Mr. Swee Siang Boey
Partner

With over 25 years of experience, Swee Siang has extensive cross-border litigation and international arbitration experience, representing clients from multiple jurisdictions in high-value and complex disputes. His areas of expertise include contractual and tortious claims, including construction, defamation, professional negligence and employment disputes. Swee Siang’s practice also encompasses insolvency and restructuring. He has acted as lead counsel in numerous cases in the State Courts as well as the Supreme Court of Singapore, and he has appeared on various occasions before the Court of Appeal which is the highest court in the jurisdiction.

In addition, he has represented clients as counsel in domestic as well as international arbitrations conducted under various institutional rules, such as SIAC, ICC, LCIA and Swiss Rules of Arbitration.

Swee Siang is qualified as an Advocate and Solicitor of the Supreme Court of Singapore, and practises out of Premier Law LLC.

Ms. Suchitra Kumar
Associate

Suchitra Kumar is a litigation and arbitration lawyer, specialising in commercial and civil disputes. She focuses on corporate disputes and international arbitration. Suchitra has gained exposure to a diverse range of contentious matters before the Supreme Court and the State Courts of Singapore. She also has experience in arbitration proceedings administered under the SIAC Rules.

Suchitra represents both local and international clients in complex cross-border claims. She advises on director and shareholder disagreements, minority oppression, breach of contract claims and data protection work.

Suchitra is developing a broad practice in a variety of sectors, with a keen interest in retail and consumer industries, regulatory compliance and white-collar fraud actions. She is qualified as an Advocate and Solicitor of the Supreme Court of Singapore and practises out of Premier Law LLC.

SINGAPORE CLARIFIES ITS TAKE ON THE MODEL

LAW ON CROSS-BORDER INSOLVENCY

1. In 2017, Singapore adopted the UNCITRAL¹United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency (the “UNCITRAL Model Law”) into its national legislation with some modifications (the “SG Model Law”, presently set out in the Third Schedule to the Insolvency, Restructuring And Dissolution Act 2018 (2020 Revised Edition), known as ‘IRDA’ for short). In this article, we briefly examine how Singapore’s jurisprudence has shaped itself in applying the SG Model Law almost seven years from the time when the SG Model Law came into effect.

What Constitutes A Foreign Proceeding?

2. The Singapore Court of Appeal (“SGCA”) recently issued a landmark judgment in Ascentra Holdings, Inc (in official liquidation) and others v SPGK Pte Ltd [2023] SGCA 32 (“Ascentra Holdings”) confirming that overseas liquidation proceedings involving solvent companies can be granted recognition under the SG Model Law as ‘foreign proceedings’. The matter concerned a company which had been placed under court-supervised voluntary liquidation in the Cayman Islands, following a dispute amongst its shareholders. The company’s liquidators had filed an application under Article 17 of the SG Model Law (“Art 17”) for the company’s Cayman liquidation to be given recognition in Singapore as a ‘foreign proceeding’, in order to gain access to powers available to local liquidators under the IRDA. The Singapore High Court (“SGHC”) declined to grant the application at first instance, and the liquidators appealed successfully to the SGCA.
3. In order to be recognised under Art 17, an overseas liquidation proceeding must qualify as a ‘foreign proceeding’ within the meaning of Article 2(h) of the SG Model Law, which defines the term as being “a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the property and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation”. In its judgment, the SGCA identified the following cumulative elements that must exist for a proceeding to qualify as a ‘foreign proceeding’ under Art 2(h)²Ascentra Holdings at [29]:-

(a) The proceeding must be collective in nature;

(b) The proceeding must be a judicial or administrative proceeding in a foreign State;

(c) The proceeding must have its basis in a law relating to insolvency or the adjustment of debt;

(d) The foreign court must exercise control or supervision over the property and affairs of the debtor in the proceedings; and

(e) The purpose of the proceeding must be the debtor’s reorganisation or liquidation.

No Requirement For Insolvency Or Severe Financial Distress

4. The crux of the appeal in Ascentra Holdings related to the third element, i.e., whether the solvent liquidation of the company had its basis in a law relating to insolvency. The first-instance Judge narrowed down the focus to the particular provision of the Cayman Companies Act³3. Section 124 of the Companies Act (2021 Revision) (Cayman Islands) governing the company’s liquidation,⁴Re Ascentra Holdings, Inc (in official liquidation) and others (SPGK Pte Ltd, non-party) [2023] SGHC 82 (“Ascentra Holdings SGHC”) at [162] – [165] rather than referring to the entire Act in full. The Judge explained that construing the word ‘law’ to encompass any provision so long as it was located in a statute that touched on the subject of insolvency would be too broad-brush in that it would sweep any proceeding into the parameters of Art 2(h) even if the proceeding only had a remote connection to insolvency⁵Ascentra Holdings SGHC at [59]. Having interpreted ‘insolvency’ as being a ‘company’s inability to pay debts’⁶Ascentra Holdings SGHC at [52], the Judge dismissed the application on the basis that the debtor in question was ‘hopelessly and irretrievably solvent⁷Ascentra Holdings SGHC at [19]’ and that the specific provisions under the Cayman Companies Act governing the company’s liquidation⁸Namely, Section 116(c) read with Section 124 of the Cayman Companies Act; Ascentra Holdings SGHC at [165], which provided for voluntary winding up by special resolution, did not relate to insolvency.
5. On appeal, the SGCA reversed the lower court’s decision, endorsing a broad approach to the interpretation of Art 2(h) to include foreign companies that are neither insolvent nor in severe financial distress. The SGCA gave due consideration to policy considerations and the overarching objectives of the SG Model Law in handing down its judgment, as follows:-

