New law simplifies insolvency process

A new law aimed at simplifying the insolvency process for struggling companies was passed on January 7 and became a significant update to the existing Simplified Insolvency Programme (SIP). The new initiative called SIP 2.0, will make the process more accessible and cost-effective for companies with total liabilities not exceeding S$2 million.

Previously, the SIP was available only to micro and small companies. However, under the updated regime, any company with liabilities under S$2 million will now be eligible. The change is set to permanently integrate SIP 2.0 into Singapore’s corporate debt restructuring and insolvency laws.

SIP 2.0 introduces a simpler eligibility criterion: companies need to meet only one condition of having total liabilities that do not exceed S$2 million. This replaces the original five criteria, which made the process more complicated for businesses seeking to utilize the program.

Key changes also include simplifying the documentation required for the application process. Under the new law, companies applying for debt restructuring or winding up will need to submit only essential documents, significantly reducing administrative burdens. This is expected to speed up the insolvency process and reduce costs for businesses in financial distress.

The updated law allows companies seeking to wind up to submit a director’s declaration if their financial records are incomplete. This new feature encourages non-viable companies to wind up more efficiently instead of remaining dormant.

The updated debt restructuring process also simplifies the approval procedure. Now, only one class of creditors—unsecured creditors—will vote on the debt repayment plan, as opposed to multiple classes in the previous program. Proposals can also be approved out of court with the involvement of a restructuring advisor, reducing the need for court intervention.

SIP 2.0 is seen as a major step forward in Singapore’s corporate debt restructuring and insolvency framework. It will remain a permanent feature of the Insolvency, Restructuring, and Dissolution Act 2018, ensuring that companies have a clearer, more efficient pathway to manage insolvency in the country.