COVID-19 (Temporary Measures) (Amendment No 3) Bill and Insolvency, Restructuring and Dissolution (Amendment) Bill

(6 min) Mr Louis Ng Kok Kwang (Nee Soon): Madam, the IRDA Bill aims to alleviate difficulties that may be faced by micro and small companies or MSCs during COVID-19.

Many businesses, including our MSCs, may not be able to weather this storm. If they are to survive, they may need significant restructuring. The Bill recognises the reality that the experiences of MSCs facing restructuring or winding up are going to be very different from that of companies with more substantial assets. I commend the effort to streamline the processes for MSCs that are in this position. I also support the COVID-19 (Temporary Measures) (Amendment No 3) Bill which addresses difficulties faced by another group – companies in our construction sector.

I have three points of clarification for the IRDA Bill and one point on the COVID-19 (Temporary Measures) (Amendment No 3) Bill.

First, the IRDA Bill lowers the threshold vote from creditors required to commence restructuring. Currently, approval from a majority of creditors holding 75% in value of the debt owed must be obtained to approve a Scheme of Arrangement. This Bill lowers the threshold from 75% to two-thirds.

The threshold is important because a company that is able to continue without intervention should not be forced to undergo restructuring at the whims of a small number of creditors. Restructuring may also compromise the rights of creditors, including those that vote against approving it.

To ensure that we strike a correct balance, will Minister share what further safeguards are in place to help businesses in the face of potentially overzealous creditors? Related to this, can Minister share what guidance is provided to MSCs and their creditors in deciding whether and when to undertake restructuring? For instance, I understand that Credit Counselling Singapore will administer the restructuring assistance scheme for sole proprietorships and partnerships. Can Minister share if the Simplified Insolvency Scheme will be complemented by programmes that provide closer guidance for MSCs and their creditors through the restructuring process?

Second, the new subsection 50(1A) allows exempted individuals to hold an insolvency practitioner’s licence without being "a qualified person." The licensing regime for insolvency practitioners was introduced in the Insolvency, Restructuring and Dissolution Act 2018. It was a welcomed move to increase professional standards in this area.

However, allowing exemptions to basic qualifications required of insolvency practitioners, so soon after the new regime is in place to raise standards, might send a contradictory message on the expected standards of insolvency practitioners.

Can Minister clarify in what situations does the Ministry intend to use this exemption clause? What checks and balance will be in place to ensure that exempted individuals perform to the standards expected? For example, will exempted individuals be required to hold any basic qualifications? Can Minister clarify if this exemption is intended to cope with the short-term increase in case-load from the fast-track process or is this intended to be a general longer term exemption? Can Minister also share if exempted individuals will be provided with any guiding principles on how to apply the relevant insolvency principles in relation to winding up or restructuring?

Fourth, although the fast-track process introduced by the Bill is limited to just six months, it is very possible that the effects of COVID-19 on small- and medium-sized MNCs will exceed this duration. Will Minister explain what factors were taken into account when stipulating this specific duration of time? Will there be any possibility of the fast-track process being extended and what are the factors that determine this extension?

Further, the intention behind the Bill of allowing smaller companies to avoid the increased costs and time associated with the usual court process should continue to apply after we have emerged from this crisis. Will Minister therefore share if the Ministry will consider adopting the provisions of this Bill on a permanent basis for MSCs and possibly even all SMEs in the future?

For my final point, I turn to the COVID-19 (Temporary Measures) (Amendment No 3) Bill.

The universal extension of time is a welcomed move. I understand there are currently some uncertainty on whether an extension of time automatically applies once a contractor has applied for relief from liquidated damages under Part 2, section 6 of the current Act. As a practical safeguard, some contractors may be legally advised to continue applying for an extension of time pursuant to the contract provisions.

However, this gives rise to its own set of issues. Importantly, an extension of time under the contract may be discretionary. Further, condition precedents for the extension of time stated under the contract may not have been fulfilled. I understand this is a common defence raised.

