How to Recover Money from Company Which Is Insolvent

Are we secured or non-secured creditor…?

Creditors should look to bankruptcy only as a last resort

Creditors should not rush to take up bankruptcy proceedings immediately upon default of payment by
debtors, but should look to bankruptcy as a last resort for debt recovery and only after all other avenues
for recovery have failed.

Alternative arrangements: Creditors are advised to consider a debt settlement proposal, Voluntary
Arrangement or Debt Repayment Scheme (DRS) proposed by debtors under Part V of the Bankruptcy Act
(Cap 20) carefully. This can be a very cost effective way of recovering debt through settlement instead of
bankruptcy proceedings. Please refer to the next section on “Alternatives to Bankruptcy” for more
information.

1. Duties of secured creditors

Secured creditors (e.g. banks or other financial institutions to whom the debtor has mortgaged or pledged
his property or goods in order to secure credit facilities) should take possession of the property or goods
upon the bankruptcy of the debtor. If the property is worth more than the amount of money secured
against it, the balance from the proceeds of sale must be remitted to OA.

Secured creditors must realise their security within 6 months from the date of the Bankruptcy Order or
such extended period as the OA may allow. Otherwise, they will not be entitled to claim any interest
subsequent to the date of the Bankruptcy Order.

2. Filing your claim against the insolvent

Once a debtor is declared bankrupt by the High Court, his creditors can no longer commence or continue
with any legal action against the insolvent to recover monetary claims that arose before his insolvency
without leave of the Court. Instead, creditors are required to submit to the OA a Proof of Debt (Form 23)
and give an account of their claims against the insolvent, along with the relevant supporting documents
(e.g. invoices, receipts, agreements, judgments). The petitioning creditor should also file his Proof of Debt
against the insolvent. Creditors who change their address after filing their Proof of Debt must notify the
OA.

Debts that are incurred after the date of Bankruptcy Order are not provable (claimable) against the
bankrupt’s estate.

3. Receiving dividends from the bankruptcy estate

Creditors are advised to carefully consider any debt settlement offer of insolvents and to accept any
invitation to mediation if proposed.

Insolvent’s Assets

Vesting of the insolvent’s property in the OA

Under the Bankruptcy Act (Cap 20), the OA takes over the title to the insolvent’s assets and has the
responsibility to realise them and pay a dividend to the insolvent’s creditors. The insolvent cannot sell or
deal with any of his assets or items of value. Only the OA or a secured creditor is able to do so (with
respect to the secured property or assets).

Scope of “assets”: Includes anything of value belonging to the bankrupt at the date of insolvency, or
obtained by him thereafter and gifts given to him before his discharge from insolvency. The insolvent must
deliver up possession of these assets to the OA.

Protected property

Certain property is protected against the insolvent’s creditors by law, which means it cannot be sold or
taken over by the OA. Under the Bankruptcy Act (Cap 20), limited tools of trade and possessions such as
furniture, clothing and provisions necessary for satisfying the domestic needs of the bankrupt and his
family remain with the bankrupt. Other protected properties include:

 Properties held in trust by the bankrupt, HDB flats (provided at least one of the owners is a Singapore
citizen) orCentral Provident Fund (CPF) contributions
 Life insurance policies which are expressed to be for the benefit of the insolvent’s spouse or children
 Compensation awarded for legal actions due to personal injuries or wrongful acts against the bankrupt

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NOTES ON THE DEBT REPAYMENT SCHEME

Principles of Corporate Insolvency Law

Chapter 3
3-03
Only the assets of the debtor company are available for its creditors
- It is not the function of corporate insolvency to confiscate for the benefit of creditors assets in the
company’s possession or control which belong to others. Only that which is the property of the
company at the time of liquidation or comes into its hands thereafter is available for its creditors.
So assets held by the company on trust do not form part of its estate, nor do goods supplied to it
under reservation of title. Similarly. Assets over which the company has given security are not
available to the creditors except to the extent of the company’s equity of redemption.
- Exceptions:
o Assets available for creditors may be swelled by the statutory avoidance or reversal of pre-
liquidation transfers and transactions, e.g. as transactions at an undervalue, preferences
and floating charges which are void for want of registration or because they were given by
an insolvent company for past consideration.
o Transfers made after the commencement of the winding-up are also void unless sanctioned
by the court, sand since the winding-up of a company not already in voluntary liquidation is
deemed to relate back to the presentation of the petition, assets of which the company had
ceased to be the owner by the time of the winding-up order may be brought back into its
estate. In addition, a percentage in value of assets subject to a floating charge has to be
surrendered to form a fund available to unsecured creditors.