archive-sg.com » SG » S » SINGAPORELAW.SG

Total: 820

Choose link from "Titles, links and description words view":

Or switch to "Titles and links view".
  • Upcoming Events
    Overview Commercial Law Case Law Cases in Articles Free Law Arbitration Cases Statutes Singapore Law Watch Headline News Commentaries Judgments Legislation Notices Directions Continuing Legal Education Resources Media Press Releases Speeches Publications Online References Sample Clauses Directory of Law Practices Latest Singapore Rankings Events Upcoming Events Archive Events Archive 2013 Events Archive 2012 Events Calendar June 2015 July 2015 August 2015 September 2015 October 2015 November 2015 December 2015 January

    Original URL path: http://www.singaporelaw.sg/sglaw/links/upcoming-events/month.calendar/2015/12/30/- (2016-01-30)
    Open archived version from archive

  • Upcoming Events
    Chamber of Maritime Arbitration ADR Publications Laws of Singapore Overview Commercial Law Case Law Cases in Articles Free Law Arbitration Cases Statutes Singapore Law Watch Headline News Commentaries Judgments Legislation Notices Directions Continuing Legal Education Resources Media Press Releases Speeches Publications Online References Sample Clauses Directory of Law Practices Latest Singapore Rankings Events Upcoming Events Archive Events Archive 2013 Events Archive 2012 Events Calendar June 2015 July 2015 August 2015

    Original URL path: http://www.singaporelaw.sg/sglaw/links/upcoming-events/week.listevents/2015/12/28/- (2016-01-30)
    Open archived version from archive

  • Archive
    Directions Continuing Legal Education Resources Media Press Releases Speeches Publications Online References Sample Clauses Directory of Law Practices Latest Singapore Rankings Events Upcoming Events Archive Events Archive 2013 Events Archive 2012 Events Archive 2013 Alternate Dispute Resolution in Singapore Presentation for Law Students Association Radboud University Nijmegen Date April 29 2013 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description About 40 postgraduate law students from the Law Student Association of the Radboud University Nijmegen Netherlands were in Singapore for a study programme Mr Loong Seng Onn Executive Director of the Singapore Mediation Centre and Senior Director of the Singapore Academy of Law and Mr Samuel Leong Counsel at the Singapore International Arbitration Centre presented on ADR in Singapore The students were then led on a Supreme Court tour and visited Maxwell Chambers Premier to learn more about the ADR facilities in Singapore Alternate Dispute Resolution in Singapore Presentation for Summer Programme Students Santa Clara University School of Law Date June 10 2013 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description About 20 postgraduate law students from Santa Clara University were in Singapore for a 10 week study and internship programme from 27 May to

    Original URL path: http://www.singaporelaw.sg/sglaw/links/archive?font-size=smaller (2016-01-30)
    Open archived version from archive

  • Events Archive 2013
    presented on ADR in Singapore The students were then led on a Supreme Court tour and visited Maxwell Chambers Premier to learn more about the ADR facilities in Singapore Alternate Dispute Resolution in Singapore Presentation for Summer Programme Students Santa Clara University School of Law Date June 10 2013 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description About 20 postgraduate law students from Santa Clara University were

    Original URL path: http://www.singaporelaw.sg/sglaw/links/archive/events-archive-2013?tmpl=component&print=1&page= (2016-01-30)
    Open archived version from archive

  • Events Archive 2012
    that both countries offer and how they can tap on these opportunities to expand their businesses regionally and globally As parties to a cross border transaction look forward to a fruitful relationship it is also critical for them to consider the various challenges and options available to resolve any business dispute particularly relating to cross border expeditiously This seminar will share information on the future prospects and business opportunities Singapore and India offer as well as how to resolve any business disputes expeditiously economically and equitably Alternate Dispute Resolution in Singapore Presentation for Summer Programme Students Santa Clara University School of Law Date June 5 2012 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description About 20 students participated in Santa Clara University s overseas summer study and internship programme in Singapore from 30 May to 27 July 2012 A session to share on mediation and arbitration in Singapore was organized for the students in the aim to promote the Singapore legal system and ADR in Singapore Committee members and the interns mentors were also invited for a networking reception Alternate Dispute Resolution in Singapore Presentation to NTU Mayor Class Date July 18 2012 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description Chinese government officials attending the NTU Mayors Class went through an ADR presentation and networking reception The objective of the event was to showcase Singapore law through an introduction to the Singapore legal and judicial system along with presentations on ADR in Singapore The networking reception offered a good platform for the officials to interact with some PSLC members and lawyers from local law firms This event was attended by about 40 participants Arbitration and Choice of Law Involving Parties from China India and ASEAN Date August 22 2012 Venue Supreme Court Building

    Original URL path: http://www.singaporelaw.sg/sglaw/links/archive/events-archive-2012-a?font-size=smaller (2016-01-30)
    Open archived version from archive

  • Events Archive 2012
    particularly relating to cross border expeditiously This seminar will share information on the future prospects and business opportunities Singapore and India offer as well as how to resolve any business disputes expeditiously economically and equitably Alternate Dispute Resolution in Singapore Presentation for Summer Programme Students Santa Clara University School of Law Date June 5 2012 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description About 20 students participated in Santa Clara University s overseas summer study and internship programme in Singapore from 30 May to 27 July 2012 A session to share on mediation and arbitration in Singapore was organized for the students in the aim to promote the Singapore legal system and ADR in Singapore Committee members and the interns mentors were also invited for a networking reception Alternate Dispute Resolution in Singapore Presentation to NTU Mayor Class Date July 18 2012 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description Chinese government officials attending the NTU Mayors Class went through an ADR presentation and networking reception The objective of the event was to showcase Singapore law through an introduction to the Singapore legal and judicial system along with presentations on ADR in Singapore The networking reception offered a good platform for the officials to interact with some PSLC members and lawyers from local law firms This event was attended by about 40 participants Arbitration and Choice of Law Involving Parties from China India and ASEAN Date August 22 2012 Venue Supreme Court Building Organiser Singapore Academy of Law Program Description What mode of dispute resolution should I choose What law should I choose to govern this contract How do I draft arbitration clauses that are fair to all parties and safeguard my organisation s interests These are some of the frequent questions an in

    Original URL path: http://www.singaporelaw.sg/sglaw/links/archive/events-archive-2012-a?tmpl=component&print=1&page= (2016-01-30)
    Open archived version from archive

