The objective of Judicial Management … 50). “Judicial management is a corporate rescue mechanism that will provide solace to businesses.  Sections 89(c)(2) and 89(c)(3) of the IRDA. Scheme of Arrangement. In 2017, the Companies Act was amended to enhance the Judicial Management regime – amongst other things, the threshold for companies to enter into Judicial Management was lowered, and a statutory provision was made to allow for super-priority to be given to rescue financing.  It is pertinent to note that the IRDA expressly stipulates that a judicial manager is an officer of the Court. See Report of the Insolvency Law Review Committee, page 82. Section 227I has therefore been re-enacted as Section 102 of the IRDA but without the imposition of personal liability on the judicial manager. Obtaining a more advantageous realisation of the company’s assets than on winding up. Once the company is placed into Judicial Management pursuant to Section 94, it is under the supervision of the Court and in the same manner as a Court-ordered Judicial Management to ensure that there is no abuse. Judicial Management is fundamentally a rehabilitation process, which differentiates it from liquidation. The results do suggest that the intrinsic value of judicial management is that when invoked its procedures allow economic rationality to prevail in the event of insolvency and pre On 30 July 2020, the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) came into operation. Judicial Management is fundamentally a rehabilitation process, which differentiates it from liquidation. A Judicial Management order is temporary in nature, generally lasting for 180 days (unless extended by the Court). I. This article reviews the various court decisions (both reported and unreported) that have been issued since the changes became operative. This suggests that the then existing insolvency laws were inadequate for such a purpose. One of the Company’s intangible assets is its listing status. Alternatively, they can resort to judicial management (JM), which is a fairly new option and governed by the Companies Act 2016, which came into force on March 1, 2018. Schemes of Arrangement ... SGHC 283 appears to set a higher standard for refusing leave to call a meeting in relation to a scheme of arrangement. 3.1Introduction. However, unlike the regimes of judicial management and liquidation, there has been a lack of guidelines on how a scheme of arrangement is passed. Legal News & Analysis – Asia Pacific – Singapore – Insolvency & Restructuring.  Section 227B(1)(b) of the Companies Act, now Section 89(1) of the IRDA. Judicial management is a method of debt restructuring where an independent judicial manager is appointed to manage the affairs, business and property of a company under financial distress. Prior to the IRDA, the legislative framework for Judicial Management was set out in Part VIIIA of the Companies Act. 8. Creditors tend to prefer Judicial Management over a Scheme of arrangement where they harbour doubts over the ability (or even, bona fides) of the company’s management to rehabilitate the company. Mr. Lee Eng Beng, S.C. Now Section 91(6) of the IRDA. Corporate Voluntary Arrangement (“CVA”) Judicial Management (“JM”) Purpose . Judicial Management is fundamentally a rehabilitation process, which differentiates it from liquidation. This meant that financially distressed companies could consider Judicial Management at an earlier stage, when it was not yet technically insolvent. Is your business prepared for climate change? - any restructuring scheme must be approved by a simple majority of shareholders at a member’s meeting and 75% of the total value of creditors present and voting at a creditor's meeting. Thus a minority of up to 25% in value and 50% in number can be crammed down.  Our article discussing the principles on when the Court will sanction a third party funding agreement can be found at https://www.clydeco.com/en/insights/2020/07/third-party-funding-in-the-context-of-insolvency-p. Sign up to receive email updates straight to your inbox! https://www.clydeco.com/en/insights/2020/07/third-party-funding-in-the-context-of-insolvency-p. However, there has been some innovation, especially with the introduction of the out-of-court Judicial Management procedure, which is worth keeping a close eye on as it is put through its paces in the coming months. Schemes of Arrangement: To negotiate compromises and settlements with your creditors . In this regard, the Court will only make a Judicial Management order where it serves one or more of the following statutory purposes: Implementation of a Scheme of Arrangement; Generally, businesses facing financial problems can turn to a scheme of arrangement and corporate voluntary arrangement. In practice however, the judicial manager would always disclaim liability and the imposition of personal liability was therefore rendered academic and served no practical utility. He or she owes a duty to act in the interest of the company's creditors as a whole, and must act as quickly and efficiently as is reasonably practicable. A Scheme manager is usually appointed to oversee the implementation of the Scheme, but he does not displace the management.  Section 227B(10)(a) of the Companies Act. evaluation of the statutory scheme of judicial management. JUDICIAL MANAGEMENT. The provisions on judicial management which were introduced in Malaysia under the Companies Act 2016 (“Act”) came into force on 1 March 2018. Judicial Management, which was based on the English administration regime, was intended as a mechanism through which potentially viable companies could restructure their liabilities and rehabilitate themselves. The existing statutory regime for Judicial Management, as amended in 2017, was largely transplanted into the IRDA, with some tweaks to further enhance its attractiveness to users. The judicial management mechanism, modeled after the Singapore provisions, provides a further option to rehabilitate a financially distressed company. Whither the Scheme of Arrangement in Singapore: More Chapter 11, Less Scheme? Judicial Management. Schemes of arrangement are not exclusively intended for insolvent companies and are widely utilised by solvent entities. Prior to the enactment of the IRDA, a company could only be placed under Judicial Management by an order of the Court. Malaysia’s scheme of arrangement framework allows for a restraining order to be granted. ∗ Meng Seng WEE ∗∗ 1. This meant that the distressed company had to spend precious time and resources in