Three takeaways from the Nam Cheong restructuring so far

We discuss the restructuring of Singapore Exchange listed ​Nam Cheong Limited, which may test certain provisions of the recently amended Singapore debt restructuring regime.

1. Test case

Nam Cheong Limited (Nam Cheong) may well be the first instance in which a moratorium is sought under s 211C of the Singapore Companies Act, which allows a moratorium to be granted over related companies. This would be important if the related companies own assets and businesses which are critical to the Nam Cheong Group as a going concern. This could facilitate any proposed restructuring of the Nam Cheong Group. It remains to be seen if this would allow the Nam Cheong Group to avoid the issues faced by the Pacific Andes Group which was unsuccessful in its attempt to obtain a moratorium over related companies under s 210(10). The Singapore High Court held in Pacific Andes Group’s case that it had no discretion to grant a moratorium under s 210(10) over companies which did not have sufficient nexus to Singapore, even though those companies were related to a company over which a s 210(10) moratorium could be ordered, and owned businesses / assets, which were important to the restructuring of the Pacific Andes Group.

2. Extraterritorial effect?

It appears that a significant body of creditors are Chinese shipyards. It may be that these Chinese creditors are not subject to the jurisdiction of the Singapore Courts, and the effect of any moratorium imposed by the Singapore Courts may be limited in respect of these creditors. Notably, China is not party to the UNCITRAL Model Law on Cross-Border Insolvency. While the Chinese Courts have recognized and enforced a Singapore High Court judgment (see the Nanjing Intermediate People’s Court judgment in Kolmar Group AG’s case, in December 2016), it is not clear if the Chinese Courts would adopt a similar approach and give effect where the order in question is a moratorium granted by the Singapore High Court over Chinese creditors which would not otherwise be subject to the jurisdiction of the Singapore Courts.

3. Potential breaches of fiduciary duties?

There is a press report that Nam Cheong may still have been investing in new vessels when “signs of troubles were showing some 18 months ago”. If Nam Cheong was in fact insolvent when such investments occurred, depending on the facts, this may raise questions in respect of potential breaches of fiduciary duties by its directors.