.A11.en ~ Gle~lhi 11ADVOCATES & SOLICITt7RS

7 DECEMBER 2017

MEMORANDUM OF LAW ON

THE ENFORCEABILITY UNDER SINGAPORE LAW OF

CLOSE-OUT NETTING PROVISIONS UNDER

THE ISDA/IIFM TAHAWWUT MASTER AGREEMENT

ALLEN & GLEDHILL LLP

ONE MARINA BOULEVARD #28-00SINGAPORE 0189$9

Allen &Gledhill LLP (UEN/Registration No. T07LL0925F) is registered in Singapore under the Limited Liability Partnerships Act(Chapter 163A) with limited liability. A list of the Partners and their professional qualifications may be inspected at the addressspecified above.

Allen~Gledhill

Memorandum of law on the enforceability under Singapore law of

Close-Out Netting provisions under the ISDA/IIFM Tahawwut Master Agreement

Introduction

This memorandum addresses the questions (set out in bold print and italics below) raised

by the International Swaps and Derivatives Association, Inc. ("ISDA") and the International

Islamic Finance Market ("IIFM") in a letter to us relating to the enforceability under

Singapore law of the termination, bilateral close-out netting and multibranch close-out

netting provisions of the 2010 ISDA/IIFM Tahawwut Master Agreement (the "TMA")

published by ISDA and IIFM.

Unless otherwise defined, terms defined and references construed in the TMA have the

same meaning and construction in this memorandum. References in this Memorandum to

"DFT Terms Agreement" shall, where the context requires, include Designated Future

transactions to be entered into pursuant to such DFT Terms Agreement.

The opinions expressed in this memorandum are confined to the laws of Singapore as of

the date of this memorandum. We do not express any opinion on issues arising under the

laws of any other jurisdiction or under Shari'ah law.

We should mention from the outset that pursuant to Section 3 of The Application of

English Law Act, Chapter 7A of Singapore (the "English Law Act"), the common law of

England, so far as it was part of the law of Singapore immediately before the coming into

force of the English Law Act (that is, on 12th November, 1993), shall continue to be part of

the law of Singapore. Prior to the passing of the English Law Act, Section 5(1) of the Civil

Law Act, Chapter 43 of Singapore (which has been repealed by the English Law Act),

provides that a Singapore court deciding issues with respect to mercantile law generally

shall decide such issues in the same manner as an English court, unless there are

contrary provisions or case law in force in Singapore.

I n this regard, we would advise that the law of contracts in Singapore tends to follow the

English law of contract. On the other hand, the law relating to insolvency in Singapore is

primarily set out in the Companies Act, Chapter 50 of Singapore (the "Companies Act")

(and the Companies Act makes applicable to some extent the provisions of the Bankruptcy

Act, Chapter 20 of Singapore (the "Bankruptcy Act") to insolvent winding up and also

judicial management) although English case law may still be relevant in interpreting certain

provisions of the Companies Act or the Bankruptcy Act for which equivalent or similar

provisions exist in England or in setting out principles of English common law relating to

insolvency which are not codified in the Companies Act or the Bankruptcy Act.

This memorandum is provided in respect of:

(a) Transactions which include any or all of the Transactions described in Appendix A;

and

(b) entities located in Singapore which are of a type set out in Appendix B

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II. Close-Out Netting Under the TMA

The discussions under this part II of this memorandum are based on the following factsand assumptions:

(a) two institutions, (either two derivatives dealers or a derivatives dealer and asophisticated end-user of derivatives), each of which is a type of entity fallingwithin one of the category types specified in Appendix B as covered by thisopinion have entered into a TMA. The parties have selected either New York lawor English law to govern the TMA. At least one of the institutions entering the TMAis a company incorporated in Singapore under the Companies Act and neitherinstitution has specified that the provisions of Section 10(a) of the TMA apply to it(unless otherwise stated in this opinion);

(b) the provisions of the TMA that we deem crucial to our opinion (being Sections 1(c),2, 5 and 6 of the TMA) have not been altered in any material respect (we considerthat any selection contemplated by Sections 5 and 6 of the TMA and madepursuant to a Schedule to the TMA or in a Confirmation of a Transaction or a DFTTerms confirmation relating to a Designated Future transaction would not beconsidered material alterations);

(c) on the basis of the terms and conditions of the TMA and other relevant factors,and acting in a manner consistent with the intentions stated in the TMA, theparties over time enter into a number of Transactions and DFT Terms Agreementsthat are intended to be governed by the TMA. The Transactions entered into or tobe entered into, and the Designated Future transactions to be entered intopursuant to DFT Terms Agreements, include any or all of the transactionsdescribed in Appendix A of this Memorandum;

(d) generally speaking, some of such Transactions provide for, and some of suchDFT Terms Agreements contemplate one or more Designated Future transactionsproviding for, an exchange of cash by both parties and others provide for thephysical delivery of shares, bonds or commodities in exchange for cash;

(e) after entering into these Transactions and DFT Terms Agreements and prior to thematurity thereof (in the case of Transactions) or the dates on which the relevantDesignated Future transactions are scheduled to be entered into (in the case ofDFT Terms Agreements), one of the parties, which is incorporated under the lawsof Singapore, becomes the subject of a voluntary or involuntary proceeding underthe insolvency laws of Singapore and, subsequent to the commencement of theinsolvency, either that party or an insolvency official seeks to assume or continuethe Confirmations and/or DFT Terms confirmations representing profitableTransactions and/or Designated Future transactions, respectively, for the insolventparty and reject the Confirmations and/or DFT Terms confirmations representingunprofitable Transactions and/or Designated Future transactions, respectively, forthe insolvent party;

(f) the TMA is legal, valid, binding and enforceable under either New York law orEnglish law by which it is expressed to be governed and under Shari'ah law; and

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(g) the Transactions and DFT Terms Agreements are entered into by the parties bona

fide, on an arms' length and commercial basis, and are properly entered into and

executed. We express no view on the enforceability of any Transactions or DFT

Terms Agreements and assume that the Transactions and DFT Terms

Agreements are enforceable.

We make no distinction in this memorandum between banks and corporations

incorporated under the Companies Act in considering the impact of the insolvency of the

Defaulting Party on the enforceability of Sections 6(d), 6(e), 6(f) and 6(h) of the TMA (the

"Close-Out Provisions"). There is no special set of rules applicable to banks in the event

of insolvency' and our conclusions in this memorandum therefore apply to both banks and

corporations incorporated under the Companies Act.

1. Assuming the parties have not selected Automatic Early Termination upon certain

insolvency events to apply to the insolvent party organised in Singapore, are the

provisions of the TMA permitting the Non-defaulting Party to terminate all

outstanding Transactions and all outstanding DFT Terms Agreements upon the

insolvency of its counterparty enforceable under the laws of Singapore?

Corporations

1.1 In general, the types of insolvency proceedings that a Singapore incorporated company

may be subject to in Singapore are the following:

(a) Winding-up: A winding-up under Part X of the Companies Act. This may be (i) an

involuntary winding-up effected by the court, (ii) a voluntary winding-up approved

by a special resolution of its members or (iii) a voluntary winding-up at the end of

the fixed term or upon the occurrence of some other event specified in the

company's articles of association and approved by an ordinary resolution of its

members. A "members' voluntary winding-up" or solvent voluntary liquidation

requires the directors of the company to make a statutory declaration to the effect

that they believe that the company will be able to pay its debts in full within 12

months of the date of the declaration; a voluntary winding-up in which such a

declaration cannot be given is a "creditors' voluntary winding-up" or insolvent

liquidation. A provisional liquidator may be appointed by the court at any time after

the making of a winding-up application and before the making of a winding-up

order.