The universal extension of time of four months addresses this uncertainty. However, contractors who require relief for a longer period of time may still have to seek recourse under part 2, section 6 or negotiate under their contract provisions.

In this event, can the Minister clarify whether an extension of time automatically applies where a contractor applies for relief and serves a Notification for Relief? If so, can the Minister clarify how this extension of time beyond the four-month period interacts with the contract provisions on extension of time?

Madam, notwithstanding these clarifications, I stand in support of both Bills.

Hansard: https://sprs.parl.gov.sg/search/sprs3topic?reportid=bill-482

Response from Mr Desmond Lee:  I would like to thank the Leader and this House for the dispensation.

Mdm Deputy Speaker, let me address some of the questions that have been raised in respect of the provisions in Parts 8A, B and C of COVID-19 (Temporary Measures) Amendment Bill.

First, Mr Louis Ng asked whether an EOT, beyond four months automatically applies when a contractor serves a Notification for Relief under Part 2 of the Act, and how this would interact with contractual provisions on EOT; while Assoc Prof Jamus Lim asked why we chose four months universal EOT instead of aligning with the two months circuit breaker or with Phase One, and Mr Xie Yao Quan asked if we had consulted the industry on the universal EOT proposal, and whether contracts between contractors and sub-contractors will also be covered.

First, let me assure the Members that our proposals were developed in close consultation with the industry and are supported by the industry associations.

Part 8A of the Bill provides for a universal EOT of four months to cover the period earlier this year when most construction projects were stopped.

As I mentioned earlier, two months account for the Circuit Breaker period, and two months account for the subsequent period when all dormitories were yet to be cleared. So, instead of aligning it with Phase One, we aligned it with the reality on the ground which is the duration for which most of the workers were still in the dormitories and the dormitories had not yet been cleared.

All contractors, including sub-contractors, were affected by these delays. Hence, the proposed universal EOT will also apply to contracts between contractors and sub-contractors.

Contractors seeking an EOT beyond the universal four months period provided by the Bill should negotiate with their counter-party, or rely on contract provisions. The intent is to arrive at an amicable resolution that is acceptable to both parties.

But if the matter cannot be resolved, then the contractor can serve a Notification for Relief under the existing Part 2 of the Act.

Once the Notification for Relief is served, the contractor will be able to rely on the defence under section 6 of the Act against any claims for liquidated damages payable under the contract in respect of delays that are materially caused by COVID-19 which occur beyond the four months EOT provided by Part 8A, and within the prescribed period.

In this respect, in response to Mr Louis Ng's question, the protection afforded under section 6 of the Act is similar in effect to an EOT but they are not exactly identical. For instance, depending on the terms of the contract, an EOT may clearly have an impact on matters such as defects liability period or DLP of a project.

Mr Xie Yao Quan also asked how equitable co-sharing between parties will be determined in respect Part 8B of the Bill. He suggested that we model the universal provision for co-sharing after the approach that has been adopted for public sector projects. I think he is referring to the prolongation cost that the Government procuring entities have provided to Government projects. That is indeed what we have done.

The proposed provision in Part 8B of the Bill will require 50% co-sharing of additional non-manpower-related costs between the contracting parties in all applicable construction contracts, whether public or private. This is subject to a monthly cap of 0.2% of the contract sum, with the total claimable amount capped at 1.8% of the contract sum.

Mr Xie also said that it may not be easy for contractors to fully account for additional costs such as incremental private transport costs, which may add up.

To clarify, the provisions under Part 8B of the Bill provide for co-sharing of additional costs due to delays arising from COVID-19. We have separately provided construction firms with substantial financial support to help with additional compliance costs associated with COVID-Safe restart criteria.

Hansard: https://sprs.parl.gov.sg/search/sprs3topic?reportid=bill-483

Response from Edwin Tong Chun Fai: Thank you, Mdm Deputy Speaker. I thank the various Members who have spoken in support of the Bill.

