BANKRUPTCY (AMENDMENT) BILL

Order for Second Reading read.

The Minister of State for Law (Assoc. Prof. Ho Peng Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, this Bill seeks to amend the Bankruptcy Act to put in place measures in support of the Technopreneurship 21 (T21) initiative and to make related amendments to the Business Registration Act and the Companies Act.

Members will recall that the Bankruptcy Act had a major and fundamental revision in 1995 aimed at encouraging entrepreneurship. The Bill therefore does not seek a fundamental overhaul of the bankruptcy regime. Instead, amendments are proposed to fine-tune our legislation to encourage technopreneurial activity and to enhance Singapore's entrepreneurial climate.

Voluntary Arrangements

Sir, in 1995, to promote entrepreneurship, a reorganisation regime called "Voluntary Arrangement" was introduced to provide an avenue for debt settlement without resorting to bankruptcy. This however has not been widely used. As greater use by debtors of Voluntary Arrangements will reduce the incidence of bankruptcy, this process should be encouraged. The measures proposed by the Bill to encourage use of Voluntary Arrangements are as follows:

(a) Firstly, the amendments extend the deadline for a bankrupt to make a proposal for voluntary arrangement from 28 days to 42 days. Currently, after the Court orders a moratorium, the debtor has 28 days to make a proposal for the settlement of his debts. The extension of this period to 42 days would allow more time for the debtor to put up a proposal and increase the chances of Voluntary Arrangements succeeding.

(b) Secondly, the amendments allow the Minister for Law to make rules prescribing the scale of fees to be charged by nominees assisting debtors in respect of Voluntary Arrangements. The reason for this is that currently, the fees are set by nominees. There is a general perception that fees currently charged are too high. A fixed scale of fees will provide certainty and encourage debtors to make use of Voluntary Arrangements.

Measures to allow Bankrupts to be economically productive - Amendments to the Companies Act and the Business Registration Act

Sir, the next point is that it is important that a bankrupt remains economically productive even during bankruptcy. This will allow the bankrupt to settle his debts earlier and get out of bankruptcy more speedily. It will also allow the bankrupt to continue contributing economically to society during bankruptcy.

Presently, a bankrupt cannot act as a company director or engage in the management of a company or business, except with leave of Court. However, very few bankrupts apply to court for permission to do business, deterred by the costs and trouble of having to apply to Court. The Official Assignee, as administrator of a bankruptcy estate, frequently deals with bankrupts and is more knowledgeable of their affairs. He will therefore be able to consider the merits of each case before he grants permission. Allowing the Official Assignee to grant such permission will also make the process cheaper, simpler and more accessible to the bankrupts. The Official Assignee is also best placed to assist bankrupts and to ensure that a portion of profits made from businesses are paid to creditors. The Bill therefore proposes:

(a) to amend the Companies Act to give the Official Receiver power to allow bankrupts to be company directors and be involved in the management of companies; and

(b) to amend the Business Registration Act to give the Official Assignee the power to allow bankrupts to be engaged in the management of business.

Sir, keeping this as a discretionary measure allows persons who become bankrupts through misfortune to be differentiated from those who have become so through malpractice. It would also encourage bankrupts to co-operate with the Official Assignee to expedite their discharge from bankruptcy. These cannot be achieved by total lifting of restrictions against bankrupts doing business.

Measures to speed up the bankruptcy discharge process in deserving cases

The Official Assignee takes into account the cause of bankruptcy and the efforts made by the bankrupt to repay his creditors when deciding whether to discharge a bankrupt. This scheme which was introduced in 1995 with a major revamp has the advantage of being an inexpensive way of discharging deserving bankrupts expeditiously, whilst creating an incentive for bankrupts to work towards their discharge. It also serves to promote entrepreneurship without eroding financial discipline and commercial morality. Indeed, Sir, the scheme has worked well and has been rated by the Commonwealth Association of Public Administration and Management in 1998 as "truly innovative and worthy of recognition" with the Insolvency Service being awarded a Certificate of Achievement.

In view of the scheme's usefulness in rehabilitating deserving bankrupts, the Bill proposes that the Bankruptcy Act be amended to reduce the period for eligibility for discharge by certificate from the current five years to three years. This will allow the Official Assignee to begin considering a bankrupt for discharge after three years.

Sir, let me stress that this is a discretion that the Official Assignee will exercise only in deserving cases. There will be no automatic discharge. This amendment will allow deserving bankrupts to return to society more quickly. The three year period was chosen to provide greater incentive for deserving bankrupts to work towards an early discharge.

