Bank Lending - A Look at the Standard Provisions of a Facility Agreement and General Considerations

CORPORATE LOANS
- fall into the following categories:
- borrowing from banks and financial institutions; and
- borrowing or raising of funds from the public

Purpose
o For due diligence etc also need to look at such documents. Acting for banks etc also need to know how to
construe such docs and how client interest is covered
o Or for personal purposes eg housing loan

“The Right Precedent”

- Importance of choosing the right precedent for corporate loans
- Different types of loan agreements – syndicated; loans with arrangers; purchase of shares (warranties &
requirements differ)
- Factors include:
i. Query if the precedent is a previously negotiated one
ii. Parties with similar or vastly different bargaining powers – 1-sided? Bank lending to small
developer?
iii. Suitability in context of present case
- Check few precedents & know what clauses are commonly provided in market practice
- Eg. Broken funding costs; cross-default clauses

Types of bank lending

- • Bilateral – bet borrower and lender
- • Syndicated
 Two or more banks contract with borrower to provide credit on common terms
 Each bank acts on a several basis in funding its proportion of the facility
• Eg 3 lenders toge contributing 100% o commitment, one 60% and other two 20% - several
means that one member not resp for commitment of other lenders, if any lender x come up
with his proportion of the commitment other lenders not aked to fork it out
 Agent bank acts as agent for banks and co-ordinates and administers all aspects of the facility
 The syndicate may be formed before or after the execution of the facility agreement and its
participants may change during the period of the facility -- This is determined by transfer provisions
in the facility agreement.
o Diff incentives to form–
 if lead bank, have direct rr with borrower but may not want too much exposure to one partr borrower
because internal guidelines such tt canot be too much of own resources to fund any partr borrower –
also certain restriction may appy depednign on industry
 Other banks want to participate – can do so with smaller exposure and htose not currently lending to
borrower in partr industry can gain experience in tt industry

BORROWING FROM FINANCIAL INSTITUTIONS

- kind of facilities obtained would be that most suitable for the business of the company

(1) Trade Financing

(i) Overdraft Facilities
• credit up to a stipulated maximum
(ii) LC/TR Facilities
• L/C = letter of credit
• TR = trust receipt
• Brief description of a transaction involving LC/TR:
(a) Singapore Buyer enters into contract to purchase goods from Seller in
Japan
(b) Contract provides for payment by an L/C

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 (c) Singapore Buyer approaches Bank in Singapore for L/C facilities.
Procedure is as follows:
(A) Singapore Buyer applies for a L/C which is made in Issuing
Bank’s standard form which incorporates an undertaking by
applicant to reimburse the Issuing Bank
(B) Issuing Bank issues a L/C in favour of the Seller of Japan and the
L/C is sent to the Paying Bank in Japan who notifies Japanese
Seller
(C) Japanese Seller ships goods and sends shipping documents
comprising:
 bills of lading
 bill of exchange (sight bill)
 invoices
 other documents
to Paying Bank in Japan against payment under the L/C.
The Paying Bank sends shipping documents to Issuing
Bank in Singapore. The Issuing Bank then informs the
Singapore Buyer and releases the shipping documents to
the Singapore Buyer against payment of the sight bill
(D) If the Singapore Buyer had arranged with the Issuing Bank for
further financing say for 3 months, then the shipping documents
will be released to the Singapore Buyer against a bill of exchange
issued by the Singapore Buyer in favour of the Issuing Bank
payable in 3 months and against TRs. If further financing is
provided, the Singapore Buyer issues a new bill of exchange in
favour of the Issuing Bank which then releases the shipping
documents to the Singapore Buyer against TRs
(E) TRs are poor security and are dependent on the ability to trace
goods which could be problematical
(iii) Bills Discounting Facilities
• Singapore Seller exports goods
• It draws a bill of exchange and discounts it to the Bank
• Bank either discounts it in the market or sends it to the collecting bank abroad for
collection
• Collecting bank will forward the bill to the Buyer for collection if it is a sight bill
and for acceptance if it is a time bill
(iv) Guarantee Facilities
• Issue shipping guarantees on behalf of consignees of goods to enable them to collect
the goods without bills of lading

(2) Non trade-related Financing

• financing of manufacturing concerns or project financing, may take any of the following forms or
combination:
a) Overdraft Facilities
b) Revolving Facilities
c) Short Term Advances
d) Term Loans  Analysis of Credit Facilities Agreement – the Term Loan:
1. Definitions and interpretation
2. Amount, purpose and use of the facility
3. Conditions precedent
4. Drawdowns
5. Interest
6. Prepayment and repayment
7. Commitment fee
8. Cancellation

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 9. Tax
10. Changes in circumstances
11. Representations and warranties
12. Negative covenants
13. Positive covenants
14. Default in payment of expenses
15. Default
16. Miscellaneous indemnities
17. Notices
18. Costs and expenses
19. Amendments and waiver
20. Successors and assigns
21. Communications
22. Severability
23. Governing law and jurisdiction
d) Guarantee Facilities
• where large-scale financing is required, the Borrower will give a mandate to an arranger(s) or
manager(s) to syndicate the loan
• upon syndication, the loan will be administered by the facility agent
• documentation will govern not only the relationship between the Borrower and the lender(s), but
that of the lender(s) inter se, the agent and the manager(s)

The Facility Agreement

o Standard clauses:-
o • Parties – in many syndicated deals many diff parties and each will have diff titles. Eg lender,
facility agent/ trustee, borrower, arrangers (co-arrangers, subarrangers etc)
o • Definitions and Interpretation
o • The Facility – set out what agreement is wrt facilty provided by lender to borrower.
o Basic type of facilities: -
o Term
 Loan of a specific amount for a specific period of time. Repayment may be in
instalments or bullet. Amounts repaid or prepaid cannot be redrawn.
o – Revolving
 Loan of a specific amount for a specific period of time but the borrower can
drawdown, repay and redraw at its discretion. Each drawing reduces the available
amount and each repayment restores it. Final epayment will be made on the final
maturity at the latest although in some cases, reductions in the available facility can
occur at regular intervals.
o – Guarantee
 Facility pursuant to which bank(s) issues guarantee(s) to a nominated beneficiary in
relation to e.g. an instalment payment for an acquisition of assets
 Bank guarantee as good as saying tht if present payment on bank, will get payment in
full
o Letter of Credit
 Facility pursuant to which bank(s) issue letter(s) of credit to support structured
transactions. Certain institutions provide funds during precompletion phase of a
project only if completion risk is underwritten by a syndicate of banks
o – Multicurrency
 This facility contains a multicurrency option permitting the borrower to switch
currencies periodically. .—borrows in various currency

Other Standard Provisions

- • Purpose of the Facility
o Working Capital

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 o Refinancing
o Funding acquisition/ capital expansion/expenditure
o Others – eg listed comp wants to conduct buyback of shares

- • Conditions Precedent that borrower to satisfy before lenders wil allow a drawdown
 To be fulfilled prior to the drawdown of the loan.
 Ensures certain conditions against right to drawdown on money
o Example:
- All security documents must be duly executed & registered with ROC
- All searches/ legal opinions being in place
 Important to include: “and all such documents as deemed necessary by agent from time to time”
o Especially useful if discovery of document is made 2 hours before drawdown
 Only include in clause those things you know that Borrower can procure
o Majority Lenders’ consent – agent’s self-protection
 *Borrower’s position?
 Lender: Has a catch all provision—“ … and any other documents that the bank requests”.
 Note: Security documents of ships are not a condition precedent. No payment of ship, no title.
 In a syndicate loan, agent does not have authority to name any condition precedent. Agent works on
majority of lenders.
o security documents that need to be duly executed, stamped and filed
o legal opinions fr other jurisdictions
o note when acting for bank – list of conditions precedent set out, try and incdloue at the end such other
documenttin as the bank may reasonably require – help client just in case miss out anything.
o Also note that when financing acquisition of asset, ie that borrowing money so that can buy vessel,
most banks req as security mortgage over vessel – so when write down or draft conds precedent for
such transctions, shl not include mortgage over veseelk itself, this takes place before drawdown. You
need monies to buy vessel, if borrower signs prior, then he mortgages sth that he does nt have title to.
You are using proceeds of the facility to buy the vessel. For this, CP will not include security doc that
you are financing acquisition of. But include undertaking to mortgage immed upon disbursement of
the facility.
 In practice, on same day, get borrower to sign all the doc first before allow disbursement
o Syndicated fac- agent x have unnilaterla right to waive conds prec. If not met, agents need to go back
to syn and ask whether still prepared to disburse facility even though cp not met. Lenders willb e
prepared to act on wishes of maj lenders – depends on makeup of the lenders. Eg 60 percent of
facility and other two with 0 percent each, no sense for 50 percent line – one lender cn call shots all
the time

- • Mechanics of Drawdown
o giving notice of drawdown
o borrower cannot just give notice and dd monies immed. Must give 5 days notice so that bank can set
aside monies
o all reps and warranties that ive given to bnak are sealed true and correct
o Drawdown Clause
 “Where all condition precedents are satisfied, Borrower may send demand notice to agent
not less than 5 days before demand…”
 Agent will then send notices to other Lenders, requiring funds
 Sometimes with different tranches in agreement – for different purposes
 Eg: Demand on tranche A cannot be similarly demanded on in tranche B (different securities/
chargors)
 Notice of drawdown – No Default
 Usually 5 working days because agent pass to lender etc…time is needed. Time can be compressed if
borrower gave notice earlier.

- • Interest calculation and Payment

o peg it to interest rate that can move

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 o rates can be found on reuter etc
o interest payable by interest periof selected – length of time before interest rate resettled
o on the basis of 1,2,3,6 or 12 mths
o borrower will then pay on last day of period
o he will be permitted to select interest period to suit his cash flow – matches the inter-bank market rate
o cumbersome to have diff interest payment dates otherwise – fixed better
o but not all borrowers will agree – lenders can say that if want to borrow on date that is not interst
payment date, that interst period for that borrowing will be shortened to end on an existing interest
payment date
 Pegged to LIBOR/SIBOR (Singapore Interbank Offer Rate)
 Interest Clause
 Normally –
 Floating rate – can find rates on Reuters screen
 Classified in S$ for 1, 2, 3, 6 or 12 months (as in inter-bank market standards)
 Borrow back-to-back
 Thus, with “broken funding” – problems arise when early payment

- • Fees – diff types of fees

o -Never incorporated into the facility agreement but in a side letter because the fees are considered as
trade secret by the banks. They pay different fees to different people. Each lender is a syndicate does
not know how much the others are paying.
o Front End/Upfront – in letter of offer contained; pay upfront, cannot refund
o Management Fee – payable regardless of whether fee used or not; payable to all lenders regardless of
whether facility is realized
o Agency – for agents acct/ performinga agency functions
o Arrangement – incorp flat fee payable to arranger and participating banks; Flat fee to arranger.
Includes underwriting fees if underwritten
o Commitment – periodic fee charged as percentage of amts undrawn. For as long as borrower x draw
on facility, to pay 0.5 percent fee – encourages you to draw down quickly but hen interest rate starts
to run, if acting for borrower, make sure that commitment fee not payable when drawing down
not possible eg when bank doing due diligence. Find balance between the two; e.g. when a syndicate
commits to disburse $10 million, they have to hold 10 million at borrower’s disposal
o Extension – when fac reaches end of tenure, borrower may want to seek extension of facility;
Payable at end of facility if borrower gives notice to extend the facility.
o Amts of fees shld not be contained in facility arrangement. Many of these are private and
confidential. Agent typically does not want money eners know fee it is earning. Also fees may be
shared differently – may not be divided pro rata to commitment to lending. So agent will bilaterally
agree with each lender what proportion is
 So when drafting facility agreement – keep them separate!

- • Mechanics of Repayment – only the repayment of principal and not interest which is dealt with in sep clause
• Deals with payment of principle, not interest. Interest is dealt with under Interest clause.
• Repayment Clause
• When & How to repay
• Scope for extension on repayment period – Only of principal sum
• Separate clause governing interests to be paid

- • Mechanics of Prepayment and Cancellation

o `prepayment – payment tt borrower makes when he wants to reduce his borrowing prematurely
o eg taking temr loan of 3 yrs, instead of paying over 30 yrs, pay up qickly. Approach existing bank
and asktp prepay existing loan. Borrower will repay before maturity of facility. And then usually
bank has set aside funds and expected interst rate earnings – so bank will say need to give 3 mths
notice of prepayment and then pay prepayment penalty

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 o for term loans – where prepaid any amt, cannot re-borrow those amts. To prevent term loan fr being
rreatd as evolving facility
o Prepaying before maturity period. Banks will allow prepayment only if notice, usually 3 months and
pre-agreed fee is given. Once amount is prepaid, the borrower cannot reborrow it again. This is to
prevent it from becoming a revolving facility.
o Prepayment Clause
 Early repayment/ early maturity
 Not beneficial position sometimes, especially if very strong Borrower
 Penalty for prepayment, since depriving Bank of interest it would have earned for the entire
borrowing period

- • Mechanics of Payments – when payment to be made by borrower to agent and agent to enders. Also distribn
of payment.
o Appropriate to interest – interest cacl on principal. If borrower, want to say – owe bank 20 million.
Pay up 20 million first – the principal. Bank will not agree because this is what incurs interest.
o What bank does is say that appropriation structure will be – if borrower pays bank (priority->)
 all costs and expenses of bank to be paid first.
 Then interest.
 Then principal – interest payable still if unable to do so
 The interest element of loan must usually be paid first.
 Note: Reference bank: How interest is to be determined. If this bank withdraws, then
have to look for another bank

- • Taxes
o Preserves the profit margin of lenders. The Borrower has to gross up if the lender has to withhold
tax. Sometimes the lender agrees to.
o Free and clear and without deduction except as required by law – where borrowers make payment of
interest, may be reqd to hold tax payable by foreign lender in sg
 Foreign lenders will be short on tax
 Will say that there is grossing out provision so that ult, it will reeive the amt it shld hav
received had borrower not been reuired to withhold any tax
 Otherwise lenders will receive less than what is due because borrower obliged to hold tax in
law
 \stimes lender (borrower?) can get tax credit in that country so can absorb
o Grossing up of payments
o Tax Credit
o Goods and Services Taxes

