Schemes of Arrangement in Singapore: Empirical and Comparative Analyses

The scheme of arrangement has historically been one of the most flexible and popular debt restructuring tools in Singapore and the United Kingdom (UK). Its chief attractions have been the ability of company management to take the lead in the restructuring and to effect a ‘within class’ creditor cram down, thereby compelling dissenting creditors to accept the terms of the scheme once the requisite approvals are obtained. The scheme of arrangement also featured prominently in Singapore’s 2017 introduction of wide-ranging reforms to its insolvency and restructuring laws (2017 reforms) with a view to enhancing its attractiveness as an international centre for debt restructuring. Central to these reforms is the transplantation (with modification) of certain provisions from Chapter 11 of the US Bankruptcy Code 1978 (US Bankruptcy Code). In particular, provisions modelled after the US Bankruptcy Code were engrafted on the existing scheme of arrangement framework in the Singapore Companies Act, including an enhanced moratorium, cross-class cram down, pre-packed schemes of arrangements and super-priority financing.

This paper presents the results of by our studies on Singapore schemes of arrangement as debt restructuring tools that span the 1996-2019 period. We have used a combination of quantitative and qualitative data. We find that successful schemes of arrangement tend to require new financing, often provided by existing shareholders, which demonstrates the value of controlling shareholders of companies in the zone of financial distress. Most of the schemes are completed within 12 months of filing, which is comparable to the market indicators. Insofar as the disputes that are raised, not unexpectedly, the cases have centered around non-compliance disclosure requirements. We find that cases do not generally disclose the liquidation values of the companies assuming an insolvent liquidation or if such values are disclosed, the comprehensive basis for such disclosures is often missing. As to the impact of the 2017 reforms, pre-packed schemes and super-priority financing have been successfully used for listed firm restructurings. The moratorium has been used more often frequently post-2017 reforms. Thusfar, the successful restructurings that are completed pursuant to the 2017 reforms involve companies that are incorporated in Singapore or foreign-incorporated companies with substantial connection with Singapore. Our findings highlight the effectiveness of the Singapore schemes of arrangement as a debt restructuring tool and suggest some areas for reform.