Measures to streamline procedures and reduce the need to resort to the courts

Sir, two amendments to the Act are proposed to streamline procedures and reduce the need to resort to the courts:

Firstly, currently under the Act, when a bankrupt makes an offer of composition or proposes a scheme of arrangement, a general meeting of creditors must be convened to consider the offer or scheme. The Bill amends the Act to allow for the offer or scheme to be accepted by the creditors by post without convening a general meeting.

Secondly, there are currently two situations where a bankrupt is required to apply to court for a discharge. These are first when a bankrupt has fully repaid all his debts or when the creditors have, by special resolution, accepted an offer of composition or scheme of arrangement from the debtor. Sir, in these two situations, the courts will invariably discharge the bankrupt. The Bill amends the Act to provide for the Official Assignee to issue a certificate to discharge a bankrupt in these two situations.

These two amendments, the last two that I have enumerated, would save time and costs and further expedite the process of discharging a bankrupt.

Other amendments

Sir, in addition to the above amendments, the Bill also amends the Companies Act to increase the debt limit for service of a statutory demand on a company from $2,000 to $10,000. This amendment brings the debt limit for companies in line with the bankruptcy debt limit which has been raised from $2,000 to $10,000 early last month.

Sir, in formulating these changes, we have sought to strike a proper balance between the interests of debtors and creditors. We were mindful that over-liberalisation of the bankruptcy regime may erode creditors' rights and make it more costly for businesses to obtain financing. Changes that would work against creditors' interests have therefore been avoided. Instead, the proposed amendments focus on, firstly, facilitating bankrupts to continue being economically active and productive during bankruptcy; secondly, saving costs by streamlining procedures and reducing the need to resort to the courts. These amendments will help to create a climate more conducive to entrepreneurship and responsible risk-taking while preserving commercial morality and financial discipline. They will also help to prepare our people to take advantage of the emerging knowledge-based economy; and, thirdly, these amendments would encourage bankrupts to work towards a speedier discharge from bankruptcy.

Sir, I beg to move.

Question proposed.

Mr Chng Hee Kok (East Coast): Mr Speaker, Sir, I rise in support of the Bill.

Any move we make to aid technopreneurship drive is always welcomed, Sir. Bankruptcy and the difficulty of getting a discharge is a major impediment to entrepreneurship. I am delighted that we have progressively lowered the legal hurdle in discharging the bankrupts since 1995. One can only hope that, by lowering the legal hurdle, we can lower the public stigma attached to bankruptcy.

Whilst we lower the legal hurdle, I get the distinct impression that we may not be discharging bankrupts fast enough. For example, I am aware of a case in which a bankrupt was in the process of seeking a discharge under the old guidelines. But when the new guidelines were implemented in which the debt was raised to $200,000, he was not given the discharge as he was still governed and considered under the old guidelines. The distinct impression given is that while we have the law, perhaps we are not implementing the law sufficiently fast. Perhaps, the Minister of State would like to comment on how fast we are discharging our bankrupts and the number of cases of discharge that we had done since 1995. Will the new guidelines apply to all cases, even those who are in the process of being discharged under the old policy guidelines?

Sir, to improve the rate of discharge, so to speak, I would like the Minister of State to also explain to this House if we have sufficient manpower in the office of the Official Assignee to implement the law. It is one thing to have the law but we do not have the manpower to do that.

Lastly, I refer to clause 7 in amending section 125(2) of the Bankruptcy Act. Sir, the time bar of five years which has now been lowered to three years to obtain a certificate is most welcomed. However, I am of the view that the three-year time bar is still an impediment in truly deserving cases since the discharge is not automatic. Perhaps, the Government or the Ministry would like to review a further lowering of this limit, especially in cases whereby the person has started an e-commerce business which is what we are trying to promote.

Sir, while we lower the legal hurdle in discharging bankrupts and helping to lower the social stigma, I wish to state that it is still necessary to instill or reinforce the basic fundamental principles that hard work and honesty are integral qualities in commerce. No one should take advantage of the bankruptcy laws to shy away from this obligation to repay his debts and I think the law should not help him in this respect.

Mr Leong Horn Kee (Bishan-Toa Payoh): Mr Speaker, Sir, I wish to speak in support of this Bankruptcy (Amendment) Bill.

As the Minister of State has said earlier, the proposed amendments are in response to measures to be implemented in support of the Technopreneurship 21 initiative. The main objective is to make it easier for businessmen who have failed and are declared bankrupt to have a chance to recover and start afresh in the shortest reasonable time. To enable technopreneurship to thrive in Singapore, we need to create a more conducive business environment and a climate that is more tolerant to business failures. Hence, people who have failed should be given second, third or even more chances to try again. We know of many successful entrepreneurs who have gone through several trials and failures before they finally succeed.