- • Change in circumstances – 3 categories of changes in circumstances

o Change in law – cost of maintaining or funding laon has increasd. Borrower to indemnify bank
 Increased costs arising as a result of change in law or interpretation or administration and/or
compliance with any requirement of any regulatory authority
 Lenders will try to push the risks to the borrowers. Usually the lenders are in a stronger
bargaining position. Lenders are only interested in lending and making profits. Thus, it is
often worked in as an indemnity from borrower to lender. The borrower will indemnify the
lender when there are increased costs. However, on order to be fair to the borrower, the
borrower is given the option to prepay and then change the lender
o Market disruption – cannot get appropriotn on interest rate – then bank will say use own cost of funds
o Supervening illegality – bank cannot cont to lend; eg. when it is illegal for the bank to continue to
fund the loan. The borrower then has to prepay all amounts due
o “Change in circumstances” Clause
 Indemnity clause
 Example:

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 - If law changes and as such becomes more difficult/ expensive for Lenders to fund, Borrower
must indemnify
- If law changes and becomes illegal for borrowing, then Borrower must repay before it becomes
illegal
 Lenders’ protection clause
 Lenders not able to know everything about Borrower, thus take warranties from Borrower

- • Warranties and representations

o Most greatly negotiated area
o For example :-
 Status – not currently in default of any other facility agreement with other creditors/ no litigation
 Binding obligations
 No conflict with laws or other obligations
 Power and Authority
 Authorisations and Consents
 Registration and Filings
 No default
 No misleading information
 Financial Statements
 No litigation
 No immunity
 No winding up
 No cross default
 Repetition (evergreen clause) – “all warranties and representations are continually repeated…”
• everyting I have represented will remain true and correct at all times where facility is still
standing – will want to negotiate down this if acting for borrower – look at key dates eg
everytime want to use facility or draw down. Most lenders x agree to this
• How to limit:
• 1. by materiality – not every litig proceeding that will result in insolvency, so must be material
litigation – put in amount to this
• 2.by knowledge - if know abt proceeding, will tel bank ie qualify by knowledge (but banks usu
regard knowledge as irrelevant, bank will want to impose risk on borrower)
 At common law, breach of warranties and Undertakings have different results but these will be worked in
as Events of Default. Therefore, breach of them will have the same result. I.e. loan recalled and all repaid,
securities enforced.
 Warranties Clause: Example:
o B (company) warrants that it is duly incorporated and validly existing in Singapore
o B with power to enter agreement which become valid & binding when executed
o B not in default of any agreement with any other part
o B warrants that there is no litigation against them (save as disclosed)
 *How widely are these drafted? Depends heavily on negotiations…
 “Evergreen Clause”
o ie. As long as any indebtedness outstanding during this agreement, then all the above warranties
are applicable
 “Undertakings”
o Eg. Observe certain financial ratios; Not to pledge assets/ give loans/ guarantee anyone else’s
indebtedness; Not to borrow more than $X
 *Borrower’s viewpoint?
o Eg. Part of a bigger group of companies – Inter-company loan (common), then clause renders
default
o *Scrutinise clause in terms of its limiting powers!

- • Undertakings
• The Borrower here is required to do something

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 • Examples of undertakings
• Not to give loans or guarantees
• Not to dispose of business
• Not to declare dividends
• Negative pledge – covenant limiting abilty of borrower to create asets without exteniding benefit of assets
to other banks/ ban on extension
 To prevent other banks fr obtaining security over assets of borrower. First grp of lender will then
hav their position prejudiced
 So first grp will say – esp where security not taken – borrower not permitted to give security to
other paty without my prior consent
• Notification of Default – to notify lender
• Preparation of Periodic Accounts
• Compliance with Laws
• Security Margin – eg 100 million facilty. Totally drawn down and fully outstanding. Assets prov as
security. Margin means that security value must be at least 120 percent of outstanding loan. So that if
value falls, still have twent percent buffer. If margin is breached, borrower needs to repay ext of facility to
ensure that margin is comploied with or prov alternative security to lender.
• Financial covenants
 Financial targets which a borrower undertakes to meet
 Failure to meet the targets usually means the borrower is in default of the facility agreement
 Monitors :
• Liquidity – borrower able to service loan once made
• Management – how well bsiness being managed
• General Risk – to lenders; Bank assesses the long term risks of borrower getting into
financial difficulties.
 Forms
• Limits:
– Some financial covenants set a financial limit which a borrower must attain
e.g. Minimum Net Worth of S$20 million:- (net worth = diff bet assets and liab
of borrower)
– cap on borrowings to limit borrower’s exposure to other creditors
• Ratios:
– Comparing two figures obtained from the borrower’s accounts e.g Financial
gearing and leverage ratio, interest cover ratio and current ratio/acid test ratio
 Ambiguity should be avoided through specifically defined terms
 Ensure that all ambiguity are resolved.
 Compare terms, financial covenants with precedents from other banks to ensure that all
grounds are covered
 Note: Although these ratios can be put in, be careful of what you put in. Do not just put in
what banks tell you to.
 Why useful – see trend
 Financial covenants only reveal health of the company once or twice a year
 Tests are all historic.
 Ratios are of most use when used in conjunction with:
• A company’s previous ratios
• Ratios for similar companies
• Management forecasts

– • Events of Default and Indemnity – most impt

 This is an area that is heavily negotiated on
– Event of Default Clause

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 o Eg. Event happens and Lender can cancel facility and demand repayment immediately
o (Most negotiations involved here!)
o *What sort of events?
- Anyone who sues B – exclusive suits $X million and below – aggregate/ not
- B’s line of business – common for litigation (eg. contractors/ sub-contractors)

- Examples of events of default :-

o default in payment
o breach of warranty or any other undertaking: period of remedy to fix breach
o winding up
o cross default: “materially, adversely affect the Lender…”, …. “reasonableness”
 *Cross-default
 Between L & B loan
 But defaulted in loan between B & A
 Default of repayment of any borrowed moneys deemed default here
 *Clause – too wide?
• Put up threshold
• Example:
 “Provided … does not affect performance of B’s obligation in this particular
loan with L”
 Breach of any representation or warranty under loan agreement
o litigation
o cessation of business
o unlawful for obligor to perform obligations
o material adverse change
 *Material/ adverse changes clause
 Provides for the case of any material or adverse changes in company’s condition/ business/
administration, or economy/ etc. then constitutes an ‘event of default’
 Important to send drafts to Borrower for approval and put in a memo for each amendments!
[Lawyer’s protection]
o security imperilled
o change in ownership of obligors
o analogous event – e.g. Mauritius Co, no concept of … e.g. winding up. They will have something
similar…Anything analogous still regarded as Events of Default.
 eg sth similar wld also constit event of default
 how to negotiate this – for lender, as wide as possible
 for borrower, cut down –
• negotiate the threshold amount – eg in cross default – borrower has several grps of
lenders financing it. Might be facility that he has defaulted on but threshold amount
very small – so can say that default must be more than x dollrs before can trigger event
of default
• or incorp period of remedy before can be considered event of default. Eg giving 30
days – If borrower breach undertaking, lender must give notice and then time to rectify.
• But not all events of default – eg wound up – cannot rectify
• Even if breach, must b such as to adversely affect borrower such that it canot perform
nagreemnet
• Provide for reasonableness

– • The Agent, the Arranger and the Security Agent

o Appointment of Agent and Security Agent
o Duties of Agent – usua preotectg agent – because acts for the sundicate
 Right of agent – able to rely on borrower and not responsible to lenders for such reliance
o Duties of Security Agent
o Role of Arranger

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 o No fiduciary duties – no duty to inform except what has come to their specific knowledge, they have to do
own investigation and appraisal of borrower
o Majority Lenders’ instructions
o Responsibility for documentation
o Exclusion of Liability - Fee comes from Borrower. Although agent is paid a fee, agent is not responsible
for everything. For e.g. agent does not take responsibility for borrowers, warranties and undertakings.
Note that expert opinions are allowed to be sought.
o Lender’s indemnity to Agent
o Resignation of Agent or Security Agent
o Confidentiality
o Relationship with Lenders
o Credit Appraisal by Lenders

– • Set-off and pro-rata sharing

 no lender in the syndicate is supposed to be in a better position than the other.
 lenders have right of setting off
 pro rata – all lenders paid proprotionatelu and no one lender in syndicate receives more than he
shld compared to others esp impt for insolvency
 Set-off & Pro-rata Clause
• When B owes money to L and L owes money to B – can set-off amounts
• Pro-rata: all Lenders undertake inter se that, where B repays L1 first, L1 must put all
moneys repaid to him on the table for the Agent to distribute – thus, prevents B from
taking advantage (especially crucial where B counting on votes of particular Lenders
on event of default)
– • Indemnities to Lenders
– • Expenses and Stamp Duty
o Initial Expenses
o Enforcement Expenses
o Stamp Duties
– • Assignments and transfers
o Novation – All lenders agree that if one lender wants out, another can come in forms new contract. When
novation and when assignment. When outstnaindg oblig to transfer, ie where facility reqt not toally drawn
yet. Assignment when no outstanding oblig. Then assign debt.
o Assignment - Usually can do this if debt is outstanding. And no obligation on lender to lend further
amounts.
o Participation – Silent or open. Silent: Borrower does not know that other lenders have participated with
grp of banks, one bank may want to allow participation or subparticipation, ie if has lent 60 million, can
allow another bank to participate to ext of 30 milklion. But other bank x direct party to syndicate, merey a
sub participant.
o Transferable Certificates – When one bank wants to be out of syndicate but there are still outstanding
obligations to be fulfilled by the banks. This is easier than novation. Outgoing bank then transfers all
obligations to incoming bank. certs attached to facility agreement. If lender wants to tradnsfer
commitment as debt, will sign this cert, no need to get entire syndicate involvewd because agrees upfront
that this method of transferable certs can be used.

– • Calculation and evidence

o Basis of Calculation (actual number of days elapsed/365 days/360 days)
 Sg dollar facility – 365
 US dollar facility – 360
o Accounts prima facie evidence/certificates conclusive of borrowers oblig
– • Remedies, waivers, amendments and consent
– • Nature of rights and obligations
– • Law and Jurisdiction
o eg sg/ arbitration etc
– • Schedules

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 o Lenders and Commitments
o Conditions Precedent
o Form of Notice Requesting Advance
o Form of Legal Opinions

- Agency Clause
 Agent’s protection, that Agent not responsible –
i. for adequacy, accuracy/ etc. of representations made by Borrower or agent
ii. for execution of documents or monitoring for event(s) of default (Lenders’ responsibility)
 Lenders to confirm that they are not relying on agent for business representations/ etc. (important to make
agent happy – since agent originates the deal in the first place)

Security
– • An arrangement which enables a creditor to look to a particular asset /its proceeds of sale if the debtor fails to
discharge its liabilities to the creditor
 eg where two grps of lenders, one with and other without security – the one without will lose out
– cannot hold assets for repayment of debt
– • Banks may require security to:-
o Improve recovery on liquidation
o Defend business/assets from third parties
o Obtain control of particular assets on liquidation

Categories of Security
• more common security taken:
a) land
b) machinery, equipment
c) inventories, stock-in-trade
d) book debts/receivables
e) shares
f) ships

Types of Security Interests

1. Mortgages
- Transfer of ownership and legal title to the Bank
- Mortgagor retains “equity of redemption”
- Formalities for creation of mortgage depends on property being secured
 Eg merchant shipping act
- Does not require delivery/possession of asset
 Any kind of asset can be mortgaged
i. Land – where title is ssued by registry of land title – stimes when purchase land fr gobt and
title not yet issued, can hae assignement with mortgage with undertaking to inform bank
that title has been issued; mortgage of land: title to the land must have been issued first
before land can be mortgaged.
ii. Mortgage on escrow: presigned but not registered. Mortgage perfected upon issue of title.
Can authorize back to do so.
iii. Mortgage of ships/vessel: Under construction here have to take debenture no. + mortgage
(fixed/floating charge). If Singapore flag: statutory mortgage –
1. if veseel built and flagged, can take stat mortgage nad deed of covenance
collateral to stat mortgage and assignment of insurances and assignment of
earnings
2. Where vessel under contruciton, and not registered as ship, take fixed and floating
charge over vessel and assignment of building contract tog with any guarantees
- Enforce by way of power of sale

2. Charges

11
- “The charge does not transfer ownership to the creditor; it is merely an encumbrance, a weight hanging on the
asset which travels with it into the hands of third parties (other than a bona fide purchaser of legal title for
value without notice)” – Goode, Legal Problems of Credit and Security (Second Edition - 1988)
- Creditor can look to the asset to discharge the debt in priority to the unsecured creditor
- Does not depend on either delivery or possession or transfer of ownership
- Enforce by appointing a receiver/administrative receiver
- Two kind of charges: fixed and floating
 Fixed – take over equipment – charger cannot deal with equipment. Borrower cannot deal with the
assets of a fixed charge freely
 Floating – Borrower can deal with its assets, present + future in ordinary course of business. E.g.
Stock in trade. A floating charge will crystallize to be a fixed charge upon Events of Default.
• borrower in business of trading 0 cannot have fixed charge over borrower’s assets because
if so borrower x deal with assets and this kill shis business. So take floating charge 0 this is
regarded as hovering over assets and only when default event takes place that it crystallizes
into fixed charge and fr this pt onwards borrower not supposed to deal with charged assets
• characteristics:
• 1. charge over class present and future
• 2. assets change in ord course of business
• 3. borrower free to deal with assets n ord course of business before crys which is process of
converting charge to fixed charge on occurrence of even ot fdefault
 => business sinterest and security for bank balanced

3. • Security Assignments
- Security interest over certain forms of assets, usually choses in action
o Eg tenancy agreement, financing developer of land. Developer building residential properties either
for sale or for lease. Can take assignmet of tenancy agreement, as an when he enters into the
agreements with lessees, you can take assigmet of receivables to use as security for debt that
developer has outstanding
o Or assignment of sale agreements – developer selling properties, bank can take assingmetn of sale
agreements as well
- can be legal or equitable
- will include a provision for reassignment on satisfaction of debt
4. • Pledges
- requires delivery (actual or constructive) of possession of an asset to the pledgee by way of security
- Asset held till obligation performed
- Enforce by way of power of sale

5. • Liens
- Right to retain chattels/assets
o Eg mechanics lien – until pay, cannot get car at garage back
- Generally no power of sale

Quasi Security Interests

- Not asset specific

• Guarantees
- guarantee by third party of performance of obligations of contracting party
- no real security
- all tt lender has is right against 3rd party such that if borrower x pay, can go to 3rd party
• Set-Off
- discharge of mutual obligations to the extent of the smaller obligation
- insolvency of borrower – bank can set off deposit with loan
- => don’t put loan and deposit with same bank!

12
- Most relevant for banks. Banks set off using your various accounts. Consolidate all of them.

