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SINGAPORE: Micro and small businesses affected by the pandemic will be able to take advantage of a new program to find simpler, faster and cheaper ways to restructure their debts or pay them off, should a new bill presented in Parliament on Monday passes ( October 5th).
The Ministry of Justice has presented the Insolvency, Restructuring and Dissolution (Amendment) Bill to establish the new Simplified Insolvency Program (SIP). The program is needed to help businesses facing financial difficulties due to the unprecedented and ongoing COVID-19 pandemic, he said.
Although business conditions are expected to improve for some industries, they are unlikely to return to pre-pandemic levels in the near future and companies in financial distress may face insolvency, the ministry said.
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While Singapore’s insolvency laws provide processes for companies with substantial assets, the solutions offered may not be suitable for micro and small businesses. This is particularly for those who have exhausted their resources as a result of the pandemic, she added.
“Most (smaller companies) will find that the business paradigm has shifted and many will find it difficult to continue with their current model,” said Second Law Minister Edwin Tong.
“Some might want to restructure, find more time to pay, or pay in different ways, or perhaps bring in new partners or change their focus. Others may find that they want to end their business, liquidate, and maybe go out and switch to something else.
“What we want to achieve with this bill is to give them a way that they can use a low-cost, fast and also simple process to achieve it,” said Mr. Tong, who is also the Minister of Culture, Community and Youth.
Micro and small businesses are defined as those with annual revenues of less than S $ 1 million and S $ 10 million, respectively. In 2018, there were some 207,000 micro and 44,000 small businesses in Singapore.
To qualify for the SIP, these companies must meet additional criteria, such as having total aggregate liabilities of less than S $ 2 million, as well as no more than 30 employees and 50 creditors. There will be a cap of S $ 50,000 on realizable unencumbered assets for companies seeking a streamlined liquidation process.
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SIMPLE PROCESSES
The IAPA will have two temporary processes adapted and modified from the existing legal framework to streamline and expedite bankruptcy processes.
Under the proposals for a simpler debt restructuring process, a request to the Superior Court for a “prepackaged” settlement scheme will be required, instead of the usual two requests.
A moratorium against action by creditors and restrictions on certain contractual clauses will also automatically take effect, giving the company a breathing space to propose its restructuring plan.
There will also be a lower threshold for creditor approval (two-thirds in value) compared to the usual requirement of a majority in number owning 75% of the value of the debt claims.
For the proposed simplified liquidation process, a company that opts for the voluntary creditors liquidation process will not need to file a court application.
Other features include early dissolution and reduced fees from a liquidator.
“When the liquidator considers that the assets of the company are insufficient to cover the liquidation expenses and its affairs do not require further investigation, the company can be dissolved later without the need to take further steps for the administration of the liquidation, such as further realization. of assets and distribution of dividends ”, said the ministry.
Since certain complex and expensive aspects of a conventional settlement will not be suitable for the streamlined process, the scope of the liquidator’s duties will be reduced. For example, a meeting of creditors will not be convened and the liquidator may only initiate legal proceedings to preserve the rights of the company.
If a business is subsequently found to be unfit for simpler liquidation, it may be placed in a court ordered liquidation at the request of the Receiver or an interested party.
The SIP will be available for six months from the start of the proposed legislation, but the application period can be extended for a period determined by the minister, the law ministry reported.
It will be administered by the Official Receiver, who may assign private insolvency practitioners to administer the cases. Applicant companies must make a copayment for the program.
The new program will complement other personalized restructuring assistance schemes and is part of the government’s efforts to help companies facing financial difficulties, the ministry said.
The Monetary Authority of Singapore said on Monday it will provide borrowers with additional relief, for example by allowing small and medium-sized enterprises (SMEs) to partially defer principal payments on some loans and receive personalized restructuring options.
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