While I am generally in support of the Bill, I would like to ask the Minister of State for some clarification on clause 11. Clause 11 empowers the Official Assignee to give permission to an undischarged bankrupt to act as a director of a corporation or to manage a corporation. My query is on the effective implementation of this power given to the Official Assignee. While I agree that it will be expedient for the power to be given to the Official Assignee to allow a person to restart a business, or act as a director, though he is still an undischarged bankrupt, my concern is how would the Official Assignee be able to exercise good judgement on the suitability of a person to continue running a business. Now, the onus of passing the judgement is on the Official Assignee. If the Official Assignee is too lenient and makes a wrong assessment, he may be allowing a crook or a cheat to restart a business and thereafter he can defraud or cheat new and more victims of their money.

On the other hand, the clause is welcomed as it gives the Official Assignee the power to allow genuine businessmen who have failed to try again. Perhaps, I would like to suggest to the Minister of State that there should be some means for the Official Assignee to consult, perhaps, a committee or a panel. This panel can comprise experienced businessmen and professionals who can give their independent judgement and views to any bankrupt who applies to be allowed to start a business or become a director. Therefore, this allows our Official Assignee to get some professional advice on this matter.

Sir, I support this Bill.

Mr Inderjit Singh (Ang Mo Kio): Mr Speaker, Sir, I support the Bill.

First of all, I would like to say that I am encouraged that the Minister of State has taken some bold steps in amending this Bill and I am confident that this will be a good signal to Singaporeans and those who plan to become entrepreneurs that we are indeed moving towards an environment where we wish to foster greater tolerance for failure. Sir, many start-ups, especially high-tech ones, are typically risky in nature and not all ideas can develop into successful business opportunities. However, if some of these ideas do become good business ventures, the gains can be tremendous, as evidenced by the many Internet start-ups which have achieved impressive market capitalisation around the world. In cases where a venture fails, the entrepreneur and the investors could suffer substantial losses and our current legislation, especially the bankruptcy law, can be very unforgiving and intolerant to those who dared to take the step towards entrepreneurship and technopreneurship. So I am hopeful that the changes proposed will encourage greater risk-taking among Singaporeans, a trait we lack currently.

Sir, in today's context, being a bankrupt is a very big stigma and leaves a permanent scar in their lives. Such people are treated badly by society and not many, especially institutions like banks and Government agencies, will be willing to give them a second chance to try again.

While I strongly support the Minister of State's intent to give differential treatment for persons who get into financial problems due to normal business risks versus those who do so as a result of mismanagement and malpractice, the Bill however does not attempt to clearly differentiate the two circumstances and it leaves entirely to the judgement of the Official Assignee. I would like to suggest that the Minister of State consider stating these clearly in the Bill.

I believe that business failure need not result in bankruptcy and therefore we should encourage and strengthen the use of informal debt settlement as an alternative and therefore mediation should be made a prerequisite before any bankruptcy proceedings go to the courts. I hope that the requirement of mediation before going to the courts can be formalised in the Bill. This will be a cheaper process and, in my opinion, will give the creditors a better chance to recover their money. I hope the Minister of State will institutionalise pre-bankruptcy mediation in the Bill. This will save many people from the unpleasant experience of becoming bankrupt, a stigma that will last a life time.

Sir, sections 95 and 95A attempt to streamline the process of discharge from bankruptcy. By allowing a bankrupt to make an offer of composition or propose a scheme of arrangement without calling a general meeting of creditors will make the whole process less cumbersome. By allowing the Official Assignee to administratively discharge a bankrupt through a certificate after this arrangement is passed by a special resolution means that there is no need to bring the process to the court.

Similarly, the new section 123A does not require a person to go back to the courts to be discharged from bankruptcy if he has paid his debts. By empowering the Official Assignee to issue the Certificate of Annulment, or discharge, the process will be much faster, saving both time and cost.

Sir, these changes are big steps that show the Government's willingness to help those who have failed to get back to their normal mode of living by removing some major obstacles.

However, I would like to ask the Minister of State to clarify whether the Official Assignee will be able to issue such Certificate of Annulment within the minimum three years, as stipulated in the Bill, or will the bankrupt still have to wait for this time period to be up before being eligible for discharge by a Certificate, especially in the case where the bankrupt has already paid up all the debts that he owes to the creditors.

