Annexed to this working guide is a copy of a recent initiative launched in Indonesia to encourage private sector restructuring. In effect, this initiative proposes an informal (out of court) "work out" style of corporate restructuring in appropriate cases. We do not put this forward as a perfect model but it provides a good basis for examining the prospect of the possible application of a similar scheme or model in the countries which are the subject of this project.

Thus, in this section we ask that you read the annexure [particularly the part headed "1. Adoption of Principles", paragraphs "a" to "i"] and, having considered those principles, comment on their possible application and implementation in your economy. In particular we would like to know the following:

A. Organization and Representation

(1) In the case of the larger companies it is usual to engage advisors who are experienced in corporate debt restructuring. These advisors may be merchant bankers and/or accountancy practitioners.

(2) The restructuring process may be initiated either by the company or its creditors. If a large number of creditors are involved a steering committee may be formed. However, such a committee is more commonly formed only by the bank creditors to negotiate the position of the banks. There is definitely merit in having a sole steering committee representative of all creditors. In practice, such a representative committee is likely to materialise only at the insistence of the company or its advisor.

(3) It is not common for the steering committee to engage a financial adviser. The steering committee normally engages only a legal adviser. Costs is usually for account of the debtor.

B. Critical Role of Senior Management

The company is usually represented by its senior management. It is however not uncommon for creditors, especially bank creditors to be represented by officers who lack authority to make decisions on the spot. This becomes especially true in the case of work outs involving prolonged negotiations.

C. Standstill and Interim Financing

The standstill agreement may feature all the matters raised in (1), (2), (3) and (4) subject to the agreement of all the parties to the agreement.

D. Information

Such information is usually supplied by the debtor company. There is no prohibition legislative or otherwise against a company supplying such information. Confidentiality agreements are not common. Banks are prohibited from disclosing information concerning a customer's account to anyone, including other banks. Hence, it is common for the company to give its consent for the banks to share all information on the company amongst themselves for purpose of the restructuring, negotiations. Professional advisers are under a duty not to disclose information to third parties.

E. Company Restructuring Proposal

Such a proposal is usually worked out between the company and its financial consultants and put to the creditors or the committee.

F. Committee's Advisory Report

As stated, the creditors or the committee normally would engage only legal advisors who will be asked to comment on the legal aspects of the proposal. The creditors themselves undertake the task of evaluating the remaining aspects of the proposal (including viability of the enterprise, group or business etc). It would be ideal for the creditors or their steering committee to retain a financial adviser to comment on the proposal. Some, including the company, are however, likely to view this as a waste of resources because the financial consultant employed by the company to work on the proposal would be acceptable not only to the company but also to the creditors. The financial consultant is expected to exercise a degree of independence in drawing up and making the proposal with largely full transparency.

G. Negotiation of a Restructuring Plan

Subject to above the matters referred to are practiced and would be of relevance.

H. Pre-negotiated Bankruptcy Rules

Section 210 of the Companies Act referred to above would be applicable.

I. Non-discrimination

There is no discrimination between local and foreign creditors in Singapore.