Judicial Management
Judicial Management (JM) is a legally sanctioned process outlined in the Insolvency, Restructuring and Dissolution Act (IRDA 2018). It serves as a mechanism for financially distressed companies to undertake comprehensive rehabilitation and operational restructuring while safeguarding their assets from creditor claims. JM is a pivotal tool that facilitates the revival of struggling businesses, with the aim of preserving jobs and value for all stakeholders involved.
Key Aspects:
The JM procedure is initiated through an application to the Singapore High Court for the appointment of a qualified Judicial Manager (JM). Upon review and approval, the court appoints the JM to take charge of the company’s affairs.
The fundamental goal of JM is the rejuvenation and turnaround of the distressed company. The JM assesses the company’s financial status, devises a comprehensive restructuring plan, and implements measures to enhance its financial well-being.
Once a JM is appointed, an automatic moratorium is imposed on legal actions and proceedings against the company. This stay of proceedings provides the company with a valuable window to engage in negotiations and execute its restructuring plan.
The JM assumes control over the company’s management and operations, often displacing the existing management team. They wield the authority to make critical decisions, negotiate with creditors, and execute the restructuring plan.
JM frequently leads to the formulation of a Scheme of Arrangement, a structured document outlining the company’s strategy for repaying debts and reorganizing its operations. Approval by creditors and shareholders is essential for the Scheme to take effect.
Creditors and shareholders play pivotal roles in the JM process. They have the opportunity to engage in negotiations, vote on the proposed Scheme, and express their views regarding the restructuring plan.
The court maintains a supervisory role throughout the JM process to ensure that the JM acts in the best interests of all stakeholders and complies with legal requirements.
If the JM successfully restructures the company, leading to improved financial health, the JM’s involvement may conclude. However, if the restructuring attempts fail, the company may proceed with liquidation.
Benefits of Judicial Management:
JM aims to safeguard jobs by rescuing financially distressed companies, potentially averting layoffs or closures.
By facilitating the company’s recovery, JM seeks to maximize the value available to creditors and shareholders.
JM offers an alternative to the often more chaotic process of liquidation, enabling a more orderly resolution of financial challenges.
The automatic moratorium on legal actions provides the company with crucial time to negotiate and implement a viable restructuring plan.
In summary, Judicial Management is a court-sanctioned process that provides financially distressed companies with an avenue for rehabilitation, operational restructuring, and asset protection. It seeks to rescue struggling businesses, preserve jobs, maximize stakeholder value, and avoid the need for immediate liquidation. JM involves the appointment of a Judicial Manager who assumes control, formulates a restructuring plan, and seeks approval for the proposed Scheme of Arrangement from creditors and shareholders. It is an invaluable tool for companies facing financial hardships and stakeholders seeking a path to recovery.
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