I OVERVIEW

In 2019, Singapore was globally ranked third and fifth in the areas of regulatory enforcement and civil justice respectively, according to the World Justice Project Rule of Law Index.2 This recognition lends credence to Singapore's development as a leading international financial centre, undergirded by robust and reliable dispute resolution infrastructure coupled with responsive and ever evolving legislation. Singapore has not only aimed to reduce the costs of lending at a local level by facilitating the enforcement of securities, but it has also sought to facilitate foreign law-governed securities located in Singapore.

At a domestic level, the Singapore courts' summary judgment process allows simple straightforward claims such as the enforcement of debt and guarantees to be expedited, keeping the costs of lending in Singapore low. Singapore has also positioned itself to be an international dispute resolution hub through legislation such as the Choice of Court Agreements Act (Chapter 39A, 2016 Edition) and through spearheading the recognition and enforcement of mediated settlement agreements under the Singapore Convention on Mediation. Singapore has also entered into memoranda of understanding with foreign courts to establish guidelines on the recognition and enforcement of judgments. Most recently, on 31 August 2018, Singapore entered into a memorandum of understanding with the Supreme Court of the People's Republic of China. Singapore has also previously entered into similar agreements with the Dubai International Financial Centre Courts, the Abu Dhabi Global Market Courts and the Qatar International Court and Dispute Resolution Centre.

As Singapore is a common law jurisdiction, Singapore law in the area of credit and security is largely based on English law. Concepts of common law have generally been followed and applied by the Singapore courts unless otherwise modified by local statute. Accordingly, Singapore law adopts and recognises the traditional common law forms of security interests such as mortgages, equitable charges, pledges and liens (as modified by local statute).

II REGULATION

The regulatory regime in Singapore in respect of securitisation will largely depend on the nature of the asset being secured. Singapore does not have a central regulatory body that maintains a register of all security interests in Singapore – instead, individual statutory bodies will have oversight over particular asset classes and, accordingly, any encumbrance or disposition of title in or to those assets will be registered with the appropriate statutory bodies. These statutory bodies may also prescribe forms in which the security documents must take, as well as any filing or lodgement requirements that must be complied with to perfect or otherwise give effect to the security created. Generally, any filings, lodgements or registrations in respect of securities with the relevant statutory body will incur fairly nominal registration charges. The creation or enforcement of certain securities will also attract taxes such as stamp duties and, in some cases, withholding tax.

The most common examples are charges over certain asset classes created by companies that are to be registered with the Accounting and Corporate Regulatory Authority of Singapore (ACRA), and mortgages over real property, which are registrable with the Singapore Land Authority (SLA). Security over these asset classes will be dealt with in greater detail below. Security interests created over specific assets such as vessels and intellectual property rights will be dealt with by the relevant statutory body in Singapore – mortgages over vessels are required to be registered with the Maritime and Port Authority of Singapore and security over intellectual property rights may be registered with the Intellectual Property Office of Singapore.

i Security over real property

Singapore adopted the Torrens system of land registration in the 1960s with the enactment of the Land Titles Act (Chapter 157, 2004 Revised Edition) (the Land Titles Act) and by 31 December 2002, the process of converting all land previously registered under the Registration of Deeds Act (Chapter 269, 1989 Revised Edition) to the Torrens system was completed. The central feature of the Torrens system is the principle that the registered proprietor has indefeasible title. In essence, the registered proprietor's title to land will be paramount and cannot be defeated by a prior unregistered interest (save for certain statutorily prescribed categories). The Torrens system saves any person dealing with a registered proprietor of land the expense of investigating the registered proprietor's title to be satisfied that the registered proprietor has good title to the land. A person dealing with a registered proprietor may therefore simply check the land register – and will be bound by interests stated in the register but will not be affected by any interests not reflected therein.

In Singapore, all dealings with title to registered land under the Land Titles Act are dealt with by the Land Registry under the auspices of the SLA. Under the Land Titles Act, the folios in respect of properties issued by the Registrar of the Land Registry are to be deemed conclusive evidence of the proprietorship of that property, including where the proprietor's estate or interest is subject to any encumbrances such as mortgages.

