Speech by Minister for Culture, Community and Youth and Second Minister for Law Edwin Tong SC at the Singapore Insolvency Conference 2023

22 NOV 2023

Introduction

  1. Good morning, everyone – distinguished guests, ladies and gentlemen, and a special warm welcome to those who came from overseas to join us this morning. Thank you very much for being here.
  1. I am very honoured to be speaking again at the Singapore Insolvency Conference. The last time I did so, for those of you who participated, we had it over Zoom. It was during the COVID-19 pandemic, which seems so long ago. But despite being able to connect, exchange know-how and share experiences, the one missing element from the 2021 edition was the ability for all of us to meet, socialise and network. This is a really important aspect of being at the Conference.
  1. So, I am very glad that we are able to do so here. Because nothing beats face-to-face interaction, sharing experiences over coffee or a drink, and over a meal. This year’s Conference has a title that is somewhat introspective and reflective, and a little contemplative as well – “Looking ahead – Rethinking R&I”.
  1. When the organisers asked me to speak at this Conference, I looked at the topic and reflected on what to say to all of you. I immediately thought that this topic raised three pertinent questions:

(a) For us to look ahead and to rethink, we have to look at what has been done in the past – to take stock of where we are, understand the landscape, think of revisions and why we introduced those changes that Angela Ee (Vice Chair of Insolvency Practitioners Association of Singapore (IPAS)) spoke about a moment ago.

(b) Then, we have to look at how that has worked out in the context of today, the present. How has that worked for us? Has it worked well? How does that fit into the overall schema of what we want to achieve as a jurisdiction and as a Government?

(c) And finally, we want to look a little bit ahead of the curve and into the horizon, do a bit of scanning and see what are some of the issues that will lie ahead of us. How can we prepare ourselves better? What are some of the subsequent additions or changes to legislation that we might expect?

  1. This morning, I will spend a bit of time looking at this topic from these three angles and share my views on each of these three points.
  1. In the context of our debt restructuring and insolvency regime, our most recent past has seen quite significant legislative reforms and also enhancements to the broader ecosystem. These changes have indeed laid the foundation for where we are today – the framework as Angela said – buttressed by very strong judgements from our bench (the leading jurisprudence of the Singapore Supreme Court); writings, commentaries, articles and publications by insolvency professionals and academia. All supplementing the thought leadership around doing debt restructuring and insolvency in Singapore. These experiences from the past, and their learning points, guide what we plan to do in the future, which I will touch on later.

