A Bankruptcy (Amendment) Bill was introduced in May 2015, aimed at improving the process for all: encouraging creditors to exercise greater financial prudence when extending credit; creating a more rehabilitative regime for bankrupts; and appointing private trustees to administer bankruptcy to help optimise public resources.
Of these, the change regarding appointment of private trustees came into effect on 1 August 2016: The requirement for institutional creditors such as banks, finance companies and large business undertakings to appoint a private trustee when administering bankruptcy to a debtor whose debt exceeds S$15,000.
CHANGES FOR INSTITUTIONAL CREDITORS
The move frees up public resources but also spells changes for these institutional creditors.
Prior to August, over 90% of bankruptcies in Singapore were administered by the Official Assignee, a civil service officer who seeks to recover assets from the insolvent to satisfy debts owed to creditors. This administrative undertaking placed a sizeable strain on public resources, especially when bankruptcy applications are on the upswing.
As an illustration, the total number of undischarged insolvent persons in Singapore stood at 18,890 as of 31 July 2016. From January to July 2016 alone, there were a total of 1,827 bankruptcy applications.
The appointment of private trustees would enable the Official Assignee to focus on administering cases where the applicant is an individual or a small business.
Bankruptcy administration can be a rather lengthy process. Even with the introduction of the differentiated discharge framework - a more rehabilitative regime to allow bankrupts to be discharged within clear time frames - the process will still take five to seven years for first time bankrupts, and seven to nine years for repeat bankrupts. This translates into a long-term working partnership between the institutional creditor and private trustee - one that will likely span a number of years.
WHAT TO LOOK OUT FOR WHEN APPOINTING A PRIVATE TRUSTEE
Accordingly, it would serve and institutional creditor well to partner a reliable private trustee with the right experience. Keeping in mind that it is now mandatory for institutional creditors in Singapore to appoint private trustees, a good rule of thumb would be to look out for factors such as prior experience in dealing with the insolvency and Public Trustee's Office and deep knowledge in insolvency administration.
Stay tuned for part II of this article, where we further examine the role of a private trustee as part of the differentiated discharge framework.