Notwithstanding that traditional mortgages involve the transfer of ownership of land by the mortgagor to the mortgagee subject to the mortgagee's right of redemption, mortgages created over land registered under the Land Titles Act differ in that there is no transfer of ownership in the property from the mortgagor to the mortgagee at the time of the creation of the mortgage. Instead, the mortgage is registered with the Singapore Land Authority, which maintains the registry of property transactions in Singapore, including the creation of any encumbrances on property in Singapore.

Unless a mortgage over real property has been registered with the SLA, the mortgage will not be effective in vesting any legal interest in the mortgagee. Upon registration, the mortgage will be reflected in any subsequent title searches conducted on the property and will be conclusive proof of the encumbrance of the property created in favour of the mortgagee.

ii Registrable charges

The creation of charges over certain asset classes granted by corporate entities may be required to be registered with the Accounting and Corporate Regulatory Authority of Singapore (ACRA), under the Companies Act (Chapter 50, 2006 Revised Edition) of Singapore (the Companies Act). The following charges are registrable:

  1. a charge to secure any issue of debentures;
  2. a charge on uncalled share capital of a company;
  3. a charge on shares of a subsidiary of a company that are owned by the company;
  4. a charge created or evidenced by an instrument that, if executed by an individual, would require registration as a bill of sale;
  5. a charge on land wherever situated or any interest therein but not including any charge for any rent or other periodical sum issuing out of land;
  6. a charge on book debts of a company;
  7. a floating charge on the undertaking or property of a company;
  8. a charge on calls made but not paid;
  9. a charge on a ship or aircraft or any share in a ship or aircraft; and
  10. a charge on goodwill, on a patent or a trademark or on a copyright or on a registered design or a licence to use any of the foregoing.

Charges created over the foregoing are to be registered with ACRA within 30 days of their creation if they are created within Singapore, or 37 days if created outside Singapore. While a failure to register the charge does not render the charge unenforceable between the chargor and the chargee, the charge will be unenforceable against the liquidator and other secured creditors of the company. In essence, where a company has created a registrable charge in favour of a lender and fails to register it, the lender will be unable to enforce its rights under the charge upon the company's insolvency or against any other creditor asserting a registered security or other recognisable interest over the same assets. The assets in question will instead form part of the company's general pool of assets to be administered and distributed by the liquidator, and the lender will be considered an unsecured creditor.

iii Issues of taxation and fees involved in the creation of security

While there are no significant tax benefits or savings in creating one form of security over another, certain types of securities will attract stamp duties that, although minimal, may nevertheless be a salient consideration for parties in a securitisation transaction. Stamp duty will be chargeable on any mortgage of real property or a mortgage of shares at the rate of 0.4 per cent of the loan amount granted on the mortgage subject to a maximum duty of S$500.

Where foreign lenders extend loans to Singaporeans or hold Singapore-based security, the issue of withholding tax arises as a relevant consideration. Withholding tax at the rate of 15 per cent will be chargeable on the gross payment of any interest, commission or fees in connection with any loan or indebtedness and deducted at the source. Any Singaporean making payment of interest, commission or fee in relation to a loan or indebtedness to a foreign entity will be required to withhold 15 per cent of that gross payment before making payment to the foreign entity.

Administrative fees or lodgement charges will also be imposed where any necessary registration or filings are made with statutory bodies. Each statutory body will prescribe the relevant administrative fees to be paid for the necessary lodgement or filings made in respect of securities. For example, a lodgement fee of S$60 will be payable to ACRA when a charge is registered.

III SECURITY AND GUARANTEES

The forms of security recognised under Singapore law may be broadly classified into the following categories:

  1. guarantees, including standby letters of credit and performance guarantees;
  2. charges over assets, both fixed and floating charges;
  3. assignments of receivables; and
  4. security over real assets such as mortgages and pledges.