The Past

  1. Looking at the broader picture, and to give you an idea of how we, the Government, see restructuring and insolvency, we intend to build it into a hub. And it is one of several hubs. We want to make Singapore an intellectual property hub. We want to make Singapore the leading dispute resolution hub. And of course, we have the foundations in finance, banking and so on. In the context of this broader objective, what really motivates us when we look at changes and refinements to the restructuring and insolvency system and ecosystem, is to see how it impacts the economy. Fundamentally, we want to ensure that this becomes a strong driver of the economy in Singapore – making people come into Singapore to do restructuring, driving businesses into, from or through Singapore. So that is a fundamental, very important part of the KPI, when we look at how we wanted to structure our laws.
  1. When we first sat down to think about this – more than a decade ago – I was, like you, an insolvency practitioner, working with many of my colleagues here around the room, and we thought about what we wanted to do. Amongst the considerations was to do a horizon scan.
  1. We concluded very quickly that we will have to do something that has a strong international flavour because transactions were getting a lot more cross-border in nature. We had corporates with presence in many jurisdictions. We could no longer say what was at the centre of main proceedings so easily anymore, or even what the centre of main interest would be, because many corporates have different parts of their business in different jurisdictions. So, we had to look at a framework that encompassed all of these different considerations. There would be assets, creditors and debtors in different jurisdictions. How do you reconcile that across different jurisdictions?
  1. I am sure all of you know that different jurisdictions will have different legal frameworks. To be able to navigate them without having one system or one outcome arbitraged against the other was another important consideration.
  1. Singapore, therefore, wanted to ensure that we put up a framework that ensured greater legislative clarity. What was the objective? How do we resolve cross-border insolvency, and in some ways in being able to do that and manage that well, how do we then attract greater foreign capital and investments?
  1. So, we transformed our debt restructuring and insolvency framework into one that we believe is pragmatic and works. It takes into account day-to-day business, how you do business, how you transact and how you do deals, but one that is also commercially sensitive and reactive to market considerations and market needs. We are neither pro-creditor nor pro-debtor. This is important because we do not want people to choose Singapore because they think that the laws favour one faction over another, but instead, because the system is fair, just, equitable, open and transparent. And that has been a very key and important consideration for us.
  1. Last year, we also clarified the jurisdiction of the Singapore International Commercial Court (“SICC”) and in line with making our system a lot more international in outlook, we allowed for foreign counsel, to appear on cases at the SICC. We thought this was really quite a natural step to address the resolution of distress across different jurisdictions.
  1. The SICC is a conducive forum for matters with strong international elements and multi-jurisdictional issues. As you know, the SICC has internationally renowned judges with deep commercial insight and expertise of foreign legal traditions; and supports greater involvement of foreign lawyers and advisors, in collaboration with local counterparts. This was what we thought was the way to go in terms of trying to deal with multi-jurisdictional, cross-border, restructurings, some of which also contain elements from different legal systems.
  1. As you heard from Angela earlier, the SICC recently resolved the Garuda Airlines recognition of its PKPU proceedings – the system in Indonesia, how it aligns and fits into the system in Singapore.
  1. These changes, amongst others, were designed to ensure that our professional services reflect and contribute to Singapore’s strength as a financial and business hub. It is, in fact, fortunate for us in Singapore that we have found ourselves, either geographically or geopolitically, to be a choice venue for many businesses to locate. There are more than 37,000 international companies are based in Singapore. 7,000 MNCs have their HQ or an important part of their regional HQ in Singapore. We have the highest number of completed regional headquarters in the past 10 years in the Asia Pacific. We are also the biggest fund magnet in Southeast Asia, with more than 4,000 tech startups in Singapore, 400 venture capital firms, and another 200 incubators and accelerators. That number is growing and we are taking steps, not just my Ministry, but other parts of the Government, to proactively encourage the location of these accelerators, fund managers and startups, into Singapore.

Present: Evolving Practice of R&I

  1. So that is the landscape we see ourselves in. You fast forward the last 10 years to where we are in the present. Our jurisprudence and practices have been maturing. This is a combination of leading judgements from the courts, as I mentioned, and a lot of progress has been made by the IPAS in lifting standards of the insolvency professionals. In no small part, we have been fortunate to benefit from the flexibility, creativity and forward-thinking approach of our judges and practitioners.
  1. In particular, we have a bench that is able to resolve novel issues, but with a very strong focus on what Singapore needs – contextualising judgements and jurisprudence.
  1. I will give you some examples.
  1. Earlier, Angela talked about Re Zipmex Pte Ltd1, involving a cryptocurrency platform. The Court in that case – for the first time in Singapore – accepted the creation of an Administrative Convenience Class. This represents what I thought was a sensible decision: both flexible as well as pragmatic.
  1. In Re Babel Holding2 , the applicant was seeking to implement an innovative restructuring plan across different entities, residing in different jurisdictions. This includes potentially pooling all assets and liabilities of the entire group, which, as all of you know, is unusual due to fact that it represents assets of separate legal personalities.
  1. Finally, on the international insolvency front, we have seen a bench that is capable of assimilating and synthesising foreign jurisprudence, but eventually contextualising it for our own local needs. In Ascentra Holdings3 , the Singapore Court of Appeal did precisely that. Under the Singapore enactment of the UNCITRAL Model Law on Cross-Border Insolvency:

(a) Finding that there is no requirement for a company to be insolvent or in severe financial distress, for a foreign proceeding to be recognised in Singapore – so broadening the scope of jurisdiction and understanding the context of how the restructuring takes place. That you do not need to be on your final death knell, financially, before the court can take jurisdiction to recognise a foreign proceeding.

(b) This was concluded following a thorough analysis of the Model Law as well as numerous authorities in leading jurisdictions – the US, UK, Australia and New Zealand – and eventually settling on departing from the UK position, representing a broader approach.