• Negative Pledge
- undertaking by borrower not to grant any security ranking in priority or pari passu with lender’s security
• Subordination
- creditors agree claims of senior creditors shall rank before claims of junior creditors
o Eg borrower receives shares, goes to bank, and asks for loan, bank says already owe a lot of money
to shareholders, one way of dealing with this is for shrs to agree that loans wld be subordinated ie
become junior creditors so that not repaid until external creditors are repaid – they are regarded as the
senior lender
- Two types of sub:
o “No proof” subordination : Junior creditor does not prove for debt until senior creditor gets paid.
 they will ask senior creditors to prove for their debt first and they wik ony prove thereafter
o “Turnover” subordination “ Junior creditor accounts to senior creditor for sums received
 if during sub, borrower has paid junir sums of money, then will pay to senior creditor

• Flawed Asset
- Typical arrangement :-
o A borrows money from B. C deposits money with B, to be repaid only and to the extent A repays B.C
holds asset which is flawed as its value is dependent on A’s repayment of sum to B. B only acquires
right to withhold payment.
- No real security interest – no rights to the deposit only to withhold payment
- Not common.

Documentation
• Documentation should reflect the transaction
• Stamp duty on the documentation

• Stamp Duty
- whether or not payable. Within 14 days of eseuciton in sg or 30 days of receipt outside sg\
- scale
- max of 500
- 10 dollar each for principal documents and supplemtnary doc
- make sure that all documents which are already signed are stamped within the stipulated periods.

Common Security Documents

Mortgage over Land

 Only where title is issued, then can have mortgage
 If unregistered, “indenture of mortgage”
 “Mortgage in escrow” – mortgage is signed in blank without particulars of property;
 Together with this, takes an assignment conferring title on property (eg. Sale & purchase agreement;
Tender)

Fixed Charge

Assignments
 Contracts
 Receivables (where cannot collect cash yet)
 Rental/ Sale proceeds (where Developers are involved)
 Progress Payments
Important to give notice (to perfect title)

Mortgage of Shares
 Can also mortgage/ charge of scripless shares

13
Debenture/ Floating Charge
 Company deals with it until a particular event crystallises the charge

Type of Security Security Documents

1. Land
i. Legal Mortgage
(a) Common law land Indenture of Mortgage

(b) Registered land: Land Titles/ Strata Title – title issued: Certificates of Title;
*Mortgage which incorporates by reference all the Subsidiary Certificates of Title; Subsidiary Strata Certificates of
terms and conditions of a memorandum of Title; or Registered Lease of Title; or instruments
Mortgage filed by the Lender with the Singapore
Land Authority. The Memo contains standard
mortgage clauses.

ii. Equitable Mortgage

(a) Registered land (Title not issued)
Assignments of –
i. Sale & Purchase Agreements in respect of the land
ii. Building Agreements in respect of URA and JTC and
State lands; or Agreements for lease; and

Mortgage executed in escrow to be perfected upon title being

issued

Caveat

Memorandum of Deposit of Title Deeds

(b) Common law land and Registered land Caveat

2. Fixed Assets, excluding land (eg. machinery, Debenture with fixed charge
equipment)
3. Inventories and stock-in-trade Debenture with floating charge
4. Book Debts/ Receivables Instrument of Charge/ Debenture/ Assignment
1. Shares
i. Scrip-based Memorandum of Deposit of Shares and transfer of legal title of
(a) Legal mortgage of shares shares to mortgagee
Memorandum of Deposit of Shares

(b) Equitable mortgage of shares

ii. Scripless The Companies (Central Depository System) Regulations 1994

Form I
(a) Charge Form H
(b) Assignment

(c) Common law security interest

6. Ships Statutory Ship Mortgage and Deed of Covenants

(3) Types of Security Documents

(i) Land
(a) Legal Mortgage

14
 (A) Common Law Land: Indenture of Mortgage
(B) Registered Land: Land Titles/Strata Title Mortgage. This incorporates by
reference all the terms and conditions of the relevant Memorandum of Mortgage
(if any) filed by the lender(s) with the Singapore Land Authority (“SLA”)
 Registration of Mortgage in SLA
 E-filing of particulars of charge with the Accounting and Corporate Regulatory
Authority (“ACRA”)
(b) Equitable Mortgage/ Charge
(A) Common Law Land:
- Memorandum of Deposit of Title Deeds}
- Power of Attorney to perfect Mortgage } ROD
(B) Registered Land:
- Memorandum of Deposit of Title Deeds}
- Power of Attorney to perfect Mortgage}
- Caveat}
(C) Registered Land (SSCT not issued for developments):
- Assignment of Sale and Purchase Agreement}
- Mortgage-in-Escrow}
- Caveat}
(D) JTC/URA/HDB Lands (title not issued):
- Assignment of Building Agreement}
- Mortgage-in-Escrow}
- Caveat} SLA
(ii) Fixed Assets excluding Land: Debenture with fixed charge
(iii) Inventories and stock-in-trade: Debenture with floating charge
(iv) Book Debts/Receivables: Charge/Debenture/Assignment
(v) Shares:

Scrip-based
(a) Legal mortgage of shares
• Memorandum of Deposit of Shares
• Transfer form together with share certificates
• Registration of shares in share register of the Company
(b) Equitable mortgage of shares
• Memorandum of Deposit of Shares
• Transfer form executed in blank together with share certificates
• Power of Attorney to complete transfer
E-filing with ACRA if within terms of s. 131(3)(c) of Companies Act (Cap. 50)
Registration of charges.
131. —(3) The charges to which this section applies are —
(a) a charge to secure any issue of debentures;
(b) a charge on uncalled share capital of a company;
(c) a charge on shares of a subsidiary of a company which are owned by the company;
(d) a charge or an assignment created or evidenced by an instrument which if executed by an individual,
would require registration as a bill of sale;
(e) a charge on land wherever situate or any interest therein;
(f) a charge on book debts of the company;
(g) a floating charge on the undertaking or property of a company;
(h) a charge on calls made but not paid;
(i) a charge on a ship or aircraft or any share in a ship or aircraft; and
(j) a charge on goodwill, on a patent or licence under a patent, on a trade mark, or on a copyright or a licence
under a copyright.
Scripless (s. 130N Companies Act)
(a) Assignment of shares – Form H
(b) Charge of shares – Form I
(c) Common law security interest

15
 Registration with The Central Depository (Pte) Limited
E-filing with ACRA
Security interest.
130N. —(1) Except as provided in this section or any other written law or any regulations made under section
130P, no security interest may be created in book-entry securities.
(2) A security interest in book-entry securities to secure the payment of a debt or liability may be created in
favour of any depositor in the following manner:
(a) by way of assignment, by an instrument of assignment in the prescribed form executed by the assignor; or
(b) by way of charge, by an instrument of charge in the prescribed form executed by the chargor:
Provided that no security interest in any book-entry securities subsequent to any assignment or charge thereof
may be created by the assignor or the chargor, as the case may be, in favour of any other person and any such
assignment or charge shall be void.
(3) Upon receipt of the instrument of assignment, the Depository shall forthwith, by way of an off-market
transaction, transfer the book-entry securities to the assignee and thereafter notify the assignor and the
assignee of the transfer in the prescribed manner.
(4) Upon receipt of the instrument of charge, the Depository shall forthwith register the instrument in a
register of charges maintained by the Depository and thereafter notify the chargor and the chargee in the
prescribed manner.
(5) The register of charges shall not be open to inspection to any person other than the chargor or the chargee
or their authorised representatives and except for the purpose of the performance of its duties or the exercise of
its functions or when required to do by any court or under the provisions of any written law, the Depository
shall not disclose to any unauthorised person any information contained in the register of charges.
(6) An assignment or a charge made in accordance with the provisions of this section, but not otherwise, shall
have effect upon the Depository transferring the book-entry securities or endorsing the charge in the register of
charges except that the instrument of assignment or charge shall not have any effect if on the date of receipt of
such instrument, the number of book-entry securities in the account of the assignor or chargor is less than the
number of book-entry securities specified in such instrument.
(7) The provisions of section 130D (1), (1A) and (2) shall apply to an assignment of book-entry securities
made under this section.
(8) An assignee or a registered chargee of book-entry securities shall have the following powers:
(a) a power, when the loan or liability has become due and payable, to sell the book-entry securities or any
part thereof and in the case of a chargee he shall have the power to sell the book-entry securities or any part
thereof in the name of and for and on behalf of the chargor; and
(b) any other power which may be granted to him in writing by the assignor or chargor in relation to the book-
entry securities provided that the Depository shall not be concerned with or affected by the exercise of any
such power.
(9) Nothing in subsection (8) shall be construed as imposing on the Depository a duty to ascertain whether the
power of sale has become exercisable or has been lawfully exercised by the assignee or chargee.
(10) No book-entry securities assigned by way of security or charged in accordance with the provisions of this
section may be —
(a) transferred by way of an off-market transaction to the assignor save upon the production of a duly executed
re-assignment in the prescribed form; or
(b) transferred by the chargor, by way of sale or otherwise, save upon the production of a duly executed
discharge or charge in the prescribed form.
(11) Upon the sale by the assignee or the chargee in exercise of his power of sale of any book-entry securities
assigned or charged in accordance with the provisions of this section, the assignee or the chargee shall
forthwith notify the Depository of the sale and the particulars of the book-entry securities sold by him, and the
Depository shall —
(a) in the case of the sale by the assignee, notify the assignor of the sale; and
(b) in the case of the sale by the chargee, effect a transfer of the book-entry securities to the buyer in
accordance with section 130G and notify the chargor of the transfer.
The provisions of sections 130I, 130J, 130L and 130M shall apply, mutatis mutandis, to a transfer effected
pursuant to this section.
(12) Upon fulfilling his obligations under an assignment by way of security or a charge, the assignor or the
chargor shall be entitled to obtain from the assignee or chargee a re-assignment or a discharge of charge, as the
case may be, of the whole or part of the book-entry securities.
(13) A re-assignment or discharge of charge shall be effected by the Depository by transferring the book-entry
securities to the assignor or cancelling the endorsement of charge in the register of charges and in the account
of the chargor, as the case may be.

16
 (14) Book-entry securities may be assigned by way of security by an assignee or charged in the prescribed
form by a chargee to secure the payment of any debt or liability of the assignee or the chargee, as the case may
be, in accordance with the provisions of this section provided that no book-entry security may be charged by a
chargee subsequent to any sub-charge.
(15) All acts, powers and rights which might previously have been done or exercised by the chargee
thereunder in relation to the book-entry securities may thereafter be done or exercised by the sub-chargee, and,
except with the consent of the sub-chargee, shall not be done or exercised by the chargee thereunder during the
currency of the sub-charge.
(16) Upon the sale by the sub-chargee in exercise of his power of sale of any book-entry securities in
accordance with the provisions of this section, the provisions of subsection (11), in respect of a sale by a
chargee, shall apply mutatis mutandis to the sale by the sub-chargee.
(17) Nothing in subsection (14) shall affect the rights or liabilities of the original assignor or chargor of the
book-entry securities under subsections (12) and (13) and he shall be entitled to a re-assignment or discharge
of charge from the assignee or chargee free from all subsequent security interests created without his consent
upon satisfying his indebtedness or liability to the assignee or the chargee.
(18) The provisions of section 130H shall apply to relieve the Depository and its servants or agents of any
liability in respect of any act done or omission made under this section as if references to “depositor” include
references to “assignee”, “chargee” or “sub-chargee”, as the case may be.
(19) Nothing in this section shall affect the validity and operation of floating charges on book-entry securities
created under the common law before or after 12th November 1993, but that the Depository shall not be
required to recognise, even when having notice thereof, any equitable interest in any book-entry securities
under a floating charge except the power of the chargee, upon the crystallisation of the floating charge, to sell
the book-entry securities in the name of the chargor in accordance with the provisions of this section.
(20) Nothing in subsection (19) shall be construed as imposing on the Depository a duty to ascertain whether
the power of sale pursuant to a floating charge has become exercisable or has been lawfully exercised.
(21) A stockbroker shall have a lien over unpaid book-entry securities purchased for the account of a customer
which shall be enforceable by sale in accordance with and subject to the provisions of this section as if the
same had been charged to him under this section except that the stockbroker shall not be obliged to notify the
Depository of the sale or the particulars of the book-entry securities sold by him.
S 92/97.
(22) Any security interest on book-entry securities created before 12th November 1993 and subsisting or in
force on that date shall continue to have effect as if that Act had not been enacted.
(23) In this section, “off-market transaction” means a transaction effected outside the Securities Exchange.
(iv) Ships: Statutory Ship Mortgage and Deed of Covenants/First Preferred Naval Mortgage
• Registration in relevant Registry of Ships
• E-filing of particulars of Charge with ACRA (if relevant)
(4) List of Checks, Searches, Enquiries and Consents

Registration and Perfection

- • When taking security, consider registration and perfection requirements
- • Differs depending on type of security sought to be created

-> Registration of Charges under Section 131, Companies Act

- • Applies to companies incorporated in Singapore and branches of foreign companies registered under Section
368 (but does not apply to a charge on property outside Singapore of such foreign company)
- • Section 131(3) sets out the type of security over subject matter requiring registration
o bk debts/ ships and aircrafts/ shares and subsidiaries
- • Effect of non-registration
o charge void against liquidator or creditors
 be careful when 30 days starts to run – must be registered wihrin 30 days of creation if not a court
order is required.
 Court will not always give an order. Court will look at the reason for it being out of time and whether
the rights of other creditors will be prejudiced.
o Note: Registration gives priority not validlity.
o some take view tt x run when assigned but when charge is dated – but there may be circumstances
where once signed sealed and dekilvered charge doc, it is deemed ot b effective charge, fact tt x put
dte on it x mean that 30 day period x start to run. Dpends on intention of parties which if intended to

17
 take effect when sign seal and delivered, then created charge nd 30 day perod starts to run. Must have
charge dfiled within these 30 days. Otherwise ned court order for extension of time. And even if court
agrees, this is made subj to interest of other creditors.
- Filing charge - by way of bizfiling
o Errors only corrected by way of order court
- Stime borrower may ask bank not to register charge s131(10) – cannot have such arrangement, second charge
not valid unless prove that it was given in gd faith
- To let world at large know that there is negative charge on this – cannot have other security withot consenst of
client
- Restrictions are shown – partr charger cnnot give security new without consent of bank client
- S131 charge – before filing, msut obt etter of authorization fr charger that info filed is correct
- Discharge of security
o Lodge prescribed form to be lodged by chargee
- Effect of non Regis
o Void against iquidator and other creditors

 Registration of charges – required

 Require Forms 33 & 34 to be filed with the Registry of Companies within 30 days
 If failed, charge is void against the liquidator & creditors – section 131(1)
 While underlying loan remains valid, security defeated for non-registration

Section 131
(1) Subject to this Division, where a charge to which this section applies is created by a company there shall be
lodged with the Registrar for registration, within 30 days after the creation of the charge, a statement containing
the prescribed particulars of the charge, and if this section is not complied with in relation to the charge the
charge shall, so far as any security on the company’s property or undertaking is thereby conferred, be void
against the liquidator and any creditor of the company.

