AN INTEGRATED APPROACH TO INSOLVENCY PROCEEDINGS IN SINGAPORE

Abstract

It is axiomatic that the accounting and legal professions are inextricably linked in corporate insolvency proceedings. A company is wound up by the order of a judge and liquidated under the oversight of an accountant; the restructuring of a distressed company is driven by an assessment of a firm’s value by accountants and concluded under the legal framework. Yet, in spite of the close relationship between these two disciplines, lawyers and accountants are often responsible for distinct segments of an insolvency proceeding. This is a natural consequence given the depth of knowledge and technical expertise required in both the accounting and legal professions. However, this compartmentalised approach has resulted in disparate strategies for tackling related issues. There is thus much room for increased efficiency through a holistic application of legal and accounting principles. Beyond these general observations on the present state of the insolvency practice, two recent developments provide further impetus to analyse how Singapore’s insolvency regimes can be made more coherent. First, Singapore has recently enacted the Insolvency, Restructuring and Dissolution Act 2018 (‘IRDA’) which has just come into force in July 2020. IRDA is a consolidation of Singapore’s corporate insolvency and debt restructuring laws in a single Act and represents the latest development in Singapore’s ambition to become the insolvency hub of the region. Second, the economic devastation brought about by COVID-19 has resulted in a marked increase in distressed companies. This has led to the swift passing of the COVID-19 (Temporary Measures Act) 2020, which anticipates the wave of insolvencies and seeks to offer temporary relief to viable businesses that have been stranded by the fast falling tides. In light of the likely flood of insolvencies in the near future, it is suggested that it is time to move from viewing insolvency proceedings from a monocular scope a single profession to the binocular lenses of an integrated frame. It is proposed that strides towards further homogenisation of the insolvency practice can be realised through two avenues. First, by highlighting issues that require coordination between both professions for further clarity and efficiency in the insolvency process. Second, by equipping both accounting and legal professionals with a better understanding of the concepts and principles used by their counterparts. Accordingly, this paper’s intended audience is to younger practitioners from both communities in order to fulfil its purpose of offering a unified perspective.