Getting the Go-Ahead – Court Sets Out Test for Sanctioning Acts of a Judicial Manager

Introduction

The Insolvency, Restructuring and Dissolution Act 2018 (“IRDA“) provides the framework for the operation of judicial management proceedings, including the powers and duties of a judicial manager (“JM“). While JMs are empowered to seek the direction of the court in relation to questions on the carrying out of their JM functions, under what conditions can a JM seek the court’s sanction of an intended course of action? This was the question considered in Re USP Group Ltd (in judicial management) [2025] SGHC 132.

The JMs in this case sought the sanction of the Singapore High Court (“Court“) under section 99(5) of the IRDA to enter into a proposed settlement agreement with a creditor. The Court had to determine whether it was appropriate to grant its sanction for the proposed agreement, even though the JMs already had the power to enter into such an agreement.

On an assessment of the application, the Court granted the sanction sought by the JMs. In reaching its decision, the Court set out the requirements that must be satisfied when a JM seeks direction that amounts to a court sanction under section 99(5) of the IRDA, emphasising that such sanction is reserved for exceptional cases involving special or unusual circumstances.

The decision is notable as it is the first written decision on section 99(5) of the IRDA, and on whether the court should grant a direction to the JMs amounting to a sanction under this provision (rather than deciding on a legal question with which the JMs were faced). This Update highlights the key points of the Court’s decision.

The JMs were successfully represented by Sheila Ng and Chew Jing Wei of Rajah & Tann Singapore LLP.

Brief Facts

The matter involved a Company in judicial management. The Company was the holding company of a wider group of companies (the “Group“), including Supra Malaysia which generated most of the Group’s revenue. The Group had outstanding loans from a bank creditor, for which the Company guaranteed repayment, and which entailed the bank creditor’s security over the shares in Supra Malaysia.

As Supra Malaysia saw interest from a few investors, the JMs of the Company sought to negotiate with the bank creditor for the release of its security over the shares in Supra Malaysia. These efforts included putting forth a proposal at a creditors’ meeting for such negotiation. However, the resolution passed at the meeting was challenged, and a creditor applied for a replacement of the JMs on the basis that they had improperly counted the votes of related entities and had not allowed certain creditors’ proxies to vote.

The High Court dismissed the replacement application, and this was subsequently upheld by the Court of Appeal in Tay Lak Khoon v Tan Wei Cheong [2025] SGCA 41, which held that there was no due cause for the removal of the JMs. The Court of Appeal found that the JMs’ conduct at the creditors’ meeting did not give rise to a reasonable apprehension of bias as they had reasonably relied on their solicitors’ advice regarding votes of related entities. Further, there was no justifiable loss of confidence in the JMs, and there were no other aspects of the judicial management that pointed to the removal of the JMs.

Amidst the ongoing proceedings, the bank creditor and the JMs arrived at the principal terms of a Proposed Agreement, which included the following, among others:

1. The moneys in the bank accounts held by two other companies in the Group would be released and used to repay outstanding loans to the bank creditor; and

2. The bank creditor would discharge all security given by the Group and discontinue the winding up proceedings commenced against debtor companies in the Group.

3. The Proposed Agreement would only take effect upon approval being obtained from the court for the Company to enter into the Proposed Agreement.

In light of the condition precedent requiring court approval for the Company to enter into the Proposed Agreement, the JMs applied for directions from the court under section 99(5) of the IRDA.

Holding of the High Court

The Court allowed the application, granting the directions sought by the JMs.

General Law

Section 99(5) of the IRDA provides that JMs may apply to the court for directions in relation to any particular matter arising in connection with the carrying out of their functions. However, thus far, the provision was mainly used to resolve questions faced by applicant JMs, and not as court sanction for proposed acts.

The Court highlighted that it would be inappropriate for JMs to seek court sanction for every action, or merely because contracting parties had agreed for court sanction to be a condition precedent. The Court held that where the direction sought under section 99(5) of the IRDA amounts to a court sanction for an intended act by the JM, the following requirements must be satisfied:

1. The JM must have the power to carry out the act.

2. The JM must honestly and reasonably believe the act would achieve one or more purposes of judicial management (as per section 89(1) of the IRDA).

3. The act must be in the interests of the company’s creditors as a whole.

4. There must be a special reason or unusual circumstance justifying court sanction, which must be something which materially tugs at the commercial or professional conscience of the JM. Examples include situations where there are doubts over the JM’s powers or legality of a transaction, or where there are potential conflicts of interests.

Application

Applying the above principles, the Court found that this was an appropriate case to issue the direction sought by the JMs, which would grant liberty to the Company to enter into the Proposed Agreement.

1. The JMs had the statutory power to enter into the Proposed Agreement.

2. The Proposed Agreement was not contrary to the wishes of the creditors, as there were no objections from the creditors and a majority of creditors supported it.

3. The JMs reasonably believed that the agreement was in the interests of the creditors and would help achieve the purposes of judicial management, particularly by protecting the Group’s key asset (Supra Malaysia) and enabling restructuring.

4. Special circumstances existed such that the Proposed Agreement would materially tug at the professional and commercial conscience of the judicial managers:

• • • The urgency of entry into the Proposed Agreement due to pending winding-up proceedings by the bank creditor against companies in the Group;
    • The history of litigation hampering the restructuring; and
    • The significance of the asset involved – Supra Malaysia – to the restructuring.

Concluding Words

The decision provides novel insight into the use of section 99(5) of the IRDA as a mechanism for obtaining the court’s sanction for proposed acts of the JM. While the provision is only to be utilised for the purpose of obtaining court sanction in special circumstances, the Court here set out helpful guidelines as to when such circumstances would be deemed to have arisen. JMs should thus be aware of this avenue and of when it may be utilised.

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