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It’s not about the money, money, money

A landmark decision of the Singapore Court of Appeal in Ascentra Holdings, Inc. and Others v SPGK Pte Ltd (“Re Ascentra”) has overturned the first instance decision of the Singapore High Court and confirmed that solvent official liquidations can be recognised as foreign main proceedings under Singapore’s adaptation of the UNCITRAL Model Law on Cross-Border Insolvency (the “SG Model Law”). In so deciding, the Singapore Court has declined to follow a decision of the English High Court which had held that a company’s insolvency was a prerequisite for recognition under the UNCITRAL Model Law on Cross-Border Insolvency (the “Model Law”).

Nothing in this briefing note is intended to provide, or should be construed as giving, Singapore legal advice. Readers should seek advice from Singapore counsel in relation to any matters of Singapore law discussed herein.


Ascentra Holdings, Inc. (“Ascentra”) is an exempted Cayman Islands company which was placed into voluntary liquidation pursuant to a special resolution passed by its shareholders on 1 June 2021. As Ascentra’s directors failed to make a declaration of solvency within 28 days of the commencement of the voluntary liquidation, the voluntary liquidator was obliged to apply for an order that the liquidation be continued under the supervision of the Grand Court, pursuant to the relevant provisions of the Cayman Islands Companies Act (as amended) (the “Companies Act”) and the Companies Winding Up Rules (as amended) (the “CWR”). A supervision order was subsequently made on 17 September 2021, with the effect that joint official liquidators (“JOLs”) were appointed and Ascentra was placed into official liquidation.

The CWR requires official liquidators to certify at the outset of the liquidation whether the company in question is solvent, insolvent or of doubtful solvency. Moreover, official liquidators must keep their initial determination under review, and must change it as and when circumstances change. In this case, the JOLs determined that Ascentra was solvent, and a certificate of solvency was accordingly filed at Court. Although the official liquidator’s solvency determination does not affect the substantive way in which the business and affairs of the company are wound up, it does have certain procedural consequences e.g. it affects whether the company’s liquidation committee should consist of the company’s creditors or its contributories.

The Importance of Recognition

Applying for and obtaining recognition of a local insolvency proceeding in a foreign jurisdiction can be vital to a successful outcome of a liquidation proceeding. Recognition of foreign proceedings provides office holders with additional powers and protections, and allows cross-border insolvencies to be dealt with in a holistic fashion, rather than piecemeal in various jurisdictions around the world. A coordinated approach to insolvency proceedings across multiple jurisdictions saves time and money, helps to preserve value and can ultimately provide greater returns to stakeholders.

The Model Law was designed to assist in obtaining such recognition. Consistent with the principle of ‘modified universalism’, the Model Law provides a draft framework which countries can adapt to their own specific circumstances and national procedural law, and which focuses on encouraging cooperation and coordination between jurisdictions in the supervision and administration of a debtor’s assets and affairs, rather than attempting the unification of substantive insolvency law.

Although not all jurisdictions have adopted (a version of) the Model Law, a large number of significant jurisdictions have, including England & Wales, the United States, the British Virgin Islands and (importantly for our purposes) Singapore.

Obtaining Recognition in Singapore

By originating summons dated 6 January 2022 (the “Application”), the JOLs sought recognition of their appointment as “foreign representatives” and of Ascentra’s liquidation in Singapore as “foreign main proceeding” pursuant to Article 15 of the SG Model Law.

Article 17(1) of the SG Model Law stipulates circumstances in which a foreign proceeding must be recognised, including if is “a foreign proceeding within the meaning of Article 2(h)”. Article 2(h) of the Third Schedule of the SG Model Law in turn defines “foreign proceeding” as “a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the property and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation”.

Consequently, the elements which need to be present under Singapore law for foreign liquidation proceedings to be recognised are that:

a. the proceeding must be collective in nature;

b. the proceeding must be a judicial or administrative proceeding in a foreign state;

c. the proceeding must have its basis in a law relating to insolvency or adjustment of debt;

d. the foreign court must exercise control or supervision of the property and affairs of the debtor in the proceedings; and

e. the purpose of the proceeding must be the debtor’s reorganisation or liquidation.

