Mr Speaker, I had previously spoken about our nation’s bankruptcy regime in the context of the 2020 amendments to the Insolvency, Restructuring, and Dissolution Act (IRDA). The Bill that is currently being debated seeks to render permanent the centerpiece of the previous amendments, the Simplified Insolvency Program (SIP).
Along the way, it further streamlines the two parts of the SIP, namely the Simplified Debt Restructuring Program (SDRP) and Simplified Winding Up Program (SWUP). As the Minister has already elaborated, these include a number of appealing and commonsensical refinements, such as shortening the moratorium period in the SDRP, limiting the eligibility criteria to just one for the SWUP, and reducing the number of required supporting documents for both processes.
Today, in addition to touching briefly on three elements in the present Bill, I will also address two broader concerns that align with the spirit of the issue: first, how much bang for the buck we are truly gaining by further simplifying corporate bankruptcy in this manner; and second, whether there is a pressing need to also consider whether individual bankruptcy proceedings can be simplified more as well.
Queries and suggestions for the bill
On the present Bill, I will note, first, that Clause 38 will now require the notification of the dissolution of the firm to be published on the “designated website” only, without also doing so in the Government e-Gazette and newspapers. The permanent record will also be available on ACRA’s Bizfile. This move is, as I understand it, an effort to reduce the costs of the new SWUP. While I understand the motivation to reduce costs, especially for newsprint, I wonder why the publication in the e-Gazette—which should be the most complete official journal of the country’s public and legal notices—is precluded. After all, notices there are already electronic in nature, and a half-page entry costs $114.[1] If this is prohibitive, perhaps a waiver or fee reduction may be considered for such instances.
Second, Clause 20 shortens the moratorium period from 90 to 30 days. The justification appears to be a desire to strengthen creditor rights.[2] The natural question here is if this 30 days is reasonable, and sufficiently balances creditor protection with debtor difficulties. Would the government be willing to share with this House the historical mean and median times for restructuring plans to be completed in Singapore? If it does not have this information, how was the decision to reduce the moratorium from 90 to 30 days arrived at?
Third, Clause 16 now requires only a supermajority vote of 2/3 of the creditors for the DRP to be approved and binding for all creditors. This is a seemingly simple but important step to ensure that restructuring can proceed expeditiously, without one or two low-key creditors preventing an efficient resolution of the debt. This so-called holdout problem has been an affliction especially in sovereign debt restructuring,[3] and has led to significant problems due to the presence of so-called vulture investors. This move essentially embeds a collective action clause as a means of ensuring post-default resolution, and is one way to usher negotiations to a close. While I do not necessarily disagree with the approach here, I would like to know if the two-thirds majority will be weighted by each creditor’s exposure, since I believe that this is fairer than a one-creditor-one-vote system.
I would also add that another way to try to bring about the outcome is through exit consents.[4] These allow the majority to alter the nonfinancial terms of the debt, in a way that would make the debt shares of holdouts effectively worthless. This strategy may be even more preferable, insofar as ensuring that even initial holdouts ultimately deliver a consensual (if acquiescent) vote, rather than one where a supermajority alone may ram through their preferred outcome.
The corporate bankruptcy regime is already fairly efficient
In my earlier speech on the IRDA amendments, I had expressed my support for less onerous, appropriately-designed resolution procedures,[5] since doing so could help bolster a more entrepreneurial mindset, especially in a knowledge and information-driven economy. This was especially important then, when the shadow of COVID-19—and the associated spike in business failures[6]—may have led to heightened risk aversion among small business owners.
Yet over the intervening 4 years, the record on the actual usage of the SIP does not appear to suggest that the issues addressed by the SIP were major binding constraints. The total number of applications for the SIP, as of end-October 2024, amounted to 116. Given the total number of bankruptcies since the SIP came into force, this is a usage rate of about one in ten.[7] Admittedly, the SIP applies only to small and micro enterprises. But given how around two-thirds of companies in Singapore are actually small firms—and how small firms are much more likely to fail—this does not seem to be too poor an estimate. If, indeed, the need for simplified insolvency is so pressing, why would the takeup rate be so limited?