Challenging Global Environment

  1. That is where we have developed till today. We have a set of rules in Insolvency, Restructuring and Dissolution Act (“IRDA”). Now, it has been five or six years since we introduced it. There has been a body of case law that supports and clarifies it, and obviously there is more to come. But where do we go from here? I will touch briefly on where we are on the global environment, which is an important indicator of how we should guide ourselves as we move forward, looking at the drivers of the economy.
  1. The impetus to continually improve our insolvency system still holds true today.
  1. I shared what we did some years ago, what I mentioned as historical, but we need to now look forward. To look forward, sometimes we need to go back and look at the landscape today. We have to constantly keep our finger on the pulse, scan ahead, look at laws for frameworks that are nimble, adaptable, and look at existing trends and commercial practices both locally and abroad. I earlier spoke about businesses 10 years ago, where we saw cross-border and multi-jurisdiction commerce as being a key driver. Today, as we look ahead, we are not just looking at multi-jurisdictional transactions. When you look at transactions increasingly now on the Metaverse, on virtual platforms, and how you resolve restructuring contracts, legal disparities, disagreements on the Metaverse, those will increasingly be the challenges of the 21st century.
  1. But understanding the future needs is critical because Singapore is a small open economy. In many ways, we are a price taker, meaning that for developments in the law, developments in economic trends, and geopolitical trends, we have to absorb and assimilate these changes, in the context of the dynamics around the world, into our system. We look at the global economy and at the geopolitical situation, tensions, trade disputes, political conflicts, weaknesses in the banking system, fluctuations, interest rates, tighter monetary policies and so on.
  1. Geopolitical tensions is something that we look at very closely, because this is not something we easily control. In fact, we cannot control it as a small nation. We read about it all the time, and almost every other page in the newspapers is about Russia-Ukraine, Israel-Palestine, and some other issue developing around the world – which has a very strong link to the way we should do business. Supply lines are affected by trade wars. People are looking at reshoring, friend-shoring, and looking a lot more to bilateral transactions as opposed to multilateral transactions. All of these have an impact on the way we should do business. It is inevitable that we will have to take these factors into account, as we look at reshaping the laws of the future.
  1. Just adding on to the point I made earlier:

(a) The World Trade Organisation (WTO), in its World Trade Report 2023, which was published just two months ago, concluded that there is growing evidence that geopolitical tensions are damaging trade flows, almost goes without saying, raising concerns of “a more fragmented world dominated by regional trade blocs”.

(b) The International Monetary Fund (IMF) had the same conclusion, estimating that the fragmentation of the global economy could in the long run reduce global GDP by 7% cumulatively. That 7% is just the effect on goods and services, and 7% would wipe out almost all of Singapore’s GDP growth in the last few years. That is how significant this can be. Inevitably, there will also be an impact on the exchange of people, talent, ideas, know-how, as well as the flow of capital. All of these are vital for our own social and economic growth, and I must state, there are a lot at risk.

  1. One further data point, geopolitical tensions are also now a top concern of businesses themselves. In the latest Global Risk Survey by Oxford Economics in the third quarter of this year, geopolitical risks are now ranked as the top global threat to businesses, ahead of tightening of credit supply, ahead of inflation risks and interest rates, which are all topline financial risk that affects the businesses. But geopolitical tensions rank above all of them now.

The Way Forward

  1. As we look at navigating our way forward, it is important to assimilate all of these learning points, think about what impact it has on our economy, and overall, how this impacts our philosophy of keeping Singapore open. Making sure that trade flows remain open: that we have a very open posture to foreign businesses coming into Singapore, transacting in Singapore, using Singapore as a platform to go into the region, and positioning Singapore as a gateway into the rest of ASEAN, for example.
  1. Moving forward, we are looking at a couple of steps. I only have enough time to talk about two different steps, which I would like to share with you.

