Company and Tort Law Subsidiary Legislations

Question: Discuss about the Company and Tort Law for Subsidiary Legislations. Answer: Introduction Insolvency is the situation where the individual or the organization does not have enough financial consideration to meet its obligations (Tomasic, 2016). The insolvency provisions, in Singapore are covered in the Companies Act, in addition to the subsidiary legislations like the Companies Regulations and the Companies (Winding up) Rules. In the following parts, the various aspects of insolvency in Singapore, as applicable on the case study, have been elucidated. There is no single conclusive test which can determine the measure of solvency of an organization. And so, the primary indicia of the inability of an entity in meeting its obligations, in terms of debts, upon becoming due, as well as the excess of liabilities over the assets, are the two tests in this regard. The first one is known as the cash flow test and the latter is the balance sheet test. It was stated in Kon Yin Tong and another v Leow Boon Cher and others [2011] SGHC 228 [33]-[34], that determination of insolvency is a question of fact. And so, inability to meet the present debts is a crucial factor (Singapore Law, 2011). Dilma Deli has been unable to meet its present debts and so, it would be deemed as insolvent. The process of winding up which can be undertaken by the subcontractor here is the one given under compulsory winding-up. The subcontractor would be deemed here as the creditor of the company and so, for their debts, they would have to apply to the court, for winding up the company compulsorily. A creditor who has a claim of over S$10,000 against the company and which has not been paid within 3 weeks to the creditors satisfaction can apply to the court for the same (Lim, 2016). Since the subcontractors outstanding renovation fees is of $500,000, they can apply to the court for winding up order. The originating summon for wind up by court of any company has to be in Form 2 or 3 of the Companies (Winding Up) Rules along with the supporting affidavit in Form 5. And this summon has to be served on the company, the nominated liquidator and the official receiver. In case no liquidator is nominated, the default liquidator is the Official receiver. Also, there is a need to pay the deposit to the official Receiver amounting to S$5,200.00 (Supreme Court Singapore, 2017). Winding up is the end of the company, after which it ceases to exist. It is a final and every lasting decision, which cannot be taken back. And so, it is often considered as the last resort by the individuals (McLaughlin, 2013). Instead of going forward with winding up, a company can opt for restructuring or commercially negotiating with the creditors. The objective of the debt restricting is to rearrange the finances of the company in such a manner so as to continue the viability of the business. The debt restricting in Singapore are contractual, hence, there is a need for agreement by all the creditors. There are two forms in which restricting can take place in Singapore, i.e., formal and involuntary. The key legislation in this regard is Companies Act of Singapore, 1994 Revised Edition under Chapter 50 (Norton Rose Fulbright, 2008). The court sanctioned restructuring can be completed through a scheme of arrangement. As per this scheme, the voluntary and involuntary reorganization can be implemented under the auspices of the court by the company or by the court, which can do so by placing the company under judicial management. To implement the scheme of arrangement, an application can be made to the High Court for summoning the meeting of creditors. After this, the creditors are provided with the proposed scheme (Norton Rose Fulbright, 2008). The other option is to opt for judicial management where by the company is placed under the judicial manager. The advantage here is that the company is shielded from its creditors. So, once an application has been made for this, a statutory stay is applied for proceedings against the company. This stops the creditors from initiating or continuing the proceedings against the company, without the consent of the judicial manner or without the leave of the court, which gives the company, a valuable breathing space (Norton Rose Fulbright, 2008). In the given case, Dilma Deli should opt for judicial management of the company. This is because the company has a number of creditors who have to be paid their dues. And unless they are legally stopped, they would initiate separate claims against the company, which would prove expensive for the company. By opting for judicial management, the company can be restructured and the debts of the company can be dealt with, without having to go through the permanent option of winding up. References Lim, D. (2016). Section 1 Introduction to Singapore Insolvency Laws. Retrieved from: https://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-30 McLaughlin, S. (2013). Unlocking Company Law. 2nd ed. Oxon: Routledge. Norton Rose Fulbright. (2008). Asia restructuring and insolvency briefing Singapore. Retrieved from: https://www.nortonrosefulbright.com/knowledge/publications/18565/asia-restructuring-and-insolvency-briefing-singapore Singapore Law. (2011). Kon Yin Tong and another v Leow Boon Cher and others [2011] SGHC 228. Retrieved from: https://www.singaporelaw.sg/sglaw/laws-of-singapore/case-law/free-law/high-court-judgments/14698-kon-yin-tong-and-another-v-leow-boon-cher-and-others-2011-sghc-228 Supreme Court Singapore. (2017). Company Winding Up Proceedings. Retrieved from: https://www.supremecourt.gov.sg/rules/court-processes/civil-proceedings/other-civil-proceedings-and-processes/company-winding-up-proceedings Tomasic, R. (2016). Insolvency Law in East Asia. Oxon: Routledge.