MinLaw Consults on Committee’s Recommendations to Enhance Singapore’s Corporate Restructuring and Insolvency Regime

From 11 March 2025 to 8 April 2025, the Ministry of Law (“MinLaw“) held a public consultation (“Consultation“) seeking feedback on the recommendations by the Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime (“Committee“).

The Committee was tasked to consider measures to: (i) further enhance Singapore’s corporate debt restructuring and insolvency (“R&I“) regime (last amended in 2018); and (ii) attract more international users to utilise this regime. In its report dated 11 March 2025 (“Report“), the Committee set out its views, perspectives and recommendations on proposed amendments to further enhance Singapore’s R&I regime. Following from the Report, MinLaw sought feedback on the Committee’s recommendations by way of the Consultation, to assist it in better assessing and further refining the proposals where appropriate.

The Committee’s nine recommendations spanning four broad categories are summarised below.

Strengthening the Judicial Management (“JM”) Regime

1. Reconceptualised JM regime: The JM regime is to be reconceptualised to emphasise the restructuring and turnaround functions.

• • In JM, a judicial manager is appointed by the court to take possession of and administer a debtor’s operations and assets in place of its management. During the course of the JM, a moratorium is in place while the judicial manager devises a proposal to achieve one of the statutory objectives of JM for the creditors’ approval. The debtor exits the JM regime where the approved proposal is achieved, or where the statutory objectives of JM can no longer be achieved. These objectives include: (i) the survival of the company, or the whole or part of its undertaking, as a going concern (“turnaround function“); (ii) the approval of a scheme of arrangement (“SOA“) (“restructuring function“); or (iii) a more advantageous realisation of the company’s assets or property than on a winding up (“recovery function“).

• • To date, the track record of the JM regime has been limited, and it is not favourably perceived in the market. However, it has seen increasing use for the restructuring and turnaround of debtors. Its key value proposition is that it provides both creditors and the debtor with an opportunity to change the debtor’s management, obtain information and assess the situation of the debtor to resolve the debtor’s immediate financial distress. This value is only realised where: (i) the JM is conducted expeditiously and the debtor exits the JM to effect a turnaround or restructuring; and (ii) the JM produces a better outcome than an immediate winding up. Such value may be eroded if there continue to be divergent purposes for the JM regime, i.e. having both restructuring/turnaround and recovery functions, which will contribute to a lack of clarity in the intended outcome of any given case and in turn negatively impact creditor support for the use of JM.

• • Therefore, the Committee recommends eliminating the recovery function and instead reconceptualising the regime to only retain the restructuring and turnaround functions. This would facilitate more positive outcomes, although parties would have to rely on other existing processes to recover and realise value (i.e. the recovery function), e.g. through receivership or winding up with the liquidator continuing business operations for a limited period.

2. Retain dual standing to apply for JM: Both creditors and the debtor should continue to have standing to apply to the court to place the debtor in JM (i.e. dual standing). This provides the debtor with the added option to seek to restructure or turnaround its business via the reconceptualised JM regime, in addition to the SOA regime.

• • Despite some indications that JM is more successful when the creditor is the applicant, maintaining this dual standing recognises: (i) the neutral role of the judicial manager as an officer of the court, and that the regime should operate in the same manner regardless of the identity of its applicant; and (ii) the value propositions and features of the JM regime differ from the SOA regime, such that debtors will continue to benefit from having this added JM option in appropriate circumstances, e.g. where a change in management is envisaged.

3. Flexible remuneration incorporating “success fees”: The remuneration of the judicial manager should be based on a model that allows flexibility to better align the judicial manager’s remuneration with successful outcomes in JM proceedings. In particular, the structuring of the judicial manager’s fees is encouraged to include a “success fee” component.

• • A key element of JM’s value proposition is the envisioned expeditious nature of JM proceedings. Lengthy JM proceedings often yield lower returns to stakeholders due to the ongoing costs that erode the debtor’s residual value. As such, it is critical to align the incentives of stakeholders with the successful outcomes of JM proceedings. In this regard, different remuneration methods have their respective strengths and weaknesses and are suitable for different scenarios. For instance, time costing may be more appropriate where there is a high level of uncertainty. In contrast, remuneration based on meeting certain pre-agreed milestones (i.e. conditional or “success fees”) is likely to better align the stakeholders and the judicial manager on the mutually agreed intended outcome of the JM proceedings and their respective interests.

• • After considering various factors, the Committee recommends a multi-stage remuneration model incorporating “success fees” as best serving the interests of all parties and facilitating faster resolution of JM cases, as a standard template. One option is to: (i) allow for time costs-based remuneration during an initial period for the judicial manager to get up to speed; and (ii) thereafter link remuneration to the achievement of the proposals of the JM. A specific remuneration figure, percentage or formula should not be prescribed, and the conditions of “success” must be mutually agreed upon between the judicial manager and creditors.

4. Retain clawback ability: The judicial manager should continue to have the ability to pursue clawback actions in the reconceptualised JM regime, to allow recovery of the debtor’s assets.

