Topics:

 Liquidation – Companies
o Establish locus standi:
o Inability to pay debts/Tests for insolvency
o Presumption of insolvency
o Disputing a debt on substantial grounds
o Regard to wishes of creditors and contributories and other factors
o Statutory Demand Format (including Individuals) – did not appear
 Bankruptcy – Individuals
 Alternatives to the Formal Insolvency Regime: Judicial Management
o JM Proceedings
 Jurisdiction
 Aims
 Appointment of JMG
 Locus Standi to appoint JMG
o Administration of JM
 Effect
 Duties
 Moratorium
 Approval
 Costs, Expenses,
 SOA in JM
o Discharge
 Avoidance of Antecedent Transactions
o Unfair/Undue Preference
o Transaction at an undervalue
o Transactions made before the making of the winding up order
o Insolvent Trading
o Fraudulent Trading
 Alternatives to the Formal Insolvency Regime: Schemes of Arrangement
o Objective
o Application to Court
 Who can apply
 Effect: Interim moratorium
o Creditor’s Meetings
 Classification of creditors
 Voting on the proposed scheme
o Court approval of the scheme
 Effect of court order
 Effect on third parties
o Administration of Scheme
 Cross-Border Insolvency & Restructuring

1. LIQUIDATION

A. MEMBERS’, CREDITORS’ VOLUNTARY WINDING UP

Members’ Voluntary Winding Up (solvent)

  The directors can do a declaration of solvency “that the company will be able to pay
its debts in full within a period not exceeding 12 months after the commencement of
the winding-up”. [293(1) CA]
 The company shall appoint a liquidator. [294(1)]
 If the company is not solvent, the liquidator will summon a creditors’ meeting. [295]

Creditors’ Voluntary Winding Up (insolvent)

The company can convene a meeting of creditors to consider its proposal for liquidation.
Creditors would have the right to choose the liquidator. [296]

Winding Up commences at the time of passing of resolution. [255(1)]

B. COMPULSORY WINDING UP BY THE COURT

Procedure: Statutory Demand

1. Serve at registered office [254(2)(a) CA] Do an ACRA search, serve on multiple
premises, check the bank loan document for the provision which states the address for
proper service

Draft Statutory Demand

STATUTORY DEMAND
Please ensure that this demand is satisfied within 3 weeks

To:
Address:

We act for ______ in this matter. We are instructed by our client ______ claims that you
owe the sum of $ ______, full particulars of which are set out in PART A of this demand and
that it is payable immediately and, to the extent of the sum demanded, is unsecured. Further
interest will continue from the date of ______ until the full sum of $______ has been paid.

Take notice that if you fail to pay the above debt or secure or compound for it to the
creditor’s satisfaction within 3 weeks from the date of service of this statutory demand, you
will be deemed unable to pay the debt pursuant to Section 254(1) of the Companies’ Act and
our client may initiate a winding up application against you.

Statutory Demand: Company

Sample: None
~  Debtor’s name, NRIC
 Amount due, interest
 Consideration
 Security, and debt less security
 Time for compliance (3 weeks), method of compliance, consequence of
non-compliance (winding-up order)
 Contact person
Procedure: Winding Up Application after Statutory Demand [Company (Winding Up)
Rules]
1. Winding Up Application made by OS with Affidavit [r7(1)]
a. Originating Summons [r22(1)]
i. Made by the company: Form 2, 1st Schedule [r22(2)(a)]
ii. Made by creditors: Form 3, 1st Schedule [r22(2)(b)]
b. Supported by Affidavit [r25(1)] in Form 5 [r25(3)]
i. Date of incorporation, registered office of company [r25(2)(a)-(b)]
ii. Grounds on which the application is made [r25(2)(c)]
2. Deposit $10,400 [TOR Practice Circular No. 1 of 2017] with Official Reciever
[r32(1)(e)]
3. File at Registrar’s office [r23(1)]
4. Serve on Company in Form 6, 7 [r26(1)]
a. Serve at registered office >> if no such office, last known principal place of
business by leaving a copy with any member, officer or employee >> if no
such person, then by leaving a copy at the office, or serving it on members that
the Court may direct
b. Serve not less than 8 days before hearing of application [r7(2)]
c. Made by company: No service required
d. Creditors can request copy and receive within 48 hours for payment [r27]
5. Registrar will appoint a hearing
6. Advertise 7 clear days before the hearing, in Form 4, 1st Schedule [r24]
a. Government gazette 1, English newspaper 1, Chinese newspaper 1 [r24(a)]
b. Advertisement contents [r24(b)]
c. File a Memorandum of Advertisement [r20]
7. Consider: Apply to stay or restrain proceedings against the company [258 CA]

Grounds of Winding Up

253 Locus Standi to Wind Up

“A company … may be wound up under an order of the court on the application (b) of
any creditor, including a contingent or prospective creditor” [253(1)(b)]

“creditor”
Re People’s Parkway Development Pte Ltd [1991] SGHC “a person towards whom
under an existing obligation, the company may or will become subject to a present
liability to pay a sum of money on the happening of some future event or at some
future date”.

“contingent”, “prospective”
Contingent: Debt which will materialise out of an existing legal obligation on an event
which may or may not occur. Prospective: debt which will certainly become due in the
future. Stonegate Securities Ltd v Gregory [1980]

Creditors must
“the Court shall not hear the winding up application if made by … creditors until …
security for costs has been given as the Court thinks reasonable and a prima facie case
for winding up has been established to the satisfaction of the Court” [253(2)(c)]
254 Grounds for Winding Up [254(1)]
“The Court may order the winding up if the company … (a) by special resolution
resolved … (e) is unable to pay its debts”

“unable to pay its debts” [254(2)]

“(a) creditor by … a sum exceeding $10,000 … has served … a demand … and the
company has for 3 weeks … neglected to pay … secure or compound … to the
reasonable satisfaction of the creditor;
(b) judgment … in favour of a creditor … is … unsatisfied in whole or in part; or
(c) proved to the satisfaction of the Court that the company is unable to pay its debts”

Re Great Eastern Hotel (Pte) Ltd [1998] SGHC There are two tests of insolvency.
Note: practically this may be difficult because of lack of access to the financial
statements. There is the cash flow test (whether the company failed to meet a current
demand for a debt already due), and balance sheet insolvency test (whether there is a
deficit after balancing overall liabilities against assets). They rejected the quick assets
test (the company can only be said to be solvent if it is able to pay its debts out of its
own money).

Chip Thye v Phay Gi Mo [2004] The Court held that either test could be used because
“there is no single test for insolvency”.

BNY v Eurosail [2013] UKSC

 Court considered the UK equivalent of s254(1)(e) and concluded it does not
simply turn on the question whether the liabilities of a coy (however assessed)
exceed its assets (however assessed).
o Just because the coy’s liabilities exceed the value of its assets, it does not
mean that it is not solvent and successful. In fact, many infant companies
would be deemed unable to pay their debts if such a strict definition is
adopted
 Criticism against balance sheet insolvency test:
o Commercially undesirable as the presentation of a winding up petition can
cause serious problems to a coy, even if a petition is likely to be dismissed
in the court’s discretion.
o Even if court would refuse the petition, the consequence on the coy would
be to deter the making of investment or giving of credit. Uncertainty, in
particular the risk of insolvency proceedings, is a disincentive to investors
and lenders
o No conceivable policy reason as to why a coy should be at risk of being
wound up simply because the aggregate value of its liabilities exceeds that
of its assets.
 However, there is still no doubt that the section applies to a coy whose assets and
liabilities are such that it has reached the point of no return
o Section is concerned with the case of a coy not being able to pay its debts,
not with an exercise of determining net assets or liabilities
o Section can only be relied on by a future or contingent creditor of a coy
which has reached the end of the road or in respect of which the shutters
should be put up, imprecise judgment-based and fact specific as the test
may be

Technical Defects in Statutory Demands

Pac-Asian Services v European Asian Bank AG [1987] The bank did not serve a
winding-up application at the company’s registered office. The court refused to
remedy it, because the presumption under 254 was not rebuttable and thus had serious
consequences.

Re Dayang [2002] The creditor company successfully petitioned for Dayang to be

wound up, and sent a letter to Dayang without referring to the 3 week period for
repayment. The court held that the letter was an effective demand because there was
no requirement to mention the 3 week period although that “it was both desirable and
prudent to do so given that the court had the discretion whether or not to make an
order for winding up”.

BNP Paribas v Jurong Shipyard [2009] SGCA Jurong offered to place in escrow
funds for BNP, who refused and wanted to continue winding up Jurong. Jurong was
not an insolvent company and this was confirmed by its offer to secure BNP’s claim
for the crystallised loss. BNP ought to have commenced court proceedings instead, as
the court’s winding-up jurisdiction was not for the purpose of deciding a disputed
debt.

Disputing Locus Standi by disputing debt on substantial grounds

Cross-claim cases
Metalform [2007] Metalform owed Holland an undisputed debt. However, Metalform
argued that it had a bona fide cross claim on substantial grounds which exceeded the
undisputed debt. The court held that a cross-claim called into question the locus standi
of the creditor to present a winding-up petition against the debtor. It followed that a
winding-up petition should not be allowed in cross-claim cases, except in special
circumstances. The debtor company merely had to prove that there was a likelihood
that the winding-up petition might fail or that it was unlikely to succeed.

No triable issues
Chimbusco [2014] Abdullah sought an unconditional stay of bankruptcy proceedings.
The court refused and held that it will only set aside a statutory demand (and thereby
require a creditor to initiate a civil suit if he wishes to pursue the claimed debt further)
where the debtor is able to adduce evidence on affidavit that raises a triable issue. Rr
127 and 98(2) of Bankruptcy Act are consistent with the fundamental principle that
the insolvency mechanism, whether in the corporate or personal context, is not meant
to be used as a parallel procedure to procure payment of disputed debts.

English position: If dispute only on the quantum of debt and abundant evidence that
company was insolvent anyway, will allow to proceed. Re Tweeds Garages Ltd
[1962] Check BNP Paribas

Korea Asset Management v Daewoo Singapore [2004] Majority creditors in Korea

applied for compulsory winding up when the company was in the process of a
voluntary winding up. The court granted this, and listed factors for allowing this. It
might refuse where the company’s resources were threadbare and considerable costs
would be incurred if leave were granted
o Timing – an application made late in the day when liquidator has
completed a substantial amount of his work or when a creditor has
acquiesced in the liquidator’s discharge of his duties for a substantial
 period is less likely to be persuasive
o Nature of claim:
 Court will ensure that the party is not seeking to avail itself of a
benefit that would not be otherwise vailable
 Whether the claim if prosecuted successfully would prejudice the
claim of other legitimate creditors in a way that undermine the pari
passu principle
 If applicant is attempting to claim from the coy property which is
prima facie belonging to the applicant, then leave should be readily
given
o Existing remedies: If the claim or right that an applicant is pursuing can
be adequately dealt with within the insolvency regime, the court will not be
inclined to grant leave to proceed
o Views of majority creditors: If there appears to be some basis for an
independent minority creditor to suggest that it is or might be marginalised
or disregarded in a liquidation process besieged by the majority creditors,
most of whom are related entities, the court ought to carefully assess how it
can grant a platform to that creditor to vindicate its rights
o Need for an independent inquiry: Role of liquidator will be considered
Choice of liquidator: if a significant objective of the independent creditors is an
investigation into the company’s affairs, the identity of the liquidator is crucial.
257 Court may make any order, including adjournment
“On hearing a winding up application, the Court may dismiss it … or make any
interim or other order that it thinks fit” [257(1)]

BNP Paribas v Jurong Shipyard [2009] SGCA The court can adjourn the hearing of a
winding-up application.
Bank will exercise discretion to make the order

325 Will consider other interests, including public interests

“The Court may … have regard to the wishes of the creditors or contributories as
proved to it by any sufficient evidence” [325(1)]

BNP Paribas v Jurong Shipyard [2009] The court will consider public interest
elements (its employees, the non- petitioning creditors, as well as the company’s
suppliers, customers and shareholders).
Raiffeisen Zentralbank v Continental Chemical [2010] The court will consider the
views of creditors, and less weight should be given to the views of secured creditors,
because they were entitled to proceed against their security.

D. EFFECT OF WINDING UP APPLICATION

1. Stop Proceedings
2. Court leave to commence proceedings

Winding Up by the Court

253 Locus Standi of Winding Up
254 Grounds of Winding Up (presumption of insolvency)
255 Effect of Winding Up
258 Can restrain further proceedings
259 Can void dispositions of property
260 Can void attachments
261 NA
263 If no private liquidator is appointed, the official receiver fulfils the position
262 (3) No action shall be proceeded except with leave of court
293 Declaration of Solvency

258 Can restrain further proceedings

“company or any creditor … may apply to the Court to stay or restrain further
proceedings” against the company
259 Can void dispositions of property
“Any disposition of the property of the company … any transfer of shares or
alteration in the status of members … after the commencement of the winding up …
shall … be void”
260 Can void attachments
299(1) “Any attachment … against the estate … of the company after … the
commencement of winding up … shall be void” [260]
See [299(1)] creditors’ voluntary winding up
262(3) Cannot have proceedings initiated
“When a winding up order has been made … no action shall be proceeded with or
commenced against the company except (a) by leave of the Court”
See [299(2)] for creditors’ voluntary winding up
334 Creditors cannot take the benefit of uncompleted execution
“Where a creditor has … attached any debt … and the company is subsequently
wound up, he shall not be entitled to retain the benefit … unless he has completed
[it], but (a) where any creditor has had notice of a meeting having been called at
which a resolution for voluntary winding up is to be proposed, the date on which the
creditor so had notice shall for the purposes of this section be substituted for the date
of the commencement of the winding up; (b) a person who purchases in good faith
under a sale by the bailiff any goods of a company on which an execution has been
levied shall in all cases acquire a good title to them against the liquidator; and (c) the
rights conferred by this subsection on the liquidator may be set aside by the Court in
favour of the creditor to such extent and subject to such terms as the Court thinks
fit.”
Re Tiong Polestar [2003] Creditor Tiong Asia Marine successfully obtained a garnishee
order and wrote to the bank on 18 Feb. The winding up commenced up 24 Feb, and the bank
paid on 25 Feb. The court held that TAM was not entitled to retain the benefit, and it was
incumbent on the creditor to get payment. Should payment be delayed by another party, the
interests of general creditors would prevail.

