Building a Restructuring Hub: Lessons from Singapore

31 Pages Posted: 6 Jan 2022 Last revised: 24 Feb 2024

See all articles by Aurelio Gurrea-Martínez

Aurelio Gurrea-Martínez

Singapore Management University - Yong Pung How School of Law

Date Written: October 11, 2021

Abstract

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 adopted in Singapore, as well as the market and institutional factors generally found in other leading legal and financial centres. It will be argued that, 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, an undesirable reform for creditors can also undermine the leadership of a jurisdiction as a legal and financial centre. 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 continuing to be 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.

Keywords: insolvency, restructuring, bankruptcy, hub, regulatory competition, judiciary, insolvency index, reorganisation procedures, entrepreneurship, access to finance, economic growth

Suggested Citation

Gurrea-Martínez, Aurelio, Building a Restructuring Hub: Lessons from Singapore (October 11, 2021). Singapore Management University School of Law Research Paper 16/2021 , Available at SSRN: https://ssrn.com/abstract=3940512 or http://dx.doi.org/10.2139/ssrn.3940512

Aurelio Gurrea-Martínez (Contact Author)

Singapore Management University - Yong Pung How School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore
(+65) 6808-5160 (Phone)

HOME PAGE: http://https://law.smu.edu.sg/faculty

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