Save for Section 62A of the Banking Act, Chapter 19 of Singapore (the "Banking Act") which should not affect our

analysis in Part II or Part III. Section 62A of the Banking Act ("Section 62A") deals with the set-off of a depositor's

liabilities to a bank in Singapore against the deposits of the depositor placed with the bank, in the event of the winding-

up of the bank. The issue here is whether "depositor's liabilities" in the context of Section 62A refers to the liabilities of

the depositor before the application of Netting Provisions, or after. In our view, if automatic early termination is elected

and the Netting Provisions apply, "liabilities" should refer to the net liabilities of the depositor after the application of

the Netting Provisions. If automatic early termination is not elected there is a question of whether the Mandatory

I nsolvency Set-off Provisions (defined in paragraph 3.2.1) are found to supersede the Close-out Provisions. If the

Mandatory Insolvency Set-off Provisions are found to supersede the Close-Out Provisions, these rules would operate

to set-off all amounts under the TMA as well as the depositor's liabilities. However, this would achieve the same

economic effect as though the Close-out Provisions were applied and the amounts were set-off under Section 62A.

Accordingly Section 62A would not affect our analysis in respect of the enforceability of the Close-out Provisions under

the TMA as set out in this memorandum. For completeness, we would also highlight that certain other licensed

financial institutions such as insurers can be subject to rules which are equivalent to Section 62A.

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(b) Judicial Management: Judicial management under Part VIIIA of the Companies

Act (which does not apply to a company which has gone into liquidation, banks,

finance companies and insurance companies licensed in Singapore, unless the

public interest so requires). The company, its directors or any of its creditors may

make an application to court applying for a judicial management order and the

court may make the order if it is satisfied that the company is or is likely to become

unable to pay its debts and it considers that to do so would be likely to result in,

inter alia, the survival of the company, or the whole or part of its undertaking as a

going concern, the approval under Section 210 or 2111 of the Companies Act of a

compromise or arrangement between the company and any such persons as are

mentioned in that section, or a more advantageous realisation of the company's

assets than would be achieved upon awinding-up. Section 227X(b) of the

Companies Act expressly allows the court to apply any provisions on winding-up

within Part X of the Companies Act to judicial management, including the right of

disclaimer and the mandatory insolvency set-off rules (described below).

(c) Arrangement: A compromise or arrangement under Sections 210, 211, 212 and

309 of the Companies Act whereby proposals between the company and its

creditors, members, or holders of units of shares (or a class of any of the

foregoing)2 for a composition in satisfaction of its debts can, if resolved upon by

the requisite number of creditors (and if sanctioned by the court), bind all its

creditors, members, or holders of units of shares (or the relevant class).

Winding-up and Judicial Management

1.2 We are of the view that the Singapore courts should recognise the provisions in the TMA

providing for the termination of all outstanding Transactions and all outstanding DFT

Terms Agreements upon the giving of notice to the Defaulting Party (i.e. the insolvent

party) following the insolvency (i.e. the winding up or judicial management) of the

Defaulting Party. We hold this view on the basis that these provisions constitute the terms

of the TMA which are binding on the liquidator of the Defaulting Party.

1.3 The right of the Non-defaulting Party to designate an Early Termination Date and

terminate the Transactions and the DFT Terms Agreements with notice after the onset of

insolvency may, however, be affected if the liquidator of the Defaulting Party has already

exercised his right to disclaim any of the Transactions and/or DFT Terms Agreements

under Section 3323 of the Companies Act. Section 332 of the Companies Act allows the

liquidator of the Defaulting Party to disclaim unprofitable contracts with the leave of the

courts of Singapore or the committee of inspection (if any)4 at any time within 12 months

In the case of a Singapore incorporated company or a Singapore registered branch under judicial management, thiswould be limited to the creditors of the company or branch only.

Section 227X, in the case of judicial management. Under Section 227X of the Companies Act, a court may apply

certain provisions in respect of winding-up to a company under judicial management, including the right of disclaimer

and the mandatory insolvency set-off rules.

The liquidator may, and shall, if requested by any creditor or contributory, summon separate meetings of the creditorsand contributories for the purpose of determining whether or not the creditors or contributories require the appointmentof a committee of inspection to act with the liquidator, and if so who are to be members of the committee. The

committee of inspection consists of creditors and contributories of the company or persons holding (a) general powersof attorney from creditors or contributories, or (b) special authorities from creditors or contributories authorising the

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after the commencement of the winding up or such extended period as is allowed by the

Court. However, where the property (i.e. the Transactions and/or DFT Terms Agreements)

has not come to the knowledge of the liquidator within one month after the

commencement of the winding up, the power of disclaiming may be exercised at any time

within 12 months after the liquidator has become aware of the property, or such extended

period as is allowed by the Court. The other party to a disclaimed contract will then need

to prove as an unsecured creditor in respect of any damages payable for any loss in

respect of the non-performance of the disclaimed contract. This right of disclaimer applies

to property of the company that constitutes onerous property at the time that the liquidator

exercises or is entitled to exercise its right of disclaimer. Unlike the clawback provisions

such as provisions concerning transactions at an undervalue or unfair preferences

(discussed in paragraphs 3.2.10 to 3.2.14 below), this right cannot be exercised in respect

of contracts that have matured or been terminated before the liquidator has had the

opportunity to exercise its rights of disclaimer. Please refer to paragraph 2.1 for a

discussion on the effects of Automatic Early Termination on the right of disclaimer.

1.4 Accordingly, there is a risk that the liquidator of the Defaulting Party may attempt to

"cherry pick" if the parties have not elected that Automatic Early Termination will apply to

the Defaulting Party and the Non-defaulting Party chooses to exercise its right to terminate

the Transactions and DFT Terms Agreements sometime after the insolvency of the

Defaulting Party. In such a case, the damages which may be claimed by the Non-

defaulting Party arising out of the disclaimer will be set-off against the amounts due to the

liquidator under the Transactions which have neither been disclaimed by the liquidator nor

terminated by the Non-defaulting Party.

1.5 However, it is expressly stated in Section 1(c) of the TMA that the TMA, all Confirmations

and all DFT Terms confirmations (and the DFT Terms Agreements which they evidence)

form a single agreement between the parties. We are of the view that this should be

effective to constitute the TMA, the Transactions and the DFT Terms Agreements as one

agreement between the parties and hence prevent the liquidator from disclaiming only

some of the Transactions or the DFT Terms Agreements. Accordingly, even in the

situation where Automatic Early Termination does not apply and the Non-defaulting Party

exercises its right to terminate the Transactions and the DFT Terms Agreements

sometime after the insolvency of the Defaulting Party, we are of the view that the liquidator

of the Defaulting Party would not be able to disclaim only some of the Transactions or

some of the DFT Terms Agreements as the Transactions and the DFT Terms Agreements

documented by the TMA are considered as one agreement.

1.6 We would further highlight that Singapore does not restrict the enforceability of ipso facto

clauses (i.e. clauses which entitle an innocent contracting party to terminate the

agreement and/or exercise certain remedies upon the commencement of judicial

management, a scheme of arrangement or other insolvency-related proceeding). In 2013,

the Insolvency Law Review Committee (the "ILRC") which had been set up by the Minister

of Law to review the existing personal and corporate insolvency regimes, released its final

reports. The Committee in Singapore specifically considered the issue of whether to

persons named therein to act on such a committee, appointed by the meetings of creditors and contributories in such

proportions as are agreed or, in case of difference, as are determined by the court.

5 Available online at: http://www.miaw.gov.sq/news/pubic-consultations/public-consultation-on-ILRC-report.html

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introduce restrictions on the enforcement of ipso facto clauses, similar to that found in the

US Bankruptcy Code. The Committee noted that under Singapore law, a contracting partyis generally not precluded from relying on ipso facto clauses. The Committee noted

various arguments for and against restricting the enforcement of ipso facto clauses,

including the argument that denying the solvent counterparties' right to terminate on

account of an ipso facto clause will result in the counterparties being unable to close out

and net the amounts owed under open contracts, resulting in cherry pickings. The

Committee finally concluded that it did not recommend introducing restrictions on the

enforcement of ipso facto clauses. When the Companies Act was amended on 23 May

2017 to introduce the proposals of the Committee relating to debt restructuring, no

restrictions on ipso facto clauses were introduced.

