Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC at the Second Reading of the Companies (Amendment) Bill [Bill no. 27/2018]
Sir, I rise in support of this Bill. This is a swift legislative response to the Court of Appeal’s proposal in the case of Diablo Fortune Inc v Duncan, Cameron Lindsay to carve out liens on sub-freights from the registration requirement under Section 131(1) of the Companies Act.
As the law currently stands, given the Court of Appeal and High Court decisions that characterise a lien on sub-freight as a floating charge and a charge on the company’s book debts, a shipowner must register its lien as a charge under the Companies Act. Failing this, the lien will not be valid against other creditors.
However, this requirement is viewed by the industry as onerous and commercially inconvenient for charter parties that are usually of relatively short durations.
This reform would resolve the dilemma shipowners face between expediency and protection of their right to exercise the lien.
Implications of lien as a charge on book debts of the company or a floating charge
The proposed statutory carve out differs from the Hong Kong approach which provides under Section 334(4) of its Companies Ordinance that a lien on sub-freights is not a charge on book debts of the company or a floating charge for the purposes of registration.
Given that the outcome on registration requirements is in effect the same, can the Minister clarify if there are any other practical implications that are intended in affirming the Singapore Courts’ characterisation of a lien on sub-freight as a charge on book debts of the company or a floating charge?
Consequences of non-registration prior to amendments taking effect
Given the lack of clarity on the characterisation and registration requirements of liens on sub-freights prior to the Courts’ decisions and this amendment, shipping companies and creditors would understandably have acted according to what is most commercially expedient.
In practice, registration of liens on sub-freights is not commonplace especially for shorter charters.
The new section 131(3AC) provides for a period of transition by clarifying that the consequences of non-registration should only apply prior to the amendments commencing where there is a liquidator or creditor.
Until the new amendments take effect, under Section 132(1) of the Companies Act, the lienor company and every officer of the company is guilty of an offence and liable to a fine for not registering such a lien. Can the Minister clarify whether these penal consequences will be applied against shipping companies and their officers?
Clarifications notwithstanding, I stand in support of this Bill, which provides much needed clarity on this area of law and is in line with commercial practice.