By Lionel Leo, Joel Chng, Muhammed Ismail Noordin and Eden Li (WongPartnership LLP)
Introduction – Cross-class cramdown in Singapore
Singapore’s emergence as a leading international debt restructuring hub has been underpinned by a deliberate and progressive enhancement of its insolvency and restructuring laws. The introduction of the cross-class cramdown mechanism stands as a testament to Singapore’s commitment to modernising its legal framework in line with global best practices. To unpack the cross-class cramdown mechanism as it stands and as it may develop in Singapore, this article first outlines how it came to be part of Singapore’s legislation.
Historically, Singapore’s corporate restructuring regime was modelled on the English scheme of arrangement, as codified in the Companies Act. Under this regime, a scheme could only be sanctioned if every class of creditors approved it by the requisite statutory majority - more than 50 per cent in number and at least 75 per cent in value within each class. This intra-class cramdown allowed a majority within a class to bind dissenters in that class, but it did not permit a scheme to be imposed on an entire dissenting class (ie, no inter-class or cross-class cramdown). The result was that a single dissenting class could hold the entire restructuring process hostage, even if the vast majority of creditors supported the scheme.
Recognising the limitations of this approach, the Insolvency Law Review Committee (ILRC) in its 2013 final Report recommended the introduction of cross-class cramdown provisions. The ILRC observed that a minority of creditors in a dissenting class should not be able to veto a scheme simply because they belong to a separate class, provided they are treated fairly and receive at least as much as they would in a liquidation scenario.[1] The Committee’s recommendations were informed by comparative studies of US Chapter 11 and other international regimes, which had long recognised the utility of cross-class cramdown in facilitating effective restructurings.
The ILRC’s recommendations were implemented in 2017 through a suite of amendments to the Companies Act, including the cross-class cramdown provision in section 211H of the Companies Act, [2] which allowed the court to sanction a scheme even if not all classes approved it, subject to certain safeguards. This provision was later substantially ported over to the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), Singapore’s omnibus legislation for corporate insolvency and personal bankruptcy, which came into force on 30 July 2020. [3] The current iteration of the cross-class cramdown mechanism is now set out in section 70 of the IRDA.
Section 70 of the IRDA empowers the court to sanction a scheme of arrangement even if one or more classes of creditors dissent, provided that: [4]
- the scheme is approved by a majority in number representing at least 75 per cent in value of the overall debt (across all classes);
- the court is satisfied that the scheme does not unfairly discriminate between two or more classes of creditors; and
- the scheme is ‘fair and equitable’ to each dissenting class.
For a scheme to be fair and equitable:
- dissenting creditors must receive at least as much as they would in the ‘most likely scenario if the compromise or arrangement does not become binding’ - typically, liquidation; [5]
- unsecured crammed down creditors must receive property of the value of their claim, or the court will need to be satisfied that the scheme does not provide any creditor with a subordinated claim or any member to ‘receive or retain any property of the company on account of the subordinate claim or member’s interest’; [6] and
- additional protections apply to secured creditors, who must receive either deferred cash payments totalling the value of their secured claim, a charge over the proceeds of sale of the secured assets or the ‘indubitable equivalent of their security. [7]
This statutory framework represents a significant departure from the previous regime, empowering the court to override the objections of entire classes of creditors, subject to robust safeguards designed to ensure fairness and prevent abuse.
Utility of Cross-class cramdown
The cross-class cramdown mechanism was introduced with the expectation that it would transform Singapore’s restructuring landscape, making it more efficient, flexible and attractive to both debtors and creditors.
The cross-class cramdown mechanism is designed to address the perennial problem of ‘holdout’ creditors - those who, for strategic or arguably idiosyncratic reasons, refuse to support a scheme of arrangement that the majority otherwise considers to be worthy of being implemented. Where these holdout creditors are required to be classed separately, [8] they wield considerable strength by being able to block any scheme of arrangement. The cross-class cramdown removes this undue holdout strength (with countervailing safeguards) and thereby facilitates the implementation of viable restructuring plans while reducing the likelihood of a value-destructive liquidation scenario.
