Facilitating a ‘Private Trustee in Bankruptcy’ Administered Bankruptcy Regime with the Insolvency, Restructuring and Dissolution (Amendment) Bill
28 November 2022 Posted in Press releases
- The Ministry of Law (“MinLaw”) is proposing changes to the bankruptcy regime to mandate that all cases, except those of public interest, be administered by Private Trustees in Bankruptcy1 (“PTIBs”). These amendments were introduced under the Insolvency, Restructuring and Dissolution (Amendment) Bill (the “Bill”), which was tabled for First Reading in Parliament today. If passed, the new regime is expected to be implemented by September 2023.
- The proposed amendments are part of MinLaw’s ongoing review of the administration of bankruptcy regime in Singapore. In 2016, MinLaw introduced a Differentiated Discharge Framework to streamline work processes and create a more rehabilitative discharge framework with clear timeframes and conditions for bankrupts to be discharged. Another significant change that was introduced in the same year required Institutional Creditors2 (“ICs”) that file bankruptcy applications to appoint PTIBs, instead of the Official Assignee (“OA”), to administer bankruptcy cases. These changes have helped to streamline and improve the quality of bankruptcy administration while allowing public resources to be better utilised. Since 2017, PTIBs have been administering more than 50% of new bankruptcy cases on average.
Better Use of Public Resources in Administering Bankruptcies
- With a PTIB-administered bankruptcy regime, public resources will not be applied towards assisting creditors in enforcing their private debts and debtors who seek a safe harbour from creditors after being unable to pay their private debts. This will enable public resources in administering bankruptcy cases to be more effectively and efficiently utilised whilst ensuring that bankruptcy cases continue to be discharged in an orderly manner in Singapore. This is also currently the practice in jurisdictions such as the United States and Canada, where the law mandates the appointment of PTIBs for every bankruptcy case.
- Based on feedback from the industry, the experience of PTIBs undertaking the administration of bankruptcy cases that are filed by ICs has been smooth. To date, there has been no action taken on the PTIBs by the OA and/or the Courts on the PTIBs’ management of bankruptcies.
Introduction of a PTIB-administered Bankruptcy Regime
- With a PTIB-administered bankruptcy regime, PTIBs will handle all bankruptcy cases, including those filed by Non-Institutional Creditors and debtors. If a case is of public interest, such as one that involves the misuse of public funds, significant debts owed to the Government or unpaid taxes, the OA may consent to act as the trustee in the bankruptcy case. Such public interest cases are estimated to constitute only about 1% of the annual caseload.
- With this new approach, the OA will take on a more regulatory role to ensure PTIBs’ competencies and legislative compliance in case administration. The OA will continue to administer undischarged bankruptcy cases that were assigned to or handled by the OA before these amendments take effect.
Protecting Persons Dealing with Bankrupts and Supporting the PTIB Industry
- Miscellaneous amendments are also proposed under the Bill to enhance the protection of persons dealing with bankrupts in commercial transactions and provide continued support to the PTIB industry. These include:
a. Making publicly searchable (upon the payment of a prescribed search fee) the information provided by undischarged bankrupts to the OA about their current employment status and employment history;
b Creating a new offence to criminalise the non-disclosure of an undischarged bankrupt’s bankruptcy status when he/she receives a deposit of at least $10,000 from any person, whether for self or on behalf of another person; and
c. Improving operational flexibility for determining PTIBs’ remuneration in line with the industry needs, which will help PTIBs keep costs down even as they take on more cases and facilitate PTIBs’ fees being kept affordable.
- More information on the PTIB-administered regime and miscellaneous amendments will be released closer to the date of implementation.
MINISTRY OF LAW
28 NOVEMBER 2022
1. PTIBs can be: (i) a solicitor; (ii) a public accountant; or (iii) a chartered accountant, and have to hold an insolvency practitioner licence from MinLaw’s Insolvency and Public Trustee's Office (“IPTO”).↩
2. Under Section 36(2) of the Insolvency, Restructuring and Dissolution Act (“IRDA”), ICs are defined as: (a) a banking corporation; (b) a finance company licensed under the Finance Companies Act; (c) a holder of a capital markets services licence granted under section 86 of the Securities and Futures Act; or (d) a company with annual sales turnover of more than $100 million and with more than 200 employees. ICs, subsidiaries of ICs or a corporation where two or more ICs control more than half of the voting power in total, are required to appoint PTIBs.↩
Last updated on 28 November 2022