Re Wan Soon Construction [2005] SGHC Unsecured creditor Deschen registered writ of
seizure and sale on Wan Soon’s property on 28 June 20014. Wan Soon was put under JM and
sold the property to Ad Graphic, completed on 23 Jan 2005. The court held that Deschen did
not execute the WSS in time and should not be allowed to steal a march from other unsecured
creditors.
Exceptional leave to commence or continue proceedings
Jumabhoy Rafiq v Scotts Investment [2003]
Korea Asset Management [2004]

Significance: jurisdiction to grant retrospective leave in certain circumstances

Facts:
 Scotts Investment (Sg), in compulsory liquidation, commenced a suit against Rafiq.
Rafiq counterclaimed and filed an application for summary judgment on the
counterclaim
 After hearing date for summary judgment was fixed, SIS claimed that Rafiq had not
obtained leave of court to commence and continue with his counterclaim per s262(3)
CA
 Rafiq then filed the present OS to apply for leave retrospectively to commence and
continue existing counterclaim. By this time, there was a possibility that part of Rafiq’s
claim might have become time-barred

Held, allowed the Pf’s application

 There was no general rule discouraging the exercise of the jurisdiction and discretion of
the court under s 262(3) of the Companies Act (Cap 50) in favour of a plaintiff.
Whether leave ought to be granted depended on the particular circumstances of each
application
 If leave were not granted, RJ would have filed his proof of debt, which the liquidators
would have rejected, necessitating a fresh action that would have repeated all the steps
already taken in RJ’s counterclaim:
 While s 262(3) of the Companies Act (Cap 50) was intended to prevent the liquidators
from being distracted and the assets of the company in liquidation being expended to
respond to unnecessary actions, it could not have been the purpose of s 262(3) to allow
liquidators, and other unsecured creditors, an unexpected windfall which would arise if
the court did not have jurisdiction to grant retrospective leave and a plaintiff could not
file a fresh action because of limitation defences
 But the existence of this jurisdiction does not necessarily mean that the jurisdiction will
be exercised in favour of all applicants. It is still for applicants to persuade the court
why such leave should be granted, especially if retrospectively. The mere fact that time
and costs have already been incurred will not necessarily be sufficient always to
persuade the court to grant leave retrospectively.

E. POWERS OF LIQUIDATOR

268 Liquidator can be appointed, receive salary

Re Econ Corp [2004] The JM complained that remuneration was excessive. The Court
ordered the Liquidator to file a fresh affidavit to prove remuneration. The Court held
that they would consider time spent, value brought to bear by the practitioner, the
reasonableness of the charge out rate, the complexity of the matter involved, the
effectiveness of what was done and the functions and responsibilities of each
practitioner.
Kao Chai Chau Linda [2016] Linda opposed some remuneration due to inefficient
work. The Court reduced the remuneration and held that the expression “fair,
reasonable and proportionate” should be read holistically: it meant that the
 remuneration awarded had to be commensurate with the nature, complexity and extent
of the work undertaken.
269 Liquidator has custody and control over company property
272 Liquidator can (with Court) carry on business, pay creditors, make compromises or
arrangements, appoint solicitors, and (without Court) bring actions, compromise
debts below $1,500, sell property, draw bills of exchange, secure assets, appoint
agents, and other things as necessary for winding up
Nova Leisure [2005] The liquidator applied to open bank accounts. The court held that
it could authorise the opening of bank accounts, but it could not unilaterally authorise
payment out, it had to be countersigned by Committee of Inspect or Official Receiver.
275 Liquidator can apply to court for his release and company’s dissolution after he has
realised all property and distributed to creditors
276 Court-release of a liquidator will discharge him from all liability
305 Liquidator shall pay debts, adjust rights, and may exercise powers under Act
306 Liquidators can accept shares as consideration for sale of company property
310 Parties can apply to Court if dissatisfied
343 Court can declare dissolution of company void within 2 years
349 OR shall record and account all moneys and accounts
2. BANKRPUTCY

A. BANKRUPTCY PROCEEDINGS

Procedure: Statutory Demand by Creditor

1. Service [96 BR]
 Normal Service
o [(1)] “take all reasonable steps to bring [it] to [his] attention”
o [(2)] “make reasonable attempts to effect personal service”
 Substituted Service
o [(3)] “Where … not able to effect personal service … served by …
means … most effective in bringing the demand to [his] notice”
o [(4)] “may be effected by
 [(a)] posting [it] at the door or … conspicuous part of the last
known place of residence or business
 [(b)] forwarding … by prepaid registered post to [last known]
 [(c)] where no knowledge of [last known] … by
advertisement … in one or more local newspapers
 [(d)] other mode which the court … ordered”
o [(5)] “period … for compliance … and setting aside … shall be not
less than 21 days”
2. Debtor may set aside the demand [97 BR]
 [(1)] by OS: “(a) within 14 days; or (b) outside jurisdiction, within 21 days”
 [(5)] with Affidavit: “(a) date; (b) grounds [to] set aside; and (c) a copy”
 [(6)] “served on creditor within 3 days from … filing”
3. Court “shall set aside the [SD] if” [98(2) BR]
 [(a)] “debtor [has] a valid counterclaim … equivalent to or exceeds … debt”
 [(b)] “disputed on grounds which appear to the court to be substantial”
 [(c)] “creditor holds assets … or security … equivalent to or exceeds … debt”
 [(d)] “rule 94 (SD format) has not been complied with”
 [(e)] “court is satisfied, on other grounds, that [it] ought to be set aside

Draft Statutory Demand

Statutory Demand: Individuals

Sample: Form 1 Statutory Demand under Section 62 of the Bankruptcy Act
94 (1) “in Form 1 … dated and signed by the creditor himself”
BR (2) “actual amount of the debt … accrued”
(3) “If … includes interest, separately identify the actual amount … the rate … and
the period”
(4) “consideration for the debt, or if … no consideration, the way … the debt arises
and
(a) if … founded on a judgment … of court … give … details, including the
action … and the date;
(b) if … founded on grounds other than a judgment … give … details as would
enable the debtor to identify the debt”

If creditor is holding security

(5) “If the creditor holds any property … or any security for the debt … (a) the full
 amount of the debt; and (b) the nature and value of the security”

(6) “debt … claimed shall be full amount … less the … value of the security”
95(1) (1) “must include an explanation … of:
(a) purpose of the demand, and … if the debtor does not comply … bankruptcy
proceedings may be commenced;
(b) time within which the demand must be complied with;
(c) methods of compliance available; and
(d) debtor’s right to apply to the court to set aside the statutory demand.”

(2) “specify one or more named individuals … for … securing or compounding the
debt … and the address and telephone number of any … named”

Procedure: Creditor’s Bankruptcy Application after Statutory Demand

1. File Application by OS with Affidavit [99 BR]
a. Timing: “The application shall not be made if the [SD] was served more than
4 months before the … application” [102(2) BR]
b. File Affidavit proving service of statutory demand [108(1) BR]
c. File Affidavit of non-satisfaction of debt [65(1)(a) BA]
2. Deposit fees with Official Assignee [105(1) BR]
3. Registrar will appoint a hearing [107 BR]
4. Served on the debtor
a. Personal Service [109 BR]
b. Substituted Service [111 BR]
5. File Affidavit proving service of bankruptcy application [114(1) BR]

Creditor’s Bankruptcy Application: Individuals

Who can file Creditor Bankruptcy Application [57 BA]
“a [CBA] may be made against an individual by one … creditor … or … more than one”
[(1)(a)(i)]

Creditor Bankruptcy Application [99(1) BR]

“shall be made in Form 2”

Affidavit [106(1) BR]

“shall be in Form 3 or 4”

Affidavit: Particulars [100 BR]

“shall state … of the debtor: (a) his name, (b) identity card, (c) place of residence, (d)
occuptation, (e) any name other than (a) which, to the creditor’s personal knowledge, the
debtor has used”

Affidavit: Identification of debt [101(1) BR]

(a) “actual amount of the debt … accrued”
(b) “If … includes interest, separately identify the actual amount … the rate … and the
period”
(c) “when the debt was incurred or became due; and”
(d) “consideration for the debt, or if … no consideration, the way … the debt arises and
(a) if … founded on a judgment … of court … give … details, including the action … and
 the date;
(b) if … founded on grounds other than a judgment … give … details as would enable the
debtor to identify the debt”

Affidavit: If creditor is holding security [101(2) BR]

“If the creditor holds any property … or any security for the debt … provide … (a) a
description of … security; and (b) value of … security … and … take into account such …
security”

Affidavit: When trustee is needed [101A BR]

“must state … whether section 33(1A) of the Act applies” << “apply … for the appointment
of a person other than the Official Assignee to be the trustee” where the creditor is an
institutional creditor” [33(1A) BA]

Affidavit: If based on statutory demand [102(1) BR]

“state … date and manner of service … and that to the best of the creditor’s knowledge and
belief, the demand has neither been complied with nor set aside and that no application to set
it aside is pending.”

Procedure: Debtor’s Bankruptcy Application after Statutory Demand

1. File Application by OS with Affidavit [99 BR]
a. Between 21 days – 4 months: “The application shall not be made if the [SD]
was served more than 4 months before the … application” [102(2) BR]
2. Deposit fees with Official Assignee [138(1) BR]
3. Registrar will settle a bankruptcy order in Form 13 [141(1) BR]
4. Serve a copy on the Official Assignee [142 BR]
5. OA will gazette [143 BR] and advertise [144 BR]

Debtor’s Bankruptcy Application: Individuals

Who can make Debtor’s Bankruptcy Appplication [58 BA]
“a [DBA] may be made against an individual debtor by the debtor himself” [(1)(a)]

Debtor Bankruptcy Application [134(1) BR]

“shall be made in Form 9 and the affidavit … shall state (a) his name, (b) identity card, etc.”

Affidavit [136 BR]

“shall be in Form 10”

Statement of Affairs, Affidavit [137 BR]

“filed … with a statement of affairs in Form 11” [(1)] “verified by an affidavit in Form 12”
[(2)]

Grounds of Winding Up

60 Singapore courts has jurisdiction

BA (1) “No bankruptcy application … against an individual debtor unless [he]
(a) is domiciled in Singapore;
(b) has property in Singapore;
(c) within … one year … preceding the … application
 (i) been … resident or … a place of residence in Singapore; or
(ii) carried on business in Singapore. >> (3) “include[s] a firm in which [he] is
a partner; and (b) business by ... agent or … manager for [him]”

Presumption against change of domicile

Algemene Bank [1989] Loo owed the bank money and claimed he was domiciled in
Taiwan. He did not produce documentary evidence that he had married a Taiwanese
lady, had a Taiwanese citizen son, and purchased a house there. His brother filed an
affidavit alleging this. The court held that there was a presumption against the change
of domicile of origin, and the burden proving any change rests on the person alleging
it. This is a particularly onerous burden for a domicile of origin, compared to a
domicile of choice.
61 Grounds for Winding Up [61 BA]
BA “no BA shall be made … unless at the time
(a) debt … is not less than $15,000;
(b) debt … is for a liquidated sum payable … immediately;
(c) debtor is unable to pay the debt; and
(d) where the debt … is incurred outside Singapore, [it] is payable … by virtue of
a judgment … enforceable by execution in Singapore.”

Presumed “unable to pay the debt” [62 BA]

“if the debt is immediately payable and
(a) (i) creditor … has served … a demand … (ii) at least 21 days have elapsed; the
debtor has neither complied … nor applied to … set it aside;
(b) judgment debt … has been returned unsatisfied in whole or in part; or
(c) he has departed from … Singapore with the intention of … obstructing …
recovery of debt”

Technical Defects in Statutory Demands

Improper Service
Wong Kwei Cheong v ABN-AMRO Bank [2002] Bank elected to advertise instead of
serving the stat demand at Wong’s premises, because the premises were locked and
the property was owned by a company. The court rejected this election and held the
bank had abused the process of court.

Not Compounding Debt

Bombay Talkies v UOB [2015] Bombay argued that the debt had been compounded.
The court held that the creditors had merely agreed to withhold windingup up for the
time being, without prejudice to its rights. Also, a debt is compounded when it is
discharged or rendered unenforceable pursuant to an agreement between the debtor
and the creditor.

B. ALTERNATIVES TO BANKRUPTCY

Individual Voluntary Arrangement [45 – 49 BA]

 “shall not apply (a) to an individual … who is an undischarged bankrupt” [44 BA]
 “any insolvent debtor who intends to make a proposal to his creditors … may apply …
for an interim order” [45(1) BA], “no bankruptcy application may be made or proceeded
with against the debtor” [45(3)(a)(i) BA] for “42 days after … unless the court … directs”
[45(4) BA]
 Court will grant if “it is satisfied that (a) the debtor intends to make a proposal for a
voluntary arrangement; (b) no previous application … has been made … 12 months
immediately preceeding … the application; and (c) the nominee … is qualigied and
willing to act” [48 BA]

Procedure
 Application by OS and appoint a nominee [46 BA]
 Court grants an interim order
 Nominee reports the results, and implements proposal [53(1) BA]

Debt Repayment Scheme [56A – 56T BA]

1. Application assessed by Official Assignee. Suitable if [65(7)(a) –(e) BA]
a. “debts … does not exceed $100,000”
b. “is not… and has not been a bankrupt … within 5 years”
c. “a voluntary arrangement … is not … and was not in effect … within 5 years”
d. “is not … and has not been subject to any such DRS … within 5 years”
e. “not a sole proprietor, a partner of a firm or …. in a limited liability
partnership”
2. Moratorium under DRS [56F(1) BA]. “(a) no creditor … shall have any remedy … in
respect of that debt; and (b) no action … shall be proceeded with or commenced”

C. BANKRUPTCY ADMINISTRATION

Bankrupt’s Duties
 Assist OA in identifying and recovering the property of his estate [129 BA]
 File Statement of Affairs [81(1) BA]
 Submit accounts every 6 months [82 BA]

Bankrupt Offences
 Failure to submit statement of affairs within 21 days [81(6) BA]
 Failure to submit Income and Expenditure Statements [82(1)(a) BA]
 Failure to hand over assets and income to OA [82(1)(b) BA]
 Other offences [Part X BA]

Restrictions on Bankrupt

76 – 77 Property is vested in OA [76 BA]

BA “property … shall (i) vest in OA … and (ii) become divisible among his
creditors”

No disposition of property [77(1) BA]

 “any disposition of property made by him during the period beginning the day of
the making of bankruptcy application and ending with the making of the
bankruptcy order shall be void”
130 “disqualified from being appointed or acting as a trustee or personal
representative”
131(1)(a) “incompetent to commence, continue or defend (i) any action other than (A)
damages … [for] injury; (B) a matrimonial proceeding; or (ii) any appeal” from
the above

Standard Chartered Bank v Thomas Loh [2010] Lawyer was made bankrupt
when his partner ran away with bank moneys. Lawyer wanted to sue bank for
defamation. The court held that it was pain felt in relation to his character, and he
could sue in his own name after obtaining leave from court.

Takahashi Kenji v Koh Hiang Pin [2012] Bankrupt husband failed to obtain OA’s
sanction while maintaining an action for ancillary matters agains the wife. The
court held that the husband’s non-compliance meant the proceedings were null
and void, since OA’s consent cannot be granted retrospectively
131(1)(b) “shall not leave, remain or reside outside Singapore without … permission”
141(1)(a) “shall be guilty of an offence if … (a) either alone or jointly … obtains credit …
not less than $1,000 … without informing that person … [he] is an undischarged
bankrupt”
148(1) “who acts as director … or directly or indirectly takes part in … management of
any corporation, except with … leave … shall be guilty of an offence”
3. JUDICIAL MANGEMENT 227A-227X

A. AIMS OF JUDICIAL MANGEMENT

Merits of JM
Rehabilitation, Preservation. This allows companies in financial trouble an opportunity to
rehabilitate and/or to preserve the company’s business as a going concern through
restructuring or reorganisation of operations and debt such as injection of fresh funds by
investor. This also preserves the interests of creditors on basis that they would be better
served under JM compared to winding up, the latter being a measure of last resort.

