News Page By Sponsors | Asian Legal Business

news

ALB speaks with Matthew Teo, director of employment at Helmsman, about the challenges, critical determinants of successful restructuring versus insolvency, comparison of Singapore's restructuring and insolvency laws with international standards, and advice for companies facing financial difficulties or contemplating restructuring in the maritime industry.

ALB: What are the primary challenges in shipping and oil-related insolvencies or restructurings in Singapore over the past decade?

Teo: The maritime industry presents unique challenges in insolvency and restructuring scenarios. A significant hurdle is the complex corporate structure typical of shipping conglomerates. The industry standard of incorporating special purpose vehicles for individual vessel ownership, while beneficial for risk management, significantly complicates the restructuring process. This practice, designed to insulate other vessels from potential arrests, necessitates separate court applications for each entity to secure statutory protections during restructuring.

Moreover, the inherently mobile nature of maritime assets introduces jurisdictional complexities. Vessels traversing international waters are subject to various maritime laws and arrest risks in different jurisdictions. This mobility demands a coordinated, multi-jurisdictional legal approach to asset protection during restructuring, requiring seamless collaboration among legal professionals across borders.

Another critical factor is the diverse array of stakeholders in the maritime sector, each with distinct interests and objectives. The capital-intensive nature of the industry means secured creditors, such as financing banks, often hold extensive security over group assets, including vessel mortgages and earnings assignments. Simultaneously, we must consider the interests of charterers, shareholders, employees, and various other creditors. Balancing these competing interests requires exceptional negotiation skills and strategic foresight to achieve a viable restructuring plan.

ALB: In your experience, what are the crit-ical determinants of successful restructuring versus insolvency?

Teo: The viability of restructuring hinges on several pivotal factors. Primarily, the company must possess a sustainable value proposition. Entities in declining industries face insurmountable odds unless they can successfully pivot their business model or demonstrate exceptional value in their assets. The presence of valuable assets can attract external investment, significantly enhancing restructuring prospects.

The root cause of financial distress is equally crucial in determining outcomes. Temporary downturns due to exogenous factors are more amenable to restructuring than systemic operational issues. Companies experiencing short-term difficulties due to external market conditions often have a higher probability of successful reorganisation. Furthermore, the support of major creditors is indispensable to the restructuring process. While modern restructuring laws may allow for creditor cramdowns, securing majority creditor backing remains fundamental to a successful reorganisation. Without this support, even the most well-crafted restructuring plans may falter.

ALB: How do Singapore’s restructuring and insolvency laws compare internationally, and what improvements could enhance the country’s position?

Teo: Singapore has significantly modernised its restructuring and insolvency framework with the introduction of the Insolvency, Restructuring and Dissolution Act 2018. This comprehensive legislation consolidates and enhances previous reforms, incorporating debtor-friendly features that position Singa-pore as a leading restructuring hub.

Key provisions include automatic moratorium on creditor actions, which provide crucial breathing space for distressed companies. The ability to obtain extra-territorial moratoriums for schemes of arrangement is particularly noteworthy, offering protection beyond Singapore’s borders. Additionally, the Act introduces simplified restructuring procedures, streamlining the process for eligible companies.

These progressive features set Singa-pore apart from other prominent restructuring jurisdictions such as the UK and Australia, potentially making it a more attractive venue for complex international restructurings. However, in considering further improvements, we must carefully balance debtor protection with maintaining Singapore’s reputation as a stable business jurisdiction.

As a major trade and finance centre, Singa-pore must safeguard against potential abuse of its restructuring processes by insolvent companies engaging in forum shopping. The challenge lies in fostering genuine business restructurings while preserving the integrity of our financial ecosystem. Any future reforms should aim to enhance efficiency and effectiveness without compromising the rights of creditors or the overall stability of the business environment.

ALB: What advice would you offer companies facing financial difficulties or contemplating restructuring?

Teo: My foremost recommendation is to engage external advisors - legal counsel and independent financial experts - at the earliest signs of distress. This proactive approach enables companies to address issues swiftly and leverage appropriate legal protections before the situation deteriorates. Early intervention often provides a wider range of restructuring options and increases the likelihood of a successful outcome. Equally critical is maintaining transparent communication with creditors. Opacity breeds mistrust, leading creditors to assume worst-case scenarios and take defensive actions that can jeopardise restructuring efforts. Open dialogue fosters an environment of cooperation, which is essential for any successful restructuring endeavour.

Companies should conduct a thorough and honest assessment of their financial position and business prospects. This evaluation should inform a realistic restructuring plan that addresses the root causes of financial distress while capitalising on the company’s strengths and market opportunities. Furthermore, companies should familiarise themselves with the available legal tools and protections under Singapore’s restructuring framework. Understanding these options allows for more strategic decision-making and can provide crucial leverage in negotiations with creditors. Lastly, time is often of the essence in restructuring scenarios. Swift, decisive action coupled with clear communication can make the difference between a successful turnaround and insolvency. Companies should be prepared to make difficult decisions and implement necessary changes promptly to maximise their chances of recovery.

news

As Helmsman transforms itself into a multi-disciplinary firm, what role is the commercial disputes practice expected to play, and what kind of synergies do you see with other practice areas?

