The Simplified Insolvency Programme (SIP) has been instituted to facilitate the restructuring or liquidation of micro and small companies (MSCs). The SIP was ushered in by the Insolvency, Restructuring and Dissolution (Amendment) Act 2020 (IRDA Amendment Act), with the relevant provisions recently commencing on 29 January 2021. It modifies the Insolvency, Restructuring and Dissolution Act (IRDA) which itself entered into force only on 30 July 2020 (See “The Insolvency, Restructuring and Dissolution Act 2018 – A New Chapter in Singapore’s Insolvency Laws”).

What is the SIP’s purpose?

The SIP is in fact part of a suite of measures to help MSCs in view of COVID-19. It provides simpler, faster and lower-cost processes for:

• Debt restructuring
• Winding up

With much of the economy continuing to reel from the shockwaves of COVID-19, the SIP seeks to tailor a more cost efficient process for struggling MSCs. MSCs which have explored other options may be looking to restructure or to liquidate where there are no better alternatives. The IRDA Amendment Act unfortunately cannot stand in way of the inevitable, where liquidation is the only real option. In this case, it meets the grim reality by providing a winding up framework that allows the MSC to be wound up expeditiously at minimum costs.

Who qualifies for the SIP?

To qualify for the SIP, the applicant MSCs must have:

• 30 or fewer employees
• 50 or fewer creditors
• Maximum liabilities (including contingent and prospective liabilities) of S$2 million
• Maximum annual sales turnover of S$10 million
• In the case of the simplified winding up programme, the value of its realisable unencumbered assets not exceeding S$50,000

In addition, the MSC has to be a company incorporated in Singapore and there must be not be any circumstances that make the MSC unsuitable for the SIP. For example, a company would be unsuitable if:

• Any Court applications or orders have been made to wind up or restructure the company; or
• The restructuring or winding up of the company is likely to require significant resources or specialised knowledge or expertise.

Creditors of an applicant MSC should take note that they can object to its acceptance into the SIP by submitting a notice of objection within the stipulated period.

Why is the SIP a simplified process?

A. Simplified Debt Restructuring Programme (SDRP) (for viable businesses)

1. Single Court application: The SIP is adapted from the existing pre-packaged scheme of arrangement under the IRDA, and requires only one application to the High Court.
2. Temporary moratorium and restriction on ipso facto clauses: Once a company has been accepted into the SDRP (until the date of its discharge), no creditor actions will be allowed in court to give the company time to formulate the restructuring plan. Clauses that lead to an automatic default or termination of contracts on insolvency in supplier and third party contracts (also called ipso facto clauses) will also be rendered ineffective.
3. Lower approval requirement by creditors: Only two-thirds in value approval (with no requirement of a majority in number) is required for the debt restructuring plan as compared with a majority in number representing 75% in value required for a scheme of arrangement under section 210 of the Companies Act.

B. Simplified Winding Up Programme (SWUP) (for non-viable businesses)

1. No Court winding up application required: The process is fashioned on the voluntary winding up regime under the IRDA, and does not require a court application to wind up the company.
2. Early dissolution without distribution of dividends, etc.: The company can also be dissolved quickly without steps such as the distribution of dividends, when the liquidator is of the view that the company’s assets are not sufficient to meet its liabilities, and there is no necessity for any further investigation into the affairs of the company.
3. Reduced scope of liquidator’s functions (no creditors’ meeting): The liquidator’s functions are reduced in scope, for example, doing away with the need for creditors’ meetings.

The winding up will be administered by the Official Receiver (OR) or assigned to private liquidators, as the case may be.

How much does it cost?

There are fees payable under the SIP, in particular, at the stages of submission and acceptance of the SIP application, as illustrated in the table below:

According to the Ministry of Law, the deposit of $18,750 for the SDRP takes into account an average government subsidy of 25% for the companies.

(Background: See https://io.mlaw.gov.sg/corporate-insolvency/sip-faq/ (accessed on 1 February 2021))

Further, the OR has a discretion to waive or remit the deposit (in whole or in part).

How long will the SIP last?

The SIP will be available to qualifying MSCs for a period of 6 months from 29 January 2021 to 28 July 2021, unless such period is further extended by the Minister for Law.

How does a company apply for SIP?

A company will need to submit an online application, with the required documents and information, via the Ministry of Law’s website at: https://eservices.mlaw.gov.sg/io/.

How can the SIP help?

If you are an MSC that meets the eligibility criteria, the SIP presents an expeditious path forward. It focuses on efficiency. It supports restructuring efforts by providing a lower costs environment to facilitate this. It also helps to bring businesses that are no longer viable to a swift and less painful end, thereby allowing resources and capital to be re-allocated quickly to other business ventures.

Further details can also be found on the Ministry of Law’s website at: https://io.mlaw.gov.sg/corporate-insolvency/sip-faq/ and https://www.mlaw.gov.sg/news/press-releases/simplified-insolvency-programme-commences.