“SIP 2.0” introduces easier, cost-effective procedures for companies with liabilities up to S$2 million, ensuring faster resolution.

A new law passed on January 7 will make Singapore’s insolvency procedures more accessible and cost-efficient, particularly for small and medium-sized enterprises (SMEs), by simplifying the existing Simplified Insolvency Programme (SIP). The revised scheme, dubbed “SIP 2.0”, expands eligibility, allowing companies with liabilities of up to S$2 million to benefit from a more streamlined process.

Unlike the original SIP, which was limited to micro and small businesses, the revamped scheme will now cover a broader range of companies. The government first introduced the SIP during the Covid-19 pandemic in 2021 as a temporary measure to assist companies in financial distress, and it has since undergone multiple extensions. With SIP 2.0, this more straightforward process becomes a permanent feature of Singapore’s corporate debt restructuring framework.

According to Second Minister for Law Edwin Tong, the original SIP proved effective, helping 61 companies resolve their financial difficulties within an average of nine months. This is significantly quicker compared to the typical process, which can take between three to four years. The new SIP 2.0 intends to make the system even more efficient by reducing the number of eligibility criteria from five to one: a company must have liabilities not exceeding S$2 million.

Key updates to the SIP include the simplification of both debt restructuring and winding-up processes. For debt restructuring, only one group of creditors—unsecured, ordinary, and preferential creditors—will vote on the debt repayment plan, rather than multiple groups. Additionally, proposals for restructuring can now be approved out of court, bypassing the previous requirement for court sanctioning, though judicial safeguards will remain to protect creditors’ interests.

For companies seeking to wind up, the process will also be simplified. Companies will no longer need to publish notifications in the government e-Gazette or a local newspaper. Instead, the official receiver’s website and Bizfile portal will be sufficient. Furthermore, the amount of time available for creditors to object to the insolvency process will be shortened from 90 days to 30 days, with one possible extension.

Despite these benefits, some Members of Parliament raised concerns over the new scheme. Chua Chu Kang MP Don Wee questioned whether the faster winding-up process might leave creditors and employees at a disadvantage. He highlighted the potential for smaller creditors to struggle in recovering debts and for employees to be left without unpaid wages.

Responding to these concerns, Minister Tong assured that the reforms would not compromise creditors’ rights and that the distribution of remaining assets should be larger, as liquidation costs are expected to decrease. He also pointed out that safeguards are in place to prevent abuse, and companies with complex or suspicious cases would be moved to a more traditional insolvency process.

SIP 2.0 is set to provide a more efficient and equitable system for companies facing financial distress, while also offering improved protection and clarity for all stakeholders involved in the insolvency process.