Legal Updates for July 2020
Ipso Facto Clauses under the New Insolvency, Restructuring and Dissolution Act
The much-anticipated Insolvency, Restructuring and Dissolution Act 2018 ("IRDA") has come into operation on 30 July 2020. With the new regime in force, commercial parties are keenly interested in the operation of its provisions and the new features introduced. In particular, the new restrictions on ipso facto clauses have attracted much attention.
Section 440 of the IRDA limits the exercise of ipso facto clauses which are triggered by the insolvency of a company or the commencement of specified proceedings. This prevents counterparties from terminating or amending contracts upon such contingencies occurring. This Update examines the precise scope of section 440 of the IRDA and its exclusions.
Are Lenders Liable to Corporate Borrowers when Loans are Misused by the Borrower's Officers?
Where funds from a loan to a company are misused by the company's officers, it is likely that the officers will be liable for breach of their duty to the company. However, are there circumstances in which the lender will also be liable to the company? This was one of the questions faced by the Singapore High Court in OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) v Crest Capital Asia Pte Ltd  SGHC 142.
In this case, the company's officers had used funds from a facility to purchase the company's own shares, in breach of the prohibition against share buybacks. The officers were found to have breached their duties towards the company, and the lender was also found liable for dishonest assistance and unlawful means conspiracy. The plaintiff was successfully represented by Lee Eng Beng S.C., Mark Cheng, Jansen Chow and Sasha Gonsalves of Rajah & Tann Singapore LLP.
Imposing Conditional Terms on an Anti-Suit Injunction
The law of anti-suit injunctions has been the subject of much discussion before the courts. As a discretionary form of relief, the court may take into account the relevant factors in deciding whether to grant an anti-suit injunction. In Times Trading Corporation v National Bank of Fujairah (Dubai Branch)  EWHC 1078 (Comms), the English High Court demonstrated the scope of exercise of its discretion, declining to grant an anti-suit injunction as applied for, but imposing conditional terms on the injunction instead.
The decision marks a rare instance where the English courts have imposed such a condition in the grant of an anti-suit injunction. It also provides some insight of how the court will exercise its discretion to achieve a fair and just outcome. Kendall Tan and Max Lim of Rajah & Tann Singapore LLP acted for the bank in related Singapore proceedings, as well as in the conduct of the English court proceedings in conjunction with Messrs Campbell Johnston Clark and instructed Counsel.
Income Tax Act – Public Consultation on 38 Proposed Amendments
On 20 July 2020, the Ministry of Finance ("MOF") announced a public consultation on 38 proposed amendments contained in the draft Income Tax (Amendment) Bill 2020 ("Draft ITA Bill"), which will amend the Income Tax Act ("ITA") if passed, as well as implement certain amendments to the Stamp Duties Act ("SDA"). These amendments fall into three general categories:
- Implementing tax changes flowing from the Unity Budget;
- Exempting payouts received under the Resilience Budget, Solidarity Budget, and the Fortitude Budget; and
- Non-budget amendments to enhance the powers of the Comptroller of Income Tax ("Comptroller") to safeguard public monies, and to improve tax administration and the clarity of existing legislation.
The consultation period runs from 20 July 2020 and closes on 7 August 2020. MOF has provided submission guidelines and a template, which should be submitted via email to email@example.com. A summary of comments received will be published by MOF by end September 2020, with all respondents kept anonymous.
This Update will briefly cover key tax measures flowing from the 2020 Budgets, but principally focus on the last category.
Public Consultation on Seven Proposed Amendments to GST Act
On 20 July 2020, the Ministry of Finance ("MOF") announced a public consultation on seven proposed amendments contained in the draft Goods and Services Tax (Amendment) Bill 2020 ("Draft Bill"), which will amend the Goods and Services Tax Act ("GST Act") if passed. These amendments are briefly summarised as follows:
- Enhancement of Comptroller of Goods and Services Tax's powers
- Measures to counter Missing Trader Fraud; and
- Enhanced powers of the Inland Revenue Authority of Singapore ("IRAS") to seize goods for the investigation of tax offences.
