(a) In relation to each type of insolvency procedure available in the legal system of this economy, what are the administrative organs/entities involved in the implementation and management of that procedure? (For example a trustee, liquidator, receiver, government official.)

 

Scheme of arrangement

No administrative organ need be involved in the implementation and management of a scheme of arrangement. It can and is often done by the company itself with its specialist advisers. However, in some cases usually on the creditors' insistence, a scheme may provide for an independent scheme administrator to be appointed. The powers and duties of the scheme administrator is determined by the scheme document itself.

Receiver

The receiver is the only administrative organ involved in a receivership. He is deemed to be the agent of the company; and this agency terminates in so far as it is inconsistent with the purposes of a liquidation if the company subsequently goes into liquidation.

Liquidation

The only administrative organs or entities involved in the implementation and management of a liquidation is the liquidator himself and the Official Receiver's office. The Official Receiver's office is a government department which becomes by operation of law the liquidator of any company in respect of which a private liquidator is not appointed. Private liquidators are officers of the court and are subject to the supervision of the Committee of Inspection if one is appointed, the court and the Official Receiver's office.

Judicial management

A judicial manager is the only administrative entity involved in a judicial management. He is not subject to the control of the Official Receiver, but is subject to the control of the court and the creditors.

(b) What qualifications must each type of administrator of insolvency procedures possess? Is there a system of regulation of insolvency administrators in this economy?

 

Judicial Manager

The nominee must be an approved company auditor. However, a judicial manager appointed by the court or nominated by the Minister need not be an approved company auditor. Save that the auditor of the company cannot act as its judicial manager, there are no other specific disqualifications mentioned in the Companies Act. However, there are general provisions in the Companies Act prohibiting certain classes of persons from participating, directly or indirectly, in the management of companies. These provisions therefore apply to judicial managers as well. Thus, the following persons may not be appointed: (a) an undischarged bankrupt; (b) a person convicted of offences in connection with the promotion, formation or management of a company, or of offences involving fraud or dishonesty punishable with imprisonment of three months or more, or of an offence under enumerated sections of the Companies Act; and (c) a person in persistent default in relation to delivery of documents to the registrar of Companies.

Liquidator

In a winding up by the court, the liquidator is appointed by the court. He must either be the Official Receiver or an approved company auditor who has also been approved as a liquidator. Liquidators are invariably accountants by profession. A person may not be appointed as liquidator unless he has consented in writing to the appointment. A liquidator may not consent to appointment if he is subject to any of the following disqualifications: (a) he owes more than S$2,500 to the company or its related corporations; (b) he is an officer of the company or its related corporations; (c) he is a partner, employer or employee of an officer of the company or its related corporations; (d) he is an undischarged bankrupt; and (e) he has been convicted of an offence involving fraud or dishonesty punishable with imprisonment of three months or more.

In a members' voluntary winding up, the liquidator need not be an approved liquidator, nor do the disqualifications in sub-para (b) and (c) above apply. Thus, in a members' voluntary winding up, a director could be appointed the liquidator. The same relaxation applies in a creditors' voluntary winding up if a resolution to that effect has been passed by a majority of the creditors.

Receiver

A receiver cannot be: (a) a corporation; (b) an undischarged bankrupt; (c) a mortgagee of any property of the company, an auditor of the company or a director, secretary or employee of the company or of any corporation which is a mortgagee of the property of the company; (d) any person who is neither an approved liquidator nor the Official Receiver.

(c) Are the creditors of a corporate debtor permitted to participate in the administration of the relevant insolvency procedure, and if so, how? (For example are the creditors permitted to assist the administrator, or supervise or dictate the conduct of the administration?)

 

Scheme of arrangement

Where a compromise or arrangement is proposed between a company and its creditors or members or any class of them, the court may order meetings of the creditors or of the members (or of the relevant class of creditors or members) to be summoned.

At the meetings convened upon the order of court, the approval of the members and creditors to the scheme of arrangement must be obtained. A majority in numbers representing three-fourths in value of the members or creditors is required to approve the scheme.

Receivership

There is no formal role to be played by creditors in a receivership.

Liquidation

In a creditors' voluntary liquidation, the liquidator is chosen by the creditors at the meeting convened in compliance with the Act. In a compulsory winding up, the petitioning creditor nominates the liquidator in his petition and this nomination is usually acceded to by the Court.