Let me just make three overarching points before I go into the specific questions that have been raised.

The first is to reiterate that these measures have to be looked at in the context of the broader schemes, measures, budgetary as well as non-fiscal measures that have been put in place to assist individuals, businesses and also to seek to rejuvenate the economy. And to the extent that Mr Henry Kwek has said what else can we do, and also whether we should keep and extend Part 3 of the earlier COVID Bill – please also look at this in the context of the fact that beyond these immediate measures, there are also measures implemented by MAS, by EDB. There is the Extended Support Scheme, both standard and customised for those who do not meet within this scheme. And then, also in relation to the insolvency thresholds, the IRDA has been revised recently so that the debt repayment scheme to ensure that individuals have a reason, have a basis on which to avoid bankruptcy had been extended, and that was implemented in July 2020. We moved the thresholds to $150,000 for those individuals.

Second, all three of these Bills need to be looked at in tandem. They provide different options. Some are complementary and, indeed, an individual or a business can use more than one of these measures. I believe it was Mr Edward Chia who asked whether these are in addition to the measures that have been put in place in the earlier rental relief framework. The answer is yes. They do support the businesses who may already have enjoyed the rental relief framework but now choose to decide that they wish to renegotiate the contract with parties; you can avail yourself of this but, obviously, to the extent that the rental relief framework also provides for a repayment period, if the repayment schedule for the outstanding amounts has not been fulfilled, then it could be unfair to allow you to exit from the contract.

So, that has to be taken into account. Those arrears should be discharged and then you can look at the termination provisions under this plan.

Third, the purpose behind these measures, as I said at the start, is to rejuvenate, not only to look at where we were six months ago which was to hold the line with a moratorium. That was the reason behind "COVID 1"; then with "COVID 2" we look at an additional injection to help tenants with their rental, one of the biggest cost components.

But we want to also look forward, in terms of rejuvenation so, for example, I mentioned we do not want to have zombie companies remain on the books, companies which are no longer sustainable as a business entity, but which remains alive because of financial and fiscal injection. That is not going to be viable in the long term. It ties up resources, manpower as well as assets.

We also want to move away from the thresholds that just hold the line. So, again, on Mr Henry Kwek's proposition as to whether we can go back to where it was before in ensuring that we assist parties to stay out of bankruptcy, for instance, or liquidation, I would suggest that those entities look at this framework in the SIP, decide whether you can restructure, if not to exit under the liquidation plan. So, the overall momentum and direction of these amendments is to take the economy, businesses forward.

Mr Murali raised several questions, one of which was whether there was going to be a moratorium within the framework of this Bill whilst the parties were working out their own renegotiations. The answer is yes, the Bill does provide. And service of the Notice of Negotiation will itself trigger an automatic moratorium on both legal as well as enforcement actions. So, if you have an outstanding judgment then there might also a moratorium on enforcement on those judgments. The list of prohibited actions, for Mr Murali Pillai's benefit is found in Part 2 of the Fifth Schedule of the Bill and this sets out the series of steps that would be covered by the moratorium.

Several Members – Mr Murali Pillai, Mr Derrick Goh, Mr Edward Chia, Mr Patrick Tay and Mr Vikram Nair – spoke about the thresholds and the concern that the thresholds that we set not to be set too high so that more entities could benefit from this.

I wish to reiterate our position that our overarching goal in designing the architecture of these two Bills is to help the economy for the long term. We are neither on the side necessarily of the landlord; we are not pro-landlord or pro-tenant or pro-hirer or pro-supplier. But we want to achieve a fair balance between the business entities and provide a framework for them to re-look at their operating assumptions, look at it in the context of what they know today about the economy, about the restrictions to the businesses and then, make a considered decision as to what the renegotiated terms ought to look like. It is in this context that we will be setting the thresholds.

