How successful is judicial management in preventing liquidation?

• Main Authors: Khoo, Ee Ee, Lam, Wei Yong, Ng, Chwee Chwee
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2014
• Subjects: DRNTU::Business::Accounting
• Online Access: http://hdl.handle.net/10356/58574
• Institution: Nanyang Technological University

Judicial Management Provisions were enacted on 15 May 1987 as Part VIllA of the Companies Act. These new provisions attempt to provide a means of protection as well as an alternative to companies that are in financial difficulties. Prior to this, a company that is experiencing financial troubles has only three alternatives, namely, liquidation, receivership or a compromise with the relevant parties. The main focus of this paper is to determine if judicial management has been able to achieve the purposes that were set out in the Act, particularly if it has indeed been a better alternative which helps to preserve the survival of an ailing company as a gomg concern. The other two objectives of judicial management, a scheme of arrangement that satisfies the requirement of s 210, and a more advantageous realisation of the company's assets, are also looked into briefly. From an analysis of the data gathered from the High Court of Singapore and the Registry of Companies and Businesses, it seems that no concrete conclusion can be made as the number of companies that survived after judicial management and those that did not are the same. Further information gathered from three judicial managers and relevant literature reviews reveals that there are six elements which are essential for the survival of a company that is under judicial management. They are viability of business, injection of funds, management's support, early recognition of problem, compromising creditors, and expertise of judicial managers. Side-effects faced during judicial management is also a factor to consider. Three companies that underwent judicial management were reviewed. These companies each emerged from the judicial management period in a different manner. Food Place Pte Ltd, a company that runs a food court, managed to preserve its going concern status. Vishtex Pte Ltd, which manufactured and exported track suits failed to survive. The third company, Electro Magnetic (S) Limited, dealing in video tapes was liquidated at the end of the judicial management period. However, its core business still continues operations, although under a different company. This is a special case which according to the definition of this paper, is a failure since the firm cannot maintain its going concern status. But, given that its business continues, it will be considered only as a technical failure. With all the information collected and the views held by the judicial managers, it seems that judicial management can be a better alternative to ailing companies. However, it is imperative that some/all of the six success factors must be present before judicial management can give full play to its functions.