\] All amounts due in respect of contributions payable (5th) \[150.467\] All remuneration payable to any employee in respect of vacation leave (6th on the list) \[150.468\] Amount of all tax assessed (penultimate on the list) \[150.469\] Sums payable to employee under the Employment Act \[150.470\] Insufficiency of funds to meet all debts (floating charge) \[150.471\] Priority to third parties entitled to insurance 150.472 Assets recovered under an indemnity for costs of litigation 150.473 Position of unsecured creditors Liquidator dissolution and release 2\. BANKRUPTCY \(a) Bankruptcy Proceedings \(i) **[Who]** can make a bankruptcy application Creditor's application: Section 307 of the IRDA Debtor's application: Section 308 of the IRDA - \(ii) Conditions to be satisfied in respect of debtor Does the Court have **[jursidiction]** over the debtor? Section 310(1) of the IRDA - - - - - - - - - **[Grounds]** for bankruptcy application: Section **** of the IRDA (**[\$15,000]**) - - - - - **[Presumption]** of inability to pay debts: Section 312 of the IRDA Statutory demand: Section 312(a) of the IRDA Expediated procedure (Section 3.1 IRDA) **[Effect]** of bankruptcy Order **[Alternatives to bankruptcy]** \(v) **[Debt Repayment Scheme \ - - - - \(b) **[Individual Voluntary Arrangement- for large business debts]** Is there a moratorium ? Part 14 of the IRDA (a general understanding of what the Individual Voluntary Arrangement is will be sufficient) - Application / Nominee appointed as supervisor \(c) Bankruptcy Administration Official Assignee / **[Private Trustee in Bankruptcy (PBIT)]** is **[mandatory]** Remuneration Rule 47 IRDA Administration of Bankrupt\'s property s327 IRA \(iii) Duties of Bankrupt General **[duties of the Bankrupt]**: Section **** of the IRDA - - - - - - - - - - - - - - - File Statement of Affairs - s332(1) IRDA Submit accounts as and when directed by OA - s333 IRDA \(iv) **[Restrictions]** against Bankrupt Sections 400, 401 and 412 of the IRDA s400 - Bankrupt is **[disqualified]** s401 - Bankrupt **[not to leave Singapore]** s412 - **[limits of liability]** Bankrupt cannot be director of company: section 148(1) of the Companies Act ([This is a strict liability offence]) \(d) Discharge or annulment of bankruptcy **[4 ways]** to case being a bankrupt \[1\] **[Annulment]** under Sections 392 to 395 of the IRDA s392 - Court\'s power to annul bankruptcy order - - s393 - Powers of the OA \[2\] Composition or scheme of arrangement by **[special resolution]** : s357 IRDA \[3\] OA\'s application to court s394 IRDA \[4\] Discharge by OA\'s certification s395 IRDA s396 IRDA **[Factors]** for OA\'s certificate Factors Where bankrupt is not repeat bankrupt s395(2)(a)(i) IRDA **[Effect]** of discharge: Section 397 of the IRDA - - - - - - 3\. JUDICIAL MANAGEMENT Judicial management offers the **[prospects of recovery]** for the company or a better realization of assets. Test for insolvent or likely to become insolvent Crtieria for JM order to be made s89(1)(a) to (c) IRDA - **[Three Statutory purposes]** \(a) Judicial Management Proceedings **[Two- ways]** to place a complay into JM **[\[1\] Court Application]**: Sections 90 to 92 of the IRDA - s91 power of the court to appoint the Judicial Manager s91(4) Notice of Application to be published in gazette s91(5) - Holder of floating charge to issue notice of application **[s91(6)]** - JM **[must be dismissed]** if prejudicial to unsecured creditors, unless against public interest exception applies s91(10) IRDA Public interest exception **[s91(10) IRDA]** ▪ Re Cosmotron Electronics (Singapore) Pte Ltd ▪ Re Bintan Lagoon Resort Ltd s92 Power of Court to appoint interim judicial manager **[\[2\]]** **[Resolution of Creditors]**: Section 94 of the IRDA - - - s94(1) - Grounds for obtaining a resolution of creditors for JM - - - s94(2) - 7 days Notice to Appoint Interim Judicial Manager s94(3) - Conditions for appointing **[interm]** judicial manager - - - - - - - s94(4) - Duties and powers of interim judicial manager - - - s94(5) - Notice of Appointment of interim judicial manager - - s94(6) - Term of Interim Judicial Manager - - s94(7) - Creditor\'s Meeting to appoint judicial manager \ - s94(9) - One director must attend s94(10) - Company secretary to attend the meeting s94(11) - **[Majority of number and value]** of creditors must approve JM - - - - - s94(12) - JM must be licensed s94(13) - **[JM must not be appointed]** - - - - - - Conditions to satisfy to apply for judicial management: Section 90 of the IRDA - **[Effect]** of