Readers of the Manifold Times would be familiar with our coverage of insolvency related news for the shipping and oil industries. These include the recent news of Sinco Shipping’s declaration of inability to continue business (thereby entering a creditor’s voluntary winding up) and the winding up application filed against Delta Corp Shipping (which involved a Court ordered winding up).

Amid global economic uncertainty, geopolitical tensions, and volatile energy prices, the shipping and oil industries are navigating some of their most turbulent times in recent memory. These challenging conditions have significantly heightened insolvency risks, particularly in capital-intensive sectors like shipping and oil.

Lawyers from multi-disciplinary law firm Helmsman LLC shared with Manifold Times on insolvency risks, the insolvency process in Singapore and how stakeholders can protect their interests.

MT: In the news we cover, we see that some of the companies have winding up applications filed against it whereas others appear to voluntarily enter into liquidation. Are these different processes and what are the differences between the two?

Generally, there are two ways for an insolvent company to wind up in Singapore: creditors’ voluntary winding up, where a company chooses to close itself down, and court-ordered (compulsory) winding up, where creditors or other interested parties seek a court order to wind up the company due to its inability to pay debts. The difference lies in who initiates the process.

Despite its name, creditors’ voluntary winding up is initiated by the company itself (and not its creditors). The directors of the company will lodge a declaration that the company cannot by reason of its liabilities continue its business and summon shareholder and creditors’ meetings to be held within 30 days. In order to preserve the assets of the company, a provisional liquidator will be appointed to manage the company’s affairs and will act until the creditors’ meeting ratifies the appointment or replaces the liquidator. It is important to note that even though the company will nominate the liquidator, it is the creditors who hold the determining vote whether to appoint that liquidator or to replace the liquidator with another nominee.

Court-ordered winding up, on the other hand, is typically initiated by a creditor of the company and as the name suggests, involves court proceedings. In most cases, the creditor will first issue a statutory demand for a debt exceeding SGD 15,000. If the debt is not paid, secured or compounded within 3 weeks and is not disputed, then the company is deemed unable to pay its debts and the creditor will be entitled to file a winding up application against the company. The applicant creditor will nominate a liquidator to be appointed if the winding up order is made.

In terms of the administration of the winding up, both processes are quite similar in that the appointed liquidator will displace the incumbent management of the company and take steps to collect and realise all of its assets for the purpose of distribution to creditors. There are, of course, differences between the two processes such as the level of Court involvement but these generally do not have much of an impact on creditors.

MT: How does a creditor get involved in the winding up of a company?

The company should have records of all its creditors and during the winding up process, the directors of a company also need to complete a Statement of Affairs listing all the company’s assets and debts. The liquidator will work off that information and normally write to all the known creditors of the company to notify them of the winding up (whether creditors’ voluntary winding up or court-ordered winding up) and ask the creditors to lodge proofs of debts to register their debts.

In some cases, a creditor may not be listed in the company’s records due to poor record keeping or instances where the debt may be disputed. Winding ups need to be advertised in the Government Gazette and at least one English-language newspaper – creditors of companies in precarious financial situations should monitor for such news (including on Manifold Times). If a creditor subsequently discovers that the company is in winding up and has not been notified by the liquidator before that, the creditor can get in contact with the liquidator to lodge its proof of debt. If no distributions have been made to creditors (referred to as dividends) yet, the creditor will generally not be prejudiced by the belated lodging of a proof of debt.

If a creditor wants to have greater involvement in the winding up process, it can also nominate a representative to stand as a member of the Committee of Inspection (assuming one is formed). The Committee of Inspection is a group creditors and/or contributories formed to assist and supervise the liquidator in the performance of their duties, and its sanction can be sought if the liquidator wishes to exercise certain powers.

MT: What can a creditor do to improve its chances of recovery against a company in financial difficulties? For example, can a creditor obtain security from an insolvent company before it is wound up?

In theory, there is nothing to stop an unsecured creditor from obtaining security from an insolvent company before it is wound up. The utility of such security may depend, however, on the type of security granted. For example, floating charges created in favour of a previously unsecured creditor within a relevant time prior to winding up are invalid if no consideration was provided for the security. Further, there are various clawback provisions in the insolvency regime which allow such transactions to be challenged (e.g. unfair preference).

Creditors have to bear in mind that a key principle in the winding up of a company is the concept of pari passu, which means “on equal footing”. This doctrine ensures that, subject to certain statutory priorities, the company’s assets must be distributed equally and proportionately among its unsecured creditors. Each creditor receives a share of the remaining assets in proportion to the size of their claim, without preference or advantage.

In the shipping context, a powerful bargaining tool for an unsecured creditor against a recalcitrant counterparty is the possibility of arresting a vessel prior to the winding up of a company, as security for the claim. The topic of arrest is an interesting one which my colleagues will be covering in a subsequent article – do look out for it!

Photo credit: Helmsman
Published: 28 May, 2025