Simplified Insolvency

  1. First, I will speak about micro and small companies (“MSCs”), which at the end of the day, represents a significant majority of businesses in Singapore. MSCs are really the lifeblood of the economy and our communities. In 2020, for instance, small enterprises accounted for 96% of enterprises in Singapore’s services sector – numbering more than 200,000 small enterprises. For a pretty small country and economy like Singapore, we have about 200,000 small enterprises that represent the lifeblood driving the local economy. All of these businesses contribute to – if you look at it from a socio-political perspective – job creation, entrepreneurship, innovation, and of course, social development.
  1. During the pandemic, one of the steps that we introduced very quickly was the Simplified Insolvency Programme (“SIP”) for MSCs. We felt that while businesses could avail themselves of the various measures introduced by the Government to keep businesses alive, afloat, helping with the cash flow, with the JSS (Jobs Support Scheme) to preserve jobs.
  1. But if businesses found themselves to be at financial risk, and therefore looking at bankruptcy and the consequences of bankruptcy, we felt that it was important for businesses that fell into hard times for economic reasons and not other reasons, like fraud and sometimes other reasons for failures, then it is far better for them not to be mired in a long drawn insolvency process. Because you would then have compounded the consequences – guarantees will be called, families will be affected, and you have aspects of the business that could not be salvaged, because it is stuck in a long-drawn proceeding.
  1. We thought many companies, corporates and businesses will be affected by the sharp downturn of business because of COVID-19. No one expected COVID-19 to happen, and no one can cater for almost zero cash flow and zero business in that period of time. That was the thing that drove the simplified insolvency process that we introduced.
  1. This SIP was, by and large, successful in assisting MSCs in severe financial distress. We are now some years past COVID-19, but we look at the data and we found this:

(a) For simplified winding up, as of 31 October 2023, just a couple of weeks ago, the Official Receiver completed the winding up of 44 out of 57 cases – so a fair number of cases. Under this process, these were done within an average of nine months, and some as quickly as a few months, as compared to a typical process, which will take anywhere between three to four years, especially where there is a longer tail of transactions and contracts to resolve.

(b) This shorter process allowed non-viable companies to be liquidated quickly, in fact, expedited, not just in terms of time savings, but also cost savings, and lessen the impact on the principals behind the business. As I said, many of them are individuals setting up the company. They have put their family wealth into the business, supported by corporate guarantees or personal guarantees. If we are able to resolve this expeditiously, it frees up this entity or the individual to find shape or form in another business more expeditiously, and also preserve the value of the insolvency estate for distribution to creditors.

(c) For simplified debt restructuring, there are fewer cases compared to the simplified winding up, though I understand that there was a successful restructuring of the Axis Group Asia Private Limited. This was done with court sanction under six months, which was very quick in the context.

  1. With these learning points and our experiences, getting straw polls from the economy, looking at practitioners’ feedback and businesses that went through the SIP, we are looking at potential changes to make this simplified insolvency process permanent in our system, and tailored for MSCs. This will help these MSCs, which I said, form 96% of the corporates in our system, navigate financial distress, by providing a simplified process that is simpler, faster, more cost-effective. And overall, the stigma that is attached to a failed business can be, if not removed, at least mitigated, through this process so that it frees up the individual to start a new business.

Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime

  1. A second change that we are thinking about, and one that perhaps represents stakeholders at the other end of the spectrum, relates to the higher-value corporates. Those who are mainly involved in larger businesses, and MNCs with cross-border presence and interest. We are studying refinements to the corporate debt restructuring and insolvency regime.
  1. One of the key areas is that of judicial management (“JM”). The JM regime, in my view, and that has been my experience in practice as well, represents a very important tool: allowing an external insolvency practitioner, who is at the same time also an officer of the court, to be appointed to manage the business and affairs of the debtor. A neutral team, coming in to hold the line, and to ensure that there is stability in the way in which businesses are held.
  1. The raison d’etre behind JM is precisely that – for a company to be properly managed. But we have found, looking at the statistics in the past 10, 20 years or so, there is historically the rate of cases that emerge successful after a JM proceeding. In fact, when we analysed it, it stood at something like 27% to 28% of success4, which goes against the whole idea of having a JM. When you first apply for a JM, you have to explain why the business is viable, why you want to manage it, to hold the line, hold the fort, and manage it out of distress. To me, it is counterintuitive that the vast majority of cases which start with a JM, end up with a liquidation. We want to ensure that the JM process is not used and not seen as an inevitable precursor to liquidation.
  1. We have set up the Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime. One of its terms of reference is to look at how we can enhance or improve the JM process so that you do not end up with those numbers, which in my view, are not what you want to see for a JM.
  1. We have two very important co-chairs – my Permanent Secretary at the Ministry of Law, Luke Goh, and Justice Aedit Abdullah. The Committee comprises members of a wide spectrum of the restructuring and insolvency ecosystem, both local practitioners, foreign practitioners as well as practitioners outside of the legal sector – bankers, accountants and so on, across the private sector, private institutions and academia – to give us a very holistic perspective outside in and inside out, looking at existing systems and frameworks, and what else we can do.
  1. The Committee has been tasked to consider, and also make recommendations for not just the JM process, but also the next bound of corporate insolvency reforms. With time, your views will be invited as well. The way we do this, as is typical the way we did the previous round of changes to our Companies Act, eventually coming into IRDA, is to take a wide set of consultations with our key stakeholders. Because we believe that this set of rules have to be market sensitive, commercially workable, pragmatic, practicable as well. And so, in time, I invite all of you to step forward if you are asked to give your views on this.
  1. What else would they cover? Besides the JM process, we will also want to look at increasing successful outcomes, not just for JM, but also restructuring, for example, our adoption of the Model Law. We want to see whether there is a basis for the potential adoption of the UNCITRAL Model Law on Enterprise Group Insolvency as well as the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments – whether that should be part of our system in Singapore as well.
  1. I am looking forward to the Committee’s very robust debate and recommendations that we will look at and consider as the next bound of the changes.