I forget whether it was Mr Edward Chia or Mr Murali Pillai who asked where we would set the revenue cap. We would look at, as far as possible, helping the majority of micro and small businesses. We believe that those are the entities which would need assistance, the nudge that we spoke about, to give them a bit of leverage in initiating the renegotiation. So, it will cover a broad range, the majority of micro and small businesses.

And as far as the revenue drop is concerned, something that is of an order of magnitude that will make it quite clear that these are entities that have suffered,and it is a result of COVID-19. The drop between the comparable periods in 2019 and 2020 will demonstrate that. And I have explained earlier why we chose to use a number, as opposed to having each and every case come before the Assessor to undertake an individual forensic evaluation as to whether or not this factor is part of the COVID-19 or not part of COVID-19, and whether it is mitigation and so on. 

We have consulted with the industry. We will continue to do so and those numbers will be prescribed in subsidiary legislation. And I assure Members that the moment we settle on the decision on this, we will make an announcement, so that as much notice as possible is given to the stakeholders.

Mr Edward Chia proposed several novel additional qualifying criteria and I do share his concerns as well. Remember that one of the objectives I outlined earlier was for this to not just be fair and thorough in how we apply it, but it has also go to be efficient in how it is administered. The last thing we want is for a scheme that is very well designed with many exceptions and many differentiated tiers, only for it to cause a problem in the administration and operationalisation of the scheme.

So, whilst I understand where Mr Edward Chia is coming from, I wonder whether the gains of that approach that he has suggested, would not be commensurate with the costs and the possible drag on the efficiency of the administration by costs. 

To formulate the criteria with intra and inter industry differences would make it difficult to apply and would also raise questions as to what would be the appropriate differentiated levels between each industry.

Mr Edward Chia also asked whether the cost incurred by a tenant on fixtures such as fixed equipment, can be used to offset the outstanding obligations and I think the rationale Mr Edward Chia gave was that these fixtures when left behind could benefit the landlord. That is a matter that is within the discretion of the Assessor when the Assessor decides what the appropriate release terms ought to be following the termination. We recognise that the default consequences that have been sketched out in a fairly long and quite elaborate table in Part 4 of the Second Schedule, might still not fit every situation. But we believe that if you look through it, the relevant guiding principle behind how and on what terms the termination ought to be allowed would be quite clear.

 Assessors, therefore, have a broad discretion to adjust the rights and obligations of the parties upon termination. An overarching intent is to achieve a fair and just outcome in each case. So, to give Members some further clarity as to what this might entail, the Assessor might well allow parties to pay sums, including the accrued obligations through instalments, having regard to the relative financial position and cash flow of the parties. They might also determine if additional compensation might be payable that is just and fair in the circumstances, one of which might be the value of the fixtures that have been left behind, as suggested by Mr Edward Chia. 

One other scenario that might arise would be whether some of the property that was unutilised, that was not consumed should be returned to the other party, the counter-party upon termination. So, there is a fairly broad and flexible range of options that the Assessor would have regard to.

Mdm Deputy Speaker, let me turn to some questions Mr Derrick Goh had raised. I think I covered it earlier when I said that the rental relief framework and the Re-Align Framework were not mutually exclusive and tenants that had qualified under the rental relief framework can still qualify for the Re-Align Framework as long as they meet the Framework's criteria. I should point out, as I mentioned earlier, that one of the conditions of the SRS is that if the tenant terminates the lease during the repayment period with some amounts still outstanding, then that has got to be something that the Assessor would take into account. The Assessor will not be able to allow a tenant to walk away from a tenancy that is under SRS without the outstanding rental still due to be paid.

Mr Patrick Tay asked about appeals and raised some questions over outcomes of some of the earlier "COVID 1" and "COVID 2" Assessor decisions. Madam, in a limited situation, a party can seek a review of the determination by the Assessor for the Re-Align Framework that is set out in section 67 of the present Bill. One example of where this power could be invoked is where the party either did not or could not put in relevant evidence before the Assessor and in the context of the case it is just and fair for the Assessor to reopen the case and look at the evidence that is available and then make a decision based on the review.