1.7 We would therefore conclude that the provisions of the TMA permitting the Non-defaulting

Party to terminate by notice all of the Transactions and the DFT Terms Agreements upon

the insolvency of the Defaulting Party are enforceable under the laws of Singapore.

1.8 We would also highlight that there are certain moratoria in connection with judicial

management. However, these moratoria do not affect a party's right to terminate

transactions or to exercise rights of set-off or netting. As mentioned above, Singapore law

generally does not contain restrictions on ipso facto clauses per se, unless they are part of

the anti-deprivation rule, which is a different doctrine and one that is more restricted. We

have discussed the application of the anti-deprivation rule in our response to question 3. In

the case of Electro Magnetic (S) Ltd (under judicial management) v Development Bank of

Singapore Ltd [1994] SGCA 33, the Court of Appeal has held that a creditor may exercise

a right of contractual set-off against a company placed under judicial management. The

relevant moratoria in relation to judicial management prohibit any steps from being taken

to enforce a charge on or security over the company's property, and also prohibit

proceedings being commenced against the company. The Court of Appeal held that:

(a) aright of set-off is a personal right and not a security within the meaning of the

judicial management moratoria, and that the bank, in exercising its right of set-off,

did not contravene the moratoria in relation to enforcement of security; and

(b) "proceedings" connotes a process initiated whether in court or by way of

arbitration or a step in such process, and that the exercise of a right of set-off is an

extra-legal step is not such a process or a step in such process; rather, it is a self-

help remedy. Accordingly, the exercise of the bank's right of set-off did not

contravene the judicial management moratoria against the commencement of

proceedings.

Given that contractual rights of netting are similarly contractual rights and self-help

remedies, we are of the view that the same analysis and conclusion would apply to netting

rights.

1.9 Section 227D(5) of the Companies Act provides that the moratoria set out under Section

227D(4) do not affect the exercise of any legal right under any arrangement (including a

set-off arrangement or a netting arrangement) that may be prescribed by regulations made

under Section 411 of the Companies Act. These carve-outs are set out under the

6 Paragraph 88(5) of the ILRC report.

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Companies (Prescribed Arrangements) Regulations 2017 and relate not to set-off and

netting arrangements per se, but to security interest arrangements in connection with, inter

alia, derivatives transactions and master netting agreements'. In a note released by the

Senior Minister of State for Law and Finance Ms Indranee Rajah, SC, titled "Enhancing

Singapore as an International Debt Restructuring Centre for Asia and Beyond"8, the

Minister discussed the carve outs, and stated that:

"There are also carve outs for certain arrangements, such as derivativetransactions in relation to closeout netting. While the exercise of nettingand sef-off rights under these contracts are not affected by themoratoriums, this carve out ensures that rights under surroundingsecurity interest arrangements are not affected by the moratoriums. "

1.10 This is consistent with our analysis set out above that the moratoria do not affect

termination, set-off and netting rights per se.

Schemes of Arrangement

1.11 The Non-defaulting Party's ability to terminate, set-off or net Transactions and DFT Terms

Agreements may be affected (for instance, where the company and creditors agree to

compromise or restructure the claims under the TMA in a way that is inconsistent with the

set-off and netting rights under the TMA) by a scheme of arrangement, but an

arrangement is only implemented after certain procedural steps have been taken

(including court approval, the convening of meetings of creditors, members and/or holders

of units of shares of the Defaulting Party, and lodgement of the order of court approving

the compromise or arrangements). If the Non-defaulting Party terminates the Transactions

and DFT Terms Agreements and exercises its rights of set-off and close-out netting prior

to the arrangement taking effect, the arrangement should not retrospectively affect such

termination, set-off and netting.

1.12 Similar to judicial management, there are certain moratoria that may apply, but we are of

the view that such moratoria do not affect the ability of the Non-defaulting Party to

terminate, set-off or net transactions prior to a scheme taking effect. The moratoria are as

follows. Where a company proposes or intends to propose a compromise or arrangement

between itself and its creditors, the company may apply under Section 211 B for the court

to make certain orders, which include orders to restrain the passing of a resolution for

winding-up, and orders restraining the taking of steps to enforce security (the "court-

ordered moratorium"). Upon the making of such an application, an automatic moratorium

will apply from the date of the application to court for a period of 30 days (or until the court

has decided the application, if earlier), similarly restraining matters such as the taking of

steps to enforce security or the commencement of any proceedings. However, neither the

While "derivatives transactions" and "master netting agreement" are exhaustively defined, it is not necessary for the

purposes of our opinion to examine which types of transactions fall within the scope of these definitions, as in our view

the moratoria do not, in the first place, affect set-off and netting rights.

A copy of this note has been attached as Appendix C to this memorandum.

in the case of Singapore-incorporated banks or insurers, the court will not approve arrangements which have been

proposed for the purposes of or in connection with any scheme under Section 212 under which the whole or any part

of the undertaking or property of the company is to be transferred, unless the Minister charged with responsibility for

banking or insurance matters has consented to such an arrangement or certified that his consent is not required. Thus,

for Singapore-incorporated banks or insurers, this could mean additional time before the scheme of arrangement is

approved.

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automatic moratorium nor the court-ordered moratorium affects the right of the Non-

defaulting Party to terminate, set-off or net the Transactions or the DFT Terms

Agreements. We are of the view that, as with the moratoria in connection with judicial

management, the moratoria would not affect the exercise of termination, set-off or netting

rights'°.

1.13 In addition to the moratoria under Section 211 B, moratoria may be made against the

subsidiary, holding company or ultimate holding company of a company against which an

order has been made under Section 211 B(1). Such moratoria have the same scope as the

Section 211 B moratoria, and accordingly, our view is that the same analysis would apply,

and such moratoria would not affect the exercise of termination, set-off or netting rights.

Temporary stays under resolution powers

1.14 We would highlight the following proposals which may, when implemented, result in delays

in the ability of allon-defaulting party to exercise its termination rights against a Defaulting

Party that is a financial institution in Singapore.

1.15 In June 2015, the Monetary Authority of Singapore (the "MAS") released a consultation on

Proposed Enhancements to Resolution Regime for Financial Institutions in Singapore.

This was followed by a second consultation paper on the Proposed Legislative

Amendments to Enhance the Resolution Regime for Financial Institutions in Singapore

(the "April 2016 CP"). These consultation papers set out proposed restrictions on

termination rights in relation to resolution proceedings.

1.16 Following these consultations, the Monetary Authority of Singapore (Amendment) Act (the

"MAS Amendment Act") was gazetted in August 2017. The MAS Amendment Act has not

come into force, but when it does, it will amend the Monetary Authority of Singapore Act,

Chapter 186 of Singapore (the "MAS Act") to introduce the following:

(a) anew Section 83 that will provide that, in relation to a contract entered into by:

(i) a pertinent financial institution" that is subject to a resolution measure; or

(ii) an entity that is part of the pertinent financial institution's group, where the

pertinent financial institution is the subject of a resolution measure and the

obligations of the entity under the contract are guaranteed or otherwise

supported by the pertinent financial institution,

and where all the substantive obligations of the contract continue to be performed

10 Section 211 B(12) provides for the provision of carve-outs from the moratoria, similar to Section 227D(5) in relation to

judicial management. The scope of the carve-outs are the same and apply to security interest arrangements in

connection with inter alia, derivatives contracts and master netting agreements, and support the view that the

moratoria do not affect set-off and netting rights per se, only surrounding rights.

A "pertinent financial institution" means a licensed bank, finance company, merchant bank, financial holding company,

operator or settlement institution of a designated payment system, an approved exchange, recognised market

operator, licensed trade repository, licensed foreign trade repository, approved or recognised clearing house,

approved holding company, holder of a capital markets services licence (other than a holder of a capital markets

services licence who carries on a business in the regulated activity of providing credit rating services), an approved

trustee for an authorised collective investment scheme or a licensed trust company. The definition of a pertinent

financial institution is prescribed in regulations and the MAS has not released updated regulations in connection with

the MAS Amendment Act as of the date of this opinion.

