12 March, 2014
The court has a discretionary power to stay voluntary winding up proceedings altogether after taking into consideration the interest of the creditors, the liquidators, and the members of the company:
— Interocean Holdings Group (BVI) Ltd v Zi-Techasia (Singapore) Pte Ltd (in liquidation) [2014] SGHC 9 (Singapore, High Court, 13 January 2014)
In this case, the plaintiff sought to revive a subsidiary that had been put into liquidation. While there were good commercial reasons for doing this, the issue before the Singapore High Court was whether and how this could be done after a winding up order had already been granted.
Facts
The plaintiff was a holding company beneficially entitled to all the issued shares of the defendant. It resolved to put the defendant into voluntary winding up on the basis that it had no business transactions for over 12 months and liquidators were appointed.
Subsequently, the plaintiff changed its mind and wanted the business of the defendant to continue so that the defendant could be profitable from new potential business. The plaintiff believed that there was considerable goodwill in the defendant’s corporate name and that there were financial and tax incentives for reinstating the defendant. The liquidators had no objection to the cessation or stay of the members’ voluntary winding up. The defendant had cash in the bank and no outstanding liabilities.
The plaintiff therefore applied for an order under section 279(1) of the Companies Act (“Act”) that the members’ voluntary liquidation of the defendant company be stayed altogether and that the officers of the defendant be permitted to resume management of the company.
Decision
The Singapore High Court noted that, in Singapore, there was no express provision permitting a winding up order, once perfected, to be set aside or revoked. Section 279(1) did, however, give it the power to grant a stay of winding up proceedings either altogether or for a limited time on such terms and conditions as it thought fit. In the Court’s view, the only way a company being wound up could be put back into its former state was by way of a court order staying the winding up proceedings. This would be so whether the company had been put voluntarily into winding up or was in such a state by way of court order.
The Court held, therefore, that it did have a discretionary power to grant the stay, after taking into consideration the interests of three parties: the creditors, the liquidators, and the members of the company. If these three interested parties consented to a stay, the Court held that it should seldom and only with good reason stand in their way. However, this would be contingent on the party seeking a stay being able to demonstrate in full and forthright detail the reasons for which a stay is sought.
The Court further held that, in the scheme of the Act, once winding up had been stayed altogether, the process of liquidation set out in the Act leading ineluctably to the dissolution of the company was also stayed. The effect of the stay would be as follows:
- All proceedings in relation to winding up became stayed including all the statutory duties and activities of the liquidator. As a result, the powers of the directors which were in abeyance while the company was in winding up would continue. The effect would be to put the officers of the company back into control of the management of the company.
- The stay took effect only from the date of the pronouncement of the stay and was not backdated to the date of the winding up order or the date that voluntary winding up commenced. The winding up was stayed, not set aside, rescinded, or discharged. Therefore a stay did not undo the actions of the liquidator but operated only to halt the proceedings and thenceforth to permit the officers of the company to continue in control.
In the present case, all the relevant parties had been notified of the application. The creditors had been paid off in full and no longer had any interest in the matter. The plaintiff was the main creditor and had affirmed that it had been satisfied in full. The liquidators and the defendant had no objection. Further, the plaintiff had been able to satisfy the Court as to its reasons for reinstating the defendant. The application for a stay in the present case was therefore granted.
For further information, please contact:
Sean Yu Chou, Partner, WongPartnership
Manoj Pillay Sandrasegara, Partner, WongPartnership
WongPartnership Insolvency & Restructuring Practice Profile in Singapore