Procedure: JM
1. Application of JM by OS with Affidavit
a. Applicant nominates a public accountant [227B(3) CA]
b. JMG’s costs will be paid for [227J(3) CA]
2. JM Order in force for 180 days [227B(8) CA]
3. JM drafts a proposal and summons a meeting of creditors within 60 days [227M CA]
a. Approval threshold majority in number and value of creditors [227N(2) CA]
b. If the creditors reject, the court may make an interim order [227N(4) CA]
4. After approval, the JMG must manage according to the approved proposals [227P(1)
CA]
5. After approval, the creditors can also monitor via a committee of creditors [227O CA]
6. JMG applies for discharge after he has achieved the statutory purpose, or the statutory
purpose is impossible to achieve [227Q CA]
7. The creditors can also ask for a discharge [227R(1) CA]

Ranking of Claims
1. Fixed charge, retention of title, beneficiary of a trust
2. Preferential debts in ss 328(1)(a)(b)(c)(e) and (f), CA as elevated by s 328(5), CA: •
costs and expenses of winding up • employee wages and salary* • employee
retrenchment benefit* • work injury compensation • employee contributions (e.g. for
CPF) • remuneration of employee for vacation leave • GST payable before proof of
debt * shall not exceed an amount that is equivalent to 5 months salary or $12500,
whichever is lesser (s 328(2), CA)
3. Deferred floating charge under s 328(5), CA
4. Remaining preferential debts in ss 328(1)(d) and (g), CA not elevated by s 328(5), CA.
5. Unsecured creditor – pari passu principle
6. Contractually subordinated creditors
7. Statutorily subordinated creditors

Grounds of JM

227A Company can make a JM application when

CA “(a) the company is or will be unable to pay its debts; and (b) there is a reasonable
probability of rehabilitating the company, … preserving ... its business as a going
concern, or that …. interests of creditors would be better served than by …
winding up”
227B Court will grant the JM application when [227B(1)]
“(a) satisfied that [Co] is or is likely to become unable to pay its debts; (<< defined
by [254(2) CA] under [227B(12) CA]) and”
(b) “the order would … achieve one or more … purposes:
(i) survival of the company, or … part of its undertaking as a going concern;
(ii) approval under [210, 211I CA];
(iii) a more advantageous realisation of … assets would be effected than on a
winding up.”

Deutsche Bank AG v Asia Pulp & Paper [2003] SGCA In an unusual case,
insolvent APP tried to have the present management do consensual debt
restructuring while the creditor bank sought independent JM because of concerns
about transparency. The court held that there was evidence that present
management had made progress, and that the bank had to show there was a real
prospect that one or more of the 3 purposes would be achieved.

Re Genesis Technologies [1994] The company was hopelessly insolvent, and

claimed that it was aggressively seeking new business opportunities, and hoped to
meet all its liabilities within 3 years, wanting to be placed under JM. 2 creditors
disagreed. The court refused because the primary objective of JM is to give the
company a new lease of life as a going concern. The court would not allow JM to
be used by directors to the detriment of creditors.

Court must dismiss a JM application when [227B(5)]

“(a) the order … is opposed by a person … entitled to appoint a … manager; and
(b) the Court is satisfied that the prejudice … caused to [this] person … if the order
is made is disproportionately greater than … prejudice … to unsecured
creditors … if the application is dismissed”

>> Locus Standi: Who is entitled to appoint a manager [227B(4)(b)(ii)]

“any such floating charge created … before 15th May 1987 … contain a power to
appoint … a judicial manager” >> floating charge over substantially all company
assets

Overriding: Court can also make an JM order [227B(10)]

“Nothing … shall preclude a Court (a) from making a JM order … if it considers
the public interest so requires”

Re Cosmotron Electronics [1989] Creditors opposed Cosmo’s petition for an order

to be placed under JM. The court held that there would be no JM order because
company was unable to pay its debts. It clarified that 227B(10) was an overriding
power which could be exercised and would connote an interest or object which, if
achieved, would transcend any or all of the purposes prescribed in s 227B(1).

Re Bintan Lagoon Resort [2005] Creditors Winners Path had bought out other
creditors and appointed a manager. Other creditors alleged that WP had lied that
they would enter a restructuring agreement. The court refused because the
allegation was not made out. Further, the test in s 227B(10) was not merely
whether it was in the public interest to appoint a judicial manager, but rather
whether the court considered “that the public interest so require[d]”. It not only
 had to be opportune but also importunate. Employees interests was not enough.

Court will take into account

o Independent insolvency practitioner’s report
o Interests of the creditors (secured and non-secured)
o Opposition by creditors to the JM order
o Conduct of the company
227B(1) Locus Standi: Application to Appoint JMG [227B(1) CA]
CA “a company … its directors (pursuant to a [members’] resolution) or a creditor
(including any contingent or prospective creditor)”

B. ADMINISTRATION OF JM

227C Interim Moratorium between JM Application and JM Order

“(a) no … order made for … winding up;
(b) no steps … taken to enforce any charge … except with leave … ; and
(c) no other proceedings … commenced or continued and no distress … against the
company or its property except with leave”
227D Removes managers and winding up applications
“(a) any receiver … shall vacate office; and
(b) any application for … winding up … shall be dismissed”

Interim Moratorium after JM Order

“(a) no … order made for … winding up;
(b) no … manager may be appointed;
(c) no other proceedings … commenced or continued except with leave;
(d) no execution … commenced or continued … against any property; and
(e) no steps … taken to enforce any charge … except with leave”

Does not affect legal rights [227B(5)]

“does not affect the exercise of any legal right under any arrangement (including …
set-off … or netting)”

Electro Magnetic v DBS [1994] The bank claimed that since Electro owed them
money, they had a lien over Electro’s funds with them. The court disagreed and
held that the right of set-off was a contractual, personal right. Therefore, it was not
affected by the moratorium.

Altus Technology v OCBC [2009] Altus went bankrupt and Samsung tried to
recover funds it paid into OCBC, who refused. The court held that Samsung was
entitled to the right of contractual set-off, affirming Electro.

No pari passu distribution

Re Wan Soon Construction [2005] The court held that pari passu does not apply to
JM/SOA, which is a corporate rescue mechanism which seeks to rehabilitate the
company, but does apply to unsecured creditors in the context of a winding up.

Duties/Powers of JMG
227G (1) “take … under his control all the property”
(2) “all powers … and duties … on the directors … shall be exercised and
performed by the JMG”
(3) “shall do all such things necessary for the management of the …
business … of the company”
(4) “include the powers … in the 11th Schedule” (etc. establish subsidiaries,
defend application for winding up, execute documents, appoint agents,
borrow money)
227H (1) “may … exercise his powers in relation to any property … subject to a
security”
227M (1)(a) “within 60 days … send … Registrar and … creditors a statement of
his proposals”
4. AVOIDANCE OF ANTECEDENT TRANSACTIONS

A. UNFAIR/UNDUE PREFERENCE

Grounds

329(1) (1) “any transfer … relating to property … against a company, which … done …
CA against an individual, would in his bankruptcy be void … under [98, 99, 103 BA]
shall in the event of the company being wound up be void”

Compulsory Winding Up
(2) “date which corresponds with … application for a bankruptcy order shall be
(a)(i) date of the making of the winding up application; or the date … which the
resolution to wind up the company voluntarily is passed, whichever is the earlier

Voluntary Winding Up
(2)(b) “the date upon which the winding up … commence[s]”
99 BA Application to restore unfair preference
(1) “where an individual … has … given an unfair preference, the [OA] may
apply for an order"
(2) “The court shall … make such order … for restoring the position”

Unfair Preference + Desire to produce

(3) “an individual gives an unfair preference to a person if (a) that person is one of
[his] creditors or surety; and (b) the individual does anything … which put[s] that
person into a position … which will be better than … if that thing had not been
done.”
(4) “the individual … was influenced … by a desire to produce … the effect … in
[99(3)(b) BA]

Given to Associate
(5) “An individual who has given an unfair preference to a person who … was an
associate … shall be presumed … to have been influenced … by such a desire …
in [99(4) BA]

“associate” [101 BA]

(2) “spouse, or is a relative, or the spouse of a relative”
(3) “in partnership, and … a relative of … partnership”
(4) “employs or by whom he is employed”
(5) “beneficiaries of the trust”
(6) “A company … if that individual has control of it”

“relative” [101(7) BA]

“brother, sister, uncle, aunt, nephew, niece, lineal ancestor or lineal descendant,
treating (a) any relationship of the half blood as a relationship of the whole blood;
and (b) an illegitimate child as the legitimate child”

“spouse” [101(8) BA]

“include a former spouse”
 “control of a company” [101(9) BA]
“(a) the directors … are accustomed to act in accordance with his directions; or
(b) he is entitled to exercise… 1/3 or more of the voting power at any general
meeting”
101 BA Relevant time when [100(2) BA]
“the individual (a) is insolvent; or (b) becomes insolvent in consequence”

When was unfair preference given

“unfair preference … given to a person who is an associate” [101(1)(b) BA]
“(i) 2 years before the day … bankruptcy application is made … ending on the
day of the making of the bankruptcy order”

“unfair preference” [101(1)(c) BA]

“(i) 6 months before the day … the bankruptcy application is made … ending on
the day of the making of the bankruptcy order”
102(2) Defence [102(3) BA]
BA “An order … shall not
(a) prejudice any interest … which was acquired from a person other than that
individual and was acquired in good faith and for value; or
(b) require a person who received a benefit … in good faith and for value to pay a
sum to the OA”
Rabobank v Jurong Technologies [2011] SGCA The court held that the directors need not be
aware that the company was insolvent at the time of giving of the preference, and there had to
be genuine commercial value in the transfer.

DBS v Tam Chee Chong (JM of Jurong High-Tech) [2011] Jurong gave a security document
to DBS, and the JM complained it was unfair preference. The court agreed, the facts showed
that Jurong wanted to give DBS a security because DBS had been kind to them. The court
held that it was sufficient that the desire to prefer was one of the factors which influenced the
decision; it need not be the sole or decisive factor.

Liquidators v Progen Holdings [2010] The liquidators asked the court to set aside 10
transactions valued close to $11m to Progen Holdings. The court set them aside because
related parties had benefited, whereas directors ought to have considered the interests of the
creditors. Past practices of transfers when the company was still solvent was not relevant
because no new value was created.

Show Theatres v Shaw Theatres [2002] SGCA 3 directors from Show were also directors of
Shaw. Shaw provided shareholder loans to Show, and Show went insolvent but repaid the
loans. Show later went for winding up. The court held that Shaw was an associate, because
where two companies have a common director, they will be treated as connected because of
the need for transparency.

Living the Link s v Tina Tan [2016] SGHC Living had made inventory and share transfers to
associate family owned companies. The court held that these were unfair preference since it
is implausible that a desire to better the position of the associate companies did not operate
on Tina Tan’s mind at all when she procured these transfers to the family owned associate
companies to the exclusion of Living’s other creditors. Running account depicts a continuing
relationship of debtor and creditor with an expectation that further debits and credits will be
recorded. The fact that an impugned payment was made pursuant to a running account is by
itself insufficient to negate an intention to prefer – it must have been made with the intention
of obtaining new value to keep the business going.

B. TRANSACTION AT AN UNDERVALUE

329 CA
98 BA Application to restore transaction at undervalue
(1) “where an individual … has … entered into a transaction … at an
undervalue, the [OA] may apply for an order"
(2) “The court shall … make such order … for restoring the position”

Undervalue
(3) “makes a gift …or … enters into a transaction
(a) on terms that provide … no consideration
(b) in consideration of marriage; or
(c) for a consideration … which, in money or money’s worth, is significantly
less than the value”

Presumed insolvent [101(3) BA]

“when a transation is entered into at an undervalue … the requirements under
[101(2) BA] shall be presumed to be satisfied”
100 BA When was unfair preference given
“5 years before the day … bankruptcy application is made … ending on the day
of the making of the bankruptcy order”
102(2) Defence [Reg 6 C(AoBAP)R]
BA “The court shall not make an order … in respect of a transaction at an
undervalue if … (a) the company … did so in good faith and for the purpose of
carrying on its business; and (b) there were reasonable gorunds for believing that
the transaction would benefit the company.”

Defence [102(3) BA]

“An order … shall not
(a) prejudice any interest … which was acquired from a person other than that
individual and was acquired in good faith and for value; or
(b) require a person who received a benefit … in good faith and for value to pay
a sum to the OA”
Buildspeed Construction v Theme Corp [2000] Buildspeed ceased construction and novated
the agreement to Theme Corp. The court said this was an undervalue transaction because the
novation agreement was less than the value of the consideration provided by $2.8m.

Leun Wah Electric v Sigma [2006] Sigma sold electrical cables to subcontractor constructor
Electric, and claimed the sum when it became due. The court held that there was no
undervalue, because the assignment was made with the intention of paying off a pressing debt
which was in Electric’s commercial interests because it helped Electric to retain its principal
supplier and carry on projects.

Velstra v Dexia Bank NV [2005] Velstra made a mistaken payment out. The court held that
this process of giving provisional credit and subsequently assigning the remittance to the
bank was entirely an arrangement between the respondent and its customer which could have
no effect as to whom Velstra had intended to enter into a transaction with. A mistaken
payment would not fall under the ambit.

Mercator & Noordstar NV v Velstra [2003] A “transaction” under Section 98 of the

Bankruptcy Act includes a unilateral act of payment and a gift transaction. It does not require
any evidence of mutuality.

Encus International v Tenacious Investment [2016] The law is unsettled as to whether grant
of security can amount to a transaction for no consideration. Court expressed preference for
the view that a grant of security should be treated as transaction which required consideration
and which therefore could be undervalued. However, as the facts did not require a conclusion
on the matter, there was no definite holding on the issue.

C. TRANSACTIONS MADE BETWEEN APPLICATION AND ORDER

259 CA “Any disposition of the property … including things in action … after the
commencement of the winding up … shall … be void.”
Kong Swee Eng v Rolles Rudolf Jurgen August [2011] The court held that avoidance can only
be invoked by company, not by the purchaser. A purchaser of shares, such as the plaintiff,
could not avoid completion in respect of agreements which were entered into prior to the
commencement of winding up, even if the company should subsequently be wound up.

QCD v Wah Nam Plastic Industry [1997] QCD wanted the balance of the purchase price of
goods sold to Wah Nam by the Reciever. The court held that “disposition” did not include the
process by which a person with a beneficial interest in the property obtains that property, or
the proceeds of realization from the company at a time when he is entitled to have it. The
word “disposition”, when used with reference to property, normally had the meaning of
connoting a change in beneficial ownership of an asset by transfer or other type of dealing.