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by the parties to the contract, the resolution measure12 and any event directly

linked to it will be disregarded in determining the applicability of any termination

rights, and any exercise of a termination right on the basis of the resolution

measure or linked event will have no effect.

This would essentially have the effect of preventing parties from terminating such

a contract on the basis of the occurrence of a resolution measure or events which

are directly linked to resolution; and

(b) anew Section 84 that will introduce a right to temporarily suspend termination

rights for contracts where one of the parties is:

(i) a pertinent financial institution that is the subject or proposed subject of a

Singapore resolution measure;

(ii) a pertinent financial institution which is the subject of a foreign resolution

or for which the foreign resolution authority has informed the MAS that

there are grounds for carrying out such resolution; or

(iii) an entity within the pertinent financial institution's group that is the subject

or proposed subject of a resolution measure and whose obligations under

the contract are guaranteed or otherwise supported by that pertinent

financial institution, where the contract has a termination right that is

exercisable if the pertinent financial institution becomes insolvent or is in a

certain financial condition.

The suspension does not affect termination rights under the contract which

become exercisable for a breach of a basic substantive obligation only. "Basic

substantive obligation" means, in relation to a contract, an obligation provided by

the contract for payment, delivery or the provision of collateral.

The suspension must expire no later than the same time on the second business

day after it takes effect.

1.17 We would note the following in respect of the proposed provisions:

(a) where early termination rights are not affected by the proposed Sections 83 and

84, our conclusions on the enforceability of early termination rights as set out in

response to this question would not be affected;

(b) in respect of early termination rights that arise in connection with the entry of the

pertinent financial institution into resolution:

(i) Section 83, once enacted, will prevent a termination right from being

triggered under the contracts described above in connection with the

MAS' exercise of resolution powers. However, this is limited to termination

rights which are exercised on the basis of the implementation of a

resolution measure or an event directly linked to the resolution measure

and is subject to the express proviso that substantive obligations provided

for in the contract continue to be performed. Accordingly, termination

12 A resolution measure can also include a determination by the MAS that a foreign resolution action be recognised in

whole or in part.

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rights which are not triggered by a resolution measure or events directly

linked thereto would continue to be enforceable; and

(ii) the suspension under Section 84, if invoked, would serve to suspend any

termination right (including termination rights that do not arise due to a

resolution measure or a directly linked event). However, this stay is

temporary and limited strictly in time, as described above. Furthermore,

the suspension does not affect termination rights under the contract which

become exercisable for a breach of a basic substantive obligation.

2. Assuming the parties have selected Automatic Early Termination upon certain

insolvency events to apply to the insolvent counterparty organised in Singapore,

are the provisions of the TMA automatically terminating all outstanding

Transactions and all outstanding DFT Terms Agreements upon the insolvency of a

counterparty enforceable under the laws of Singapore?

2.1 As stated above, Section 332 of the Companies Act allows the liquidator of the Defaulting

Party to disclaim unprofitable contracts with the leave of the courts of Singapore or the

committee of inspection. However, we are of the view that Section 332 will not be

applicable in the case where Automatic Early Termination is elected because the

Automatic Early Termination provisions will be effective to terminate the Transactions and

DFT Terms Agreements immediately following the insolvency of the Defaulting Party. The

result will be that the liquidator of the Defaulting Party will not have the opportunity to

disclaim any of the Transactions and the DFT Terms Agreements under Section 332.

2.2 In addition (as in the case of the situation addressed in question 1 above where Automatic

Early Termination does not apply), as it is expressly stated in Section 1(c) of the TMA that

the TMA, all Confirmations and all DFT Terms confirmations (and the DFT Terms

Agreements which they evidence) form a single agreement between the parties, we are of

the view that this should be effective to constitute the TMA, the Transactions and the DFT

Terms Agreements as one agreement between the parties and hence prevent the

liquidator from disclaiming only some of the Transactions or the DFT Terms Agreements.

In addition, as described in question 1, the moratoria in connection with judicial

management and schemes of arrangement do not restrict termination (whether automatic

or at the election of the parties).

2.3 Accordingly, we are of the view that, under Singapore law, the Automatic Early

Termination provisions of the TMA should prevent the liquidator of the Defaulting Party

from "cherry picking". We would therefore advise, in response to the specific question

above, that the provisions of the TMA automatically terminating all the outstanding

Transactions and all outstanding DFT Terms Agreements upon the insolvency of the

Defaulting Party are enforceable under the laws of Singapore.

2.4 However, as described in our response to question 1 above, we are of the view that the

provisions of the TMA permitting the Non-defaulting Party to terminate by notice all of the

Transactions and the DFT Terms Agreements upon the insolvency of the Defaulting Party

are enforceable under the laws of Singapore, even where the parties have not selected

Automatic Early Termination. Accordingly, we would take the view that it is not necessary

for Automatic Early Termination to be selected where facing a Singapore party under the

TMA.

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Allen~Gledl-iill

3. Are the provisions of the TMA providing for the netting of termination values in

determining a single lump-sum termination amount upon the insolvency of a

counterparty enforceable under the laws of Singapore? In this connection, your

opinion should address not only (in respect of Fully Delivered Terminated

transactions) the provisions relating to Early Termination Amounts determined in

accordance with Sections 6(d) and 6(e) of the TMA but also:

• In relation to Non-Fully Delivered Terminated Transactions and Terminated DFT

Terms Agreements, the provisions of Section 6(f) of the TMA including the

provision for payment in the circumstances contemplated in Section 6(f)(v)(2) of

liquidated damages in an amount equal to the value (or, as the case maybe, the

absolute value) of the Relevant Index; and

• Generally, the set-off of amounts payable between the parties to the TMA

pursuant to Section 6(h) of the TMA.

3.1 Overview

3.1.1 The discussions below relating to the enforceability of the provisions of the TMA providing

for such netting in the event of the insolvency of the Defaulting Party concerns close-out

netting effected pursuant to Automatic Early Termination as well as pursuant to

termination by notice. We set out below the relevant considerations in the context of the

insolvency of the Defaulting Party, in respect of each of the following:

(a) the provisions relating to Fully Delivered Terminated Transactions and Early

Termination Amounts under Sections 6(d) and 6(e) of the TMA;

(b) the provisions relating to Non-Fully Delivered Terminated Transactions and

Terminated DFT Terms Agreements under Section 6(f) of the TMA; and

(c) the provisions relating to set-off under Section 6(h) of the TMA.

3.1.2 As a starting point, we would note that netting and set-off may be construed as distinct

concepts. Close-out netting generally involves three steps:

(a) termination of outstanding transactions;

(b) valuation of the terminated transactions; and

(c) payment of a single net amount.

3.1.3 In contrast, set-off involves the setting-off of a debtor's cross-claim against the creditor's

primary claim. Outside insolvent winding-up and judicial management, there are four

principal forms of set-off under Singapore law, namely (a) equitable set-off, (b) procedural

or legal set-off, (c) combination, and (d) contractual set-off. Within insolvent winding-up

and judicial management, there is the separate concept of mandatory insolvency set-off.

For the purposes of this memorandum, we are primarily concerned with contractual set-off

and mandatory insolvency set-off.

3.1.4 The distinction between netting and set-off could have implications in terms of whether

mutuality is required —the argument is if the computation of amounts such as the Ciose-

out Amount and the Relevant Index Amount is by way of netting and not set-off, this is a

mere accounting between the parties to determine a single amount and does not involve

the set-off of various claims. By extension, the mandatory insolvency set-off provisions

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Allen~Gleclhill

and considerations of mutuality13 should not be relevant. We would note that this concept

has not been tested in Singapore. If under English law or New York law, it is determined

that the determination of these amounts is by way of netting, we believe the better view is

that Singapore courts will similarly characterise it as such.

