Jurisdiction - Singapore
Singapore – Insolvency: Beluga Chartering GmbH (In Liquidation) & Ors v Beluga Projects (Singapore) Pte Ltd (In Liquidation) & Anor [2014] SGCA 14.

25 April, 2014


Legal News & Analysis – Asia Pacific – Singapore – Insolvency & Restructuring


A foreign company had both creditors and assets in Singapore. However, it had not carried on business here and had not been required to register a branch. When it became insolvent, it was wound up in Germany, and a winding up order was also made against it in Singapore. Held that its liquidator had to transmit all proceeds from its local assets to the German liquidator for distribution amongst all its creditors worldwide:

— Beluga Chartering GmbH (in liquidation) & Ors v Beluga Projects (Singapore) Pte Ltd (in liquidation) & Anor [2014] SGCA 14 (Singapore, Court of Appeal, 28 February 2014)


This case involved a foreign company, Beluga Chartering GmbH (“Beluga”), which had both creditors and assets in Singapore. However, as it had not carried on business here, it had not been required to register as a branch.

When an order was made for its winding up in Singapore, its liquidators (“Liquidators”) applied to court to ascertain how they should deal with its local assets. The value of those local assets (less a possible set-off claim) amounted to about USD 850,000, and its local debts and liabilities amounted to about SGD 1.4m. Beluga’s creditors worldwide were owed debts of approximately EUR 1.2 bn, while its worldwide assets amounted to about EUR 20m.

If the Liquidators were required to transmit all monies received from Beluga’s local assets to its country of incorporation, Germany, it would form part of the pool to be divided amongst all its creditors worldwide, including those creditors in Singapore. Each creditor would then receive less than two cents on the Euro. However, if the Liquidators were required to first pay Beluga’s local debts and liabilities before transmitting the remainder (if any) to Germany, the creditors in Singapore would receive substantially the full amount owed.

Legal Background

There was a question as to which of these outcomes applied because Division 5 of Part X of the Companies Act deals with the winding up of unregistered companies and its sections do not address the question of a cross-border corporate insolvency. Division 2 of Part XI of the Companies Act sets out the obligations of a foreign company in Singapore. One of its sections, section 377, sets out the obligations of a foreign company’s Singapore liquidator in the event of its winding up. Among other things, section 377 obliges the Singapore liquidator of a foreign company to first pay its debts and satisfy its liabilities incurred in Singapore before transmitting the remaining assets to the foreign company’s country of incorporation.

While Beluga was a foreign company, being incorporated in Germany, it had not registered a branch to carry on business in Singapore as it had not carried on business here. Accordingly, it was argued that it should not be treated as a foreign company but as an unregistered company and that Division 5 of Part X would apply. As nothing in Division 5 of Part X obliged the Liquidator to first pay its local debts and liabilities, it was argued that the Liquidator was hence obliged to transmit the funds from Beluga’s local assets to Germany for distribution as part of its worldwide pool of assets.


The Singapore High Court had held at first instance that the ring-fencing provisions in section 377 of the Singapore Companies Act applied to any foreign company whether or not it was registered in Singapore. The Singapore Court of Appeal took a different view and ordered that the Liquidator transmit Beluga’s funds to Germany. It held that it did not have the power to ring-fence Beluga’s assets for distribution first to its Singapore creditors: such a power had not been provided for in the Companies Act and did not arise under the common law.

Whether Section 377 Of The Companies Act Applied

The Court of Appeal first considered whether there was anything in the Companies Act that would allow section 377 to be applied to a foreign company which was neither registered nor carrying on business in Singapore. It concluded that neither section relied upon by the Liquidator, namely, sections 350(2) and 365 of the Companies Act, provided such a basis.

Section 350(2) provides as follows:


This Division shall be in addition to, and not in derogation of, any provisions contained in this or any other written law with respect to the winding up of companies by the Court and the Court or the liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by it or him in winding up companies.

The Court held that the word “companies” in section 350(2) should be read as referring to “a company incorporated pursuant to the Companies Act”. Accordingly, the provisions of Division 2 of Part XI concerning foreign companies that are not incorporated under the Companies Act, which included section 377(3)(c), could not be imported pursuant to the second limb of section 350(2) so as to apply to the winding up of unregistered companies under Division 5 of Part X.

Section 365 in turn provides as follows:


[Division 2 of Part XI] applies to a foreign company which, before it establishes a place of business or commences to carry on business in Singapore, complies with section 368 and is registered under this [Division 2 of Part XI].

