THE ROLE OF INSOLVENCY PRACTITIONERS IN INSOLVENCY PROCEEDINGS (SINGAPORE) 1 Not to be reproduced or disseminated without permission.

TYPES OF INSOLVENCY PROCEEDINGS RECEIVERSHIP To preserve asset(s) secured to a secured creditor, e.g. contract proceeds or a mortgaged property. This is usually pursuant to an instrument, e.g. debenture. The power to appoint a Receiver & Manager (“R&M”) is common in security arrangements. JUDICIAL MANAGEMENT To (1) rehabilitate a company into a going concern (in whole or part), (2) obtain approval of a Scheme of Arrangement, and/or (3) achieve a more advantageous asset realisation compared to liquidation. A Judicial Manager (“JM”) takes over the company’s directors. LIQUIDATION Aim is to administer an organised winding-down of a company’s affairs, a fair distribution of assets and a dissolution of the entity. Liquidation may be “voluntary” – by members (“MVL”) or by creditors (“CVL”) – or by Court on a “compulsory” basis (“CWU”). SCHEME OF ARRANGEMENT Aim is for a company to propose a compromise or arrangement (a “Scheme of Arrangement”) with creditors and/or shareholders. The Court’s assistance is sought to allow a company to negotiate this effort to rehabilitate. The directors remain in control.

RECEIVERSHIP Who may apply Duties/Powers Qualifications Effect Creditor, by instrument, e.g. debenture Creditor, by Court Order Appointment may exclude Manager role Duties/Powers If appointed by instrument, R&M is the Company’s officer (R&M has duties similar to director) If appointed by Court or without Manager role, R&M is not an officer Announce appointment Take charged property into custody/control Qualifications Approved Liquidator Not undischarged bankrupt Not eligible: Company’s auditor, mortgagee, or mortgagee’s director, secretary or employee Effect Typically an event of default in banking contracts, construction & building contracts, under security arrangements Duties/Powers Report every 6- months on receipts, payments, debt to creditor, estimated value of charged assets If appointed pursuant to floating charge, R&M must pay preferential debts before claim by floating charge holder

JUDICIAL MANAGEMENT Who may apply Duties/Powers Qualifications Effect Directors (by resolution) Company (by shareholders) Creditors (including contingent or prospective creditors) Duties/Powers JM is the Company’s officer and agent Personal liability on contracts entered/ adopted during appointment Announce appointment Take into custody and manage the Company’s affairs, business and property Qualifications Public Accountant Effect No winding-up No receivership JM is for 180 days Moratorium against legal proceedings execution security over property, re-entry/ forfeiture of lease retention of title repossession under hire- purchase/leasing Duties/Powers 60 days to present Statement of Proposals Power to acquire rescue financing and apply to Court for super-priority JM to implement proposal if approved JM to apply for discharge or extension of JM order

LIQUIDATION Who may apply Duties/Powers Qualifications Effect MVL: shareholders’ resolution when Company is solvent CVL: directors’ resolution first; then creditors and shareholders CWU: by Court on application of: creditor shareholders JM Minister Duties/Powers If appointed by directors in CVL or by shareholders in MVL, duties as officer (director) If appointed by creditors in CVL or by Court, not an officer Announce appointment Take property into custody/control Investigate affairs and report fraud Qualifications Approved Liquidator Not undischarged bankrupt Not convicted of fraud/dishonesty Not indebted to a related company >S$2,500 MVL/CVL: unapproved liquidator, officer and related individual can act Effect Moratorium against legal action, execution, etc. Creditors file Proofs of Debt Typically an event of default in contracts Duties/Powers Pursue asset recovery Adjudicate Proofs of Debt Effect distribution of assets Report unfit conduct of directors Submit record of receipts/payments Apply to dissolve Company and for discharge/release

SCHEME OF ARRANGEMENT (DIP) Who may apply Company Liquidator Creditor Shareholder Holder of units of shares in Company Duties/Powers Company’s duty to: classify creditors make full disclosure assess Proofs of Debt seek approval of super-priority for rescue financing meet pre-pack req’mts issue notices/ clear explanatory statement Qualifications No specific requirements Usually an approved liquidator Effect Company remains in control Moratorium against legal proceedings execution security over property, re-entry/ forfeiture of lease retention of title repossession under hire- purchase/leasing Duties/Powers Chairman of creditors’ & shareholders’ meetings has duty to conduct meeting and report to Court Court’s power to: cram-down order re-vote approve/review Scheme Manager’s duty to implement terms of Scheme

RAJAH & TANN ASIA Nigel Pereira > 750 fee earners 40+ practice areas South Asia Philippines Indonesia Singapore Lao PDR Vietnam Cambodia Thailand Myanmar China Japan Malaysia Nigel Pereira Advocate & Solicitor, S’pore Solicitor, England & Wales Certified Fraud Examiner Member, CIArb 9 Battery Road 25th Floor Singapore 049910 +65 6232 0629 nigel.pereira@rajahtann.com www.rajahtannasia.com