Insolvency and Restructuring
The Insolvency, Restructuring and Dissolution Act 2018 (IRDA) was passed by Parliament on 1 Oct 2018 and came into effect on 30 Jul 2020. The IRDA consolidates the written laws relating to personal and corporate insolvency and debt restructuring into a single piece of legislation. The IRDA also establishes a regulatory regime for insolvency practitioners (IPs).
Together with the new pieces of subsidiary legislation, the Act ensures that Singapore’s insolvency and restructuring laws remain progressive and modern, whilst balancing the interests of debtors, creditors and other stakeholders. Building on the Companies Act amendments in 2017 which enhanced Singapore’s corporate rescue and restructuring framework, this legislation will benefit businesses experiencing financial difficulties as well as their creditors, create new opportunities for insolvency professionals (including lawyers and accountants), distressed debt funds and financial institutions, and further strengthen Singapore as an international centre for debt restructuring.
On corporate debt restructuring and insolvency, the Act introduces new features, including:
- Restriction on certain contractual rights that are triggered upon the commencement of restructuring proceedings (i.e. ipso facto clauses). This facilitates restructuring of a distressed company’s business, where its contracts contain such clauses.
- Enlarging the range of causes of action which may be funded by third parties, specifically certain officeholder avoidance actions, which may otherwise not be pursued due to lack of funds.
- Summary procedure to dissolve companies that have insufficient assets to pay for the administration of the winding up.
The Act also establishes a new licensing and regulatory regime for insolvency practitioners. This regime requires insolvency practitioners to uphold professional standards when performing insolvency and debt restructuring work in Singapore.