(a) Deliberate drafting⁹Ascentra Holdings at [39] – [42] – The SGCA highlighted that Art 2(h) of the SG Model Law had been modified from the corresponding Article 2(a) of the UNCITRAL Model Law with the manual addition of the wording ‘or adjustment of debt’. This was analogous to Section 101(23) of the US Bankruptcy Code. The phrase ‘adjustment of debt’ also showed up in Chapter 11 of the US Bankruptcy Code, the purpose of which is the preservation of going concerns and to allow for restructuring to ensure the continuity of struggling businesses. Chapter 11 was not limited only to companies which were insolvent. The SGCA took the position that the deliberate inclusion of the phrase ‘or adjustment of debt’ in Art 2(h) must have aimed at extending recognition to alternative modes of dissolution, such as schemes of arrangement and/or US Chapter 11 reorganisations (neither of which required insolvency or severe financial distress as a prerequisite)¹⁰Ascentra Holdings at [59].

(b) Preparatory material¹¹Ascentra Holdings at [47], [59] – The SGCA cautioned against over-reliance on extraneous material pertaining to the UNCITRAL Model Law, given that the original form had not been ported over into the SG Model Law due to the textual amendments contained therein. In any event, the SGCA was not satisfied that such evidence went so far as to exclude liquidations of solvent companies from being afforded recognition. There was also no suggestion that expanding the cover of the UNCITRAL Model Law to solvent companies would undermine its object.

(c) Harmony with international approach¹²Ascentra Holdings at [69] – [92] – The SGCA referred to the position across different insolvency regimes, ultimately noting that the predominant view tipped in favour of a wider reading of Art 2(h). In particular, the SGCA:-

(i) Agreed with the US approach in Re Betcorp Limited (in liquidation) 400 BR 266 (Nevada US Bankruptcy Court, 2009), which considered a proceeding to be conducted under a law relating to insolvency or adjustment of debt insofar that the underlying law engaged the topic insolvency, even if the specific provision governing the provision was not implicated¹³[92]. Ascentra Holdings at [71]; and

(ii) Refused to follow the contrary position taken by the English High Court in Re Sturgeon Central Asia Balanced Fund Ltd (in liquidation) [2020] EWHC 123 (Ch), that the UNCITRAL Model Law is not aimed at solvent companies and proceedings which produce the result of generating a return to members and not creditors¹⁴Ascentra Holdings at [88] – [89].

6. For the reasons set out above, the SGCA was satisfied that the Cayman liquidation qualified as a ‘foreign proceeding’ under the meaning of Art 2(h), and the appeal was allowed.

Requirement For Foreign Proceeding To Be Collective

7. The decision in Ascentra Holdings was most recently followed by the SGHC in Re Thresh, Charles and another (British Steamship Protection and Indemnity Association Ltd and another, non-parties) [2023] SGHC 337 (“Thresh, Charles”), which involved an application for the recognition of a winding up order made against a Bermuda-incorporated company regulated by Bermuda Monetary Authority (“BMA”). For background, the winding up order in question was issued in respect of proceedings initiated by the BMA in Bermuda (“Bermuda Proceeding”) – the company subject to the order was not being wound up due to insolvency, but on grounds of its non-compliance with Bermudian regulations. The present application for recognition had been initiated by the joint provisional liquidators appointed by the Supreme Court of Bermuda (“Applicant”), and opposed by the sole shareholder of the company, as well as its manager (“Opposing Parties”).
8. One of the points in contention was whether the first element set out in paragraph 3(a) above, i.e., that the requirement for the proceeding to be ‘collective’ in nature in order to fall within the meaning of a ‘foreign proceeding’ under Art 2(h), had been fulfilled. The SGCA had, in Ascentra Holdings, dealt with each of these elements, and the SGHC in Thresh, Charles referred to the SGCA’s guidance on the relevant principles to be applied when determining whether a proceeding was collective¹⁵Ascentra Holdings at [104]; Thresh, Charles at [25]:-

(a) For a proceeding to be collective, it must concern all creditors of the debtor generally (as opposed to, for example, a proceeding initiated at the request and for the benefit of a single secured creditor).

(b) In evaluating whether a proceeding is collective, a primary consideration is whether substantially all of the assets and liabilities of the debtor are dealt with in the proceeding.

