__________________________________ REPORT OF THE INSOLVENCY LAW REVIEW COMMITTEE __________________________________ FINAL REPORT 2013 Mr. Lee Eng Beng, S.C. Managing Partner of Rajah & Tann LLP (Chairman of the Committee) �L- Ms Sia Aik Kor Official Assignee and Public Trustee, Insolvency <;vr�v�. and Public Trustee's Office (Vice-Chair) Ms Joan Janssen Director-General of the Legal Group, Ministry of Law (Vice-Chair) ()WW Mr. Ng Wai King Joint Managing Partner, WongPartnership LLP Mr. Manoj Sandrasegara Partner, WongPartnership LLP M· Mr. Edwin Tong Partner, Allen & Gledhill LLP �- Mr. Ong Yew Huat Formerly of Ernst & Young LLP �lPV Mr. Sushi! Nair Director, Drew & Napier LLC Mr. Don Ho Don Ho & Associates representing the Insolvency Practitioners Association of Singapore Contents CHAPTER 1: INTRODUCTION ......................................................................................................... 1 (A) The Committee ................................................................................................................... 1 (B) The Current Framework And The Need For Reform ............................................................ 4 (C) The Committee’s Approach ................................................................................................. 7 CHAPTER 2: A NEW INSOLVENCY ACT......................................................................................... 9 (A) Reasons For Consolidation ................................................................................................. 9 (B) The Approach ................................................................................................................... 11 (C) Key Areas Of The New Insolvency Act .............................................................................. 12 (D) Some Framework Issues .................................................................................................. 14 Jurisdiction ....................................................................................................................... 14 Consistency ...................................................................................................................... 15 Insolvency Practitioners .................................................................................................... 16 Proofs of Debt ................................................................................................................... 16 Realisation of Security ...................................................................................................... 19 Preferential Debts ............................................................................................................. 20 Applicability of the Rules of Court ...................................................................................... 22 (E) Summary Of Recommendations ....................................................................................... 23 CHAPTER 3: BANKRUPTCY ......................................................................................................... 26 (A) Alternatives To Bankruptcy ............................................................................................... 27 (B) Proceedings In Bankruptcy ............................................................................................... 32 (C) Bankruptcy Order And Its Consequences .......................................................................... 34 Vesting of Property in the Official Assignee ....................................................................... 35 Duties, Disqualifications and Disabilities Imposed on a Bankrupt ....................................... 37 Other Suggestions ............................................................................................................ 38 (D) Annulment And Discharge From Bankruptcy ..................................................................... 39 Discharge ......................................................................................................................... 39 Views on automatic discharge ........................................................................................... 43 Annulment ........................................................................................................................ 45 (E) Summary Of Recommendations ....................................................................................... 48 CHAPTER 4: RECEIVERSHIP ........................................................................................................ 50 (A) Developments In The UK .................................................................................................. 53 (B) The Position In Singapore ................................................................................................. 56 (C) Updating The Statutory Framework ................................................................................... 58 (D) Summary Of Recommendations ....................................................................................... 61 CHAPTER 5: THE LIQUIDATION REGIME ..................................................................................... 63 (A) Summary Liquidations ...................................................................................................... 65 (B) The Official Receiver As Liquidator Of Last Resort ............................................................ 68 (C) Priority Of The Official Receiver’s Fees ............................................................................. 70 (D) Funding By Creditors Or Contributories ............................................................................. 72 (E) Standing Of A Director To Apply For Winding Up .............................................................. 74 (F) Powers Of Management And Provisional Liquidators At Commencement Of Voluntary Liquidation ........................................................................................................................ 75 (G) Use By Liquidator Of Property Subject To A Floating Charge ............................................ 76 (H) Unclaimed Third Party Assets ........................................................................................... 77 (I) Summary Of Recommendations ....................................................................................... 78 CHAPTER 6: JUDICIAL MANAGEMENT........................................................................................ 81 (A) The Judicial Management Experience ............................................................................... 82 (B) The Case For Retaining Judicial Management .................................................................. 88 (C) Receivership And Judicial Management ............................................................................ 89 (D) The Commencement Of Judicial Management .................................................................. 92 (E) Debts Incurred In Judicial Management ............................................................................ 96 (F) Transition From Judicial Management To Liquidation ...................................................... 100 (G) Application Of Bankruptcy And Liquidation Provisions ..................................................... 101 (H) Safeguards For Creditors ................................................................................................ 103 (I) Additional Reforms Adapted From The US Bankruptcy Code .......................................... 105 Debtor-in-Possession Reorganisation ............................................................................. 105 Super-Priority For Rescue Finance ................................................................................. 107 Limitations on Set-Off in Rescue Proceedings ................................................................. 113 Restrictions on the Enforcement of Ipso Facto Clauses ................................................... 117 Extra-Territorial Stays of Proceedings ............................................................................. 123 (J) Some Implementation Issues .......................................................................................... 125 (K) Summary Of Recommendations ..................................................................................... 129 CHAPTER 7: SCHEMES OF ARRANGEMENT ............................................................................ 134 (A) Issues Identified For Reform ........................................................................................... 135 (B) Proposals For Reforms ................................................................................................... 139 (C) Scope Of Moratorium ...................................................................................................... 140 (D) Filing And Adjudication Of Proofs Of Debts ..................................................................... 143 (E) Information To Be Provided To Creditors ........................................................................ 146 (F) Safeguards For Creditors ................................................................................................ 147 (G) Statutory Right To Apply To Court For Directions ............................................................ 148 (H) Power To Order A Re-Vote ............................................................................................. 150 (I) Company Voluntary