Helmsman was founded in 2019 as a specialist ﬁrm focussed on shipping and commodities. But as its client base expanded and its relationships with existing clients deepened, the instructions that the ﬁrm received often went beyond ship-ping and commodities work. The time was ripe for the ﬁrm to transition to provide multi-disciplinary legal services to meet the growing demands. Helmsman celebrated its strategic transformation at the end of October 2022 and formally announced the formation of new practice groups – commercial disputes, employment and corporate, banking and ﬁnance, in addition to the existing shipping and commodities practice groups.

The commercial disputes practice group is intended to cover all contentious matters that do not fall within the specialised categories of shipping, commodities or employment disputes. But legal matters, in practice, are often multi-dimensional and may not ﬁt neatly into the scope of a single practice group. Different aspects of a legal matter may require different expertise. For example, a charter-party dispute resolved by way of arbitration may transform into a dispute centred on principles of arbitration law when a setting aside application is brought before the court of the seat. In addition, many clients see the ﬁrm as a trusted partner and seek support on various aspects of their business. For example, ﬁntech start-ups may require assistance in drawing up ﬁnancing agreements, advice on their employment processes, and legal steps to be taken to recover bad debts. While the ﬁrm has ﬁve distinct practice groups, these groups do not operate as silos. On the contrary, the work is often ﬂuid and collaborative.

One of your goals is to expand the firm’s practice within Asia-Pacific and beyond. Can you talk a bit about your experience in the cross-border disputes space, and how you plan to grow this offering?

Prior to joining Helmsman, I was involved in the establishment of the Singapore International Commercial Court (“SICC”) and, subsequently, the continual development of the SICC’s practice and procedure. As Deputy Divisional Registrar of the SICC, my work required a keen understanding of the respective features, advantages and disadvantages of different competing and complementary fora for the resolution of cross-border commercial disputes and the concerns that litigants may have. This gives me a more nuanced perspective when advising clients on their cross-border dispute resolution options.

The vast majority of the commercial disputes matters that the ﬁrm currently handles is cross-border in nature. The ﬁrm has a Hong Kong ofﬁce, and we have lawyers who are qualiﬁed to practise Singapore law, English law and Hong Kong law. With lawyers who are ﬂuent not only in English but also Mandarin, Cantonese, Malay and French, the ﬁrm is uniquely placed to assist with a broad range of cross-border legal matters. Since its establishment, the ﬁrm has forged valuable connections with clients and counterparts from all over the world. This allows us to tap on the deep experience of our network in appropriate cases and to lend our expertise when legal services are required in our part of the world. By continuing to build and nurture relationships and remaining abreast of legal, commercial and political developments, the ﬁrm will continue to provide plain, practical advice through its different practice groups in the region and beyond.

What kind of work is keeping you most busy right now, and what factors are driving that?

Commercial disputes are varied in nature, and there is no single type of matter that dominates my practice. Earlier this year, we successfully defended an application in the Singapore court to set aside an arbitral award. More recently, we obtained a winding-up order against a subsidiary of a listed company in contested winding-up proceedings. At the moment, we are also involved in a number of ongoing court proceedings and arbitrations relating to allegations of fraud, competing title to property and commodities trading, among other things. We are concurrently working on several advisory matters where disputes have arisen or are imminent. The subject matters are wide-ranging and include disputes arising from share sale and purchase agreements, breaches of directors’ duties, cryptocurrency disputes between issuers and exchanges, trade credit insurance claims.

What kind of trends and developments can we expect to see in Singapore’s disputes landscape in the next few years, and how would you like Helmsman to adapt to those?

Recent technological advances have caused seismic shifts in the way that the legal profession functions. Big data techniques are being used in technology-assisted review tools which offer lawyers in the common law world a more efﬁcient way of conducting electronic discovery. It has also become common to utilise legal technology service providers to aid in electronic presentation of evidence and document management to facilitate the efﬁcient conduct of hearings. The pandemic has hastened the shift to a modernised and robust procedural framework, incorporating virtual hearings and the acceptance of electronic signatures and attestations as part and parcel of the ordinary processes for dispute resolution. More recently, the spotlight has been turned to the use of artiﬁcial intelligence in legal practice. Helmsman has been actively looking into how best to utilise the different technology-driven solutions so that our lawyers can practise more effectively, efﬁciently and sustainably.

Technology has also played a big part in the type of work that the ﬁrm has been engaged in. For the commercial disputes practice group, technology disputes have been emerging with increasing frequency and variety. These include disputes involving digital assets, the platforms and exchanges for transacting and dealing with such assets, and the new digital economy. Questions relating to the nature of digital assets, tracing these assets, identifying ownership and control, restraining dealings of these assets and valuing these assets have arisen and will continue to arise. Legal principles continue to evolve as the courts and tribunals reﬁne their analyses in the context of different factual matrices arising in every subsequent case. It is important for the ﬁrm to keep up to date with the developments in this fast-moving area of law, both in and outside Singapore.

We deliver practical and effective solutions.

Peerless relationship management

Fair and reasonable billing

Talented and approachable people

Restructuring in the maritime sector: A Singapore perspective

A conversation with Una Khng

Subscribe to our newsletter