making an application to the Court, when such time and resources could be better channeled into rehabilitating the company. The cases featured below range from judicial management, schemes of arrangement and the receiver’s ability to have continued supply of utilities. In September 2016, two of CFI’s key subsidiaries namely Victoria Foods and Crest […] 9. T This is in addition to the rescue funding sought under a scheme of arrangement. Under the IRDA, the judicial manager "must" perform his or her functions to achieve one or more of the above statutory purposes. Scheme of Arrangements and Liquidations. The Transfer, Schemes of arrangement are becoming increasingly more popular in recent years as the preferred way in which 'takeovers' of Australian listed companies are effected.A scheme of arrangement is These sections relate to avoidance of undervalue and unfair preference transactions, extortionate credit transactions, wrongful/fraudulent trading and assessment of damages against delinquent officers. Therefore, the 2017 Amendments lowered the threshold for a company to be placed in Judicial Management. This may be done without the assistance of the court, but to do so would require the unanimous consent of all affected creditors, which may be difficult to obtain. Authorised and regulated by the Solicitors Regulation Authority. In order to be approved, more than 50% in number and 75% in value of the creditors present and voting at the meeting must vote in favour of the scheme. The moratoria that apply to restrain the enforcement of security in schemes of arrangement, judicial management and liquidation has been discussed above at Section II.i. Further, if we examine the provisions of the Insolvency, Restructuring and Dissolution Bill, it was clarified that the enactment of Section 99 of the IRDA was not “intended to affect other funding Arrangements that are allowed under common law, such as funding for causes of action that belong to the company as its property, and funding for the investigation of potential causes of action for financially distressed companies.” Thus, despite Section 94 of the IRDA, the principles established by case law in respect of when third-party funding agreements will be approved by the Court will still remain applicable. PWC, Director, Global Office of the General Counsel, SCA Asia Pacific, General Counsel, Shanghai, Pacific Harbor Capital, Legal and the Chief Compliance Officer, Hong Kong. Judicial Management. Therefore, the relevant section was amended to allow the Court the discretion to override an objection to a Judicial Management application in certain defined circumstances, i.e. Implementation of a Scheme of Arrangement; The general framework of the IRDA has been discussed in the first article in our series of articles covering the various aspects of IRDA and can be found here. Section 94 of the IRDA now provides that instead of applying to Court for a Judicial Management order, a company can be placed under Judicial Management if a majority of the creditors (in number and value) so approve after requisite notices and documents have been filed and a creditors’ meeting called..  However, the Insolvency Law Review Committee noted that relying on the public interest ground to obtain an order for Judicial Management was problematic as it was “of uncertain scope and [therefore] is rarely relied on”. ... SGHC 283 appears to set a higher standard for refusing leave to call a meeting in relation to a scheme of arrangement. On the other hand, a restrainin… If you continue to use this site we will assume that you are happy with it. Judicial Management was introduced into Singapore’s restructuring and insolvency landscape in 1987, following the collapse of Pan Electric Industries Limited in 1985, which at that time led to an unprecedented closure of the Singapore Stock Exchange for 3 days. , Before the 2017 Amendments, if the holder of a floating charge (i.e. Judicial Management is fundamentally a rehabilitation process, which differentiates it from liquidation. Creditors tend to prefer Judicial Management over a Scheme of arrangement where they harbour doubts over the ability (or even, bona fides) of the company’s management to rehabilitate the company. The IRDA is an omnibus legislation housing all of Singapore’s insolvency and restructuring laws in one single piece of legislation. Section 227I(1) of the Companies Act provided that the judicial manager will be personally liable for contracts adopted by him in carrying out of his functions but the judicial manager may also disclaim personal liability in this regard. © Clyde & Co LLP. The judicial management procedure is court-based and involves a petition and a subsequent order. Geraldine Goon examines the first reported decision in Malaysia on judicial management. Although many of the significant amendments to the Judicial Management regime had already taken place in the 2017 Amendments, the IRDA saw the implementation of further enhancements, discussed below. On the face of the provision, this meant that a company could only enter Judicial Management if it was already insolvent. There are instances where your company may face severe financial difficulties, but it may nonetheless be revived because of its strong business fundamentals.  Section 227HA((10) of the Companies Act, now Section 101(10) of the IRDA. Court-appointed judicial managers are granted authority to seek additional credit security, which will be placed in order of priority, similar to the rescue funding allowed for schemes of arrangement explained above. Under the IRDA, a company can enter into a JM through a resolution of creditors (more on this below). The restraining order would restrain any further legal proceedings to be initiated against the applicant company applying for a scheme of arrangement. The present Judicial Management regime contained in the IRDA is not vastly different from that which was put in place after the 2017 Amendments, prior to the IRDA’s commencement. Prior to the IRDA, the procedures for a Judicial Management were set out in Sections 227AA to 227X of the Companies Act (Cap. Where the  Section 227B(5)(b) of the Companies Act. The scheme of arrangement is expected to reschedule the debt and free up some space for capital and recurrent expenditure. two new corporate rescue mechanisms: judicial management and corporate voluntary arrangement; and additional controls on court sanctioned schemes of arrangement to make this process more effective as a means of effecting corporate debt restructuring.