Understanding the Singapore bankruptcy laws

Many Indians register their companies in Singapore for obvious reasons – easier compliances, policy certainty, etc. Those who have their companies registered in Singapore should also be aware of the basic Singapore Bankruptcy laws.

Here we are trying to give you the contours of Singapore Bankruptcy laws.

Singapore Bankruptcy

Bankruptcy is a legal status of an individual who cannot repay debts of greater than $15,000 and is declared a bankrupt by the High Court.  As a debtor, one may apply to make herself a bankrupt, or the creditors may apply to make one a bankrupt.

The High Court usually appoints the Official Assignee to administer the bankrupt’s affairs in bankruptcy. These include the selling off of the bankrupt’s assets to repay his creditors, the registration of the creditors’ claims and the distribution of dividends to the bankrupt’s creditors.

The Official Assignee and her role
Under the Singapore Bankruptcy laws, the Official Assignee is a public servant and an officer of the Court. The Official Assignee is assisted in her duties by the officers at the Insolvency Office. The High Court can appoint the Official Assignee as the trustee of the bankruptcy estate. Alternatively, the Court may appoint a private trustee to administer the bankrupt’s affairs if the petitioning creditor so requests.

The Official Assignee acts as the receiver of the bankrupt’s estate. The Official Assignee shall, as far as practicable, consult the creditors with respect to the management of the bankrupt’s estate. The Official Assignee investigates the conduct and affairs of the bankrupt and also recovers and realises his assets for distribution to the bankrupt’s creditors. The Official Assignee also assists the bankrupt in obtaining a discharge from bankruptcy.

Restrictions as a bankrupt

Under Singapore Bankruptcy laws, a person who has been declared bankrupt may face following restrictions:

Traveling overseas: The person can only leave Singapore if you get the trustee’s prior permission.

Managing a business or acting as a director of a company: He/she cannot manage a business or act as a director of a company, unless with the permission of the court or the written permission of the Official Assignee.

Obtaining credit: One must disclose his/her bankruptcy status to the lender if one is applying for a credit or loan of at least S$1,000.

Note: With effect from 1 May 2022, Credit Counselling Singapore (CCS) is introducing its Bankruptcy Rehabilitation Programme (BRP) that supports the bankrupts and their families in their financial recovery journey and assists the bankrupts to get a discharge from insolvency with record removed.

The services offered include general enquiry assistance, employment assistance, counselling that helps improve financial, mental, emotional and relationship well-being.

Starting and continuing court actions: One cannot start or continue court actions without the trustee’s prior approval barring in cases where an action for damages in respect of any injury to the bankrupt, and any appeal arising from the action and a matrimonial proceeding, and any appeal arising from this action. 

Being a trustee or personal representative: One is disqualified from being appointed or acting as a trustee or personal representative in respect of any trust, estate or settlement unless one obtains the General Division of the High Court’s permission to do so.

Notice To Bankrupts
Bankrupts under the Official Assignee’s (OA’s) administration must submit their Statement of Affairs (SA) as advised in the Notice sent to them by the OA.

Bankrupts must update their address with the National Registration Office as all correspondence will be sent to the address maintained therein.

Bankrupts under Private Trustees’ administration must contact their Private Trustee to submit their SA in the manner advised by their Private Trustee. Bankrupts under Private Trustees’ administration must update their Private Trustee of their latest address.

It is an offence for a bankrupt to:

• fail to file his SA;
• leave or remain outside Singapore without the OA’s / his Private Trustee’s prior permission;
• conceal, dispose, fail to deliver or leave Singapore with his property (except property that is protected against creditors by law) as it vests in the OA / his Private Trustee.

Notice To Creditors, Debtors, Asset Holders & Interested Persons
Creditors of bankrupts should file their Proof of Debts with the OA / Private Trustees at https://www.mlaw.gov.sg/eservices/io/ within 6 months from the date of the Bankruptcy Order or any other date as instructed by the OA / Private Trustees.

All debts due to the bankrupts should be remitted to the OA.

All persons holding assets belonging to bankrupts or who have relevant information on the assets and affairs of bankrupts should furnish the information and location of such assets to:

• the OA, if the bankrupts are under the OA’s administration;
• the respective Private Trustee, if the bankrupts are under the Private Trustee’s administration.

