Ascentra Holdings, Inc (In Official Liquidation) and others v SPGK Pte. Ltd.

Ascentra Holdings, Inc, a Cayman Islands company that had sold health and beauty products and communications software in Hong Kong, Taiwan and Singapore, was placed in voluntary liquidation by its shareholders on 1 June 2021 after disputes among them. Its directors failed to file a declaration of solvency, so the voluntary liquidator applied for the liquidation to continue under court supervision. On 17 September 2021 the Grand Court of the Cayman Islands so ordered and appointed Ms Chua Suk Lin Ivy and Mr Graham Robinson as joint official liquidators, who then certified that the company should be treated as solvent.

The liquidators applied in HC/OS 16/2022 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) for the Cayman liquidation to be recognised as a foreign main proceeding, with a view to pursuing claims they said Ascentra had against SPGK Pte Ltd and another Singapore company. SPGK Pte Ltd resisted. The High Court judge held that the Cayman liquidation was not a foreign proceeding, reasoning that a "foreign proceeding" under Art 2(h) must be under a law relating to insolvency in the sense of rules governing companies that are insolvent or in severe financial distress, which the solvent liquidation track used here was not. The liquidators and Ascentra appealed in Civil Appeal No 23 of 2022.

1. Whether the Cayman liquidation was conducted under a law relating to insolvency or adjustment of debt, given that Ascentra was solvent
2. Whether the Cayman liquidation was a collective proceeding
3. Whether the Cayman liquidation was for the purpose of liquidation within Art 2(h)
4. Whether the Singapore court had jurisdiction because Ascentra had property in Singapore

On the first issue, the court held that the Model Law as enacted in Singapore does not require the company to be insolvent or in severe financial distress. Nothing in Art 2(h) refers to solvency. Parliament had deliberately added the words "or adjustment of debt", taken from the United States Bankruptcy Code, which showed an intention to cover proceedings such as schemes of arrangement and Chapter 11 reorganisations that are open to solvent companies, and proceedings recognisable under Chapter 15. The presumption of insolvency in Art 31 would be largely superfluous if insolvency were a precondition. The judge had erred by largely ignoring those added words. While the Model Law's primary focus was insolvent companies, the preparatory materials and guides did not show that extending it to solvent companies would undermine its purpose; solvent and insolvent regimes often overlap and a liquidation can move between them. Harmonisation also pointed the same way: the weight of authority in the United States, Australia, New Zealand and, apart from Re Sturgeon, England followed the broad approach in Re Betcorp, which the court adopted. A proceeding qualifies if the law or relevant part of the law under which it is conducted includes provisions on insolvency or adjustment of debt. Part V of the Cayman companies statute did, so the test was met.

The practical concerns raised were overstated. The other requirements of Art 2(h) filter out proceedings unconnected with insolvency, a moratorium can be modified or ended under Art 20(6), and the Art 31 presumption yields to evidence of solvency. Requiring proof of insolvency under foreign law at the recognition stage would add undesirable complexity; a light threshold tempered by conditions was preferable.

The liquidation was collective, as it dealt with the rights of all creditors and the liquidators' statutory duty was to realise and distribute assets to them. Its purpose was liquidation, and that word could not be confined to insolvent liquidations. Jurisdiction existed because Ascentra held shares in a Singapore company, which the respondent did not dispute were property situated in Singapore.

The Court of Appeal allowed the appeal and held that the Cayman liquidation must be recognised as a foreign main proceeding under Art 17. The parties were given permission to make submissions within 14 days on whether recognition should be subject to conditions, and costs of $60,000 (inclusive of disbursements) were awarded to the appellants.