Further, in a compulsory liquidation and in a creditors' voluntary liquidation, the general body of creditors can compel the appointment of a committee of inspection which then plays a supervisory role under various provisions of the Companies Act. Under section 272, the liquidator can with the consent of the committee of inspection or the court carry on business for more than 4 weeks after the making of the winding up order; can compromise claims by or against the company and appoint solicitors to assist him in his duties. Furthermore, the liquidator is under section 273 of the Companies Act under a duty to have regard to the directions of the committee of inspection in administering the assets of the company.

Further, any creditor may take part in the public examination of an officer of a company in connection with which fraud has been committed.

Judicial management

In a judicial management, the creditors also have a role to play. Firstly, the creditors may oppose the nomination of a person proposed as judicial manager by the petitioner. This may be done by the majority in number and value of the creditors (including contingent or prospective creditors).

Moreover, after the judicial manager has been appointed, the creditors are entitled no more than 60 days thereafter (or such longer period as the court may allow) to have laid before them a statement of the judicial manager's proposals for the achievement of the purposes for which the order was made.

Any revisions to the judicial manager's proposals accepted at the first creditors' meeting must likewise be approved at a creditors' meeting. Furthermore, the creditors may appoint a committee to supervise the judicial manager. This committee cannot interfere with the management of the company, but may require the judicial manager to furnish it with such information as it may require.

Finally, under section 227R of the Companies Act, any creditor can seek relief from the court if it is of the view that the judicial manager is managing the affairs, business and property in a manner which is unfairly prejudicial to the interests of the creditors or members generally, or some part of the creditors comprising 25% in value of the company's debts.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what are the powers given to each type of administrator by statute, at general law or pursuant to the terms of the appointment? (for example power to carry on the business of the organization, to pay creditors, to compromise claims of or against the debtor, to issue or defend legal proceedings, to obtain credit, to sell property, to execute documents on behalf of the debtor.)

 

Scheme of arrangement

There is no statutory administrator of a scheme of arrangement. It is normally administerd by the company unless the scheme itself provides for an independent scheme administrator to be appointed.

Receivership

A receiver and manager appointed under the terms of a debenture usually has the widest powers of management and will be empowered to carry on the business of the company with a view to selling the company's undertaking as a going concern. He is under no duty to pay creditors other than the debenture holders who appointed him. He has the power to compromise, prosecute or defend any claims by or against the company in the same way as the company itself could have done. He can also sell the charged property and execute documents in the name of the company for this purpose. This latter power is usually pursuant to an express power of attorney in the charge documents. Under Part VIII of the Act, he is under a duty to lodge 6-monthly returns with the Registry of Companies showing detailed accounts of his payments and receipts during the preceding 6 months.

Liquidation

The liquidator's job is to take into his custody or under his control all the property or choses in action to which the company is to appears to be entitled. The court may order any contributory, trustee, receiver, agent or officer of the company to deliver to the company any money, property or documents that he has in his hands.

A liquidator has two sorts of powers: those that he may exercise in his own discretion, and those that require the approval of the court or the committee of inspection. The liquidator's discretionary powers are to be found in section 272(2) of the Companies Acts. In particular, a liquidator has the power to bring or defend any action or other legal proceeding in the name and on behalf of the company, to sell the property of the company, to appoint agents to do any business which he is unable to do himself to do all acts and execute in the name of the company all deeds, receipts and other documents and for that purpose use the company's seal. A liquidator is not obliged to prosecute or facilitate the prosecution of any claim unless he believes that the claim has a reasonable chance of succeeding or that it will serve some useful purpose, nor is it his job to reopen transactions that have been carried out in good faith by the company. A creditor or contributory who is dissatisfied with the conduct of the liquidator may complain to court, which can inquire into the matter. Some of the liquidator's powers are exercisable only with the authority of the court or of the committee of inspection. These are: (a) carrying on the company's business so far as is necessary for the beneficial winding up thereof for more than four weeks after the date of the winding up order; (b) paying off any class of creditors in full, subject to the statutory scheme of priorities; (c) making a compromise or arrangement with the creditors; (d) compromising any debts owed to the company by contributories or other debtors; and (e) appointing a solicitor to assist him in his duties.

In a voluntary winding up, the liquidator may carry on the business of the company in his own discretion, but only so far as is necessary for the beneficial winding up thereof. The other powers set out above may be exercised by the liquidator with the approval of a special resolution of the company in a members' voluntary winding up or with the approval of the court or the committee of inspection in a creditors' voluntary winding up. The acts of a liquidator are valid notwithstanding any defect that may subsequently be found in his appointment or qualification.

