Corporate Bankruptcy in Singapore: Restructuring and Liquidation

Businesses in Singapore may face insolvency due to various factors like market downturns or mismanagement. Understanding corporate bankruptcy processes, including restructuring and liquidation, is crucial for stakeholders aiming to navigate financial turbulence effectively.

Corporate Insolvency Regime

Singapore's corporate insolvency is regulated under the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). The Act provides mechanisms for:

• Judicial Management: A court-appointed manager takes over company operations to rehabilitate the business.

• Scheme of Arrangement: A court-approved agreement between a company and its creditors to restructure debts.

• Liquidation (Winding Up): The company's assets are realized to pay off debts, leading to its dissolution.

  
  

Judicial Management

• Purpose: To rehabilitate the company or achieve a better outcome for creditors than liquidation.

• Process: A judicial manager is appointed to manage the company's affairs, business, and property.

• Moratorium: Legal proceedings against the company are halted, providing breathing space for restructuring.

  
  

Scheme of Arrangement

• Flexibility: Allows for creative solutions tailored to the company's situation.

• Creditor Approval: Requires approval from a majority in number representing at least 75% in value of creditors or class of creditors.

• Court Sanction: The scheme must be approved by the court to be binding.

  
  

Liquidation

• Voluntary Liquidation: Initiated by the company's shareholders when the company cannot continue business.

• Compulsory Liquidation: Ordered by the court, often upon a creditor's application.

• Role of Liquidator: Oversees the winding-up process, distributing assets to creditors according to statutory priorities.

  
  

Impact on Stakeholders

• Employees: May face retrenchment; owed wages have priority in debt repayment.

• Creditors: Secured creditors have priority over unsecured creditors in asset distribution.

• Directors: Obligations continue, and they must cooperate with insolvency practitioners.

  
  

Conclusion

Corporate bankruptcy in Singapore offers avenues for restructuring to save viable businesses or orderly winding up when necessary. Companies facing insolvency should seek professional advice to navigate these complex processes while considering the interests of all stakeholders.