This brings me to the next amendment in section 125. I am glad that the minimum period of bankruptcy before a Certificate of Discharge can be issued has been reduced from five years to three years. Can I, however, ask the Minister of State whether he will consider reducing this period to less than three years? At this juncture, in fact, I would like to suggest that we define in our legislation two categories of bankruptcy. One that occurs as a result of failure of business venture especially those of high-tech in nature and, the second, as a result of malpractice and mismanagement. Our current "one size fits all" ruling treats all failures equally and this, in my opinion, will discourage many technopreneurs.

Sir, since the Ministry does have the intent to institute a differential treatment for the two categories, I would like to suggest that the Ministry study the proposal of institutionalising a two-tier bankruptcy ruling where those who became bankrupts by virtue of true business failure, without the intent of malice or mismanagement, be allowed an easier option to be discharged. This will achieve two objectives in my opinion. First, it will encourage more people to embark on high-risk technological start-ups and, second, it will allow people who failed to become more productive and to try again at a much faster pace than the current legislation allows. As an example, in the Silicon Valley in the USA, once a person who has become a bankrupt proves that he has no other assets that can be used to distribute to his creditors, automatic discharge is possible. This of course is an ideal approach. This has made Silicon Valley in the USA a vibrant place for many new start-ups because technopreneurs do not have to wait too long before starting up new ventures again. In my opinion, such a change will definitely shift mindsets among Singaporeans towards being more entrepreneurial.

By amending section 148 of the Companies Act, we effectively allow bankrupts to be economically productive. This is an excellent move because I feel that this allows many talented people to contribute their knowledge and experience and perhaps even establish successful ventures in the process. It is a waste of our valuable resources by not allowing them to do business or to act as company directors or to manage companies. The new arrangement of empowering the Official Assignee will definitely make it easier for them to become economically active faster. Can I suggest that we take a bolder step by amending this section to read as follows:

"Bankrupts should be allowed to act as company directors unless the Official Assignee disagrees."

In this approach, such bankrupts would automatically be allowed to do all the things that we have mentioned without getting permission, but if someone wants to object, then the Official Assignee can come in and take action based on that objection. This would give a more positive outlook to our legislation.

One last comment I have is on section 254(2)(a) where the debt threshold for filing bankruptcy has been raised from $2,000 to $10,000. While the increase looks big and is welcomed, I feel that many high-tech start-ups can be very much more expensive than the $10,000 and this $10,000 limit may not be helpful if such ventures fail. Here again, having a two-tier bankruptcy rule where perhaps, we set a much higher limit for high-tech start-ups and for ventures that require a lot more capital to be accorded a different limit.

In conclusion, I would like to add that the changes proposed in this Bill reflect the desire of the Government to promote a conducive environment for technopreneurs and will give a good signal of the type of changes we need to make for T21 to be successful.

I hope that this will not be the end of the changes we are willing to make to this Bill and I hope that the Minister of State will be willing to be more aggressive and consider some of the recommendations I have made in reviewing the Bill again in the near future.

Sir, I support the Bill.

Mr Ong Kian Min: Mr Speaker, Sir, before commenting on the Bill, I would like to declare my interest as a lawyer in private practice where from time to time, I advise clients on bankruptcy and insolvency matters.

The amendments to the Bankruptcy Act, the Companies Act and the Business Registration Act proposed under the Bill seek to put in place important measures in support of the Technopreneurship 21 initiative which we are promoting in Singapore. The proposed amendments are welcomed as concrete and practical measures to relax the rules and procedures affecting bankrupts in Singapore. It is hoped that these changes will help encourage greater risk-taking amongst entrepreneurs and would-be entrepreneurs and will reduce the unnecessary restrictions and burdens on those who may have failed in previous business ventures but have the resolve to try again.

In line with the measures to encourage the bankrupt to work towards a speedier discharge of his bankruptcy, perhaps the Minister of State could also consider relaxing the conditions for bankrupts to travel and work outside Singapore. I have come across a number of cases where the bankrupts have failed in their business ventures in Singapore, or had been structurally retrenched from their jobs, but who are willing to travel abroad to take up employment opportunities in other countries in order to earn a living to provide for their families, to repay their debts and to secure a discharge of their bankruptcy.

