THE ROLE OF INSOLVENCY PRACTITIONERS IN INSOLVENCY PROCEEDINGS

THE ROLE OF INSOLVENCY PRACTITIONERS IN INSOLVENCY PROCEEDINGS (SINGAPORE) 1 1 Not to be reproduced or disseminated without permission.

TYPES OF INSOLVENCY PROCEEDINGS RECEIVERSHIP To preserve asset(s) secured to a secured creditor, e. g. contract proceeds or a mortgaged property. This is usually pursuant to an instrument, e. g. debenture. The power to appoint a Receiver & Manager (“R&M”) is common in security arrangements. LIQUIDATION Aim is to administer an organised windingdown of a company’s affairs, a fair distribution of assets and a dissolution of the entity. Liquidation may be “voluntary” – by members (“MVL”) or by creditors (“CVL”) – or by Court on a “compulsory” basis (“CWU”). 2 Not to be reproduced or disseminated without permission. JUDICIAL MANAGEMENT To (1) rehabilitate a company into a going concern (in whole or part), (2) obtain approval of a Scheme of Arrangement, and/or (3) achieve a more advantageous asset realisation compared to liquidation. A Judicial Manager (“JM”) takes over the company’s directors. SCHEME OF ARRANGEMENT Aim is for a company to propose a compromise or arrangement (a “Scheme of Arrangement”) with creditors and/or shareholders. The Court’s assistance is sought to allow a company to negotiate this effort to rehabilitate. The directors remain in control.

RECEIVERSHIP Who may apply Duties/Powers Qualifications • Creditor, by instrument, e. g. debenture • If appointed by instrument, R&M is the Company’s officer (R&M has duties similar to director) • Approved Liquidator • Creditor, by Court Order • Appointment may exclude Manager role Effect • Typically an event of default in banking contracts, construction & building contracts, under security arrangements • If appointed by Court or without Manager role, R&M is not an officer • Announce appointment • Take charged property into custody/control Duties/Powers • Report every 6 months on receipts, payments, debt to creditor, estimated value of charged assets • If appointed pursuant to floating charge, R&M must pay preferential debts before claim by floating charge holder • Not undischarged bankrupt • Not eligible: Company’s auditor, mortgagee, or mortgagee’s director, secretary or employee

JUDICIAL MANAGEMENT Who may apply Duties/Powers Qualifications • Directors (by resolution) • JM is the Company’s officer and agent • Public Accountant • Company (by shareholders) • Creditors (including contingent or prospective creditors) Effect • No winding-up • No receivership • JM is for 180 days • Moratorium against • legal proceedings • execution • security over property, re-entry/ forfeiture of lease • retention of title • repossession under hirepurchase/leasing • Personal liability on contracts entered/ adopted during appointment • Announce appointment • Take into custody and manage the Company’s affairs, business and property Duties/Powers • 60 days to present Statement of Proposals • Power to acquire rescue financing and apply to Court for super-priority • JM to implement proposal if approved • JM to apply for discharge or extension of JM order

LIQUIDATION Who may apply Duties/Powers Qualifications • MVL: shareholders’ resolution when Company is solvent • If appointed by directors in CVL or by shareholders in MVL, duties as officer (director) • Approved Liquidator • CVL: directors’ resolution first; then creditors and shareholders • CWU: by Court on application of: • creditor • shareholders • JM • Minister Effect • Moratorium against legal action, execution, etc. • Creditors file Proofs of Debt • Typically an event of default in contracts Duties/Powers • Pursue asset recovery • If appointed by creditors in CVL or by Court, not an officer • Adjudicate Proofs of Debt • Announce appointment • Report unfit conduct of directors • Take property into custody/control • Investigate affairs and report fraud • Effect distribution of assets • Submit record of receipts/payments • Apply to dissolve Company and for discharge/release • Not undischarged bankrupt • Not convicted of fraud/dishonesty • Not indebted to a related company >S$2, 500 • MVL/CVL: unapproved liquidator, officer and related individual can act

SCHEME OF ARRANGEMENT (DIP) Who may apply Duties/Powers Qualifications • Company’s duty to: • No specific requirements • Liquidator • Creditor • Shareholder • Holder of units of shares in Company Effect • Company remains in control • Moratorium against • legal proceedings • execution • security over property, re-entry/ forfeiture of lease • retention of title • repossession under hirepurchase/leasing • classify creditors • make full disclosure • assess Proofs of Debt • seek approval of super-priority for rescue financing Duties/Powers • Chairman of creditors’ & shareholders’ meetings has duty to conduct meeting and report to Court • Court’s power to: • meet pre-pack req’mts • cram-down • issue notices/ clear explanatory statement • approve/review • order re-vote • Scheme Manager’s duty to implement terms of Scheme • Usually an approved liquidator

RAJAH & TANN ASIA • > 750 fee earners • 40+ practice areas Nigel Pereira Japan China 9 Battery Road 25 th Floor Singapore 049910 South Asia Myanmar Lao PDR Cambodia Thailand Advocate & Solicitor, S’pore Solicitor, England & Wales Certified Fraud Examiner Member, CIArb Philippines Vietnam +65 6232 0629 nigel. pereira@rajahtann. com Malaysia Singapore Indonesia 7 Not to be reproduced or disseminated without permission. www. rajahtannasia. com