To Mr Patrick Tay's point that there have been questions on the determination under "COVID 1" that has raised some degree of unhappiness with his residents, I would like Mr Patrick Tay to know that we engage with many of these individuals quite often. Indeed, we have been engaging with parties who give us feedback on the assessment process. And, in most cases, the relief is to grant the moratorium. But having said that, we do look at the cases very closely within MinLaw. I believe previously when I spoke about the earlier Bill, I mentioned that these Assessors are organised in a form where there is a district judge who heads each of the groups, and they discuss the outcomes across the different Assessor panels. In many cases, particularly when we first set up the Assessor panels, both Minister Shanmugam and myself were involved in reviewing each decision, making sure that there is parity across the different Assessor panels and to really discern the different issues that come through so that there is alignment and uniformity in the decisions.

That said, if Mr Patrick Tay is aware of any other outlier decisions that he wishes for us to look at, please do contact MinLaw and we will have that evaluated. 

Madam, there are various miscellaneous and clarificatory amendments to Parts 1, 2 and 3 of the Act. These also come in to modify the process and to improve on the process as we learn more about it.

First, these amendments will clarify that the Minister may extend the prescribed periods under Parts 1, 2 and 3 or for description of the scheduled contracts under Part 2 of the Act by different periods of time.

Second, the Bill provides that applications pending at the end of the prescribed period will be deemed withdrawn. Apart from events and tourism related contract and construction and supply contracts, which I spoke about in my opening speech, the only relief available under Part 2 is really the temporary moratorium. And once the prescribed period expires, there is no need for any further determination by the Assessors. The rationale being the relief is in fact, the moratorium itself.

Third, to facilitate the smooth operation of Part 2 of the Act in relation to each scheduled contract, the Bill makes amendments to remove all the references to this section 3 prescribed period and instead have the provisions refer to the specific dates prescribed in the COVID-19 (Temporary Measures) (Rental and Related Measures) Regulations. This will facilitate necessary flexibility should there be a need to make further amendments subsequently.

Ms Hany Soh asked about assistance to help businesses understand the options how the Framework works and to whom it applies and the process. I think she made several very useful and thoughtful suggestions. My Ministry is getting ready to support the businesses and as I said at the outset, we know that as much as good intentions and thought have gone into designing the scheme, we do want it to be able to be operationalised and administered well and efficiently on the ground.

We have reached out to various industry groups, including the various chambers, trade organisations, associations – those who are in touch on the ground with the micro and small businesses – for help to disseminate information packages. I think Mr Murali also made that point.

We will also arrange for these organisations to set up legal clinics so that they can have a more direct port of call, more direct way of consulting with pro bono lawyers to assist in at least making a first triage of whether the case or the contract is something that they would wish to seek renegotiation for. And if so, what kind of terms will be appropriate for them; some kind of assistance. We have also been exploring with the Law Society to set up something on a broader scale for more outreach for these pro bono lawyers to assist parties on the ground. In doing so, we are very mindful that we have a limited six-week period. I have explained why it ought to be six weeks because of certainty but at the same time we also acknowledge that parties will need assistance on the ground in this six-week period and we will do so.

Apart from Law Society and the trade associations, we have also reached out to the law schools. As Members may know, law schools also run pro bono centres with the assistance of tutors and students. We have also reached out to the Singapore Mediation Centre or SMC for assistance where mediators can then help parties to break the impasse during the negotiation period. Because very often, when you have two individuals come together, the environment could be hostile in those situations where expert mediators can play a role, MinLaw officers will put them in touch with SMC mediators to try to facilitate the process.

All of that, done in the context of understanding that what we really want out of this, is for parties to renegotiate their positions, come up with something that both sides can live with, mutually workable and carry on from that position.