Further, the liquidator has the power to disclaim land that is burdened with onerous covenants, shares in corporations, unprofitable contracts and any other property which is otherwise unsaleable or not readily saleable by reason of requiring the possessor to pay money or to perform some onerous act. This power may be exercised only with the leave of the court or the committee of inspection, which may be granted subject to conditions.

The power of disclaimer cannot be exercised to allow the company to get out of a contract merely because it would be better in the liquidator's view not to have to perform the contract. In deciding whether or not to grant leave to the liquidator, the court will take into consideration the effect of the disclaimer on parties interested in the liquidation. The benefit to the unsecured creditors will be weighed against the possible injury to persons who are interested in the property.

The liquidator has power to recover property of the company which has been improperly dissipated before winding up.

Where a company has either bought property from or sold property to a person who was at the time of the transaction a director of the company for cash consideration and the transaction occurred within two years before the commencement of the winding up, the company may recover any amount by which the property was overvalued or undervalued (as the case may be) from the director. This also applies to transactions with another company where that company had common directors with the company in liquidation. The liability to account seems to be strict, and there is no provision allowing the members to approve such a transaction. Similarly, if a director entered into a transaction with the company to buy or sell non-cash assets worth more than S$100,000.00 without the approval of the general meeting, the liquidator presumably could exercise the company's right to rescind the transaction. There is no time limit prescribed for this latter right of rescission, but the longer the liquidator defers rescission, the less likely it is that rescission will be allowed.

If the promoters or officers of the company have breached their duties towards the company, the liquidator may apply to court to have these duties enforced in a summary way. Section 341 allows the court to assess damages against delinquent promoters and officers summarily by means of a misfeasance summons.

In addition to bringing a misfeasance summons, the liquidator may also apply to court to make any person who was party to carrying on the company's business in a fraudulent manner liable for the company's debts. Where an officer has authorized the contracting of a debt when he had no reasonable and probable expectation of the debt being repaid, the liquidator may apply to make him liable to pay that debt.

Judicial management

When a judicial manager is appointed, he has to send to the Registrar, the members and the creditors of the company a statement of his proposals for the achievement of the purposes for which the order was made.

Where the judicial manager's proposals have been approved, he must manage the company in accordance with those proposals. He may revise the proposals from time to time, but only if those revisions are approved at a creditors' meeting.

In order to enable the judicial manager to carry out his duties, the directors of the company and the secretary must submit a statement of affairs to him within 21 days of receiving notice that the judicial management order has been made. The judicial manager may require verification of the statement of affairs by former officers of the company, the company's employees and promoters of the company (if the company was formed within a year prior to the making of the order). Officers (including former officers), employees and promoters of the company are obliged to give the judicial manager such information as he may reasonably require.

The court may summon any officer of the company or any other person who is suspected of having the company's property in his possession, or who is suspected of being indebted to the company, or whom the court thinks can provide information, to appear before it and require him to submit an affidavit containing an account of his dealings with the company. The court may also require such a person to produce any books, papers or other records under his control. The court's power to order such inquiries in dealings with the company may be exercised on the application of the judicial manager.

(b) To what extent and in what circumstances may each type of insolvency administrator seek assistance, advice or direction in the conduct of the administration, and from what sources? (for example the Court, his appointor, the creditors of the debtor, a solicitor, accountant or other relevant person.)

 

Scheme of arrangement

There is no statutory provision for an administrator under section 210, so there are no provisions for the administrator to have guidance. However, it is always possible to apply to the Court for guidance under the general law.

Receivership

A receiver or a receiver and manager will usually engage solicitors to guide him in legal matters. If necessary, a receiver has the power under section 218(3) to apply at any time to the Court for directions in relation to any matter arising in connection with the performance of the functions of a receiver or manager.

The receiver must be careful, however, in taking directions from the debenture holder. The terms of a debenture invariably deem the receiver to be the agent of the company. However, if the debenture holder has so interfered in the receivership by giving directions etc as to constitute the receiver the agent of the debenture holder, the debenture holder may be held liable for any negligence or misfeasance by the receiver.

Liquidator

A liquidator can seek guidance from the committee of inspection appointed under section 277 of the Companies Act. Further, a liquidator is empowered to engage solicitors. In the final resort, a liquidator can seek directions from the court under section 273(3) of the Companies Act in the case of a compulsory liquidation or under section 310(1) of the Companies Act in the case of a voluntary winding up.

