SICC's new regulations simplify cross-border corporate insolvency

SICC's new regulations simplify cross-border corporate insolvency

After a regulation change on October 1, Singapore's International Commercial Court (SICC) will be able to hear international debt restructuring and bankruptcy cases, further solidifying the island nation's position as a global centre for such cases.

Order 21 of the Singapore International Commercial Court Rules 2021 (SICC Rules) has been revised, and a new Order 23A has been added, as a result of the amendments made by the Singapore International Commercial Court (Amendment No. 2) Rules 2022.

The SICC will now follow new procedures for corporate bankruptcy, restructuring, or dissolution cases that are worldwide in scope and commercial in nature, and they will provide reorganization outcomes that will be acceptable to both creditors and debtors.

The main difficulties in handling cross-border bankruptcy and restructuring processes, according to Patrick Ang, managing partner of the Singapore law firm Rajah & Tann, are coping with numerous legal systems, varying degrees of legal development, and a lack of legal harmonization.

Debtor and creditor parties may have differing opinions on "the choice of jurisdiction to initiate bankruptcy or restructuring," as Ang put it. "The SICC offers a top-notch, impartial, open, and consistent venue, particularly in this region. The court may hear cases involving international insolvency and restructuring under the new SICC regulations.

Lawyers from other countries were also given the opportunity to collaborate with their Singaporean counterparts under the new guidelines. Foreign lawyers are now able to represent clients in corporate bankruptcy, restructuring, and dissolution actions before the SICC thanks to the Legal Profession (Representation in Singapore International Commercial Court) (Amendment No. 2) Rules 2022.

Nonetheless, as Ang pointed out, in order for a foreign firm to appear before the SICC, it must have both a major relationship to Singapore and a foreign element. For instance, a firm or asset could serve as a connecting link.

Ang stressed that the laws of the state where enforcement is sought have the most bearing on whether or not a SICC ruling is enforceable.

Ang advised that "parties should take note of the important jurisdictions that matter" (such as where assets need to be protected) and develop a strategy as soon as possible. Some of the important factors will include whether or not the courts in the countries have utilized ordinary law to support and recognize a foreign judgement or whether they have embraced the UNCITRAL Model Law.

Ang forecasted that more businesses would struggle in the new year as a result of persistent domestic and global uncertainty and obstacles.

According to Ang, "increasing interest rates and rising inflationary pressures are projected to pose considerable challenges for many enterprises." Medium-sized businesses and heavily indebted companies should be comparatively more vulnerable both locally and throughout Southeast Asia, according to our predictions. Recently, Singapore has been the site of a series of crypto-related restructurings and insolvencies involving regional enterprises and presence".

Corporate insolvency cases involving cryptocurrency marketplaces have become more prevalent, according to the Singapore High Court's general division. Zipmex and Defi Payments, both part of the Vauld Group, are just two examples of companies that have lately sought injunctive relief. Three Arrows Capital, a cryptocurrency hedge fund, had its overseas agents apply to Singapore's High Court to recognize liquidation proceedings that had been initiated in the British Virgin Islands.

According to the new regulations, if the jurisdictional conditions are met, such procedures that are started in the general division of the Singapore High Court may be transferred to the SICC.

Edwin Tong, Singapore's Minister for Culture, Community, and Youth and Second Minister for Law, announced in his opening remarks at the SICC conference on September 22 that, given an insolvency procedure has begun in the SICC, lawyers representing clients in certain insolvency cases before the SICC would be entitled to enter into conditional fee agreements (CFAs) with their clients.

Tong explained that the Legal Profession Act and the Legal Profession (Conditional Fee Agreement) Regulations 2022 provide a legal framework that allows for CFAs to be used in SICC proceedings while they are pending in the SICC and in any appeals that may result from those proceedings.

Tong elaborated, calling this a "notable and beneficial evolution" for SICC insolvency procedures. "Debtors will have another way to get money in addition to the traditional methods of borrowing from banks and other institutions. Allowing Singaporean attorneys to provide CFAs is a leveller between them and their overseas competitors".