Despite the expiry of the prescribed period, a company will not to be treated as incurring debts or other liabilities without reasonable prospect of meeting them in full if the debt or other liability is incurred by the company during the prescribed period. For more information, feel free to contact our Suresh Nair or Nicole Foo. Failure to comply with a statutory demand is a common method for proving a company is insolvent. As a result of the amendments, during the prescribed period, a bankruptcy application may only be brought in respect of debts of at least $60,000. Statutory demands and winding up applications. A statutory demand is normally the first step that is taken by a creditor in the winding up of a company on the grounds of insolvency. There is no “saving” in the Bill for Statutory Demands issued to companies prior to the commencement of the Act. A statutory demand is a legal document in which the creditor issues to the debtor, demanding payment. This is so even if the Statutory Demand was served prior to the commencement of the Act. (b) the time period to satisfy a Statutory Demand will be increased from 3 weeks to 6 months. 2. Upon the expiry date (Usually 18- or 21 days from the date of the delivery) on the statutory demand, a creditor may be entitled to file for winding-up or … 1.1 A creditor of a company can make an application to the Court under s459P of the Corporations Act for orders winding up the company in insolvency under s459A. The insolvency thresholds for bankruptcy and winding up applications during the prescribed period will be as follows: (a) the monetary threshold for bankruptcy applications will be increased from $15,000 to $60,000 for all bankruptcy applications filed after the commencement of the Act and during the prescribed period; and. The Judge may dismiss the winding up application, adjourn the hearing or make a winding up … Any statutory demand made in this period will be void, and the creditor must find another way to demonstrate that the company cannot pay its debts. Please refer to schedule of the Order on how the meeting can be held via electronic means. Handing it to the individual who owes the debt. (c) must describe the means which meeting can be electronically accessed (e.g. Can I defer the meeting? In the recent case of Ramesh Mohandas Nagrani v United Overseas Bank Ltd [2015] SGHC 266, the Singapore High Court had to decide whether to set aside a statutory demand based on alleged irregularities in its contents, and touched on what makes a statutory demand invalid. How long will the alternative arrangements apply? 14 of 2020). In the event that the amount is unascertained, the creditor should obtain a judgment in their favour, and subsequently issue a Statutory Demand followed by a compulsory winding up petition on the basis of the judgment debt. Will the revised threshold amount of $100,000 for winding up cases apply? With this change, Singapore has joined a host of other jurisdictions which have suspended their wrongful or insolvent trading laws during this period. When a company is unable to fulfil its monetary obligations, a creditor may choose to serve a statutory demand with the intention of winding-up a company. If the application is made on the basis of an unsatisfied Statutory Demand, then the relevant time period may differ according to when the Statutory Demand was served, as explained below. This option applies to meetings held or conducted on or after 1 October 2020 up to the expiry of the Order; 1. The Bill is welcome relief in these uncertain times, although it is to be hoped that the Bill’s retrospective effect in relation to corporate Statutory Demands would be extended in the Parliamentary process to personal bankruptcies as well. Applications may be brought on a number of grounds, the most important being that the company is unable to pay its debts. Winding up Without a Statutory Demand. The Bill also contains provisions effectively suspending insolvent trading rules during the prescribed period. With effect from the commencement of the Act, bankruptcy applications may only be filed for debts of $60,000 or more. (a) must be sent via email to each creditor, contributory, member of partner (as the case may be) who has notified the convenor or the company, limited liability partnership or VCC (as the case may be) of his or her electronic mail address; The Ministry of Law announced on 1 April 2020 that it intends to introduce the COVID-19 (Temporary Measures) Bill (the “Bill”) in Parliament in the week of 6 April 2020 to offer temporary relief to businesses and individuals who might find themselves unable to fulfil their contractual obligations because of COVID-19. AnAn resisted the winding up application by challenging both the substance and the quantum of the alleged debt. Coupled with the process server fee and solicitors costs