Transitional Provisions Under the Insolvency, Restructuring and Dissolution Act

Client Update: Singapore 2020 AUGUST

Restructuring & Insolvency

Transitional Provisions under the Insolvency, Restructuring and Dissolution Act

Introduction

The Insolvency, Restructuring and Dissolution Act 2018 ("IRDA") came into operation on 30 July 2020. Its provisions set out the new regime for personal and corporate insolvency in Singapore.

The IRDA marks a reform of the existing regime, establishing a number of changes:

(a) It consolidates and replaces the bankruptcy framework previously contained in the Bankruptcy Act ("BA") and the restructuring and insolvency framework previously contained in the Companies Act ("CA"). (b) It introduces a licensing and regulatory regime for insolvency practitioners. (c) It limits the exercise of ipso facto clauses.

However, the imposition of the IRDA does not mean that all existing proceedings are immediately subject to the new provisions. The IRDA contains transitional provisions to provide for a smooth transition over to the new regime.

In this Update, we look at the cut-off dates under the IRDA and when its provisions begin to apply with regard to winding-up, judicial management, schemes of arrangement, foreign proceedings, the regulation of insolvency practitioners and the restrictions on ipso facto clauses.

Restructuring and Insolvency

Prior to the enactment of the IRDA, restructuring and insolvency proceedings were governed by the CA. Here, we set out the relevant dates and timelines for which proceedings are still subject to these previous provisions.

Winding-Up

For winding-up proceedings, the IRDA does not apply in the following situations:

(a) Winding-up of a registered company: An application to wind-up a company made before 30 July 2020 under the previous section 253 of the CA;

Client Update: Singapore 2020 AUGUST

Restructuring & Insolvency

(b) Winding-up of an unregistered company: An application for the winding-up of an unregistered company made before 30 July 2020 under the previous section 351 of the CA; (c) Voluntary winding-up: Any voluntary winding-up commenced before 30 July 2020 as provided under the previous section 291(6) of the CA; (d) Oppression or injustice: Any Court order for winding-up as a remedy for oppression or injustice to a shareholder made before 30 July 2020 pursuant to section 216(2)(f) of the CA; and (e) Receivers and managers: Any appointment made before 30 July 2020 of a receiver or manager of the property of a company.

Judicial management

For judicial management, the IRDA does not apply to any application for a judicial management order under the previous section 227B(1) of the CA made before 30 July 2020.

Schemes of arrangement

For schemes of arrangement, the IRDA does not apply where the following applications have been made before 30 July 2020:

(a) Scheme meetings: An application under section 210(1) of the CA for the Court to order a meeting of creditors to consider a proposed scheme of arrangement. (b) Approval of schemes: An application under the previous section 211I of the CA for the Court to approve a scheme of arrangement without a meeting of creditors. (c) Moratorium: An application under the previous section 211B of the CA for a moratorium restraining proceedings against the company pending the proposal of a scheme of arrangement.

Foreign proceedings

For foreign proceedings, the IRDA does not apply in the following situations:

(a) Liquidation of foreign company: Any liquidation or dissolution of a foreign company in its place of incorporation or origin in respect of which a notice to the Registrar under section 377(2)(a) of the CA was lodged before 30 July 2020. (b) Recognition of foreign proceedings: Any application made before 30 July 2020 for recognition of a foreign proceeding under Article 15(1) of the Tenth Schedule to the CA.

Client Update: Singapore 2020 AUGUST

Restructuring & Insolvency

Bankruptcy

Personal insolvency was previously governed by the now-repealed BA. For bankruptcy proceedings, the BA continues to apply where the following applications have been made before 30 July 2020:

(a) Any bankruptcy application; (b) Any application for an interim order pending the proposal of a composition or scheme of arrangement made under section 45 of the repealed BA; (c) Any application for an order for the administration in bankruptcy of the estate of a deceased debtor made under section 148 of the repealed BA; and (d) Any application for a second or subsequent bankruptcy order against a bankrupt.

Further, the IRDA does not apply to any request to the Court, received before 30 July 2020, seeking aid in respect of an order of a court of Malaysia or any designated country having jurisdiction in bankruptcy and insolvency.

Insolvency Practitioners

The IRDA establishes a new regulatory regime for insolvency practitioners acting as officeholders in insolvency and restructuring proceedings. Insolvency practitioners are required to have a valid insolvency practitioner's licence and will be subject to the licensing and disciplinary framework.

The licensing requirement only applies to the undertaking of insolvency officeholder appointments commenced on or after 30 July 2020. Such insolvency officeholder appointments include:

(a) An approved liquidator acting as a liquidator or provisional liquidator, or as a receiver or manager; (b) A public accountant acting as a judicial manager or interim judicial manager, a trustee of a bankrupt’s estate or a nominee under a voluntary arrangement; and (c) A solicitor acting as a trustee of a bankrupt’s estate or a nominee under a voluntary arrangement.

The licensing requirement does not apply to:

(a) A liquidator appointed in a members' voluntary winding-up; and (b) A scheme manager appointed in relation to a scheme of arrangement.

The IRDA also provides a six-month transition period (from 30 July 2020 to 30 January 2021) for insolvency practitioners. During this time, insolvency practitioners may continue to undertake insolvency officeholder appointments without a licence provided that they apply for a licence within this period.

Client Update: Singapore 2020 AUGUST

Restructuring & Insolvency

However, this allowance ends once the licensing officer grants the licence, or the application is refused or withdrawn.

Ipso Facto Clauses

The IRDA restricts the operation of ipso facto clauses which are triggered by reason only of the insolvency of a contracting party or the commencement of corporate rescue proceedings, namely, proceedings for judicial management and schemes of arrangement.

However, this restriction only applies to contracts entered into on or after 30 July 2020, and for proceedings commenced on or after 30 July 2020; it does not have retroactive effect.

Concluding Words

With the IRDA in effect, it is important for businesses to ascertain whether the provisions apply to them or their proceedings. The introduction of new features in the bankruptcy and insolvency framework means that, depending on when certain proceedings were commenced or applications were made, vastly different rules and mechanisms may apply.

Insolvency practitioners should also take note of the timelines for applying for the required licence and ensure that, before such licence is obtained, the insolvency officeholder appointments which they undertake fall within the transitional provisions.

For further queries, please feel free to contact our team below.

Contacts

Raelene Pereira Cherie Tan Partner, Restructuring & Partner, Restructuring & Insolvency Insolvency

T +65 6232 0401 T +65 6232 0428

[email protected] [email protected]

Please feel free to also contact Knowledge and Risk Management at [email protected]

Client Update: Singapore 2020 AUGUST

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