Recent statistics show that the number of companies compulsorily wound up in Singapore fell by 32.2% year-on-year in the first four months of this year. However, this does not necessarily mean the market is picking up. Felicia Tan, a partner in our restructuring and insolvency practice, told Lianhe Zaobao that the decline does not signal a broad improvement in the credit risk environment.

Felicia noted that it is too early to tell whether this downward trend will last, warning that the figures could easily rebound later in the year. She attributed the current decline largely to geopolitical and macroeconomic uncertainties. Crucially, she pointed out that creditors themselves might be under pressure, leading them to delay taking formal legal action against debtors.

“When their cash flow is only sufficient to sustain day-to-day operations, they tend to adopt a wait-and-see approach rather than investing resources into pushing for liquidation,” Felicia explained. She added that for unsecured creditors, compulsory liquidation is generally a “lose-lose situation”, as recovering more than 20 to 30% of a debt in a standard liquidation is already considered fortunate.