3.2 Fully Delivered Terminated Transactions and Early Termination Amounts under

Sections 6(d) and 6(e) of the TMA

Pari Passu Distribution

3.2.1 It is provided in Section 300 of the Companies Act that the property of a company shall, on

its winding-up, be applied pari passu in satisfaction of its liabilities apart from secured

liabilities and statutorily preferred debts such as employees' salary and the costs and

expenses of the liquidation14. Separately, in the case of an insolvent winding-up or possibly

judicial management the mandatory insolvency set-off provisions which are set out in

Section 88(1) of the Bankruptcy Act, and applied to companies by Section 327(2) of the

Companies Act (the "Mandatory Insolvency Set-Off Provisions") could apply. The

question accordingly arises as to whether Sections 6(d) and 6(e) of the TMA (the "Netting

Provisions") represent an attempt by the parties to vary by contract the provisions of

Section 300 of the Companies Act and consequently confer upon the Non-defaulting Party

a result which cannot be effectively achieved in the absence of the creation of a security

interest in favour of the Non-defaulting Party.

3.2.2 In this regard, we would point out that there are no Singapore authorities dealing directly

with the issue as to whether the Netting Provisions will contravene the pari passu rule of

distribution as set out in Section 300 of the Companies Act or under case law or the

mandatory insolvency set-off provisions. However, it is our opinion that the better view is

that the Netting Provisions are valid and enforceable as express clauses of the TMA and

in accordance with their terms for the reason that the effect of the Netting Provisions will

probably achieve the same result as would be achieved under the Mandatory Insolvency

Set-Off Provisions. We will examine below the operation of the Mandatory Insolvency Set-

Off Provisions.

3.2.3 The Mandatory Insolvency Set-Off Provisions, essentially provide that, where there have

been mutual credits, mutual debts and other mutual dealings between an insolvent

company and one of its creditors, then the total sum due from one party must be set-off

against the total sum due from the other party such that only the balance is payable by or

to the liquidator. The applicable case law suggests that the Mandatory Insolvency Set-Off

Provisions cover not only debts existing at the date of liquidation but also debts which

arise later out of rights and liabilities existing at that time. This means that the debts need

not actually be payable at the date of liquidation and accordingly, the Mandatory

Insolvency Set-Off Provisions will extend to cover the Early Termination Amount for Fully-

Delivered Terminated Transactions in respect of Transactions existing at such date of

liquidation notwithstanding that the Early Termination Amount is only determined after

such date of liquidation. As mentioned in paragraph 3.1 above, there is an argument that

if computation of the Close-out Amount and the Relevant Index Amount involve netting

rather than set-off, the mutuality requirements should not apply. However, as this point has

13 See paragraphs 3.2.1 to 3.2.4 below.

14 The pari passu rule applies both to voluntary and compulsory liquidation.

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Allen~Gledhill

not been tested in Singapore, we have set out the analysis in respect of the mutuality

requirements.

3.2.4 In order for set-off to apply under the Mandatory Insolvency Set-Off Provisions, the

following conditions must be met:

(a) there must be mutuality. Broadly speaking, mutuality requires each claimant to be

liable on the debt to the other and each claimant must beneficially own the debt

that is sought to be set off (for instance, where the parties to the TMA are acting

as principals and own the beneficial interests in the debts)15;

(b) the mutual debts must be capable of maturing into monetary claims, and thereby

establishing a liability on each side which is pecuniary in nature. In respect of

transactions which involve physical delivery of shares, bonds or commodities, this

requirement is achieved in the TMA by converting the delivery obligations into

monetary obligations upon the occurrence or the designation of an Early

Termination Date; and

(c) set-off will not be available to the Non-defaulting Party if it had notice, at the time

the parties entered into the TMA and each Transaction, of the making of a

winding-up application against the Defaulting Party, appointment of a provisional

liquidator in respect of the Defaulting Party, or a judicial management application

against the Defaulting Party. In contrast with conditions (a) and (b) above, the

non-fulfilment of this condition (c) will affect only those Transactions entered into

after the Non-defaulting Party had notice of the making of a winding-up application,

the appointment of a provisional liquidator or the judicial management application

against the Defaulting Party (with the result that set-off may not be available with

respect to such Transactions).

3.2.5 The Netting Provisions presently provide for (a) the acceleration of all payment obligations

by each Party and the set-off or netting of amounts to derive the Close-out Amount under

Section 6(d) and (b) set-off between (i) the Close-out Amount with respect to the Fully

Delivered Terminated Transactions and (ii) the Unpaid Amounts to derive the Early

Termination Amount under Section 6(e). In our view, each of these would qualify as

mutual debts and mutual credits for the purpose of the Companies Act (on the

assumptions set out in this memorandum) with the result that the Mandatory Insolvency

Set-Off Provisions will produce a result consistent with the contractual netting achieved

under the TMA. This therefore leads us to our conclusion that the Netting Provisions are

consistent with Section 300 of the Companies Act and the Mandatory Insolvency Set-Off

Provisions and would be enforceable under Singapore law.

Disposition of Property after Commencement of Winding-up

3.2.6 Section 259 of the Companies Act provides that any disposition of the property of a

company made after the commencement of the winding-up of the company shall be void

unless otherwise ordered by a Singapore court. Section 259 of the Companies Act does

not distinguish between dispositions amounting to preferences and dispositions which

15 This is the reason for our assuming that each of the parties are entitled legally and beneficially to the rights,

entitlements and benefits of each of the Transactions and none of the respective parties' rights are encumbered in

favour of any third party.

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Al1en~Gledhill

result from bona fide business transactions (unlike Section 329 of the Companies Act,

which is discussed in paragraphs 3.2.10 to 3.2.14 below). For the purpose of Section 259

of the Companies Act, awinding-up of a company is deemed to commence on the earliest

of the making of a winding-up application against the company, the passing of the

resolution for winding up and possibly where a provisional liquidator has been appointed

before the resolution for winding-up had been passed, at the time when the declaration of

the inability by reason of its liabilities of the company to continue its business is lodged

with the Registrar of Companies16.

3.2.7 There is no authority in Singapore as to whether proper netting arrangements (such as the

Netting Provisions) will be within the ambit of Section 259 of the Companies Act. We

would, however, subscribe to the view that Section 259 of the Companies Act should not

adversely affect the exercise of set-off like rights pursuant to the Netting Provisions for

three reasons. First, the effect of the rule allowing for mutual set-off (as discussed in

paragraph 3.2.3 et. seq. above) will be rendered nugatory in such circumstances.

Secondly, case law suggests that the Singapore courts will uphold dispositions of a

company's property if they were made in good faith and for the benefit of the company

(which is the reason for our assumption of good faith in paragraph (g) above). Thirdly,

Section 259 of the Companies Act would in any event refer to payments made to the Non-

defaulting Party of the net Early Termination Amount and does not affect the rights of the

Non-defaulting Party under the Netting Provisions which provide for a reduction of the

value of the Terminated Transactions into a net value in the first place.

Anti-deprivation Rule

3.2.8 We would highlight that there is a risk that in the event of the insolvency of a company, the

Fully Delivered Terminated Transactions could be found to infringe the anti-deprivation

rule if the effect of the Fully Delivered Terminated Transactions is to deprive the company

of property which would otherwise be available to its creditors. The anti-deprivation rule is

a principle of insolvency law that contractual terms purporting to dispose of property on

insolvency may be invalid as being in fraud or an evasion of the insolvency law. However,

in Belmont Park Investments PTY Limited v BNY Corporate Trustee Services Limited and

Lehman Brothers Special Financing Inc [2011] UKSC 38, Lord Collins stated (at

paragraphs 78 and 79 thereof) that in general "a deliberate intention to evade insolvency

laws is required" and that "a commercially sensible transaction entered into in good faith

should not be held to infringe the anti-deprivation rule". Similarly, in the case of Lomas v

JFB Firth Rixson Inc [2012] EWCA Civ 419, which considered Section 2(a)(iii) of the ISDA

Master Agreement, the Court (in considering whether the anti-deprivation rule was

infringed) placed great emphasis on the specific facts of the case.