This is a more general point. The strength of Singapore’s insolvency framework scored 74.3 (out of 100) in 2020, placing it 27th in the world.[8] While this may suggest room for improvement, the reported weaknesses had little to do with speedy bankruptcy resolution or high costs, both of which our nation ranked among the best worldwide.. Rather, they relate to the management of debtors’ assets, limited creditor participation, and the poor involvement of creditors in reorganization proceedings. Future revisions of the corporate bankruptcy framework may wish to bear this in mind.
To be clear, any reduced costs of doing business for our small and medium enterprises are welcome. Still, one is left to wonder if we are focusing on meeting a genuine business need with the SIP, or dancing around other insolvency concerns that may matter more.
Focusing more of our legislative energies on the individual bankruptcy regime
This is especially relevant when one considers how, over the same period, personal applications for bankruptcy were an order of magnitude higher, amounting to almost 15,000 cases.[9] Applications hit an 18-year high in 2023, and are on track to significantly exceed that number for 2024.[10] This begs the question, then, of whether the resolution regime for individual bankruptcies can be further expedited and simplified, much like what we are doing here for companies. Doing so may even improve our business climate, since the nature of entrepreneurship today is that many individuals take on personal debt to pursue their dreams of starting their own company.
To be fair, there have been some advances on this front. The Debt Repayment Scheme (DRS), modeled after Chapter 13 of the U.S. Bankruptcy Code, offers a debt resolution alternative that is more flexible and forgiving than the traditional bankruptcy, at least for debts below a certain threshold.[11] But after more than a decade and a half, the DRS appears to be fraying at the edges.
As my Sengkang colleague Louis Chua recently pointed out, third party consultants are being engaged to help with the administration, and the fees they charge may be a concern.[12] Yet the Ministry of Law does not regulate third-party debt consultancies or the fees they charge, which potentially allows such consultancies to take advantage of distressed residents, thereby worsening their debt burden in the process. While it is undeniable that there should be some nominal fee for administrative costs incurred by the Official Assignee (OA), the 1.5% collection and 3% distribution fees by the OA may be seen as punitive, especially if the debt amount is significant. DRS hearings also currently exempt creditors from attendance,[13] which may introduce inadvertent delays in the process of discharge, especially in instances where the repayment schedule needs to be renegotiated.
Still, Singapore remains somewhat of an outlier among advanced economies, where there is no automatic discharge from bankruptcy.[14],[15] The United Kingdom rolled this out in its Insolvency Act of 1986, while Hong Kong did the same t the end of the 1990s. Germany and France followed a few years after.[16] Even Nearby Malaysia started in 2017.[17]
Moreover, even the elapsed duration before a discharge may be considered by the Official Assignee here is a long 3 years. Contrast this to Canada, where the duration for automatic discharge is 9 months for 1st timers with no surplus income, and 24 months for 2nd timers.[18] Or the United Kingdom—where bankrupts only have to wait for a year after the order is first issued,[19] or the United States, where most debts under Chapter 7 bankruptcy occurs four months after filing.[20]
While automatic discharge and an expedited exit from bankruptcy must not be regarded as a magic panacea for encouraging risk-taking and entrepreneurship,[21] it nevertheless underscores how a more consumer-friendly regime seems warranted, especially since we are doing so for businesses. Surely we do not wish to leave tens of thousands of Singaporeans in debt purgatory, for longer than they need to be.
It may also be time to revisit the bankruptcy threshold,[22] which is currently set at a fairly low level of $15,000. This was last raised in 2015 (from $10,000). However, taking inflation into account means that this would be equivalent to around $18,000 in today’s dollars. Notably, the threshold was also temporarily raised in the aftermath of the pandemic (to $60,000), and accompanied by an increase in the eligibility threshold of the DRS (to $250,000). Yet while we are here debating a permanent extension of the pandemic-era accommodations for corporate bankruptcy, we have not done the same for individual bankruptcy.
