Aaron Loh Cheng Lee and another v Hodlnaut Pte. Ltd.

Aaron Loh Cheng Lee and Ee Meng Yen Angela, the interim judicial managers of Hodlnaut Pte Ltd, applied in Companies Winding Up No 94 of 2023 to wind up the company, which held cryptocurrency for various creditors. In HC/OA 451/2022, on 24 April 2023, the court had directed them to present a winding up petition while the interim judicial management continued.

One of the directors then sought a 3-month moratorium under s 210(1) of the Companies Act 1967, based on a non-binding term sheet from Open Technology Markets Limited (the OPNX Offer). At the hearing on 7 August 2023 the court voiced concern about the directors' conduct over the offer and the last-minute filing of HC/OA 792/2023, and adjourned the application so the interim judicial managers could consider the offer. The application was heard on 16 October 2023, opposed by two directors.

1. Whether the company's obligations to return cryptocurrency counted as debts in deciding whether it was unable to pay its debts under s 125(1)(e) read with s 125(2)(c) of the IRDA
2. Whether the withdrawal halts imposed by the company showed that no liability was owed
3. Whether the court should decline to wind up the company to allow a restructuring
4. Whether the interim judicial managers should be appointed liquidators

On insolvency, the judge held that cash flow insolvency is the sole test under s 125(2)(c), following Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd [2021] 2 SLR 478, and that the test looks broadly at the company's position over a 12-month timeframe, including contingent and prospective liabilities. The directors argued from s 125(2)(a), the Payment Services Act 2019 and the Rules of Court 2021 that only fiat liabilities counted. The judge disagreed: s 125(2)(a) concerns a demand for a specific money sum, and a debt does not arise only once a court has quantified it. Cryptocurrency was simply another kind of asset the court could value on the evidence. The Three Arrows decision relied on by the directors turned on a s 125(2)(a) demand in cryptocurrency. The judge stressed that the decision did not treat cryptocurrency as money generally.

On the withdrawal halts, a halt does not extinguish liability; it only stops withdrawal. The company's assets could not meet its debts over the next 12 months, and with net liabilities of about S$92 million as of July 2023, no likely price rise would rescue it.

On discretion, resisting a winding up to allow restructuring requires a considerably stronger case than an initial moratorium. The proposed restructuring had a very low chance of success and the major creditors did not support it.

On the liquidators, the directors' complaints, including the failure to withdraw assets before the collapse of FTX Trading Ltd, had already been raised and rejected. The judge saw no reason to doubt the interim judicial managers' suitability and considered their familiarity with the business an advantage.

Aedit Abdullah J granted the application and ordered the company to be wound up. The judge appointed the interim judicial managers as liquidators, authorised them to appoint solicitors in that capacity, granted liberty to apply for approval of their remuneration and released them from liability. The other applications filed alongside the winding up application were to be dealt with separately.