  • Ch.16 Singapore Company Law
    to appoint a liquidator to get in the assets of the company to which the creditors have a prior claim before the members of the company Accordingly in such circumstances directors must ensure that the affairs of the company are properly administered and that its property is not dissipated or exploited to the prejudice of the creditors see Winkworth v Edward Baron Development Co Ltd 1987 1 All ER 114 D Duty at Common Law to Avoid Conflicts of Interest 16 3 7 As a fiduciary a duty of loyalty is imposed on a director vis à vis the company As a result a director is obliged not to place himself in a position where his duty to the company may conflict with his own interests see Chew Kong Huat v Ricwil Singapore Pte Ltd 2000 1 SLR 385 Kumagai Zenecon Construction Pte Ltd v Low Hua Kin 2000 2 SLR 501 One particular application of this duty is that a director is not permitted without the fully informed consent of the company to make a profit in connection with the director s position Thus if a director comes across a business opportunity while discharging his role as a director he cannot personally take advantage of such an opportunity unless the company has with full knowledge of the facts permitted him to do so This permission may be given by the rest of the board assuming the other board members giving approval are independent and do not stand in any way to benefit personally or by the members in general meeting see Dayco Products Singapore Pte Ltd v Ong Cheng Aik 2004 4 SLR R 318 E Duty at Common Law to Act for Proper Purposes 16 3 8 The management of a company is generally vested in the board of directors and the board will often have other more specific powers such as the power to issue shares under section 161 of the Act provided that the directors have obtained a specific or general mandate to do so Such powers must be exercised for proper purposes Even if directors have acted in good faith in what they believe is in the best interests of the company they may have exercised certain powers in an improper manner For example it has been held that where the power to issue shares was used to facilitate a takeover bid for a company that was not a proper exercise of such a power even though the directors felt that they were acting in the company s best interests see Howard Smith Ltd v Ampol Petroleum Ltd 1974 AC 821 F Effect of Breach of Fiduciary Duties 16 3 9 If a director places his own interests above those of the company the director will be liable for any loss caused to the company If the director has profited from his position without the informed consent of the company the director may have to account for the profits to the company Where the director has contracted with the company e g the director has sold an asset to the company the company may be able to avoid the contract if the contract with the company was entered into in breach of the director s fiduciary obligations to the company Where a third party has entered into a contract with the company knowing that the directors of the company have acted improperly the company may also be able to avoid the contract vis à vis the third party Return to the top SECTION 4 ENFORCEMENT OF CORPORATE RIGHTS A The Proper Plaintiff Rule 16 4 1 As a company has a personality separate from that of its members a member of the company cannot sue to enforce rights that belong to the company This is known as the proper plaintiff rule namely that the company is the proper plaintiff in respect of any rights that it has see Foss v Harbottle 1843 2 Hare 461 Ng Heng Liat v Kiyue Co Ltd 2003 4 SLR 218 Where a company has rights to be enforced or is being sued the usual body that is empowered to decide whether the company should either bring an action or defend the claim is the board of directors in whom the power of management is usually vested B Derivative Actions 16 4 2 Notwithstanding the proper plaintiff rule there may be occasions where a member of the company is entitled to bring an action on behalf of the company Where a member does this the action is referred to as a derivative action as the right is derived from the company The member is not suing to enforce any rights that belong to him personally In such actions the company is included as a nominal defendant so that any decision of the court will bind the company as well 1 The need for derivative actions to counter illegitimate abuse of power 16 4 3 A member may bring a derivative action at common law in respect of a wrong done to the company where the wrongdoer is the person who has control of the company and is in a position or has used such control to prevent a proper action from being brought against him The wrong done may have arisen because the person in control of the company has appropriated the company s assets for himself or it may consist of an abuse of the powers vested in the wrongdoers e g where the majority shareholders attempt to use their voting power in an illegitimate manner In such a situation the wrongdoers would use their control of the company to prevent a claim from being brought against themselves Accordingly a member will be allowed to institute a derivative action against the wrongdoers if the member is bringing the claim bona fide for the benefit of the company in circumstances where there is no other remedy available If the action is being brought for an ulterior motive or in bad faith the court is entitled to take that into account in determining if it is in the best interests of the company that the action should proceed see Sinwa SS HK Co Ltd v Morten Innhaug 2010 4 SLR 1 Statutory Derivative Action 1 Statute empowers certain individuals to institute derivative actions 16 4 4 In addition to the common law derivative action discussed above sections 216A and 216B of the Act make provision for a statutory derivative action This action is potentially available to any member of a company the Minister of Finance in certain cases or any other person who in the discretion of the court is a proper person to make an application under the section Such persons are potential complainants under sections 216A and 216B 2 Statutory derivative actions require the company to pay reasonable legal fees incurred by the complainant 16 4 5 Section 216A 2 of the Act provides that a complainant may apply to the court for leave to bring an action or arbitration in the name and on behalf of the company or intervene in an action or arbitration to which the company is a party for the purpose of prosecuting defending or discontinuing the action or arbitration on behalf of the company The court will only grant leave if the court is satisfied under section 216A 3 of the Act that the complainant has given 14 days notice to the directors of the company of the complainant s intention to apply for leave the complainant is acting in good faith and it appears to be prima facie in the interests of the company that the action or arbitration be brought prosecuted defended or discontinued One advantage of the statutory derivative action is that if the court authorizes the bringing of the action or arbitration it can order the company to pay reasonable legal fees and disbursements incurred by the complainant in connection with the action Under the common law derivative action the risk of legal costs falls on the person bringing the action 16 4 6 Section 216B 1 states that an application under section 216A shall not be stayed or dismissed by reason only that it is shown that an alleged breach of a right or duty owed to the company has been or may be approved by the members of the company However evidence of approval by the members may be taken into account by the court in making an order under section 216A Return to the top SECTION 5 SHAREHOLDER REMEDIES A The Oppression Remedy 1 Section 216 allows certain individuals to seek recourse if they are being oppressed 16 5 1 In addition to the ability to bring a common law or statutory derivative action to protect the legitimate interests of the company there are two other important remedies open to shareholders who feel that their interests are being prejudiced The first arises under section 216 of the Act Section 216 1 provides that any member or holder of a debenture of the company or the Minister of Finance in certain cases may apply to the court for an order that the affairs of the company are being conducted in a manner oppressive to one or more of the members or holders of debentures or in disregard of their interests as members shareholders or holders of debentures of the company A similar application may be made if an act of the company has been done or is threatened which unfairly discriminates against or is otherwise prejudicial to one or more of the members or holders of debentures Section 216 is commonly referred to as the oppression remedy 2 The Court will make orders as it thinks fit to remedy the matters complained of 16 5 2 Where such an application is made and the court after hearing the evidence is satisfied that the complaint is a valid one the court may with a view to bringing an end or remedying the matters complained of make such order as it thinks fit Such orders may include directing or prohibiting any act or canceling or varying any transaction or resolution regulating the conduct of the affairs of the company in future authorizing civil proceedings to be brought in the name of the company providing for the purchase of the shares and debentures of the company by other members or holders of debentures or the company itself or even winding up the company 3 Courts are only concerned that there should be standards of fair dealing in place not whether the company is well managed 16 5 3 Section 216 of the Act is intended to provide relief to members or holders of debentures where those in control of the company exhibit conduct that is equivalent to abuse or wrongdoing vis à vis such members and holders of debentures The courts are not concerned whether a company is well managed Business decisions are for the board to make and the courts will not generally second guess business decisions Nor are the courts concerned that a member or some members are frequently outvoted It is part and parcel of corporate administration that decisions are taken by the majority What the courts are concerned with is whether the affairs of the company are being run by those in control in such a way that there is a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder or debenture holder is entitled to expect see Re Kong Thai Sawmill Miri Sdn Bhd 1978 2 MLJ 227 This may arise where key shareholders are excluded from management where shareholders are deprived of information about the company where the dominant members are clearly preferring their own interests and where the patriarch of a family company behaves in an autocratic manner just to give some common examples 16 5 4 Similarly section 216 of the