Andrew Reeves
Soletanche Bachy


On 19 March 2014 the Society of Construction Law (Singapore) held a seminar on Construction
Insolvency. The seminar was chaired by Ms.Uma Menon and the speakers were Mr Abuthahir AbdulGafoor (Stone Forest Corporate Advisory) and Mr Koh Kia Jen(Rodyk & Davidson).Both speakers covered all aspects of a typical insolvency.The topic was particularly interesting in view of the insolvency of Alpine Bau GmBh, the Austrian main contractor on the Singapore MRT Downtown line.

Due to reasons of confidentiality, the specific details of the Alpine insolvency could not be revealed, however Kia Jeng provided the legal framework when a foreign company operating in Singapore becomes insolvent.In Alpine’s case, proceeds from its Singapore branch office must be used to pay off debts incurred in Singapore because it is registered as a foreign company under the Singapore Companies Act. Therefore,Section 377(3) of the Singapore Companies Act applies to it. Any surplus is then remitted to Austria.

If the foreign entity does not register itself to do business in Singapore, Section 377(3) of the Singapore Companies Act does not apply.
Therefore, the foreign entity’s assets in Singapore will be remitted to its principal place of liquidation and Singapore creditors will not get first bite of such assets before remittance.

Another interesting point was that insolvency in itself is not sufficient grounds to terminate a contract, unless it is expressly provided for in the contract. It is also important to diligently adhere to the termination procedures provided in the contract to avoid being challenged as wrongful termination.

Abuthahir highlighted that obtaining funds in the first instance to manage the insolvency is key. In the Alpine’s case, obtaining funds was difficult but
nevertheless funds were obtained. Interestingly, he noted that in several insolvency cases the contractor’s cash flow was poor. The audience was advised that cash flow can in fact be improved by ensuring receipt of timely revenue. Abuthahir also outlined the procedural aspects involved in the liquidation such as recovery of assets, negotiations with parties and adjudication of debts. In the Singapore context, this provided a practical insight into the process of liquidation and would have been
much appreciated by the attendees.

The seminar was very informative for lawyers and non-lawyers and testimony to this was the auditorium packed with more than a hundred attendees.

 

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