The features of each category of security, relevant perfection requirements and the enforceability of the securities in the face of insolvency proceedings are explored in greater depth below.

i Guarantees

Personal and corporate guarantees, standby letters of credit and performance guarantees or bonds are all fairly typical forms of security in personam used commercially in Singapore. Generally speaking, there are no registration or other perfection requirements in respect of personal security, save that the guarantee be in writing and signed by the person giving the guarantee.3

The key feature of a guarantee is that the guarantor assumes only a secondary or collateral liability to that of the borrower, who will be primarily liable for repayment of the loan. In a true guarantee, the liability of the guarantor will depend on the validity and enforceability of the primary contract. Consequently, the liability of the guarantor will arise only when the borrower defaults. Notwithstanding this, guarantees in Singapore are often drafted as a guarantee and indemnity, thereby creating a separate and independent obligation on the part of the guarantor. The effect of this practice creates a primary obligation on the part of the guarantor that is not contingent on first looking towards the borrower under the underlying contract, or the validity of the contract.

Standby letters of credit (SBLC) are also often used in trade finance transactions. Under an SBLC, the issuing bank will undertake to pay the beneficiary upon the default of performance of obligations owed to the beneficiary of the SBLC. The prospective defaulter is usually the applicant of the SBLC. An SBLC may be contrasted with a guarantee, as it imposes a primary obligation on the issuing bank to make payment upon the beneficiary having fulfilled the terms of the credit. This is usually by way of the beneficiary producing a written demand for payment and a declaration of the performance default of the applicant. The issuing bank will be required to pay without further investigation in the absence of fraud. To maintain international comity between banks and lenders, SBLCs are usually issued subject to customary terms contained in the UCP 600 or the ISP98, which prescribe standard sets of rules and terms applicable to documentary credits or SBLCs.

Performance bonds are also common instruments used by banks. Performance bonds typically state that the bank will pay the bearer of the bond unconditionally upon demand, without any regard to liability under the underlying contract. In essence, when the bearer of the bond calls on the performance bond, the obligation on the bank to make payment will arise without any requirement for the bank to conduct independent investigations as to whether a breach has occurred under the underlying contract.

ii Charges

Charges do not involve the transfer of either ownership or possession of the charged property to the lender, and may be either fixed or floating. Fixed charges are granted over one or more specific assets and assets subject to a fixed charge cannot be freely dealt with or sold by the chargor. In contrast, a floating charge may be taken over a class of assets generally and 'hovers' over the assets, allowing the chargor to deal with it in the ordinary course of its business. Floating charges are appropriate where security is needed to be taken over the inventory of a business, as the chargor will still be able to sell or add to its inventory in the course of its business.

The specific assets secured by a floating charge will only be determined at the point in time that the floating charge crystallises. Parties may contractually agree on the events that trigger the crystallisation of a floating charge, such as events of default, insolvency or any attempt to dispose of or encumber the charged assets in a manner inconsistent with the terms of the security. Notwithstanding any contractual provisions for events of crystallisation, a floating charge automatically crystallises if a receiver is appointed over the chargor's assets or if the chargor goes into liquidation or ceases to carry on business.4 Upon crystallisation, the floating charge will attach to the assets in the class that it hovers over, and will be a fixed charge.

As stated above, all floating charges and certain fixed charges will be registrable with ACRA within 30 days of their creation (if created within Singapore) or 37 days (if created outside Singapore). A failure to register a registrable charge within the required period will, in the event of the chargor's insolvency, render the charge void against the liquidator and other creditors of the company. Priority between two charges over the same assets will be determined by the date of creation of the charges, and not by the time of registration.

iii Assignment of receivables

Another common security taken by lenders is assignment of trade debts. The assignment of trade debts and receivables may be by way of an absolute legal assignment or an assignment by way of security.

If an assignment is to be an absolute legal assignment, it must comply with the form and procedure prescribed by Section 4(8) of the Civil Law Act (Chapter 43, 1999 Revised Edition), namely that the assignment must be in writing and must not purport to be by way of charge only, and notice of the assignment must be given to the third-party debtor. Notice of the assignment to the third-party debtor is required to perfect the assignment. Where an absolute assignment fails to comply in full with the requirements of Section 4(8), the assignment will be an equitable assignment.

