Speech by Mr Ng How Yue, Permanent Secretary for Ministry of Law, at INSOL G36 Breakfast Session, INSOL Singapore Conference 2019

04 APR 2019

4 Apr 2019 Posted in Speeches

Distinguished Guests,
Ladies and Gentlemen

Introduction

It gives me great pleasure to join you today at this breakfast session on the sidelines of the INSOL Singapore Conference 2019. I would like to extend a warm welcome to all overseas delegates. I trust that yesterday’s Conference programme, and your time in Singapore, have been fruitful.
Today, I would like to share our approach towards policy making, and illustrate this with examples in the insolvency and restructuring sphere, which all of you would be familiar with.

Singapore’s Historical Development
Let me start by giving a long historical perspective. As you may be aware, Singapore celebrates its Bicentennial this year. This marks the 200th anniversary of Sir Stamford Raffles’ arrival in Singapore in 1819.
This was a key turning point in Singapore’s history, as many of our pioneers from the Malay Archipelago, Indonesia, China, India, the Middle East and Europe came to our shores at the time, setting Singapore on a trajectory to become the outward-looking, multicultural society it is today. Our perspectives and approach on many issues, including on policy-making, is tied to our historical development, our outward orientation, our desire to make a meaningful contribution in the world.
Singapore grew and modernised as Asia developed. Particularly over the last few decades, Asia has grown strongly, leading to a gradual shift of global economic weight towards Asia.
In 2017, Asia recorded the highest increase in trade volume globally, with growth of 8.1% against global growth of 4.7%.^[1]
This trend is expected to continue into future decades. 9 out of the 15 fastest growing economies over the next 34 years are projected to be from Asia.^[2]
Asian economies are forecast to occupy the top 2 to 4 spots in the world’s largest economies by 2050 and will take over a considerable share of world GDP.^[3]
This growth has augmented Singapore’s position as a global financial and business centre, anchored by our geographic location, connectivity to regional and global markets, and our system of governance.
We are also progressively developing ourselves as a legal services centre. There has also been increasing recognition that Asian legal needs can, and should, be satisfied closer to home, whether they be a need for legal services, legal frameworks or dispute resolution services.
In this respect, we believe that Singapore is well placed to meet the legal needs of businesses in Asia:

a. We are strategically located at the heart of the Asian trade routes, with excellent transportation and communication links which make us one of the most well-connected cities in the world.

b. Singapore offers trustworthiness, certainty and stability, all of which are intrinsically linked to our system of governance – one with low corruption, high efficiency, where the rule of law is upheld.

c. The Government proactively reviews legislation to ensure that it stays up to date. Our courts also have a strong international outlook, and consider a wide diversity of foreign judgments in their decisions.

Singapore’s approach to policy making
Businesses will find in Singapore laws that are responsive and keenly attuned to their needs. We keep abreast of commercial developments and international best practices, knowing that the law cannot remain static in this age.
For example, on restructuring and insolvency, we have, over the years, strengthened our corporate rehabilitation processes and our capability to deal with cross-border restructuring and insolvency cases. These steps were taken in response to the changing needs of the market as communicated to us by the industry, and were sensitive to the global developments in insolvency and restructuring.
As a global financial centre, while we want businesses set up here to thrive, we also want to provide them with the best possible tools and regime to restructure when they fall into trying times and help them get back on their feet. Hence, we seek to provide a comprehensive suite of options for these businesses and transactions from start to end.
We see plenty of opportunities for professionals in the restructuring eco-system: Accountants, auditors, valuers, financiers, lawyers, specialist turnaround managers. There are also further opportunities beyond the restructuring industry for other players: Opportunities to invest in distressed companies; increased corporate activity, such as loans and M&A, all of which will benefit our wider economy.
Today, following our reforms, Singapore has one of the most flexible and forward looking corporate debt restructuring regimes in Asia.
INSOL’s decision to locate its first ever overseas office here complements our efforts and we are delighted to have been chosen to host INSOL’s Asian Hub. This office will have a significant impact in Singapore and more broadly in Asia – spurring thought leadership, developing best practices and increasing opportunities for training and education and professionals.

UNCITRAL Model Law on Cross-Border Insolvency
Allow me to share a few examples of how we keep our policies and regulations up to date.
My first example is about Singapore’s decision to adopt the UNCITRAL Model Law on Cross-Border Insolvency. As you will no doubt be aware, to date, more than 40 jurisdictions have adopted the Model Law. Singapore also adopted the Model Law as part of our reforms in 2017.
Under our previous insolvency regime:

a. There was limited recognition of foreign insolvency officeholders under the Common Law.

b. There were also very few legislative provisions on cross-border insolvency, touching only on the recognition of Malaysian bankruptcies and reciprocal recognition of Official Assignees.
The government recognised the pressing need for reforms in cross-border restructuring for several reasons:

a. Globalisation had resulted in many businesses having assets, debts and operations across multiple countries. This was especially true in Singapore.

b. Further, a large insolvency or restructuring of Singapore business almost always has a cross-border element.

c. Finally, the lack of a formal cross-border framework to deal with issues that arise in these cases had caused significant uncertainty.
In November 2010, the Insolvency Law Reform Committee was appointed to conduct a holistic review of Singapore’s insolvency laws. The Committee was chaired by Mr Tan Eng Beng, Senior Counsel at law firm Rajah & Tann, which is represented here today among the G36, and included insolvency experts from legal practice, accountancy, academia and government. The Committee recommended a broad based reform of our insolvency laws.

a. 97 recommendations were submitted by the Committee in October 2013, including for Cross-border Insolvency reform.

b. Among these, the Committee recommended adoption of the Model Law for a few reasons, including the need for a comprehensive and predictable framework for cross-border restructuring, which would enhance clarity and certainty for the industry.
However, two issues were left open for the Government’s consideration:

a. Whether a reciprocity requirement should be included. In other words, whether Singapore would only apply the Model Law vis-a-vis another jurisdiction which had also accepted the Model Law; and

b. The scope of application of Model Law e.g. whether it should extend to personal insolvency.
In May 2014, after a process of public consultation, the Government issued its response to the Committee’s report, and in particular accepted the recommendation to adopt the Model Law.
On the issue of reciprocity – a policy decision was made not to impose a requirement for reciprocity. This stemmed from a conscious effort to keep Singapore open and was consistent with our support for a universalist approach to insolvency and restructuring.

a. Only a small number of countries have imposed a reciprocity requirement, while Singapore has historically enjoyed the benefits of other countries’ enactment of the Model Law, e.g. the US’ Chapter 15, and the UK’s Cross-Border Insolvency Regulations, neither of which imposed reciprocity.

b.At the same time, and for similar reasons, we abolished the ring fence which previously existed, which required liquidators of registered foreign companies to pay off debts incurred in Singapore before transferring to foreign liquidation, and replaced it with a limited exclusion, which I will explain shortly.
On the issue of exclusions, the Government decided to exclude certain classes of entities/persons from the Model Law. This motivated by the need to stay practical and sensible to commercial realities in practice.

a. There are 2 classes of exclusion:

Individuals: Singapore amended the Bankruptcy Act in 2015 to introduce a new ‘differentiated discharge framework’ for bankruptcy administration. Adoption of the Model law in this context would have introduced complications and conflict with this new framework.

Financial Institutions:Entities with special rules that protect customer deposits in insolvency were excluded. This is in line with many other Model Law countries. This exclusion effectively replaced the previous ringfence rule which was much broader.
The Model Law provisions were passed in Parliament in March 2017 and came into force in May 2017 under the Companies (Amendment) Act 2017.

Results of reform
We believe that the reforms to our insolvency laws have started to bear fruit.
Adoption of the Model Law was well received by the international community – one of the reasons Singapore was awarded ‘Most Improved Jurisdiction’ at the inaugural Global Restructuring Review awards ceremony in London in 2017.
In over a year and a half after the 2017 Companies Act came into force, our Courts have seen more than 100 applications made under the new provisions. Notable cases include Nam Cheong, Hoe Leong, and H&C S Holdings.
Nam Cheong – Company listed on the Singapore Exchange; benefitted from the enhanced stay provision introduced in the amended Companies Act^[4]

a. Was granted a four months’ moratorium extension by the court beyond the original six-month moratorium, which allowed it to successfully complete its scheme of arrangement process.
Hoe Leong – Another company listed on the Singapore Exchange, benefitted from the reforms to the Companies Act in two ways:

a. The company successfully applied to pass a scheme of arrangement and a moratorium was granted to restrain all action or proceedings against the company in Singapore or elsewhere. Certain subsidiaries of the company also obtained worldwide moratoriums. This was possible under the reform allowing the court to grant a moratorium extending to creditor actions outside of Singapore, if the creditor is in Singapore or within the jurisdiction of the Singapore courts.

b. Another reform supported “pre-packaged” schemes of arrangement. This allows the Court to make an order approving the scheme of arrangement, even though no meeting of creditors has been ordered or held. The company utilised this scheme to restructure its debts of approximately $80 million owed to bank creditors and its controlling shareholder. Scheme documents were despatched to the relevant creditors in November 2017, and the scheme was sanctioned by the court 2 months later in January 2018, even with the court being on vacation for the whole of December 2017. The cost and time savings, and ability to obtain swift relief through such pre-packaged schemes, do have wide impact on distressed companies.
H&C S Holdings – In a landmark decision, the High Court of England and Wales recognised Singapore’s new moratorium proceedings as foreign main proceedings under the UK’s enactment of the UNCITRAL Model Law.

a. This addresses any uncertainty on whether the English courts would recognise Singapore’s new moratorium order.

b. This follows recognition of Singapore proceedings in the world’s leading jurisdiction, such as the US. Examples include Berlian Laju Tanker – an Indonesian liquid bulk cargo firm – where the US courts recognised its Singapore proceedings under the Model Law, consequently ordering a moratorium against creditor action.
In 2018, further refinements were made in the Insolvency, Restructuring and Dissolution Act, which was passed in Parliament on 1 Oct 2018. These build on the earlier 2017 Companies Act amendments. The individual and corporate insolvency regimes, previously under separate legislation, have also been consolidated into a single statute.
As a whole, the reforms to our insolvency laws have brought the following benefits:

a. First, to local businesses undergoing financial difficulties, by providing more robust tools for them to rehabilitate and to get back onto their feet.

b. Second, positioning Singapore as a forum of choice for foreign companies to restructure; and

c. Third, creating greater value for our economy, by buttressing Singapore’s position as an international legal, financial and business centre through a strong restructuring and insolvency regime.
The reforms have also given the industry something to coalesce around – we see greater activity and collaboration; practitioners are stepping forward to contribute to the development of their sector, and gaining international recognition for their expertise.
Our jurisprudence has also been enriched by a series of important decisions on a wide range of insolvency related issues, many of which have relevance beyond Singapore’s shores.
In November 2018, INSOL International published a Special Report titled “Will Singapore become an international centre of debt restructuring? A comparative analysis of Singapore’s bold insolvency reforms”.

a. Report concluded that there is good reason to believe Singapore will accomplish its mission to be an international centre of debt restructuring, particularly in the medium to long term.

b. The author cited the strength of Singapore’s legislative reforms, our existing competitive advantages, the growing Asian markets, and the determination shared by the Singapore government and judiciary for the success of this project, as factors leading to his conclusion.
All this has been possible because of the efforts of all the stakeholders, groups of people we have consulted, the feedback we have received.

Moving forward
Moving forward, there is still much to be done – more time is required for our reforms to prove themselves and for the restructuring and insolvency ecosystem to mature.
In addition, as the Model Law requires adoption by States, it will take time before it is universally embraced.
Where do we go forward from here? On the Ministry’s part, we will continue to support the industry and stay attuned to developments:

a. For instance, we will support opportunities for professional training and education for insolvency and restructuring professionals to upgrade themselves, which we hope will increase our existing talent pool. We will also encourage cross-accreditation of professional development courses, between the legal and accounting sectors.

b. We look forward to maintaining existing partnerships and fostering new collaborations with the industry and other stakeholders, continue to monitor developments, and engage with relevant groups to refine the framework over time. This is the only way forward in our evolving world.
Thank you, and I hope you enjoy the rest of the Conference and that your stay in Singapore is fruitful.

^[1] World Trade Statistical Review 2018, World Trade Organisation
^[2] The World in 2050 (2017), PWC Report
^[3] The World in 2050 (2017), PWC Report
^[4] Enhanced stay provision: automatic 30-day moratorium against creditor action immediately upon the filing of an application by the debtor company. This applies even if the restructuring proposal has not been fully worked out and there is only an intention to present a restructuring proposal as soon as practicable. The court can extend the moratorium if it is satisfied there are good reasons to do so. (s 211B(8) of Companies Act).

Last updated on 05 Apr 2019