Cheo Sharon Andriesz v Official Assignee [2013] Bankrupt husband transferred two
properties under a consent judgment in a divorce suit. The court held it was void because the
disposition was made by the bankrupt, and parties ought to conduct relevant bankruptcy
searches before the commencement of proceedings. This applied [77 BA]

E. FRAUDULENT TRADING/INSOLVENT TRADING

[340(1) CA] “If … it appears that any
business … has been carried on with intent to
defraud creditors … the Court … may
declara that any person who was knowingly a
party … shall be personally responsible,
without any limitation of liability”
[339(3) CA] “If … it appears that an
officer … who was knowingly a party to the
contracting of a debt had … no reasonable …
ground of expectation … of the company …
being able to pay the debt … the officer
shall … be liable on conviction to a fine not
exceeding $2,000”

[340(2) CA] “Where a person has been

convicted … under [339(3) CA] … the
Court… may… declare that the person shall
be personally responsible without any
 limitation of liability”
Tang Yoke Kheng v Lek Benedict [2005] The civil standard of proving on a balance of
probabilities applied where fraud was the subject of a civil claim, despite the infusion of a
criminal element (ie, fraud). However, because of the severity and potentially serious
implications attaching to a fraud, the court’s expectation of proof would be higher even in a
civil trial.

Liquidator of Leong Seng Hin Piling Pte Ltd v Chan Ah Lek [2007] Question whether a
person was carrying on a business was subjective, not objective. He must personally have
been dishonest.
SCHEMES OF ARRANGEMENT

PRELIMINARY MATTERS IN PREPARING A SCHEME – OBJECT &

PURPOSE

 Before a scheme becomes binding on the creditors of the company

o Application made to Court that one or more meetings of creditors be summoned
(s.210(1) of the Act)
o Proposed scheme is put before the meeting(s) of creditors for consideration and
approved by requisite majority (s.210(3) of the Act)
o If proposed scheme is approved by requisite majority, the court may sanction the
scheme (ss.210(3) and (4) of the Act)
o A copy of the order of court sanctioning the scheme must be lodged with the
Registrar (s.210(5) of the Act)
 Section 210 CA

Re TPC Korea Co Ltd [2010] 2 SLR 617

Facts:
 Applicant (TPC Korea) was a coy incorporated in the Republic of Korea and in the
business of shipping, trading and other related business
 Coy applied for rehabilitation in Korea under the Debtor Rehabilitation and Bankruptcy
Act, a proceeding analogous to Ch 11 US Bankruptcy Code
 Coy had no presence or assets in Sg other than interests in 5 vessels which regularly
plied Sg
 Coy applied for a Sg court order to be at liberty to convene meeting of its creditors in
Sg for the purpose of considering and if thought fit, approving the Korean
Rehabilitation plan pursuant to s210(10) of CA and pending court approval of the SOA
or until rehabilitation proceeding in Korea was terminated, all actions against coy’s
assets be restrained

Held, dismissed the application:

 Key qn is whether or not s210(11) of CA confers jurisdiction on this court to issue a
s210(10) restraining order on a non-Sg incorporated or registered coy which has
commenced rehabilitation process in its country of incorporation, Korea. The Applicant
does not have a place of business in Singapore, it does not carry on business in
Singapore and it has no assets in Singapore save for interests in that the Relevant
Vessels which regularly call at the port of Singapore. As a result of the Relevant
Vessels being occasionally present in Singapore, they become susceptible to the
admiralty jurisdiction of the Singapore courts.
 The Companies Act applies primarily to companies incorporated in Singapore
under it or its predecessor companies legislation. It also applies to foreign
incorporated companies which are registered as such where they either carry on
business or have assets in Singapore. Whether a provision applies only to Singapore
incorporated companies or extends to foreign companies or other unregistered
companies (as defined in the Act) depends on its interpretation. In the Companies Act
the terms “companies”, “corporations”, “foreign companies” and “unregistered
companies” are each defined generically or specifically under different Parts of the Act.
 The provision in issue, viz, s 210(11), is contained in Pt VII of the Act, which provides
for schemes of arrangement, reconstructions and amalgamations governing the process
 under which a Singapore incorporated company may present schemes to shareholders
or creditors for prescribed thresholds of approval. Within this process, the Court is also
empowered under s 210(10) to restrain proceedings against the company, when such a
scheme has been proposed. Such restraint may include a pre-emptive moratorium on
actions against the company
 Section 210 of the Companies Act was available to Singapore incorporated companies
and by s 210(11), was extended to be available to foreign companies as defined as
those which were liable to be wound up under the Companies Act
 Court will favourably consider making a winding up order against a foreign company
provided assets exist in Singapore or there is a sufficient nexus or connection with
Singapore.
o Protection of local creditors is the primary foundation upon which this
jurisdiction is exercised.
 What is being sought here is a pre-emptive restraining order against all creditors,
whether or not in Sg, from invoking the admiralty jurisdiction of Sg courts against the
applicant’s vessels which may be in the port of Sg from time to time
 When a foreign company was liable to be wound up under the Companies Act, a
proposed foreign scheme of arrangement which was sought to operate in Singapore
would have to comply with the processes and prescriptions of s 210 in relation to the
scheme
 Schemes of arrangement did not have extraterritorial effect on assets located beyond
the relevant jurisdiction save in accordance with applicable law and/or treaty

Conclusion: As the Applicant has no assets whatsoever in Singapore, other than interests
in the vessels that may ply the Singapore port in future, I am unable to grant the
application, given the absence of clear statutory jurisdiction to do so, the forced
construction proposed and its far reaching implications.

STEP 1: APPLY TO COURT FOR LEAVE TO CONVENE MEETING

 Apply through ex-parte OS under [ROC O88 r2(1)]

 Supported by affidavit by a duly authorised person in the company
 Proposed scheme must be exhibited [CA 211(1)]
 If there are multiple winding petitions pending, application may be inter partes

Order 88 r 2(1) ROC

2.—(1) Unless otherwise provided in the Act or this Order, every application under the Act
must be made by originating summons and these Rules shall apply subject to this Order.

Royal Bank of Scotland NV and others v TT International Ltd and another appeal
[2012] 2 SLR 213
Facts:
 TT Intl was incorporated in Sg and listed on Sg Exchange
 Financial crisis in 2008 significantly affected the coy’s business. Its financial position
became precarious when some bank creditors recalled their facilities and demanded
prompt repayment of the sums due.
 Coy then appointed nTan Corporate Advisory Pte Ltd as an independent financial
advisor and announced that it would be implementing a SOA
 On 29 Jan 2009, coy applied for and received approval from the court pursuant to
s210(1) CA to summon a meeting of its creditors to propose the scheme but key terms
could not be agreed on.
 Despite the stalemate, coy proposed the scheme for voting by creditors in Sept 2009.
After the creditors had voted on 16 Oct 2009, they were informed that the proposed
scheme manager had not completed the adjudication of the proofs of debt.
 On a much later date at 17 Dec 2009, proposed scheme manager reported that scheme
had been passed by majority of creditors representing 75.06% in value, barely
exceeding the sat threshold of 75%
 Proposed scheme manager was also the nominee for the individual voluntary
arrangements filed by the chairman and an executive director (chairman’s wife) of the
coy
 Opposing scheme creditors were then prompted to seek copies of proofs of debt and
other information. Coy provided some information based on a goodwill basis but
proposed scheme manager was adamant that access to relevant proofs could and would
not be given to opposing creditors.
 HC disagreed with opposing creditors and approved the scheme

Held, allowed the appeal:

Objective of s210
 Confers on a coy the power to compromise with creditors and members
 Section is intended to provide machinery 1) for overcoming the impossibility or
impracticability of obtaining the individual consent of every member of the class
intended to be bound by the SOA and 2) preventing, in appropriate circumstances a
minority of class members frustrating a beneficial scheme

Procedure

Application to court to convene meeting

 First formal step towards obtaining approval for SOA is for the subject coy to apply ex
parte to court for a meeting of all creditors, or all classes of creditors to approve the
scheme. Court can grant such an application pursuant to s210(1)
 At this stage, one of the key tasks and responsibilities of the promoter of SOA is to
classify its creditors according to separate interests. This is not a matter of form. If the
scheme creditors’ meetings are not properly conducted, court has no jurisdiction to
sanction proposed scheme
 It is the applicant’s responsibility to determine whether more than one meeting of
creditors is required by the scheme and the meetings which the applicant considers will
be required. Court, in considering whether or not to order meetings of creditors, will
consider whether more than one meeting of creditors is required and if so, what is the
appropriate composition of those meetings. It is the applicant’s responsibility to raise
any issues relating to creditors to the court for its directions
 Even if there is a need at this stage to hear potentially dissenting creditors, such a
hearing could be conducted expeditiously and summarily.
 The adoption of this procedure in Singapore requires the company’s solicitors, when
applying for an order to summon the scheme creditors’ meeting, to unreservedly
disclose all material information to the court to assist it in arriving at a properly
considered determination on how the scheme creditors’ meeting is to be conducted.
 Any issues in relation to a possible need for separate meetings for different classes of
creditors ought to be unambiguously brought to the attention of the court hearing the
application. As time is ordinarily of the essence in such applications, all scheme related
matters (including appeals therefrom) should be heard on an expedited basis.
 Following this, court may give directions for the calling of scheme creditors’ meeting.
o However, at this stage, court should not consider merits and fairness of the
scheme as this stage concerns the court’s jurisdiction to sanction the scheme if
it proceeds.
o Also if there is no realistic prospect of a scheme receiving the requisite approval,
court should not act in vain in granting the applications for meetings to be
convened. A failure to make conscientious assessment of the likely prospects of
scheme approval may result in adverse costs orders

Notice to be sent under s211

 Once the court issues directions for the calling of scheme creditors’ meetings, notices
summoning the meetings must be sent to the creditors. S211 requires that such notices
be accompanied by a statement that clearly explains the intent and purport of the
compromise or arrangement and discloses any material interests of the directors and
effect of the scheme thereon. It is essential that the explanatory circular must be
“perfectly fair and, as far as possible, give all the information reasonably necessary to
enable the recipients to determine how to vote”
 Copy of SOA document and a proxy form for the creditors’ use at the scheme
creditor’s meeting should be enclosed to ensure that creditors have adequate
information about the proposed scheme.

Submission of proof of debt

 After this, the prospective scheme creditors will submit their proofs of debt together
with any supporting documents to the chairman of the meeting(s) for his adjudication.
The chairman chairman of the meeting is almost invariably the proposed scheme
manager (or his nominee).
 Submissions have to be made before a “cut-off” point stated in the scheme document
and highlighted in the s211 explanatory statement.
 If the chairman wishes to extend the time for submission of proofs, not only should
prior court sanction for this be sought, all creditors should also be informed to
ensure that the extension of time benefits all, and not merely a particular group of
sympathetic creditors.
 Chairman then has to perform the quasi judicial task of adjudicating upon disputes as to
voting rights of anyone claiming to be a creditor. The chairman cannot act capriciously
or arbitrarily and must determine issues objectively.

Conduct of scheme creditors’ meeting

 The entire process of proof, admission or rejection is ordinarily completed before the
scheme creditors’ meeting(s) is held. Although s 210 does not expressly spell this out,
it has also become the usual practice for the chairman to post a list of the creditors
and the corresponding amounts of their admitted claims (for the purpose of voting)
at the meeting venue prior to the meeting.
 Disclosure of material information about the scheme or the company’s affairs ought not
to be deliberately withheld until the meeting so as to influence its outcome. This would
unfairly prejudice those which may have decided not to attend after considering the
 information sent to them earlier and will likely be seen as an attempt to improperly
influence the voting outcome.
 After the creditors cast their votes, the chairman will immediately thereafter tabulate
the results and announce them by the end of the meeting.
 Per s210(3), Thus, if the proposed scheme is accepted (within each designated class, if
any), by a majority in number of the creditors (present and voting) who hold at least
75% of the total debts owed by the company (to the respective designated classes, if
any), the proposed scheme can proceed to the third stage.

Seeking court’s approval

 Apply to court to approve the scheme. This requirement is underscored by s210(3)
which states that scheme will become binding only if approved by order of the court
 s210 allows a majority of creditors to “cram down” on the rights of a minority of
objecting creditors and implement a scheme notwithstanding the latter’s objections.
The requirement of the court’s approval serves as an additional crucial check to
ensure the integrity of voting outcome(s) at the scheme creditors’ meeting(s) and
the objective fairness of the proposed scheme.
 Court must be satisfied of three matters
o Statutory provisions have been complied with. (e.g. resolution passed by
requisite statutory majority)
o Those who attended the meeting were fairly representative of the class of
creditors or the class of members and that the statutory majority did not coerce
the minority
o Scheme is one which a man of business or an intelligent and honest man, being a
member of the class concerned would reasonably approve  “fair and
reasonable” test
 If court is satisfied, it will issue an order of court approving the scheme. Scheme
becomes binding on all parties when that order is lodged with Registrar of Companies
and Business pursuant to s210(5) of CA

Transparency and objectivity

 The integrity of voting outcome(s) of the scheme creditors’ meeting(s) is dependent
upon the fairness of the proof of debt adjudication process. The objectivity of the
chairman is a critical aspect of the entire process.
 The proposed scheme manager’s responsibility to be independent in managing
differences between the company and creditors is in a broad sense not different from
the legal obligation imposed on other insolvency practitioners, eg, a liquidator.
 If the minority creditor is to be “crammed down” upon by the majority, then it has
every right to insist that the majority is constituted strictly in compliance with the
requirements of s 210 and that the chairman of the meeting scrupulously discharges his
responsibilities fairly.

Proposed scheme manger’s duties

 The proposed scheme manager is engaged by a company that is usually in a parlous
financial position. He formulates a scheme of arrangement to save he company and
pitches it to the creditors to secure approval of his plan. At that stage of the process,
he owes no direct duties to the creditors, save of course that he must act in good
faith and must not mislead creditors or suppress material information from them.
It is trite law that the court will not sanction a scheme if the company and/or its
 majority creditors are not acting bona fide
 The proposed scheme manager’s duties are then amplified when he assumes the quasi-
judicial role of adjudicating on the admission and rejection of the proofs of debts. In
this role, he owes duties to be objective, independent, fair and impartial
 Refer to office of liquidator as a comparator

Conflict of interest
 To an extent, the proposed scheme manager is inherently in a position of conflict
because if he successfully resuscitates the company, he is remunerated, inter alia, for
managing the scheme and reviving the company. Therefore, there are undeniable
incentives for the proposed scheme manager to prefer the interests of his
appointers (not infrequently, the company itself as is the case here) over those of
their creditors from the outset. He must, nevertheless, seek to strike the right balance
and manage the competing interests of successfully securing the approval of his
proposed scheme and uncompromisingly respecting the procedural rights of all
involved in the scheme process. It must also be appreciated that an informed voting
process can only take place if all material information a creditor might need to
determine how to vote is made available
 A proposed scheme manager goes too far when he begins to align his interests with
those of the company beyond what we have described above. The temptation to do so
is especially acute when his initial appointers are not the creditors, but the company’s
management.

Application to facts
 Here the proposed Scheme Manager was also surprisingly the nominee for the IVAs
filed by Mr Sng and Ms Tong. The success of those IVAs in turn depended heavily on
the success of the Scheme.
 This additional relationship with Mr Sng and Ms Tong, key personnel of the
Respondent, was inappropriate because it put the proposed Scheme Manager in an
unacceptable position of unavoidable conflict of interest.