The strategic utility of the cross-class cramdown is particularly evident in complex, multi-creditor restructurings, where the interests of different creditor groups may not always align. The ability to cramdown dissenting classes incentivises all stakeholders to engage constructively in negotiations, knowing that the court has the power to override unreasonable objections. This, in turn, can expedite the restructuring process, reduce costs and preserve value for all parties.
Until recently, cross-class cramdown in Singapore was primarily used as a threat against creditors who may seek to wield their holdout power and potentially exert creditor-on-creditor violence. However, this threat actually materialised for Equatorial Marine Fuel Management Services Pte Ltd (Equatorial), a creditor of the GP Global APAC Pte Ltd (GPAPAC), the Singapore arm of a multi-jurisdictional oil trader, when GP APAC applied to the Singapore court to cramdown on the single-creditor class comprising Equatorial for GP APAC’s scheme of arrangement relating to about US$245 million in debt. [9]
Equatorial’s claim against GP APAC arose from a consent judgment for unpaid gas oil supplied to GP APAC, amounting to approximately S$1.017 million. Prior to GP APAC proposing a scheme, Equatorial had taken aggressive enforcement action: it obtained a writ of seizure and sale against the property that GP APAC used as its headquarters in Singapore to satisfy Equatorial’s judgment debt against GP APAC. GP APAC sought to resist the sale. 8owever, GP APAC and Equatorial reached agreement that the proceeds from this sale were to be paid into court. The conditions for the payment out of these monies to Equatorial were that (1) no scheme of arrangement for GP APAC was sanctioned, or (2) the moratorium on proceedings against GP APAC expired. These conditions were reflected in both the moratorium orders granted in favour of GP APAC and the payment consent order for the proceeds of the sale of GP APAC’s property.
Against this backdrop, GP APAC proposed a scheme of arrangement, which in broad terms provided for all external creditors of GP APAC to be paid a pro rata distribution from the realisation of GP APAC’s assets (including the sum paid into court from the sale of GP APAC’s property) in exchange for a release of all their claims. To achieve this objective, GP APAC classified creditors into four classes: (1) all secured, guaranteed and unsecured creditors, excluding Equatorial, (2) Equatorial, (3) employees and (4) related party creditors. Class (1) and (3) creditors voted overwhelmingly in favour of the scheme (ie, 100 per cent in value and number, comprising 15 of 17 creditors holding approximately US$232 million or 98.69 per cent of the admitted debt of all scheme creditors). Class (4) was excluded from voting as they were not receiving anything under the scheme. Only class (2), a single-creditor class comprising Equatorial, chose to abstain from voting in what appeared to be a demonstration of their holdout power. This led to GP APAC’s application for a cross-class cramdown on class (2).
Given that the requirements for meeting the fair and equitable standard differ for secured and unsecured creditors, the court first had to determine whether Equatorial was a secured or unsecured creditor for the purpose of the cross-class cramdown provision. The court accepted GP APAC’s position that Equatorial was an unsecured creditor, because it had not completed enforcement steps prior to the commencement of the scheme proceedings, and allowing it to keep the S$1.017 million would amount to letting Equatorial steal a march on the other unsecured creditors, running counter to the pari passu principle that all creditors with the same priority of debt should be paid a pro rata share.
GP APAC then successfully established that the scheme it proposed was fair and equitable by showing that:
- in the most likely alternative scenario (liquidation), Equatorial would not be entitled to receive the S$1.017 million paid to court, but instead would only be entitled to recovery as an unsecured creditor with a recovery rate of 1.3 per cent, compared to the estimated recovery under the scheme of 3.4 per cent; and
- no creditor who ranked below Equatorial would be receiving any recovery. This was clear from the structure of the scheme, which gave pro rata recovery to all creditors from the assets of the company and excluded related party creditors. The scheme also did not provide any recovery to shareholders who ranked below Equatorial.
GP APAC’s scheme clearly demonstrates that the Singapore court will not hesitate to grant a cross-class cramdown where there is unwarranted creditor holdout. The design of the scheme to take advantage of the cross-class cramdown provisions should also be borne in mind by creditors and debtors, with the minutiae of scheme recoveries and creditor classification for voting potentially being pivotal in obtaining sanction if no agreement can be reached out of court.