Mr Murali suggested that model clauses be looked at and I think that is a very good idea. We will work on some of those and maybe consult with Mr Murali as well. We have another pro bono source now. And we will tap on Mr Murali's experience and expertise to work some of these clauses into contracts upon renegotiation. 

Ms Soh also asked if there will be enough Assessors with the right qualifications to ensure that the determinations are responsive. I think that is another very important point because much as we want the process to be resolved quickly with a six-week time period, we also want to ensure that the Assessors will be able to expeditiously, in the context of the case, reach a decision.

Our Assessors for the contractual moratorium period set up by "COVID 1", comprise mainly volunteers. I outlined that in a previous Parliamentary Question. For this framework, the six-week deadline as I mentioned, means that we must expect that most of the applications will coalesce and come together at around the same time. And so, the applications for the adjustments will also likely be more complex with regard to the schedule that we have set up and yet at the same time, need to be more timely.

So, the mechanism that we have set up, we will require more resources and hence, we have decided that the Assessors for this Bill, will first of all be a dedicated and separate pool of Assessors from the earlier COVID-19 Bills. Second, they will also be full-time Assessors, engaged by the Ministry to look into these cases and they will comprise experienced lawyers and accountants who will look at this on a full-time basis once the Bill is in force.

Ms Soh and Assoc Prof Jamus Lim also asked about legal advice and legal representation in relation to claims under the COVID-19 Bill for assessment. I just want to clarify that legal advice is always available. And legal advice in fact, will be available through the various pro bono options that I have outlined earlier. What we have not done is to allow for lawyers to represent the parties before the Assessors and there are good reasons for that.

First, if you have a lawyer represent one party, it is invariably going to be the stronger party to the negotiation. The whole purpose and raison d'etre behind this, is to assist the smaller micro and small enterprises to be able to take advantage of this Bill and to try and take a position before the Assessor. So, we do not want the two parties to be unequally represented before the Assessor.

Second, this process is not designed with legalities in mind, where rules of evidence, how you prove a case and so on will be the central feature of the assessment. It is really about looking at what is fair and just, in the context of the case, in the context of the two parties and the circumstances between the two parties.

As Members know, the Assessors' overarching objective is really to achieve that fairness. From that perspective, it is not an adversarial process with the Assessor in the middle. The Assessor is really trying to bring the parties together to find what is a fair and just outcome for both parties.

Madam, I turn now to the questions raised on the Simplified Insolvency Programme or SIP. Mr Chia also asked about the eligibility criteria and whether they could cover a large number of companies and whether we could include other qualifying criteria. I think for the earlier reasons I have set out, we would not want to differentiate the criteria. Because there is already a fairly clear criteria not only in terms of the size of the entity, but also as I outlined in my opening speech, we are also restricting qualification to number of creditors, number of employees, the size of the debt and in the context of liquidation, the amount of realisable asset. So, these criteria already scope the relevant cases and right-size the kinds of companies and corporates, who are entitled to take advantage of the SIP.

I think Assoc Prof Jamus Lim also sought to argue that there ought to be a differentiated tier for a small company, that is different from a micro company, that might be different from another company. I think what we wanted to do as its name suggest is to simplify it and not to over complicate the matter. As I said, these are the criteria that look at different touchpoints in the context of a restructuring or liquidation, and already right-sizes the corporates for the purposes of this Bill.

Mr Louis Ng made several comments and have some queries in relation to the lowering of the threshold for creditor approval. Mr Ng asked about the guidance and assistance provided to these companies and their creditors both at the initial stage and if accepted into the programme, during the restructuring process.

The viability and suitability of a micro or small company for the simplified debt restructuring will be continually evaluated. I outlined at the outset, in my opening speech, that not only does the criteria have to be satisfied at the outset but the Restructuring Adviser and the Official Receiver continually evaluates if the company can continue to maintain its eligibility criteria, and whether or not it is in a position to carry out with these functions as stipulated by either the restructuring plan or in the liquidation process.