Act should not be invoked where the essence of the complaint is that a wrong has been done to the company In such instances the more appropriate route is for the plaintiff to apply for leave to commence a derivative action against the wrongdoers Having said this Singapore courts recognize that the distinction between a personal wrong to which section 216 applies and a corporate wrong to which the proper remedy should be a derivative action is not always clear Wrongful acts committed against a company may amount to a personal wrong against minority shareholders insofar as such acts can have an adverse effect on the company s assets and the value of the shares in the company As such it is suggested that one key question is whether the plaintiff seeks relief from misconduct in which case a derivative action should be commenced or the misconduct is evidence on which the plaintiff asserts that he has been oppressed as a member or debenture holder see Ng Kek Wee v Sim City Technology Ltd 2014 4 SLR 723 B Winding Up on the Just and Equitable Ground 16 5 5 Under section 254 1 i of the Act the court may wind up a company where it is just and equitable to do so This is also an important remedy for shareholders as it provides a means for disgruntled shareholders to use the winding up process to disengage from a company 16 5 6 The just and equitable ground for winding up has been used in a number of different circumstances For example where the main object of the company cannot be achieved or has been departed from aggrieved members of the company may petition for the company to be wound up Similarly a company may be wound up if it engages in acts that are entirely outside of what can fairly be regarded as having been within the general contemplation and understanding of the members when they became members of the company Another situation where the just and equitable ground has been used is where the company s business has been carried on in a fraudulent manner In addition where the company is a quasi partnership in that the way the business is run resembles how a partnership is managed despite the use of the corporate form and further trust and confidence among the members has been irretrievably damaged the court may order the winding up of the company since the members can no longer work with one another 16 5 7 Section 254 2A states that instead of making a winding up order the Court has the discretion if it is of the opinion that it is just and equitable to do so to make an order for the shares of one or more members to be purchased by the company or other members on terms to the satisfaction of the Court Return to the top SECTION 6 SHARES 1 Definition of a share 16 6 1 A share is the interest of a shareholder in the company measured by a sum of money for the purpose of liability in the first place and of interest in the second but also consisting of a series of mutual covenants entered into by all the shareholders between themselves in accordance with section 39 1 of the Act see Borland s Trustee v Steel Brothers Co Ltd 1901 1 Ch 279 2 Rights and liabilities of shareholders 16 6 2 As mentioned earlier the liability of a member shareholder is to contribute to the company only that amount unpaid on the shares taken up by the member shareholder This is what is meant by limited liability A shareholder is entitled to participate in the life of the company on the terms set out in the company s constitution and to the extent allowed by the Act These will often determine the exact rights of the shareholder Some of the usual rights of shareholders include being entitled to a pro rata share of any dividends that are declared and paid having a pro rata share of any assets remaining upon a winding up after the creditors of the company have been paid and having the power to appoint and remove the directors of the company 3 Types of shares 16 6 3 Generally speaking there are two broad classes of shares ordinary shares and preference shares Preference shares as the name suggests are shares that confer some preference on the holders of those shares That preference may be in the form of dividends or return of capital For example the terms of a preferential share may provide that the holders of those shares are entitled to a particular rate of dividend before any dividends may be paid to holders of ordinary shares A Maintenance of Capital 1 Capital must be maintained and not returned to company members 16 6 4 As a general rule though this is now subject to many exceptions a company under Singapore law is required to maintain its capital in the sense that it cannot return capital to its members This general rule is intended to protect creditors Creditors of a company are said to give credit to the company on the faith that the capital of the company will be applied only for the purposes of the business and therefore have a right to insist that such capital be kept and not returned to the shareholders see Re Exchange Banking Co 1882 21 Ch D 519 2 Rules that the company must adhere to 16 6 5 Arising from this general principle the following 5 propositions may be made a company may not purchase its own shares or those of its parent company see section 76 1A a of the Act a company may not lend money on the security of its own shares or those of its parent company see section 76 1A b of the Act a public company cannot give financial assistance to a third party to purchase the company s shares or those of its parent company see section 76 1 of the Act a company cannot pay dividends except out of available profits section 403 of the Act a company cannot reduce its capital or otherwise return assets to its members except to the extent the Act permits this see section 78A of the Act 3 Only profits can be returned to company members 16 6 6 This is not to say that members of a company cannot obtain any return on their investment Indeed if a company makes profits in a particular year the company may pay dividends to its shareholders out of the profits made The rules relating to capital maintenance also do not mean that members of the company must contribute to the company when trading losses have occurred which have depleted the company s capital A member s liability to the company is limited only to the amount he has agreed to contribute to the company when the shares are issued to him The rules relating to capital maintenance simply mean that absent profits a company must not take any steps that in effect return capital to its shareholders 4 A company may purchase its own shares under certain circumstances 16 6 7 One of the exceptions now permitted by the Act is that a company may in certain circumstances purchase or otherwise acquire its own shares if it is expressly permitted to do so by its constitution see section 76B 1 of the Act Generally it will be necessary to convene a general meeting of shareholders to pass a resolution in some instances a special resolution allowing the company to buy back its shares Pursuant to section 76B 3 of the Act the total amount of shares that can be bought during the relevant period shall not exceed 20 or such other percentage as the Minister may prescribe of the total number of shares of the type of shares being purchased This limitation does not apply to redeemable preference shares see section 76B 3D of the Act The relevant period is defined in section 76B 4 as the period commencing from the shareholders resolution authorizing the purchase and expiring on the date when the company next has to hold its Annual General Meeting or the date of the next Annual General Meeting whichever is the earlier Payment for share buy backs may be made out of the company s capital or profits so long as the company is solvent see section 76F 1 of the Act This ensures that creditors are not prejudiced In addition directors and the Chief Executive Officer of a company should not authorize any buy backs if they know that the company is not solvent see section 76F 3 of the Act Where a company purchases its ordinary shares it may keep them as Treasury shares provided the amount held by the company does not exceed 10 of the class of shares in question see sections 76H and 76I of the Act B Reduction of Capital 16 6 8 Notwithstanding the capital maintenance rules the Act permits a reduction of capital in certain circumstances Sections 78A 1 and 3 of the Act provide that a company may unless its constitution excludes or restricts it reduce its share capital in any way and in particular do all or any of the following extinguish or reduce the liability on any of its shares in respect of share capital not paid up cancel any paid up capital which is lost or unrepresented by available assets pay off any paid up share capital which is in excess of the needs of the company 16 6 9 Any reduction of capital must be authorized by a special resolution and the company must in general meet solvency requirements see sections 78B and 78C of the Act Creditors may pursuant to section 78D of the Act object to the reduction and if there are any such objections the court will cancel the reduction if the court is satisfied that the creditors claims have not been secured or they are insufficient safeguards for such claims and it is not the case that such security or safeguards are unnecessary see section 78F of the Act If there are no objections from creditors the share reduction will take effect upon certain formalities being complied with and no order of court is required see section 78E 1 and 2 of the Act 16 6 10 A reduction of capital is also possible by way of special resolution subject to court approval In such cases the capital reduction does not take effect until it receives approval by an order of court see section 78G of the Act Return to the top SECTION 7 DEBENTURES AND CHARGES A Definition of a Debenture and its Terms 16 7 1 A company will frequently have to borrow money for its business operations Often when it does so a document known as a debenture will be created Simply put a debenture is a document that either creates a debt or acknowledges it see Levy v Abercorris Slate and Slab Co 1887 37 Ch D 260 16 7 2 When a company borrows money it will often give security to its creditor for the loan Where a debtor gives security to a creditor the creditor obtains a proprietary interest in the property of the debtor over which security has been granted This proprietary interest in those assets allows the creditor to have priority to those assets ahead of ordinary creditors of the debtor should the debtor not be able to pay its debts One common form of security that companies provide to its creditors is a charge over its assets The debenture that creates or acknowledges the debt will frequently also contain the terms of the charge that is created B Definition of a Charge and its Terms 16 7 3 A charge is a non possessory form of security i e the validity and efficacy of the security is not dependent on