Schemes of arrangement for companies in financial difficulty

What a scheme is

A scheme of arrangement is an arrangement or compromise between a company and its creditors (or members) that the court has sanctioned. It works much like a contract, but with one key difference: once sanctioned, it binds every creditor it covers, including those who did not vote for it. That is why the court's approval is needed.

Schemes for companies in financial difficulty are now governed mainly by the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), which brought Singapore's insolvency and restructuring laws together. The company generally keeps running its business during a scheme, and its directors keep their powers.

The moratorium

A company that intends to propose a scheme can apply to court for a moratorium, which stops creditors from starting or continuing proceedings against it. Filing the application triggers an automatic moratorium of 30 days, or until the application is heard if that is sooner. The court can grant a longer moratorium.

The application must include a list of creditors and evidence of creditor support for the proposed scheme, or brief details of the scheme if it has not yet been fully worked out. A foreign company may also seek protection if it has a substantial connection with Singapore, for example assets or substantial business here.

Voting and court sanction

The company usually applies to court for permission to call a meeting of creditors. Creditors with different interests are put in separate classes. Within each class, the scheme needs the support of more than half the creditors present and voting, who must also hold three-quarters of the value of the debts voted.

If the votes are obtained, the court then decides whether to sanction the scheme. It will look at whether the statutory steps were followed, whether creditors had enough information, and whether the terms are reasonable.

Cram-down and pre-packaged schemes

The IRDA lets the court approve a scheme even where a class of creditors has voted against it, provided the overall voting requirements are met and the court is satisfied the scheme does not discriminate unfairly between classes and is fair and equitable to each dissenting class.

A pre-packaged scheme allows the court to sanction a scheme without a creditors' meeting. The company must show that creditors were given the information they needed, notice was given, and the scheme would have achieved the required majorities if a meeting had been held.

Rescue financing and other options

Lenders can be reluctant to put new money into a struggling company. The court can order that rescue financing be given priority over other debts if it is needed for the company's survival or for a better outcome than a winding up.

Schemes are one of several tools. Judicial management, where an independent judicial manager takes over, is another, and smaller companies may use the Simplified Insolvency Programme, which was revamped and made permanent from 29 January 2026. Further changes to the regime have been recommended by a government-appointed committee and were broadly accepted by the Ministry of Law in May 2026, so the rules may change again.

• Take advice early, before creditors start enforcing.
• Map out creditor classes and likely support.
• Consider whether a moratorium is needed and how long it should last.
• Plan any rescue financing alongside the scheme.

Getting advice on a restructuring

This guide is general information, and restructuring law is changing. If your company, or a company that owes you money, is considering a scheme, ask a lawyer to review the options for your specific situation as early as possible.