Insights

As a financial hub, F1 night race location, long-haul stopover, historic, expensive, friendly and innovative city state, Singapore has used its scarce resources wisely since independence in 1965. A new twist now emerges following the passage of the “Omnibus Bill” in October 2018 that has become the Insolvency, Restructuring and Dissolution Act 2018. The new twist is Singapore as a restructuring hub – an attempt, perhaps, to challenge the global supremacy of London?

One of the most innovative parts of the Insolvency Act 1986, relating to individuals, was the introduction of the Individual Voluntary Arrangement (IVA). IVAs are private agreements between debtors and their creditors to compound their debts and avoid bankruptcy. Once 75%, by value, of creditors have agreed to the IVA it becomes binding on all creditors. Slow to start, but championed by a few Insolvency Practitioners (IPs), IVAs have grown in numbers. As private agreements (unlike Bankruptcy) debtors can retain certain assets and introduce third-party assets and income, provided creditors get a better deal than they would in bankruptcy.

As the legislators add further chains and manacles to the bank’s position, the banks engineer ways to avoid them, escape from them and, in so doing, undermine efforts to constrain them.

On 22 October 2006 European Home Retail PLC (EHR) appointed Administrative Receivers (PWC), under a debenture granted to HBOS in 2000. Not something earth shattering, in itself, but the timing – 8 weeks to Christmas (that’s around 56 more sleeps) sent reverberations through the press (Smithers, 2006 for example), the banks, the consuming public and the corridors of power.

When the Insolvency Act 1986 was written, pride of place, Part 1 of the Act, was dedicated to the Company Voluntary Arrangement (CVA). Not hidden in Chapter 17, sub-section A (iii) paragraph 22(z) but there, on the first page, heralding a new era of corporate recovery and rehabilitation.

“Poor management” is often a key reason given for the insolvency and failure of businesses, and this is explored, as well as what facilitates poor management.