the secured creditor having possession of the security given For example a company that needs to use the machinery in its factory can still grant security by way of a charge over such machinery to the bank that has provided the financing to purchase the machinery The bank need not take possession of the machinery for the charge to be effective Being non possessory in nature the charge can also be taken over intangible assets such as shares and book debts 16 7 4 A charge arises where in a transaction for value the company and its creditor show an intention that property existing or future will be made available as security for the payment of a debt and that the creditor shall have a present right to have such property made available as security even though the present legal right can only be enforced at a future time usually when there is a default see National Provincial and Union Bank of England v Charnley 1924 1 KB 431 at pp 449 450 1 Fixed and floating charges 16 7 5 Company charges may be fixed or floating A fixed charge is one that attaches to specified assets that are presently owned by the chargor or that may be acquired in the future e g a company may grant a fixed charge over all the machinery presently in its factory and any machinery subsequently acquired for the factory As the fixed charge immediately attaches to the specified assets either at the creation of the charge or upon later acquisition the company cannot dispose of the charged assets to a third party If the company does so this is a breach of the terms of the charge and the third party will not obtain good title to the assets unless the third party has provided value for the purchase and did not know of the existence of the fixed charge 16 7 6 A floating charge on the other hand is a security interest that does not at its inception specifically attach to any assets of the chargor company The charge is said to float over the assets in question until some act occurs which causes the charge to attach to the assets From that time the charge effectively becomes a fixed charge The acts which cause the floating charge to crystallize i e to attach to the assets may be contractually provided for in the debenture Thus the parties may provide that in certain circumstances the floating charge will automatically crystallize without the parties having to do anything else or that in certain circumstances the chargee may give notice of crystallization to the company thereby causing the charge to crystallize Floating charges may also crystallize in other ways e g if the company goes into liquidation or if it ceases to be a going concern 16 7 7 The advantage of floating charges is that they can be taken over assets which as a class are constantly changing For example where the assets of a company largely comprise perishable goods or raw materials it is impractical to obtain a fixed charge because the goods have to be sold within a relatively short period or are intended to be used in the manufacturing process If a fixed charge over such assets is created it will be extremely inconvenient for the company to have to obtain the permission of the chargee each time the company wishes to sell its goods or consume its raw materials A floating charge will enable the chargor company to sell or otherwise use such assets and it is only when the charge crystallizes that the power to deal with the assets comes to an end On the other hand when the assets are not intended to be dealt with in the ordinary course of business such as in the case of machinery or a parent company s shares in its subsidiary a fixed charge would be more appropriate 2 Registration of charges 16 7 8 Under section 131 of the Act certain charges created by companies have to be registered with the public authority responsible for corporations Failure to do so will render the charge void against the liquidator or other secured creditors of the company As a chargee will often wish to enforce a charge when the company is insolvent this provides an incentive to chargees to ensure that any charge created in their favour is registered within the 30 day period after the creation of the charge as required by section 131 1 of the Act Where a charge has not been registered within the 30 day period it may be possible to obtain an extension of time under section 137 of the Act e g if the omission to register was accidental or does not prejudice the position of creditors or members of the company 16 7 9 Under section 131 3 g of the Act all floating charges must be registered As for fixed charges only those that fall within those charges described in section 131 3 of the Act require registration Return to the top SECTION 8 COMPANIES IN DISTRESS A Schemes of Arrangement 16 8 1 There may be occasions where it is desirable to rearrange the rights of the company its creditors and shareholders particularly where the company is in a financially perilous position On such occasions it may be difficult to obtain the unanimous consent of all creditors and shareholders Accordingly section 210 of the Act provides for schemes of arrangement to be binding on the company its creditors and shareholders as the case may be where the requisite majority is obtained subject to approval by the court Schemes of arrangement are most often used where it is desirable to compromise creditors claims against an insolvent company 1 Application for a scheme of arrangement and the requisite documents 16 8 2 For a scheme of arrangement to take effect it will be necessary first of all to make an application to court under section 210 1 of the Act for an order summoning one or more meetings of the creditors members of the company or holders of units of shares of the company If the court is minded to make such an order a proposal must then be tabled before the relevant meetings and approved by the requisite majority unless the court orders otherwise of the creditors or class of creditors members or class of members or the holders of units of shares or class of holders of units of shares The default majority required is such numbers as amounts to three fourths in value of the class in question present and voting either in person or by proxy see section 210 3AB of the Act To allow the relevant parties to exercise their votes in an informed manner section 211 1 of the Act states that every notice summoning the meeting must contain a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors and the effect thereon of the compromise or arrangement in so far as it is different from the effect on the like interests of other persons If this is not done and the creditors and members do not have sufficient information on which to make an informed decision the court may later decline to approve the scheme even though it may have been approved by the requisite majority see Re Dorman Long Co 1934 Ch 635 Wah Yuen Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd 2003 3 SLR 629 2 The Court may make such alterations as it thinks are just 16 8 3 Any scheme will be binding only if the court approves it and such approval may be subject to such alterations or conditions as the court thinks just see section 210 4 The requirement of the court s approval serves as an additional crucial check to ensure the integrity of voting outcome s at the scheme creditors meeting s and the objective fairness of the proposed scheme see The Royal Bank of Scotland NV v TT International Ltd 2012 2 SLR 213 Re Dorman Long Co 1934 Ch 635 B Judicial Management 16 8 4 Where a company is in financial difficulty but there is a reasonable prospect of rehabilitating the company or of preserving all or part of the business as a going concern or that otherwise the interests of creditors would be better served than by resorting to a winding up the company or its creditors may apply to court for an order that the company be placed under the judicial management of a person known as a judicial manager see section 227A of the Act 1 The order must satisfy several conditions 16 8 5 Upon such an application by the company its directors or creditors section 227B 1 of the Act provides that the court may make a judicial management order if the court is satisfied that the company is or will be unable to pay its debts Additionally the court must be satisfied that the order if made would be likely to achieve one or more of the following purposes namely the survival of the company or the whole or part of its undertaking as a going concern the approval under section 210 of the Act of a compromise or arrangement between the company and any such persons as are mentioned in that section the more advantageous realization of the company s assets than would occur in a winding up 2 Motives for the application must be honourable and without ill intent 16 8 6 The court must be vigilant to ensure that the judicial management procedure is not directly or indirectly used by the directors and shareholders of the company to the detriment of creditors The motives of the application should therefore be clearly honourable The court must also show great heed to the wishes and views of creditors since the assets of an insolvent company in effect belong to creditors see Re Genesis Technologies International Pte Ltd 1994 3 SLR 390 at p 392 The court is obliged to dismiss an application for a judicial management order however if the making of such an order is opposed by a debenture holder of debentures secured by a floating charge see sections 227B 4 and 5 of the Act 3 Role of the judicial manager 16 8 7 If the court makes an order for judicial management the business and property of the company will be managed by a judicial manager see section 227B 2 As the role of the judicial manager is to rehabilitate the company or to preserve part or all of its business as a going concern section 227G 1 of the Act provides that on the making of a judicial management order the judicial manager shall take into his custody or control all the property to which the company is or appears to be entitled Section 227G 2 goes on to state that during the period for which the order is in force all the powers and duties of the directors shall be exercised and performed by the judicial manager and not by the directors The judicial manager may do all such things as are necessary for the management of the affairs of the company and shall do all such things as the court may sanction see section 227G 3 of the Act 4 Benefits of judicial management vis à vis premature liquidation 16 8 8 The benefit of judicial management is that it allows a company that is not hopelessly insolvent some breathing space to reorganize its affairs If this can be done successfully this will benefit all creditors and members of the company The alternative may be a forced and premature liquidation that is not in the interests of most creditors and members Accordingly when a judicial management order is made section 227D 1 provides that