Ascentra’s Application

The Application was heard by the Singapore High Court on 23 March 2022 and 27 May 2022. Another party, SPGK Pte Ltd (“SPGK”) (a company incorporated under the laws of Singapore), also appeared on the Application, although it is neither a creditor nor contributory of Ascentra. Although Ascentra and SPGK reached an agreement as to the form of the proposed recognition order prior to the hearing, the Singapore High Court, of its own volition, queried whether Ascentra’s liquidation was a liquidation “under a law relating to insolvency”. By a judgment dated 3 April 2023[1] (the “Judgment”) the Singapore High Court dismissed the Application, and refused to recognise the JOLs’ appointment or Ascentra’s official liquidation as a foreign main proceeding.

The Decision Below

In the Judgment, Judge Coomaraswamy adopted a purposive approach to the interpretation of the SG Model Law, concluding that “the ordinary meaning of the words ‘law relating to insolvency’ encompass only a proceeding invoked in circumstances where the company is insolvent or in severe financial distress”.[2]

Accordingly, in the Honourable Judge’s view, the fact that Ascentra’s official liquidation had been commenced under – and is governed by – the Companies Act, did not mean that the liquidation had its basis in a law relating to insolvency, notwithstanding that the Companies Act is the only primary legislation which deals with the liquidation of Cayman companies (whether solvent or insolvent). The fact that provisions dealing with a liquidation proceeding were located within a statute which also deals with the subject matter of insolvency generally could not lead to the conclusion that the liquidation should be deemed to be under a law “relating to” insolvency.[3]

Judge Coomaraswamy also considered the purpose and intent of the Model Law, and found that: “The purposes of the Model Law are in no way engaged when recognition is sought of a foreign proceeding involving a company which is neither insolvent nor in severe financial distress”[4]. He concluded that, although the UNCITRAL Working Group had intended that the definition of “foreign proceeding” be interpreted broadly, it had not intended to bring a solvent liquidation within the Model Law.[5]

In reaching his conclusion, the Honourable Judge declined to follow the decision of the Supreme Court of New South Wales in Re Chow Cho Poon (Private) Ltd (2011) 80 NSWLR 507, in which the Court concluded that the whole of the winding up provisions in the Australian Companies Act (2006 Rev Ed) were to be classified as “a law relating to insolvency”, or various decisions of the United States Bankruptcy Court, including Re Betcorp Limited (in Liquidation) (2009) 400 BR 266 in which the Court found (at paragraph 282) that the terms “law related to insolvency or the adjustment of debt” did not require a company to be either insolvent or to be contemplating using the law to adjust any debt. Instead, Judge Coomaraswamy followed the English decision in Re Sturgeon,[6] in which the High Court of England & Wales concluded that including solvent debtors in the definition of “foreign proceeding” would be contrary to the purpose and object of the Model Law.

The Court of Appeal’s Decision

In a lengthy and carefully considered judgment, the Singapore Court of Appeal concluded that:

(a) first, it is evident from the ordinary meaning of the relevant provisions of the SG Model Law that there is no express requirement for a company to be insolvent or in severe financial distress for a proceeding concerning that company to be recognised as a foreign proceeding under the SG Model Law. In particular, the Court of Appeal was satisfied that the words “or adjustment of debt” were included in Art 2(h) of the SG Model Law to enable the Singapore courts to recognise: (a) proceedings in foreign jurisdictions that are akin to schemes of arrangement commenced under Singapore law and/or reorganisations commenced under Chapter 11 of the US Bankruptcy Code; and (b) proceedings recognisable under Chapter 15 of the US Bankruptcy Code (which sets out the US’ adaptation of the Model Law);

(b) second, even if the Court of Appeal were to ignore the words “or adjustment of debt” (which were added to the wording of the Model Law by the Singapore Parliament), the Court was not satisfied that the drafters of the Model Law intended to exclude solvent companies from the scope of the Model Law for the purposes of recognition. In particular, it was not clear to the Court of Appeal how extending the scope of Art 2(h) to cover proceedings involving solvent companies would undermine the purpose of the SG Model Law;

(c) third, the Court was satisfied that Art 2(h) should be interpreted in a way that is broadly harmonious with the approaches adopted in other jurisdictions, and the weight of the authorities in other jurisdictions favours such an interpretation; and

(d) fourth, the practical concerns raised by SPGK could be easily dealt with.

