Public Consultation on Proposed Draft Subsidiary Legislation Under Section 440 of the Insolvency, Restructuring and Dissolution Act
23 March 2020 – 13 April 2020
- The Ministry of Law (“MinLaw”) invites members of the public to provide feedback on the proposed draft subsidiary legislation to be promulgated under s 440 of the Insolvency, Restructuring and Dissolution Act (No. 40 of 2018) (“IRDA”) in relation to the eligible financial contracts to be prescribed for exemption under s 440(5)(a) of the IRDA.
- The IRDA introduced a new statutory provision at s 440. This provision restricts the operation of ipso facto contractual clauses in which a party to a contract has the contractual right to terminate or modify that contract entered into with a company, by reason only that specific proceedings (as defined in s 440(6) of the IRDA) are commenced or that the company is insolvent. It does not restrict the operation of ipso facto clauses that are triggered on any other contractually provided grounds (e.g. the failure of the company undergoing reorganisation to deliver services to the counterparty as required under the contract).
- S 440 of the IRDA facilitates the attempts of a company to restructure by protecting its valuable commercial contracts from being terminated by reason only that the company has embarked on restructuring efforts, under certain specified circumstances. The concept of restricting the application of ipso facto clauses is also found in other jurisdictions, such as the US, Canada and Australia. This restriction, if applicable, operates from the commencement of judicial management proceedings or scheme of arrangement proceedings until their conclusion.
- To balance the interests of the counterparty and other stakeholders, various safeguards are included in s 440. This includes exemptions for certain types of contracts (under s 440(5) of the IRDA) and certain types of entities (under s 440(6) of the IRDA), where the restriction would have a disproportionately adverse impact on markets.
- Public consultation
- MinLaw welcomes interested persons to provide comments and feedback on the category of exemptions to be prescribed by the Minister regarding any legal right under any eligible financial contracts as may be prescribed (s 440(5)(a) of the IRDA) (“Financial Contracts Exemptions”).
- The draft subsidiary legislation in respect of the Financial Contracts Exemptions is set out at the Annex below*. Please note that comments and feedback need not be confined to the specific questions set out within the draft subsidiary legislation.
- Respondents are requested to indicate your name and the organisation you represent (if applicable), as well as contact details (email address and telephone number) to enable us to follow up, and seek clarification, if necessary. Please title all comments and feedback “MinLaw IRDA Consultation” and send them by email to MLAW_Consultation@mlaw.gov.sg. All comments and feedback must reach us by the close of business (i.e. no later than 5pm) on 13 April 2020.
*Please note that the proposed provisions in this piece of subsidiary legislation in this public consultation are still undergoing the legislative drafting and vetting process, and are therefore not finalised and subject to change following the consultation process.
Last updated on 23 Mar 2020