• • This ensures that judicial managers are not constrained in the full performance of their functions, in that clawback actions are not reserved only for winding up but can also be deployed in JM to effect a successful turnaround and preserve value, and that creditors can be incentivised to support the restructuring plan provided there is a good chance of a successful clawback action. As safeguards: (i) the creditors still hold the power to decide on the judicial manager’s proposals including whether to commence clawback actions; (ii) the clawback action must still support the broader restructuring or turnaround plan; and (iii) the judicial manager must still establish that the debtor was factually insolvent at the time, or as a result, of the transaction (if required by legislation).

Refining the Cross-Class Cramdown in SOAs

5. Removing majority threshold: The cross-class cramdown threshold requirements should be refined to remove conditions requiring a majority in number of creditors (representing three-fourths in value of creditors meant to be bound by the proposed SOA) to vote in favour of the restructuring plan.

• • The cross-class cramdown mechanism prevents a minority of creditors in a dissenting class from vetoing an SOA simply because they belong in a separate class, provided they are treated fairly under the proposed SOA. The court has the power to approve the compromise or arrangement despite the dissenting class, provided various threshold requirements are met. This proposed refinement to the cross-class cramdown threshold requirements removes the high threshold which deters the putting together of a plan for a cross-class cramdown and makes the tool more functional.

6. Including shareholders where appropriate: The scope of the cross-class cramdown provisions should be expanded to encompass shareholders in appropriate circumstances.

• • This reflects the economic reality of the debtor’s capital structure in a financially distressed situation and ensures that shareholders with no economic interest in the debtor cannot hold out against a restructuring plan. As safeguards: (i) shareholders should be given an opportunity to retain an interest in the debtor if they contribute “new value” to the debtor, as this could incentivise them to continue their initial support for the debtor; and (ii) the implementation of these recommendations should balance these considerations against the principle that the proposed SOA should not discriminate unfairly between classes of creditors and be fair and equitable to each dissenting class.

Refining the Framework and Tools for Efficient Debt Restructurings

7. Streamlining processes for disposal of property and issuance of shares: The process for disposing of the company’s undertaking or property, and issuing new shares, should be streamlined in a JM or an SOA.

• • Currently under the Companies Act 1967, the company’s approval in a general meeting is required when a company seeks to: (i) dispose of the whole or substantially the whole of its undertaking or property; or (ii) issue new shares in connection with a restructuring. This creates uncertainty on a restructuring plan that the creditors have agreed to, provides shareholders with de facto veto powers in an insolvency situation (when the creditors’ interests come to the fore), and can impede a quick and successful conclusion of restructuring. Streamlining these processes ensures greater facilitation for debtor companies to carry out their restructuring plans in JM or SOA proceedings.

8. Appointment of Restructuring Officer: The court should be provided with the discretion to assess and appoint a neutral third-party individual as a Restructuring Officer to assist with a restructuring under an SOA. However, this same power need not be implemented in the JM regime for various reasons.

• • Such appointment could ensure greater oversight or assistance with implementing the SOA and promote greater transparency to the creditors. Further, the Committee also recommends that: (i) the Restructuring Officer may take on a wide range of roles to assist with the SOA; (ii) such appointment should not be mandatory, but be targeted at cases where such assistance would be useful or appropriate; and (iii) the court should be afforded the flexibility to limit or designate the functions that the officer would perform, e.g. to act as a monitor, to provide business expertise, or to take on the functions typically performed by that neutral individual.

Adopting UNCITRAL Model Laws Relating to Insolvency

9. The UNCITRAL Model Law on Enterprise Group Insolvency (“MLEGI“) and the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments (“MLRIJ“) should be adopted. This will: (i) further strengthen Singapore’s ability to deal with international, cross-border R&I matters; (ii) complement Singapore’s earlier adoption of the UNCITRAL Model Law on Cross-Border Insolvency (“MLCBI“) in 2017; and (iii) position Singapore as one of the first States to implement the two Model Laws, demonstrating its commitment to mutual cooperation and international best practices in the area of international insolvency.

• • The MLEGI aims to facilitate the restructuring of the whole of a business enterprise with multinational holdings or the sale of the business as a going concern, through “group insolvency solutions” that seek to enhance the overall combined value of two or more group members through a restructuring, a sale of business or a liquidation. The MLEGI’s support for restructuring of enterprise groups provides an opportunity for Singapore to coordinate such insolvencies, particularly for proceedings heard in the Singapore International Commercial Court, which is an optimal forum for cases involving multiple governing laws.

• • The MLRIJ aims to provide a framework for the recognition and enforcement of foreign insolvency-related judgments. While the MLCBI has been the main global instrument for cross-border insolvency, there is uncertainty regarding the MLCBI’s application to the enforcement of insolvency judgments, and such enforcement is typically excluded from general private international instruments for commercial matters. The MLRIJ provides a bespoke and tailored regime for the recognition of foreign insolvency-related judgments, providing clear guidance and certainty to foreign users seeking to enforce such judgments in Singapore, and facilitating cooperation and harmonisation of cross-border insolvency by contributing to its wider adoption.

Click on the following links for more information (available on the MinLaw website at www.mlaw.gov.sg):

• Report of the Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime 2025
• Public Consultation on the Report of The Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime
• MinLaw Press Release titled “MinLaw Seeks Feedback on Recommendations to Enhance Singapore’s Corporate Restructuring & Insolvency Regime”