We have discussed on many occasions in this House the problems of structured unemployment . Where a person is retrenched because of the particular industry he has been engaged in is going through a period of consolidation and structural changes, it would not be easy for him to find another job in Singapore. And it would be a double whammy for that person if, because of the financial difficulties arising from unemployment, he is made a bankrupt as well. Under the existing rules, a bankrupt has to seek the permission of the Official Assignee (OA) to do so. However, such permission from the OA may be declined or delayed for a whole host of reasons. One of the key concerns is in ensuring that the bankrupt would fulfil his obligations towards his creditors and the OA when he is free to leave the country. Yet, the job abroad may offer just the most crucial opportunity for the bankrupt to turn his life around. Therefore, I believe that we should find ways of fine-tuning the present conditions to allow the bankrupt to work overseas while at the same time securing his return to repay his debts.

Although changes to existing legislation are necessary for the changing needs of our society, we must of course bear in mind the need to balance the interest of the individual bankrupt and those of his creditors. It is also important that the new rules are not open to abuse. In this connection, I would like to make the following comments on some of the specific provisions proposed under the Bill.

First, the proposed amendment to section 95 of the Bankruptcy Act is intended to simplify the existing procedures for a bankrupt to propose the composition and scheme of arrangement of his debts to his creditors and to obtain their approval. The composition or scheme of arrangement may under the re-enacted section 95 be voted on at a physical general meeting of creditors, or the votes may be put in writing through the post by the creditors. This makes it easier for compositions and schemes of arrangement to be settled conveniently and with less hassle. However, the new section 95 provides that anyone who fails to attend a meeting of creditors or who fails to signify his assent or dissent in writing is taken to have voted in favour of the resolution. This is different from the present position whereby such a creditor's debt will merely be disregarded in calculating the percentages of rates for or against the resolution. The new provision appears to detract from the fundamental principle of law that silence is not assent. The objection to this is not merely academic, as the effect of a successful composition under the new section 95 is that the rights of the creditors may be affected, ie, that they may have to accept less than 100% of their debt or compromise their priority status in the ranking of creditors. While the new procedures are in general welcomed, I wonder if it would be going too far to put undue pressure on creditors with these technicalities. A creditor may fail to attend a meeting for good reasons, for instance, the notice for the meeting may have gone astray.

Further, could the Minister clarify what is the result where nobody attends the meeting or replies to the OA's invitation to vote? As there is no longer a requirement for a quorum, it appears that composition will go through with 100% voting in favour.

My second point relates to clause 8 of the Bill. The proposed section 157 deals with service of "any summons, notice or document" and is thus wide enough to cover service of statutory demands and creditors' petitions. The old section 157 made it clear that it did not apply to the service of any document for which a special mode of service had been prescribed. Thus, the old section 157 operated without prejudice to the rule relating to personal service of statutory demands and the rule relating to personal service of petition.

The new section 157 is not restricted in this manner and by reference to the rules, it appears to be intended to override the rules and thus will conflict with these rules. The new section 157 should therefore make it clear whether it is to operate without prejudice to the rules or notwithstanding the rules.

My preference is that it should operate notwithstanding these rules, which should then be repealed. This will make it easier for creditors to serve such documents on debtors who frequently evade service. However, this may go against the spirit of the amendments which is to be more protective of debtors' interests.

Sir, at this juncture I would also like to raise an ancillary point on the present section 123(1)(b) of the principal Act where there appears to be a typographical mistake. The word "paid" in the second line of subsection (b) should read as "proved". This may be a good opportunity to rectify this error.

My last point relates to the powers of the court. The new amendments to the Bankruptcy Act, Companies Act and the Business Registration Act will widen the powers of the Official Assignee. Some of these powers were only exercisable by the Court in the past, but now they will be exercisable by the Official Assignee. Indeed, it appears that no procedure has been provided to allow the Court to oversee the exercise of the OA's discretionary powers. There is no objection in principle in giving these wide powers to the OA. However, the law should provide some form of mechanism for a dissatisfied creditor to apply to the Court to review, and if found fit, to have the exercise of the power set aside. Although it is recognised that the OA's office is in a better position than the Courts in many cases to deal with the particular matters which the new powers relate to, there may be special circumstances in which the Courts' intervention may be necessary to bring about a fairer balance between the interest of the bankrupt and those of the creditors. In line with the spirit of the new amendments, such a mechanism for review could take the form of a quick and simple application under the Act rather than by cumbersome procedures for judicial review.

Sir, I support the Bill.

Mr Shriniwas Rai (Nominated Member): Mr Speaker, Sir, I thank you for giving me this opportunity.

Sir, I support the Bill. May I suggest to the Minister to consider changing the title of the Act from "Bankruptcy Act" to "Insolvency Act". "Bankruptcy" is a much disliked word these days. We have transformed our bankruptcy law in the last few years and this is very progressive, and I would like to thank the Minister for taking the initiative and bringing in the amendments at such a short notice.

