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Wang Aifeng v Sunmax Global Capital Fund 1 Pte Ltd [2022] SGHC 271
The Court (per Goh Yihan JC) in this decision considered the principles for granting permission to continue or commence legal action against a bankrupt individual under s 327(1)(c)(ii), IRDA.
Significance: in Adip Mittal v Offshore Holding Company Pte Ltd [2022] SGHC 239, the General Division of the Singapore High Court (coram Goh Yihan JC) considered, in the first reported decision on this issue, the legal principles applicable to s 124(1)(b) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), which allows directors to wind up companies. Prior to the IRDA, directors had no legal standing to wind up companies.
Continue reading “Directors winding up companies under Singapore’s IRDA”
Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd) [2021] SGCA 60
Supreme Court Case Summary | Judgment
Significance:
A. Directors’ conduct of appeal against company winding up
A company may appeal against a winding up order. Its directors may control the conduct of the appeal. However, the directors and/or shareholders may not use the company’s funds to pursue an unmeritorious appeal when these funds should be reserved for payment to the creditors. 2 general rules:
(1) directors and/or shareholders controlling the conduct of the appeal should pay costs incurred by the company in prosecuting the appeal out of their own pockets instead of using company funds. If the appeal succeeds, the directors and/or shareholders can reclaim from the company the funds that they had expended from their own pockets in prosecuting the appeal.
(2) the directors and/or shareholders controlling the conduct of the appeal should be personally responsible for the payment of any party and party costs awarded in favour of the respondent if the appeal fails.
B. Cash Flow Test for Insolvency
Previously, courts have applied both the cash flow test and the balance sheet test to assess if a company is insolvent.
The Court of Appeal held that the cash flow test is the only test under s 254(2)(c) of the Companies Act (now s 125(2)(c) of the Insolvency Restructuring and Dissolution Act) to determine whether a company is unable to pay its debts: at [65].
It assesses whether the company’s current assets exceed its current liabilities such that it is able to meet all debts as and when they fall due.
“Current assets” and “current liabilities” refer to assets which will be realisable and debts which will fall due within a 12-month timeframe.
Significance: The bankrupt made certain cheque payments to his family members in the clawback period prior to his bankruptcy. The trustee in bankruptcy applied to claw back these payments for being unfair preference (as two of the family members were also creditors of the bankrupt) and undervalue transaction (this was essentially a gift to his daughter which she used to pay for expenses for her wedding, which cost a total of about S$135,000). The statutory presumption of unfair preference was not found to have been rebutted. The court found that it would not be justified to not order a claw back for the gift to the daughter as it would otherwise be tantamount to the bankrupt’s creditors footing the bill of the daughter’s “lavish wedding”.
In Jurong Aromatics Corp Pte Ltd (receivers and managers appointed) and others v BP Singapore Pte Ltd and another matter [2018] SGHC 215, the Singapore High Court considered the nature of charges and whether contractual clauses prohibiting assignments applied to prevent the charge from arising. The court also considered decrystallisation, estoppel, waiver, and whether insolvency set-off applied.
It was reported that in the light of the liquidation of long-surviving departmental store Robinsons, goods suppliers have been experiencing issues with payments for sold consigned goods.
What has not been considered in these reports is that suppliers who consigned goods to Robinsons should consider if it is indeed a consignment at law and whether title or property of goods have passed to Robinsons, or if not then whether they can take back the goods.
Continue reading “Retailer Insolvency and Rights of Goods Suppliers”
Significance: In a rare split decision, the majority of the Court of Appeal (Sundaresh Menon CJ and Tay Yong Kwang JA; Woo Bih Li J dissenting) refused recognition of foreign bankruptcy order due to breach of natural justice.
The majority found that the evidence did not prove that:
(i) notices of the bankruptcy application in Indonesia were properly served on the appellants;
(ii) the appellants had actual knowledge of the bankruptcy proceedings but chose not to appear in them.
The appellants were thus deprived of the opportunity to challenge validity of service or liability under the guarantees and object to the making of the bankruptcy orders.
The Court left open the issue of the correctness of the legal principles on recognition of foreign bankruptcy orders: at [22].
Supreme Court case summary found here.
Ang Chek Chin v ANS Import & Export Pte Ltd (formerly known as Ang Ngee Seng Import & Export Pte Ltd) [2020] SGHC 177
(Coram: Audrey Lim J)
Significance: Generally, a person who is not of the class of persons (company, creditor, contributory, official receiver or liquidator) should not be allowed to appear to be heard on the application to wind up the company. However, in appropriate circumstances, a person who would be directly affected by a winding up order may have the right to be added as a party to the proceedings.
S 285 of the Companies Act to summon a person is not meant for the purpose of determining whether a winding up should be granted but predicated on a winding up order made or provisional liquidator being appointed. The proper procedure for summoning witnesses is in s 257(2) of the CA, which allows the court on a winding up application to do certain things including directing a trial and directing that oral evidence be taken.
Re Design Studio Group Ltd and other matters [2020] SGHC 148
Significance: The High Court granted the applicants super-priority to a debt arising from rescue financing under s 211E of the Companies Act, now s 67 of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA“). Notably, the financing was a ‘roll-up’, i.e. using newly input post-petition finances to pay off existing pre-petition debt, such that the pre-petition debt is effectively paid off and “rolled up” into the super-priority post-petition debt.
Re PT MNC Investama TBK [2020] SGHC 149 – Foreign company held to have standing to apply for moratorium for a scheme of arrangement
Significance: Indonesian company successfully applied for a moratorium under section 211B of the Companies Act, now section 65 of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA“) (which came into force on 31 July 2020). The court, per Aedit Abdullah J, was satisfied that the applicant has a substantial connection to Singapore as per s 351(1)(d) and s 351(2A) of the Companies Act, now s 246(e) of the IRDA.