Conclusion

  1. As I conclude, let me come back to the questions posed by: “Looking Ahead, Re-thinking R&I”. I have done my best to share a snapshot of where we were, what we have done, why we had done it, what our objectives are, and a little bit of a sneak peek as to what we are trying to do in the future. I would say that these were only possible because of the foundations laid successively and successfully in the past, twinned with innovations by practitioners. I have been part of the practitioners’ pool, so hearing your stories of cases, how you navigate them, how you adapted innovatively, all that became part of the learning in how we make our changes. We have also seen very novel judgments – I cited a few earlier and there are many more examples which we will talk about in the panels later – looking at the experiences of our judges and bench, and looking at the legal innovations that they have come up with. All of these will go into our thinking as we reshape our insolvency laws for the next bound.
  1. Indeed, my Ministry, we are committed to strengthening Singapore’s position as an international centre for corporate restructuring and insolvency, aligned with the other hubs that I mentioned. I want to end off by saying that this has really only been possible because in Singapore, whilst we are a small jurisdiction, we are also a very close-knit jurisdiction. One of my fond memories of being in practice, when I was an insolvency practitioner like many of you here, was the fact that we could very easily come together, whether as fellow lawyers across the bar table, even representing different sides, or with academia, or with the bench, for which we have a very close and tight collaboration and consultation. Often, we all take the approach that we might be a group of lawyers advocating for creditors, or one group for the debtors, but ultimately, the mission is the same – it is to ensure the best, the fairest, the most open and equitable returns. And I think the objective on all sides, including on the bench, and on both sides of the bar, remain the same. That has been my experience as I now look at policymaking. You have generously shared with me your views and we continue to tap into your expertise and know-how, and experiences of the local bar, and foreign practitioners who operate in the local jurisdiction, our academia, our judges.
  1. I would like to thank everyone for collaborating with us so openly and generously to improve our R&I framework. I have given you a tip of the iceberg sense of where we want to go from here. As I said earlier, we will shortly tap onto your expertise again, and I look forward to you sharing generously so that we can really shape or reshape the next bound of corporate insolvency and restructuring rules and legal framework.
  1. On that note, I wish all of you a very happy, two-days of this Conference. I am glad that we are back in person. If there is one thing that I have learned, is someone who told me this: “Knowledge is good, know-how is better, but know who is best”. So that is why this networking is so important because it is about developing a vibrant, strong, collaborative network of partners, not just between different professions, but between practitioners from different jurisdictions because increasingly your work will evolve and entail practitioners from different jurisdictions. On that note, I wish all of you a very good two days. Thank you.

1. [2023] SGHC 88.↩

2. [2023] SGHC 98.↩

3. [2023] SGCA 32.↩

4. Report of the Insolvency Law Review Committee (2013), cases from 1996 to 2010.↩

Last updated on 22 November 2023