Proposed Enhancements to Strengthen Singapore As an International Centre for Debt Restructuring

March 2, 2017

The Singapore Ministry of Law and Ministry of Finance recently conducted a public consultation exercise from October 21, 2016 to December 2, 2016 to seek feedback on the proposed Companies (Amendment) Bill 2017 ("Bill") to strengthen Singapore as an international centre for debt restructuring.  

The idea for change dates back to December 2010 when the Ministry of Law formed the Insolvency Law Review Committee ("ILRC") to review Singapore’s bankruptcy and corporate insolvency regime. Subsequently on May 8, 2015, the Ministry of Law established the Committee to Strengthen Singapore as an International Centre for Debt Restructuring ("Committee") to build on the work of the ILRC. Many of the Committee’s recommendations are adapted from the United States Chapter 11 bankruptcy proceedings that subsequently found their way into the resultant Bill. The changes are likely to come into effect in 2017.  

The key changes proposed by the Bill cover the following three areas: 

  • Enhancing the existing legal framework for restructurings;
  • Promoting rescue financing in Singapore; and
  • Improving cross-border insolvency.  

1. Enhancing the existing legal framework for restructurings

 Most of the amendments proposed by the Bill aim to enhance the existing provisions under the Companies Act for schemes of arrangement and judicial management, as elaborated in further detail below:

(i) Clarifying the law on foreign companies conducting restructuring proceedings in Singapore

 Presently, a foreign debtor is required to show that it has a clear connection or nexus to Singapore before a Singapore court may allow the foreign debtor to rely on the schemes of arrangement provisions in the Companies Act. To ensure greater clarity, the Bill sets out a list of non-exhaustive factors that the court may take into account in determining whether the requisite nexus exists. These include, but are not limited to:

  • Whether Singapore is the centre of main interests of the foreign debtor;
  • Whether the foreign debtor has substantial assets in Singapore; and
  • Whether the foreign debtor is a foreign company that is registered under the Companies Act.[1]

(ii) Moratoriums for restructurings

Currently, an automatic moratorium against creditor action arises on submission of a judicial management application. The same does not apply to schemes of arrangement. Under the proposed amendments, the Bill provides that a Singapore court may grant a moratorium when a company has made an application to call a meeting of its creditors. The Bill also provides for a month-long moratorium that will commence upon an application for one.[2]

Additionally, the courts may also extend the moratorium to a subsidiary of a debtor company. However, to safeguard against abuse, the subsidiary must be relevant to the restructuring. Furthermore, it must be demonstrated that its inclusion in the moratorium would contribute to the success of the restructuring.

The above amendments were adapted from the Chapter 11 provisions of the United States Bankruptcy Code ("Bankruptcy Code"). Under the Bankruptcy Code, a moratorium is automatically granted to a debtor upon the filing of a petition under Chapter 11. The moratorium granted is worldwide in nature and protects the company from creditor action globally.

(iii) Cram-downs for schemes of arrangements

The Bankruptcy Code also inspired the provisions for enhanced cram-downs for schemes of arrangements. This means that under the proposed Bill, the Singapore courts will now have the ability to approve a scheme of arrangement where there are multiple classes of creditors, notwithstanding that there may be a class of creditors that opposes the proposed scheme of arrangement. However, certain conditions must be met, such as the majority of creditors present and voting to approve the scheme must represent at least 75% in value of the creditors to be bound by such scheme. Furthermore, the court may only make such an order if it is satisfied that the scheme in question would not discriminate unfairly between two or more classes of creditors.[3] 

2. Promoting rescue financing in Singapore

Another element of the Bankruptcy Code that features in the proposed Bill relates to the provision of super-priority finance. This means that in both a scheme of arrangement or judicial management situation, lenders who provide rescue financing may be able to obtain super-priority status subject to the court’s approval. Super-priority status allows such creditors to be paid ahead of other creditors in a winding-up proceeding and is similar to debtor-in-possession financing under the Bankruptcy Code.[4]

3. Improving cross-border insolvency

Finally, to facilitate the resolution of cross-border insolvency proceedings, the Bill will formally adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency. The Bill will also abolish the ring-fencing rule in winding up for foreign companies. Currently under the Companies Act, where a foreign company registered in Singapore is subject to foreign insolvency proceedings, a Singapore liquidator is only permitted to remit funds to the foreign jurisdiction after all debts in Singapore have been paid. Under the Bill, this restriction (otherwise known as the ring-fencing rule) will only apply to prescribed financial institutions.[5]


The Bill comes as a welcome change as Singapore faces stiff challenges in its ambitions to become a restructuring hub. The latest setback comes in the wake of Pacific Andes Resources Development, a Singapore-listed entity that recently abandoned local court proceedings in favour of United States bankruptcy protection as the latter offered a worldwide moratorium that granted the financially ailing company protection against creditor action globally while it sought to restructure itself. Singapore is already an established centre for regional restructurings. However, by introducing the above changes to the existing insolvency and restructuring framework, the Bill seeks to transform Singapore into a competitive hub for international debt restructuring.  

   [1]   Section 351(1) of the Bill.

   [2]   Section 211B of the Bill.

   [3]   Section 211H of the Bill

   [4]   Section 211E of the Bill.

   [5]   Section 377 of the Bill.

Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. For further details, please contact the Gibson Dunn lawyer with whom you usually work or the following authors in the firm’s Singapore office:

Robson Lee (+65 6507-3684, [email protected])
Grace Chow (+65 6507-3632, [email protected])

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