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Restructuring and insolvency law in Singapore deals with the legal processes available to businesses and individuals facing severe financial distress. This field encompasses measures that aim to help companies and individuals either recover and reorganise their financial affairs or, where recovery is not possible, to wind down their affairs in an orderly way. Singapore’s legal system provides a modern and business-friendly framework for both restructuring and insolvency, making it a leading hub in Asia for such matters. These laws strike a balance between creditor protection and giving viable businesses a chance to rehabilitate.
There are various situations where legal assistance becomes crucial in restructuring and insolvency matters. Some common reasons include:
A lawyer can provide tailored legal advice, represent you in court, assist with negotiations, and ensure that your interests are safeguarded throughout the process.
Singapore’s key restructuring and insolvency laws are found in the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). This legislation consolidates company insolvency, personal bankruptcy, and restructuring processes. Some important features of the Singapore regime include:
Singapore’s legal system emphasises fairness, transparency, and efficiency during insolvency and restructuring, offering protection for creditors while enabling genuine attempts at business recovery.
Restructuring involves legal processes to help a financially distressed company or individual reorganise their affairs and return to viability. Insolvency refers to the inability to pay debts when they fall due, often leading to liquidation (for companies) or bankruptcy (for individuals).
A company should consider restructuring if it faces financial difficulty but has a realistic chance of surviving with changes to its debt, business model, or operations. Early intervention usually increases the likelihood of a successful restructuring.
The primary restructuring options are schemes of arrangement and judicial management. Schemes of arrangement allow reorganisation of debts with creditor approval, while judicial management gives court-appointed managers control to attempt recovery.
Liquidation, or winding up, can be started by the company (voluntary) or by creditors through the court (compulsory). A liquidator is appointed to sell assets and distribute the proceeds to creditors based on legal priorities.
Employees are typically entitled to salary and retrenchment benefits owed before other unsecured creditors. These claims are usually given priority up to specified limits under the law.
Individuals who owe at least the minimum threshold (currently S$15,000) and cannot pay may be made bankrupt by creditor application or their own application. The Official Assignee manages their assets to repay creditors, and discharged bankruptcy is possible over time under certain conditions.
In some restructuring processes, such as judicial management, limited trading is allowed if it benefits creditors and helps rehabilitation. During liquidation, trading usually ceases unless it is necessary to complete the winding up.
Directors must act in the best interests of creditors, avoid wrongful trading, and ensure they do not incur further debts the company cannot pay. Breaching these duties can result in personal liability.
Creditors can participate in meetings, vote on restructuring proposals, and apply to court if they feel prejudiced. Secured creditors generally have priority claims on secured assets, and the law recognises their rights during insolvency proceedings.
Yes, Singapore follows internationally recognised rules and can offer assistance to foreign insolvency representatives. Local courts may also recognise foreign insolvency proceedings and grant relief as appropriate.
If you need information or guidance about restructuring and insolvency in Singapore, consider reaching out to the following:
If you or your business is experiencing financial distress, it is important to seek professional legal advice as early as possible. Here are some steps to consider:
Early intervention can improve your chances of achieving a positive outcome. A qualified restructuring and insolvency lawyer will guide you through your options, protect your interests, and help you navigate the legal challenges ahead.
