Individual Bankruptcy & Company Insolvency


Individual Bankruptcy

see www.ipto.gov.sg

• 1. What is bankruptcy?
  Bankruptcy is a process by which a borrower of money is declared by the High Court to be unable to repay the loan and recovery of the loan is conducted in an orderly manner. The High Court usually appoints the Official Assignee to administer the bankruptcy estate which includes the selling of assets, registration of creditors' claims and paying dividends to a bankrupt’s creditors.
• 2. Who is the Official Assignee?
  The Official Assignee is a public servant and an officer of the Court. In the vast majority of cases, the High Court will appoint the Official Assignee as the trustee and receiver of the estate once a Bankruptcy Order is made. The Official Assignee will administer all your affairs in bankruptcy. Alternatively, the Court may appoint a private trustee in place of the Official Assignee if your creditors so request.
• 3. What is the Official Assignee's role?
  The Official Assignee's role is two-fold; to realise as much assets as possible for distribution to creditors and to assist you in obtaining a discharge from bankruptcy. As an administrator of the bankruptcy estate, the Official Assignee also has the duty to investigate your conduct while you remain in bankruptcy. The duties of the Official Assignee include resolving creditors' claims through a legal process, payment of dividends and applying to the High Court for your discharge from bankruptcy. In situations where there are disputes between you and your creditors regarding the amount of a debt or the amount of payment of the debt, the Official Assignee will act as mediator to assist in reaching a mutually acceptable proposal.
• 4. Why should I avoid bankruptcy?
  You should avoid bankruptcy for these reasons:
  
  

  • Social stigma on being declared a bankrupt;
  • Your assets become vested in the Official Assignee and divisible among your creditors;
  • A statutory requirement to file your Statements of Affairs and Income and Expenditure statements, and thorough investigations by the Official Assignee into your financial affairs;
  • Monthly payments to your bankruptcy estate for the benefit of the creditors;
  • Disclosure of bankruptcy if you intend to obtain credit of more than S$500 from others;
  • Restriction on overseas travel; and
  • Inability to manage a business or act as director of companies without approval of the Court or the Official Assignee.
• 5. How do I become a bankrupt?
  You can become a bankrupt on the actions of your creditor. If you are unable to pay your debts of at least S$10,000, the Court may declare you a bankrupt upon the petition of a creditor. Before filing a bankruptcy petition, a creditor would issue a notice known as a Statutory Demand, demanding payment from you. If the payment is not met within the time stated in the Statutory Demand, the creditor will file a petition in the Court and a hearing date will be given. If payment is not made by the hearing date, the Court may proceed to make a Bankruptcy Order and declare you bankrupt.
  
  Do not ignore your creditors' letters of demand and Statutory Demands, or Writs of Summons from the Court. This will only compel your creditors to commence bankruptcy proceedings against you. You can be made a bankrupt even if you refuse to respond to your creditors or accept legal documents presented upon you.
• 6. What alternatives are there to bankruptcy?
  The Official Assignee is a public servant and an officer of the Court.
  
  

  • Private Arrangement
  • Voluntary Arrangement
  • Court Dispute Resolution
  • Debt Repayment Scheme

Company Winding Up

• What is liquidation or winding-up?
  Overview
  Liquidation or winding-up is a process where the assets of a company are seized and realised, the resulting proceeds are applied in discharging all its debts and liabilities, and any balance is then distributed among the members of the company according to their rights and interests, or otherwise dealt with as the constitution of the company directs.
  
  The general purpose of winding-up a company can be one or both of the following:
  
  

  • to ensure a just distribution of the company's assets among creditors and contributories
  • to terminate the company's existence by its eventual dissolution.

  
  
  Just distribution of assets

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  The company's assets and affairs pass into the hands of an independent liquidator whose powers, duties and functions are regulated by the Companies Act. The liquidator will investigate into the company's affairs and the conduct of the company's officers, and make the appropriate recovery from them. All business is ceased.
  
  The rights of unsecured creditors against the company's assets are virtually "frozen" upon the commencement of the winding-up. Thus, a further deterioration of the company's financial position and proliferation of its liabilities is averted;
  
  Unsecured creditors are paid on a pari passu basis, i.e. they are paid out of the company's assets equally. Any balance is then distributed among the contributories of the company.
  
  
  Reasons for termination of company's existence

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  • Company has ceased business activities
  • Management deadlock
  • Oppression - shareholders dispute under Section 216 of the Companies Act (Cap 50)
  • Corporate or financial restructuring of the group to which the company belongs
  • Minimise tax liabilities or maximise tax advantages for the group to which the company belongs
  • Breach of statutory provisions, including offences committed
  • Company acting outside its scope of activities
• 2. What are the various types of winding-up?
  Members' voluntary winding-up
  The members of the company may pass a resolution that the company be wound up and that a liquidator be appointed. This mode of winding-up is adopted where the company is able to pay its debts in full within 12 months after the announcement of winding-up. Winding-up n commences at the time of passing of the resolution.
  
  Creditors' voluntary winding-up
  If the company is not able to meet its liabilities, the company can convene a meeting of its creditors to consider its proposal for a voluntary winding-up of the company. If a resolution is passed in favour of the winding-up, the company will appoint a liquidator, subject to any preference the creditors may have as to the choice of liquidators.
  
  Compulsory winding-up
  Under Section 253 of the Companies Act (Cap 50), the company itself, creditors, contributories, liquidator, judicial manager or the Minister may present a petition to the High Court for the winding-up of the company.
  
  Circumstances where a company may be wound up by the Court include:
  
  

  • when the company is unable to pay its debts
    The company is deemed unable to pay its debts under Section 254(2)(a) of the Companies Act if a company's creditor, who is owed more than S$10,000, has served a demand for the sum owing at the registered office of the company, and the company has not paid this sum for three weeks thereafter.
  • when the Court is of the opinion that it is just and equitable that the company be wound up Section 254(1) of the Companies Act states all the grounds under which the Court may liquidate a company:

  
  The petitioner has to pay a deposit for the winding-up application to the Official Receiver, and the Court may appoint the Official Receiver or an approved company auditor to act as the liquidator of the company. The winding-up commences at the date of the presentation of the winding-up petition.