- Improvement of Goods and Services Tax ("GST") administration and clarity of existing legislation
- Enhanced GST rules to counteract tax avoidance arrangements ("anti-avoidance rules");
- Introduction of a surcharge for tax avoidance arrangements;
- Clarification of treatment of claims relating to overpaid or erroneously paid GST;
- Mandatory use of electronic mode to pay all GST refunds; and
- Empowerment of the Comptroller to provide information to authorised IRAS officers for the purpose of administering public schemes such as the Jobs Support Scheme.
The consultation period runs from 20 July 2020 and closes on 7 August 2020. MOF has provided guidelines and a template for submissions, which should be submitted via email to firstname.lastname@example.org. A summary of comments received will be published by MOF in October 2020, with all respondents kept anonymous. If the Draft Bill is passed, its amendments are anticipated to take effect on 1 January 2021.
This Update covers the key features of the proposed amendments below.
COVID-19 Legal Response Package
The COVID-19 pandemic has brought about unprecedented challenges to many businesses. In the face of a prolonged crisis, companies are forced to adjust to a ‘new normal’ in this era of uncertainty. To guide you through this period, we have specially put together a COVID-19 Response Package which aims to address the current legal issues that are confronting your business.
The COVID-19 Response Package includes business recovery checklists to help your business develop its response plan as you restart operations amid the uncertainties. It also highlights some COVID-19 related measures and responses put in place by the Government in the following areas and how we can assist you to navigate the changes:
- Banking & Finance
- Competition & Antitrust
- Consumer Protection
- Corporate Real Estate
- Debt Capital markets
- Financial Institutions
- Investment Funds
- Technology, Media and Telecommunications
- Workplace & Employment.
Proposed Changes to Companies Act to Cope with Evolving Business Environment
The Accounting and Corporate Regulatory Authority is seeking public feedback on proposed amendments to the Singapore Companies Act and its subsidiary legislation set out in the consultation paper issued on 20 July 2020 ("Consultation Paper").
Feedback on the proposals in the Consultation Paper must be submitted to ACRA by 17 August 2020.
This Update provides a brief overview on certain notable proposed amendments in the Consultation Paper concerning the following areas:
- Facilitating digitalisation;
- Revising concepts of companies for purpose of financial reporting and auditor resignation;
- Revising requirements governing sole director company and director's duty of disclosure;
- Safeguarding shareholders’ interests;
- Refining provisions governing capital maintenance and financial assistance;
- Streamlining financial reporting requirements for companies and foreign companies; and
- Timing relating to the striking off and restoration of companies.
Insolvency, Restructuring and Dissolution Act to Come into Operation on 30 July 2020
On 23 July 2020, it was announced that the Insolvency, Restructuring and Dissolution Act 2018 ("IRDA"), together with 48 pieces of subsidiary legislation, will come into operation on 30 July 2020.
The IRDA is a significant piece of legislation and its implementation is set to effect major changes in the restructuring and insolvency regime in Singapore. Businesses and insolvency practitioners should be aware of the impending changes and the potential impact on the industry. It should also be noted that the COVID-19 pandemic has resulted in certain temporary measures which affect the operation of the insolvency framework.
This Update highlights the key elements of the IRDA, as well as the COVID-19 related measures which relate to personal and corporate insolvency.
Recovery of Gambling Debts Incurred at Foreign Casino Disallowed by Singapore Court
The Singapore International Commercial Court ("SICC"), in The Star Entertainment QLD Ltd v Wong Yew Choy and another matter  SGHC(I) 15, has reaffirmed that for public policy reasons, Singapore law does not allow for the recovery of gambling debts, other than in respect of gambling that is legally permitted under local statutes such as the Casino Control Act.
The case involved a claim by The Star, an Australian casino operator, against a Singaporean casino patron, Dr Wong Yew Choy, for gambling debts arising from purported losses in baccarat games played at The Star's casino in Queensland, Australia. The SICC granted Dr Wong's striking out application, and held that the claim fell afoul of section 5(2) of the Civil Law Act.