Although Singapore law recognises both legal and equitable assignments, the difference between them lies in the rights and remedies afforded to the lender against the third-party debtors. These differences may be traced to the requirement for notice to be given to the third-party debtor. In the absence of a Notice of Assignment, any payments made by the third-party debtor to the assignor will be a good satisfaction of its debt and the third-party debtor will be treated as having discharged its underlying obligations. This is because a third-party debtor, without knowledge of the assignment, will continue to discharge its obligations in accordance with the underlying contract by making payment to the assignor and cannot be liable to the assignee for the payment of debts already paid.

iv Security over real assets

Mortgages

While traditional mortgages involve the transfer of ownership of land by the mortgagor to the mortgagee subject to the mortgagee's right of redemption, mortgages of land registered under the Land Titles Act must comply with the formalities in the Land Titles Act. Land title mortgages differ from traditional mortgages in that there is no transfer of ownership in the property from the mortgagor to the mortgagee at the time of the creation of the mortgage.

Owing to Singapore's adherence to the Torrens system, priority of land title mortgages will not be determined by the order in which they are created – rather they will be determined by the order in which they were registered with the Land Titles Registry. This is an important distinction since rights to title in registered land derive from the act of registration.

Priority between legal mortgages (other than mortgages in respect of which priority is determined by registration in accordance with any applicable statute; for example, land title mortgages and Singapore ship mortgages) will be determined by the order in which they are created, although mortgagees are free to regulate their respective rights and interests between themselves. A legal mortgage will also prevail over all other mortgagees of whose mortgages the legal mortgagee had no notice at the time the legal mortgage was created.

Pledges

As pledges involve the bailment of the secured assets, the key feature of a pledge is that the pledgee has actual or constructive possession of the goods. Actual delivery may take place by physically depositing the goods with the pledgee, while constructive delivery may be by way of deposit of title deeds (without which the pledgor is unable to deal with the goods) or by way of deposit of keys to the warehouse in which the goods are stored.

The pledgee should not relinquish possession (whether actual or constructive) of the goods to the pledgor, as doing so may bring the pledge to an end. The redelivery of the pledged goods to the pledgor may cause the pledgee to lose his or her rights to the pledged goods unless it is for a limited purpose and parties clearly intend for the pledgee to regain possession when that purpose has been met.5

v Enforcement of security in the event of insolvency

Sections 98 and 99 of the Bankruptcy Act (Chapter 20, 2009 Revised Edition) (the Bankruptcy Act) set out the effect of bankruptcy on certain antecedent transactions, and will apply equally to companies (with the necessary logical amendments by way of Section 329 of the Companies Act. These provisions allow for the unravelling of pre-liquidation and post-liquidation transactions that would have remained binding on the company but for the winding-up. These provisions are intended to preserve net pools of assets available for distribution by the liquidator to unsecured assets, as well as preventing creditors from possibly jumping the queue in terms of priority.

In addition, the Companies Act prescribes a six-month 'hardening period' for floating charges wherein a floating charge created within six months of the commencement of a company's winding-up may be invalid to a certain extent.

Floating charge void upon winding-up

Section 330 of the Companies Act provides that a floating charge on a company's assets created within six months of the commencement of winding-up shall, unless it is proved that the company was solvent immediately after the creation of the charge, be invalid except to the amount of any cash paid to the company at the time of and in consideration for the charge together with interest on that amount at the rate of 5 per cent per annum.

Unwinding of transactions at an undervalue

Under Section 98 of the Bankruptcy Act, where an individual or company enters into a transaction for a consideration whose value is significantly less than the value of the consideration provided by the counterparty within five years prior to the date of the winding-up application, the court is empowered to make such orders as it thinks fit to restore the position to what it would have been if that individual or company had not entered into that transaction.

The individual or company must have been insolvent at the time the transaction was entered into or have become insolvent as a consequence of that transaction. A presumption of insolvency of the individual or company will apply where the transaction was entered into with an associate, the definition of which includes companies with directors in common, as well as companies in a parent–subsidiary relationship.

Notwithstanding that the transaction was entered into at an undervalue and that the company or individual was insolvent at that time or made insolvent as a consequence of that transaction, the Companies (Application of Bankruptcy Act Provisions) Regulations (1996 Revised Edition) provides that the court shall not make an order in respect of an undervalue transaction if it is satisfied that the company that entered into the transaction did so in good faith and for the purpose of carrying on its business with reasonable grounds for believing that the transaction would benefit the company.