Mr Ng asked about the licensing and regulatory framework behind IRDA, in particular section 50(1A) and the extent or scope to which the Minister intends to exempt and individual from being a qualified person. Allow me, Madam, to first clarify that the amendment is a separate one from the Simplified Insolvency Programme and the amendment will supplement the general powers of the Minister found in Part 3, Division 3 of IRDA and this relates to the licensing of insolvency practitioners.

The exemption may be granted to a professional who has accrued sufficient expertise and experience, so practical experience, undertaking insolvency work as an approved liquidator under the predecessor Companies Act, but who does not presently meet the qualified person requirement. Granting an exemption in such a situation would allow this individual to be considered for the insolvency practitioner's licence and to continue to undertake such work under IRDA. One other example, which I did allude to in my opening speech was for foreign practitioners who are involved in cross-border, multi-jurisdictional restructurings, to also be allowed to come into Singapore to practise to the extent that an aspect of the restructuring either touches on or involves Singaporean assets or Singaporean stakeholders.

Mr Tay had a series of questions on the employees and I would like to just briefly respond to those questions that deal with the position of employees and how they are protected in the context of both the simplified restructuring and the simplified liquidation. As Mr Tay would appreciate, the approach and treatment of claims under these two situations are quite different. One is for the continued rehabilitation of the company and the other is for the dissolution and liquidation.

In a restructuring scenario, the impetus is to facilitate the potential rehabilitation and for there to be a meaningful rehabilitation, the employees will be an important group of stakeholders. The Simplified Debt Restructuring programme, in fact, through its threshold requirements, expressly recognises this position. Hence, if a company proposes to compromise debts owed to employees and other unsecured creditors with preferential debts under section 203 of IRDA, then these creditors will, as a default, vote in a separate class under the proposed section 72M(4)(b)(ii). What this means is that, without the assent of this group of creditors, the scheme will not pass. Each of the classes have to, on their own, pass the two-thirds threshold before the scheme will be sanctioned.

To avoid doubt, this provision, however, is not intended to affect the existing principles that apply to classification in schemes of arrangements generally, outside of the current Simplified Debt Restructuring programme.

In relation to a situation where companies is in an insolvent liquidation, this is different because it is a terminal procedure and this is a scenario where there are insufficient debts to meet the creditors' claims, including the employees' claims. In this context, the existing priority of debt provisions under section 203 of IRDA already strikes the appropriate balance by giving priority to the varying claims in a descending order as Members might know. This is to facilitate an orderly and optimal distribution of the company's assets. The cost and expenses of liquidation and the expenses of the applicant for the winding up under section 203(1)(a) to 203(1)(c) are paid out first before any other debts. Removing priority for this type of categories of claims would undermine an orderly liquidation and also a distribution of dividends.

To Mr Tay's point, that ranks in priority to the employees' claims and after that, those priority claims are paid off, the employees claims would then be paid next, thereafter.

Assoc Prof Jamus Lim had one other point about section 72H and section 250H. This relates to the criteria for admission into the Simplified Insolvency Programme, both for restructuring and liquidation. And I think Assoc Prof Jamus Lim had some comments about how this is a broad use of Executive discretion.

I wish to assure Assoc Prof Jamus Lim that, first of all, this is not meant to overturn the Official Receiver's decision to admit a company into the programme. This allows the Minister some discretion at the margins where, if a company might, say, have 51 employees instead of 50, in all other respects, you satisfy the criteria, the Minister has the discretion to allow this company into the programme.

This is no free pass because all the other criteria to the programme, including the continued satisfaction of the eligibility criteria, still apply to these companies. It is not as if it is a broad discretion, or at least that is how I heard it to be, which seems to turn the criteria upside down. It does not do that and it only allows, out of fairness, for some corporates who exist at the margins, who may not have made it into the criteria, to be considered by the Minister.

Mdm Deputy Speaker, I believe I have covered most if not all of the queries raised by Members. With that, I beg to move.

Source: Hansard