Right of scheme creditors to examine proofs of debt submitted by other creditors in

respect of proposed scheme
 Issue of access to proofs of debt requires an assessment of the rights and interests of
individual creditors in relation to collective interests of the other creditors and the
company.
o First interest: for process by which proofs of debt are adjudicated upon and
admitted to be transparent
o Second interest: But at the same time, it is also easier for individual creditors to
challenge chairman’s decision on adjudication and admission of proofs of debt,
frustrating creditors supporting the scheme
 Creditor has no legal right to have access to proofs of debt of other creditors, except
where his voting rights have been or are likely to be affected. n other words, he is
entitled to access only if he produces prima facie evidence of impropriety in the
admission or rejection of such proofs of debt
o B/c even though all other insolvency and bankruptcy regimes allow creditors to
inspect proofs of debt submitted by other creditors, SOA is different. The
creditor has an autonomous voting right which may be critical to the jn of the
court to sanction the scheme. Hence, claims to be given access to proofs of debt
filed by other creditors can only be justified if the information is relevant to his
 voting rights. The creditor has a positive “right” to be given his voting
rights according to the value of his lawful claims against the company, and
he also has a negative “right” to protect his voting rights from being
whittled down by excessive voting rights given to another creditor.
 If the proposed chairman of a scheme creditors’ meeting rejects a scheme creditor’s
request for the disclosure of other scheme creditors’ proofs of debt (together with
supporting documentation), the requesting scheme creditor can apply to court for
an order that the proofs and supporting documentation be disclosed to it. The
court will determine this issue after weighing the rights of the applicant creditors
against the collective interests of the other creditors and the company, taking into
account any allegations about the prima facie dubiousness of the challenged debts.

When a scheme creditor should be notified of the chairman’s decisions to admit or

reject its own and other creditors’ proof of debt
 It is common practice for the chairman to post a list of the scheme creditors and the
corresponding amounts of their admitted claims (for the purpose of voting) at the
meeting venue before the creditors’ meeting
 The creditors commence voting knowing how much their votes will count with or
against those of their fellow creditors. In addition, the information allows some
measure of informed consultation between the creditors regarding the exercise of their
votes. This is likely to lead to a more considered and informed vote by the body of
creditors as a whole.

Application
 Here, proposed scheme manager did not do so. Prior to the meeting, scheme creditors
were not provided by the proposed scheme manager with a list of scheme creditors and
corresponding quanta of their claims that had been admitted for purpose of voting
 The proposed Scheme Manager eventually reported the results of the Scheme Meeting
slightly over two months later in the Chairman’s Report on 17 December 2009 (see
above at [21]). As a consequence of the proposed Scheme Manager’s unexplained
conduct of the Scheme Meeting, doubts were understandably sown in the minds of
some opposing creditors about the integrity of the voting process.
 Before the scheme meeting took place, the proposed scheme manager should have
o Complete adjudicating all proofs of debt
o Provide all scheme creditors present with the full list of scheme creditors antheir
corresponding quanta
 A proposed scheme manager who cannot comply with the above prior to the scheme
creditors’ meeting should act prudently and seek from the court leave to defer the
meeting until after the adjudication is completed.

Right of scheme creditor to appeal chairman’s decisions to admit or reject its own
and other creditors’ proof of debt
 Chairman of a s 210 creditors’ meeting has three options when assessing a contentious
claim for the purpose of voting.
o First, he might admit the claim wholly.
o Second, he might reject a claim wholly or partially, in which case he should
provide to the creditor written grounds of his rejection. Chairman’s decisions
should not be peremptory. His duty to give reasons puts the onus on him to look
at each proof more carefully in the proper exercise of his quasi-judicial
function. This requirement also improves the transparency of the voting process
 o Third, if the chairman has doubts whether a proof should be admitted or
rejected, he should mark it as objected to and allow the creditor to vote subject
to the vote being declared invalid in the event of the objection being sustained.
Chairman may often require further evidence in support of a proof.
 When deciding which proportion of a creditor’s claim to admit (or to
allow a creditor to vote, when his proof is marked as objected to), the
chairman need only make a “reasonable estimate” or a “just
estimate” of the claim by doing his best with the factual material the
claimant furnishes, without undertaking any detailed inquiry.
 Chairman’s decisions in admitting or rejecting proofs for purpose of voting are subject
to appeal to the court . However, such appeals to court should only be taken after the
votes have been counted and it can be seen whether the vote in question would affect
the result , preferably concurrently during the sanction stage
 In such an appeal, court should be slow in overriding the professional judgment of a
chairman in admitting or rejecting proofs of debt. The court will not ordinarily interfere
with the chairman’s decisions based on his professional judgment unless it was affected
by bad faith, a mistake as to the facts, an erroneous approach to the law or an error of
principle and that the court’s role is not to engage in its own valuation of a claim
 Nonetheless, the court has to be satisfied that the proposed scheme manager has acted
on the correct principles in his quasi-judicial role as chairman of a s 210 creditors’
meeting. If a proof of debt is not capable of substantiation without the need for serious
investigation or exertion, then the chairman should at least make the necessary
enquiries regarding the proof.
 f the court determines that a creditor’s claim was wrongly admitted or rejected for the
purpose of voting and the scheme would not have been approved but for that wrongful
admission or rejection, then the scheme must fail as the statutory supermajority of
three-fourths in value of the creditors has not been satisfied.

Classification of scheme creditors for voting purposes under s210

 Starting point: those creditors whose rights are so dissimilar to each other’s that they
cannot sensibly consult together with a view to their common interest must vote in
different classes
 If the scheme favours or prejudices a group of creditors (against other creditors)
differently from how they would be favoured or prejudiced in a liquidation, such
as to give them an additional non-private interest to vote for or against the scheme
(which would make it impossible for them to consult the other creditors with a view to
their common interest), then that group of creditors should be classed separately.
 The dissimilarity principle means that if a creditor’s (or a group of creditors’)
position will improve or decline to such a different extent vis-à-vis other creditors
simply because of the terms of the scheme (and not because of its own unique
circumstances, ie, its “private interests”) assessed against the most likely scenario
in the absence of scheme approval (“the appropriate comparator”), then it should
be placed in a different voting class from the other creditors. The appropriate
comparator depends on facts of each case and is not necessarily insolvent liquidation.
o In Re British Aviation, the appropriate comparator was insolvent run-off
o In T & N Limited, the appropriated comparator was continued litigation
regarding the disputed claims
 Ultimately, the classification of creditors for the purposes of voting is protective of
minority creditors whose rights might be crammed down upon if they are
outvoted. By allowing them to vote separately from creditors whose rights are so
 different from them such that the latter have additional non-private interests in voting
for the scheme, these minority creditors are less likely to be overwhelmed and their
votes are given the appropriate significance. The application of the dissimilarity
principle to complex transactions and situations where there are different levels of
secured and unsecured creditors, as well as intra-creditor relationships, is not without
its difficulties. Defining a “legal right” in these contexts can be thorny. The courts have
therefore to take a broad, practical and objective approach in analysing creditor
relationships and ensure that the application of this principle does not lead to an
impractical mushrooming of classes that could potentially result in the creation of
unjustified minority vetoes.

Contingent claims
 Here the appropriate comparator was an insolvent liquidation. Without the Scheme, the
liquidator would distribute the contingent claimants a portion of the Respondent’s
assets (on a pari passu basis) based on the “just estimate” (see s 327(1) of the Act) of
their contingent claims. Under the Scheme, the contingent claimants would be able to
claim under the terms of the Scheme if their claims crystallised within five years of the
Scheme’s effective date.
 However, even so, it seemed that contingent creditors would assess the Scheme
primarily based on its effectiveness in preserving the Respondent’s economic value (so
as to satisfy their claims), as the rest of the creditors in the general class of unsecured
creditors would. In that light, we saw no reason to classify those contingent creditors
separately. It cannot be overlooked that the separate classification of any group of
creditors allows that group a minority veto and courts must be careful not to allow the
test for classification to become “an instrument of oppression by a minority”

Claims by substantial shareholders pertaining to unpaid dividends

 These claims constitute deferred debts in the order of distribution of assets in the
course of liquidation
 The classification of creditors requires the consideration of whether the scheme altered
the relative rights of the different creditors so that the creditors in question would be
better or worse off (relative to other creditors) under the scheme than they would be
(relative to other creditors) in a winding up situation in this matter.
 Here, although the substantial shareholders’ claims would be subordinated in a
liquidation pursuant to s 250(1)(g), their claims would not be subordinated (and
thus, more advantageously dealt with) under the Scheme. Their rights were thus
so dissimilar from those of the general class of unsecured Scheme Creditors (due
to this additional non- private interest to vote for the Scheme) that it was plainly
necessary for them to be classified separately for the purposes of voting.

Right of first refusal

 If a significant part of the non-sustainable debt is converted to equity under the scheme,
then the shares of major shareholders in the coy might be diluted. Therefore, to protect
as such, ROFR is given to these shareholders
 These ROFR were non-existent in liquidation scenario but unique to two shareholders
under the scheme, improved their position relative to other Scheme Creditors vis-à-vis
a liquidation scenario. With respect to the Judge, the ROFRs did not merely give the
shareholders “an additional private interest in supporting the vote”. In our view, the
ROFRs were additional legal rights under the Scheme which gave them non-private
interests in supporting the vote.
 Means that they have to be classified differently

When scheme creditors should have their votes discounted

Related creditors
 Court may discount or disregard altogether the votes of those who, though entitled to
vote at a meeting as a member of the class concerned, have such personal or special
interests in supporting the proposals that their views cannot be regarded as fairly
representative of the class in question
 Norm for the votes of related party creditors to be discounted in light of their special
interests to support a proposed scheme by virtue of their relationship to the company.
 Next qn: extent to which each related party creditors’ vote should be discounted

Wholly-owned subsidiaries
 Most of the related parties are wholly-owned subsidiaries
 The votes of wholly-owned subsidiaries should be discounted to zero. Wholly-
owned subsidiaries are entirely controlled by their parent company, ie, the Respondent
in this case. Indeed, we view the Respondent’s wholly-owned subsidiaries as
extensions of the Respondent itself. If the Respondent were to wind up any of its
wholly-owned subsidiary creditors, the debts owing to those wholly-owned subsidiary
creditors (save for those debts owed by the wholly-owned subsidiary creditors to
genuine third party creditors) would be extinguished and the assets of the wholly-
owned subsidiary creditors would be the Respondent’s.

Contingent creditors
 Contingent creditor should not be allowed to vote the full amount of his contingent
claim as if it had actually been proven
 Generally speaking, a creditor with a contingent claim of $10m (with a 80% chance of
crystallisation within five years of the scheme’s effective date ) should only be allowed
to vote with 80% of the voting weight given to a creditor with an actual claim of $10m
that had crystallised by the ascertainment date
 Contingent claimants should generally vote according to the likelihood of their claims
crystallising.

Significance:
 An application for leave to convene a meeting is not the appropriate forum to consider
the merits and fairness of the scheme.
 The role of the court is primarily to decide whether a meeting should be called and the
manner in which it should be conducted.

Re Foursea Construction (M) Sdn Bhd [1998] 4 MLJ 99

Facts:
 Applicant filed an ex parte OS under s176(1) and (10) of the CA for an order that the
applicant be directed to convene meetings in respect of its creditors for the purpose of
considering SOA proposed to be made between the applicant and its creditors
 There were already on record several winding up petitions pertaining to the applicant
pending hearing in HC
Held, dismissed the application:
 Application under s176(1) must be dealt with summarily, by hearing inter partes, with
an opportunity given to the known creditors on record to make their representation, and
not ex parte. By making an ex parte application, great justice is caused to the creditors
who are legally entitled to enforce execution proceeding and are thus put o further
unnecessary expense in setting aside the orders
 An application under s 176(1) gives the court the discretion only if there are no
winding-up proceedings initiated prior to the application. If there are such winding-
up proceedings, then any such application must be made in the very winding-up
proceedings by making the petitoners and the supporting creditors, if any, as parties
thereto. The presiding judge in the winding-up court would then have before him the
wishes of all the creditors or contributories in coming to some conclusion by either
making the order for arrangement and/or reconstruction and thus granting a stay under
s 222 of the Act; or refuse the application and instead wind up the company

Note: TT International does not require inter partes OS, ex partes summons is sufficient

Persons who can apply

 Company, creditors, members [CA 210(1)(a)-(c)]
 Judicial Manager [CA 227X(a)]
 Liquidator [CA 272(1)(c)] who can also propose a scheme [CA 309] any arrangement
is binding on the company if sanctioned by a special resolution, and on the creditors if
acceded to by 75% in value and 50% in number of the creditors, every creditor for
under $50 being reckoned in value only. Creditors may appeal (s 309(4) CA)

SAAG Oilfield (2012) SGCA Workmen argued that their tort claims were covered by
insurance and they should not be classed as creditors. The court held that they were creditors.
 “‘creditors’ … is to be given a wide meaning and includes persons having any
pecuniary claim against the company, including unliquidated, prospective or
contingent claims” [42] citing Re Glendale (1982) NSW
 “wide interpretation … for the term ‘creditors’” [69]
 Court advised that to avoid “unwittingly approve schemes of arrangement which had
the unintended effect of binding tort claimants in circumstance where such claimants
had never heard of the scheme and had no chance to object to it”, that “evidence
should normally be adduced, from a responsible officer of the company, to the effect
that the company has received no notice of any pecuniary claim against it” and that it
would “be appropriate to qualify the definition by adding an exclusion” of such
people [68]

EFFECT OF APPLICATION – INTERIM MORATORIUM

 Court has power to impose a legal moratorium to restrain any further proceedings against
the company except with the leave of the court
 Power includes adjourning a winding up application, staying any actions or proceedings
against the company and restraining a debenture holder from appointing a receiver and
manager
 Application by inter partes summons  give persons affected by stay of proceedings an
opportunity to be heard
 Application may be brought either before, after or concurrently with an application under
s.210(1) of the Act.
 A proposal of the Scheme must be placed before the court – Re Kuala Lumpur

Section 210 (10) CA

Power of Court to restrain proceedings
(10) Where no order has been made or resolution passed for the winding up of a company
and any such compromise or arrangement has been proposed between the company and its
creditors or any class of such creditors, the Court may, in addition to any of its powers, on the
application in a summary way of the company or of any member or creditor of the company
restrain further proceedings in any action or proceeding against the company except by leave
of the Court and subject to such terms as the Court imposes.

Re Foursea Construction (M) Sdn Bhd [1998] 4 MLJ 99

Facts:
 Applicant filed an ex parte OS under s176(1) and (10) of CA for an order that the
applicant be directed to convene meetings in respect of its creditors to consider a
proposed SOA
 There were several winding-up petitions pertaining to the applicant pending the hearing

Held:
 Applicant must be dealt with summarily, by hearing inter partes, with an opportunity
given to the known creditors on record to make their representation and not ex parte
 S176(1) gives the court discretion only if there are no winding-up proceedings initiated
prior to the application. If there are, then any such application under s176(1) must
be made in the very winding-up proceedings by making the petitioners and the
supporting creditors and the presiding judge in the winding-up court would then
come to a decision either to make an order for the arrangement thus granted a
stay under s222 of CA or refuse the application

Re Kuala Lumpur Industries Bhd [1990] 2 MLJ 180

Facts:
 Pf were restrained from proceedings against the members of a group of companies for a
period of 2 months by an order made under s176(10) of CA obtained by way of ex
parte OS
 Pf then filed an application to intervene and to move the court to set aside the s176(10)
order

Held:
 S176(10) is not pegged to s176(1)
 In making a s 176(10) order, there must be a proposal of the scheme of compromise
or arrangement (not necessarily ready for presenting to the creditors to be voted
upon) but with sufficient particulars to enable the court to assess that it is feasible
 and merits due consideration by the creditors when it is eventually placed before
them in detailed form. Further, the court has to be satisfied that there is or there would
be a bona fide s 176(1) application. It is unnecessary that the proposal must emanate
from the company to its members or to the creditors; the proposal could emanate from
anybody. It is also not necessary that there should be a scheme in a complete form
capable of being presented to the creditors for being voted on.

