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Receivership & Judicial Management Services
What is receivership? Under what circumstances, a company may be placed under receivership?
Receivers are typically appointed by the court as a ‘neutral fiduciary’ or recommended by the lender as plaintiff. Specific court language refers to a ‘receiver’ as the hands and eyes of the court. As a result, carrying out any necessary actions to preserve the assets of the receivership estate.
However, the Receiver is not a representative or agent for the party owning these assets or the plaintiff, but rather, he/she is granted powers as an officer of the court to benefit all parties involved in the litigation. In other words, the duty of a receiver is to control assets, businesses and other real properties involved in litigation in order to preserve them during the pending outcome of said litigation. Having said that, if a receiver is appointed to enforce a charger for the benefit of holders of debentures of the company, the company may be placed under receivership.
A company may be placed under judicial management, instead of resorting to a winding up, if the company or its creditor(s) is/will be unable to pay its debts, and have a reasonable possibility of rehabilitating the company upon application to the Court. Thereby, a judicial manager will be appointed.
To allow a financially distressed company to reinstate its financial health with the supervision of the Singapore Courts is the main aim of the Judicial Management. In order to carry out this, the company will be placed under the management of a court-appointed officer and by implementing a moratorium against all claims made by creditors.
Since Judicial Management is upon application to the Court, the application can be made by the company, its directors or its creditors. The affidavit should nominate a Judicial manager and set out the reasons why an order for Judicial Management is sought as the application is by way of originating summons supported by an affidavit deposed by a representative of the applicant.
Once the application is made and until it is dealt with by the Courts, no resolution can be passed to wind up the company. On top of that, no legal action can be commenced against the company and no steps can be taken to enforce any security over the company’s assets by creditors except with the leave of Court.
If the Court is satisfied that the company is or will be unable to pay its debts and that the making of the order will likely ensure the survival of the company, or the whole or a part of its undertaking as a going concern or that it is likely that a more advantageous realisation of the company’s assets would be effected than a winding up. Thereby, the order for Judicial Management would be granted.
Who can become the Judicial Manager? The Judicial Manager nominated must be a public accountant and cannot be an auditor of the company.
The Court also retains discretion as to who to appoint as the Judicial Manager and will generally appoint the party nominated by the applicant if there is no objection to such nomination. However, the nomination may be opposed by a simple majority of the creditors, both in number and value. The Court may, if satisfied as to the value of the creditors’ claims and as to the grounds of opposition, invite the creditors to nominate a person in his instead, and if it sees fit, adopt their nomination.
Income Tax Filing Requirements
Do a company under judicial management or receivership required to submit income tax filing? Even if a company is under judicial management or receivership, it is still required to submit the Income Tax Return (Form C-S/C), audited/unaudited financial statements and tax computation to IRAS yearly. On the other hand, companies filing Form C-S are not required to submit audited/unaudited financial statements and tax computations to IRAS. Yet, these companies should prepare and submit the documents to IRAS upon request.
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