3.2.9 Accordingly, it should be noted that whether or not the Fully Delivered Terminated

Transactions would be found to infringe the anti-deprivation rule would depend very much

on the facts of the particular case and the particular Fully Delivered Terminated

Transaction. Very broadly, however, assuming that a party has entered into the Fully

Delivered Terminated Transaction in good faith and that there is a good commercial

rationale for doing so and that, at the time it did so, there were reasonable grounds for

believing that to do so would benefit the party, we would take the view on the basis of the

16 If applied to judicial management, the relevant time is the time of the making of the judicial management application

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Allen~Gledhill

assumptions herein that in general the Fully Delivered Terminated Transactions should not

be regarded as being in contravention of the anti-deprivation rule.

Transactions at an undervalue

3.2.10 Pursuant to Section 227T and Section 329 of the Companies Act, transactions entered into

at an undervalue within a certain period prior to the commencement of insolvency

proceedings in respect of a Singapore company (including a Singapore incorporated bank)

may be set aside or varied by the Singapore courts, if the relevant company was insolvent

at the time or became insolvent as a result of the preference. A transaction is essentially

entered into at an undervalue if the insolvent company makes a gift or otherwise enters

into a transaction where no consideration or inadequate consideration is received. The

relevant period is the period of five years ending on the date of commencement of winding-

up orjudicial management, as described under paragraph 3.2.6 above.

3.2.11 In the present context, this is relevant to whether Fully Delivered Terminated Transactions

may be set aside or varied by the Singapore courts. However, if the parties deal on arms'

length terms, and for proper value, this should avoid the Fuily Delivered Terminated

Transactions being characterised as transactions at an undervalue (which is the reason for

our assumption of arms' length and commercial basis for dealings in paragraph (g)

above)".

Unfair Preference

3.2.12 Pursuant to Section 227T and Section 329 of the Companies Act, unfair preferences

granted within a certain period prior to the commencement of insolvency proceedings (as

described in paragraph 3.2.9 above) may be set aside or varied by the Singapore courts if

the Defaulting Party was insolvent at the time or became insolvent as a result of the

preference. An unfair preference would be regarded as having been given by the company

to a person:

(a) where that person is one of the Defaulting Party's creditors or a surety or

guarantor for any of its debts or other liabilities; and

(b) the Defaulting Party does anything or suffers anything to be done which (in either

case) has the effect of putting that person into a position which, in the event of the

liquidation, will be better than the position he would have been in if that thing had

not been done.

3.2.13 The test for unfair preference is the requirement that the Defaulting Party which gave the

preference must have been influenced in deciding to give it by a desire to produce in

relation to that person the effect mentioned in paragraph 3.2.12(b) above. In relation to

certain specified classes of "persons connected with the company" (i.e. "Related Parties"),

the company will be presumed, unless the contrary is shown, to have been influenced by

the desire to produce the effect stated in paragraph 3.2.12(b) above. The relevant period,

Regulation 6 of the Companies (Application of Bankruptcy Act Provisions) Regulations, states that the court shall not

make an order referred to in section 98 of the Bankruptcy Act in respect of a transaction at an undervalue if it is

satisfied that:

(a) the company which entered into the transaction did so in good faith and for the purpose of carrying on its

business; and

(b) at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.

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Al1en~Gledl~ill

in the case of preferences given to such Related Parties, is the period of two years ending

with the date of commencement of winding-up or judicial management1e; in the case of

preferences given to other persons who are not Related Parties, the relevant period is the

period of six months ending with that date.

3.2.14 We are of the view that, on the above assumptions, a payment effected in accordance with

the terms of the TMA prior to the insolvency of the Defaulting Party should not be

considered by the Singapore courts as a payment made with a view to giving the Non-

defaulting Party a preference over the other creditors of the Defaulting Party (this is also

because such payment in accordance with the terms of the TMA is intended for the

primary purpose of reducing the credit exposure of both parties to the Transactions).

However, if the Defaulting Party was influenced in entering into Transactions during the

unfair preference period by the desire to prefer the Non-defaulting Party, this may justify

the application of Section 227T or Section 329 of the Companies Act.

3.3 Non-Fully Delivered Terminated Transactions and Terminated DFT Terms

Agreements under Section 6(f) of the TMA

3.3.1 The determination of the Relevant Index under Section 6(f) essentially provides for the set-

off or netting of the Relevant Index Amounts with respect to the Non-Fully Delivered

Terminated Transactions and the Terminated DFT Terms Agreements. This raises the

same concerns in respect of the determination of the Early Termination Amount under the

Netting Provisions, and in that regard, our analysis with respect to the Non-Fully Delivered

Terminated Transactions and the Terminated DFT Terms Agreements would be same as

that set out with respect to Transactions under paragraph 3.2 above —the provisions

under Section 6(f) for determining the Relevant Index Amounts) would be consistent with

Section 300 of the Companies Act and the Mandatory Insolvency Set-off Provisions on the

basis of assumptions set out in this memorandum. Our comments on anti-deprivation,

transactions at an undervalue and unfair preferences would also apply to Non-Fully

Delivered Terminated Transactions and Terminated DFT Terms Agreements.

3.3.2 There is a risk, however, that the option to sell the Designated Assets or the sale of the

Designated Assets proper under Section 6(f)(v) may be void or voidable on the following

grounds.

Void disposition of property

3.3.3 As highlighted in paragraph 3.2.6 above, Section 259 of the Companies Act provides that

the disposition of any property of a company after commencement of winding-up

proceedings is void unless otherwise ordered by the Singapore courts. Therefore, any sale

of Designated Assets by the insolvent party pursuant to the Wa'ad entered into after the

commencement of winding-up may be void.

3.3.4 One major factor that a court will take into account in determining whether to approve of or

validate the disposition of property would depend on whether the TMA is a contract for the

disposition of property which can be enforced by a decree of specific performance. Such a

decree is granted at the discretion of the Singapore courts and is generally granted where

a legal remedy is either inadequate or impractical. In this instance, the issue of whether

specific performance would be granted would depend heavily on what the Designated

18 cfparagraph 3.2.6 which describes when winding-up or judicial management is deemed to have commenced.

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Allen~Gledhi]1

Assets in question are. In general, courts are more likely to exercise their discretion to

grant specific performance in the case of a disposition of assets which are non-fungible,

such as land. If the Designated Assets are fungible assets (such as Sharia'h-compliant

listed securities or a commodity such as zinc), there would be an increased risk that a

court may refuse to uphold or validate the sale of the Designated Assets under Section

259 of the Companies Act.

3.3.5 We would highlight that Section 259 of the Companies Act would only apply where there is

a sale of the Designated Assets by the insolvent party —accordingly, if there is no actual

sale of the Designated Assets, and the obligation to pay the Positive Indexed Value or

Negative Indexed Value is instead converted into a claim for liquidated damages pursuant

to Section 6(f)(v)(2) (the "Liquidated Damages Provision"), aset-off under Section 6(h)

of the TMA of such liquidated damages would not, in our view, infringe the provisions of

Section 259 of the Companies Act for the reasons set out under paragraph 3.2.7 above.

We would highlight a claim for liquidated damages may not be enforceable if it is found to

amount to a penalty19.

Unfair preference

3.3.6 There is a risk that the completion of the sale of the Designated Assets may be regarded

as an unfair preference where this is completed during the relevant clawback period

described in paragraph 3.2.13 above and has the effect of putting the Non-defaulting Party

into a position which, in the event of the liquidation, will be better than the position the

Non-defaulting party would have been in if that sale had not been done. However, the

computation of the Relevant Index Amount itself should not amount to an unfair preference

on the assumption that this is intended to represent the replacement cost of the early

terminated Non-Fully Delivered Terminated Transactions and DFT Terms Agreements. In

addition, the set-off of the Positive Indexed Value or Negative Indexed Value and/or any

liquidated damages under the Liquidated Damages Provision would not, of itself, amount

to an unfair preference.