 In practice, Borrower normally wants to dispense with filling Forms. Thus would execute documents and file
new ones 29 days later to avoid being reflected in the instant search (but cannot do that!)
 The 2nd charge will be stripped of validity, unless satisfies the Court that it was done in good faith – section
131(10)

Section 131
(10) Where a charge requiring registration under this section is created before the lapse of 30 days after the
creation of a prior unregistered charge, and comprises all or any part of the property comprised in the
prior charge, and the subsequent charge is given as a security for the same debt as is secured by the prior
charge, or any part of that debt, then to the extent to which the subsequent charge is a security for the
same debt or part thereof, and so far as respects the property comprised in the prior charge, the subsequent
charge shall not be operative or have any validity unless it is proved to the satisfaction of the Court that it
was given in good faith for the purpose of correcting some material error in the prior charge or under
other proper circumstances and not for the purposes of avoiding or evading the provisions of this
Division.

 Sometimes, in complex transactions, documents have to be signed way in advance – “escrow” – signed in
blank and not dated; This is generally accepted (eg. Multi-jurisdictional agreements)
 But in case law, if it is not dated, but if intention of parties that the document has immediate effect, cannot use
signing in escrow as a way to circumvent section 131. The courts will hold parties to their intentions and time
starts running from when parties intended to date their documents.
 Question of “intention”
 Cannot simply amend forms – eg. Name of Borrower or chargee is wrong, must get Court order to amend!
 Documents can be signed after disbursement of funds

 Duty to register charges – signing of Forms not reserved for only the Borrower; Includes “any interested party”
– section 132(1)

18
-> Registration of Security Interest Over Book-Entry Securities
- • Types of security:-
o Assignment (using Form H)
o Charge (using Form I)
o Common law charge (Regulation 23A Companies (Central Depository System) Regulations)

Section 132
(1) Documents and particulars required to be lodged for registration in accordance with section 131 may be
lodged for registration by the company concerned or by any person interested in the documents, but if
default is made in complying with that section, the company and every officer of that company who is in
default shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $1000 and also
to a default penalty.

 Duty to register charges existing on property acquired – section 133 (widely construed section)
 Eg. Buy over assets

Section 133
(1) Where a company acquires any property which is subject to a charge of any such kind as would,
(a) if it had been created by the company after the acquisition of the property, have been required to be registered
under this Division or,
(b)where a foreign company becomes registered in Singapore and has prior to such registration created a charge
which if it had been created by the company while it was registered in Singapore would have been required to be
registered under this Division or,
(c) where a foreign company becomes registered in Singapore and has prior to such registration acquired property
which is subject to a charge of any such kind as would if it had been created by the company after the acquisition
and while it was registered in Singapore have been required to be registered under this Division,
the company shall cause a statement of the prescribed particulars to be lodged with the Registrar for registration
within 30 days after the date on which the acquisition is completed or the date of the registration of the company in
Singapore, as the case may be.

NB: Subdivisions (a), (b) & (c) are my own – for easy reference

Real Property
- • Verify ownership and other third party rights. Appropriate searches to be done
- • Registration requirement under Land Titles Act, Cap 157
- • JTC (Jurong Town Corporation) leases. JTC consent may be required but requirement is waived subject to
submission of a duly completed Notice of Mortgage/Charge in the prescribed form and terms and conditions

Registration Under Bill of Sale Act, Cap. 24

- • Generally applies to creation of security interests over personal chattels
- • A bill of sale, in its ordinary meaning, is a document which is given where the legal property in goods passes
to the person who lends money on them, but possession does not pass
- • Usually grantee of bill of sale has the power to seize and take possession of the subject matter of the bill of
sale
- not commonly used.
- • Scope of definition of “bill of sale”
- • Registration within 3 clear days after execution
o check whether security falls under bill of sale!!!!
- • Renewal of registration at least every 12 calendar months

Registration Under Merchant Shipping Act, Cap. 179

- • Mortgage over vessels to be in prescribed form
o not suff for chargee or banks
o actual detailed terms ->
- • Terms found in deed of covenants. Specified to be collateral to stat mortgage
- must be regisrered with registry of ships
- time registered determines priority

19
Assignments
- • Assign benefit of choses in action
- • Rule in Dearle v. Hall (priority determined in general by order in which notice is given to the debtor)
- • Policy of assurance. Note Section 73, Conveyancing and Law of Property Act, Cap. 61
o once s73, then x part of his estate, he cant deal with it as such
o wife and children x have

Pledges
- • Mere agreement not sufficient
- • Depends on conduct of parties

Other Considerations: • Searches

- part of due diligence
- where and what to search depends on subject matter
- timing is also important i.e. winding-up/bankruptcy searches

• Searches perform following functions:-

- to verify what we already know of the subject matter eg litigation proceedings in place
- indicate potential problem areas if search results conflict with what is known. May warrant further
investigation
- indicate areas where there may be pre-existing third party rights

(i) Checks on the Company

(a) Restrictions on the capacity, rights, powers or privileges of the Company
relating to borrowing, mortgaging or charging its assets, providing a
guarantee of the obligations and liabilities of any person (Memorandum of
Association of Company)
(b) Restrictions on the power of Directors to borrow, mortgage or charge its
assets or give guarantees (see Articles of Association of Company to obtain
resolution of board of directors and the approval of the Company in general
meeting (if necessary))
(c) Manner of execution of documents i.e. under hand or by common seal
(d) S. 76, 131, 160, 162, 163, 259, 329, 330 Companies Act (Cap. 50) }
(e) S. 98, 99 Bankruptcy Act (Cap. 20) }
(f) Rules 905, 906 Listing Manual } see lect notes
Companies Act - Company financing dealings in its shares, etc.
76. —(1) Except as otherwise expressly provided by this Act, a company shall not —
(a) whether directly or indirectly, give any financial assistance for the purpose of, or in connection with —
(i) the acquisition by any person, whether before or at the same time as the giving of financial assistance, of —
(A) shares or units of shares in the company; or
(B) shares or units of shares in a holding company of the company; or
(ii) the proposed acquisition by any person of —
(A) shares or units of shares in the company; or
(B) shares or units of shares in a holding company of the company;
(b) whether directly or indirectly, in any way —
(i) acquire shares or units of shares in the company; or
(ii) purport to acquire shares or units of shares in a holding company of the company; or
(c) whether directly or indirectly, in any way, lend money on the security of —
(i) shares or units of shares in the company; or
(ii) shares or units of shares in a holding company of the company.
(2) A reference in this section to the giving of financial assistance includes a reference to the giving of
financial assistance by means of the making of a loan, the giving of a guarantee, the provision of security, the
release of an obligation or the release of a debt or otherwise.
(3) For the purposes of this section, a company shall be taken to have given financial assistance for the
purpose of an acquisition or proposed acquisition referred to in subsection (1) (a) (referred to in this
subsection as the relevant purpose) if —
(a) the company gave the financial assistance for purposes that included the relevant purpose; and

20
(b) the relevant purpose was a substantial purpose of the giving of the financial assistance.
(4) For the purposes of this section, a company shall be taken to have given financial assistance in connection
with an acquisition or proposed acquisition referred to in subsection (1) (a) if, when the financial assistance
was given to a person, the company was aware that the financial assistance would financially assist —
(a) the acquisition by a person of shares or units of shares in the company; or
(b) where shares in the company had already been acquired — the payment by a person of any unpaid amount
of the subscription payable for the shares, or the payment of any calls on the shares.
(5) If a company contravenes subsection (1), the company shall not be guilty of an offence, notwithstanding
section 407, but each officer of the company who is in default shall be guilty of an offence and shall be liable
on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 3 years or to both.
(6) Where a person is convicted of an offence under subsection (5) and the Court by which he is convicted is
satisfied that the company or another person has suffered loss or damage as a result of the contravention that
constituted the offence, that Court may, in addition to imposing a penalty under that subsection, order the
convicted person to pay compensation to the company or other person, as the case may be, of such amount as
the Court specifies, and any such order may be enforced as if it were a judgment of the Court.
(7) The power of a Court under section 391 to relieve a person to whom that section applies, wholly or partly
and on such terms as the Court thinks fit, from a liability referred to in that section extends to relieving a
person against whom an order may be made under subsection (6) from the liability to have such an order made
against him.
(8) Nothing in subsection (1) prohibits —
(a) the payment of a dividend by a company in good faith and in the ordinary course of commercial dealing;
(b) a payment made by a company pursuant to a reduction of capital in accordance with Division 3A of this
Part;
(c) the discharge by a company of a liability of the company that was incurred in good faith as a result of a
transaction entered into on ordinary commercial terms;
(d) anything done in pursuance of an order of Court made under section 210;
(e) anything done under an arrangement made in pursuance of section 306;
(f) anything done under an arrangement made between a company and its creditors which is binding on the
creditors by virtue of section 309;
(g) where a corporation is a borrowing corporation by reason that it is or will be under a liability to repay
moneys received or to be received by it —
(i) the giving, in good faith and in the ordinary course of commercial dealing, by a company that is a
subsidiary of the borrowing corporation, of a guarantee in relation to the repayment of those moneys, whether
or not the guarantee is secured by any charge over the property of that company; or
(ii) the provision, in good faith and in the ordinary course of commercial dealing, by a company that is a
subsidiary of the borrowing corporation, of security in relation to the repayment of those moneys;
(ga) the giving by a company in good faith and in the ordinary course of commercial dealing of any
representation, warranty or indemnity in relation to an offer to the public of, or an invitation to the public to
subscribe for or purchase, shares or units of shares in that company;
(h) the purchase by a company of shares in the company pursuant to an order of a Court;
(i) the creation or acquisition, in good faith and in the ordinary course of commercial dealing, by a company of
a lien on shares in the company (other than fully-paid shares) for any amount payable to the company in
respect of the shares; or
(j) the entering into, in good faith and in the ordinary course of commercial dealing, of an agreement by a
company with a subscriber for shares in the company permitting the subscriber to make payments for the
shares by instalments,
but nothing in this subsection —
(i) shall be construed as implying that a particular act of a company would, but for this subsection, be
prohibited by subsection (1); or
(ii) shall be construed as limiting the operation of any rule of law permitting the giving of financial assistance
by a company, the acquisition of shares or units of shares by a company or the lending of money by a
company on the or units of shares.
(9) Nothing in subsection (1) prohibits —
(a) the making of a loan, or the giving of a guarantee or the provision of security in connection with one or
more loans made by one or more other persons, by a company in the ordinary course of its business where the
activities of that company are regulated by any written law relating to banking, finance companies or
insurance or are subject to supervision by the Monetary Authority of Singapore and where —
(i) the lending of money, or the giving of guarantees or the provision of security in connection with loans
made by other persons, is done in the course of such activities; and

21
(ii) the loan that is made by the company, or, where the guarantee is given or the security is provided in respect
of a loan, that loan, is made on ordinary commercial terms as to the rate of interest, the terms of repayment of
principal and payment of interest, the security to be provided and otherwise;
(b) the giving by a company of financial assistance for the purpose of, or in connection with, the acquisition or
proposed acquisition of shares or units of shares in the company or in a holding company of the company to be
held by or for the benefit of employees of the company or of a corporation that is related to the company,
including any director holding a salaried employment or office in the company or in the corporation; or
(c) the purchase or acquisition or proposed purchase or acquisition by a company of its own shares in
accordance with sections 76B to 76G.
(9A) Nothing in subsection (1) prohibits the giving by a company of financial assistance for the purpose of,
or in connection with, an acquisition or proposed acquisition by a person of shares or units of shares in the
company or in a holding company of the company if —
(a) the amount of the financial assistance, together with any other financial assistance given by the company
under this subsection repayment of which remains outstanding, would not exceed 10% of the aggregate of —
(i) the total paid-up capital of the company; and
(ii) the reserves of the company,
as disclosed in the most recent financial statements of the company that comply with section 201;
(b) the company receives fair value in connection with the financial assistance;
(c) the board of directors of the company passes a resolution that —
(i) the company should give the assistance;
(ii) giving the assistance is in the best interests of the company; and
(iii) the terms and conditions under which the assistance is given are fair and reasonable to the company;
(d) the resolution sets out in full the grounds for the directors’ conclusions;
(e) all the directors of the company make a solvency statement in relation to the giving of the financial
assistance;
(f) within 10 business days of providing the financial assistance, the company sends to each member a notice
containing particulars of —
(i) the class and number of shares or units of shares in respect of which the financial assistance was or is to be
given;
(ii) the consideration paid or payable for those shares or units of shares;
(iii) the identity of the person receiving the financial assistance and, if that person is not the beneficial owner
of those shares or units of shares, the identity of the beneficial owner; and
(iv) the nature and, if quantifiable, the amount of the financial assistance; and
(g) not later than the business day next following the day when the notice referred to in paragraph (f) is sent to
members of the company, the company lodges with the Registrar a copy of that notice and a copy of the
solvency statement referred to in paragraph (e).
(9B) Nothing in subsection (1) prohibits the giving by a company of financial assistance for the purpose of,
or in connection with, an acquisition or proposed acquisition by a person of shares or units of shares in the
company or in a holding company of the company if —
(a) the board of directors of the company passes a resolution that —
(i) the company should give the assistance;
(ii) giving the assistance is in the best interests of the company; and
(iii) the terms and conditions under which the assistance is given are fair and reasonable to the company;
(b) the resolution sets out in full the grounds for the directors’ conclusions;
(c) all the directors of the company make a solvency statement in relation to the giving of the financial
assistance;
(d) not later than the business day next following the day when the resolution referred to in paragraph (a) is
passed, the company sends to each member having the right to vote on the resolution referred to in paragraph
(e) a notice containing particulars of —
(i) the directors’ resolution referred to in paragraph (a);
(ii) the class and number of shares or units of shares in respect of which the financial assistance is to be given;
(iii) the consideration payable for those shares or units of shares;
(iv) the identity of the person receiving the financial assistance and, if that person is not the beneficial owner
of those shares or units of shares, the identity of the beneficial owner;
(v) the nature and, if quantifiable, the amount of the financial assistance; and
(vi) such further information and explanation as may be necessary to enable a reasonable member to
understand the nature and implications for the company and its members of the proposed transaction;
(e) a resolution is passed —
(i) by all the members of the company present and voting either in person or by proxy at the relevant meeting;

