Case Commentary Company Law Debt Restructuring Insolvency Law Schemes of Arrangement Singapore Statutory Interpretation

Contingent Liabilities As A Basis For The Composition of Debts [Insolvency Law] [Restructuring] [Company Law] [Companies Act] [Statutory Interpretation]

In the freshly released judgment in Re Empire Capital Resources Pte Ltd [2018] SGHC 36, the Singapore High Court reiterated that a scheme of arrangement under Singapore law could lawfully release third-party claims, i.e. the creditors’ claims against entities / persons other than (or in addition to) the scheme applicant.

A unique feature of the case is that the applicant was the guarantor of certain liabilities, rather than the primary obligor. In Justice Aedit Abdullah’s view, this did not make a difference as a scheme could release current as well as contingent claims.

The Court however cautioned that where the purported scheme seeks to release the applicant’s and a third party’s debts, there must be a nexus or connection between such debts. In the absence of such a nexus or connection, the purported scheme would fall outside the ambit of Section 210 of the Companies Act.

The Court however declined to elaborate as to what would constitute a sufficient nexus, save that it existed on the present facts. It will interesting to see – whether on appeal or in a future decision – the factors considered in determining the existence of such a “nexus”.

The full judgment is available for viewing on Singapore Law Watch here. This link typically expires within 3 months.

 

25 February 2018

*The contents of this article represent the views and observations of the author alone from a Singapore law perspective and are subject to copyright protection under the laws of the Republic of Singapore (as may from time to time be amended). No part of this article may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed and/or broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of the author.

Please note that whilst the information in this article is correct to the best of the author’s knowledge and belief at the time of writing, it is for academic reference, does not constitute legal advice and is only intended to provide a general guide to the subject matter. It should therefore not be treated as a substitute for specific professional advice for and/or in respect of any particular course of action as such information may not suit your specific business, operational and/or commercial requirements. You are therefore urged to seek legal advice for your specific situation. All the author’s rights are expressly reserved and nothing herein shall be construed as a waiver thereof.

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