Singapore Court of Appeal Clarifies Test for Determining Company’s Inability to Pay Debts and Right to Appeal Winding Up

23 Jun 2021 CaseWatch

In Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd) [2021] SGCA 60, the Singapore Court of Appeal held that:

(a) The cash flow test is the sole test under section 254(2)(c) of the Companies Act (re-enacted as section 125(2)(c) of the Insolvency, Restructuring and Dissolution Act (“IRDA”)); and

(b) A company has the right to appeal a winding up order regardless of whether a stay order is granted, and its directors can control the conduct of the appeal.

The Court of Appeal also stated, in obiter, that a company which partially pays off a statutory demand within three weeks, causing the remaining amount payable to fall below the prescribed threshold (which was $10,000 under the Companies Act and now $15,000 under the IRDA), will not be deemed to be unable to pay its debts under section 254(2)(a) of the Companies Act (re-enacted as section 125(2)(a) of the IRDA).

This update takes a look at the Court of Appeal’s decision.

If you would like information or assistance on the above or any other area of law, you may wish to contact the Partner at WongPartnership whom you normally deal with or any of the following Partners:

Partner – Restructuring & Insolvency
d +65 6517 8707
Click here to see Joel’s CV.

Daniel LIU
Partner – Restructuring & Insolvency
d +65 6416 2470
Click here to see Daniel’s CV.