JM \(i) Aims of Judicial Management Section 89 of the IRDA - Three purposes of the Judicial Manager \(b) Administration of Judicial Management \(i) Effect of filing of application Judicial Management Application and Judicial Management Order Statutory Moratorium **[s95 IRDA]** s95 - **[Automatic]** interim moratorium - - - - - - - s66 - **[Final]** Moratorium - - - - **[Set-off rights]** still in effect **[s96(5) IRDA]** ▪ Electro Magnetic (S) Ltd v DBS ▪ Altus Technology Pte Ltd (under judicial management) v OCBC Expanded moratorium **[s96(4) IRDA]** Extension of JM **[s111(3) IRDA]** Judiucial Manager Powers **[s99 IRDA and first schedule]** Judicial Manager cannot Juidical Manager can Discharge s112 IRDA Court\'s power to relief Judicial Manager (**[s115 IRDA]**) Statement of proposals within 90 days **[s107 IRDA]** 4\. AVOIDANCE OF ANTECEDENT TRANSACTIONS It is important to be aware of the relevant time periods for challenging transactions and the elements required to establish a claim. \(a) Unfair or Undue Preference (UUP) **[Requirements]** Section 224 of the IRDA s224(1) - Company is in JM/WU + relevant time s224(2) - Court may restore the transaction as if not entered into s224(3) - Transaction UV is no consideration or less monies worth - - s224(4) - Good faith defence - - **[ Relevant time]**: Section 226 of the IRDA s226(1)(a) - **[relevant time is 1 year for unrelated and 2 years for connected]** s226(2) - requirement of unable to pay debts s226(3) - TUV entered into with **[connected person]**, s225(5), 362(5) IRDA **[Presumption of "influenced by desire to prefer\"]** Progen Engineering \[2010\] 4 SLR 1089 DBS Bank v Tam Chee Chong - - Rabobank v Jurong Technologies Industrial Corp Ltd \[2011\] 4 SLR 977 s226(4) - TUV if entered commencement of JM s226(5) - \'relevant time\' alternative period s226(6) - Additional relevant time periods Extent of orders that can be granted by Court: Section 227 of the IRDA Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd \[2010\] 4 SLR 1089 - **[Respondant cannot simply deny the existence of desire to prefer to rebut the presumption]** \(b) Transaction at an undervalue (TUV) Requirements (s224 & s361 IRDA) Section 225 of the IRDA s225(1) - Company in JM or WU s225(2) - Court may restore transaction s225(3) - UP = guarantor, better position s225(4) - Y must have desired to prefer X What is the test? s225(5) - unfair presumption if Y is connected to X, unless contrary is shown s225(6) - Court order is not immunity **[ Relevant time]**: Section 226 of the IRDA s226(1)(a) - \ - Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and others \(d) Wrongful Trading **[s239 IRDA]** No requirement for criminal conviction Wrongful means no reasonable prospect Section 239 of the IRDA - Responsibility for wrongful trading +-----------------------------------+-----------------------------------+ | **Elements** | **S 239(12) IRDA**: Company (Y) | | | trades wrongfully if -- | | | | | | - | | | | | | [of meeting them in | | | full]; or | | | | | | - | | | | | | o  (i) that it has [no reasonable | | | prospect of meeting in | | | full;] and | | | | | | o  (ii) **that | | | [resulted] in** | | | company becoming insolvent. | +-----------------------------------+-----------------------------------+ | **Criminal liability** | **S 239(6) IRDA**: Where company | | | has traded wrongfully, every | | | person who was party to it and | | | who -- | | | | | | - - | | | | | | is to be **[guilty of | | | offence] **and liable | | | on conviction to fine not more | | | than \$10,000 / imprisonment for | | | term not more than 3 years / | | | both. | +-----------------------------------+-----------------------------------+ | **Who** | **S 239(5) IRDA**: Following | | | persons may apply under (1) -- | +-----------------------------------+-----------------------------------+ | **may apply?