Developments in bankruptcy and insolvency law in Singapore and Malaysia


This article reviews some of the recent developments in bankruptcy and bankruptcy law in Singapore and Malaysia.

Singapore: dispositions of property

Under the Singapore Bankruptcy Act, any disposal of assets made by a liquidator since the date of filing for bankruptcy is void unless the court approves or ratifies the disposal. This rule is anchored in Section 328 of the Insolvency, Restructuring and Liquidation Act 2018 (IRDA).

Recently, two rulings by the Supreme Court clarified the applicable yardstick for deciding whether the court should ratify the disposition of property. In Sutherland, Hugh David Brodie v Official Assignee and anor (2021), the insolvency administrators as spouses asked the complainant in March 2018 to pay the monthly mortgage for their property to the bank so that the insolvency administrators could get a better price than the property was sold on the open market. The plaintiff would in turn be repaid interest-free from the surplus of the sales proceeds. The agreement was recorded in an assignment agreement dated September 18, 2018, after filing for bankruptcy on May 11, 2018. The bankruptcy petition was finally issued on October 25, 2018.

The court ruled that the purpose of Section 328 (1) IRDA was to preserve the liquidator’s assets for an orderly and taxable distribution to general creditors. The ratification must therefore further the aim of the section. Good faith, disclosure and value would be relevant when considering ratification, but the importance or necessity would have to be viewed as part of the general exercise of judgment. In the Hugh Sutherland case, the Supreme Court found that creditors benefited from the transaction because they did not have to deduct from the proceeds of the sale the interest payable to the bank on the plaintiff’s mortgage payments. Therefore, it would have been unfair for the general group of creditors to have received and kept an advantage under the assignment agreement, but this assignment agreement has been declared null and void.

In the Ong Dan Tze Magdalene v Chee Yoh Chuang and anor case (2021), the complainant initiated divorce proceedings against the insolvent husband 1.5 months before filing for bankruptcy. The complainant obtained a preliminary ruling on the dissolution of the marriage 2.5 months before the final resolution of the insolvency order, which included approval orders for the sale of a property and the payment of the sales proceeds to the complainant as well as the transfer of another property to the complainant (the interim judgment) .

The higher court refused to ratify the interlocutory judgment. The Supreme Court found that the parties knew that the first property had already been sold at the time the interlocutory judgment was issued, and in any event found that the applicant had not acted in good faith in obtaining the interlocutory judgment because she had concealed it Truth. As for the second property, the Supreme Court found it did not benefit the general community of creditors, and the evidence strongly suggested that the preliminary ruling was an attempt to move the liquidator’s assets out of the reach of its creditors.

Perhaps unsurprisingly, the ratification test, as set out in both cases, benefits the general public. However, the court is aware of real transactions that were completed to sell the property prior to bankruptcy. In such cases, good faith is essential in entering into any such arrangement, including divorce proceedings.

Malaysia: higher bankruptcy threshold

There are three main laws in Malaysia related to the new amendments to bankruptcy law: (1) The Bankruptcy Law of 1967; (2) the Act on Temporary Measures to Reduce the Effects of Coronavirus Disease 2019 (Covid-19), 2020; and (3) the Insolvency Act (Amendment) 2020. The amendments made are intended to provide a buffer for the sudden surge in bankruptcy rates in the country.

The particular amendment to Sections 2 and 5 (1) (a) of the Insolvency Act 1987 is put into effect by Part VII of the Provisional Covid-19 Act to be consulted and applied in relation to bankruptcy or bankruptcy. related conflicts through August 31, 2021, subject to any extensions by the government.

It is particularly noteworthy that Clause 20 of the aforementioned bill provides that, while in effect, no filing for bankruptcy should be made against a debtor unless the aggregate debt under the filing is MYR 100,000 (USD 24,125), as of which previous amount of MYR50,000.

The Insolvency Act 2020 has also come into force, but will only come into force on September 1, 2021. Until then, all insolvency or bankruptcy-related questions will still relate to the provisional Covid-19 law.

This was first published in the Asia Business Law Journal.

Source link


Leave A Reply