Centrality of Classification of creditors
As the GP APAC case illustrates, a central pillar of the cross-class cramdown regime is the classification of creditors for voting purposes. [10] The specific safeguards that need to be satisfied to cramdown on a dissenting class of creditors depends on whether they are a secured or unsecured creditor. Further, classification also affects whether a creditor is put in a position where it wields holdout power in the first place.
Assessing how to properly class creditors within the contours of the law while meeting the commercial objectives of a scheme is a perennial problem for all parties to a scheme. It is not merely a technical exercise; it goes to the heart of the court’s jurisdiction to sanction a scheme and can have profound implications for the outcome of a restructuring.
The test for creditor classification, as stated by the Court of Appeal in The Bank of Scotland NV v TT International Ltd; [11] can be summarised as follows: creditors should be classed together if their rights under the scheme are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. The focus is on the legal rights of creditors, not their separate commercial interests.
In practical terms, as noted by the Court of Appeal in Pathfinder Strategic Credit LP v Empire Capital Resources, [12] the classification process involves three steps:
- identify the comparator: determine the most likely scenario in the absence of scheme approval (often liquidation);
- assess relative positions: compare the relative positions of creditors under the proposed scheme and the comparator; and
- determine dissimilarity: assess whether any differences are so material as to render the creditors’ rights dissimilar, such that they cannot sensibly consult together.
Applying these steps to the complicated and sometimes messy capital structures of companies can pose significant difficulty. For example, in the context of under-secured creditors who hold a claim that is partially secured (up to the value of the collateral) and partially unsecured (for the deficiency), there have been divergent approaches taken by the Singapore courts:
- in Hoe Leong Corporation Ltd: under-secured creditors were allowed to vote the secured portion with the secured class and the unsecured portion with the unsecured class; [13] and
- in Pacific International Lines (Private) Limited: the court required the unsecured portion of under-secured claims to be classed separately from other unsecured claims, on the basis that their interests were sufficiently dissimilar. [14]
These differing approaches reflect the inherent complexity of the classification exercise and the potential for strategic behaviour by both debtors and creditors. The bifurcation of claims can be viewed with suspicion by other creditors, as it allows an under-secured creditor to have two votes (albeit in different classes), potentially skewing the outcome of the scheme.
The classification of creditors can also be complicated by ‘loan-to-own’ strategies, where an investor acquires distressed debt with a view to converting it to equity through a scheme. In ReDSG Asia Holdings Pte Ltd, [15] the court found that a potential investor who acquired claims contingent on the implementation of the scheme should be classed separately from other unsecured creditors, as their interests were not aligned.
Fee payments to supportive creditors, such as lock-up or consent fees, can also raise classification issues. The court will consider whether such fees are material enough to influence voting and whether they are made available to all creditors within the class. If not, separate classification may be required. [16]
The deliberate fragmentation of classes can be used as a strategic tool to facilitate the use of the cross-class cramdown mechanism. By isolating supportive creditors in a separate class, a scheme proponent can ensure that at least one class approves the scheme, opening the door to a cramdown of dissenting classes. 8owever, this raises concerns about the potential for improper gerrymandering and the need for clear guidelines to protect the interests of minority creditors.
Safeguards for Dissenting Secured Creditors in Cross-Class Cramdown
The difficulties with classification dovetail with the uncertainty around what, in practical terms, needs to be provided for the safeguards to cramdown on a class comprised of dissenting secured creditors.
The safeguards for secured creditors under Singapore’s cross-class cramdown regime are in section 70(4) of the IRDA, which incorporates elements of the ‘absolute priority rule’ from US Chapter 11. [17] In essence, a scheme is only considered fair and equitable to a dissenting class of secured creditors if each receives:
- deferred cash payments totalling the amount of the creditor’s claim that is secured by the security held by the creditor, and the preservation of its security;
- a charge over the proceeds of sale of the secured assets; or
- the ‘indubitable equivalent’ of its security.