** | - - - - | | | | | | o (i) judicial | | | manager/liquidator; or | | | | | | o (ii) Court. | +-----------------------------------+-----------------------------------+ | **Guidance from Court** | **S 239(10) IRDA**: Any company / | | | (with company's consent) any | | | person **[may apply to Court for | | | declaration] **as to | | | [whether particular course of | | | conduct, transaction or series of | | | transactions at time of and after | | | application would constitute | | | wrongful trading]. | +-----------------------------------+-----------------------------------+ | **Defence** | **S 239(2) IRDA**: Court may | | | relieve (in whole/part) person | | | declared responsible from | | | personal liability if -- | | | | | | - - | | | | | | personal liability. | +-----------------------------------+-----------------------------------+ | **Civil liability** | **S 239(1) IRDA**: If, in course | | | of judicial management/winding | | | up, it appears that company (Y) | | | has traded wrongfully, Court, on | | | application of any person in (5), | | | may declare that **any party to | | | trade is [personally | | | responsible] for | | | all/any of debts/other | | | liabilities of Y if he** -- | | | | | | - - | | | | | | wrongfully. | | | | | | **S 239(3) IRDA**: Court may make | | | additional orders with regards to | | | declaration in (1) -- | | | | | | - | | | | | | o (i) on any debt/obligation due | | | from company to person liable; or | | | | | | o (ii) on any charge / interest | | | in any charge on any assets of | | | company held | | | | | | - - - | | | | | | | | | | | | - | | | | | | \(c) provision for sums received | | | to be paid to such | | | persons/classes of persons. | +-----------------------------------+-----------------------------------+ Defence of honesty s239 IRDA 5\. SCHEMES OF ARRANGEMENT \[Odelia\] Difference between JM and SOA? - - - \(a) Objective and Purpose of Scheme - - - - - **[Requirements]** for SOA s210 of the Companies Act - - Overview of the various stages of a scheme application and applicable tests: The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal \[2012\] 2 SLR 213 - - - - \(i) **[Who]** can apply Section 210(2) of the Companies Act - - - - - - - - \(ii) Interim Moratorium **Automatic interim moratorium**: Section 64 of the IRDA Duration **[Scope]** of the moratorium Requirements Conditions Notice of Application Documents to be submitted Company to furnish financial information Extension of duration Discharge / Variation \(b) Convening the Scheme Meeting Application to **[Court for Leave]** to convene meeting O38r2(1) The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v. TT International Ltd and another appeal \[2012\] 2 SLR 213 Pathfinder Strategic Credit LP v Empire Credit Resources Pte Ltd \[2019\] 2 SLR 77 **[After Leave]** is granted by Court to convene creditor\'s meeting Sections 210(1) and 211 of the Companies Act Notice of the meeting and explanatory statement Contents of the explanatory statement must be full and frank \(i) **[Classification]** of creditors **[ Dissimilarity principle]**: The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v. TT International Ltd and another appeal \[2012\] 2 SLR 213 Test - scheme is overall fair and equitable to each dissenting class Possible classes of creditors Pathfinder Strategic Credit LP v Empire Credit Resources Pte Ltd \[2019\] 2 SLR 77 \(ii) **[Voting]** on the proposed scheme **[ Threshold of creditor support required]**: Section 210(3AB) of the Companies Act Majority in number of each class of creditors representing three-fourths in value present and voting - - \(c) Court approval of the Scheme \(i) **[Factors]** that the Court takes into consideration - - - The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v. TT International Ltd and another appeal \[2012\] 2 SLR 213 - - - - Pathfinder Strategic Credit LP v Empire Credit Resources Pte Ltd \[2019\] 2 SLR 77 Wai Wen Electrical Engineering **[Effect]** of SOA approval **[Termination]** of the SOA 6\. CROSS-BORDER ASPECTS OF INSOLVENCY LAW & RESTRUCTURING \(a) Winding Up of Foreign Companies \" Part 10 of the IRDA \" Substantial connection with Singapore: Sections 246(1)(d) and 246(3) of the IRDA s246(1)(d) - there must be a **[substantial connection]** with Singapore s246(3) - Factors of substantial connection with Singapore - - - - \(b) Recognition of Foreign Insolvency & Restructuring Proceedings \" Third Schedule of the IRDA: UNCITRAL Model Law on Cross-Border Insolvency Powers of a foreign liquidator or insolvency office holder in Singapore; No requirement of reciprocity. What is the COMI? - Rebuttal presumption The **[Zetta Jet factors]** in determining COMI Why is the COMI important? Foreign main proceeding = recognition order provides **[automatic relief]**. Foreign non-main = powers and reliefs are **[subject to discretion of the Singapore courts]** **[Courts must be satisfied that interest of creditors are protected (Art 22)]** Re Opti-Medix Re Tai Soo Suk (Hanjin Shipping) and Beluga Shipping. Jurisdiction of the Singapore Courts to make a winding up order **[against a foreign company]**; **[Requirements]** 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.