Unwinding of unfair preference transactions

Section 99 of the Bankruptcy Act allows the court to unwind transactions occurring before the winding-up application that unfairly favour one creditor at the expense of other creditors even if the transaction does not diminish the company's assets. This provision aims to police debtor misconduct and passivity and ensures that all creditors are treated fairly.

Where the creditor is an associate of the company, the court has the power to examine and unwind any unfair preference transaction made within the two years preceding the winding-up application of the company. If the creditor is not an associate of the company, the court may only examine and unwind unfair preference transactions that are made within the six months preceding the winding-up application. The unfair preference transaction must be carried out at a time when the company was insolvent or becomes insolvent as a result of that transaction.

The following are examples of transactions that may be construed as intending to improve the position of a particular creditor:

  1. payment or part payment of an old debt;
  2. providing security for past indebtedness; or
  3. transfer of assets to an unsecured creditor in full or partial repayment of debt.

The court will only exercise its power to unwind such transactions if the company was influenced by a desire to produce, in relation to the creditor, the effect of putting the creditor in a better position than would have been the case if the transaction had not been entered into.

While the defence of good faith is inapplicable to unfair preference transactions, in the event of a company's insolvency, the liquidator will bear the burden of proof in establishing that the company was influenced by a desire to prefer a particular creditor in relation to the alleged unfair preference transaction.

IV PRIORITY OF PAYMENTS AND WATERFALLS

A Singapore court is likely to give effect to a contractual provision in an agreement (whether or not governed by Singapore law) distributing payments to parties in a certain order specified in the contract so long as the clauses are valid, binding and enforceable under the governing law of the agreement but subject to any statutory priorities that may arise in the event of the insolvency of the debtor under the provisions of the Companies Act.

Lenders are also free to contractually determine the distribution of payments between themselves. This may take the form of a subordination agreement in which lenders determine the order in which they may collect repayment from the debtor, or an inter-creditor pari passu agreement such that all lenders share equally in repayment in the proportions of the debts respectively due to them. Lenders in syndicated loan transactions will often enter into agreement with the facility agent to set out the distribution of payments to each lender in default and non-default scenarios.

Certain common law rights are also available to bankers, such as the banker's lien and banker's right of set-off.

A banker's common law right of lien over securities deposited by a customer with the banker in the ordinary course of business arises whenever the customer is indebted to the banker. The banker's right of lien will not extend to the credit balance in the customer's account as this credit balance is essentially a debt owed by the bank to its customer. It is illogical for the bank to take a lien over its own indebtedness. This is instead addressed through the banker's right of set-off. In select circumstances, a banker's right of lien can arise even though the customer's account is in credit. For example, if a banker allows its customer to draw against uncleared cheques deposited by the customer with the bank, the banker will have a right over the cheques as the banker has already given credit to the customer for the value of the cheques.

The banker's equitable right of set-off arises where there are mutual credits and debits between a bank and its customer. If a customer has more than one account with the bank, the bank will be entitled to treat all the accounts as one single account unless otherwise expressly or implicitly agreed between the parties. The bank may therefore combine two or more accounts kept by the customer with it in exercising its right of set-off.

V ISOLATION OF ASSETS AND BANKRUPTCY REMOTENESS

From the borrower's perspective, relying on the concept of separate legal identity and segregating its asset-holding companies is one of the main ways a group can achieve bankruptcy remoteness. This is facilitated in Singapore by the convenience and expediency of incorporating a company. Lenders, through a mix of cross-collateralisation, cross-default clauses and non-restructuring or reorganisation undertakings, and obtaining parent–child guarantees across group companies, seek to extend the lenders' remedies and recourse to group structures.

The bankruptcy regime is particularly relevant in factoring or discounting transactions. Financers engaging in invoice discounting or factoring arrangements are exposed to the risk of having their purchase of accounts receivables from the borrower recharacterised as a secured loan transaction. If so recharacterised, the sale of receivables will be treated as an assignment by way of security, which would have been registrable as a charge within the timelines set out in Section 131 of the Companies Act. In the event of the seller's insolvency, the charge over the account receivables would be void for want of registration.

