Worker’s Party MP Sylvia Lim’s speech during the Parliamentary debate on the Insolvency Amendments Bill on 9 January 2023 is reproduced in full below.
Minister Edwin Tong’s second reading speech on the bill may be accessed at this link.
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Over the years, I have met several residents who were undischarged bankrupt and whose estates were being managed by the Official Assignee (“OA”). They shared with me their experience liaising with the OA officers for various purposes, ranging from proposing instalment payments of their debts to obtaining permission to leave the country. While they had no complaint about the way they were treated, a common dissatisfaction was the perceived difficulty in contacting the OA officers, or delays in obtaining responses. This was an issue I first raised a decade ago during MinLaw’s COS. Since then, I have noted the Ministry’s constructive moves to improve the situation, including taking steps to rationalise the OA’s workload.
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A major change took place in 2015, when the then Bankruptcy Act was amended to require institutional creditors such as banks and finance companies to have their bankrupt debtors’ estates managed by private trustees in bankruptcy (PTIBs). This scheme for institutional creditors to appoint PTIBs would have significantly reduced the numbers of new bankruptcies under the OA’s direct management, since institutional creditors accounted for more than 50% of bankruptcy applications. According to MinLaw’s Register of Insolvency Practitioners, there are today 187 lawyers and accountants registered as potential PTIBs.
The Bill before the House today will move the needle even further, as it proposes that all creditors, not just institutional creditors, will need to appoint a PTIB if they intend to make their debtors bankrupt. Debtors, too, who wish to voluntarily apply for bankruptcy, will also have to appoint a PTIB. When the scheme in the Bill is implemented, the OA will directly manage only a minority of bankruptcies, which the Ministry has explained would be cases with a public interest element, such as when public funds have been misused.
From a resource standpoint, it is hard to quarrel with the Ministry’s rationale to move towards PTIBs: that taxpayer-funded public resources, such as the OA’s office, should not be tied up enforcing private debts. It should fall to the creditor and the debtor to bear the costs of bankruptcy administration. That said, I have some queries on evaluating our experience with the PTIB scheme thus far, and one query on the Bill itself.
First, on evaluating the PTIB experience. Five years ago, Singapore commenced the use of PTIBs in bankruptcy cases involving institutional creditors. Now that the Bill proposes to extend the use of PTIBs to non-institutional creditors and voluntary bankruptcies as well, it is appropriate to ask what can be learned from the past five years. Have there been better outcomes in bankruptcies, not just in terms of freeing up public resources, but also better experiences for creditors and debtors?
In the Ministry’s Media Release of 28 November, it was stated that the administration of bankrupt estates by PTIBs since 2017 “has been smooth and no action has been taken on the PTIBs by the OA and / or the Courts on the PTIBs’ management of bankruptcies”. This was apparently based on feedback from the industry. While no formal action has been taken, it would be good for the Ministry to elaborate on how the OA has exercised its supervisory role over the PTIBs under Section 42 of the Act. For instance, has the OA had to inquire into any complaints by creditors or debtors, and if so, what was the nature of those complaints?
Specifically, from the debtors’ perspective, I would like to highlight three aspects which I think are important in assessing whether the PTIB system is working optimally. First, on neutrality of administration. Bankruptcy cases are now being handled not by a public officer from the OA’s office, but by a PTIB chosen by the creditor, whose fees are also underwritten by the creditor. It is sometimes said that he who pays the piper calls the tune. Have there been any complaints from debtors that the PTIBs have been unfair to them? A second aspect concerns the fees to be paid to the PTIBs. From my reading, the fees are not fixed according to a scale, but are decided by the creditors in each case. Is there a wide variation in the rates of fees charged? If the range is too wide, this is not desirable. I have also noted Member Mr Murali’s concerns about possible financial hardship that might be caused to non-institutional creditors and debtors if high fees are charged going forward. Finally, on response times to debtors. This was a common grouse of bankrupts in the past. Have PTIBs been able to respond efficiently to debtors’ communications and requests?
I also have a query on Clause 2 regarding the proposed expansion of the PTIB scheme to non-institutional creditors and to voluntary bankruptcies. Given that non institutional creditors and debtors may not have knowledge and experience in insolvency matters, how will they decide which insolvency practitioner to propose as their PTIB? Will more resources be put up to assist them in making their selection of insolvency practitioner?
Finally, let me say a few words to conclude. We know that bankrupt persons end up in bankruptcy for a myriad of reasons, including misfortune, bad timing and being guarantors for the debts of others. Bankruptcy can be debilitating and disempowering, as bankrupts are stigmatised and disqualified from public office and various professions. I do hope that as we move towards a system of having PTIBs as the default, the bankruptcy experience can be a less painful one.
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