    Original URL path: http://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-16?font-size=smaller (2016-01-30)
    Open archived version from archive

  • Ch.16 Singapore Company Law
    be taken into account This is because creditors of an insolvent company are entitled to appoint a liquidator to get in the assets of the company to which the creditors have a prior claim before the members of the company Accordingly in such circumstances directors must ensure that the affairs of the company are properly administered and that its property is not dissipated or exploited to the prejudice of the creditors see Winkworth v Edward Baron Development Co Ltd 1987 1 All ER 114 D Duty at Common Law to Avoid Conflicts of Interest 16 3 7 As a fiduciary a duty of loyalty is imposed on a director vis à vis the company As a result a director is obliged not to place himself in a position where his duty to the company may conflict with his own interests see Chew Kong Huat v Ricwil Singapore Pte Ltd 2000 1 SLR 385 Kumagai Zenecon Construction Pte Ltd v Low Hua Kin 2000 2 SLR 501 One particular application of this duty is that a director is not permitted without the fully informed consent of the company to make a profit in connection with the director s position Thus if a director comes across a business opportunity while discharging his role as a director he cannot personally take advantage of such an opportunity unless the company has with full knowledge of the facts permitted him to do so This permission may be given by the rest of the board assuming the other board members giving approval are independent and do not stand in any way to benefit personally or by the members in general meeting see Dayco Products Singapore Pte Ltd v Ong Cheng Aik 2004 4 SLR R 318 E Duty at Common Law to Act for Proper Purposes 16 3 8 The management of a company is generally vested in the board of directors and the board will often have other more specific powers such as the power to issue shares under section 161 of the Act provided that the directors have obtained a specific or general mandate to do so Such powers must be exercised for proper purposes Even if directors have acted in good faith in what they believe is in the best interests of the company they may have exercised certain powers in an improper manner For example it has been held that where the power to issue shares was used to facilitate a takeover bid for a company that was not a proper exercise of such a power even though the directors felt that they were acting in the company s best interests see Howard Smith Ltd v Ampol Petroleum Ltd 1974 AC 821 F Effect of Breach of Fiduciary Duties 16 3 9 If a director places his own interests above those of the company the director will be liable for any loss caused to the company If the director has profited from his position without the informed consent of the company the director may have to account for the profits to the company Where the director has contracted with the company e g the director has sold an asset to the company the company may be able to avoid the contract if the contract with the company was entered into in breach of the director s fiduciary obligations to the company Where a third party has entered into a contract with the company knowing that the directors of the company have acted improperly the company may also be able to avoid the contract vis à vis the third party Return to the top SECTION 4 ENFORCEMENT OF CORPORATE RIGHTS A The Proper Plaintiff Rule 16 4 1 As a company has a personality separate from that of its members a member of the company cannot sue to enforce rights that belong to the company This is known as the proper plaintiff rule namely that the company is the proper plaintiff in respect of any rights that it has see Foss v Harbottle 1843 2 Hare 461 Ng Heng Liat v Kiyue Co Ltd 2003 4 SLR 218 Where a company has rights to be enforced or is being sued the usual body that is empowered to decide whether the company should either bring an action or defend the claim is the board of directors in whom the power of management is usually vested B Derivative Actions 16 4 2 Notwithstanding the proper plaintiff rule there may be occasions where a member of the company is entitled to bring an action on behalf of the company Where a member does this the action is referred to as a derivative action as the right is derived from the company The member is not suing to enforce any rights that belong to him personally In such actions the company is included as a nominal defendant so that any decision of the court will bind the company as well 1 The need for derivative actions to counter illegitimate abuse of power 16 4 3 A member may bring a derivative action at common law in respect of a wrong done to the company where the wrongdoer is the person who has control of the company and is in a position or has used such control to prevent a proper action from being brought against him The wrong done may have arisen because the person in control of the company has appropriated the company s assets for himself or it may consist of an abuse of the powers vested in the wrongdoers e g where the majority shareholders attempt to use their voting power in an illegitimate manner In such a situation the wrongdoers would use their control of the company to prevent a claim from being brought against themselves Accordingly a member will be allowed to institute a derivative action against the wrongdoers if the member is bringing the claim bona fide for the benefit of the company in circumstances where there is no other remedy available If the action is being brought for an ulterior motive or in bad faith the court is entitled to take that into account in determining if it is in the best interests of the company that the action should proceed see Sinwa SS HK Co Ltd v Morten Innhaug 2010 4 SLR 1 Statutory Derivative Action 1 Statute empowers certain individuals to institute derivative actions 16 4 4 In addition to the common law derivative action discussed above sections 216A and 216B of the Act make provision for a statutory derivative action This action is potentially available to any member of a company the Minister of Finance in certain cases or any other person who in the discretion of the court is a proper person to make an application under the section Such persons are potential complainants under sections 216A and 216B 2 Statutory derivative actions require the company to pay reasonable legal fees incurred by the complainant 16 4 5 Section 216A 2 of the Act provides that a complainant may apply to the court for leave to bring an action or arbitration in the name and on behalf of the company or intervene in an action or arbitration to which the company is a party for the purpose of prosecuting defending or discontinuing the action or arbitration on behalf of the company The court will only grant leave if the court is satisfied under section 216A 3 of the Act that the complainant has given 14 days notice to the directors of the company of the complainant s intention to apply for leave the complainant is acting in good faith and it appears to be prima facie in the interests of the company that the action or arbitration be brought prosecuted defended or discontinued One advantage of the statutory derivative action is that if the court authorizes the bringing of the action or arbitration it can order the company to pay reasonable legal fees and disbursements incurred by the complainant in connection with the action Under the common law derivative action the risk of legal costs falls on the person bringing the action 16 4 6 Section 216B 1 states that an application under section 216A shall not be stayed or dismissed by reason only that it is shown that an alleged breach of a right or duty owed to the company has been or may be approved by the members of the company However evidence of approval by the members may be taken into account by the court in making an order under section 216A Return to the top SECTION 5 SHAREHOLDER REMEDIES A The Oppression Remedy 1 Section 216 allows certain individuals to seek recourse if they are being oppressed 16 5 1 In addition to the ability to bring a common law or statutory derivative action to protect the legitimate interests of the company