22
or
(ii) if the resolution is proposed to be passed by written means under section 184A, by all the members of the
company,
to give that assistance;
(f) not later than the business day next following the day when the resolution referred to in paragraph (e) is
passed, the company lodges with the Registrar a copy of that resolution and a copy of the solvency statement
referred to in paragraph (c); and
(g) the financial assistance is given not more than 12 months after the resolution referred to in paragraph (e) is
passed.
(9C) A company shall not give financial assistance under subsection (9A) or (9B) if, before the assistance is
given —
(a) any of the directors who voted in favour of the resolution under subsection (9A) (c) or (9B) (a),
respectively —
(i) ceases to be satisfied that the giving of the assistance is in the best interests of the company; or
(ii) ceases to be satisfied that the terms and conditions under which the assistance is proposed are fair and
reasonable to the company; or
(b) any of the directors no longer has reasonable grounds for any of the opinions expressed in the solvency
statement.
(9D) A director of a company is not relieved of any duty to the company under section 157 or otherwise, and
whether of a fiduciary nature or not, in connection with the giving of financial assistance by the company for
the purpose of, or in connection with, an acquisition or proposed acquisition of shares or units of shares in the
company or in a holding company of the company, by —
(a) the passing of a resolution by the board of directors of the company under subsection (9A) for the giving of
the financial assistance; or
(b) the passing of a resolution by the board of directors of the company, and the passing of a resolution by the
members of the company, under subsection (9B) for the giving of the financial assistance.
(10) Nothing in subsection (1) prohibits the giving by a company of financial assistance for the purpose of, or
in connection with, an acquisition or proposed acquisition by a person of shares or units of shares in the
company or in a holding company of the company if —
(a) the company, by special resolution, resolves to give financial assistance for the purpose of or in connection
with, that acquisition;
(b) where —
(i) the company is a subsidiary of a listed corporation; or
(ii) the company is not a subsidiary of a listed corporation but is a subsidiary whose ultimate holding company
is incorporated in Singapore,
the listed corporation or the ultimate holding company, as the case may be, has, by special resolution,
approved the giving of the financial assistance;
(c) the notice specifying the intention to propose the resolution referred to in paragraph (a) as a special
resolution sets out —
(i) particulars of the financial assistance proposed to be given and the reasons for the proposal to give that
assistance; and
(ii) the effect that the giving of the financial assistance would have on the financial position of the company
and, where the company is included in a group of corporations consisting of a holding company and a
subsidiary or subsidiaries, the effect that the giving of the financial assistance would have on the financial
position of the group of corporations,
and is accompanied by a copy of a statement made in accordance with a resolution of the directors, setting out
the names of any directors who voted against the resolution and the reasons why they so voted, and signed by
not less than two directors, stating whether, in the opinion of the directors who voted in favour of the
resolution, after taking into account the financial position of the company (including future liabilities and
contingent liabilities of the company), the giving of the financial assistance would be likely to prejudice
materially the interests of the creditors or members of the company or any class of those creditors or members;
(d) the notice specifying the intention to propose the resolution referred to in paragraph (b) as a special
resolution is accompanied by a copy of the notice, and a copy of the statement, referred to in paragraph (c);
(e) not later than the day next following the day when the notice referred to in paragraph (c) is despatched to
members of the company there is lodged with the Registrar a copy of that notice and a copy of the statement
that accompanied that notice;
(f) the notice referred to in paragraph (c) and a copy of the statement referred to in that paragraph are sent to
—
(i) all members of the company;

23
(ii) all trustees for debenture holders of the company; and
(iii) if there are no trustees for, or for a particular class of, debenture holders of the company — all debentures
holders, or all debenture holders of that class, as the case may be, of the company whose names are, at the
time when the notice is despatched, known to the company;
(g) the notice referred to in paragraph (d) and the accompanying documents are sent to —
(i) all members of the listed corporation or of the ultimate holding company;
(ii) all trustees for debenture holders of the listed corporation or of the ultimate holding company; and
(iii) if there are no trustees for, or for a particular class of, debenture holders of the listed corporation or of the
ultimate holding company — all debenture holders or debenture holders of that class, as the case may be, of
the listed corporation or of the ultimate holding company whose names are, at the time when the notice is
despatched, known to the listed corporation or the ultimate holding company;
(h) within 21 days after the date on which the resolution referred to in paragraph (a) is passed or, in a case to
which paragraph (b) applies, the date on which the resolution referred to in that paragraph is passed,
whichever is the later, a notice —
(i) setting out the terms of the resolution referred to in paragraph (a); and
(ii) stating that any of the persons referred to in subsection (12) may, within the period referred to in that
subsection, make an application to the Court opposing the giving of the financial assistance,
is published in a daily newspaper circulating generally in Singapore;
(i) no application opposing the giving of the financial assistance is made within the period referred to in
subsection (12) or, if such an application or applications has or have been made, the application or each of the
applications has been withdrawn or the Court has approved the giving of the financial assistance; and
(j) the financial assistance is given in accordance with the terms of the resolution referred to in paragraph (a)
and not earlier than —
(i) in a case to which sub-paragraph (ii) does not apply — the expiration of the period referred to in subsection
(12); or
(ii) if an application or applications has or have been made to the Court within that period —
(A) where the application or each of the applications has been withdrawn — the withdrawal of the application
or of the last of the applications to be withdrawn; or
(B) in any other case — the decision of the Court on the application or applications.
(10A) If the resolution referred to in subsection (10) (a) or (b) is proposed to be passed by written means
under section 184A, subsection (10) (f) or (g), as the case may be, shall be complied with at or before the time
—
(a) agreement to the resolution is sought in accordance with section 184C; or
(b) documents referred to in section 183 (3A) in respect of the resolution are served on or made accessible to
members of the company in accordance with section 183 (3A),
as the case may be.
(11) Where, on application to the Court by a company, the Court is satisfied that the provisions of subsection
(10) have been substantially complied with in relation to a proposed giving by the company of financial
assistance of a kind mentioned in that subsection, the Court may, by order, declare that the provisions of that
subsection have been complied with in relation to the proposed giving by the company of financial assistance.
(12) Where a special resolution referred to in subsection (10) (a) is passed by a company, an application to the
Court opposing the giving of the financial assistance to which the special resolution relates may be made,
within the period of 21 days after the publication of the notice referred to in subsection (10) (h) —
(a) by a member of the company;
(b) by a trustee for debenture holders of the company;
(c) by a debenture holder of the company;
(d) by a creditor of the company;
(e) if subsection (10) (b) applies by —
(i) a member of the listed corporation or ultimate holding company that passed a special resolution referred to
in that subsection;
(ii) a trustee for debenture holders of that listed corporation or ultimate holding company;
(iii) a debenture holder of that listed corporation or ultimate holding company; or
(iv) a creditor of that listed corporation or ultimate holding company; or
(f) by the Registrar.
(13) Where an application or applications opposing the giving of financial assistance by a company in
accordance with a special resolution passed by the company is or are made to the Court under subsection (12),
the Court —
(a) shall, in determining what order or orders to make in relation to the application or applications, have regard
to the rights and interests of the members of the company or of any class of them as well as to the rights and

24
interests of the creditors of the company or of any class of them; and
(b) shall not make an order approving the giving of the financial assistance unless the Court is satisfied that —
(i) the company has disclosed to the members of the company all material matters relating to the proposed
financial assistance; and
(ii) the proposed financial assistance would not, after taking into account the financial position of the company
(including any future or contingent liabilities), be likely to prejudice materially the interests of the creditors or
members of the company or of any class of those creditors or members,
and may do all or any of the following:
(A) if it thinks fit, make an order for the purchase by the company of the interests of dissentient members of
the company and for the reduction accordingly of the capital of the company;
(B) if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the
Court for the purchase (otherwise than by the company or by a subsidiary of the company) of the interests of
dissentient members;
(C) give such ancillary or consequential directions and make such ancillary or consequential orders as it thinks
expedient;
(D) make an order disapproving the giving of the financial assistance or, subject to paragraph (b), an order
approving the giving of the financial assistance.
(14) Where the Court makes an order under this section in relation to the giving of financial assistance by a
company, the company shall, within 14 days after the order is made, lodge with the Registrar a copy of the
order.
(15) The passing of a special resolution by a company for the giving of financial assistance by the company
for the purpose of, or in connection with, an acquisition or proposed acquisition of shares or units of shares in
the company, and the approval by the Court of the giving of the financial assistance, do not relieve a director
of the company of any duty to the company under section 157 or otherwise, and whether of a fiduciary nature
or not, in connection with the giving of the financial assistance.
(16) A reference in this section to an acquisition or proposed acquisition of shares or units of shares is a
reference to any acquisition or proposed acquisition whether by way of purchase, subscription or otherwise.
(17) This section does not apply in relation to the doing of any act or thing pursuant to a contract entered into
before 15th May 1987 if the doing of that act or thing would have been lawful if this Act had not been enacted.
Registration of charges.
131. —(1) Subject to this Division, where a charge to which this section applies is created by a company there
shall be lodged with the Registrar for registration, within 30 days after the creation of the charge, a statement
containing the prescribed particulars of the charge, and if this section is not complied with in relation to the
charge the charge shall, so far as any security on the company’s property or undertaking is thereby conferred,
be void against the liquidator and any creditor of the company.
(1A) In connection with the registration of a charge to which this section applies which is created by a
company there shall be produced to the Registrar, upon the Registrar’s request and for the purposes of
inspection, at no cost to the Registrar, the instrument (if any) by which the charge is created or evidenced or a
certified true copy thereof.
13/87.
(2) Nothing in subsection (1) shall prejudice any contract or obligation for repayment of the money secured by
a charge and when a charge becomes void under this section the money secured thereby shall immediately
become payable.
(3) The charges to which this section applies are —
(a) a charge to secure any issue of debentures;
(b) a charge on uncalled share capital of a company;
(c) a charge on shares of a subsidiary of a company which are owned by the company;
(d) a charge or an assignment created or evidenced by an instrument which if executed by an individual,
would require registration as a bill of sale;
(e) a charge on land wherever situate or any interest therein;
(f) a charge on book debts of the company;
(g) a floating charge on the undertaking or property of a company;
(h) a charge on calls made but not paid;
(i) a charge on a ship or aircraft or any share in a ship or aircraft; and
(j) a charge on goodwill, on a patent or licence under a patent, on a trade mark, or on a copyright or a licence
under a copyright.
(3A) The reference to a charge on book debts in subsection (3) (f) shall not include a reference to a charge on a
negotiable instrument or on debentures issued by the Government.
40/89 .

25
(4) Where a charge created in Singapore affects property outside Singapore, the statement containing the
prescribed particulars of the charge may be lodged for registration under and in accordance with subsection (1)
notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to
the law of the place in which the property is situate.
13/87.
(5) When a series of debentures containing or giving by reference to any other instrument any charge to the
benefit of which the debenture holders of that series are entitled equally is created by a company, it shall be
sufficient if there are lodged with the Registrar for registration within 30 days after the execution of the
instrument containing the charge, or if there is no such instrument after the execution of the first debenture of
the series, a statement containing the following particulars:
(a) the total amount secured by the whole series;
(b) the dates of the resolutions authorising the issue of the series and the date of the covering instrument, if
any, by which the security is created or defined;
(c) a general description of the property charged; and
(d) the names of the trustee, if any, for the debenture holders.
(6) For the purposes of subsection (5), where more than one issue is made of debentures in the series, there
shall be lodged within 30 days after each issue particulars of the date and amount of each issue, but an
omission to do so shall not affect the validity of the debentures issued.
(7) Where any commission, allowance or discount has been paid or made either directly or indirectly by a
company to any person in consideration of his (whether absolutely or conditionally) subscribing or agreeing to
subscribe or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any
debentures the particulars required to be lodged under this section shall include particulars as to the amount or
rate per cent of the commission, allowance or discount so paid or made, but omission to do so shall not affect
the validity of the debentures issued.
(8) The deposit of any debentures as security for any debt of the company shall not for the purposes of
subsection (7) be treated as the issue of the debentures at a discount.
(9) No charge or assignment to which this section applies (except a charge or assignment relating to land) need
be filed or registered under any other written law.
(10) Where a charge requiring registration under this section is created before the lapse of 30 days after the
creation of a prior unregistered charge, and comprises all or any part of the property comprised in the prior
charge, and the subsequent charge is given as a security for the same debt as is secured by the prior charge, or
any part of that debt, then to the extent to which the subsequent charge is a security for the same debt or part
thereof, and so far as respects the property comprised in the prior charge, the subsequent charge shall not be
operative or have any validity unless it is proved to the satisfaction of the Court that it was given in good faith
for the purpose of correcting some material error in the prior charge or under other proper circumstances and
not for the purposes of avoiding or evading the provisions of this Division.
Approval of company required for disposal by directors of company’s undertaking or property.
160. —(1) Notwithstanding anything in a company’s memorandum or articles, the directors shall not carry
into effect any proposals for disposing of the whole or substantially the whole of the company’s undertaking
or property unless those proposals have been approved by the company in general meeting.
(2) The Court may, on the application of any member of the company, restrain the directors from entering into
a transaction in contravention of subsection (1).
(3) A transaction entered into in contravention of subsection (1) shall, in favour of any person dealing with the
company for valuable consideration and without actual notice of the contravention, be as valid as if that
subsection had been complied with.
(4) This section shall not apply to proposals for disposing of the whole or substantially the whole of the
company’s undertaking or property made by a receiver and manager of any part of the undertaking or property
of the company appointed under a power contained in any instrument or a liquidator of a company appointed
in a voluntary winding up.
Loans to directors.
162. —(1) A company (other than an exempt private company) shall not make a loan to a director of the
company or of a company which by virtue of section 6 is deemed to be related to that company, or enter into
any guarantee or provide any security in connection with a loan made to such a director by any other person
but nothing in this section shall apply —
(a) subject to subsection (2), to anything done to provide such a director with funds to meet expenditure
incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly
to perform his duties as an officer of the company;
(b) to provide a loan to such a director who is engaged in the full-time employment of the company or of a
corporation that is deemed to be related to the company, as the case may be, for the purpose of purchasing or

