Case: Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd [2021] SGCA 60 – cash flow test for insolvency; directors liability for costs

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.

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Case: Ang Chek Chin v ANS Import & Export Pte Ltd (formerly known as Ang Ngee Seng Import & Export Pte Ltd) [2020] SGHC 177 – who has right to be heard in winding up application

Singapore Law; Legal; Lawyer

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.

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Case Update: Bombay Talkies (S) Pte Ltd v United Overseas Bank Limited [2015] SGCA 66 – compounding debt, statutory demands, winding-up

Singapore Law; Legal; Lawyer

Bombay Talkies (S) Pte Ltd v United Overseas Bank Limited [2015] SGCA 66

Significance: meaning of compounding debt in respect of statutory demands under the companies winding-up regime.

Continue reading “Case Update: Bombay Talkies (S) Pte Ltd v United Overseas Bank Limited [2015] SGCA 66 – compounding debt, statutory demands, winding-up”