Discharge from Bankruptcy

One may get out of bankruptcy in these three ways:

Annulment of the Bankruptcy Order by full settlement or Offer of Composition or Scheme of Arrangement: When a bankrupt repays his debt in full or makes a settlement offer which is accepted by a majority (in number) of his creditors representing at least 75% of the total debt owed, the Bankruptcy Order made against him will be annulled.

In the case of a settlement offer, the outcome of the annulment is dependent on the creditors. If the creditors accept the proposal, a Certificate of Annulment will be issued under Section 95A of the Bankruptcy Act (Chapter 20).

The annulment of the Bankruptcy Order has the effect of putting the debtor in the same position as if no Bankruptcy Order had been made against him, but it does not release the debtor from any provable debts which have not been filed against him when the bankruptcy was in force.

Discharge by the High Court: A bankrupt may apply to the High Court to grant him an Order of Discharge. The Official Assignee may also apply to the High Court for the bankrupt’s discharge under Section 124 of the Bankruptcy Act (Chapter 20) if the proven debts exceed S$500,000.

The High Court will take into consideration the views of the Official Assignee and the bankrupt’s creditors before deciding whether to discharge him from bankruptcy. The High Court will consider facts such as the bankrupt’s age, earning capacity and his assets before deciding whether to discharge him. In addition, the High Court will also consider the amount of monthly instalment payments the bankrupt has contributed to his bankruptcy estate for the benefit of his creditors, whether any bankruptcy offences were committed, and generally, whether the bankrupt has co-operated fully with the Official Assignee in the administration of the bankruptcy estate.

Also Read: Singapore govt extends Simplified Insolvency Programme by 18 months

Discharge by Certificate of the Official Assignee: The Official Assignee may discharge the bankrupt from bankruptcy provided at least three years have lapsed since the commencement of the bankruptcy and where the proven debts do not exceed S$500,000.

In deciding whether to issue a Certificate of Discharge to the bankrupt, the Official Assignee will take into consideration factors such as:

• Whether the bankrupt has met the Expected Dividend or the Target Contribution;
• Whether the bankrupt has property available which remain to be realised;
• The period that the bankrupt has been in bankruptcy;
• The cause of bankruptcy;
• The bankrupt’s general conduct in bankruptcy and the level of the bankrupt’s co-operation in the administration of the bankruptcy estate;
• Whether the bankrupt had committed any offence leading up to or during bankruptcy which adversely impacted one or more creditors. These include (but are not limited to) offences under the Bankruptcy Act, the Insolvency, Restructuring and Dissolution Act and the Penal Code; and
• Whether there are valid objections from the bankrupt’s creditors to the bankrupt’s discharge.

Any indicative timeline for a discharge is not guaranteed. The eventual duration of your bankruptcy will depend on the factors listed above.

 

Alternatives to bankruptcy One can try different ways to repay your debts without being declared a bankrupt. Here are a few ways to do it under Singapore Bankruptcy laws: Private arrangement If you are unable to repay the entire debt, you may try to negotiate with your creditors to reach an agreement, such as paying your debts in instalments or in scheduled repayments. You can try to request for an extension of time to sell your assets to repay your debt. You should inform your creditors of your latest financial position, and provide information and evidence to prove that. This agreement does not involve the court. Debt Repayment Scheme During a bankruptcy hearing, the court will consider whether you qualify for the Debt Repayment Scheme (DRS). This is a pre-bankruptcy scheme by the Official Assignee. It aims to help eligible debtors with debts not more than $150,000 avoid bankruptcy through a debt repayment plan. Criteria for the Debt Repayment Scheme As the debtor, you must satisfy all these criteria: >Your debts do not exceed $150,000. >You are not an undischarged bankrupt and have not been a bankrupt within the last 5 years. > A voluntary arrangement involving you is not in effect, and was not in effect within the last 5 years. > You are not subject to any existing DRS, and have not been subject to any such scheme within the last 5 years. > You are not a sole proprietor, a partner of a firm or a partner in a limited liability partnership. If you satisfy all these criteria, the court may adjourn the hearing for the Official Assignee to assess if you are suitable for the DRS. After the Official Assignee’s assessment If you are found to be suitable, the DRS will start. The court will treat the bankruptcy application as withdrawn. You will have to fulfil your duties as a debtor under the DRS. If you are found to be unsuitable, the court will schedule another hearing for the bankruptcy application. You may be declared bankrupt at that hearing.