Knowledge Highlights 21 November 2024
Bill introduced to revamp and make permanent Simplified Insolvency Programme to support financially distressed companies
On 11 November 2024, the Insolvency, Restructuring and Dissolution (Amendment) Bill (“Bill”) was tabled for first reading in Parliament. The Bill, which forms part of the Ministry of Law’s (“MinLaw”) efforts to bolster Singapore’s insolvency framework and support for financially distressed companies, seeks to revamp the Simplified Insolvency Programme (“SIP”) and make it a permanent feature of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”).
By way of background, the SIP was established on 29 January 2021 to provide simpler, faster, and lower-cost proceedings to assist micro and small companies (“MSCs”) in need of winding up or restructuring through either a Simplified Debt Restructuring Programme (“SDRP”) or a Simplified Winding Up Programme (“SWUP”). The initial application period for the SIP was from 29 January 2021 to 28 July 2021. The application period for the SIP was subsequently extended three times. The validity period of the SIP was last extended to 28 January 2026. On 22 November 2023, in a speech at the Singapore Insolvency Conference 2023, Minister for Culture, Community and Youth and Second Minister for Law Edwin Tong, SC said that the Government was considering changes to make the SIP permanent and tailored for MSCs.
Key amendments
The Bill will amend Parts 5A and 10A of the IRDA to make permanent the SDRP and the SWUP. The Bill also makes some modifications to simplify the procedures for eligible companies to enter into the SDRP and SWUP. Licensed Insolvency Practitioners (“IPs”) in the private sector who are experienced and have the relevant expertise will administer the key changes to the two processes.
Set out below are the key amendments:
- Simpler eligibility criteria: To allow companies that are not MSCs to also benefit from the SIP, the new SDRP and SWUP under the Bill will have only one general eligibility criterion (unlike the current four general eligibility criteria for the SDRP, and five general eligibility criteria for the SWUP), i.e. the company’s total liabilities must not exceed S$2 million.
- Simpler application process: A company applying for the SDRP will be required to produce only key supporting documents. The IPs, when assessing whether the company meets the requirements for entry into the SDRP, may request for more documents. For the SWUP, if the company has incomplete records, the company may submit a directors’ declaration that the eligibility criterion is met. To prevent abuse, enforcement provisions will target false declarations.
- More effective administration: In the new SDRP, only one class of creditors will vote on the debt repayment plan (“DRP”), instead of up to three (i.e. secured, preferential and ordinary, and unsecured creditors) in the current SDRP. The DRP will be binding on all creditors if a majority of at least two-thirds in value of creditors present and voting approve the DRP. Court involvement will also be limited to situations where approval of a DRP is disputed and only on specified grounds.
For the new SWUP, costs are reduced by removing the need to publish notifications in the Government e-Gazette and newspapers, and requiring publication on MinLaw’s website only. Lodgments will still be on the Accounting and Corporate Regulatory Authority’s Bizfile for permanent record. In situations where no creditor funding is given to the IP to conduct investigations to recover assets, the IP may proceed to complete the liquidation and thereafter dissolve the company without taking any further investigative action.
To facilitate the efficient liquidation and dissolution of unviable companies, the new SDRP and SWUP may transit to other liquidation processes.
- Strengthened creditor protection: In the new SDRP, the initial moratorium period during which creditors are unable to enforce their rights is shortened from 90 to 30 days, and a black-out period of five years also applies (i.e. a company which fails to successfully complete the SDRP cannot apply for the SDRP again until at least five years have elapsed).
The detailed list of the differences between the features of the existing and current SIP can be found in the Annex to the press release.
MinLaw will continue to evaluate processes and work closely with industry stakeholders to enhance Singapore’s restructuring and insolvency framework and ecosystem.
Reference materials
The following materials are available on the Parliament website www.parliament.gov.sg and the MinLaw website www.mlaw.gov.sg:
