Singapore courts and legislature take pro-business approach to cross-border insolvencies


Financier Worldwide Magazine

March 2016 Issue

March 2016 Issue

Fears of a second serious financial crisis within a decade have galvanised the Singapore legislature and courts to coordinate their efforts in dealing with cross-border corporate failures. As one of the world’s most open economies, and home to over 7000 multinational corporations, Singapore is clearly intent on promoting restructuring efforts as far as possible and ensuring effective and orderly resolutions when failure is inevitable.

This article discusses three recent cases in the Singapore High Court that illustrate Singapore’s pro-business approach to cross-border insolvencies and highlights how the courts are working in tandem with the legislature to facilitate cross-border insolvencies.

In Re Conchubar Aromatics Ltd and others, the Singapore High Court held that an interim stay of proceedings can be granted independently and in anticipation of an application being made to court to call a creditors’ meeting to vote on a scheme of arrangement.

The applicants were foreign shareholders in Jurong Aromatics Corporation Pte Ltd (JAC), a company owning and operating one of the world’s largest petrochemical plants. Although flushed with a US$2.4bn initial investment, the recent sharp collapse in oil prices precipitated a series of events that led the company into receivership in October 2015. This had a knock-on effect on the applicants as their primary assets were their shares in JAC. Ongoing suits threatened to ruin their efforts to restructure.

However, the Singapore High Court provided the applicants a lifeline by restraining all proceedings against them for 10 weeks so that they could finalise their restructuring proposal. At this stage, the Court was only concerned about whether the draft proposal, even if incomplete, suggested that the proposed scheme was bona fide and was sufficiently detailed.

The low threshold set by the Court for the obtaining of a stay is significant as it signals the Court’s willingness to protect nascent restructuring proposals that were still being formulated from being shifted by precipitous creditor actions.

In Re Sembawang Engineers and Constructors Pte Ltd and Re Punj Lloyd Pte Ltd and another matter, the Singapore High Court held that a creditors’ meeting can be called to vote on a scheme of arrangement even if the proposed scheme is contingent on the acceptance of a separate restructuring proposal.

The applicants were the wholly-owned Singapore subsidiaries of a publicly listed Indian company. Both applicants proposed schemes of arrangement to their respective creditors. However, the caveat was that one scheme was dependent on the other, and both schemes could only take effect if the Indian parent company took on certain liabilities that required the approval of the creditors of the Indian parent company.

The Court was cognisant of the uncertainty surrounding the contingent nature of the proposed schemes of arrangement. Nevertheless, it proceeded to order a creditors meeting despite the objections raised by some of the creditors.

The Court stressed that its role was merely regulatory. It would simply ensure that the creditors were properly classified and had all the necessary information so that they could vote on the scheme in a fair manner. It would not go to the extent of intervening in commercial matters as the creditors were in a much better position to weigh the risks of voting for a contingent scheme.

The non-interventionist approach of the Singapore Courts in the context of contingent restructuring proposals is significant as it indicates their pro-business approach toward the orderly and efficient resolution of cross-border insolvencies.

In addition, in a speech delivered by the Chief Justice of Singapore Sundaresh Menon at the opening of the 2016 legal year, he revealed that the Singapore courts have been discussing the possibility of creating Memorandum of Understandings (MOUs) with other courts within Asia. These are essentially agreements between the courts to open up communication when the courts of each jurisdiction are dealing with an international insolvency. The MOUs are meant to facilitate the process of ensuring the various creditors, spread across several jurisdictions, obtain the best results possible and to reduce the issue of conflicting orders made by the courts.

In tandem with this is the Singapore legislature’s effort to introduce the new Insolvency Bill in Parliament. The Insolvency Bill includes the adoption of the UNCITRAL Model Law on Cross-Border Insolvency. The adoption of the UNCITRAL Model law promises the facilitation of multi-jurisdictional restructuring efforts, by facilitating communication and coordination among courts. With this coordination it becomes harder for assets to be dissipated, concealed or liquidated across borders.

The Insolvency Bill will also introduce a provision similar to an American facility in relation to schemes of arrangement. As long as certain safeguards are met, the court can sanction a scheme even if a class of creditors voted against the scheme. This ensures that creditors who are not generally prejudiced by the restructuring cannot prevent it from going ahead.

The legal developments described above tie in neatly with Singapore’s desire to be a choice of jurisdiction for multinational corporations. With its strong commitment to protecting international businesses even in insolvency situations, it is little wonder that Singapore continues to maintain its ranking as the world’s easiest place to do business.


Abraham Vergis is managing director, Danny Quah is counsel and Christy Oakes is a paralegal at Providence Law Asia LLC. Mr Vergis can be contacted on +65 6438 1969 or by email: Mr Quah can be contacted on +65 6438 1969 or by email:

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Abraham Vergis, Danny Quah and Christy Oakes

Providence Law Asia LLC

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