FTI Consulting selected to run Simplified Insolvency Programme

The government of Singapore has appointed FTI Consulting as one of its preferred restructuring advisers to run the Simplified Insolvency Programme.

FTI Consulting has been named among four restructuring advisers to run the Simplified Insolvency Programme (SIP) – introduced by the Singapore Ministry of Law on 29th January to help pandemic-affected micro and small businesses access a cost and time-efficient restructuring process.

“While business conditions are expected to improve for some industries, it is unlikely they will return to pre-pandemic levels in the near future. Financially distressed companies may thus face potential insolvency,” read a Ministry of Law statement.

Singapore’s traditional insolvency laws are geared towards larger enterprises, leaving the country’s 250,000 plus micro and small enterprises – as of 2018 – out in the cold. SIP simplifies restructuring and liquidation processes for this vast segment on a temporary basis. 

For businesses looking to restructure their debt, the new law reduces the number of legal applications to be filed; introduces a moratorium to protect from creditors; and lowers approval requirements for a restructuring plan – to name a few advantages.

Companies looking to liquidate will benefit from exemptions to court application in some cases; exemption from administrating the wind-up of a business in other cases; and reduced obligations to liquidators, among other provisions.

The result is a trimmed down and cheaper insolvency mechanism on all counts. That said, SIP is only applicable to businesses that meet the eligibility criteria – which includes limits on total liabilities; limits on creditors and employees; and limits on value of the assets being liquidated. Companies that fail to comply – even during SIP procedures – will be expelled from the programme.

For now, SIP is valid for six months starting January – subject to extension if the small business landscape hasn’t bounced back by June. In the mean time, FTI Consulting and all other advisors picked by the government will help thousands of micro and small businesses navigate the new insolvency mechanism.

Commenting on why FTI Consulting was selected to co-oversee the programme, Ellyn Tan, Managing Director at the firm, said: “Our vast expertise across many industries allows us to quickly ascertain the key issues and to react immediately on behalf of our clients. For clients in crisis, the team develops liquidity forecasts, improves cash flow management, seeks additional financing, negotiates loan covenant waivers and guides complex debt restructuring.”

Under the SIP, FTI’s role will include “assessing whether a distressed SME has a reasonable prospect of being successfully restructured, providing updates to stakeholders on the status of the restructuring, working and assisting the company to formulate a debt restructuring programme and obtaining agreement from creditors as to the proposed compromise or arrangement.”

The fresh mandate comes weeks into the reign of Vincent Fok – FTI Consulting’s new Corporate Finance & Restructuring head for Asia. Singapore is a key market under Fok’s jurisdiction, giving him a substantial project with which to kick off.