Whither the Scheme of Arrangement in Singapore: More Chapter 11, Less Scheme?

Abstract

Singapore’s statutory provisions on scheme of arrangement are very similar to that found in most Commonwealth countries. Over the last two decades the scheme has become a popular tool to restructure the debts, both financial and trading, of insolvent companies. The courts have taken a leading role in this development and in the process have laid down principles and rules to augment the bare statutory provisions. The scheme has become a de facto debtor in possession regime in Singapore. This success story has an unexpected twist recently. As part of its strategy to develop Singapore into an international centre for debt restructuring, the Government has accepted the recommendations of a law review committee to bring in significant elements of the US Chapter 11. A draft Bill published for consultation included an automatic, wide-ranging moratorium, cross-class cram down, super priority lien and pre-packaged schemes. It will be argued that due to the significant differences between the insolvency laws of Singapore and US and the different conceptual framework of the scheme and Chapter 11, there will be a period of uncertainty or even instability while the courts work out ways to harmonise the two different bodies of law. This bold experiment has relevance beyond Singapore. The developments have close parallels in UK’s recent consultation on reforming her insolvency law framework and, to a lesser extent, the European draft directive on restructuring. The Singapore story of injecting US Chapter 11 into the Commonwealth scheme is thus deserving of close attention while it unfolds.