Korea Asset Management Corp v Daewoo Singapore: Compulsory Winding Up & Liquidator Independence

In Korea Asset Management Corp v Daewoo Singapore Pte Ltd (in liquidation), the Singapore High Court, on 16 February 2004, granted Korea Asset Management Corp leave to initiate compulsory winding up proceedings against Daewoo Singapore Pte Ltd, despite the company already undergoing creditors’ voluntary winding up. The court, presided over by V K Rajah JC, emphasized the importance of liquidator independence and the protection of creditor interests, particularly when the majority creditor is seeking compulsory winding up due to concerns about the voluntary liquidation process.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application allowed.

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Court grants leave for compulsory winding up of Daewoo Singapore despite voluntary liquidation, emphasizing liquidator independence and creditor rights.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Korea Asset Management CorpApplicantCorporationApplication allowedWon
Daewoo Singapore Pte Ltd (in liquidation)RespondentCorporationApplication opposedLost

3. Judges

Judge NameTitleDelivered Judgment
V K RajahJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Andre YeapRajah and Tann
Tan Teck WangRajah and Tann
Suresh NairAllen and Gledhill
Foo Hsiang MingAllen and Gledhill

4. Facts

  1. Daewoo Singapore Pte Ltd was undergoing creditors’ voluntary winding up.
  2. Korea Asset Management Corp (KAMCO) was the undisputed majority creditor, holding 71% of the admitted outstanding debt.
  3. KAMCO sought leave to initiate compulsory winding up proceedings.
  4. The company insisted on proceeding with voluntary winding up, citing concerns about additional costs.
  5. KAMCO raised concerns about the independence of the appointed liquidators from PWC.
  6. PWC had an associated entity in Korea, Samil Accounting Corporation, which had been involved in the restructuring of the Daewoo Group.
  7. Anjin, a Korean accounting firm, reported that the company had written off or intended to write off $420,931,000 in debts from related companies.

5. Formal Citations

  1. Korea Asset Management Corp v Daewoo Singapore Pte Ltd (in liquidation), OS 1632/2003, [2004] SGHC 25

6. Timeline

DateEvent
Restructuring of the Daewoo Group.
PWC provided advice on a possible scheme of arrangement for the company.
PWC performed a limited financial due diligence of the company.
Directors of the company filed a statutory declaration initiating a creditors’ voluntary winding up.
Directors appointed three partners from PWC as provisional liquidators.
Company issued notices of meetings to shareholders and creditors.
Applicants requested postponement of creditors’ meeting.
Liquidators responded to applicants' request regarding postponement.
Applicants queried the liquidators about perceived conflicts of interest.
Shareholders’ meeting held; DI resolved for the company to be wound up.
Creditors’ meeting convened; declared lapsed by applicants’ representative.
Liquidators stated that PWC had earlier undertaken work for the company.
Solicitors for the company alleged that the applicants had obstructed the efficient discharge of PWC’s duties.
Liquidators reiterated their independence from other PWC partnerships globally.
Solicitors for the applicants refuted allegations of obstruction.
Solicitors for the company reiterated that the liquidators viewed themselves as the liquidators of the company.
Liquidators made an ex parte application for orders regarding creditors’ meeting and powers as liquidators.
Court granted ex parte order.
Liquidators issued a second notice of meeting to creditors.
Second creditors’ meeting convened; declared lapsed by applicants’ representative.
Applicants’ solicitors reiterated that the applicants had an interest in all applications made by the liquidators to court.
Applicants were provided with a copy of the ex parte order of court obtained by PWC.
Solicitors for the applicants reserved their clients’ rights to take issue with the events that had transpired.
Applicants initiated an application for leave to file and proceed with a petition to wind up the company.
Court allowed the application for leave to initiate compulsory winding up proceedings.

7. Legal Issues

  1. Compulsory Winding Up vs. Voluntary Winding Up
    • Outcome: The court held that leave should be granted for compulsory winding up to ensure an independent inquiry and protect the interests of the majority creditor.
    • Category: Substantive
    • Sub-Issues:
      • Court's discretion in granting leave for compulsory winding up
      • Interests of creditors in winding up proceedings
      • Independence of liquidators
  2. Liquidator Independence
    • Outcome: The court emphasized the importance of liquidator independence and the need for liquidators to be free from any appearance of conflict of interest.
    • Category: Substantive
    • Sub-Issues:
      • Conflict of interest
      • Duty of impartiality
      • Appearance of independence
  3. Creditor Rights in Winding Up
    • Outcome: The court recognized the importance of protecting the rights of both majority and minority creditors, particularly in cases involving related entities.
    • Category: Substantive
    • Sub-Issues:
      • Majority creditor rights
      • Minority creditor rights
      • Voting rights at creditors' meetings