One key interpretive question is what is meant by ‘the creditors’ claim that is secured by that security’: does this refer to the face value of the debt, or only to the value of the collateral? [18]
To address this question, a good starting point is the provision from which the cross-class cramdown provisions in the IRDA were adapted from section 1129(b)(2) of the US Bankruptcy Code. Under the US Bankruptcy Code, the ‘allowed amount’ of a secured claim is generally understood to refer to the value of the collateral. The US regime allows an under-secured creditor to elect to have its entire claim treated as secured, but this election right is absent from the IRDA.
The prevailing view is that the value of the secured claim under the IRDA should be capped at the value of the collateral. This approach is consistent with the principle that secured creditors should not be worse off than if they had enforced their security outside the scheme. It also aligns with the ‘indubitable equivalent concept, which US courts have interpreted as the unquestionable value of a lender’s secured interest in the collateral.
Adopting a value-based approach ensures that secured creditors are protected, but it also necessitates potentially contentious valuation exercises. The court must determine the value of the collateral, which can be subjective and technical. 8owever, Singapore courts are well-equipped to handle such disputes, and valuation exercises are a common feature of restructuring cases.
The value-based approach strikes a balance between protecting secured creditors and preventing abuse of the cramdown mechanism.
Though not entirely clear, the IRDA appears to afford protection to an under-secured creditors’ claim by bifurcating the protections into (1) a secured portion (up to the value of the collateral) and (2) an unsecured portion (the deficiency). The secured portion is protected by the statutory safeguards, while the unsecured portion is treated like any other unsecured claim. This mirrors the approach in liquidation and judicial management, where secured creditors can only prove for the unsecured portion of their debt after realising their security.
Unlike in the United States, the absence of an election right under the IRDA means that under-secured creditors cannot opt to have their entire claim treated as secured, as they can under US law. This looks to be a deliberate policy choice, reflecting the desire to balance the interests of all stakeholders and prevent the over-empowerment of secured creditors.
The cross-class cramdown provisions are designed to encourage corporate rescues and restructurings, taking a collective view of the interests of creditors, shareholders and the economy at large. By providing secured creditors with certainty that they will not receive less than the value of their collateral, the regime promotes fairness and equitability, while also facilitating the implementation of viable restructuring plans.
Enhancements to the Cross-Class cramdown – Addressing shareholder holdout and reducing thresholds for creditor cramdown
While Singapore’s restructuring laws are applied and continue to develop iteratively through case law, the Singapore legislation is expected to make more dramatic changes to the cross-class cramdown following recommendations by the latest Committee to Enhance Singapore’s Corporate Restructuring and Insolvency Regime, which released its report in early 2025.
Two recommendations from this committee stand out as relevant for any discussion on Singapore’s cross-class cramdown: [19]
- lower creditor approval thresholds to qualify for cross-class cramdown; and
- expanding the cross-class cramdown to include shareholders.
Lower Approval Thresholds For Creditor Cramdowns
The current creditor approval threshold to qualify for cross-class cramdown in Singapore is that regardless of classification, a majority in number of creditors present and voting representing at least 75 per cent in value of creditors has voted in favour of the scheme. Looking to the United Kingdom, the United States and the Netherlands, the committee recommended refining this threshold to make the cross-class cramdown more functional.
The Singapore government has not yet indicated which jurisdiction’s approach to cross-class cramdown, or combination thereof, would be adapted for Singapore, but each has some unique aspects that the committee considered worth highlighting.
- The UK plan [20] regime gives an overriding discretion to the courts to determine whether to sanction a plan. It imposes a requirement that none of the members of the dissenting class would be any worse off than in the event of the ‘relevant alternative’ (ie, the most likely scenario to occur if the plan were not sanctioned (commonly called the ‘no worse off’ test)). It does away with the 50 per cent ‘headcount’ requirement and retains only the 75 per cent ‘value’ requirement for sanction, but this only needs to be met by ‘a class of creditors or members present and voting at the relevant meeting, who would receive a payment, or have a genuine economic interest in the debtor, in the event of the relevant alternative’.
