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

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 • 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
(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

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 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
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

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 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
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

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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
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

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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
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

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 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:
- 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…”

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• 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
• 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

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• 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
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

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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
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

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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
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

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 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
- “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:

12
• 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!
- 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.

13
 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
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

14
 (b) Registered land: Land Titles/ Strata Title – title issued: Certificates of
*Mortgage which incorporates by reference Title; Subsidiary Certificates of Title; Subsidiary Strata
all the terms and conditions of a Certificates of Title; or Registered Lease of Title; or
memorandum of Mortgage filed by the instruments
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 Caveat
Registered land

2. Fixed Assets, excluding land (eg. Debenture with fixed charge

machinery, 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
(a) Legal mortgage of shares title of shares to mortgagee
Memorandum of Deposit of Shares

(b) Equitable mortgage of shares

ii. Scripless The Companies (Central Depository System)

Regulations 1994
(a) Charge Form I
(b) Assignment Form H

(c) Common law security interest

6. Ships Statutory Ship Mortgage and Deed of Covenants

(3) Types of Security Documents

(i) Land
(a) Legal Mortgage
(A) Common Law Land: Indenture of Mortgage

15
 (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)

16
 (a) Assignment of shares – Form H
(b) Charge of shares – Form I
(c) Common law security interest
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

17
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.
(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

18
 • 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 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.

19
 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)

-> 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

20
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

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

21
- • 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
(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

22
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

23
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
(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

24
(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; 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

25
(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;
(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 —

26
(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 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;

27
(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 .
(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

28
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

29
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 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

30
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 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

31
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.
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
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

32
 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)Afterthe 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)

33
 • Relevant Legislation
 Residential Property Act (Cap. 274)
 Housing Developers (Control and Licensing) Act
(Cap. 130)
 Planning Act (Cap. 232)
 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.

34
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
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

35
  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)

$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 —

36
(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

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 1. Memorandum – power of company to
2. Composite Litigation Search (High Court) borrow, mortgage charge its assets, power
3. Composite Litigation Search (Subordinate to guarantee obligations and liabilities of
Courts) any persons
4. Company Winding Up Search 2. Articles – power of Directors to borrow,
5. Bankruptcy Search (where guarantor is an mortgage, charge assets or give
individual) 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

37
 (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
- RCB (s. 131(3)(e) CA) President/ State respecitively
2. Chargees/ Mortgagees (where
- Government departments applicable)
a) LTA – Rapid Transit Systems and Street 3. After execution of documents, get
Works documents stamped and lodged for
b) Ministry of Environment – Sewerage and registration at appropriate registries
Health and Pollution Control Departments (including ROC)
c) Building and Construction Authority
d) Property Tax Department NB: Where security is taken over foreign
e) Chief Planner, URA Development Control property, prudent to consult foreign counsel
Division (steps required to create or perfect the
security interest)
- Relevant Legislation
a) Residential Property Act In some jurisdictions, spousal consent may
b) Housing & Developers (Control and be required if security is taken over
Licensing) Act matrimonial 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

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

38
• 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.
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

39
- 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

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 –

40
(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 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

41
 (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.

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 (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.

- • 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.

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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 :
(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

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 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.

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

45
 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:
• 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

46
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 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

47