26
otherwise acquiring a home occupied or to be occupied by the director, except that not more than one such
loan may be outstanding from the director at any time;
(c) to any loan made to such a director who is engaged in the full-time employment of the company or of a
corporation that is deemed to be related to that company, as the case may be, where the company has at a
general meeting approved of a scheme for the making of loans to employees of the company and the loan is in
accordance with that scheme; or
(d) to any loan made to such director in the ordinary course of business of a company whose ordinary business
includes the lending of money or the giving of guarantees in connection with loans made by other persons if
the activities of that company are regulated by any written law relating to banking, finance companies or
insurance or are subject to supervision by the Monetary Authority of Singapore.
(2) Subsection (1) (a) or (b) shall not authorise the making of any loan, or the entering into any guarantee, or
the provision of any security except —
(a) with the prior approval of the company given at a general meeting at which the purposes of the expenditure
and the amount of the loan or the extent of the guarantee or security, as the case may be, are disclosed; or
(b) on condition that, if the approval of the company is not given as aforesaid at or before the next following
annual general meeting, the loan shall be repaid or the liability under the guarantee or security shall be
discharged, as the case may be, within 6 months from the conclusion of that meeting.
(3) Where the approval of the company is not given as required by any such condition the directors authorising
the making of the loan or the entering into the guarantee or the provision of the security shall be jointly and
severally liable to indemnify the company against any loss arising therefrom.
(4) Where a company contravenes this section any director who authorises the making of any loan, the
entering into of any guarantee or the providing of any security contrary to this section shall be guilty of an
offence and shall be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not
exceeding 2 years.
15/84.
(5) Nothing in this section shall operate to prevent the company from recovering the amount of any loan or
amount for which it becomes liable under any guarantee entered into or in respect of any security given
contrary to this section.
(6) For the purpose of subsection (1), the reference to director therein includes a reference to his spouse, son,
adopted son, step-son, daughter, adopted daughter and step-daughter.
15/84.
U.K.s.190.
Aust. s. 125.
Prohibition of loans to persons connected with directors of lending company.
163. —(1) Subject to this section, it shall not be lawful for a company (other than an exempt private company)
—
(a) to make a loan to another company; or
(b) to enter into any guarantee or provide any security in connection with a loan made to another company by
a person other than the first-mentioned company,
if a director or directors of the first-mentioned company is or together are interested in 20% or more of the
total number of equity shares in the other company (excluding treasury shares).
(2) Subsection (1) shall extend to apply to a loan, guarantee or security in connection with a loan made by a
company (other than an exempt private company) to another company where such other company is
incorporated outside Singapore, if a director or directors of the first-mentioned company —
(a) is or together are interested in 20% or more of the total number of equity shares in the other company
(excluding treasury shares); or
(b) in a case where the other company does not have a share capital, exercises or together exercise control over
the other company whether by reason of having the power to appoint directors or otherwise.
15/84. 13/87.
(3) For the purposes of this section —
(a) where a company makes a loan to another company or gives a guarantee or provides security in connection
with a loan made to another company, a director or directors of the first-mentioned company shall not be taken
to have an interest in shares in that other company by reason only that the first-mentioned company has an
interest in shares in that other company and a director or directors have an interest in shares in the first-
mentioned company; and
(b) “interest in shares” has the meaning assigned to that expression in section 7.
15/84.
(4) This section shall not apply —
(a) to anything done by a company where the other company (whether that company is incorporated in

27
Singapore or otherwise) is its subsidiary or holding company or a subsidiary of its holding company; or
(b) to a company, whose ordinary business includes the lending of money or the giving of guarantees in
connection with loans made by other persons, to anything done by the company in the ordinary course of that
business if the activities of that company are regulated by any written law relating to banking, finance
companies or insurance or are subject to supervision by the Monetary Authority of Singapore.
15/84
13/87.
(5) For the purposes of this section, an interest of a member of a director’s family shall be treated as the
interest of the director and the words “member of a director’s family” shall include his spouse, son, adopted
son, step-son, daughter, adopted daughter and step-daughter.
15/84.
(6) Nothing in this section shall operate to prevent the recovery of any loan or the enforcement of any
guarantee or security whether made or given by the company or any other person.
15/84.
(7) Where a company contravenes this section, any director who authorises the making of any loan, the
entering into of any guarantee or the providing of any security contrary to this section shall be guilty of an
offence and shall be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not
exceeding 2 years.
Avoidance of dispositions of property, etc.
259. Any disposition of the property of the company, including things in action, and any transfer of shares or
alteration in the status of the members of the company made after the commencement of the winding up by the
Court shall unless the Court otherwise orders be void.
Undue preference.
329. —(1) Subject to this Act and such modifications as may be prescribed, any transfer, mortgage, delivery of
goods, payment, execution or other act relating to property made or done by or against a company which, had
it been made or done by or against an individual, would in his bankruptcy be void or voidable under section
98, 99 or 103 of the Bankruptcy Act 1995 (read with sections 100, 101 and 102 thereof) shall in the event of
the company being wound up be void or voidable in like manner.
(2) For the purposes of this section, the date which corresponds with the date of making of the application for
a bankruptcy order in the case of an individual shall be —
(a) in the case of a winding up by the Court —
(i) the date of the making of the winding up application; or
(ii) where before the making of the winding up application a resolution has been passed by the company for
voluntary winding up, the date upon which the resolution to wind up the company voluntarily is passed,
whichever is the earlier; and
(b) in the case of a voluntary winding up, the date upon which the winding up is deemed by this Act to have
commenced.
(3) Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors
shall be void.
Effect of floating charge.
330. A floating charge on the undertaking or property of the company created within 6 months of the
commencement of the winding up shall, unless it is proved that the company immediately after the creation of
the charge was solvent, be invalid except to the amount of any cash paid to the company at the time of or
subsequently to the creation of and in consideration for the charge together with interest on that amount at the
rate of 5% per annum.
Bankruptcy Act - Transactions at an undervalue
98. —(1) Subject to this section and sections 100 and 102, where an individual is adjudged bankrupt and he
has at the relevant time (as defined in section 100) entered into a transaction with any person at an undervalue,
the Official Assignee may apply to the court for an order under this section.
(2) The court shall, on such an application, make such order as it thinks fit for restoring the position to what it
would have been if that individual had not entered into that transaction.
(3) For the purposes of this section and sections 100 and 102, an individual enters into a transaction with a
person at an undervalue if —
(a) he makes a gift to that person or he otherwise enters into a transaction with that person on terms that
provide for him to receive no consideration;
(b) he enters into a transaction with that person in consideration of marriage; or
(c) he enters into a transaction with that person for a consideration the value of which, in money or money’s
worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the
individual.

28
Unfair preferences
99. —(1) Subject to this section and sections 100 and 102, where an individual is adjudged bankrupt and he
has, at the relevant time (as defined in section 100), given an unfair preference to any person, the Official
Assignee may apply to the court for an order under this section.
(2) The court shall, on such an application, make such order as it thinks fit for restoring the position to what it
would have been if that individual had not given that unfair preference.
(3) For the purposes of this section and sections 100 and 102, an individual gives an unfair preference to a
person if —
(a) that person is one of the individual’s creditors or a surety or guarantor for any of his debts or other
liabilities; and
(b) the individual does anything or suffers anything to be done which (in either case) has the effect of putting
that person into a position which, in the event of the individual’s bankruptcy, will be better than the position he
would have been in if that thing had not been done.
(4) The court shall not make an order under this section in respect of an unfair preference given to any person
unless the individual who gave the preference was influenced in deciding to give it by a desire to produce in
relation to that person the effect mentioned in subsection (3) (b).
(5) An individual who has given an unfair preference to a person who, at the time the unfair preference was
given, was an associate of his (otherwise than by reason only of being his employee) shall be presumed, unless
the contrary is shown, to have been influenced in deciding to give it by such a desire as is mentioned in
subsection (4).
(6) The fact that something has been done in pursuance of the order of a court does not, without more, prevent
the doing or suffering of that thing from constituting the giving of an unfair preference.

Listing Manual

29
905 Winding Up, Judicial Management, etc
.
(1)Any application filed with a court to wind up the listed issuer or any of its subsidiaries, or to place the
issuer or of any of its subsidiaries under judicial management.
.
(2)The appointment of a receiver, judicial manager or liquidator of the listed issuer or any of its
subsidiaries.
.
(3)Any breach of any loan covenants or any notice received from principal bankers or from the trustee
of any debenture holders to demand repayment of loans granted to the listed issuer or any of its
subsidiaries which, in the opinion of the issuer's directors, would result in the issuer facing a
permanent cash flow problem.
.
906 Announcements of Results, Dividends, etc
.
(1)Any recommendation or declaration of a dividend (including a bonus or special dividend, if any), the
rate and amount per share and date of payment. Where dividends are not taxable in the hands of
shareholders, this shall be mentioned in the notice to the Exchange and in the dividend advice to
shareholders. Where there is a material variation in the interim or final dividend rate compared to that
for the previous corresponding period, the directors shall state the reasons for the variation at the time
the dividend is recommended or declared. Where the directors take a decision not to declare or
recommend the payment of any dividend, this should be announced.
.
(2)After the end of the listed issuer's half year and financial year, no announcement shall be made of
any:-

(a) Dividend;
(b) Capitalisation or rights issue;
(c) Closing of the books;
(d) Capital return;
(e) Passing of a dividend; or
(f) Sales or turnover

unless it is accompanied by the results of the half year or financial year, as the case may be, or unless
the results have been announced.
(g) Searches:
• ACRA
• Composite Litigation Search (High Court)
• Composite Litigation Search (Subordinate Courts)
• Company Winding Up Search
(ii) Checks on the Security
(a) Land:
• Singapore Land Authority
• ACRA (s. 131(3)(e) Companies Act)
• Government Departments namely:
 Land Transport Authority Survey and Lands Department
 National Environment Agency – Environment Health Department
 Building and Construction Authority
 Inland Revenue Authority of Singapore
 Urban Redevelopment Authority
 National Environment Agency – Central Building Planning Unit
 Public Utilities Board
 Road Line Plan – INLIS (Integrated Land Information Services)
• Relevant Legislation
 Residential Property Act (Cap. 274)
 Housing Developers (Control and Licensing) Act (Cap. 130)
 Planning Act (Cap. 232)

30
  Building Control Act (Cap. 29)
 Sale of Commercial Properties Act (Cap. 281)
 Conveyancing and Law of Property Act (Cap. 61)
 Singapore Academy of Law (Stakeholding) Rules (Cap. 294A)
 Land Titles Act (Cap. 157)
 Land Titles (Strata) Act (Cap. 158)
 Stamp Duties Act (Cap. 312)
(b) Fixed Assets
(c) Book Debts
• ACRA (s. 131(3)(f) Companies Act)
(d) Shares
• ACRA (s. 130N & 131(3)(c) Companies Act)
• The Central Depository (s. 130N Companies Act)
(e) Ships
• Relevant Registry of Ships
• ACRA (s. 131(3)(i) Companies Act)
• Lloyd’s Register
• High Court Admiralty Register
(iii) Consents
(A) sought from HDB, URA, JTC and Collector of Land Revenue
(B) sought from other Chargees/Mortgagees
(iv) After Execution of Documents
• they should be stamped by e-stamping and lodged for registration in the
appropriate registries (e.g. e-filing with ACRA)
(v) consult foreign counsel
(vi) spousal consent may be required

• Searches to do -
- Memorandum and Articles of Association
o Whether borrower has capacity to enter
o Section 23 amended – comp has full capacity to do any act subj to the Act, written law and its MA
 In old days, had to pick up MA and check whtehr borrower has power to borrow./ prov
security
 With section 23 in place now, sg comp have ability to enter any transaction unless MA and
written law says otherwise. Still relevcnt to pick up MA to see if any restrictions to
PREVENT comp fr entering transactions
o Also to see minutes and resolutions in writing of borrower
 If receive resoln in writing and there re 5 blocks orf signatures when shld be 8 – then this is
obv not valid
o Assets of charger comp comprise shares in another comp – must check other comp, no prob in
transferring shares in event of default
 If comp B arts say tt dirs can refuse transfer of shares, then diff to enforce comp A”s charge.
Shares then become worthless and diff to transfer to buyers.
o  e.g. How the Common Seal of company is to be affixed.
o  Corporate benefit: What is the benefit to the company who is providing the guarantee?
o  e.g. Whether the Company has power to create security?
- Accounting & Corporate Regulatory Authority
o  Instant info search
o If there are changes, ask for a copy of the changes. Look out for things like negative pledges,
change of company name, status and if the company is subjected to any winding up or liquidation
proceedings.
o Determine existenve of comp – whether exempt priat company etc
o Relationships of directors

31
 o Existence of charges created
o Oblig of dir to notify of changes. Not on shrs (right only) – so list of shr may not be the correct list.
o Any infr of section 162 and 163 and whether any negative pledges on company

- Winding Up/Bankruptcy Register

o reflection of sovereignty
o Do online
o Impt because reflects insolvency status of person you are searching
o High Court keeps a winding up register on all petitions that have been filed
o Any creation of security is thus void
o Unless Borrower can satisfy that winding up petition is frivolous

- Cause Books – any bankruptcy or winding up

 Kept by High Court (now, probably in e-form)
 If company is sued, need to advise Lenders on the nature of claim – affects whether or not to proceed
on the loan agreement
 Get statement of claim –
a) understand the effects on Borrower;
b) advise Lender to earmark pending resolution; or
c) force Borrower to settle dispute with the Plaintiff of the case
 Important to get the Borrower ‘as clean as possible’ – ensure that Lender will be able to get back
disbursed money
o Litigation Search
o Then notify
- Seizure and Sale – if asset seized and it is what you want charged to you, you have to ensure

- Judicial Management Register

o Whether or not JM appointed
o Powers of directors may be substantially reduced
o Section 227T, Companies Act; Sections 98, 99, Bankruptcy Act
o – to ensure that borrower not under judicial management
o Powers of Directors are reduced
- : - Composite search

- Title Search
o Registry of Titles (if property is involved) or Registry of Deeds
 Ensure that Borrower really owns land – that there are no encumbrances or restrictions on
landlord
 Land Titles Act & Building Control Directives
 Buildings built according to plans
 Inland Revenue Authority of Singapore
 Ensure no property tax is outstanding, since property tax will be the 1st charge over your
mortgage (ie. takes priority)\
 Registry of Ships & High Court’s Admiralty Register (for vessels)
 Involving arrest on vessel(s)
o LTA/ building constrction reqt/ etc/
o Depends on the type of security: Spore land: LTA. Vessel: registry of Ships/Admiralty Courts/
Lloyd’s Register

- Registry of Ships – detailks of ship, owner, whether any existing encumbrances (not for vessels under
constriction – see building contract if actinf for buyer of vessel)

- Admiralty register – ascertain whether ship registered

SEARCHES (CHECKLIST)

