Re Ascentra Holdings, Inc (In Official Liquidation) and others

Ascentra Holdings, Inc, a Cayman Islands company that had sold health and beauty products and communications software in Hong Kong, Taiwan and Singapore, went into voluntary liquidation after disputes among its shareholders over the direction of the business. The shareholders resolved on 1 June 2021 to wind it up. Its directors did not file the declaration of solvency that Cayman law required, so the liquidator petitioned the Grand Court of the Cayman Islands, which on 17 September 2021 placed the liquidation under its supervision and appointed Mr Graham Robinson and Ms Ivy Chua as joint official liquidators.

The company and its two liquidators then applied in Singapore, in Originating Summons No 16 of 2022 filed on 6 January 2022, for the Cayman liquidation to be recognised as a foreign main proceeding under Art 15 of the Third Schedule to the Insolvency, Restructuring and Dissolution Act 2018, Singapore's version of the UNCITRAL Model Law on Cross-Border Insolvency. Part of their purpose was to obtain information from Singapore companies against which the liquidators considered the company might have claims. One of those companies, SPGK Pte Ltd, opposed the application as a non-party.

The liquidators accepted that the company was and had always been solvent; they had certified its solvency and repeated it in affidavit evidence. The court described it as "hopelessly and irretrievably solvent".

1. Whether a solvent company's liquidation can be a foreign proceeding under Art 2(h) of the Third Schedule
2. Whether the phrase "a law relating to insolvency" covers any proceeding begun under a statute that also deals with insolvency
3. Whether United States, English and Australian decisions recognising solvent liquidations should be followed in Singapore
4. Whether the company's Cayman liquidation had its basis in a law relating to insolvency

Only one of the four requirements for a foreign proceeding set out by the Court of Appeal in United Securities was disputed: that the proceeding have its basis in a law relating to insolvency. Reading Art 2(h) purposively under s 9A of the Interpretation Act 1965, the court considered that insolvency means an inability to pay debts as they fall due now and in the reasonably near future, and that Cayman law appeared to use the same test. It rejected the applicants' broad reading of "relating to", under which any proceeding started under a statute that also governs insolvency would qualify. That reading put form over substance: a shareholder oppression claim would then count merely because it sat in the same Act. The phrase meant a body of rules governing a company that is insolvent or in severe financial distress.

The extrinsic material confirmed this. The court held it could consider the 2013 UNCITRAL Guide as well as the 1997 Guide named in s 252(2) of the IRDA, with the 1997 Guide prevailing only on a true conflict. The Model Law's purpose was to protect creditors collectively when a debtor's assets cannot meet all claims, and none of that was engaged for a solvent company, where there is no scramble for assets and no reason to impose a moratorium on creditors. The preparatory papers and both Guides showed the Model Law was meant for insolvent or severely distressed debtors, and the 2013 Guide said in terms that a proceeding to wind up a solvent entity is outside it.

The court declined to follow the United States line of cases led by Re Betcorp, which it said gave no reasons grounded in the Model Law and had been criticised, and preferred the English decision in Re Sturgeon. Borrowing the words "adjustment of debt" from the United States statute did not show that Parliament meant to adopt the United States approach. The Court of Appeal's remarks in United Securities were obiter and in any event pointed to a law dealing with insolvency or severe financial distress. The Australian decision in Re Chow Cho Poon was given less weight because it predated the 2013 Guide.

The company's liquidation began as a members' voluntary winding up under ss 116(c) and 124 of the Cayman Act. Those provisions applied only to a solvent company, and the court found that the liquidation would pay all creditors in full and return a surplus to shareholders. The applicants' point that the solvency determination might change was true in theory, but all the evidence suggested it would not.

The High Court dismissed the application. The Cayman liquidation of a solvent company was not a foreign proceeding within Art 2(h) of the Third Schedule, so the court had no power to recognise it under Art 17. The court noted that the liquidators could still cause the company to take steps in Singapore, such as seeking pre-action or non-party discovery or suing in its name, but not through recognition under the Third Schedule.