Distinguishing a true sale from a secured loan in account receivables financing

In deciding whether a transaction may be properly characterised as a true sale or a secured loan transaction, the courts will look at the substance as opposed to the form of the transaction, taking into account the following factors in distinguishing a true sale from a secured loan.

Equity of redemption

The essence of a loan lies in the obligation to repay, which may be express or implied.6 The corollary is that the borrower has an equity of redemption, that is, the right to the ownership of the charged assets free of the charge on the discharge of his or her obligation to repay the lender. In contrast, a seller of book debts should not have an equity of redemption.7

Rights on realisation of book debts

In the case of a loan on security, the lender, on realising the charged assets, has to account to the borrower for any excess over the amount of the borrower's obligations to the lender. The corollary is that if the charged assets do not realise the amount of the obligations, the borrower is still liable for the shortfall. In contrast, in the case of a true sale of book debts, the buyer becomes the owner of the book debts and any profit or loss on realisation attaches to the buyer. A sale and purchase of book debts without recourse is therefore clearly distinguishable from a loan on security.

A sale and purchase of book debts with recourse would generally not be characterised as a loan on security, provided that the protection that the buyer is seeking is the obligation of the seller to repurchase the book debts or to guarantee payment of the book debts, as opposed to the obligation to repay the money paid to the seller by the buyer to the extent that it is not recovered by the collection of debts.8

Discount or interest

In the case of a true sale of book debts, the profit to the buyer should be a discount on the book debts, namely the difference between the amount paid for the book debts and the realisation of the same, as opposed to interest payable on the amount paid by the buyer to the seller.

If the transaction is rightfully characterised as a true sale, there will be no need for any registration or lodgment to be made with any government or regulatory authority in Singapore.

VI OUTLOOK

In keeping with Singapore's development as a leading international finance centre and in recognition of the increasingly transnational nature of insolvency and restructuring proceedings, Singapore has taken steps to develop its law to reflect the commercial realities of international transactions and trade. In 2017, Singapore adopted and implemented the UNCITRAL Model Law on Cross-Border Insolvency (the UNCITRAL Model Law). In the coming year, Singapore will see further changes to the restructuring and insolvency landscape with the enactment of the Insolvency, Restructuring and Dissolution Act. The legislative amendments introduced in the Insolvency, Restructuring and Dissolution Act are likely to shape the lending and securitisation market in Singapore as companies are encouraged to rehabilitate and restructure. Enforcement of foreign judgments in Singapore will also be made easier once the recently passed amendments to the Reciprocal Enforcement of Foreign Judgments Act (Chapter 265, 2001 Revised Edition) (REFJA) come into force.

i UNCITRAL Model Law

The UNCITRAL Model Law recognises the increasingly transnational nature of restructuring and insolvency proceedings and aids in preserving the interests of foreign lenders. With the adoption of the UNCITRAL Model Law, a foreign representative can apply to the Singapore High Court for recognition of foreign insolvency proceedings if certain stipulated conditions are met, unless that recognition would be contrary to the public policy of Singapore. There is also no requirement of reciprocity in that the Singapore courts will be able to apply the UNCITRAL Model Law for foreign corporations in jurisdictions that have not adopted or ratified the UNCITRAL Model Law. If the foreign insolvency proceeding takes place in the state where the debtor has the centre of its main interests, certain automatic reliefs will be provided by the recognition order. These reliefs include the staying of individual actions or proceedings against the debtor's assets, rights, obligations or liabilities, and the staying of execution against the debtor's assets. Where the foreign insolvency proceedings are taking place in the state where the debtor does not have the centre of its main interests, any reliefs provided will be subject to the discretion of the Singapore courts.

ii Insolvency Restructuring and Dissolution Act

On 1 October 2018, Singapore's Parliament passed the Insolvency, Restructuring and Dissolution Bill (the Omnibus Bill). The Omnibus Bill, which has yet to come into force, consolidates Singapore's corporate and personal insolvency and restructuring laws into a single enactment. The Bill updates insolvency legislation in Singapore and, more significantly, introduces a number of new provisions in respect of corporate insolvency. Once the Omnibus Bill takes effect, the Bankruptcy Act and provisions in the Companies Act relating to restructuring and corporate insolvency will be repealed.