The Court noted the apparent circularity of section 365. Section 368 of the Companies Act was part of Division 2 of Part XI, which was stated to apply to a company only if it complied with section 368. It further noted that Parliament’s intention was that the provisions in Division 2 should apply to companies which intended to establish a place of business or carry on business in Singapore and would have been liable to register under section 368 of the Companies Act. Accordingly, the interpretation that would be most consistent with Parliament’s purpose would be to read the references in section 365 to prior compliance with section 368 and registration under the Division as including a continuing obligation to comply with and register under section 368 as long as a company came within the terms of section 368. This meant that a foreign company fell within the scope of section 365 if was subject to section 368 but had not complied with the registration requirements. The Court, in doing so, noted the problems of extraterritoriality that may arise if a wide interpretation of section 365 were preferred.

Section 365 would therefore operate as a condition precedent for the application of all provisions in Division 2 of Part XI except for section 368. It would be triggered when a foreign company:


  • had actually been registered under section 368(1); or
  • came under the liability to register under section 368(1) because it intended to establish a place of business or commence carrying on business in Singapore, this being a liability that continued even after it actually commenced business or established a place of business here without being registered.

As Beluga was not carrying on business in Singapore and was not obliged to register under section 368, section 377(3)(c) therefore did not apply to the Liquidator.


Whether Common Law Allowed The Court To Ring-Fence Beluga’s Assets

The Court then considered whether there were any case law principles that would allow it to ring-fence Beluga’s Singapore assets for the benefit of its Singapore creditors.

It noted that Singapore law had accepted the ancillary liquidation doctrine. This provided that once the domicile of the company in liquidation has been ascertained, it was for the court of the country of domicile to act as the principal court to govern the liquidation; and the courts of the other domiciles acted as ancillary, as far as they could, to the principal liquidation.

The effect of the ancillary liquidation doctrine was to empower the local court to order the local liquidator to remit assets that were gathered in locally to the principal place of liquidation. However, it did not give the court a power equivalent to that under section 377(3)(c) to order the Singapore liquidator of a foreign company to ring-fence its local assets to pay off debts and satisfy liabilities incurred in Singapore. While English cases had considered whether the ancillary liquidation doctrine gave the courts a discretion, premised on the principle of modified universalism, to order assets collected locally in the ancillary liquidation to be remitted to the liquidators of the principal liquidation regardless of any statutory provision providing otherwise, this was the opposite of what the Liquidator was contending for in this case. What the Liquidator was arguing for here was that the court had a “positive power to ring fence assets” even though such a power was not conferred by any applicable statute, which went a step beyond the principles elucidated in the English cases.

In the view of the Court, whatever might be the local position on the extension of the ancillary liquidation doctrine, it did not apply here as there was no question of “disapplying” any statutory insolvency provision or depriving the Singapore creditors of any vested rights under the Companies Act or other written law.

Observations On The Position Of A Foreign Liquidator

While the case did not require the Court to do so, it made several noteworthy observations on the position of a foreign liquidator where local liquidation proceedings are not initiated. These observations are not binding but provide useful guidance on how the Court may rule in a subsequent case where the issue arises before it:


  • A liquidator of a foreign company will be recognised as the representative of the company for the purposes of getting in and realising the company’s worldwide assets and there would generally be no basis for a Singapore court to decline to recognise the liquidator’s claim to assets belonging to the company under general principles of property law.
  • Singapore courts are not bound by any stay of legal proceedings that flows from a foreign winding up order in the absence of local winding up proceedings. Nonetheless, it remains open to the courts to assist the foreign liquidation proceedings by exercising their inherent discretion to stay proceedings.
  • As a very broad statement of principle, most courts recognise the desirability and practicality of a universal collection and distribution of assets and that a creditor should not be able to gain an unfair priority by an attachment or execution on assets located within the jurisdiction of the court subsequent to a winding up order made elsewhere.
  • Whether and how the Singapore court will render assistance to foreign winding up proceedings through the regulation of its own proceedings will depend on the particular circumstances before it. Assistance might, for example, take the form of a stay of a claim if Singapore is not the appropriate forum; or staying an execution or attachment; or exercising a discretion against granting a garnishee order absolute; or refusing leave to serve process out of the jurisdiction; or winding up the company in Singapore.

Our Analysis / Comments

This case confirms the Singapore courts’ inclination to follow the principle of universalism by co-operating with foreign jurisdictions in cases of cross-border insolvency. The ultimate effect of the decision is the preservation of a worldwide pari passu regime, in that creditors of unregistered foreign companies who are outside of Singapore would not be prejudiced in relation to local creditors, whose sole advantage is the fact of their jurisdiction.

The High Court had previously noted that the ring-fencing rule under section 377(3) is a “wholly novel provision” which abrogates the normal pari passu principle. It is certain that the Court of Appeal had this in mind when it restricted the applicability of the rule to only companies which had a place of business or carried on business in Singapore. To hold that even foreign unregistered companies were subject to this rule would certainly be an overreach when Parliament’s intention was not clear.




For further information, please contact:


Sean Yu Chou, Partner, WongParntership
[email protected]

Manoj Pillay Sandrasegara, Partner, WongPartnership
[email protected]



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