Judicial Manager

A judicial manager will normally engage solicitors and other professional advisers and if necessary is empowered to apply to court for directions in relation to any matter arising in connection with the performance of his functions under section 227G(5) of the Companies Act.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what are the duties imposed upon each type of administrator by statute and at general law? (for example a duty to take possession of assets of the debtor, to realise those assets, to discharge the debt owed to his appointor, to call for proofs of debts owed to creditors, to adjudicate upon claims of creditors, to apply available assets in discharge of those claims, to report on the conduct of the debtor by the proprietors.)

 

Scheme of arrangement

There are no specific duties imposed on the person administering a scheme of arrangement. The obligations will be set out in the scheme document itself.

Receiver

A receiver or a receiver and manager is invariably deemed by the debenture to be an agent of the company and not of the debenture holder. However, his primary duty is to realise the assets of the company and discharge the debt due to the debenture holder. He owes only a duty of good faith in equity, and not one of reasonable care at common law, to the company. The only exception appears to be that if the receiver decides to sell the charged property, he owes a duty of care in negligence to take reasonable steps to ensure that he receives the fair value for the property at the time of sale.

Liquidator

Under section 269(1), a liquidator is under a duty to take into his custody or under his control all the property and things in action to which the company appears to be entitled. After receiving the statement of affairs from the managers of the company, the liquidator is under a duty under section 271(1) of the Companies Act to submit a preliminary report to the court or the Official Receiver as to the causes of the company's failure and whether further inquiry is desirable. The liquidator is under a duty to use his own discretion in the management of the affairs and property of the company and the distribution of its assets, subject to his obligation to have regard to the directions of the creditors or contributories or the court. When the liquidator has realised all the property of the company and has distributed a final dividend, he is empowered to apply to court for his release.

Judicial manager

A judicial manager is under a duty to take into his custody or under his control all property to which the company is or appears to be entitled. During the currency of a juidicial management order, a judicial manager is obliged to manage the company in accordance with the proposals approved by the creditors at a meeting convened for that purpose.

(a) What remedies and/or sanctions are available in the legal system of this economy in respect of breaches of duty or transgressions committed by each type of insolvency administrator?

 

Scheme of arrangement

There are no statutory remedies or sanctions in respect of breaches of duty or transgressions committed by those administering a scheme of arrangement. The scheme administrator would have common law liability for negligence, fraud or misconduct.

Receiver

A receiver or a receiver and manager who has misapplied or retained or become liable or accountable for any money or property of the company or been guilty of any misfeasance or breach of trust or duty in relation to the company can be compelled by the court to compensate the company as the court thinks just.

Liquidator

A liquidator is obliged under section 274 of the Companies Act to pay money received by him into such bank account as is prescribed by the Companies (Winding Up) Rules or as is specified by the court failing which he his guilty of a criminal offence. Any liquidator who retains for more than 10 days a sum exceeding $1,000 or such other amount as the court in any particular case authorises him to retain is liable to pay interest on that sum at rate of 20% per annum and is in addition liable to have all or part of his remuneration disallowed, to be removed from office and to pay any expenses occasioned by reason of his default. A private liquidator is subject to the control of the Official Receiver.

A liquidator, whether appointed by the court or in a voluntary winding up, may be removed by the court on cause shown. Cause may be shown when there is some unfitness of the person by reason of his personal character, or from his connection with other parties, or from the circumstances in which he is mixed up. Thus, for instance, if a liquidator refuses to take action against miscreant directors because he is one of them or because they are his friends, he may be removed by the court. Similarly, if the liquidator is not independent or impartial because of his connection with persons against whom there might be pending claims, there would be cause to have him removed. Where it appears that the liquidator is in a position where his duty and interest conflict, the court may remove him.

An action against a liquidator for breach of duty can also be brought under Section 341 of the Companies Act. Under Section 341, the court may compel the liquidator to repay or restore any money/property of the company which he has misapplied.

Judicial manage

r A judicial manager may at any time be removed from office by order of the court. There are no express provisions giving any party a right of action against a judicial manager for misfeasance or misconduct in office. However, if he has been guilty of such acts, he is unlikely to obtain his release from liability to the company from the court under section 227J(4) or section 227Q(4) of the Companies Act. The company, acting by its liquidator if necessary, will then be free to take action against the judicial manager under the general law.

(b) Have there been actual instances of breach of duty or transgressions committed by insolvency administrators?

 

There have been no reported instances.

(c) If so, give the details of any major cases and a summary of the action taken and the results.

 

Not applicable.