The Omnibus Bill sets out provisions that deal with voidable transactions in the context of personal as well as corporate insolvency. In particular, Section 229 of the Omnibus Bill provides for the extent to which a floating charge may be unwound or deemed voidable.

The Omnibus Bill also introduces restrictions on ipso facto clauses. At present, Singapore law does not contain any restrictions on the exercise of ipso facto clauses upon the insolvency of a Singapore company. Consequently, parties are free to contractually provide for the termination or modification of the operation of a contract upon the occurrence of one of the parties' insolvency. Section 440 of the Omnibus Bill will restrict the ability of contractual counterparties to terminate, amend or claim accelerated payments under any agreement, or to terminate or modify any existing right or obligation under that agreement simply on the grounds that proceedings have been commenced against the company or that the company is insolvent. This provision aims to support companies' rehabilitative efforts and expressly prohibits any attempts to contract out of the restrictions. The Bill also prescribes certain specified classes of contracts such as government contracts and ship charters that will not be subject to the restrictions on ipso facto clauses.

As Section 440 of the Omnibus Bill applies only to situations where the proceedings have commenced and are continuing against a company or the company is insolvent, it may be implied that ipso facto clauses may still be triggered on the occurrence of any other material breaches of the agreement, such as a failure to make timely payments. Even so, many lenders will probably have to review their standard-form loan and security agreements, which usually include as events of default or crystallisation the commencement of any proceedings or insolvency of the company that would trigger immediate repayment of the loan and the enforcement of securities. Bearing in mind that the current position under common law is that floating charges will crystallise immediately upon the chargor's going into receivership or liquidation, it is unclear whether this position will continue to hold in the face of Section 440 of the Omnibus Bill.

iii Reciprocal Enforcement of Foreign Judgments Act

On 3 September 2019, Singapore's Parliament passed the Reciprocal Enforcement of Foreign Judgments (Amendment) Bill. Once the amended REFJA comes into force, the existing Reciprocal Enforcement of Commonwealth Judgments Act (Chapter 264, 1985 Revised Edition) (RECJA) will be repealed. The revised REFJA aims to streamline the legislative framework for the enforcement of foreign judgments in Singapore with qualifying judgments from states that have ratified the Hague Choice of Court Convention enforced under the Choice of Courts Agreements Act 2016 and all other judgments enforced under the amended REFJA.

The amendments to the REFJA increase the types of foreign judgments in civil proceedings that can be enforced in Singapore. The regime will work on a reciprocal basis, thereby allowing the Singapore government greater flexibility to enter into treaties with foreign jurisdictions to enhance the recognition and enforcement of Singapore judgments overseas.

At present, the REFJA and RECJA only enforce final money judgments from superior courts in foreign jurisdictions. The amendments to the REFJA extend the scope of the REFJA to recognise and enforce non-money judgments and lower court judgments, as well as interlocutory judgments. In particular, the amendment for the recognition of foreign interlocutory judgments is much needed to keep pace with the international nature of the business transactions of today.

The amendments to the REFJA will also introduce new provisions to prevent reciprocity requirements from being circumvented. For example, judgments from a recognised court on appeal from a non-recognised court will not be enforced under the REFJA.


Footnotes

1 Ting Chi Yen is a partner and Dorothy Loo is an associate at Oon & Bazul LLP.

2 Rule of Law Index 2019, World Justice Project, IBSN 978-0-9964094-1-4.

3 Section 6(b), Civil Law Act (Chapter 43, 1999 Revised Edition).

4 Re Panama, New Zealand and Australian Royal Mail Co (1870) 5 Ch App 318 (Court of Appeal in Chancery, England).

5 Law of Credit and Security, Loo Wee Ling at [10.57].

6 Nissho Iwai International (Singapore) Pte Ltd v. Kohinoor Impex Pte Ltd and another [1995] SGHC 127 at [10] to [13].

7 In re George Inglefield, Limited [1933] Ch. 1.

8 Salinger on Factoring, 4th Ed. at 7-22.