Drafting an Effective Jurisdiction Clause in Trust Deeds
In Ivanishvili, Bidzina and others v Credit Suisse Trust Ltd  SGCA 62, the Singapore Court of Appeal had to consider the interpretation of a "forum for administration" clause in a trust deed, and whether it amounted to a jurisdiction clause, exclusive or otherwise. The Court examined the existing case law and the context of the words in the provision, ultimately holding that the clause was a jurisdiction clause, but that it applied only to matters which related to the administration of the trust, and not to disputes between the trustee and beneficiaries.
In this Update, we look at the key aspects of the Court of Appeal's decision and its implication on the drafting of trust deeds.
Regional Shipping Update: Focus on Philippine Shipping Law Developments in 2nd Quarter of 2020
This is the Second Quarter 2020 issue of the Regional Shipping Update of Rajah & Tann Asia’s Shipping & International Trade Practice, a publication that provides a snapshot of key legal developments in various jurisdictions where our member firms have regional presence. In each quarter, we cover one jurisdiction, and for this issue, we focus on the Philippines with the following updates:
- Supreme Court Issues Rules of Procedure for Admiralty Cases
- Department of Transportation Creates the Shippers’ Protection Office
- Heirs of Licuanan v. Singa Ship Management, Inc.: A Seafarer’s Heirs are Entitled to Death Benefits for Work-related Illness Even if Death Occurs After the Term of Contract
Sustainability Reporting by Issuers During COVID-19: What SGX RegCo Expects
The COVID-19 pandemic has posed extraordinary challenges to businesses and many companies have had to rapidly respond and manage disruptions to business operations. As we transit into the next phase of COVID-19, where businesses gradually resume and borders re-open, keeping investors and stakeholders updated remains essential, and reporting on social factors is particularly vital during this period.
In this regard, the Singapore Exchange Regulation ("SGX RegCo") recently issued a statement on the Regulator's Column on 6 July 2020, setting out its expectations on sustainability reporting by issuers listed on SGX-ST Mainboard and Catalist ("listed issuers").
This Update highlights key points listed issuers should note in approaching sustainability reporting in this new business climate with reference to the expectations set out by SGX RegCo, such as keeping investors and stakeholders updated and the emphasis on the social aspect of sustainability reporting during this period.
Executing Documents in New Normal: Key Considerations When Using Electronic Signatures
The COVID-19 pandemic is expected to change how we operate business moving forward. With a majority of the global workforce currently telecommuting amid the elevated border control and safe distancing measures, there is an increased need to assess what would be the most efficient way of executing contracts and documents in the new normal. There is therefore more demand for the use of electronic signatures in commercial transactions.
In this Update, we highlight some key requirements or considerations that you should take note of to ensure that a document or contract that has been executed by electronic signatures is valid.
Temporary Relief Measures for Tenants and Landlords, Purchasers and Developers in the COVID-19 (Temporary Measures) Amendment Act 2020 (Updated 7 July 2020)
On 5 June 2020, the COVID-19 (Temporary Measures) (Amendment) Bill 2020 was passed in Parliament. The COVID-19 (Temporary Measures) (Amendment) Act 2020 ("Amendment Act") was gazetted and came into force partially on 20 June 2020. The Amendment Act amends the COVID-19 (Temporary Measures) Act 2020 to provide for, amongst other changes, relief measures relating to tenants and landlords, purchasers and developers by the ongoing COVID-19 pandemic, including a framework for rental relief. These changes have yet to come into force.
On 7 July 2020, the Ministry of Law released a note on the rental relief framework in the Amendment Act, providing further details on the entitlement to rental relief and the relevant relief mechanism. The Ministry of Law has also indicated in this note that the rental relief provisions in the Amendment Act will come into force by end-July 2020.
We earlier issued a Client Update highlighting the key measures in the Amendment Act relating to tenants and landlords, intending purchasers and developers. The write-up has since been updated to reflect the clarifications provided by the Ministry of Law and to keep you in the know on the latest information.
Cayman Islands Investments Funds to Register by 7 August 2020: New Private Funds Law and Mutual Funds (Amendment) Law of the Cayman Islands
In February 2020, the Cayman Islands government enacted the Private Funds Law, 2020. The Private Funds Law 2020, along with the Private Funds (Savings and Transitional Provisions) Regulations 2020 (together, "PFL") and an amendment to the Mutual Funds Law (2020 Revision) (the "MFL Amendment"), came into effect on 7 February 2020.