32
$5 instant search at ROC

Search from… Cost

Singapore $5
Malaysia (includes postage) $6
Overseas (other than Malaysia) $15

 Discover if –

i. Company still alive or not

ii. Who are the current directors/ shareholders

iii. Exempt company? If private exempt, then section 163 is not applicable (inter alia)
Prohibition of loans to persons connected with directors of lending company.
163. —(1) Subject to this section, it shall not be lawful for a company (other than an exempt private company) —
(a) to make a loan to another company; or
(b) to enter into any guarantee or provide any security in connection with a loan made to another company by a
person other than the first-mentioned company,
if a director or directors of the first-mentioned company is or together are interested in 20% or more of the total
number of equity shares in the other company (excluding treasury shares).
(2) Subsection (1) shall extend to apply to a loan, guarantee or security in connection with a loan made by a
company (other than an exempt private company) to another company where such other company is incorporated
outside Singapore, if a director or directors of the first-mentioned company —
(a) is or together are interested in 20% or more of the total number of equity shares in the other company
(excluding treasury shares); or
(b) in a case where the other company does not have a share capital, exercises or together exercise control over the
other company whether by reason of having the power to appoint directors or otherwise.
(3) For the purposes of this section —
(a) where a company makes a loan to another company or gives a guarantee or provides security in connection with
a loan made to another company, a director or directors of the first-mentioned company shall not be taken to have
an interest in shares in that other company by reason only that the first-mentioned company has an interest in shares
in that other company and a director or directors have an interest in shares in the first-mentioned company; and
(b) “interest in shares” has the meaning assigned to that expression in section 7.
(4) This section shall not apply —
(a) to anything done by a company where the other company (whether that company is incorporated in Singapore
or otherwise) is its subsidiary or holding company or a subsidiary of its holding company; or
(b) to a company, whose ordinary business includes the lending of money or the giving of guarantees in connection
with loans made by other persons, to anything done by the company in the ordinary course of that business if the
activities of that company are regulated by any written law relating to banking, finance companies or insurance or
are subject to supervision by the Monetary Authority of Singapore.
(5) For the purposes of this section, an interest of a member of a director’s family shall be treated as the interest of
the director and the words “member of a director’s family” shall include his spouse, son, adopted son, step-son,
daughter, adopted daughter and step-daughter.
(6) Nothing in this section shall operate to prevent the recovery of any loan or the enforcement of any guarantee or
security whether made or given by the company or any other person.
(7) Where a company contravenes this section, any director who authorises the making of any loan, the entering
into of any guarantee or the providing of any security contrary to this section shall be guilty of an offence and shall
be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 2 years

iv. Whether other charges are created on the same assets Borrower is attempting to give to Lender (eg. 3
other mortgages ranking ahead)
- Even if charges do not contain identical assets, read through all charges thoroughly
- Any negative pledge clauses attached? If so, then must seek consent , or Borrower may re-finance
first loan first
Important to point these out to Lender client, if not may be held for breach of professional negligence

33
 Note: No requirement to register charge as soon as possible after execution – only required to register
within 30 days

Example:
B has loan agreement with Bank X.
B goes out and seeks another debenture from Bank Y.
Even if Bank X registers charge later, Bank X still has priority – since charge priority is dependent on the
execution/ creation of documents.
Thus, at the time before disbursing loan, Bank Y needs to know if Forms 33 & 34 have been submitted
over the same assets. Best then to do 2 searches – one at the beginning and the other before drawdown.

v. Sometimes, Borrower may execute documents which do not require registration (eg. Letters of set-off),
thus difficult to find out

List of Checks, Searches, Enquiries and Consents

Checks Searches Enquiries/ Consents

Company 1. Registry of Companies & Businesses
2. Composite Litigation Search (High Court)
3. Composite Litigation Search (Subordinate Courts)
4. Company Winding Up Search
5. Bankruptcy Search (where guarantor is an
individual)
1. Memorandum – power of company to borrow,
mortgage charge its assets, power to guarantee
obligations and liabilities of any persons
2. Articles – power of Directors to borrow,
mortgage, charge assets or give guarantees/
obtain board resolutions or approval of
company in general meeting/ authorise
transaction and execution of loan & security
documents
3. Manner of execution of documents (under
hand or corporate seal)
Sections 76, 160, 162, 163 Companies Act

Security 1. Land 1. HDB, URA, JTC and Collector of Land

- Singapore Land Registry Revenue prior to mortgage, in respect of lands
leased by HDB, URA, JTC and The President/
- RCB (s. 131(3)(e) CA) State respecitively
2. Chargees/ Mortgagees (where applicable)
- Government departments 3. After execution of documents, get documents
a) LTA – Rapid Transit Systems and Street Works stamped and lodged for registration at
b) Ministry of Environment – Sewerage and Health and appropriate registries (including ROC)
Pollution Control Departments
c) Building and Construction Authority NB: Where security is taken over foreign property
d) Property Tax Department prudent to consult foreign counsel (steps required
e) Chief Planner, URA Development Control Division to create or perfect the security interest)

- Relevant Legislation In some jurisdictions, spousal consent may be

a) Residential Property Act required if security is taken over matrimonial
b) Housing & Developers (Control and Licensing) Act property.
c) Planning Act
d) Building Cotrol Act
e) Sale of Commercial Properties Act
f) CLPA
g) Singapore Academy of Law (Stakeholding) Rules
h) Land Titles Act
i) Land Titles (Strata) Act

2. Fixed Assets (other than land); stock in trade &

inventories
- RCB

34
 3. Book Debts
- RCB (s. 131(3)(f) CA)

4. Shares
- RCB (s. 130N and s. 131(3)(c) CA)
- Central Depository (Pte) Limited

5. Ships
- Relevant Registry of Ships
- RCB (s. 131(3)(i) CA)
- Lloyd’s Register
- High Court Admiralty Register

• Approvals
- to check regulatory approvals, consents, restrictions and prohibitions if taking security over subject matter
which is industry – specific or regulated
- e.g regulatory authorization may be needed for certain land before security can be taken.
- possible effect on lender should default occur. Security must be enforceable
- corporate authorisation. Check constitutive documents, applicable legislation

• Legal Opinions
- For cross border transactions:
- Advice banks to take legal advice from lawyers in other jurisdiction.
- What is needed for registration, perfection of securities.
- Note the assumptions made before the legal opinions are made. If it is too wide, opinion will only be of limited
use.

- In many transactions, this is required

- Cross borer transactions – foreign parties involved. Impt to get legal opinion fr counsel, status of entity –
whether still functioning and has capacity to enter trasanctions and obt all corp autorisations nec, no govt authn
required
- You may not have expertise where this is foreign transaction – need to get legal advice. Ask client whether
want to take legal opinion. Banks will say yes usually where borrower is foreign.
- Depends on nature of transaction. Bank may take risk if less money involved

GENERAL CONSIDERATIONS when handling finance transactions

1. COMPANIES ACT

Ensure if acting for Lenders, Lenders have relevant information about Borrower, especially –
a) Financial standing
b) Nature of transaction

Section 76
- Eg. Undertaking come completion – where not directly or indirectly assisting (includes agreeing to give
mortgage or be debtor), not breach section 76
- Exceptions to section 76 – possible via Court order
- • Prohibits a company from directly or indirectly giving financial assistance in connection with the
“acquisition” of its own shares or the shares of its holding company
- Company cannot give financial assistance to a person to buy its own shares in the Company.
- • “acquisition” includes purchase (in reality a transfer of a chose in action) or subscription (creation of new
shares)
- must note whether s76 breached
- liberalization:
- • Procedures to sanction financial assistance
o Section 76 (9A) : (Subject to specified conditions) if the amount of assistance does not exceed
10% of the paid up capital of the reserves of the company.

35
 o Section 76(9B): (Subject to specified conditions) if all the shareholders approve the giving of the
financial assistance.
o Section 76(10): Special Resolution and other procedures required to sanction financial assistance.–
Procedure to sanction financial assistance. –“Whitewash procedure” sometimes through resolution,
sometimes through court order.

Section 76
(1) Except as otherwise expressly provided by this Act, a company shall not –
…
(c) whether directly or indirectly, in any way, lend money on the security of –
(i) shares or units of shares in the company; or
(ii) shares or units of shares in a holding company of the company.

Example:
OUB (Public Co.) – agent in syndication with list of members
- B wants to borrow $100 million
- B with lots of shares – wants to give shares in NOL and/or OUB (allow to take a charge on these shares)
- But this will breach section 76 if give OUB shares to OUB in loan agreement
- Thus, cannot structure deal as 1 loan, but as 2 loans (with tranche A & tranche B)
- OUB lender in tranche A & have security over NOL shares; but OUB not a lender in tranche B – security for
this is OUB shares

Section 151 - Acts of Directors & management

The acts of a director or manager or secretary shall be valid notwithstanding any defect that may afterwards be
discovered in his appointment or qualification.

- • Acts of a director or manager or secretary shall be valid notwithstanding any defect that may afterwards be
discovered in his appointment or qualification
o lender counsel – will receive resolutions passed by directors authorizing transaction
o if one of directors has resigned – or not properly appointed – section is useful. Defect will not affect
o but x apply if lender aware that there was a defect

Section 160 - Substantial Disposal of company assets

(1) Notwithstanding anything in a company’s memorandum or articles, the directors shall not carry into effect
any proposals for disposing of the whole or substantially the whole of the company’s undertaking or
property unless those proposals have been approved by the company in general meeting.
(2) The Court may, on the application of any member of the company, restrain the directors from entering into a
transaction in contravention of subsection (1).

- • Notwithstanding anything in a company’s memorandum and articles, the directors shall not carry into effect
any proposals for disposing of the whole or substantially the whole of the company’s undertaking or property
unless those proposals have been approved by the company in general meeting
- for finance transactions, one qn is – where comp mortgage entire building as security., if mortgage is enforced,
receiver will sell the building, this is disposing of whole of undertaking of comp. breaches section?
o Can reciver sell building without resolution?
o No case law in sg
o Whether this amts to disposal or disposal amts to disposal for section 160
- But rule of thumb – get shrs resolution and board resolution – seek firm view on it and follow that view; each
firm has diff view of section 160

- In issuing loans, consider whether giving of unconditional security would constitute disposition of assets?
Generally not in Singapore – South African cases in pari materia (no local cases)
- If company is a private company, easy to get a shareholders’ and/or board resolution; More difficulty in public
company
- Shareholders resolution may be beneficial since shareholders might otherwise argue that there is no corporate
benefit

36
Section 162
- • Prohibition against making loan to, or entering into a guarantee or providing any security in connection with
a loan to director of a company or related corporation (subject to exceptions)
o helping dir buy home etc/ enable him to reimburse him for expenses in carrying out duties/
- • “loan” construed depending on substance of transaction
- • Does not apply to exempt private companies
o (“exempt private company” means –
(a) a private company in the shares of which no beneficial interest is held directly or indirectly by any
corporation and which has not more than 20 members; or
(b) any private company wholly owned by the Government, which the Minister, in the national interest,
declares by notification in the Gazette, to be an exempt private company).

Section 163 Persons connected with directors of lending company

(1) Subject to this section, it shall not be lawful for a company (other than an exempt private company) –
(a) to make a loan to another company; or
(b) to enter into any guarantee or provide any security in connect with a loan made to another company by a
person other than the first-mentioned company, if a director or directors of the first-mentioned company is or
together are interested in shares in the other company of a nominal value equal to 20% or more of the
nominal value of its equity share capital.

- • Prohibition against company making loan to another company or entering into any guarantee or providing
security in connection with such loan, if director(s) of first company is or are together interested in 20% or
more of the total number of equity shares of second company (excluding treasury shares) or if the
second company does not have a share capital, exercises or together exercises control over the other
company whether by reason of having the power to appoint directors or otherwise
- • Does not apply :-
o to exempt private companies
o to anything done by a company where the other company is its related corporation
o to a company, whose ordinary business includes the lending of money or the giving or guarantees in
connection with loans made by other persons, to anything done by the company in the ordinary
course of that business if the activities of that company are regulated by any written law relating to
banking, finance companies or insurance or are subject to supervision by the Monetary Authority of
Singapore
- Eg: Co. A trying to give security for loan by Co. B and Co. B is owned by the directors of Co. A; If the
directors of Co. A owns 20% or more of Co. B, then in breach of section 163
- Exceptions: Co. B is a holding subsidiary
- Section 163 is not applicable to private exempt companies

Section 259 - Winding up

Any disposition of the property of the company, including things in action, and any transfer of shares or
alteration in the status of the members of the company made after the commencement of the winding up by the
Court shall unless the Court otherwise orders be void.

- • Any disposition of the property of the company, including things in action, and any transfer of shares or
alteration in the status of the members of the company made after the commencement of the winding up by the
court shall unless the court otherwise orders be void.
- Need to do prelim search!!!
o If prelim search shows that winding up commence, need to alert lender immed – cant take security at
all

Section 330 - Effect of floating charges in winding up – section 330

- • A floating charge on the undertaking or property of the company created within 6 months of the
commencement of the winding up shall, unless it is proved that the company immediately after the creation of
the charge was solvent, be invalid except to the amount of any cash paid to the company at the time of or

37
 subsequently to the creation and in consideration for the charge together with interest on that amount at
the rate of 5% per annum.

Section 329
Incorporation of winding up rules normally applicable to individuals, applicable to companies too – section 329
(1) Subject to this Act and such modifications as may be prescribed, any transfer, mortgage, delivery of goods,
payment, execution or other act relating to property made or done by or against a company which, had it been
made or done by or against an individual, would in his bankruptcy be void or voidable under section 98, 99 or
103 of the Bankruptcy Act 1995 (read with sections 100, 101 and 102 thereof) shall in the event of the company
being wound up be void or voidable in like manner.

- • Subject to this Act and such modifications as may be prescribed, any transfer, mortgage, delivery of goods,
payment, execution or other act relating to property made or done by or against a company which, had it been
made or done by or against an individual, would in his bankruptcy be void under Sections 98, 99 or 103 of the
Bankruptcy Act 1995 (read with Sections 100, 101 and 102 thereof) shall in the event of the company being
wound up be void or voidable in like manner.
- This section makes provisions in Bankruptcy Act applicable to individuals as well.
- Cross refer to bankrupt act two main sections->

Bankruptcy Act, Cap. 20

Section 98
—(1) Subject to this section and sections 100 and 102, where an individual is adjudged bankrupt and he has at
the relevant time (as defined in section 100) entered into a transaction with any person at an undervalue, the
Official Assignee may apply to the court for an order under this section.
(2) The court shall, on such an application, make such order as it thinks fit for restoring the position to what it
would have been if that individual had not entered into that transaction.
(3) For the purposes of this section and sections 100 and 102, an individual enters into a transaction with a person
at an undervalue if —
(a) he makes a gift to that person or he otherwise enters into a transaction with that person on terms that provide
for him to receive no consideration;
(b) he enters into a transaction with that person in consideration of marriage; or
(c) he enters into a transaction with that person for a consideration the value of which, in money or money’s
worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the
individual.
 There is usually a problem if the transaction is between related parties.

