š¤š» Guest Take: Bridging Borders ā Singaporeās Embrace of PRC Reorganisation Proceedings by Virtus Law
The Singapore High Court granted recognition and ancillary relief for consolidated reorganisation proceedings related to three companies in the Peopleās Republic of China.
Acrostics Asia is delighted to share Virtus Law LLPās piece on a landmark Singapore High Court decision granting recognition and ancillary relief for consolidated reorganisation proceedings related to three companies in the Peopleās Republic of China (PRC).
While not the first time the Singapore Court recognised a PRC liquidation proceeding, this decision is the first reported judgment in Singapore to recognise and provide relief in support of PRC reorganisation proceedings, according to the article written by Virtus Lawās Managing Partner Lauren Tang, Senior Associate Yilei Tan and Associate Chit Yee Ooi.
This highlights the readiness of the Singapore Court to lend cross-border support to PRC insolvency or reorganisation proceedings to promote cross-border cooperation between PRC and Singapore.
Virtus Law is a member of the Stephenson Harwood (Singapore) Alliance.
Case Background
The Companies were undergoing Reorganisation Proceedings in PRC, and Mr. Zhang Jingping was appointed as the administrator of the Reorganisation Proceedings (the āAdministratorā).
The Administrator made the recognition application before the Singapore Court as the Administrator discovered potential issues in respect of the Companiesā affairs in Singapore, including the transfer of one of the Companiesā 100% shareholding in a Singapore incorporated company (āSG Subsidiaryā) for a nominal consideration of $1 before the commencement of the Reorganisation Proceedings.
The Administrator therefore sought the Singapore Courtās recognition of the Reorganisation Proceedings and ancillary relief, including:
an order allowing the Administrator to examine witnesses, take evidence and the delivery of information concerning the Companiesā property, affairs, rights, obligations or liabilities in Singapore (the āArticle 21(1)(d) Reliefā); and
orders entrusting the Administrator with the administration or realisation of the Companiesā property in Singapore, subject to the Singapore Courtās approval for expatriation of such property out of Singapore (āArticle 21(1)(e) Reliefā).
Recognition of the Reorganisation Proceedings
Under Article 15 of the Model Law, foreign representatives may apply for the recognition of the foreign proceeding in which the foreign representative has been appointed, subject to the procedural requirement that the application is accompanied by the requisite documentation (see Articles 15(2) to 15(4) of the Model Law).
The Singapore Court largely had no issues with the procedural requirements of the application, save that it did not accept the submission that the Reorganisation Proceedings were collective in nature merely because they were commenced under the PRC bankruptcy law.
The Singapore Court required the Administrator to address the nature of the Reorganisation Proceedings itself, but nonetheless reached the conclusion that the Reorganisation Proceedings was collective because a meeting of creditors of the Companies would have to be called so creditors could vote on the draft plan on reorganisation, a statutory threshold would have to be met for each category of creditors before the reorganisation plan could be approved by the PRC Court, and all assets and liabilities of the Companies would be in a consolidated reorganisation where the rights and debts of each entity would be extinguished and the properties owned by each entity would be treated as a unified estate.
Reliefs Granted
Article 21(1)(d) Relief
Three requirements must be met for Article 21(1)(d) Relief to be granted:
the documents or information must concern the debtorās property, affairs, rights, obligations or liabilities;
the applicant must show that there is some reasonable basis for his belief that the person concerned can assist him in obtaining relevant information and/or documents, and that the information and/or documents are reasonably required; and
the court must take into account all relevant circumstances when exercising its discretion to make the order, including whether the interests of the affected person are adequately protected, so as to not make an order that is wholly unreasonable, unnecessary or oppressive to him.
There were no issues as regards limbs 1 and 2. As regards limb 3, the Singapore Court was of the view that the specific transactions identified by the Administrator warranted investigations (e.g. the transfer of the Singapore Subsidiary for a nominal consideration).
Further, the timing of the transactions and the substantial values involved (i.e. a $1 billion syndicated loan and a significant amount in receivables) warranted the examination orders. The Singapore Court therefore found that the information sought was reasonably required to obtain as full a picture as possible of the Companiesā affairs to identify potential claims to maximise recovery for creditors.
Article 21(1)(e) Relief
The Singapore Court granted Article 21(1)(e) Relief as it was satisfied that local creditors would be treated fairly and given ample opportunity to participate in foreign insolvency proceedings as the Administrator clarified that no property would be expatriated without leave of court.
Conclusion
While not the first time the Singapore Court recognised a PRC liquidation proceeding (see here where we assisted the administrators of Sainty Marine Corporation to obtain a Singapore Court recognition order), this decision is the first reported judgment in Singapore to recognise and provide relief in support of PRC reorganisation proceedings.
This highlights the readiness of the Singapore Court to lend cross-border support to PRC insolvency or reorganisation proceedings to promote cross-border cooperation between PRC and Singapore.
This is especially so given the reciprocity requirement for a PRC Court to recognise a Singapore insolvency or reorganisation judgment (see here), where the Xiamen Maritime Court of the PRC recognised the appointment of the judicial managers of two Singapore companies.