there are two other important remedies open to shareholders who feel that their interests are being prejudiced The first arises under section 216 of the Act Section 216 1 provides that any member or holder of a debenture of the company or the Minister of Finance in certain cases may apply to the court for an order that the affairs of the company are being conducted in a manner oppressive to one or more of the members or holders of debentures or in disregard of their interests as members shareholders or holders of debentures of the company A similar application may be made if an act of the company has been done or is threatened which unfairly discriminates against or is otherwise prejudicial to one or more of the members or holders of debentures Section 216 is commonly referred to as the oppression remedy 2 The Court will make orders as it thinks fit to remedy the matters complained of 16 5 2 Where such an application is made and the court after hearing the evidence is satisfied that the complaint is a valid one the court may with a view to bringing an end or remedying the matters complained of make such order as it thinks fit Such orders may include directing or prohibiting any act or canceling or varying any transaction or resolution regulating the conduct of the affairs of the company in future authorizing civil proceedings to be brought in the name of the company providing for the purchase of the shares and debentures of the company by other members or holders of debentures or the company itself or even winding up the company 3 Courts are only concerned that there should be standards of fair dealing in place not whether the company is well managed 16 5 3 Section 216 of the Act is intended to provide relief to members or holders of debentures where those in control of the company exhibit conduct that is equivalent to abuse or wrongdoing vis à vis such members and holders of debentures The courts are not concerned whether a company is well managed Business decisions are for the board to make and the courts will not generally second guess business decisions Nor are the courts concerned that a member or some members are frequently outvoted It is part and parcel of corporate administration that decisions are taken by the majority What the courts are concerned with is whether the affairs of the company are being run by those in control in such a way that there is a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder or debenture holder is entitled to expect see Re Kong Thai Sawmill Miri Sdn Bhd 1978 2 MLJ 227 This may arise where key shareholders are excluded from management where shareholders are deprived of information about the company where the dominant members are clearly preferring their own interests and where the patriarch of a family company behaves in an autocratic manner just to give some common examples 16 5 4 Similarly section 216 of the Act should not be invoked where the essence of the complaint is that a wrong has been done to the company In such instances the more appropriate route is for the plaintiff to apply for leave to commence a derivative action against the wrongdoers Having said this Singapore courts recognize that the distinction between a personal wrong to which section 216 applies and a corporate wrong to which the proper remedy should be a derivative action is not always clear Wrongful acts committed against a company may amount to a personal wrong against minority shareholders insofar as such acts can have an adverse effect on the company s assets and the value of the shares in the company As such it is suggested that one key question is whether the plaintiff seeks relief from misconduct in which case a derivative action should be commenced or the misconduct is evidence on which the plaintiff asserts that he has been oppressed as a member or debenture holder see Ng Kek Wee v Sim City Technology Ltd 2014 4 SLR 723 B Winding Up on the Just and Equitable Ground 16 5 5 Under section 254 1 i of the Act the court may wind up a company where it is just and equitable to do so This is also an important remedy for shareholders as it provides a means for disgruntled shareholders to use the winding up process to disengage from a company 16 5 6 The just and equitable ground for winding up has been used in a number of different circumstances For example where the main object of the company cannot be achieved or has been departed from aggrieved members of the company may petition for the company to be wound up Similarly a company may be wound up if it engages in acts that are entirely outside of what can fairly be regarded as having been within the general contemplation and understanding of the members when they became members of the company Another situation where the just and equitable ground has been used is where the company s business has been carried on in a fraudulent manner In addition where the company is a quasi partnership in that the way the business is run resembles how a partnership is managed despite the use of the corporate form and further trust and confidence among the members has been irretrievably damaged the court may order the winding up of the company since the members can no longer work with one another 16 5 7 Section 254 2A states that instead of making a winding up order the Court has the discretion if it is of the opinion that it is just and equitable to do so to make an order for the shares of one or more members to be purchased by the company or other members on terms to the satisfaction of the Court Return to the top SECTION 6 SHARES 1 Definition of a share 16 6 1 A share is the interest of a shareholder in the company measured by a sum of money for the purpose of liability in the first place and of interest in the second but also consisting of a series of mutual covenants entered into by all the shareholders between themselves in accordance with section 39 1 of the Act see Borland s Trustee v Steel Brothers Co Ltd 1901 1 Ch 279 2 Rights and liabilities of shareholders 16 6 2 As mentioned earlier the liability of a member shareholder is to contribute to the company only that amount unpaid on the shares taken up by the member shareholder This is what is meant by limited liability A shareholder is entitled to participate in the life of the company on the terms set out in the company s constitution and to the extent allowed by the Act These will often determine the exact rights of the shareholder Some of the usual rights of shareholders include being entitled to a pro rata share of any dividends that are declared and paid having a pro rata share of any assets remaining upon a winding up after the creditors of the company have been paid and having the power to appoint and remove the directors of the company 3 Types of shares 16 6 3 Generally speaking there are two broad classes of shares ordinary shares and preference shares Preference shares as the name suggests are shares that confer some preference on the holders of those shares That preference may be in the form of dividends or return of capital For example the terms of a preferential share may provide that the holders of those shares are entitled to a particular rate of dividend before any dividends may be paid to holders of ordinary shares A Maintenance of Capital 1 Capital must be maintained and not returned to company members 16 6 4 As a general rule though this is now subject to many exceptions a company under Singapore law is required to maintain its capital in the sense that it cannot return capital to its members This general rule is intended to protect creditors Creditors of a company are said to give credit to the company on the faith that the capital of the company will be applied only for the purposes of the business and therefore have a right to insist that such capital be kept and not returned to the shareholders see Re Exchange Banking Co 1882 21 Ch D 519 2 Rules that the company must adhere to 16 6 5 Arising from this general principle the following 5 propositions may be made a company may not purchase its own shares or those of its parent company see section 76 1A a of the Act a company may not lend money on the security of its own shares or those of its parent company see section 76 1A b of the Act a public company cannot give financial