Staving Off Bankruptcy – What Constitutes “Sufficient Reason” to Stay Bankruptcy Proceedings?

Introduction

Singapore’s insolvency framework, while marked by efficiency, also contains mechanisms to delay bankruptcy proceedings for legitimate purposes. This includes section 315(1) of the Insolvency, Restructuring and Dissolution Act (“IRDA“), which allows the court to stay proceedings on bankruptcy applications “for sufficient reason”. In DBS Bank Ltd v Li Yuan [2025] SGHCR 11, the Singapore High Court (“Court“) considered what constitutes “sufficient reason” for a stay of bankruptcy proceedings – in particular, whether this includes a debtor’s request for more time to repay the debt in respect of which the bankruptcy application is made.

The claimant creditor in this case had issued a statutory demand on the defendant debtor, which went unpaid, leading the claimant to initiate bankruptcy proceedings against the defendant. The defendant applied to court for a stay of the bankruptcy proceedings, essentially seeking more time to repay the debt in full.

The Court held that a debtor’s request for more time to repay the debt does not constitute “sufficient reason” to order a stay of bankruptcy proceedings under section 315(1) of the IRDA. Rather, it reinforces the debtor’s inability to repay the debt. The Court thus declined to grant the stay application. In reaching its decision, the Court also provided helpful guidance on what constitutes “sufficient reason” under section 315(1).

Nonetheless, the Court allowed the defendant to adjourn the hearing of the bankruptcy proceedings on the basis of the proposed repayment. This application was unopposed by the claimant. In reaching this decision, the Court also set out the applicable approach when considering whether to grant such adjournment.

The claimant was successfully represented in this decision by Cherie Tan, Foung Han Peow and John Loh of Rajah & Tann Singapore LLP.

Brief Facts

The claimant in the bankruptcy application was DBS Bank Ltd (“DBS“), which had extended banking facilities to the defendant, Ms Li Yuan (“Ms Li“). Ms Li failed to comply with a margin call and with a letter of demand for amounts due and owing under the banking facilities. DBS subsequently served a statutory demand on Ms Li that went unpaid. DBS thus brought bankruptcy proceedings against Ms Li.

On 7 January 2025, Ms Li made a payment proposal to DBS, stating that she: (i) would make payment of US$100,000 forthwith; and (ii) would make full payment of the remaining debt in the statutory demand by 31 March 2025 (“Proposal“). Ms Li then applied to court for a stay of the bankruptcy proceedings on the grounds of the Proposal.

The Court considered the following issues:

1. What constitutes “sufficient reason” under section 315(1) of the IRDA for which the court may make an order staying the proceedings in a creditor’s bankruptcy application?

2. Whether a debtor’s request for more time to repay the debt constitutes “sufficient reason” under section 315(1) of the IRDA, and if so, whether a stay should be ordered in this case?

3. Whether an adjournment of the hearing of the bankruptcy proceedings should be granted pursuant to rule 95(1) of the Insolvency, Restructuring and Dissolution (Personal Insolvency) Rules 2020 (“PIR“)?

Holding of the High Court

The Court dismissed the application for a stay of proceedings but granted an adjournment of the hearing until 31 March 2025.

Stay of Proceedings

Section 315(1) of the IRDA provides that the court may “for sufficient reason, make an order staying the proceedings on a bankruptcy application”.

Here, the Court set out the relevant principles regarding what constitutes “sufficient reason” under section 315(1) so as to enable its discretion to order a stay of bankruptcy proceedings:

1. For “sufficient reason” to be shown, the grounds for the stay must have a reasonable prospect of either: (i) putting into question the legal foundation of the bankruptcy application; or (ii) resulting in the dismissal of the bankruptcy application.

2. Even where “sufficient reason” is shown, the debtor must go on to persuade the court that its discretion should be exercised in favourof a stay. The principal consideration would be whether there are sufficient safeguards for the creditor’s pecuniary interests if a stay were to be ordered.

3. A debtor’s request for more time to repay the debt reinforces the fact of the debtor’s inability to repay the debt and confirms that the bankruptcy application has been brought with good grounds and is properly maintained. This does not constitute “sufficient reason” to order a stay.

The Court was of the view that the Proposal was effectively a request by Ms Li for more time to repay the debt in full. Applying the above principles, it was not within the scope of section 315(1) of the IRDA for a stay of the bankruptcy proceedings to be granted on the basis of the Proposal. The Court thus declined to order a stay of proceedings.

Adjournment

The Court clarified that where a debtor seeks more time to repay the debt, rather than apply for a stay of bankruptcy proceedings, he should instead seek an adjournment of the hearing of the bankruptcy application.

The PIR provides for the court’s power to grant adjournments at the hearing of a bankruptcy application. In particular, under rule 95(2) of the PIR, one of the grounds for adjournment is that “the debtor appears and satisfies” the court “that the debtor is able to repay the debtor’s debt in full or in part within a reasonable period”.

The Court provided the following guidance on how rule 95(1) would be applied:

1. The burden is on the debtor to persuade the court that: (i) he would be able to repay the debt within a certain period of time; and (ii) such period of time is reasonable.

2. The court must scrutinise if the debtor’s position has foundation. Therefore, the debtor must offer some explanation on how he would be able to repay the debt within the stated period of time.

3. The extent of the explanation required depends on the circumstances of each case, such as the quantum of the debt and the means by which the debtor says he would come to be able to repay the debt.

The Court granted Ms Li liberty to file an affidavit on the adjournment of the hearing and subsequently granted an adjournment until after 31 March 2025. In reaching its decision, the Court considered the fact that DBS did not oppose the adjournment. The Court was also of the view that the explanations which Ms Li relied on in support of her request for an adjournment had the requisite foundation, including:

1. Evidence that Ms Li’s husband owned certain shares;

2. A statement of the sale of the shares and the timeline for such sale; and

3. Confirmation that the proceeds of sale would be made available for Ms Li’s use to repay the debt by 31 March 2025.

Concluding Words

The decision provides helpful guidance on the factors that the court will consider when faced with an application to stay bankruptcy proceedings or an adjournment of a hearing for bankruptcy proceedings. In particular, creditors should take note of the factors that may lead to an adjournment, including: (i) whether the source of funds for repayment has been established; (ii) whether a reasonable timeline for repayment has been set out; and (iii) whether sufficient evidence has been provided by the debtor.

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