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Circular No.: C&P/004/01/tl

3 January 2020                                                    

INSOLVENCY, RESTRUCTURING AND DISSOLUTION ACT 2018

The Insolvency, Restructuring and Dissolution Act (IRDA) 2018 which was passed by Parliament on 1 October 2018, consolidates Singapore’s corporate and personal insolvency and restructuring laws into a single enactment.

One of the noteworthy changes is the restriction on the operation of ipso facto clauses where such clauses are commonly found in construction contracts. Ipso facto clauses entitle a contracting party to terminate the contract and/or exercise certain remedies when its counterparty in the contract enters into judicial management, schemes of arrangement or any other insolvency-related proceeding.

Members should note that clause 440(1) of the IRDA 2018 will restrict the ability of a contractual party to exercise the following if its contractual counterparty enters into judicial management, schemes of arrangement or any other insolvency-related proceeding:

  • terminate or amend, or claim an accelerated payment or forfeiture of the term under any agreement (including a security agreement) with the company; or
  • terminate or modify any right or obligation under any agreement (including a security agreement) with the company.

However, the contractual party may exercise its contractual rights on other substantive grounds, such as non-performance by the insolvent company for termination.

The above information is not exhaustive and members are advised to  consult their own legal counsel for further clarification where necessary.

 

 

 

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