Singapore Court Provides Directors’ Creditor Duty Guidance

Legal Analysis: Jeff Burton Reorg Asia Highlights: The Singapore Court of Appeal, or CoA, has clarified the nature, scope and content of directors’ duty to consider the interests of creditors, or Creditor Duty; The court is to (i) ascertain the financial state of the company at the material time against three categories created by the CoA and (ii) examine the subjective intentions of the director, determining whether the director acted in what they considered to be the best interests of the company; Importantly directors will need to consider the Creditor Duty when a company is in financial distress, not just when it may be cash flow or balance sheet insolvent. This could mean that the transactional decisions of directors of distressed companies come under scrutiny earlier; and But the CoA also indicated that there was room for directors to attempt a restructuring without the court applying courtroom hindsight to decisions directors made in “good faith”. Relevant Document: Judgment In upholding a judgment from the Singapore High Court, the CoA in Foo Kian Beng v OP3 International Pte Ltd (in liquidation) (2024) SGCA 10 has provided significant guidance on when and how the Creditor Duty engages and what may constitute a[...]