In essence, both the PFL and the MFL Amendment seek to impose registration requirements and regulations on investment funds domiciled in the Cayman Islands which were previously either not required to be registered or were regulated in a limited fashion. Steps for compliance must be completed by 7 August 2020.
This Update highlights the registration requirements under the PFL and the MFL Amendment and the steps required to be taken to comply with the PFL and the MFL Amendment before 7 August 2020.
Enforcement of Awards / Judgments – Examining a Debtor on Assets in a Foreign Jurisdiction
To facilitate the enforcement of awards and judgments, the Singapore courts are empowered to make certain orders, including orders for the examination of a judgment debtor or its officer regarding the judgment debtor's property (referred to here as the "EJD" process). The recent Singapore Court of Appeal decision in Sun Travels & Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd  SGCA 65 concerned the types of questions permissible during the EJD process. In this appeal, the Appellant had objected to answering questions about its assets in the Maldives on the basis that those assets would not be available for satisfaction of the judgment debt.
Dismissing the Appellant's objections, the Court of Appeal confirmed that questions could be asked about assets of the judgment debtor in a foreign jurisdiction – regardless of the enforceability of the Singapore judgment there. In doing so, the Court of Appeal resolved the conflict in the earlier High Court decisions of Indian Overseas Bank v Sarabjit Singh  3 MLJ xx xi and Sun Travels & Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd  SGHC 291 (the latter being the decision which was the subject of the appeal). The Respondent was successfully represented by Paul Tan, Alessa Pang and David Isidore Tan of Rajah & Tann Singapore LLP, together with Toby Landau QC.
Dos and Don'ts for Financial Reports Amid COVID-19: SGX RegCo's Expectations
The COVID-19 pandemic has created "significant uncertainty, or even threats to business prospects" to issuers listed on SGX-ST Mainboard and Catalist ("listed issuers"). Emphasising the need for "high quality and reliable financial statements", the Singapore Exchange Regulation ("SGX RegCo") recently issued a statement on the Regulator's Column on 27 July 2020, setting out its expectations of financial reports, including interim financial reports ("27 July 2020 Statement").
This Update highlights salient points raised by SGX RegCo in its 27 July 2020 Statement which listed issuers, their boards of directors, and management must take note of in preparing financial reports, including interim financial statements.
Visit our COVID-19 Resource Centre for views from our lawyers across the region on common issues and legal implications brought about by COVID-19. For specific inquiries, please reach out to your relationship partner or send an email to our COVID-19 Legal Team.
MAS Consults on Environmental Risk Management Guidelines for Banks, Insurers and Asset Managers
The Monetary Authority of Singapore ("MAS") is seeking feedback on three sets of proposed Guidelines on Environmental Risk Management that will apply to: (i) banks, merchant banks and finance companies; (ii) insurers; and (iii) fund management companies and real estate investment trust managers (collectively, "Proposed Guidelines") set out in three consultation papers.
The Proposed Guidelines set out sound practices for these financial institutions in the following areas: (1) Governance; (2) Risk management; and (3) Disclosure of environmental risk. Each set of Proposed Guidelines is tailored to each sector based on its business activities and salient risk management practices pertinent to such sector.
Feedback on the three consultation papers are required to be submitted to MAS by 6.30pm, 7 August 2020.
This Update provides an overview of the Proposed Guidelines highlighting the scope of application and a summary of the salient features of the Proposed Guidelines.
Singapore and China to Cooperate in the Field of Central Bank Digital Currency
As digital currencies continue to become more commonly used, central banks across the world have begun to explore the implementation of Central Bank Digital Currencies ("CBDC") to replace fiat cash. Mr Ravi Menon, the Managing Director of the Monetary Authority of Singapore, speaking at a financial forum in Shanghai, discussed the intention for cooperation between Singapore and China in relation to CBDCs. The exchange of knowledge and expertise between the two countries would be a significant aid for the respective CBDC programmes and would also open the door for future opportunities for collaboration. In this Update, we take a look at the CBDC efforts in Singapore and China and what this development could mean for their economies.