3.4 Set-off under Section 6(h) of the TMA

3.4.1 The set-off mechanism under Section 6(h) would be consistent with Section 300 of the

Companies Act and the Mandatory Insolvency Set-off Provisions in so far as it concerns

the set-off of the Early Termination Amount, the Positive Indexed Value or Negative

Indexed Value, and other amounts owing under the TMA (including liquidated damages

under the Liquidated Damages Provision), on the assumptions set out in this

memorandum. We express no view on the set-off of amounts that do not arise under the

TMA.

3.4.2 The deferment of the Non-defaulting Party or Non-affected Party's obligation to pay the

specified proportion of the Early Termination Amount under Section 6(h)(ii) (the

"Deferment Provision") would not, of itself, give rise to any issues under Singapore laws,

as the liquidator would be able to adopt a "wait-and-see" approach to determine whether

the Non-defaulting Party or Non-affected Party (as the case may be) will exercise its rights

under Section 2(e) to require the company in liquidation to purchase Designated Assets

19 Although there is no specific case law on point, we are of the view that a claim that is unenforceable due to it

constituting a penalty may be unenforceable in Singapore for being contrary to public policy, even if there is no

prohibition against penalties under the governing law of the TMA.

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Allen~Gledhill

(assuming that the Non-defaulting Party or Non-affected Party is in-the-money in respect

of DFT Terms Agreements and Non-Fully Delivered Terminated Transactions). In addition,

in our view, the Deferment Provision should not, as a matter of principle, of itself offend the

anti-deprivation principle where the parties are acting in good faith, as a possible

justification for this is that this is to enable a seller under Section 6(f) musawama to wait

and set-off its payment in respect of the Early Termination Amount against what the other

party will pay it under the Section 6(f) musawama, to give an overall net payment.

However, this determination would ultimately be a question of fact.

3.5 Resolution powers of the MAS

3.5.1 For completeness, we would highlight that the Monetary Authority of Singapore Act (the

"MAS Act"), Chapter 186 of Singapore, was amended in 2013 to confer resolution powers

on the MAS to deal with, inter alia, banks, insurance companies and other financial

i nstitutions in the event of their insolvency. These powers are broad and include the power

to order a transfer of all or part of the business of a financial institution; they supplement

existing powers of control conferred on the MAS under the Banking Act, Chapter 19 and

the Insurance Act, Chapter 142.

3.5.2 These powers include

(a) Power to issue directions. Under Section 30AAM, the MAS may issue directions or

make regulations concerning any person that has ceased to be a specified

financial institution20, (a) in order to discharge, or facilitate the discharge of, any

binding obligation of the person, or (b) where it is in the public interest to do so.

Such directions or regulations may potentially be wide enough to affect set-off or

netting arrangements;

(b) Power to issue moratoria. Under Section 30AA0(1), the MAS may, if it considers it

to be in the interests of the affected persons of a specified financial institution21,

make an order prohibiting that specified financial institution from carrying on its

significant business or from doing or performing any act or function connected with

its significant business or any aspect thereof. This is potentially wide enough to

allow the MAS to make orders prohibiting or otherwise affecting set-off or netting

arrangements;

(c) Power to apply for court orders. Under Section 30AA0(2), the MAS may, if it

considers it to be in the interests of the affected persons of a specified financial

institution, apply to the Singapore High Court for certain orders (the duration of

which may not exceed 6 months). These include orders that no execution, distress

or other legal process shall be commenced, levied or continued against any

property of the specified financial institution, no steps shall be taken to enforce

any security over any property of the specified financial institution or to repossess

20 A specified financial institution is defined to mean a "pertinent financial institution" (see footnote 11) or an "excluded

financial institution" (which would be a licensed or exempt financial adviser (other than a pertinent financial institution),

a person exempted from the requirement to hold a capital markets services licence (other than a pertinent financial

institution), a licensed insurer, a registered insurance intermediary, a licensed money-changer, a licensed remitter, the

holder of a stored value facility or atrustee-manager of a registered business trust).

21 In respect of this section 30AA0, a specified financial institution is as set out above in respect of section 30AAM, save

that it does not include the trustee-manager of an approved business trust.

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Allen~Gleclhill

from the specified financial institution any goods under any hire-purchase

agreement, chattels leasing agreement or retention of title agreement, and/or that

no steps shall be taken by any person to sell, transfer, assign or otherwise

dispose of any property of the specified financial institution. However, these orders

do not include powers to prevent netting or set-off, and we are of the view that

these orders pertain to the commencement of proceedings, enforcement of

security and the disposal of property. With respect to commencement of

proceedings and enforcement of security, we are of the view that these are not

relevant to netting arrangements - it is not necessary to commence legal process

in Singapore in order to give effect to a netting arrangement, and netting

arrangements do not constitute security interests. With respect to the disposal of

the property, it is arguable that netting or set-off may amount to the disposal of

property of the financial institution, but we believe that the better view is that the

analysis should be the same as the analysis in respect of Section 259 of the

Companies Act (as set out in paragraph 3.2.7 above), and that a court order

preventing the disposal of property should not adversely affect the exercise of set-

off or netting rights pursuant to Sections 6(d) to 6(f) and Section 6(h) of the TMA

for the reasons set out in paragraph 3.2.7. An actual sale of Designated Assets

under Section 6(f) could be subject to this moratorium, but this should not affect

the set-off of the Relevant Index Amount or liquidated damages;

(d) Power to order a compulsory transfer of business. Under Section 30AAS, which

applies to any pertinent financial institution, the MAS may make a determination

that the whole or any part of the business of a transferor shall be transferred to a

transferee, if:

(i) any ground exists for the MAS to exercise any power under the relevant

provisions (as defined under the Monetary Authority of Singapore (Control

and Resolution of Financial Institutions) Regulations 2013) in relation to

the transferor, whether or not the MAS has exercised the power;

(ii) the board of directors of the transferee (in any case where the transferee

is a corporation), has consented to the transfer;

(iii) the MAS is satisfied that the transfer is appropriate, having regard to

factors such as:

(1) the interests of the affected persons of the transferor (which, in

the case of a licensed bank or a licensed finance company, would

include the interests of the depositors);

(2) the interests of the affected persons of the transferee (which, in

the case of a licensed bank or licensed finance company, would

include the interests of the depositors);

(3) the stability of the financial system in Singapore; and

(4) any other matter that the MAS considers relevant; and

(iv) the transfer involves the whole or part of the significant business of the

transferor.

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Allen~Gledhi_ll

I n respect of such a compulsory transfer, where the transferor is a pertinent

financial institution incorporated or established outside Singapore, any

determination shall only be in respect of the transferor's business (or any part

thereof) which is reflected in the books of the transferor in Singapore in relation to

the transferor's operations in Singapore.

3.5.3 In addition, the MAS Amendment Act will introduce powers allowing the MAS to make

reverse transfers of the whole or any part of the business back to the transferor, as well as

onward transfers of business (in whole or in part) to another transferee.

3.5.4 We would note that these powers do not make any direct reference to netting or set-off

arrangements. However, before these resolution powers were introduced, the MAS

conducted a public consultation in December 2012 in the Consultation Paper on Proposed

Amendments to the Monetary Authority of Singapore Act, and received feedback that

these powers were too broadly worded and could affect bilateral netting arrangements that

parties had legitimately entered into. In response to such concerns, the MAS stated (in the

Response to the Consultation on Amendments to the MAS Act, dated 5 Feb 2013):

"MAS will also provide in the MAS(A) Bill, a general power toprescribe safeguards to the exercise of the resolution powers. Thiswould enable the Minister to expressly provide in subsidiaryle_gislation that bilateral netting arranpements, as well as othersimilar arrangements warrantin_q carve-out, will not be affectedby the exercise of resolution powers under the MAS Act."(emphasis added)

3.5.5 The concerns surrounding the potential impact on bilateral netting arrangements were

recognised in Parliament. During the second reading of the Monetary Authority of

Singapore (Amendment) Bill, the importance of enforceability of bilateral netting

arrangements was raised. Ms Tan Su Shan, Nominated Member of Parliament was

quoted as saying:

"First, enforceability of bilateral netting arrangements. 1 appreciateand thank the Deputy Prime Minister for bringing this up in a speechearlier and as 1 had earlier mentioned about net and grossexposures, it is useful to point out -- as he had rightly pointed out --that most industry players here use the ISDA Master Agreement toenforce bilateral netting arrangements.