8. Remedies Sought

  1. Compulsory Winding Up Order

9. Cause of Actions

  • Winding up

10. Practice Areas

  • Insolvency
  • Liquidation
  • Corporate Law
  • Commercial Litigation

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Re Palmer Marine Surveys LtdEnglish authorityYes[1986] BCLC 106EnglandCited to highlight concerns about potential abuse of voluntary liquidation processes and the need for thorough investigation when assets are transferred to new entities.
Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte Ltd (in liquidation)Court of AppealYes[2002] 3 SLR 241SingaporeCited to explain the rationale behind provisions preventing actions against a company in liquidation without leave of court, which is to prevent a scramble among creditors.
Overseas Union Bank v Lew Keh LamunknownYes[1999] 3 SLR 393SingaporeCited to support the purpose of s 76(1)(c)(ii) of the Bankruptcy Act, which is to prevent the liquidators’ task from being made more difficult due to a scramble among creditors.
In re Southard & Co LtdunknownYes[1979] 1 WLR 1198EnglandCited to emphasize that when choosing between compulsory and voluntary winding up, the court must decide which option better serves the interests of unsecured creditors, particularly independent opposing creditors, and the public.
Re MCH Services LtdunknownYes[1987] BCLC 535EnglandCited to support the principle that a compulsory winding up order should not be refused if it would leave trade creditors with a justified feeling of grievance, depriving them of the opportunity to ensure an independent liquidator is in charge.
In re Aro Co LtdunknownYes[1980] Ch 196EnglandCited to indicate that the court has an absolute discretion under s 299(2) of the Act.
In re David Lloyd & CounknownYes(1877) 6 Ch D 339EnglandCited to support the principle that leave to proceed should be readily given if an applicant is merely attempting to claim property that prima facie belongs to them.
Meehan v Stockmans Australian Cafe (Holdings) Pty LtdunknownYes(1996) 22 ACSR 123AustraliaCited to support the proposition that a good reason for refusing leave would exist in cases where the company’s resources are threadbare and considerable costs would be incurred if leave were granted.
Re Berkeley Securities (Property) LtdunknownYes[1980] 3 All ER 513EnglandCited to support the principle that when the liability of the creditor needs to be a liquidated amount before it is admitted to proof, leave will usually be readily granted.
Re Islington Metal and Plating Works LtdunknownYes[1983] 3 All ER 218EnglandCited as a contrasting case to Re Berkeley Securities (Property) Ltd regarding when leave will be readily granted.
Re Zirceram Ltd (in liquidation)High CourtYes[2000] 1 BCLC 751EnglandExtensively cited to summarize the law pertaining to the consideration and weight that should be accorded to the views of creditors, especially regarding fairness and commercial morality.
Re Inside Sport Ltd (in liquidation)unknownYes[2000] 1 BCLC 302EnglandTentatively suggested that the recourse, where the identity of the liquidator is an issue, is to apply for a change of the liquidator under s 302 of the Act.
Re Pinkroccade Educational Services Pte LtdunknownYes[2002] 4 SLR 867SingaporeAppeared to accept that liquidators in voluntary liquidation have less exacting obligations than court liquidators appointed pursuant to a compulsory winding up.
In re J Burrows (Leeds) Ltd (in liquidation)unknownYes[1992] 1 WLR 1177EnglandCited to support the wider view that criminal prosecutions are embraced by the moratoriums.
R v DicksonunknownYes(1992) 94 Cr App R 7EnglandCited to support the wider view that criminal prosecutions are embraced by the moratoriums.
Re Timberland LtdunknownYes[1976] VR 790AustraliaCited as an example of Australian courts deciding that criminal prosecutions are not embraced by the moratoriums.
R A Ringwood Pty Ltd v LowerunknownYes[1968] SASR 454AustraliaCited as an example of Australian courts deciding that criminal prosecutions are not embraced by the moratoriums.
Re Lowerstoft Traffic Services LtdunknownYes[1986] BCLC 81EnglandCited to support the principle that liquidators should not only be independent, but indeed be seen to be so.
Re Pinstripe Farming Co LtdunknownYes[1996] 2 BCLC 295EnglandCited to support the principle that liquidators should not only be independent, but indeed be seen to be so.
Souster v Carman Construction Co LtdunknownYes[2000] BPIR 371EnglandCited to emphasize that the role of a voluntary liquidator in a petition for the compulsory winding up of a company is that of neutrality to assist the court.
Re Medisco Equipment LtdunknownYes[1983] BCLC 305EnglandCited to support the principle that the role of the voluntary liquidator is that of neutrality to assist the court.
Re Arthur Rathbone Kitchens LtdunknownYes[1997] 2 BCLC 280EnglandCited to support the principle that the role of the voluntary liquidator is that of neutrality to assist the court.
Re Roselmar Properties Ltd (No 2)unknownYes(1986) 2 BCC 99,157EnglandCited to emphasize that the voluntary liquidator has a duty to stand neutral between all creditors and to exercise a detached judgment in an almost quasi-judicial manner.
In re The Seremban General Agency, LtdunknownYes(1922) 3 FMSLR 3MalaysiaCited to support the principle that those who have the greatest financial interest in the assets of the company should usually be allowed the biggest say.

13. Applicable Rules

Rule Name
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) r 119
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) rr 106 to 130
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) r 114(4)
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) r 117(4)
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) r 118(3)

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 1994 Rev Ed) s 291(1)Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 296(7)Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 296(8)Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 299(2)Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 262(3)Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 227C(c)Singapore
Bankruptcy Act (Cap 20, 2000 Rev Ed)Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 253(2)(d)Singapore
Third Parties (Rights Against Insurers) Act (Cap 395, 1994 Rev Ed)Singapore
Companies Act s 302Singapore
Companies Act s 11(2)(b)Singapore
Companies Act s 325(1)Singapore
Companies Act s 325(2)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Compulsory winding up
  • Voluntary winding up
  • Liquidator independence
  • Creditors' rights
  • Conflict of interest
  • Related party transactions
  • Ex parte application
  • Majority creditor
  • Minority creditor
  • Proof of debt

15.2 Keywords

  • Winding up
  • Insolvency
  • Liquidator
  • Creditors
  • Daewoo
  • KAMCO
  • Singapore
  • Companies Act

17. Areas of Law

Area NameRelevance Score
Insolvency Law95
Winding Up95
Company Law40
Civil Procedure20

16. Subjects

  • Insolvency
  • Winding Up
  • Corporate Law