Speech by Mr. Louis Ng Kok Kwang, MP for Nee Soon GRC, at the Second Reading of the Insolvency, Restructuring and Dissolution (Amendment) Bill (Bill No. 36/2020) and COVID-19 (Temporary Measures) (Amendment No. 3) Bill
Mdm, this Bill aims to alleviate difficulties that may be faced by micro and small companies (MSCs) during COVID-19.
Many businesses, including our MSCs, may not be able to weather this storm. If they are to survive, they may need significant restructuring.
The Bill recognises the reality that the experiences of MSCs facing restructuring or winding up are going to be very different from that of companies with more substantial assets.
I commend the effort to streamline the processes for MSCs that are in this position.
I also support the COVID-19 (Temporary Measures) (Amendment No. 3) Bill which addresses difficulties faced by another group – companies in our construction sector.
I have three points of clarification for the Insolvency, Restructuring and Dissolution (Amendment) Bill and one point on the COVID-19 (Temporary Measures) (Amendment No. 3) Bill.
Safeguards against lower threshold for restructuring
First, the Bill lowers the threshold vote from creditors required to commence restructuring.
Currently, approval from a majority of creditors holding 75% in value of the debt owed must be obtained to approve a Scheme of Arrangement. The Bill will lower the threshold from 75% to two-thirds.
The threshold is important because a company that is able to continue without intervention should not be forced to undergo restructuring at the whims of a small number of creditors.
Restructuring may also compromise the rights of creditors, including those that vote against approving it.
To ensure that we strike a correct balance, will Minister share what further safeguards are in place to help businesses in the face of potentially overzealous creditors?
Related to this, can Minister share what guidance is provided to MSCs and their creditors in deciding whether and when to undertake restructuring?
For instance, I understand that Credit Counselling Singapore will administer the restructuring assistance scheme for sole proprietorships and partnerships.
Can Minister share if the Simplified Insolvency Scheme will be complemented by programmes that provide closer guidance for MSCs and their creditors through the restructuring process?
Qualifications for officers administering fast-track programme
Second, the new subsection 50(1A) allows exempted individuals to hold an insolvency practitioner’s licence without being “a qualified person.”
The licensing regime for insolvency practitioners was introduced in the Insolvency, Restructuring and Dissolution Act 2018. It was a welcomed move to increase professional standards in this area.
However, allowing exemptions to basic qualifications required of insolvency practitioners, so soon after the new regime is in place to raise standards, might send a contradictory message on the expected standards of insolvency practitioners.
Can Minister clarify in what situations does the Ministry intend to use this exemption clause? What checks and balance will be in place to ensure exempted individuals perform to the standards expected?
For example, will exempted individuals be required to hold any basic qualifications?
Can Minister clarify if this exemption is intended to cope with the short-term increase in case-load from the fast-track process or is this intended to be a general longer term exemption?
Can Minister also share if exempted individuals will be provided with any guiding principles on how to apply the relevant insolvency principles in relation to winding up or restructuring?
Length of time for fast-track process
Third, although the fast-track process introduced by the Bill is limited to just six months, it is very possible that the effects of COVID-19 on small- and medium-sized MNCs will exceed this duration.
Will Minister explain what factors were taken into account when stipulating this specific duration of time?
Will there be any possibility of the fast-track process being extended and what are the factors that determine this extension?
Further, the intention behind the Bill of allowing smaller companies to avoid the increased costs and time associated with the usual court process should continue to apply after we have emerged from this crisis.
Will Minister therefore share if the Ministry will consider adopting the provisions of this Bill on a permanent basis for MSCs and possibly even all SMEs in the future?
Extension of time for construction contracts
For my final point, I turn to the COVID-19 (Temporary Measures) (Amendment No. 3) Bill. The universal extension of time is a welcomed move.
I understand there is currently some uncertainty on whether an extension of time automatically applies once a contractor has applied for relief from liquidated damages under Part 2, Section 6 of the current Act. As a practical safeguard, some contractors may be legally advised to continue applying for an extension of time pursuant to the contract provisions.
However, this gives rise to its own set of issues. Importantly, an extension of time under the contract may be discretionary. Further, condition precedents for the extension of time stated under the contract may not have been fulfilled. I understand this is a common defence raised.
The universal extension of time of 4 months addresses this uncertainty.
However, contractors who require relief for a longer period of time may still have to seek recourse under Part 2, Section 6 or negotiate under their contract provisions.
In this event, can Minister clarify whether an extension of time automatically applies where a contractor applies for relief and serves a Notification for Relief? If so, can the Minister clarify how this extension of time beyond the 4 months period interacts with the contract provisions on extension of time?
Mdm, notwithstanding these clarifications, I stand in support of the Bills.
Watch the speech here
Watch the response here