Building a restructuring hub: Lessons from Singapore

• Main Author: Aurelio GURREA-MARTINEZ
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: insolvency; restructuring; bankruptcy; hub; regulatory competition; judiciary; insolvency index; reorganisation procedures; entrepreneurship; access to finance; economic growth; Asian Studies; Commercial Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/3465; https://ink.library.smu.edu.sg/context/sol_research/article/5423/viewcontent/SSRN_id3940512_hub.pdf
• Institution: Singapore Management University

This article analyses the legal, market and institutional features needed to become an international hub for debt restructuring. For that purpose, it explores the strategy followed by Singapore, as well as the market and institutional factors generally found in other leading centres for legal and financial services such as the United States, the United Kingdom and Hong Kong. In jurisdictions traditionally having creditor-oriented insolvency systems, such as the United Kingdom, Hong Kong and Singapore, one of the primary challenges for the improvement of the restructuring framework for debtors consists of making sure that the insolvency system remains protective of the interests of the creditors. If an insolvency reform makes creditors worse off, lenders may respond with an increase in the cost of debt, ultimately harming firms’ access to finance and the promotion of economic growth. Moreover, in the context of global financial centres, such as the United Kingdom, Hong Kong and Singapore, an undesirable reform for creditors can also undermine the leadership of these jurisdictions as international hubs for legal and financial services. As a result, an insolvency reform seeking to support the real economy may end up doing more harm than good. Relying on a novel index measuring the attractiveness of reorganisation procedures from the perspective of debtors, secured creditors and general unsecured creditors, this article shows how the United States managed to design a pro-debtor and pro-creditor insolvency system, and how Singapore and the United Kingdom have significantly enhanced their restructuring framework while remaining attractive jurisdictions for lenders. Moreover, it will be argued that enhancing the insolvency framework is just the first step to become a restructuring hub. The sophistication of the judiciary, the development of the restructuring ecosystem, and other external factors mainly related to the international recognition of reorganisation procedures will also play an essential role in the success of a jurisdiction seeking to become an international hub for debt restructuring.