When Restructuring And Insolvency Regimes Collide

• Law Firm: Withers LLP
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Insolvency/Bankruptcy
• Author: Mr Zhen Yu Lam and Wong Sze Qi
• Published date: 24 September 2023

Singapore's economy is expected to see slower growth in 2023 after its rapid recovery from the pandemic in 2022, with the Ministry of Trade and Industry recently narrowing the GDP growth forecast for the year.¹ As industries continue to feel the pinch of high inflation and interest rates, creditors and debtors alike may be considering appropriate solutions for companies which struggle to pay their debts.

In this article, we discuss a recent case which reflects how the Singapore Courts favour the restructuring of businesses while giving regard to creditors' interests. In Yap Sze Kam v Yang Kee Logistics Pte Ltd [2023] SGHC 43,² the Singapore High Court had the opportunity to consider an interesting interplay between the judicial management and receivership regimes. The Court declined to grant judicial management orders, on the basis that this would not be in the interests of the creditors considered as a whole, given the progress which have been made by the receivers and managers appointed over shares in the holding company.

Lam Zhen Yu from Withers KhattarWong's restructuring and insolvency team assisted Maybank in successfully opposing the judicial management applications in Court. The arguments we raised were adopted and cited by the Court as important considerations in reaching its decision.

Summary of facts

The case concerned the Yang Kee group of companies, including the parent holding company (the "HoldCo"), the logistics business arm (the "LogCo") and the property holding arm ("PropCo"). Following default on convertible bonds previously issued by the Group, receivers and managers (the "Receivers") were appointed by the bondholders over shares in HoldCo and PropCo, which were charged as security for the bonds. Upon their appointment, the Receivers had effective management control over the whole Group, and appointed their nominees to act as directors of the companies.

The Receivers then took steps to realise the undertaking of the Yang Kee Group and conducted a sale process which culminated in the Receivers deciding to proceed with one of two offers put forward by interested parties (the "Deal"). The Deal did not involve the sale of the entire undertaking of the Group, but primarily concerned the sale of shares in the PropCo held by HoldCo, together with a refinancing/waiver of outstanding arrears and guarantees owed by other companies in the Group. The Receivers also took steps to conduct a separate sale process of the LogCo's business and assets.

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