- The US Chapter 11 regime has a general requirement of at least two-thirds in amount and more than one-half in number of the allowed claims in a class for that class to have passed a plan. A plan can be sanctioned even if one or more classes dissents to the plan, provided that at least one class of impaired creditors (ie, creditors with claims that will not be satisfied in full or in which some legal, equitable or contractual right is altered) votes in favour of the plan. To be sanctioned, the plan cannot ‘unfairly discriminate’ and must be ‘fair and reasonable’. These terms have been interpreted through a sizeable body of case law. While not explicit, the absolute priority rule applies through the ‘fair and reasonable’ criteria. In particular, to cramdown on a secured creditor class, the ‘indubitable equivalent of their claims must be offered.
- The Netherlands’ wet homologatie onderhands akkoord (commonly called the ‘WHOA’) requires a two-thirds majority in value of outstanding claims for a class of creditors. If at least one class of creditors has voted in favour of the restructuring plan, and that class is in-the-money (ie, would receive a cash distribution in the event of winding up), the debtor can then request the court to confirm that plan in a hearing. The absolute priority rule under Dutch law may be deviated from in certain circumstances provided that (1) the plan is fair and reasonable and not detrimental to the rejecting class and (2) the rejecting class that would have been in-the-money in a winding up has been offered a cash out option.
Shareholder Cramdown
Drawing from these other jurisdictions, the committee also recommended expanding the scope of Singapore’s cramdown mechanism to include shareholders in appropriate cases. This would address the ‘shareholder holdout problem’, where shareholders have the ability to block value-maximising restructurings, despite having no economic interest in the distressed company. [21] Under the current regime in Singapore, a common way in which shareholders can ‘block’ a restructuring is if the restructuring plan contemplates the issuance of new shares, as shareholder approval is required under Singapore law before a company may issue new shares.
In the Singapore context, the debate around the shareholder cramdown has centred around two countervailing considerations:
- on the upside, introducing the shareholder cramdown would make Singapore a more attractive restructuring forum for creditor-led restructurings, since the need to obtain shareholder approval for certain corporate actions required under a restructuring plan introduces additional variables to execution certainty; and
- on the downside, introducing the shareholder cramdown could potentially discourage entities – in particular – family businesses from restructuring in Singapore.
While the exact contours of the proposed reform have not been made clear, the committee has broadly suggested allowing shareholder cramdowns to ‘reflect the economic reality of the debtor’s capital structure in a financially distressed situation’. This suggests that a targeted approach may be taken, such as by allowing the courts to dispense with shareholder approvals where the scheme to be implemented would typically require them (eg, schemes involving the transfer of substantial assets of the company or issuance of new shares for a debt-to-equity swap would require shareholders’ approval, under Singapore’s Companies Act), provided that similar safeguards to those available for unsecured creditors in a cross-class cramdown are met.
The expected enhancements to the cross-class cramdown mechanism signals the need for creditors and shareholders alike to account for the risk of cramdown when negotiating in a restructuring. while sophisticated creditors may have already begun seeing the cross-class cramdown as a looming threat, going forward, it should feature even more prominently in their risk assessment. In particular, it should be noted that the treatment that a creditor asks for and the steps it takes while negotiations are ongoing could impact whether the creditor could face a cramdown if they disagree with the treatment they eventually receive under the scheme (as Equatorial experienced, adopting aggressive enforcement strategies could backfire and lead to any ‘security’ achieved being ‘clawed back’ for the benefit of the scheme). The same applies for shareholders, depending on which safeguards are adapted into Singapore’s implementation of the enhanced cramdown mechanism.
Singapore’s approach of adapting appropriate safeguards for creditors and shareholders in implementing an enhanced cross-class cramdown mechanism would likely serve to enhance the efficacy of the Singapore scheme of arrangement by facilitating debt restructurings that involve debt-to-equity swaps and hive-offs and provide a balanced solution for the shareholder holdout problem. They will help to sustain the momentum generated in recent years through wide-sweeping legislative reforms [22] and the expansion of the Singapore International Commercial Court’s mandate to hear cross-border restructuring and insolvency proceedings. [23]
* The full article was originally published by The Asia Pacific Restructuring Review.
