Insolvency, Restructuring and Dissolution Act to Commence on 30 July 2020
23 Jul 2020 Posted in Press releases
- The Insolvency, Restructuring and Dissolution Act (“the Act”), together with its 48 related pieces of subsidiary legislation, will commence on 30 July 2020.
- The Act is an omnibus legislation that consolidates Singapore’s personal and corporate insolvency and debt restructuring laws1 into a single piece of legislation and updates relevant laws to be aligned with international best practices.
- Together with the new pieces of subsidiary legislation, the Act ensures that Singapore’s insolvency and restructuring laws remain progressive and modern, whilst balancing the interests of debtors, creditors and other stakeholders. Building on the Companies Act amendments in 2017 which enhanced Singapore’s corporate rescue and restructuring framework, this legislation will benefit businesses experiencing financial difficulties as well as their creditors, create new opportunities for insolvency professionals (including lawyers and accountants), distressed debt funds and financial institutions, and further strengthen Singapore as an international centre for debt restructuring.
Please see Annex A for background information on the Act.
Key Features of the Act
- On personal bankruptcy, the provisions largely retain the repealed Bankruptcy Act, following significant amendments to the latter in 2015. One noteworthy change is the increase of the maximum debt threshold for the Debt Repayment Scheme from $100,000 to $150,000.
- On corporate debt restructuring and insolvency, the Act introduces new features, including –
- Restriction on certain contractual rights that are triggered upon the commencement of restructuring proceedings (i.e. ipso facto clauses). This facilitates restructuring of a distressed company’s business, where its contracts contain such clauses.
- Enlarging the range of causes of action which may be funded by third parties, specifically certain officeholder avoidance actions, which may otherwise not be pursued due to lack of funds.
- Summary procedure to dissolve companies that have insufficient assets to pay for the administration of the winding up.
- The Act also establishes a new licensing and regulatory regime for insolvency practitioners. This regime requires insolvency practitioners to uphold professional standards when performing insolvency and debt restructuring work in Singapore.
Please see Annex B for information on the new licensing and regulatory regime.
- The unprecedented spread and severity of the COVID-19 pandemic, together with closures and restrictions imposed by the safe distancing measures, has resulted in significant impact on businesses.
- The COVID-19 (Temporary Measures) Act has increased monetary thresholds for insolvency from 20 April 2020 to 19 October 2020 (subject to further extension).
- The Ministry of Law is considering further temporary measures, in addition to the processes in the Act, to assist micro and small companies which, as a result of the COVID-19 pandemic, may require support to either restructure their debts or wind down their businesses.
MINISTRY OF LAW
23 JULY 2020
1. The personal and corporate insolvency and debt restructuring laws are currently in two separate statutes (Bankruptcy Act and Companies Act). With the Act coming into force on 30 July 2020, the Bankruptcy Act will be repealed, and the provisions in the Companies Act relating to corporate insolvency and restructuring will be repealed. ↩
Last updated on 23 Jul 2020