of issuing, this can mean upfront costs over £2,000 to commence the winding up petition process. https://singaporelegaladvice.com/law-articles/winding-up-company-singapore A statutory demand is a possible first step of the insolvency legal process in which a creditor presents a company with a written demand requiring payment of an unpaid debt. (b) must be published on the website of the company, limited liability partnership or VCC (as the case may be) or the website of the convener; Any person who wishes to oppose the winding up application may file an affidavit in opposition which must be served on the applicant at least 5 days before the hearing of the winding up application. The practical effect of this is as follows: an unsatisfied Statutory Demand issued against an individual say on 1 April 2020 would be effective to ground a bankruptcy application if the debt was at least $60,000 and it remained unpaid for 21 days. The Bill does not however have retrospective effect in relation to Statutory Demands served under the Bankruptcy Act (Cap. (b) Real-time Q&A: as long as the entity also allows attendees to submit matters which they wish to raise at the meeting prior to the meeting by post or electronic mail; They were first introduced with effect from 1 March 2020 … These changes will be in place for a “prescribed period” which, it is envisaged, would in the first instance be 6 months from the date of the passing of the legislation (the “Act”), although that period may be shortened or extended by the Minister by order in the Gazette. The hearing of the winding up application is usually fixed within 6 weeks from the date of its filing. As the winding up application was brought before the commencement of the prescribed period, the threshold amount of $100,000 will not apply. 3. Beware of this possible landmine. My company has been borrowing heavily to keep our operations afloat during the prescribed period. Breach Notification: New Data Protection Requirements. Statutory demands are powerful tools but must be used with care to ensure the legal requirements are followed. (a) the monetary threshold for bankruptcy applications will be increased from S$10,000 to S$100,000 after the commencement of the Act and during the prescribed period; and. Under the Bill, individuals and officers of companies are to be temporarily relieved from their obligation to avoid and/or prevent incurring any debt or trading while insolvent if the debts are incurred in the business’/ company’s ordinary course of business during the prescribed period and before the filing of an application for voluntary arrangement or bankruptcy in respect of a bankrupt, or the appointment of a judicial manager or liquidator in the case of a company. 1.2 The most common basis for an application under s459P is that the subject company has failed to comply with a Statutory Demand and is presumed to be insolvent (s459C (2) (a)). The Court has a discretion as to whe… (e) may be accompanied by any other documents relevant to the meeting. 2. It is envisaged that the change will stave off mass insolvencies arising from fear of liability under s 144 of the Bankruptcy Act and s 339(3) of the Companies Act due to uncertainty over the future “going concern” status of businesses. High Court rules on arbitrability of disputes under the Securities and Futures Act, PK Wong & Nair © 2020 / All Rights Reserved / Website design by LegisComm Pte Ltd, Court of Appeal decides on issues of authenticity of documents and rights of set-off. THE COVID-19 (TEMPORARY MEASURES) (ALTERNATIVE ARRANGEMENTS FOR MEETINGS) (CORPORATE INSOLVENCY) ORDER 2020 (the “Order”). A creditor has commenced winding up proceedings against my company before the commencement of the prescribed period. [Applies to companies, LLPs and VCCs]. Where a Statutory Demand is served on an individual after the commencement of the Act and during the prescribed period, the debt would have to be for at least $60,000 and would have to remain unsatisfied for at least 6 months after the Statutory Demand is served. Among the measures proposed in the Bill are very significant but temporary changes to insolvency thresholds and the laws relating to insolvent trading. If the Statutory Demand was served prior to the commencement of the Act, then it is sufficient if the Statutory Demand remained unsatisfied for only 21 days. 1. As the winding up application was brought before the commencement of the prescribed period, the threshold amount of $100,000 will not apply. Upon the making of the winding up order, a statutory trust is imposed on the assets of the company for the purpose of discharging the company’s liabilities (Media Development Authority of Singapore v Sculptor Finance (MD) Ireland Ltd [2014] 1 SLR 733). Following the expiry of 15 working days from date of service of the statutory demand, the applicant