assistance to a third party to purchase the company s shares or those of its parent company see section 76 1 of the Act a company cannot pay dividends except out of available profits section 403 of the Act a company cannot reduce its capital or otherwise return assets to its members except to the extent the Act permits this see section 78A of the Act 3 Only profits can be returned to company members 16 6 6 This is not to say that members of a company cannot obtain any return on their investment Indeed if a company makes profits in a particular year the company may pay dividends to its shareholders out of the profits made The rules relating to capital maintenance also do not mean that members of the company must contribute to the company when trading losses have occurred which have depleted the company s capital A member s liability to the company is limited only to the amount he has agreed to contribute to the company when the shares are issued to him The rules relating to capital maintenance simply mean that absent profits a company must not take any steps that in effect return capital to its shareholders 4 A company may purchase its own shares under certain circumstances 16 6 7 One of the exceptions now permitted by the Act is that a company may in certain circumstances purchase or otherwise acquire its own shares if it is expressly permitted to do so by its constitution see section 76B 1 of the Act Generally it will be necessary to convene a general meeting of shareholders to pass a resolution in some instances a special resolution allowing the company to buy back its shares Pursuant to section 76B 3 of the Act the total amount of shares that can be bought during the relevant period shall not exceed 20 or such other percentage as the Minister may prescribe of the total number of shares of the type of shares being purchased This limitation does not apply to redeemable preference shares see section 76B 3D of the Act The relevant period is defined in section 76B 4 as the period commencing from the shareholders resolution authorizing the purchase and expiring on the date when the company next has to hold its Annual General Meeting or the date of the next Annual General Meeting whichever is the earlier Payment for share buy backs may be made out of the company s capital or profits so long as the company is solvent see section 76F 1 of the Act This ensures that creditors are not prejudiced In addition directors and the Chief Executive Officer of a company should not authorize any buy backs if they know that the company is not solvent see section 76F 3 of the Act Where a company purchases its ordinary shares it may keep them as Treasury shares provided the amount held by the company does not exceed 10 of the class of shares in question see sections 76H and 76I of the Act B Reduction of Capital 16 6 8 Notwithstanding the capital maintenance rules the Act permits a reduction of capital in certain circumstances Sections 78A 1 and 3 of the Act provide that a company may unless its constitution excludes or restricts it reduce its share capital in any way and in particular do all or any of the following extinguish or reduce the liability on any of its shares in respect of share capital not paid up cancel any paid up capital which is lost or unrepresented by available assets pay off any paid up share capital which is in excess of the needs of the company 16 6 9 Any reduction of capital must be authorized by a special resolution and the company must in general meet solvency requirements see sections 78B and 78C of the Act Creditors may pursuant to section 78D of the Act object to the reduction and if there are any such objections the court will cancel the reduction if the court is satisfied that the creditors claims have not been secured or they are insufficient safeguards for such claims and it is not the case that such security or safeguards are unnecessary see section 78F of the Act If there are no objections from creditors the share reduction will take effect upon certain formalities being complied with and no order of court is required see section 78E 1 and 2 of the Act 16 6 10 A reduction of capital is also possible by way of special resolution subject to court approval In such cases the capital reduction does not take effect until it receives approval by an order of court see section 78G of the Act Return to the top SECTION 7 DEBENTURES AND CHARGES A Definition of a Debenture and its Terms 16 7 1 A company will frequently have to borrow money for its business operations Often when it does so a document known as a debenture will be created Simply put a debenture is a document that either creates a debt or acknowledges it see Levy v Abercorris Slate and Slab Co 1887 37 Ch D 260 16 7 2 When a company borrows money it will often give security to its creditor for the loan Where a debtor gives security to a creditor the creditor obtains a proprietary interest in the property of the debtor over which security has been granted This proprietary interest in those assets allows the creditor to have priority to those assets ahead of ordinary creditors of the debtor should the debtor not be able to pay its debts One common form of security that companies provide to its creditors is a charge over its assets The debenture that creates or acknowledges the debt will frequently also contain the terms of the charge that is created B Definition of a Charge and its Terms 16 7 3 A charge is a non possessory form of security i e the validity and efficacy of the security is not dependent on the secured creditor having possession of the security given For example a company that needs to use the machinery in its factory can still grant security by way of a charge over such machinery to the bank that has provided the financing to purchase the machinery The bank need not take possession of the machinery for the charge to be effective Being non possessory in nature the charge can also be taken over intangible assets such as shares and book debts 16 7 4 A charge arises where in a transaction for value the company and its creditor show an intention that property existing or future will be made available as security for the payment of a debt and that the creditor shall have a present right to have such property made available as security even though the present legal right can only be enforced at a future time usually when there is a default see National Provincial and Union Bank of England v Charnley 1924 1 KB 431 at pp 449 450 1 Fixed and floating charges 16 7 5 Company charges may be fixed or floating A fixed charge is one that attaches to specified assets that are presently owned by the chargor or that may be acquired in the future e g a company may grant a fixed charge over all the machinery presently in its factory and any machinery subsequently acquired for the factory As the fixed charge immediately attaches to the specified assets either at the creation of the charge or upon later acquisition the company cannot dispose of the charged assets to a third party If the company does so this is a breach of the terms of the charge and the third party will not obtain good title to the assets unless the third party has provided value for the purchase and did not know of the existence of the fixed charge 16 7 6 A floating charge on the other hand is a security interest that does not at its inception specifically attach to any assets of the chargor company The charge is said to float over the assets in question until some act occurs which causes the charge to attach to the assets From that time the charge effectively becomes a fixed charge The acts which cause the floating charge to crystallize i e to attach to the assets may be contractually provided for in the debenture Thus the parties may provide that in certain circumstances the floating charge will automatically crystallize without the parties having to do anything else or that in certain circumstances the chargee may give notice of crystallization to the company thereby causing the charge to crystallize Floating charges may also crystallize in other ways e g if the company goes into liquidation or if it ceases to be a going concern 16 7 7 The advantage of floating charges is that they can be taken over assets which as a class are