[1] Report of the Insolvency Law Review Committee: Final Report (2013), Chapter 7 at paragraph 49.
[2] Act 15 of 2017.
[3] 2020 Rev Ed.
[4] Insolvency, Restructuring and Dissolution Act 2018, section 70(3).
[5] Muhammed Ismail Noordin and Eden Li, ‘Cross-class cramdown of secured creditors – Singapore’s implementation of a US Chapter 11 tool’, International Insolvency & Restructuring Report 2023/24, www.wongpartnership.com/upload/medias/ KnowledgeInsight/document/19030/WongPartnership_59-64_IIRR2023-24.pdf (accessed 6 June 2025).
[6] Insolvency, Restructuring and Dissolution Act 2018, section 70(4)(b)(ii).
[7] id, section 70(4)(b)(i).
[8] See Section 3 below.
[9] Sidney Watson, ‘Global oil trader secures Singapore’s first-ever cross-class cram down’, GRR (3 April 2025), www.globalrestructuringreview.com/article/global-oil-trader-secures-scheme-sanction-in-singapores-first-ever-cross-class-cram-down (accessed 22 July 2025).
[10] Stephanie Yeo, ‘Class Composition in Schemes of Arrangement’, Singapore Academy of Law [2022] SAL Prac 13 (1 June 2022), https://journalsonline.academypublishing.org.sg /Journals/SAL-Practitioner/Insolvency-and-Restructuring/ctl/eFirstSALPDFJournalView /mid/596/ArticleId/1738/Citation/JournalsOnlinePDF (accessed 06 June 2025).
[11] [2012] 2 SLR 213 at [133].
[12] [2019] 2 SLR 77 at [88].
[13] Approved by the High Court on 22 January 2018 in HC/OS 14/2018.
[14] Orders made in HC/SUM 20/2021 on 20 January 2021.
[15] [2022] 3 SLR 1250.
[16] Re Brightoil Petroleum (S’pore) Pte Ltd [2022] 5 SLR 222.
[17] Insolvency, Restructuring and Dissolution Act 2018, section 70(4); 11 USC section 1129(b)(2)(B).
[18] Muhammed Ismail Noordin and Eden Li, ‘Cross-class cramdown of secured creditors – Singapore’s implementation of a US Chapter 11 tool’, International Insolvency & Restructuring Report 2023/24, www.wongpartnership.com/upload/medias /KnowledgeInsight/document/19030/WongPartnership_59-64_IIRR2023-24.pdf (accessed 06 June 2025).
[19] Report of The Committee to Enhance Singapore's Corporate Restructuring and Insolvency Regime (2025), www.mlaw.gov.sg/public-consultation-on-the-rni-committee-report (accessed 22 July 2025), pp 16–19.
[20] Part 26A of the UK Companies Act 2006.
[21] Stephanie Yeo and Clayton Chong, ‘Fixing the shareholder holdout problem in Singapore’ (5 October 2022), https://ccla.smu.edu.sg/sgri/blog/2022/10/05/fixing-shareholder-holdout-problem-singapore (accessed 6 June 2025).
[22] Smitha Menon, Clayton Chong and Muhammed Ismail Noordin, ‘Insolvency, Restructuring and Dissolution Act – Key Changes from the Financiers’ Perspective’, Legiswatch (February 2021), www.wongpartnership.com/upload/medias /KnowledgeInsight/document/14469/LegisWatch_InsolvencyRestructuring andDissolutionAct_KeyChangesfromthe FinanciersPerspective.pdf (accessed 6 June 2025).
[23] Clayton Chong and Muhammed Ismail Noordin Singapore, ‘The Singapore International Commercial Court and its role in establishing Singapore as a nodal jurisdiction’, International Insolvency & Restructuring Report 2022/23, www.wongpartnership.com/frontend/web /upload/2023/06/05/76-81_IIRR2022-23-WongPship.pdf (accessed 6 June 2025).