I also have some suggestions. Could the office of the Official Assignee and Public Trustee be corporatised to be more service-oriented in the long term? I am not suggesting that it should be done today. But we should look into this on a long-term plan. I have at the 1998 Budget debate praised the good work of the Official Assignee and Public Trustee. In fact, my feedback is this. I have had some dealings with the Official Assignee and Public Trustee and the department has improved by leaps and bounds. I have seen how effectively a bankrupt's case is being managed now and dividends paid at a shorter period than it was previously. What used to take a few years now takes a few months. The backlog has been cleared not only in the judicial system but also by the Official Assignee, and I think this House should be grateful for the work done by this department.

It is very important that businessmen who have failed should be given a second chance. This would encourage entrepreneurship. I am glad that under clause 4, creditors can accept composition of this scheme by special resolution. This clause lays down the procedure for doing it. I do not have to repeat it. It is gratifying to note that under section 35A of the Act, the Official Assignee has the power of annulment before going to Court. Previously, applications had to be made to Court and it was expensive and time-consuming. Now, this power is vested in the OA and it is a very laudable clause.

I am a little concerned about subsection 2 of this section. It says that "notice of annulment shall be advertised in the Government Gazette in any local newspaper". I think, in fairness, Sir, the advertisement should be in one English newspaper and one in a vernacular language newspaper. The decision should be left to the Official Assignee as to which newspaper he wishes to choose. But perhaps one consideration should be the debtors. If the debtor is an Indian, he may want to publish in Tamil Murasu. Similarly, if he is a Malay, he may want to publish in Berita Harian. I think we should bear this in mind.

Another suggestion is that the Official Assignee should farm out some of its work to accountants and lawyers. This would give an opportunity for young lawyers and young accountants to practise some insolvency laws as well.

Similarly, I welcome section 123A. It allows for annulment of bankruptcy orders for debts that are being fully paid up. I am also glad that section 157 has brought about fundamental changes. Previously, we had what is called "personal service". New section 157(1) says that service could be effected by:

'(a) delivering it to him;

(b) by delivering it to any adult person residing at his usual or last known place of residence .;

(c) by leaving it at his usual or last known place of residence or business; or

(d) by forwarding it by registered post in a cover addressed to him at his usual or last known place of residence or business or at any address furnished by him.'

The other thing I am glad, Sir, is the composition that the Minister has mentioned earlier. I am glad that it has been done.

Sir, I have the benefit of going through Mr Inderjit Singh's speech earlier, and I support his call for a two-tier category. I think it is something that is worthy of consideration. Although it may not be practical now, I think we should give it serious thought.

Sir, this is a very judicious Bill. The interests of the creditors and the debtors have all been taken into account. Finally, I owe it to the Attorney-General's Chambers. I wish to congratulate them for this Bill which is in simple language. Plain English is taking place now and I am glad. Perhaps the Minister could write a note to the Attorney-General's Chambers on this.

Mr Jeyaretnam: You write.

Mr Shriniwas Rai: Thank you, Mr Jeyaretnam. I will do it.

Assoc. Prof. Ho Peng Kee: First, let me thank all the speakers who have spoken. Sir, indeed, as the speeches have underscored, it is important to keep a proper balance between the interests of the creditors and the debtors. There were some speeches in this House which have reflected some concerns of debtors, and other speeches in this House asking for more, reflecting concerns of creditors. I think this is something which we always keep in mind. I am glad that Members can see that in other exercises concerning bankruptcy laws which we had, first, the revamp in 1995, and then we continued to fine-tune the law over the last 2-3 years, we have kept this balance in place. Indeed, as one or two Members have asked whether or not there can be further refinements, the answer will be yes, because no laws are cast in stone, particularly laws like bankruptcy and as has been shown from our track record. I think, where appropriate, to maintain this balance in the light of changing circumstances, as have happened, with the drive towards technopreneurship. These amendments have been partly driven by this drive towards technopreneurship.

Let me take the points of Members now. On Mr Chng Hee Kok's main point, he says that there are some people who still see bankruptcy discharge proceedings as being rather slow. I think a lot must depend on the bankrupt. Because in terms of refinements, firstly, to the procedures and, secondly, to the insolvency service of the Insolvency and Public Trustee Office (IPTO), the Official Assignee and his staff have made many improvements to the procedures and process of bankruptcy. Many units, for example, have been formed. One unit, for example, is the Bankruptcy Unit for Discharges, a special unit formed to speedily process all bankruptcy discharges. And it also maintains a hot line to inform bankrupts of the status of their cases. Indeed, some of its innovations, like I have said, have been recognised by other world-wide agencies. One example, besides the one I mentioned in my speech, where the Commonwealth Association of Public Administration and Management recognised its discharge by certificate process, is the fact that the IPTO last year became the first legal institution in Singapore and the first insolvency service in the world to be awarded the ISO 9002. And I am glad Mr Rai, through his practical experience, also testifies to the fact that the processes have improved. I think that is the first thing to note. If there is any delay in the discharge of any particular bankrupt, it is not because of the processes.