constantly changing For example where the assets of a company largely comprise perishable goods or raw materials it is impractical to obtain a fixed charge because the goods have to be sold within a relatively short period or are intended to be used in the manufacturing process If a fixed charge over such assets is created it will be extremely inconvenient for the company to have to obtain the permission of the chargee each time the company wishes to sell its goods or consume its raw materials A floating charge will enable the chargor company to sell or otherwise use such assets and it is only when the charge crystallizes that the power to deal with the assets comes to an end On the other hand when the assets are not intended to be dealt with in the ordinary course of business such as in the case of machinery or a parent company s shares in its subsidiary a fixed charge would be more appropriate 2 Registration of charges 16 7 8 Under section 131 of the Act certain charges created by companies have to be registered with the public authority responsible for corporations Failure to do so will render the charge void against the liquidator or other secured creditors of the company As a chargee will often wish to enforce a charge when the company is insolvent this provides an incentive to chargees to ensure that any charge created in their favour is registered within the 30 day period after the creation of the charge as required by section 131 1 of the Act Where a charge has not been registered within the 30 day period it may be possible to obtain an extension of time under section 137 of the Act e g if the omission to register was accidental or does not prejudice the position of creditors or members of the company 16 7 9 Under section 131 3 g of the Act all floating charges must be registered As for fixed charges only those that fall within those charges described in section 131 3 of the Act require registration Return to the top SECTION 8 COMPANIES IN DISTRESS A Schemes of Arrangement 16 8 1 There may be occasions where it is desirable to rearrange the rights of the company its creditors and shareholders particularly where the company is in a financially perilous position On such occasions it may be difficult to obtain the unanimous consent of all creditors and shareholders Accordingly section 210 of the Act provides for schemes of arrangement to be binding on the company its creditors and shareholders as the case may be where the requisite majority is obtained subject to approval by the court Schemes of arrangement are most often used where it is desirable to compromise creditors claims against an insolvent company 1 Application for a scheme of arrangement and the requisite documents 16 8 2 For a scheme of arrangement to take effect it will be necessary first of all to make an application to court under section 210 1 of the Act for an order summoning one or more meetings of the creditors members of the company or holders of units of shares of the company If the court is minded to make such an order a proposal must then be tabled before the relevant meetings and approved by the requisite majority unless the court orders otherwise of the creditors or class of creditors members or class of members or the holders of units of shares or class of holders of units of shares The default majority required is such numbers as amounts to three fourths in value of the class in question present and voting either in person or by proxy see section 210 3AB of the Act To allow the relevant parties to exercise their votes in an informed manner section 211 1 of the Act states that every notice summoning the meeting must contain a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors and the effect thereon of the compromise or arrangement in so far as it is different from the effect on the like interests of other persons If this is not done and the creditors and members do not have sufficient information on which to make an informed decision the court may later decline to approve the scheme even though it may have been approved by the requisite majority see Re Dorman Long Co 1934 Ch 635 Wah Yuen Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd 2003 3 SLR 629 2 The Court may make such alterations as it thinks are just 16 8 3 Any scheme will be binding only if the court approves it and such approval may be subject to such alterations or conditions as the court thinks just see section 210 4 The requirement of the court s approval serves as an additional crucial check to ensure the integrity of voting outcome s at the scheme creditors meeting s and the objective fairness of the proposed scheme see The Royal Bank of Scotland NV v TT International Ltd 2012 2 SLR 213 Re Dorman Long Co 1934 Ch 635 B Judicial Management 16 8 4 Where a company is in financial difficulty but there is a reasonable prospect of rehabilitating the company or of preserving all or part of the business as a going concern or that otherwise the interests of creditors would be better served than by resorting to a winding up the company or its creditors may apply to court for an order that the company be placed under the judicial management of a person known as a judicial manager see section 227A of the Act 1 The order must satisfy several conditions 16 8 5 Upon such an application by the company its directors or creditors section 227B 1 of the Act provides that the court may make a judicial management order if the court is satisfied that the company is or will be unable to pay its debts Additionally the court must be satisfied that the order if made would be likely to achieve one or more of the following purposes namely the survival of the company or the whole or part of its undertaking as a going concern the approval under section 210 of the Act of a compromise or arrangement between the company and any such persons as are mentioned in that section the more advantageous realization of the company s assets than would occur in a winding up 2 Motives for the application must be honourable and without ill intent 16 8 6 The court must be vigilant to ensure that the judicial management procedure is not directly or indirectly used by the directors and shareholders of the company to the detriment of creditors The motives of the application should therefore be clearly honourable The court must also show great heed to the wishes and views of creditors since the assets of an insolvent company in effect belong to creditors see Re Genesis Technologies International Pte Ltd 1994 3 SLR 390 at p 392 The court is obliged to dismiss an application for a judicial management order however if the making of such an order is opposed by a debenture holder of debentures secured by a floating charge see sections 227B 4 and 5 of the Act 3 Role of the judicial manager 16 8 7 If the court makes an order for judicial management the business and property of the company will be managed by a judicial manager see section 227B 2 As the role of the judicial manager is to rehabilitate the company or to preserve part or all of its business as a going concern section 227G 1 of the Act provides that on the making of a judicial management order the judicial manager shall take into his custody or control all the property to which the company is or appears to be entitled Section 227G 2 goes on to state that during the period for which the order is in force all the powers and duties of the directors shall be exercised and performed by the judicial manager and not by the directors The judicial manager may do all such things as are necessary for the management of the affairs of the company and shall do all such things as the court may sanction see section 227G 3 of the Act 4 Benefits of judicial management vis à vis premature liquidation 16 8 8 The benefit of judicial management is that it allows a company that is not hopelessly insolvent some breathing space to reorganize its affairs If this can be done successfully this will benefit all creditors and members of the company The alternative may be a forced and premature liquidation that is not in the interests of most creditors and

    Original URL path: http://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-16?tmpl=component&print=1&page= (2016-01-30)
    Open archived version from archive



  •