creditor may issue proceedings in the High Court to wind up the company. More information on the amendments to the Order can be found in https://www.mlaw.gov.sg/news/press-releases/refinements-to-alternative-arrangements-for-meetings. However, the statutory trust does not confer beneficial or proprietary interests on the unsecured creditors, who therefore do not have locus … If the statutory demand goes unchallenged, it demonstrates that an undisputed debt is outstanding, and this is criteria that must be satisfied for a winding up petition to be issued. Ordinarily, such a winding up petition can be stayed or dismissed if there is a bona fide and substantial dispute over the debt by showing that there are triable issues. This avoids potentially an expensive winding up petition fee at court for the issuing of the winding up petition. This is so even if the Statutory Demand was served prior … The current pandemic has caused many businesses to consider their ways of working and put in place contingency planning. 5. c) before the appointment of a judicial manager or a liquidator of the company. 1 April 2020) would be insufficient to ground a winding up application during the prescribed period unless the debt exceeded $100,000 and it remained unsatisfied for 6 months. To this extent, the Bill appears to have retrospective effect. As the company director, will I be at risk of committing an offence for wrongful trading once the prescribed period expires? The government has announced today that the temporary restrictions on statutory demands and winding up petitions will be extended from 31 December 2020 to 31 March 2021, together with the bans on business evictions and landlords using Commercial Rent Arrears Recovery. The Statutory Demand is still a basis to issue a winding petition on the ground of “inability to pay … The Bill appears to draw a distinction between the treatment of Statutory Demands issued in bankruptcy proceedings on the one hand and winding up proceedings on the other, in that the Bill is to effectively have retrospective effect in respect of the latter but not in respect of the former. Second, the failure to satisfy a statutory demand simply creates a presumption that the corporate debtor is unable to pay its debts. You will also need to satisfy the Covid Test. Once a statutory demand has been served by the ATO, the taxpayer will have 21 days to: ‘satisfy’ the statutory demand by either paying the debt or … First, a creditor can still commence winding up proceedings against a corporate debtor if that company owes S$100,000 or more to the creditor. It is a popular misconception that the creditor is required to serve a statutory demand on a company before it is entitled to present a winding up petition. A creditor may only file a bankruptcy application against a debtor … As section 123 of the Act sets out, serving a statutory demand is only one way that you can evidence a company is unable to pay its debts as they fall due. 20). It creates a presumption of insolvency. No. However, a Statutory Demand issued against a company on the same day (i.e. If not, how can I proceed to hold the meeting? 2. Giving it to a company director, secretary of other principle officer. (c) Use of virtual AGM platforms and other electronic means to accept submissions: as long as the entity also allows such submissions by post or electronic mail. As for companies, it would only be possible to bring a winding up application during the prescribed period for debts in excess of $100,000. The above methods usually … I am an insolvency practitioner and I am required to hold a Court-ordered or Court-directed meeting within the circuit breaker period. 50), it may be brought during the prescribed period only in respect of debts exceeding $100,000, and where the Statutory Demand has remained unsatisfied for at least 6 months. Beware of this possible landmine. Hearings are usually conducted in open court before a High Court Judge each Friday. [Applies to companies, LLPs and VCCs]. If you owe a company money and are unable to pay it, you should be proactive at an early stage to stop the situation escalating out of control. Winding up petitions are often made based on a statutory demand for a debt due. A company is not treated as incurring debts or other liabilities without reasonable prospect of meeting them in full if the debt or other liability is incurred: A statutory demand is a formal demand for payment which, if it remains unpaid for more than three weeks, can be used to support a winding up petition. The statutory demand in this case was successfully upheld by Rebecca Chew and Ang Siok Hoon from Rajah & Tann Singapore … A statutory demand can be used as evidence that a company is unable to pay its debts and, if the … 3. This is the second time these insolvency restrictions have been extended. How should I hold the meeting? The insolvent trading provisions at s 144 of the Bankruptcy Act and s 339(3) of the Companies Act are effectively suspended during the prescribed period in that a bankrupt / an officer of a company will not be treated as having no reasonable ground of expectation of the business / company being able to repay a debt so long as the debt was incurred in the ordinary course of business, during the prescribed period and before the making of an application for voluntary arrangement or bankruptcy in the case of a bankrupt or the appointment of a judicial manager or liquidator in the case of a company. 