The OA tells me that he has in fact hired temporary staff when the need arose to cater to the demand. He also tells me that from his experience, there will always be about 20-25% of bankrupts who do not cooperate with his office. They do not file statements. They do not turn up for meetings. So it is a matter of getting people to understand that it is to their full benefit to cooperate with the OAPT, particularly in view of the discharge by certificate process. It has worked for many cases, because this process, in fact, encourages deserving bankrupts to cooperate. And if they do and they fit within the requirements, then the OAPT can consider selecting such deserving bankrupts to be discharged.

The other group of people who may hold up discharges are the creditors. So besides the bankrupts, there are also creditors who hold up the discharge process, in respect of offers of composition by bankrupts. They do not respond to the OA's letters, despite many reminders. This can be quite taxing. This is in fact one of the problems being addressed by the Bill, that debtors who come forward, cooperate and who are able to put together an offer of composition or scheme of arrangement should not be held back by creditors who do not respond to the many letters calling for meetings.

Mr Chng Hee Kok also asked whether the new guidelines will apply to bankrupts whose process of discharge has begun. Of course, the new guidelines will apply to all outstanding cases. So they will benefit should they satisfy the requirements.

Mr Inderjit Singh is another strong proponent for creditors. He applauds the Government for making these innovations to the Bill and, indeed, I want to thank him because I think he captures the spirit behind the Bill, which is to encourage entrepreneurship. On the other hand, like I have said, we have to keep in mind the central point that we want to maintain a balance between the interest of creditors and debtors. So we cannot go overboard. We must keep this in mind, because otherwise if bankrupts are able to get out of bankruptcy too easily without showing effort on their part, that may also increase business costs. That may also increase the reluctance of bankers to lend money. I think that is the central point. His points are well made, but, at the same time, we have to keep this balance in mind.

On his suggestion for a faster discharge process for high-tech businesses, as I have said, we have moved it down from five years to three years. The three years will enable the OAPT sufficient time to study the circumstances of the bankruptcy, and will also give the bankrupt an opportunity to show that he is prepared to work with the OAPT. All these factors are indeed taken into consideration. If he does meet the criterion, when three years are up, he will be considered for discharge by certificate. I think we should keep it at that, and not lower the 3-year criterion. Let us see how the process works, and if circumstances warrant it, of course, we can consider it down the road.

The idea is not to put this 3-year limit as an absolute bar. If a bankrupt is able to make an offer of composition, which is accepted by the creditors or indeed has paid up fully, then he will be discharged immediately, once the creditors agree. So the 3-year bar is not an impediment in those circumstances. Indeed, the OAPT tells me that there have been bankrupts who have been able to get out of bankruptcy within a week. So a lot depends on how quickly they cooperate.

His observations on the importance of pre-bankruptcy mediation are very valid ones. Indeed, Mr Singh will be happy to know that the Ministry of Law is now working with the Official Assignee and the Singapore Mediation Centre on a pre-bankruptcy mediation programme. Once the details are ready, they will be announced. In the meantime, the OAPT is already exploiting mediation, not at the pre-bankruptcy stage, but at the post-bankruptcy stage. A Bankruptcy Mediation Unit was formed earlier this year to provide mediation services to bankrupts and creditors to encourage them to work towards a settlement. I have been told that to-date, 104 cases have been successfully mediated. So lessons which are learned by this Unit can, of course, be applied to pre-bankruptcy processes which are also important, because then it will keep the person away from the bankruptcy regime.

Mr Leong Horn Kee and Mr Inderjit Singh also asked about the criteria and the process by which the OA will decide whether or not to allow bankrupts to manage businesses or be directors of companies. Both in New Zealand and Malaysia, it is the OA who grants such permission. The OA is looking into the criteria that are used in these countries before finalising the factors that he would consider. What is important is that in processing such applications, the OA will consider the interests of the public, the creditors and the bankrupt. He will take into account a number of factors which will include, first, the cause of bankruptcy; secondly, previous involvement in a failed business or company; thirdly, liability of the proposed business; and, fourthly, whether creditors will benefit from the proposed business. These are the factors which will guide his deliberations.