Re Panglobal Bhd & Ors [1999] 1 MLJ 590

Facts:
 Applicants want a restraining order
 A scheme creditor, which held a debenture on the assets of LTL (third applicant), had
called in the loan granted to the first applicant and were entitled at any time to enforce
their rights under the debenture, including the right to appoint a receiver and manager
 MPG (fifth applicant) had also assigned to Phileo allied Nank certain rentals as one of
the securities for another loan.
 It was argued that the appointment of a receiver/manager and/or enforcement of the
assignment would prejudice the promotion of scheme

Held, restraining order as against AMIL granted:

 Only further proceedings in a pending action or proceeding may be restrained
under s 176(10) of the Companies Act 1965. This application ought to be served on
the creditors whose actions or proceedings were sought to be restrained, so that they
may have an opportunity to oppose the application for the restraining order
 As the applicants feared that AMIL might appoint a receiver and manager at any time
now, and that if that were to happen they would be deprived of any opportunity to
promote the scheme, the court granted an interim order, to last for two weeks,
restraining AMIL from enforcing their rights under the debenture

Re Punj Lloyd Pt Ltd and another matter [2015] SGHC 321- duty to disclose
Facts:
 Two companies in question are Punj Lloyd (PLPL) and its subsidiary Sembawang
Engineers and Construction Pte Ltd (SEC).
 PLPL is a wholly owned subsidiary of Punj Lloyd Limited (PLL), a company listed on
the India stock exchange
 Both PLPL and SEC have run into financial difficulties
 Both companies then sought orders from the Court under s210(1) CA for meetings of
creditors to be called to consider restructuring of its debts by way of SOA. PLPL‘s
scheme would also be dependent on SEC’s scheme being approved. The companies
scheme involve ultimately, PLL assuming liabilities subject to it obtaining approval
from its creditors and other entities
 Some concerns were then raised by creditors in respect of certain transactions within
the group.

Held:

Duty to disclose
 Factors to consider under s210(1)
o Fairness of classification of creditors
o Anything showing futility of meeting
o Matters that may otherwise indicate possible abuse of process
 The duty to disclose material information exists to ensure that the Court has all
necessary information before it to be able to make a considered determination in
respect of those factors. This obligation can be seen to be derived from the fact that the
applicant company needs to move the court to exercise its statutory power to permit a
meeting to be called.
 In Ng Huat, what was found to be material non-disclosure were matters going to the
likelihood of viability of the scheme – bankruptcy hearing of a putative white knight as
well as an opposing creditor that had obtained an arbitration award in its favour. Both
of these mean that the scheme would not be successfully adopted
 Here, there was no material non-disclosure

Re Conchubar Aromatics Ltd and other matters [2015] SGHC 322

Facts:
 Three applicant coy applied for and were granted interim stay of proceedings under
s210(10) for 10 weeks or until earlier discharged, ahead of any application for the
calling of a creditors’ meeting under s210(1).
 The Applicants argued that a restraint order under s 210(10) of the Companies Act
could be granted independent of the calling of a meeting under 210(1), citing Re
KL Industries. It is authority for the proposition that a restraint order may be issued if
there is a proposal which gives more than a general layout of the scheme and the
applicant was acting bona fide. The fact that the applicants were foreign companies
would not obstruct the granting of a moratorium, as there was sufficient nexus to
Singapore such that these companies were liable to be wound up under the Act:

Held:
 S210 (10) permits the court to order restraining of further proceedings if
o There has been no order or resolution for the winding up of the coy; and
 o An arrangement has been proposed between the coy and its creditors
 S210(10) does not expressly require that there be any application under s210(1) – it
only refers to the proposal of an arrangement, not its actual presentation at a
meeting of creditors or approval by that meeting
 It is only necessary that the proposal is detailed enough to allow the Court to
consider its feasibility. As noted in Re GAE, completeness is not required. It is to be
expected that refinements and modifications will be needed before any meeting is
sought. Further, I did not think that feasibility had to be decided conclusively: close
scrutiny of the merits of the proposal or its viability and likely acceptance by the
creditors should not be carried out at this stage. What the Court needed to assess was
whether on the face of the proposal the Court could conclude that there was a
reasonable prospect of the scheme working and being acceptable to the general run
of creditors. So long as the court could make this broad brush assessment, sufficient
particularity would have been given.
 Court should be careful to ensure that there is no attempt to game the system by
companies seeking the benefit of s210(10) restraint orders without putting
forward a serious proposal. There is a need to ensure a bona fide proposal
 It should also be clear that an application under s 210(1) should be made shortly
thereafter and if not, a sufficient explanation and proposed timelines should be given.
Here, the Applicants committed to a 10 week timeline, and volunteered to appear in
court on a regular basis to provide updates.

No need for inter partes

 No requirement specified by the statute. An ex parte application, followed by
appropriate setting aside hearings before a single judge may be the best way to deal
with a complex situation

CREDITORS’ MEETINGS
 If there is no realistic prospect of a scheme receiving the requisite approval, the court
should not act in vain in granting the application for the meeting to be convened
 After leave is granted to convene creditors’ meeting,
o Notice of meeting & explanatory statement must be sent to creditors
o Explanatory statement must:
 explain nature of scheme
 state any material interests of company’s directors and shareholders
 contain full and fair disclosure of information reasonably necessary to
enable recipients to determine how to vote

Section 210(1) and 211 CA

Royal Bank of Scotland NV and others v TT International Ltd and another appeal
[2012] 2 SLR 213

Re Ng Huat Foundations Pte Ltd [2005] SGHC 112

Facts:
 Ng Huat Foundations applied under s210 of CA for an order that it be at liberty to
 convene a meeting for the purpose of considering a SOA propose by the applicant to its
creditors. The applicant also asked that no proceedings in any action be taken against it
until the holding of the meeting of the creditors pursuant to s210(1)
 Liabilities of the applicant amounted to $1.3m and total assets amounted to $44,000.
 Two of the opposing creditors collectively represented 34% in value.

Held:
 In considering an application under s 210 of the Act, a court has to consider the
overall fairness of the scheme and the prospects of its acceptance by 75% in value
of the creditors
 Court think that there was little prospect of the scheme receiving the approval of the
requisite three-fourths in value of the creditors. Court should not act in vain.

Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd
[2003] 3 SLR(R) 629
Facts:
 Applt which had a winding up petition against it, presented a SOA under the
Companies Act for the consideration of its creditors.
 Scheme provided that creditors whose claims were less than a stipulated amount would
be paid in full and subordinated the claims of its directors and a related coy to the rest
of the creditors
 More than 75% in value of creditors voted in support of the scheme. Here, creditors
were not divided into any classes and voted together at the same meeting
 Rspdt opposed as had the claims of the related parties been discounted, scheme would
have received the support of less than 75% in value of creditors
 Judge below refused to sanction the scheme

Held, dismissed the appeal due to lack of transparency on Wah Yuen’s part:
 When approving the scheme under s210 of the Act, the duty of the court is to consider
o Whether the statutory provisions have been complied with
o Whether scheme is fair and reasonable to creditors as a whole
o Whether the coy and majority creditors are acting bona fide
o Whether the minority is being coerced to promote the interest of the majority

Duty to give information

 Where a meeting is summoned under s 210 of the Act, s 211(1) requires the company
to provide its creditors with a statement “explaining the effect of the compromise
or arrangement and in particular stating any material interests of the directors,
whether as directors or as members or as xreditors of the company or otherwise,
and the effect thereon of the compromise or arrangement in so far as it is different
from the effect on the like interests of other persons”.
 Creditors should be put in possession of such information as it is necessary to make a
meaningful choice

CLASSIFICATION OF CREDITORS
 The underlying concern is not only limited to majority oppression of the minority, but
also ensuring that minority does not unfairly thwart the majority if undue fragmentation
of creditors is required

Royal Bank of Scotland NV and others v TT International Ltd and another appeal
[2012] 2 SLR 213
• Company’s solicitors must ““unreservedly disclose all material information to the court
to assist it in arriving at a properly considered determination on how the scheme
creditors’ meeting is to be conducted. Any issues in relation to the possible need for
separate meetings for different classes of creditors ought to be unambiguously brought
to the attention of the court hearing the application.”

Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd
[2003] 3 SLR(R) 629
Classification of creditors

 For voting purposes, s 210(3) requires the creditors to be divided into separate classes
if “their rights are so dissimilar that they cannot sensibly consult together with a view
to their common interest. Each class vote must comply with the % requirements in
s210(3) before the scheme can be put before the court for its approval. This is to
minimize the risk that the majority may push through the scheme at the expenses of the
minority, whose rights may be dissimilar
 Related party creditors did not constitute a separate class of creditors for voting
purposes simply because they were related parties. This is because “the test is based
on similarity or dissimilarity of legal rights against the company, not on similarity
or dissimilarity of interests not derived from such legal rights. The fact that
individuals may hold divergent views based on their private interests not derived
from their legal rights against the company is not a ground for calling separate
meetings
 Here, no difference whether related parties should be classified differently
 Wah Yuen should have put 1) those who stood to recover 100% of their claims and 2)
those whose claims were subordinated to the rest of the creditors, into separate classes
for voting purposes. Rights of these two groups of creditors were so dissimilar form the
remaining creditors that they could not sensibly consult together with a view to the
common interest
 Although related party votes are counted for purposes of determining whether the
statutory majority has been reached, the courts have consistently attributed less
weight to such votes when asked to exercise their discretion in favour of a scheme.
This is because the related party may have been motivated by personal or special
interests to disregard the interests of the class as such and vote in a self-centred
manner. In the present case, we found no reason to abandon our traditional reserve
because Wah Yuen’s continued reticence on the related party debts prevented the court
from making a competent assessment of the bona fides of the related party votes.

CLASSES OF CREDITORS
 Secured creditors
 Contingent creditors
 Creditors with priority and preferential claims and are receiving payment in full
compared to those receiving payment in part
 Related party creditors
 Creditors whose claims are subordinated in liquidation

VOTING ON THE PROPOSED SCHEME

 Statutory majority required is
o Majority in number representing ¾ in value of the creditors or class of creditors
present and voting at the meeting
o Either in person or by proxy

Section 210(1) of CA

Section 227X(a) of CA
 In judicial management pursuant to Section 227X(a):
o Majority in number representing ¾ in value of the creditors present and voting at
the meeting
o No need for division of creditors into different classes

Royal Bank of Scotland NV and others v TT International Ltd and another appeal
[2012] 2 SLR 213

COURT APPROVAL OF THE SCHEME

The Court must be satisfied of three matters, namely:

1. Statutory provisions have been complied with;
2. Those who attended the meeting were fairly representative of the class of creditors; and
3. The scheme is one which a man of business or an intelligent and honest man, being a
member of the class concerned and acting in respect of his interest, would reasonably
approve.

WHAT THE COURT CONSIDERS

Section 210(3) of CA

Royal Bank of Scotland NV and others v TT International Ltd and another appeal
[2012] 2 SLR 213

The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2008] 3 SLR(R)
121 – extension of time for filing proofs of debt after court has approved the scheme
Issue: whether the court retains a residual jurisdiction to extend the time for a creditor to
file its proof of debt after the court has approved a SOA pursuant to s210 of CA

Facts.
 Reliance wanted to implement SOA. Reliance sent a letter to all Scheme Creditors,
including the applt.
 Applied to the SGHC for permission to convene a creditor’s meeting.
 Sent the notice of the Court Meeting, Explanatory Statement and documents setting out
the terms and conditions of the scheme to the applt. Oriental received these documents.
 By way of several letters, Oriental was supposedly informed that the deadline for
submitting the completed Proof of Debt Form in the Claims Cut-off Date was 12.00
midnight on 14 May 2007.
 Oriental however alleged that it did not the above letterss.
 After Nov 2006, Reliance also sent a further 6 emails to Oriental to remind them to
submit its proof of debt before the cut-off date
 Reliance also alleged that it tried to contact Oriental on 11 May 2007 twice.
 In July 2007, Oriental was informed that it had failed to file its proof of debt in time
and therefore its claim of approx. US$20m was deemed to be of 0 value.

Held, allowed Oriental’s appeal:

Established principles for SOA

 S210 (4) allows a court to grant its approval to a SOA subject to such alterations or
conditions as it thinks just.
 SOA will not bind a coy, its members and its creditors until the court approves it.
Before the court sanctions a scheme, it will have to be satisfied of 3 matters:
o Statutory provisions have been complied with
o Those who attended the meeting were fairly representative of the class of
creditors and members. Statutory majority did not coerce the minority
o Scheme is one which a man of business or an intelligent and honest man, being
a member of the class concerned and acting in respect of his interest would
approve
 Once the court gives its approval to a scheme, the scheme is binding on all parties and
cannot be altered, even if the shareholders and creditors of the company acquiesce in
the alteration
 However, the court retains an inherent jurisdiction to amend or set aside the scheme in
limited circumstances, for e.g. If scheme was obtained by fraud or where there are
obvious mistakes in the documents setting out the scheme.
 Creditor or member should raise his objections at the hearing for court sanction and not
any later.

Whether court has jn to extend the time for filing proofs of debt in a court-approved
scheme
 English approach will mean that once the court has approved SOA, it no longer has
jurisdiction to grant an extension of time for a creditor to file its proof of debts in
respect of that scheme regardless of the circumstances save in cases of obvious
mistakes in the document which sets out the scheme
 English approach seems intuitively restrictive as it does not cover the situation where
there is no fraud and that the failure to file a claim in time is not attributable to the fault
of the creditor nor does it prejudice any of the parties.
 The better view would be to treat an extension of time in respect of a court-approved
scheme as a matter of procedure rather than a matter going to the substance or
materiality of the commercial dimension of the scheme. (Australian approach)
o This would mean that a grant of an extension of time will not be seen as
detracting from the principle that a court-approved scheme should not be altered
in substance.
o Further, such an application would not be viewed as raising a late objection to
the scheme that will jeopardize the certainty of the scheme’s validity

Circumstances where court’s jn to extend time will be exercised

 In considering whether prejudice will be caused to any party, the court must consider
the entire circumstances of the case:
o Whether any distribution has been made under the scheme
o Whether allowing the application for extension of time will inconvenience the
other creditors or substantially affect the dividends that they can expect to
receive
o Whether the order for extension of time can be framed to avoid any potential
prejudice to other creditors; and
o How much the creditor seeking the extension of time stands to lose if no
extension is granted
 Another factor that courts will take into consideration in deciding whether to exercise
its jurisdiction to extend time is the reason behind the failure of the party seeking the
extension of time to comply with the originally stipulated timeline
o Party seeking an extension of time should not be blameworthy for its non-
compliance with the original timeline
 Conduct of the party seeking an extension of time, and the extent of delay involved are
also relevant factors
 Factors are not exhaustive and court must have regard to the entire factual matrix.
However, the overriding consideration remains that of prejudice.
A creditor who is late in filing its proof of debt due to a genuine oversight should not
be penalised with forfeiture of its entire debt if no prejudice would be caused to the
other creditors or the company by granting an extension of time. That is not to say,
however, that a creditor can be as negligent or lackadaisical as it wants in filing its
proof of debt.

Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd
[2003] 3 SLR(R) 629
Held, CA refused to sanction the scheme duet to lack of transparency on the
circumstances in which related coy debts were incurred;

Whether Wah Yuen was sufficiently forthcoming on the related party debts
 Although Wah Yuen acknowledged that it was in possession of all that was necessary
to establish the evidence of the related party debts, it did not produce any of the
evidence. Rather, they dismissed Singapore Cables’ concerns by telling them they
could raise objections before the court when the scheme came up for court’s approval.
 Wah Yuen could not legitimately expect its creditors to be satisfied with the mere
assertion that the movements were “not unusual” when the proposed scheme required
them to decide if they should relinquish their claims in toto in exchange for only a
 limited return
 Here, court withheld approval because it found that creditors were not in a position to
assess the fairness and reasonableness of the scheme. Creditors were not given
sufficient facts to exercise an informed vote.
 The estimated realizable value vis-à-vis each creditor in a liquidation scenario was not
reliable because it was based on unaudited information. This means that the creditors
could not determine whether the returns under the proposed SOA were in fact greater
than what they could expect in a liquidation

Re Econ Corp Ltd [2004] 1 SLR(R) 273

Facts:
 Econ Corporation Ltd was a public coy and a wholly-owned subsidiary of Econ
International Limited (EIL), a public coy listed on the Singapore Stock Exchange
 Coy and EIL incurred significant losses and were unable to meet the demands of their
creditor
 Coy convened a meeting of its unsecured creditors on 17 June 2003 per s210 of CA.
Value of the admitted claims of those who voted in favour of the proposed SOA
exceeded the statutory requirement of 75%
 Coy then applied for the sanction of the approved scheme under s210(10). Opposing
creditors alleged that the approved scheme lacked transparency and that the unsecured
creditors should have been classed separately from certain other creditors at the
meeting of 17 June 2003.
 This lack of information allegedly hindered the opposing creditors’ ability to determine
if the returns under the proposed SOA were greater than what they would expect to
receive in a liquidation.

Held, dismissed the application, refusing to sanction the schee

 Opposing creditors’ allegations that the coy withheld information of EIL’s extensive
losses were not unfounded.
o The Company withheld information of EIL’s extensive losses from its creditors
which, had it been known to the creditors on 17 June 2003, may well have
affected the outcome of the voting. The opposing creditors were entitled to
know the state of the Company’s finances as well as that of the parent company,
EIL, before they could decide whether the returns under the scheme of
arrangement proposed would in fact be greater than what they could expect to
recover in a liquidation
o The sale of machinery and equipment to creditors such as Tat Hong with the
accompanying set-off arrangements made no commercial sense. The set-off
arrangements were highly questionable
 Problem with classification of creditors
o Opposing creditors whose claims are $4000 or less should have been classed
separately. These creditors had interests dissimilar to the others. They had
priority and would be paid in full whereas in a winding up, their claims would
rank pari passu with those of the other unsecured creditors
o Similarly, contingent creditors should also have been separately classed for
voting purposes. The liabilities and rights of contingent creditors would not
arise unless and until calls are made on the performance bonds they issued on
the coy’s behalf
 Liquidation is also not the only other alternative if the application is not granted.
Opposing creditors had intended to apply for judicial management. Note that here 89%
in value of admitted claims voted in favour of the scheme.

Re Horizon Knowledge Solutions Pte Ltd [2004] SGHC 270

Facts:
 Horizon Knowledge Solutions Pte Ltd was incorporated in Sg under its former name
Postkid.com Pte Ltd, as a private coy limited by shares. Coy is part of a group of
companies controlled by Horizon Education and Tech which is listed on Singapore
Stock Exchange
 Coy filed ex parte OS to 1) convene a meeting; 2) an order that no proceedings to be
taken against the coy.
 OS was granted
 Coy convened a meeting and then filed another application for scheme to be sanctioned
by the court
 Application was opposed by two creditors

Held, dismissed the application

 Problem with classification of creditors
o Related unsecured creditors should have been separately classed form the rest
of the unsecured creditors. It would have been impossible for the related
creditors to consult with the unrelated creditors as their interests were not
common.
 As the payment to unsecured creditors under the proposed scheme
 amounted to 15% of their claims (which percentage IFS considered
paltry), the unrelated creditors may well take the view that it was no
better than what they could obtain in a liquidation scenario (be it $0.04
or 0.12%).
 On the other hand, the related creditors would want the scheme
approved whatever the extent of the “haircut” creditors had to accept.
The Company could carry on trading
o In this regard, the 75% vote threshold under s210(3) would not have been
achieved
 Lack of transparency
o Information pertaining to the parent company’s accounts, the Company’s
audited accounts and related creditors’ debts was equally material and should
have been provided at the creditors’ meeting, if not earlier, when requested by
IFS.

Twenty First Century Oils Sdn Bhd v Bank of Credit Commerce (M) Bhd & Ors (No. 2)
[1993] 2 MLJ 353

Re Halley’s Departmental Store Pte Ltd [1996] 1 SLR(R) 81

EFFECT OF COURT ORDER

 All parties of the scheme are bound, including dissenting creditors

Chew Eu Hock Construction Co Pte Ltd (under judicial management) v. Central

Provident Fund Board [2003] 4 SLR(R) 137

Eltraco International Pte Ltd v. Sennet Electrical Engineering Pte Ltd and Others
[2003] SGHC 40 

Held:
 A scheme of arrangement duly passed and sanctioned by the court inherited a statutory
effect upon the relationship between the debtor company and its creditors.

The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2008] 3 SLR(R)
121

EFFECT OF SCHEME ON THIRD PART IES

 Scheme may incorporate terms that affected 3P rights

Section 210 of CA

Daewoo Singapore Pte Ltd v. CEL Tractors Pte Ltd [2001] 2 SLR(R) 791- guarantor’s
rights
Facts:
 Rspdt, CEL proposed a SOA with their creditors, of whom Daewoo was one
 Daewoo had a personal guarantee given by a director of CEL in respect of monies
owed to them
 Scheme contained a term to the effect that upon due performance by CEL of its
obligations under the scheme, Daewoo would release the guarantor from his
obligations under the guarantee
 Daewoo voted against the scheme but it was approved by the requisite majority of the
creditors
 Daewoo then argued that SOA under s210 of CA bound only the coy and its creditors,
and could not discharge or affect the liability of a 3P guarantor to the coy’s debts

Held:
 There was no reason in principle why the scheme could not incorporate the term. It
was permissible in law to incorporate in a scheme an involvement or participation
by an outsider who was not a party to it. Hence, there was nothing to prevent CEL
from proposing, as part of a wider scheme, that Daewoo would, upon implementation
of the scheme, discharge not only CELS’s debts and liabilities, but also the guarantor’s
liabilities for its debts and liabilities. Whether the term was agreeable to Daewoo was a
different matter which depended on the circumstances of the case, and what Daewoo
had to offer as a quid pro quo for the discharge of these liabilities
 Where a scheme of arrangement or compromise, containing such a term, was approved
by all the creditors of the company, it was binding on the company as well as its
creditors. In such a case, there was no need for the company to invoke s 210 as the
scheme was entirely contractual. Section 210 was only invoked where it was not
practicable to secure the unanimous agreement of all the creditors, and when the
scheme was approved by the requisite majority of the creditors and the court, it bound
all of them

Whether such a term is valid or effectual

 As the scheme is binding on the company and its creditors, there is no reason in
principle why the company cannot in principle enforce the terms of the scheme as
against the creditors. It must be borne in mind that the scheme contains reciprocal
rights and obligations of the company and the creditors, and once the company has
observed and performed all its obligations under the scheme, the creditors likewise
must observe and perform their obligations thereunder, and if they fail or refuse to do
so, the company is entitled to take proceedings to enforce their obligations under the
scheme.
 As between Daewoo and the guarantor, the scheme did not affect their rights and
obligations under the guarantee. However, as the scheme bound CEL and Daewoo,
there was no reason why CEL could not enforce its terms against Daewoo, if CEL
duly performed its obligations under the scheme vis-à-vis Daewoo, Daewoo must
likewise perform its obligations, and if it refused or failed to do so, CEL was entitled to
seek equitable reliefs against it

Econ Piling Pte Ltd and another v Sambo E&C Pte Ltd and another matter [2010] 3
SLR 764: scheme can release joint debtor’s liabilities if there is express provision to
do so
Facts:
 Econ Piling and NCC were partners in a JV to submit a joint bid to construct two
underground stations.
 After securing the bid, the JV subcontracted certain parts of the work to Sambo
 However, Econ fell into financial difficulties and was put into judicial management.
SOA was proposed by the judicial manager and received approval from ¾ in value of
Econ’s creditors and had been sanctioned by the court
 One week after the scheme was approved and a month prior to the court’s sanction,
Sambo commenced an ad hoc arbitration against the JV in respect of claims arising
from the sub contract
 Questions of law were then referred:
o Whether the terms of the scheme required the consent of Econ before Sambo
could commence an ad hoc arbitration against it
o Whether the joint debts of Econ as a plaintiff in any JV, were compromised or
settled in accordance with the Scheme
o Whether the liability of NCC incurred in the JV had been similarly
compromised

Held:

First question: Econ’s consent required to continue arbitration proceedings

 Cl 4.1.3 of the scheme provides that No creditor shall without the consent in writing of
Econ, take any step to commence or continue in proceedings against the coy for the
adjudication of the claim. As such, while Sambo did not require Econ’s consent to
commence arbitration since it took place before the SOA was sanctioned, it required
Econ’s consent before it could continue the arbitration proceedings.

Second question: No claim can be brought against Econ in respect of joint debt and
liabiltiies
 Terms of the scheme were widely drafted to cover all claims by a creditor against
Econ. This meant that the joint debts and liabilities of Econ as a partner in any joint
venture, including the JVA, were compromised or settled in accordance with the terms
of Scheme in that no claim could be brought against Econ in respect of such joint debts
and liabilities.

Third question: NCC liable for joint liabilities as joint debtor

 A release of one joint debtor would only release all the other joint debtors if the release
constituted accord and satisfaction of the joint debt. It was a matter of construction as
to whether a release of one joint debtor amounted to a release of the entire debt or
merely a contract not to sue that joint debtor:
 A discharge of a joint debtor by operation of law did not amount to accord and
satisfaction of the joint debt. Although a scheme of arrangement was not regarded as a
statutory contract in Singapore, this did not mean that it was therefore consensual in
nature. A scheme of arrangement and its attendant legal consequences owed its efficacy
entirely to the order of court that sanctioned it, and was tantamount to a release by
operation of law
 In such a case where a joint debtor’s liability was to be released by operation of law,
there was no need for the creditor to reserve its rights to proceed against the other
debtors.
 But if a scheme expressly provided that the rights of a creditor in relation to other joint
debtors were to be compromised, these terms would be enforced if they received the
necessary creditor consent and court sanction. In such circumstances, the scheme
would then release NCC from its joint liabilities to Sambo

ADMINISTRATION OF A SCHEME

SCHEME MANAGER/ ADMINISTRATOR

Re Glendale Land Development Ltd (in liq) (1982) 7 ACLR 171

PRIORITY OF PAYMENTS
 Scheme manager
 Creditors whose debts are incurred post-scheme
 Unsecured creditors afforded priority in winding up pursuant to Section 328 Companies
Act

Section 328 CA

TERMINATION OF A SCHEME
 Scheme document will set out termination events, which might include:
o A certain duration
o Occurrence of certain events of default
o Final payment or distribution made to creditors and full implementation of scheme
o Vote at a meeting of creditors or on decision of the scheme manager
CROSS-BORDER ASPECTS OF INSOLVENCY LAW & RESTRUCTURING

CROSS BORDER ASPECTS

 Local companies with foreign interests
 Foreign companies with local interests
 So, what is an “international liquidation”?
o Debtor’s business is conducted in different countries
o Creditors are situated in different countries
o Assets are located in different countries
o Parallel proceedings exist in different countries

WINDING UP OF FOREIGN COMPANIES

JURISDICTION

Section 350(1) CA
Definition of unregistered company
350.—(1) For the purposes of this Division, “unregistered company” includes a foreign
company and any partnership, association or company consisting of more than 5 members
but does not include a company incorporated under this Act or under any corresponding
previous written law.

Section 350(2) CA
Provisions of Division cumulative
(2) This Division shall be in addition to, and not in derogation of, any provisions contained in
this or any other written law with respect to the winding up of companies by the Court and
the Court or the liquidator may exercise any powers or do any act in the case of unregistered
companies which might be exercised or done by it or him in winding up companies.

Section 351
Winding up of unregistered companies
351.—(1) Subject to this Division, any unregistered company may be wound up under this
Part, which Part shall apply to an unregistered company with the following adaptations:

(a) the principal place of business of such company in Singapore shall for all the purposes of
the winding up be the registered office of the company;

(b) no such company shall be wound up voluntarily;

(c) the circumstances in which the company may be wound up are —

(i) if the company is dissolved or has ceased to have a place of business in Singapore or has a
place of business in Singapore only for the purpose of winding up its affairs or has ceased to
carry on business in Singapore;
(ii) if the company is unable to pay its debts;
(iii) if the Court is of opinion that it is just and equitable that the company should be wound
up.

(2) An unregistered company shall be deemed to be unable to pay its debts if —

(a) a creditor by assignment or otherwise to whom the company is indebted in a sum
exceeding $2,000 then due has served on the company, by leaving at its principal place of
business in Singapore or by delivering to the secretary or a director or chief executive officer
or by otherwise serving in such manner as the Court approves or directs, a demand under his
hand requiring the company to pay the sum so due, and the company has for 3 weeks after the
service of the demand neglected to pay the sum or to secure or compound for it to the
satisfaction of the creditor;

(b) any action or other proceeding has been instituted against any member for any debt or
demand due or claimed to be due from the company or from him in his character of member,
and, notice in writing of the institution of the action or proceeding having been served on the
company by leaving it at its principal place of business in Singapore or by delivering it to the
secretary or a director or chief executive officer or by otherwise serving it in such manner as
the Court approves or directs, the company has not within 10 days after service of the notice
paid, secured or compounded for the debt or demand or procured the action or proceeding to
be stayed or indemnified the defendant to his reasonable satisfaction against the action or
proceeding and against all costs, damages and expenses to be incurred by him by reason
thereof;

(c) execution or other process issued on a judgment, decree or order obtained in any court in
favour of a creditor against the company or any member thereof as such or any person
authorised to be sued as nominal defendant on behalf of the company is returned unsatisfied;
or

(d) it is otherwise proved to the satisfaction of the Court that the company is unable to pay its
debts.