9. In Thresh, Charles, the Opposing Parties argued that the criterion under Art 2(h) for the Bermuda Proceeding to be a collective one had not been satisfied, and therefore that it should not be granted recognition, because¹⁶Thresh, Charles at [27]:-

(a) The Bermuda Proceeding had been “unilaterally initiated” by the BMA;

(b) It had not been shown that the company’s creditors had notice of, and were able to participate in, the Bermuda Proceeding;

(c) The Bermudian winding-up order was obtained without providing the company or its creditors an opportunity to be heard; and

(d) The Applicant had not reached out to the company’s creditors to provide them with a right to submit claims for determination and to receive an equitable distribution, and had not consulted the creditors before bringing the present application.

10. In applying the principles set out in paragraph 8 above, the SGHC found these arguments unmeritorious, and decided that the Bermuda Proceeding did satisfy the requirement of being a collective one, because:-

(a) There was no evidence that the Bermuda Proceeding had been initiated by BMA for its sole benefit – whilst it may be presumed to have an interest in ensuring that lapses and failures in compliance with statutory and regulatory requirements would result in a business being wound up, this was in furtherance of an underlying objective to safeguard public interest¹⁷Thresh, Charles at [28];

(b) There was no evidence of steps taken by any creditor to challenge the Bermudian winding-up order¹⁸Thresh, Charles at [34];

(c) The proposition that all creditors must receive notice in order for a proceeding to be collective was too broad and unsupported¹⁹Thresh, Charles at [35]; and

(d) The argument that Applicant had not reached out to the company’s creditors was a “non-starter”. Before the Applicant actually reached out to creditors, it was entitled to better understand the company’s financial affairs. Indeed, the very aim of the present application for foreign recognition of the Bermudian winding-up order was to allow the Applicant the time and breathing room to conduct this exercise²⁰Thresh, Charles at [34].

Public Policy Considerations

11. The Opposing Parties also submitted that the grant of the foreign recognition order would be contrary to public policy relying on the overriding exception under Article 6 of the SG Model Law (“Art 6”), which provides that “[n]othing in this [SG Model Law] prevents the Court from refusing to take an action governed by this [SG Model Law], if the action would be contrary to the public policy of Singapore”. The SGHC took this opportunity to determine the scope of the Art 6 exception, since the UNCITRAL Model Law differs from the SG Model Law in that the former allows a court to exercise its jurisdiction to deny recognition of a foreign proceeding only if doing so would be “manifestly contrary” to public policy. On the other hand, Art 6 omits the word ‘manifestly’. Accordingly, the SGHC concluded that public policy grounds for refusing any action under the SG Model Law “may be invoked for reasons less stringent than those concerning matters of fundamental importance for Singapore”²¹Thresh, Charles at [38] – [41].
12. Notwithstanding that the standard for refusing recognition on public policy grounds is lower in the SG Model Law than that set out in the UNCITRAL Model Law, the threshold is a high one, and is not easily met²²22. Thresh, Charles at [42]. Although the SGHC declined to exhaustively define the phrase ‘contrary to public policy’ in Art 6, it nevertheless noted that limiting one’s rights on the basis of public policy grounds is an exceptional measure, and that the burden is on a party seeking to invoke such an exception to identify and show how the precise public policy is engaged and how it has been violated²³Thresh, Charles at [42].
13. In this regard, the Opposing Parties contended that there had been a breach of public policy on the following grounds²⁴Thresh, Charles at [43], [47]:-

(a) There was a breach of the rules of natural justice; namely the right to a fair hearing in the conduct of the Bermuda Proceeding, as the company and its directors had no actual notice of the Bermuda Proceeding until after the winding up order was made, due to ineffective service of the petition; and

(b) The Applicant failed to protect the relevant interests in commencing the present application with no due regard to the interests of the creditors and their wishes. In particular, complaints were made against the Applicant for acting dishonestly, and of incurring exorbitant costs.

14. Apart from noting that the Opposing Parties failed to state what public policy was breached, how it was attributable to a constitutionally authoritative source, or the weight to be given to the alleged public policy as opposed to any countervailing concern in favour of recognition²⁵Thresh, Charles at [44], the SGHC rejected the Opposing Parties’ arguments set out above, because, amongst other things:-

(a) There was no evidence that the manner in which service had been effected was impermissible under the laws of Bermuda. There was also no application filed to set aside the Bermudian winding up order on this ground (or any other, for that matter)²⁶Thresh, Charles at [45] – [46].

(b) There was nothing in the material before the SGHC to rise to the level of being contrary to any public policy. In particular, the SGHC was not in a position to assess whether the Applicant had incurred exorbitant costs as alleged, without having before it proper accounting of such matters. Such allegations of misconduct levelled against the Applicant were, in any event, matters for the Supreme Court of Bermuda²⁷Thresh, Charles at [48].

15. The decisions in Ascentra Holdings and Thresh, Charles provide much-welcome guidance for the interpretation of various provisions under the SG Model Law²⁸Ascentra Holdings at [64]. They also show a clear trend towards prioritising international comity, in promoting the overall purposes of the UNCITRAL Model Law, which are to facilitate co-operation between courts and stakeholders involved in insolvencies that transcend borders and to provide a clear-cut avenue for direct access by foreign liquidators to local courts in states which have adopted the UNCITRAL Model Law.