Yet the possibility that we face a tide of even more personal bankruptcies in the year ahead is very real. Rising costs of living have placed immense pressure on many households. Retrenchments spiked in 2023, and are likely to remain high for 2024.[23] And interest rates on debt worldwide—including in Singapore—have remained stubbornly high, even after the recent rate cut cycle by the U.S. Federal Reserve. This portends yet more challenges for Singaporeans who are struggling under the burden of debt.
Hence, while I support this Bill, I urge the government to also consider analogous improvements to the insolvency regime that applies to households, and not just firms.
[1] For a ¾ page, the cost is $171, and a full page costs $228.
[2] Ministry of Law (2024j), “Simplified Insolvency Programme to be Revamped and Made Permanent to Support Financially Distressed Companies,” Press Release, Nov 11.
[3] Grund, S. (2023), Sovereign Debt Restructuring and the Law The Holdout Creditor Problem in Argentina and Greece, New York: Routledge.
[4] Tamura, K. (2004), “The Problem of Sovereign Debt Restructuring: Holdout Problem and Exit Consents,” Journal of Restructuring Finance 1(1): 101–27.
[5] Hansard (2020) 95(12): Nov 3.
[6] The number of applications by companies for compulsory liquidation spiked in 2019, to 406, before falling sharply in 2020 to 224. See Insolvency Office (2024), Companies in Compulsory Liquidation, Singapore: Ministry of Law.
[7] The number of corporate insolvency applications between 2021 and 2023 (inclusive) were 260, 257, and 273, respectively. Assuming that the number of cases in 2024 holds steady at that of the prior year, and adjusting for the number of months through October, the expected cases for 2024 would be (273/12*10=) 228. This yields a total of 1,018 cases since the SIP came operational in January 2021, for a takeup rate of around (116/1018») 11 percent.
[8] World Bank (2020), Doing Business Economy Profile: Singapore, Washington, DC: World Bank Group.
[9] The equivalent number of applications between January 2021 and October 2024 were 3,160, 3,648, 3,986, and 4,096, respectively, which sums to 14,890. See Insolvency Office (2024), Number of Bankruptcy Applications Orders Made and Discharges, Singapore: Ministry of Law.
[10] Through November 2024, total applications were already at 4,521.
[11] See, K.O., (2008), “Alternatives to Bankruptcy—The Debt Repayment Scheme (DRS),” Singapore Academy of Law Journal 20: 541–558. The current threshold requires that unsecured debts not exceed $150,000 to qualify for a debt repayment plan.
[12] Hansard (2024) 95(142): Oct 14.
[13] Hansard (2024) 95(109): Aug 2.
[14] Insolvency Office (2024), Exiting Bankruptcy, Singapore: Ministry of Law.
[15] To be clear, automatic discharges are, in virtually all jurisdictions, still subject to meeting certain conditions or, most commonly, writs of no-objection from creditors.
[16] In Hong Kong, Section 30A of the Bankruptcy Ordinance (Cap. 6) commenced in 1998. Germany’s introduced a new Insolvency Code (Insolvenzordnung, InsO) in 1999, France’s Law on Personal Recovery (Loi de Rétablissement Personnel) came into effect in 2003, and the UK
[17] Azmi, R., A.A. Razak & S.N.S. Ahmad (2017), “Discharge in Bankruptcy: A Comparative Analysis of Law and Practice between Malaysia, Singapore and the United Kingdom (UK)—What Can We Learn?,” Commonwealth Law Bulletin 42(2): 203–33.
[18] Jean Fortin Financial Restructuring (2025), Automatic Discharge, Montreal: Jean Fortin and Associates.
[19] Conway, L. (2022), “Discharge from Bankruptcy,” Commons Library Research Briefing 3043, London: House of Commons Library.
[20] United States Courts (2024), Discharge in Bankruptcy—Bankruptcy Basics, Washington, DC: Administrative Office of the United States Courts
), “Automatic Discharge: The Panacea to Our Bankruptcy Woes?”, Singapore Law Review 24: 204–12.
[22] Ang, L. & A. Peh (2024), “Why Are More People in Singapore Going Bankrupt?,” CNA, Mar 11.
[23] Source: https://stats.mom.gov.sg/Pages/Retrenchment-Summary-Table.aspx.