Section 98 Transactions at an undervalue

- • Where an individual is adjudged bankrupt and he has within the period of 5 years(Note) ending on the day of
presentation of the bankruptcy petition, entered into a transaction at an undervalue, the Official Assignee may
apply to the court for such order as the court thinks fit for restoring the position to what it would have been if
that individual had not entered into that transaction.
- • An individual enters into a transaction with a person at an undervalue if —
(a) he makes a gift to that person or he otherwise enters into a transaction with that person on terms that
provide for him to receive no consideration;
(b) he enters into a transaction with that person in consideration of marriage; or
- spouse transferring assets to each other caught by this
(c) he enters into a transaction with that person for a consideration the value of which, in money or money’s
worth, is significantly less than the value, in money or money’s worth, of the consideration provided by
the individual.
- Note: The individual must be insolvent at that time or become insolvent as a consequence of the transaction.

Section 99 Unfair preferences

(1) Subject to this section and sections 100 and 102, where an individual is adjudged bankrupt and he has, at the
relevant time (as defined in section 100), given an unfair preference to any person, the Official Assignee
may apply to the court for an order under this section.
(2) The court shall, on such an application, make such order as it thinks fit for restoring the position to what it
would have been if that individual had not given that unfair preference.

38
- • Where an individual is adjudged bankrupt and he has, within the period of 2 years(note) (in the case of an
associate) or 6 months (Note) (in any other case) from the bankruptcy petition, given an unfair preference, the
Official Assignee may apply to the court for such order as the court thinks fit for restoring the position to what
it would have been if that individual had not given that unfair preference.
- An individual gives an unfair preference to a person if
a) that person is one of the individual’s creditors or a surety or guarantor for any of his debts or other
liabilities; and
b) the individual does anything or suffers anything to be done which (in either case) has the effect of putting
that person into a position which, in the event of the individual’s bankruptcy, will be better than the
position he would have been in if that thing had not been done.
Note: The individual must be insolvent at that time or become insolvent in consequence of the preference.
Eg indiv owes money to many – little money left and gives subst amt to one creditor. Official assignor will see
payment smade in past 2 yrs or 6 mths, recall all monies paid and distrib proportionately to creditors

(don’t really need to know this)

Banking Act
Section 29 prescribes limits to the bank’s ability to lend.

2. Insolvency
 Sometimes insolvency may occur before winding up petition
 Banking Act section 29 prevents banks from giving unsecured loans to any directors
 Also regulates amount bank may give to any single borrower

(1) Subject to certain exceptions, a bank in Singapore shall not —

(a) grant or permit to be outstanding to any one person or to any group of persons under the control or influence of
any one person, any credit facilities if the aggregate amount of such credit facilities exceeds 25% of its capital
funds or such other percentage not exceeding 100% of its capital funds as the Authority may approve;
(b) grant substantial loans which in the aggregate exceeds 50% of its total credit facilities or such other percentage
as the Authority may determine;
(c) grant any credit facility against the security of its own shares;
(d) grant, directly or indirectly, unsecured credit facilities which in the aggregate and outstanding at any one time
exceed the sum of $5,000 —
(i) to any of its directors, whether those credit facilities are obtained by its directors jointly or severally;
(ii) to a firm or LLP in which the bank or any of its directors has an interest as a partner, manager or agent, or to
any individual or firm or LLP of whom or of which any of its directors is a guarantor;
(iii) to a company in which any of its directors, whether legally or beneficially, owns more than 50% of the issued
capital or in which any of its directors controls the composition of the board of directors, but excluding public
companies the securities of which are listed on any securities exchange approved under the Securities and Futures
Act (Cap. 289) or such other securities exchange which the Authority may approve, and the subsidiaries of such
public companies; or
(i) to any corporation, other than a bank, that is a related corporation of the bank;
(e) grant to any of its officers (other than a director) or its employees or other persons, being persons receiving
remuneration from the bank (other than any persons receiving remuneration from a bank in respect of their
professional services) unsecured credit facilities which in the aggregate and outstanding at any one time exceed one
year’s emoluments of that officer or employee or person.

3. Finance Companies Act, Cap. 108

• Dealings by finance companies and credit facilities and limits

 – Finance company cannot lend unsecured loan to anyone in excess of $5000

23. Subject to certain exceptions, no finance company shall, inter alia —

(a) grant or permit to be outstanding to any one person or to any group of persons under the control or influence of
any one person, any credit facilities if the aggregate amount of such credit facilities exceeds 25% of its capital
funds or such other percentage not exceeding 100% of its capital funds as the Authority may approve;
(b) grant substantial loans which in the aggregate exceed 50% of its total credit facilities or such other percentage
as the Authority may from time to time determine; or
(c) grant unsecured advances, unsecured loans or unsecured credit facilities :

39
(i) to any person or body of persons, whether incorporated or not, which in the aggregate and outstanding at any
one time exceeds $5,000; and (ii) which in the aggregate and outstanding at any one time exceeds 10% of the
capital funds of the finance company.

MAS 757 dated 28 May 2004 – internationalization of sg dollar

Non internationilsation – special safeguards
 Banks are instructed that if they want to lend > S$5 million, they first need MAS approval

• Lending of Singapore Dollar to Non-Resident Financial Institutions

- Banks may lend S$ to non-resident financial institutions for any purpose whether in Singapore or
elsewhere as long as the aggregate S$ credit facilities do not exceed S$5 million per entity. (to prevent
speculation on sg dollar)
- For the amounts exceeding S$5 million per entity, the following conditions apply:
(a) Where the S$ proceeds are to be used outside Singapore, banks shall ensure that the S$
proceeds are swapped or converted into foreign currency upon draw-down.
(b) Notwithstanding paragraph (a), banks may extend temporary S$ overdrafts of any amount to
vostro accounts of non-resident financial institutions for the purpose of preventing settlement
failures. However, banks must take reasonable efforts to ensure that the overdrafts are covered
within two business days.
(c) Notwithstanding paragraphs (a) and (b), banks shall not extend S$ credit facilities to non-
resident financial institutions if there is reason to believe that the S$ proceeds may be used for
S$ currency speculations.

4. M&A of Borrowing Company

 Ensure updated – get certification from Chairman that it is true & accurate
 Things to look out for –

i. Whether company with power to borrow for that particular purpose

ii. Whether company has power to create charge (may only be empowered to borrow but on an unsecured
basis)
iii. Whether M&A provides for Third Party security provider – can give security on third party loans, or own
loans only? (look at amount of loan in the particular case)
Example:
Bank lends to A – A asks B’s help to provide security
Often, M&A of companies do not empower such a position. Thus may require M&A to be amended
iv. If iii. is allowed, satisfy Lender that there is a corporate benefit to at Third Party security
v. Check if there’s a quorum required for general meetings
vi. Will circular resolution suffice or require directors meeting
vii. Any director abroad at time of contracting – can bring seal abroad/ affix seal in another country?

5. Dealing with listed companies -

Chapter 9, Listing Manual

905(1) An issuer must make an immediate announcement of any interested person transaction of a value equal to,
or more than, 3% of the group's latest audited net tangible assets.
906(1) An issuer must obtain shareholder approval for any interested person transaction of a value equal to, or more
than:-
(a) 5% of the group's latest audited net tangible assets; or
(b) 5% of the group's latest audited net tangible assets, when aggregated with other transactions entered into with
the same interested person during the same financial year. However, a transaction which has been approved by
shareholders, or is the subject of aggregation with another transaction that has been approved by shareholders, need
not be included in any subsequent aggregation.
909 The value of a transaction is the amount at risk to the issuer.
909(3) In the case of borrowing of funds from an interested person, the value of the transaction is the interest
payable on the borrowing. In the case of lending of funds to an interested person, the value of
the transaction is the interest payable on the loan and the value of the loan.

40
Raising Funds From Offerings Of Securities
(1) Equity Issues
(i) Shares
- a prospectus has been registered by the Monetary Authority of Singapore (“theAuthority”)
- certain exemptions or “safe harbours” set out in Division 1, Subdivision (4) of Part XIII of the
Securities and Futures Act (Cap. 289)
- requirements of the SGX-ST Listing Manual are required to be complies with
- issue will generally be underwritten so that shares which are not applied for will be taken up
by the underwriters and/or sub-underwriters
(ii) Rights Issue
- offer to its existing members to apply for new shares in a fixed proportion of new shares to the
number of existing shares held
- a rights issue which is renounceable in favour of persons other than existing members and
which is accompanied by an application for the new shares requires an offer information
statement to be lodged with the Authority (s. 277 Securities and Futures Act (Cap. 289)
Offer made using offer information statement
277. —(1) Subject to subsection (1A), Subdivisions (2) and (3) of this Division (other than section 257) shall
not apply to an offer of securities (not being such securities as may be prescribed by the Authority) issued by
an entity whose shares are listed for quotation on a securities exchange, whether by means of a rights issue or
otherwise, if —
(a) in the case where the securities offered are units of shares or debentures, the shares or debentures are those
of the entity that issued the units;
(b) an offer information statement relating to the offer which complies with such form and content
requirements as may be prescribed by the Authority is lodged with the Authority; and
(c) the offer is made in or accompanied by the offer information statement referred to in paragraph (b).
[1/2005]
(1A) Subsection (1) shall apply to an offer of securities referred to therein only for a period of 6 months from
the date of lodgment of the offer information statement relating to that offer.
[1/2005]
(2) The Authority may, on the application of any person interested, modify the prescribed form and content of
the offer information statement in such manner as is appropriate, subject to such conditions or restrictions as
may be determined by the Authority.
[16/2003]
(3) Sections 249, 249A, 253, 254 and 255 shall apply in relation to an offer information statement referred to
in subsection (1) as they apply in relation to a prospectus.
[1/2005]
(4) For the purposes of subsection (3) —
(a) a reference in section 249 or 249A to the registration of the prospectus shall be read as a reference to the
lodgment of the offer information statement; and
(b) a reference in section 253 or 254 to any information or new circumstance required to be included in a
prospectus under section 243 shall be read as a reference to any information prescribed under subsection (1)
(b).
[16/2003; 1/2005]
(5) Where the written consent of an expert is required to be given under section 249 (as applied in relation to
an offer information statement under subsection (3)), that written consent shall be lodged with the Authority at
the same time as the lodgment of the statement.
[16/2003; 1/2005]
(6) Where the written consent of an issue manager or underwriter is required to be given under section 249A
(as applied in relation to an offer information statement under subsection (3)), that written consent shall be
lodged with the Authority at the same time as the lodgment of the statement.
[1/2005]
[Companies, s. 106F]

(2) Debt Issue

(i) Debenture – Bonds and Notes
(a) a bond or note is a debt instrument whereby the issuer of the bond or notes promises to
pay the holder of the bond/note its face value plus amounts of interest at future dates.
Rate of interest may be fixed or floating:

41
 • fixed rate securities referred to as bonds, notes and debentures
• floating rate securities or bonds commonly referred to as notes or FRNs
(Floating Rate Notes)
• bonds or notes may be issued at a discount and payment of its face value made
on maturity date
(b) FRNs may be issued with fixed rate conversion option, or with warrants entitling the
holder to buy equity shares in the issuer or another entity, or bonds in a further debt issue
(c) Short term notes: These are short term floating rate instruments which have enabled
borrowers to raise funds at a lower cost than conventional bank borrowing
(d) Trust Deed:
• Bonds and Notes may be constituted under a Trust Deed
• Bondholders or noteholders are represented by a Trustee whose duties are set
out in s. 266 Securities and Futures Act
Duties of trustees
266. —(1) (Deleted by Act 16/2003)
(2) Where, after due inquiry, the trustee for the holders of debentures at any time is of the opinion that the
assets of the borrowing entity and of any of its guarantor entities which are or should be available whether by
way of security or otherwise, are insufficient, or likely to become insufficient, to discharge the principal debt
as and when it becomes due, the trustee may apply to the Authority for an order under this subsection.
[1/2005]
(3) The Authority, on such application —
(a) after giving the borrowing entity an opportunity of making representations in relation to that application,
by order in writing served on the entity at its registered office in Singapore, may impose such restrictions on
the activities of the borrowing entity, including restrictions on advertising for deposits or loans and on
borrowing by the entity as the Authority thinks necessary for the protection of the interests of the holders of
the debentures; or
(b) may, and if the borrowing entity so requires, shall direct the trustee to apply to the court for an order under
subsection (5); and the trustee shall apply accordingly.
[1/2005]
(4) Where —
(a) after due inquiry, the trustee at any time is of the opinion that the assets of the borrowing entity and of any
of its guarantor entities which are or should be available, whether by way of security or otherwise, are
insufficient or likely to become insufficient, to discharge the principal debt as and when it becomes due; or
(b) the borrowing entity has contravened an order made by the Authority under subsection (2),
the trustee may, and where the borrowing entity has requested the trustee to do so, shall apply to the court for
an order under subsection (5).
[1/2005]
(5) Where an application is made to the court under subsection (3) or (4), the court may, after giving the
borrowing entity an opportunity to be heard, by order, do all or any of the following things:
(a) direct the trustee to convene a meeting of the holders of the debentures for the purpose of placing before
them such information relating to their interests and such proposals for the protection of their interests as the
trustee considers necessary or appropriate, and of obtaining their directions in relation thereto and give such
directions in relation to the conduct of the meeting as the court thinks fit;
(b) stay all or any actions or proceedings before any court by or against the borrowing entity;
(c) restrain the payment of any moneys by the borrowing entity to the holders of debentures of the borrowing
entity or to any class of such holders;
(d) appoint a receiver of such of the property as constitutes the security, if any, for the debentures;
(e) give such further directions from time to time as may be necessary to protect the interests of the holders of
the debentures, the members of the borrowing entity or any of its guarantor entities or the public,
but in making any such order the court shall have regard to the rights of all creditors of the borrowing entity.
[1/2005]
(6) The court may vary or rescind any order made under subsection (5) as the court thinks fit.
(7) A trustee in making any application to the Authority or to the court shall have regard to the nature and kind
of the security given when the offer of the debentures was made, and if no security was given shall have
regard to the position of the holders of the debentures as unsecured creditors of the borrowing entity.
[1/2005]
(8) A trustee may rely upon any certificate or report given or statement made by any advocate and solicitor,
auditor or officer of the borrowing entity or guarantor entity if it has reasonable grounds for believing that

42
such advocate and solicitor, auditor or officer was competent to give or make the certificate, report or
statement.
[1/2005]
[Companies, s. 101]
• Offerings are subject to prospectus requirements except for offerings exempted
under Division I, Subdivision (4) of Part XIII of the Securities and Futures Act

43