2. Leaving it at the registered office in the case of a limited company or limited liability partnership. 3. online location); A statutory demand is also cheaper to proceed with rather than a winding up petition. Hence, whereas in personal bankruptcies a Statutory Demand issued prior to the commencement of the Act would be “actionable” after 21 days notwithstanding the provisions in the Act requiring a 6 month notice period, in corporate insolvencies a Statutory Demand would have to comply with the 6-month time period prescribed in the Act even if it was issued prior to its commencement. 4. (a) Real-time electronic voting: as long as certain prescribed safeguards are adopted, and the entity still allows attendees to vote by appointing the Chairman or convenor as the case may be) as their proxy to vote. Any letter of demand, without any reference to possible winding up proceedings, can be an effective statutory demand. a) in the ordinary course of business; (d) must set out how a creditor, contributory, member or partner (as the case may be) may vote at the meeting; and As the company director, will I be at risk of committing an offence if I continue trading during this period? You can petition without demand if you can prove to the satisfaction of the court that the company is unable to pay its debts as they fall due (satisfying section 123(1)(e) of the Insolvency Act 1986), by showing that the debtor is balance sheet or cash-flow insolvent. 6. We have recently been informed that as a result of the Prime Minister’s announcement last week, process servers are no longer able to attempt personal service of statutory demands and/or bankruptcy petitions and/or winding-up petitions. What are the other refinements in the amendments to the Order that are applicable to insolvency-related meetings? Statutory demand costs … A creditor has issued a statutory demand to my company before the commencement of the prescribed period, giving 3 weeks’ notice for repayment. How can the quorum for the alternative meeting be met? A debtor who receives a statutory demand for a debt which it disputes should be prepared to produce in winding-up proceedings precise factual evidence substantiating its position and to show that it has referred the dispute to arbitration by then. Statutory demands and winding up petitions issued to commercial tenants are to be temporarily voided and restrictions placed on the use of Commercial Rent Arrears Recovery; and Landlords and investors are being asked to work collaboratively with high street businesses unable to … The amendments to the Order, which come into force on 29 September 2020, has extended the application of alternative arrangements to 30 June 2021. As the statutory demand was issued before the commencement of the prescribed period, the 6 months’ threshold will not apply. Statement of the Cause(s) of Winding-Up The company has been wound up for the following reason(s): ☐ Depression / Economic Recession ☐ Cash Flow Problem ☐ Poor Sales ☐ Insolvency of Affiliated Company ☐ High Overheads ☐ Bad Management ☐ Inability to … A formal written demand for payment of a debt within 21 days. Statutory Demands and Winding Up in Insolvency is a practical reference text examining the formal requirements for a Statutory Demand under Part 5.4 Division 2 of the Corporations Act, 2001, the legislative history of the statutory demand regime and the various circumstances in which courts will set aside a demand. Creditor's Bankruptcy Application. A guide to statutory demands in the context of personal and corporate insolvency. For these meetings, you may wish to apply to seek directions from the Court or variation of orders if you so require, as to the safe distancing measures that you propose to implement at such meetings. No. There are a number of factors that the Court will take into account when deciding whether or not to make a liquidation order. You are allowed to defer these meetings up to a date no later than 30 September 2020. The notice of the meeting is to be given as follows: statutory demand issued must conform to the legislative requirements. These proceedings, are issued under Section 241(2)(c). A statutory demand is essentially a final ultimatum for a payment due to your