I have said just now that the OA is well placed to make this consideration because he and his staff deal with the bankrupt on a continual basis. So he will be able to assess not just their ability to pay but their character and whether or not they will fulfil these criteria. Certainly, when he makes his decision, he is not going to act alone. There will be a committee that will assist him in the OA's office. The committee will include other professionals like accountants who can also help him make a professional judgment. Let me assure this House that the OA will make his decisions very judiciously, taking into consideration the factors that I have mentioned.

Mr Ong Kian Min asked about this perennial question of travelling for bankrupts, particularly bankrupts who want to work overseas. He says in the past, it was so difficult. The bankrupt works overseas to help him pay off his debts, get him off the bankruptcy, helps everybody, but the bankrupt has difficulty travelling. I think he will be very pleased to know that this is a problem of the past, because the OAPT tells me that in so far as working overseas is concerned, he is now more relaxed. This is set out in a brochure, The Bankruptcy Information Sheet No. 5. There are many such pamphlets and brochures on various matters which have been produced and which are easily available, helping bankrupts along. This one deals with travelling overseas, which says that a bankrupt will be allowed to travel overseas or remain abroad if he is required to do so in the course of his employment. All that the bankrupt needs to do is to produce the employer's letter indicating the need to travel. Indeed between August 1998 and July 1999, there were 1,509 applications for bankrupts to travel for purposes of employment. And of these, only 6 or 0.4% were rejected. So this will be good news for bankrupts.

Mr Ong Kian Min makes a few points about the Bill itself. One concern that he expresses is the amendment to section 95, as to the creditors' silence on a composition offer, whether that is unfair to the creditors. On the other hand, other Members who have spoken appreciate the thrust behind this amendment. Because here is a situation where you have creditors who, in the past, might have received letters informing them of the meeting but they did not attend. This holds up the process. Really, the important point is that the notice of the meeting or the notice that they can object in writing must be sent to the creditors. And this will be done because registered post will be used. Since a large percentage of creditors are institutions, companies, businesses - more than 80% - the likelihood of wrong address or the letter not reaching the place is very minimum. Indeed, the OAPT tells me that for many of these situations, creditors who are institutions have written off these debts and are not too concerned. In fact, they may agree to the composition but in the past they have never replied. So this new amendment will help expedite the process. Indeed, this is not a new situation because we have other provisions in our law where silence constitutes consent. Those lawyers who do criminal law will know that. An accused person who is served a notice of warning containing charges made against him, if he keeps silent, adverse inference can be drawn against him. Even in the Act itself, section 126 provides for a similar provision for discharge by certificate of the OA, which says that if the creditor does not object to a notice of the OA's intention to discharge a bankrupt, he is deemed to have no objection to the discharge. So this, in fact, has already been used in the current discharge scheme which has worked very well. It is really just applying it in other situations where it can be seen that from practical experience the OA is very clear that it will help expedite the process.

The other point is section 157. Mr Rai also brings up this point. Of course, the amendment makes it easier for various notices and summons to be served. However, in so far as the document relates to the creditor's petitions and statutory demands, the current position of the need for personal service still applies. It must be so because these amendments are to help the bankrupt. It is not to dispense with personal service where the creditors want to petition him for bankruptcy. This is done because there are express provisions in the Bankruptcy Act (sections 52 and 62) which specifically mention that these documents are to be served in a manner which is prescribed, and the rules in fact prescribe personal service. These sections clear up this point.

The other point that Mr Ong mentioned is recourse to courts. I do not know whether he knows that section 30 in the Bankruptcy Act states very clearly that the OA is subject to the control of the court, and section 31 specifically empowers the court to review the OA's act on application of a dissatisfied bankrupt, creditor or any other person. This is a very simple process. All it entails is an application to court which would be heard in chambers, like any other summons. Even though the Act does give more powers to the OA, firstly, the assurance to the House is that the OA, as the record shows, will exercise these powers judiciously. Secondly, these amendments are procedural rather than substantive. Thirdly, sections 30 and 31 will enable recourse to the courts by any dissatisfied bankrupt, creditor or any other person who may want to seek redress from an OA's action.

Mr Rai makes two suggestions, one complimenting the Attorney-General and the other about improving service in the IPTO. I think he will know that the IPTO was made an autonomous agency some years ago and that has improved its services. Of course, if the need arises, and if it is useful for it to be corporatised, that can be considered.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Assoc. Prof. Ho Peng Kee].

Bill considered in Committee; reported without amendment; read a Third time and passed.