The Singapore Story of Injecting US Chapter 11 into the Commonwealth Scheme

Singapore’s scheme of arrangement was very similar to that found in most Commonwealth countries. Over the last two decades the scheme has become a popular de facto debtor in possession regime in Singapore used to restructure the debts, both financial and trading, of insolvent companies. The courts have taken a leading role in this development. This success story has an unexpected twist recently. As part of its strategy to develop Singapore into an international centre for debt restructuring, the Government accepted the recommendations of a law review committee to bring in significant elements of the US Chapter 11: an automatic, wide-ranging moratorium, cross-class cram down, super priority lien and pre-packaged schemes. It will be argued that due to the significant differences between the insolvency laws of Singapore and US and the different conceptual framework of the scheme and Chapter 11, there will be a period of uncertainty or even instability while the courts work out ways to harmonise the two different bodies of law. This bold experiment has relevance beyond Singapore. It has close parallels in UK’s imminent reforms and, to a lesser extent, the European draft directive on restructuring.