The Court of Appeal went on to conduct a thorough analysis of the Model Law, along with numerous authorities dealing with the recognition of solvent companies in the United States, the United Kingdom and elsewhere. Whilst that analysis falls outside the scope of this briefing note, it is notable that the Court of Appeal approved the approach taken by the US Bankruptcy Court in Re Betcorp, and respectfully disagreed with the approach that was taken by the English High Court in Re Sturgeon.

Lastly, the Court of Appeal considered and dismissed other objections raised by SPGK regarding the nature and purpose of Ascentra’s liquidation, concluding that it was a collective proceeding and was being conducted for the purpose of reorganisation or liquidation.

The Implications

The decision in Re Ascentra is significant. It confirms that Cayman official liquidators (and, presumably, Cayman restructuring officers) are entitled to seek recognition of their appointment in Singapore, and avail themselves of the powers and protections that comes with such recognition, without having to worry about whether the company’s actual, or potential, solvency alone will prevent recognition from being granted. Liquidators, administrators and trustees of solvent companies in other jurisdictions (such as Chapter 11 trustees) are also likely to benefit from the Court of Appeal’s decision. When considering a recognition application, the Singapore Court will not be required to conduct a de novo determination of a foreign company’s solvency position (which would involve complex questions of exactly how that company’s solvency should be assessed by the Singapore Court), which is something the Model Law was expressly intending to avoid.

The Court of Appeal’s decision also offers a pragmatic solution in circumstances where a Cayman liquidator is under a continuing duty to keep his solvency determination under review, and where the financial position of many Cayman liquidations is fluid. Had the Judgment stood, it would have meant that the recognition of any liquidation proceedings granted in Singapore after a certificate of insolvency had been filed could be challenged if and when the liquidator determined that the company had in fact become solvent (for example, following the conclusion of a successful lawsuit). To make matters worse, such a change in solvency might, potentially, occur between the filing and the hearing of the recognition application, meaning that costs and time could be wasted preparing for a hearing that was doomed to fail. Conversely, a liquidation ineligible for recognition due to a determination of solvency might suddenly become eligible for recognition upon the filing of a certification of insolvency (for example, if a significant creditor were to come out of the woodwork). Moreover, the Judgment was silent as to whether a Cayman liquidation that had been determined to be of doubtful solvency would be capable of being recognised as a foreign proceeding.  Given the numerous practical problems and issues that undoubtedly would have arisen had the Judgment stood, the Court of Appeal’s decision provides much needed clarity and is to be warmly welcomed.

Campbells LLP acts as Cayman Islands counsel for the Joint Official Liquidators of Ascentra, Graham Robinson and Ivy Chua Suk Lin.

[1] In re Ascentra Holdings, Inc (in Official Liquidation) [2023] SGHC 82.
[2] Paragraph 158 of the Judgment.
[3] Paragraph 59 of the Judgment.
[4] Paragraph 78 of the Judgment.
[5] Paragraph 85 of the Judgment.
[6] Re Sturgeon Central Asia Balanced Fund Ltd (in liquidation) Carter v Bailey and another (as foreign representatives of Sturgeon Central Asia Balanced Fund Ltd) [2020] EWHC 123 (Ch).
Guy Cowen - Senior Associate, Campbells Grand Cayman - Insolvency & Restructuring

Guy Cowan

+1 345 914 5876

Nienke Lillington

+1 345 914 6921