(3) A company incorporated outside Singapore may be wound up as an unregistered

company under this Division notwithstanding that it is being wound up or has been dissolved
or has otherwise ceased to exist as a company under the laws of the place under which it was
incorporated.

(4) In this section, “to carry on business” has the same meaning as in section 366.

Re Griffin Securities Corp [1999] 1 SLR(R) 219 


Held:
 Section 351 Companies Act expressly confers upon the Singapore Courts the power to
make a winding up order against “unregistered companies”, defined by S4 as a
“company… incorporated outside of Singapore”
 Therefore, the Court had jurisdiction to make a winding up order against a foreign
company provided Companies Act and Rules have been complied with.
 The jurisdiction to wind up a foreign company will only be exercised where there is a
sufficient nexus between the foreign company and Singapore to justify the making
of the winding up order against a foreign company.

Re Projector SA [2009] 2 SLR(R) 151

Held:
 Singapore courts have the jurisdiction to wind up a foreign company where it can be
shown that the foreign company either has assets in Singapore or that the foreign
company has a sufficient nexus or connection with Singapore
 In determining sufficient nexus, the Court will consider whether there is a reasonable
possibility that benefit would accrue to the foreign company’s creditors from the
winding up

ADMINISTRATION
 Winding up of foreign coy in its place of incorporation – principal winding up
 Winding up of same coy in foreign jurisdiction – ancillary winding up

Part XI of CA

Tohru Motobayashi v Official Receiver and Anor [2000] 3 SLR(R) 435

Held:
 Applt, Tohru was the trustee in bankruptcy of the Jap coy Okura which was registered
as a foreign coy in Sg
 Okura was adjudicated bankrupt in Tokyo and wound up in Sg
 Tohru then requested the Sg liquidator to apply to Sg courts to declare that Sg
liquidator remit to the trustee all assets recovered and realized for Okura’s branch in Sg
for global distribution, after paying off the priority creditors and payments stipulated by
Sg law
 Tohru filed an OS to seek a declaration to that effect

Held, allowed the appeal:

 Tohru ceased to be the liquidator of Okura Sg since the appointment of the Sg
liquidator. However, Tohru remains as the liquidator of the coy, Okura in Japan and
Japan is the principal jurisdiction in the liquidation of the coy
 Tohru had locus standi to make the application on the construction of s377(3)(c).
Although a Singapore liquidator had been appointed, Tohru remained Okura’s
liquidator in Japan, the principal jurisdiction for the liquidation of the company,
and the trustee was an interested party as the construction of s 377(3)(c) would
determine the amount of monies that he as the liquidator of Okura Japan would receive
from the Singapore liquidator.

RBG Resources plc (in liquidation) v Credit Lyonnais [2006] 1 SLR(R) 240
Facts:
 Applicant, CL relying on s377(3) of CA, wanted its debt owing from RBG resources to
be paid from the Sg liquidation estate of RBG before monies were transmitted to the
English liquidation estate
 CL also applied for an order that its proof of debt be admitted against the Sg liquidation
estate of RBG
 Sg liquidators of RBG and another creditor objectd to the application
 Note the assumption proceeded on: RBG had a place of business in Sg and was not
registered under Pt XI Div 2 of CA

Held, court cannot order CL’s proof of debt to be admitted against the Sg liquidation
estate of RBF:
 If a foreign coy failed to be registered in Sg before it went into liquidation, principle in
s377(3)(c) did not apply
 RBG’s liability to CL was not incurred in Sg but in England
 Common law ancillary liquidation doctrine: A liquidator appointed by the Singapore
court to administer the affairs of a foreign company concurrently in liquidation in its
principal place of incorporation, is to recover the foreign company’s assets within the
jurisdiction for the purpose of achieving a pooling of all the foreign company’s assets
worldwide. It would entail transmission of the Singapore assets to the principal place of
liquidation to be administered by the principal liquidator

***Beluga Chartering GmbH (in liquidation) v Beluga Projects (Sg) Pte Ltd (in
liquidation) and Anor [2014] 2 SLR 81
Common law ancillary liquidation doctrine & effect of foreign insolvency proceedings
on claims before Sg court

Facts:
 1st applt, Beluga Chartering GmbH (in liquidation), was a coy incorporated in
Germany.
 16 Match 2011: winding-up order was made against Beluga Chartering in Germany
and liquidator was appointed.
 17 Feb 2012: HC made winding up order against Beluga Chartering in Sg and
liquidators were appointed
 1st and 2nd rspdt were companies incorporated in Sg and were wholly owned
subsidiaries of Beluga Chartering. Sg subsidiaries then brought a claim against Beluga
Chartering for about $1.5m for agency work performed for them and obtained
judgment in default
 Beluga Chartering’s only asset in Sg was the sum of US$840,647.42 that was owned
by non-party deugro to Beluga
 Sg liquidators then filed an application referring to qns of law, namely whether Sg
liquidators were entitled to remit the deugro Asset to the seat of the principal
liquidation in Germany despite the existence of Sg subsidiaries’ unsatisfied judgment
debt.

Held, directing the Sg liquidators to remit realized assets of Beluga Chartering in Sg

to German liquidator, without first satisfying judgment debt owed to Sg subsidiaries

Application of s377(3)(c)
 S365 would operate as a condition precedent for the application of all provisions in Div
2 of Pt XI save for s368. It would be triggered when a foreign coy:
o Has actually been registered under s368(1)
o Comes under the liability to register under s368(1) because it intends to
establish a place of business or commence carrying on business in Sg. This is a
liability that continues even after it actually does commence business or
establishes a place of business here without being registered
 S377(3)(c) would thus apply to Beluga Chartering only if it was under the obligation to
register under s368
 Beluga Chartering was not carrying on business in Sg and was not obliged to register
under s368
 Winding up of Beluga Chartering, an unregistered foreign coy, was thus governed
primarily by Div 5 of Pt X and Sg liquidators were not subject to obligations under
s377(3)(c)
 Since there is no express statutory provision dealing with the relationship between Sg
liquidator and foreign liquidator. As such, Beluga Chartering’s application to remit Sg
assets to Germany had to be decided on the basis of common law

The common law position – common law ancillary liquidation doctrine

 Principle: Ascertain what is the domicil of the company in liquidation; let the Court of
the country of domicil act as the principal Court to govern the liquidation; and let the
other Courts act as ancillary, as far as they can, to the principal liquidation. ...
 Doctrine encompasses a broad range of orders that would assist the principal
liquidation
 This ancillary liquidation doctrine is part of Sg common law and court has a power
under this doctrine to order the local liquidator to remit assets that are gathered in
locally to the principal place of liquidation.
o In RBG Resources, the common law ancillary liquidation doctrine was also
applied. The court then directed that Sg liquidators were at liberty to transmit
Sg assets of RBG to English liquidators

Whether court has a discretion to ring-fence local assets for locally incurred debts
notwithstanding the common law ancillary liquidation doctrine
 Traditional common law position gives the court a general power to order the remittal
of realised assets to the principal place of liquidation. But it does not have the power to
authorise the local liquidator to ignore the statutory insolvency scheme so as “to
deprive creditors proving in a [local] liquidation of their statutory rights under that
scheme”
 For the Sg subsidiaries (unsecured creditors), their only claim to a stat priority for the
judgment debt was the ring-fencing provision under s377(3)(c) which was not available
to them. No evidence was put to show that a general pari passu distribution would not
be ordered in the German liquidation. As such, court has the power to hold that Sg
liquidators were at liberty to remit Sg assets to German liquidator for
distribution.
 Remittal of assets to a foreign liquidator would be permitted even if the
distribution in the foreign liquidation differs from that mandated by Singapore’s
statutory insolvency scheme, as long as it is not contrary to principles of justice or
local public policy. The mere fact that the foreign insolvency scheme differs from
the local insolvency scheme would not suffice to constitute injustice.
 In a case such as the present where there was no indication that the scheme of
distribution would differ and the only known creditors (namely, the Singapore
Subsidiaries) were not preferential creditors and had no priority under the local
statutory scheme, there would have been no basis for not remitting the local assets.
 Court does not have a discretion under common law that extended to a positive power
to ring-fence assets even when there was no statutory basis for doing so. It has never
been thought that the court has the power to confer on a creditor a priority that it does
not otherwise have under the statutory regime.

‘RING-FENCING’ AND EFFECT OF S377(3)(C) COMPANIES ACT

Section 377(3)(c) CA
“A liquidator of a foreign company appointed for Singapore by the Court or a person
exercising the powers and functions of such a liquidator shall, unless otherwise ordered by
the Court, only recover and realise the assets of the foreign company in Singapore and shall,
subject to paragraph (b) and subsection (7), pay the net amount so recovered and realised to
the liquidator of that foreign company for the place where it was formed or incorporated after
paying any debts and satisfying any liabilities incurred in Singapore by the foreign
company.”

Section 377(7) CA
“Section 328 shall apply to a foreign company wound up or dissolved pursuant to this section
as if for references to a company there were substituted references to a foreign company.”

Tohru Motobayashi v Official Receiver and Anor [2000] 3 SLR(R) 435

Held:
 S377(3)(c) mandated that Sg liquidator must:
o Pay of the preferred debts as defined in s328
o Then pay of all debts and liabilities incurred by Okura in Sg before the net
amount could be remitted to Okura’s trustee in bankruptcy in Japan

RBG Resources plc (in liquidation) v Credit Lyonnais [2006] 1 SLR(R) 240
Held:
 Section 377(3)(c) would apply only in the domestic liquidation of a foreign company
where that company was registered under Division 2 of Part XI of the Companies Act

Beluga Chartering GmbH (in liquidation) v Beluga Projects (Sg) Pte Ltd (in liquidation)
and Anor [2014] 2 SLR 815
*Ref above
Held:
 S377(3)(c) may apply in the domestic liquidation of a foreign company in Singapore,
regardless of whether that foreign company was registered under Division 2 of Part XI
 Registration under Division 2 of Part XI was not a condition precedent to the operation
of S377(3)(c)
 S377(3)(c) applied subject to the court’s discretion to disapply the operation of the
section

POWERS OF A FOREIGN LIQUIDATOR IN SG

Part XI of CA
 See s350 and s377(2)(b)

Section 377(2)(b)
(2) If a foreign company goes into liquidation or is dissolved in its place of incorporation or
origin —
(a) each person who immediately prior to the commencement of the liquidation proceedings
was an authorised representative shall, within 14 days after the commencement of the
liquidation or the dissolution or within such further time as the Registrar in special
circumstances allows, lodge or cause to be lodged with the Registrar notice of that fact and,
when a liquidator is appointed, notice of such appointment; and

(b) the liquidator shall, until a liquidator for Singapore is duly appointed by the Court, have
the powers and functions of a liquidator for Singapore.

Re China Underwriters Life and General Insurance [1988] 1 SLR(R) 40 


 Sg court held that it had no jurisdiction in respect of coy which were not wound up
under Part X of the CA

Official Receiver of Hong Kong v Kao Wei Tseng [1990] 1 SLR(R) 315 

 CA held that powers and functions of a liquidator under S377(2)(b) of CA were limited
to enabling that foreign liquidator to only collect and recover the assets of that foreign
coy in Sg.
 S377(2)(b) did not confer upon the foreign liquidator all the powers and functions of a
liquidator appointed by the SGHC

Beluga Chartering GmbH (in liquidation) v Beluga Projects (Sg) Pte Ltd (in liquidation)
and Anor [2014] 2 SLR 815
Extra: What is the effect of foreign insolvency proceedings on claims before the Sg court
 If an insolvent foreign company – whether registered or unregistered – is not
concurrently wound up in Singapore, the application of the ancillary liquidation
doctrine does not arise, and any issues that arise before the Singapore courts would
instead involve questions of recognition.
 There are broadly two types of recognition that the Singapore courts may be requested
to grant: (a) recognition of the title of the foreign liquidator and (b) recognition of the
foreign proceedings.

Recognition of the title of the foreign liquidator

 Law of the place of incorporation of a coy governs an agent’s authority to act on behalf
of the coy. As such, if a liquidator is properly appointed under that law, his authority
and title to act on behalf of a company should be recognized
 Unlike personal bankruptcy proceedings, a winding-up order does not automatically
vest the assets of the company in the liquidator; instead, the legal title to assets remains
with the company (albeit impressed with a statutory trust), but the power of the board
of directors to deal with the company’s assets is displaced in favour of the liquidator.
Accordingly, a liquidator of a foreign company will be recognised as the
representative of the company for the purposes of getting in and realising the
company’s worldwide assets and there would generally be no basis for a
Singapore court to decline to recognise the liquidator’s claim to assets belonging
to the company under general principles of property law.

Recognition of foreign winding up proceedings

 Considers the issue of whether a stay of execution that is consequential on a foreign
winding-up order would extend to assets located in Sg such that creditors here would
not be entitled to execute against or attach these assets
 A statutory moratorium on the commencement or continuation of legal
proceedings and process triggered by a winding-up order does not generally have
extraterritorial effect. This is premised on the fundamentally territorial nature of
jurisdiction. Therefore, under the common law rules of recognition, a court would
not recognize jurisdiction of a foreign legislature or court to impose a stay on any
proceedings in the forum court and so would not be bound by any such stay
 Sg courts are not bound by a foreign winding-up order in the absence of a local
winding-up proceedings. However, it remains open to the court to assist the foreign
liquidation proceedings by exercising their inherent discretion to stay proceedings
 Most courts recognise the desirability and practicality of a universal collection and
distribution of assets and that a creditor should not be able to gain an unfair priority by
an attachment or execution on assets located within the jurisdiction of the court
subsequent to a winding-up order made elsewhere. However, this can only operate as a
very broad statement of principle. Whether and how the Singapore court will render
assistance to foreign winding-up proceedings through the regulation of its own
proceedings will depend on the particular circumstances before it.
o Assistance might, for example, take the form of a stay of a claim if Singapore is
not the forum conveniens; or staying an execution or attachment; or exercising a
discretion against granting a garnishee order absolute; or refusing leave to serve
process out of the jurisdiction; or winding up the company in Singapore.
 But the commencement of legal proceedings against a defendant foreign company or
an attempt to levy execution against its assets is not precluded by the mere fact that
insolvency proceedings have been commenced against the company in another
jurisdiction.

INVOKING LOCAL RESTRUCTURING LEGISLATION TO AID A FOREIGN

RESTRUCTURING

JUDICIAL MANAGEMENT

Part VIIIA of CA

Deutsche Bank AG v Asia Pulp & Paper Co Ltd [2003] 2 SLR(R) 320 

Facts:
 Applt (Deutsche Bank and BNP) were creditors of the rspdt, APP
 APP was a Sg incorporated holding coy for about 150 foreign subsidiaries. Widjaja
family were the controlling shareholders of APP
 APP group was insolvent and declared its intention to begin consensual debt
restructuring with its creditors
 Applt petitioned to have APP placed under JM as there was cause for concern that the
restructuring was not carried out in a timely, fair and transparent manner

Held, dismissed the appeal:

 Since consensual restructuring for APP’s Chinese subsidiaries were progressing well, a
JM order in Sg would add no value
SCHEMES OF ARRANGEMENT

Section 210 CA

Re TPC Korea Co Ltd [2010] 2 SLR 617

 Sufficient nexus test
 Ref above