creditors. Pursuant to COVID-19 (Temporary Measures) (Prescribed Period) Order 2020, the prescribed period is 6 months commencing on 20 April 2020. The creditor must carefully particularise the correct basis of liability in the Statutory Demand. It also contains a comprehensive treatment of winding up in corporate insolvency. Reduction of Monthly Instalment or Contribution, © 2021 If the Statutory Demand was served prior to the commencement of the Act, then it is sufficient if the Statutory Demand remained unsatisfied for only 21 days. For corporate insolvencies, a winding up application may only be brought if the debt is in excess of $100,000, and if the demand has remained unsatisfied for 6 months or more. What is a Statutory Demand? COVID-19 Vaccinations in the Workplace: Mandatory or Optional? 4. [Applies to companies, LLPs and VCCs]. b) during the prescribed period; and If the debtor is unable to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay This includes guidance on when a statutory demand may be used against a company or an individual, how to draft and serve a statutory demand, the potential consequences of serving a statutory demand and the requirements for presenting a bankruptcy petition or winding-up petition. Where a winding up application is brought on the basis of an unsatisfied Statutory Demand under s 254(2)(a) of the Companies Act (Cap. The quorum may be met by creditors, contributories, members or partners (as the case may be) being personally or electronically present at the meeting. A statutory demand for payment cannot be sent to you in the post but served by one of the following methods: 1. If the application is brought on the basis of an unsatisfied Statutory Demand, then the Statutory Demand must have remained unsatisfied for 6 months before the application is brought, unless the Statutory Demand was served prior to the commencement of the Act. For corporate insolvencies, a winding up application may only be brought if the debt is in excess of $100,000, and if the demand has remained unsatisfied for 6 months or more. The process of the compulsory winding up of insolvent companies often begins with the service on the registered address of the debtor company, a statutory demand specifying the debt owed to the creditor. Information On Outstanding Assets of a Defunct Company, QUESTIONS & ANSWERS RELATING TO THE COVID-19 (TEMPORARY MEASURES) ACT 2020 (No. Neither a statutory demand, nor a winding up petition will come out of the blue. The Federal Court held that the statutory demand need not stipulate that it was issued pursuant to section 218, and there is no need to mention any 3-week payment period. Open Government Products, https://www.mlaw.gov.sg/news/press-releases/refinements-to-alternative-arrangements-for-meetings. This Order does not apply to meetings ordered or directed by the Court. If a winding up petition is issued for a debt that is disputed, the court will simply dismiss the petition and could award costs against the creditor. (b) the time period to satisfy a Statutory Demand issued during the prescribed period (by payment or providing security) will be increased from 21 days to 6 months. This means that where the Statutory Demand was served prior to the commencement of the Act, the creditor would still be within his rights to bring a bankruptcy application on the basis of a Statutory Demand that goes unsatisfied for a period of 21 days, although the Statutory Demand must have been in respect of a debt of at least $60,000. In respect of companies, however, the position appears to be different. No. Instead these are the final steps in what is often a lengthy process chasing up a non-paying customer or client. The “statutory demand procedure” is designed to provide a fast-track method of proceeding to the winding up of a company. The following refinements were made in the amendments to the Order, which come into force on 29 September 2020: The alternative arrangements apply for the period starting on 27 March 2020 and ending on 30 September 2020. When AnAn failed to pay the demand within the statutory timeline, VTB applied to the Singapore court to wind up AnAn on the basis of alleged insolvency. A creditor has issued a statutory demand to my company before the commencement of the prescribed period, giving 3 weeks’ notice for repayment. Now that my company cannot pay, will the revised 6 months’ threshold be applicable? I am an insolvency practitioner and I am required to hold meetings within the circuit breaker period. Statutory demand costs do not involve a court issue fee and simply involve solicitors’ costs for completing them together with the process server fee for issue. My company has been borrowing heavily to keep our operations afloat and I am uncertain if the company will survive this crisis. 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