Many industry players are also concerned that the proposedresolution powers may affect the enforceability of sucharrangements. As the proposed powers are broad and it appearsthat they may in some instances defeat existing contractual rights. Ifthis leads, for example, to "cherry picking" of which transactions toclose out, then this could lead to counterparty losses. Section30A(am) ~sicJ may also give the MAS powers to override theinstitution's existing contractual obligations. If this is the case, Flsaround the world will have to re-assess their exposure to SingaporeFls. And this would affect our status as a good "netting"jurisdiction and increase the cost of doing business here.

We welcome subsidiary legislation to ensure bilateral nettin_qarrangements will be carved out and ask that this be extended tocover the Banking Act and Insurance Act too. "

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Allen~Gledhill

I n response, Mr Tharman Shanmugaratnam acknowledged the validity of this concern,

and confirmed that carve-outs for bilateral netting arrangements would apply across ail

financial institutions:

"Let me now respond to a few of the specific points which Ms Tanhas raised. First, Ms Tan has expressed a valid concern over theimpact of the proposed resolution powers on the Bill on bilateralnetting arrangements. This is an important point.

1 can assure Members that the carve-outs through subsidiarylegislation that we will make, as provided for in the Bill, will includespecific provisions for bilateral netting arrangements. I can alsoconfirm that the carve-outs for bilateral netting arrangementswill apply across all financial institutions, including banks andinsurance companies.

The approach we are taking is essentially similar to that being takenin the United Kingdom where they have adopted a SpecialResolution Regime, and the carve-outs that the European Union hasnow directed its members to put in place when designing theirresolution frameworks. It is a system where you put in place thebasic provisions and the powers that a regulator needs, but youhave carve-outs to ensure that contractual obligations andspecifically, bilateral netting arrangements, are not defeated. "

3.5.6 It is clear from the parliamentary debates that Singapore regards itself as a good netting

jurisdiction, and that the policy intention is to preserve bilateral netting arrangements. Such

parliamentary debates may, pursuant to Section 9A(3) of the Interpretation Act, Chapter 1

of Singapore, be considered in the interpretation of provisions of the MAS Act to confirm

that the meaning of the provisions is the ordinary meaning conveyed by the text of the

provision taking into account its context and its underlying purpose or object, or to

ascertain the meaning of the provisions where they are ambiguous or obscure or where

the ordinary meaning conveyed by the text of the provision taking into account its context,

or underlying purpose or object leads to a result that is manifestly absurd or

unreasonablezZ.

3.5.7 The MAS amended the proposed legislation to include a new Section 30AAZN, which

makes specific provision for the enactment of regulations exempting set-off arrangements

or netting arrangements from the provisions of Part IVB of the MAS Act (dealing with

resolution of financial institutions):

"30AAZN.—(1) The Minister may make such regulations as may benecessary or expedient for carrying out the purposes and provisionsof this Part and for prescribing anything that may be required to beprescribed under this Part.

(2) Without prejudice to the generality of subsection (7), regulationsmade under this section may —

(b) provide for either or both of the following:

(i) that any arrangement is exempted from any provision ofthis Part;

Zz Section 9A(3) provides that material in the interpretation of a provision of a written law shall include the speech made

in Parliament by a Minister on the occasion of the moving by that Minister of a motion that the Bill containing the

provision be read a second time in Parliament.

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AllenGlecllvll

(ii) that the Minister or the Authority shall not exercise anypower under this Part in relation to anv arrangement;

(c) prescribe —

(i) any set-off arrangement, netting arrangement or othertype of arrangement as an arran_gement referred to inparagraph (b)(i) or (ii);

(ii) for any arrangement referred to in paragraph (b)(i), eachprovision of this Part which that arrangement is exempted from;and

(iii) for any arrangement referred to in paragraph (b)(ii), eachpower which the Minister or the Authority shall not exercise inrelation to that arrangement;" (emphasis added)

In addition, the MAS has general powers of exemption, such as Section 41C of the MAS

Act, which allows the MAS to, by regulations (though no such regulations have yet been

passed) or upon application, exempt persons from certain provisions of the MAS Act:

"41 C.—(1) The Authority mav, by regulations, exempt any person orclass of persons from all or any of the provisions of Parts IVA, VAand VB and any regulations made under section 27A, 278, 28A,30AAJ, 30AAM, 30P or 30W, subject to such conditions orrestrictions as maybe prescribed.

(2) The Authority maV, on the application of any person, by notice inwriting exempt the person from —

(a) all or any of the provisions of Parts IVA, VA and VB and anyregulations made under section 27A, 278, 28A, 30AAJ, 30AAM, 30Por 30W,~ and

(b) all or any of the requirements specified in any direction made bythe Authority under this Act,

subject to such conditions or restrictions as the Authority may specifyby notice in writing."

3.5.8 In the April 2016 CP, the MAS proposed to introduce the following safeguards for set-off

and netting arrangements:

(a) a safeguard that prevents the cherry-picking of transactions during a partial

transfer of business of a financial institution by providing that the Minister will not

approve a partial transfer of business unless it provides for the transfer of

protected rights and liabilities from the transferor to the transferee (the

"Regulation 15 Safeguard"). Rights and liabilities are considered to be protected

if they are rights and liabilities which arise from all financial contracts between a

transferor on one part and a counterparty, which are rights and liabilities of the

counterparty which the counterparty is entitled to set-off or net under aset-off

arrangement or netting arrangement.

"Financial contract" is proposed to be defined to include a "derivatives contract",

which means any contract or arrangement under which (i) a party to the contract

or arrangement is, or may be required to, discharge its obligations under the

contract or arrangement at some future time; and (ii) the discharge of the party's

obligations, or the value of the contract or arrangements, is ultimately determined,

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Allen~Glecll~i71

derived from, or varies by reference to (wholly or in part), the value or amount, or

fluctuations in the values or amounts, of one or more underlying things; and

(b) a safeguard that provides that the MAS' powers of moratorium shall not apply to

any set-off arrangement or netting arrangement in relation to a financial contract

after 23:59 (Singapore time) on the second business day after the date on which

the moratorium has commenced (the "Regulation 16 Safeguard").

3.5.9 While the precise effect of the proposals would depend on the final form of the regulations,

we are of the view that the Regulation 15 Safeguard, if enacted in its present form, would

be effective to prevent the cherry-picking of transactions during a transfer of business, and

would safeguard set-off and netting arrangements (including the Close-out Provisions

under the TMA) in connection with "derivatives contracts" in the event that the MAS

exercises its powers under Section 30AAS of the MAS Act.

3.5.10 With regards to the MAS' moratorium powers, as well the MAS' other resolution powers in

respect of which there is no specific safeguard, we are of the view that such powers would

not affect our conclusions on the enforceability of Close-out Provisions, save that, as

stated in paragraph 3.5.2(c) above, the MAS' moratoria powers may prevent an actual

sale of Designated Assets under Section 6(f)(v)(1) (but should not prevent the set-off of

the Relevant Index Amount or liquidated damages). The MAS has made numerous policy

statements that it is not the MAS' intent, in exercising resolution powers over financial

institutions, to interfere with set-off and netting arrangements, and that an exercise of

resolution powers should not defeat or otherwise affect the preservation of set-off and

netting arrangements:

(a) on 9 October 2014, the MAS issued a letter to ISDA which stated that it is not the

MAS' intent, in the exercise of resolution powers over financial institutions, to

defeat or otherwise affect the preservation of bilateral netting arrangements

(including centrally cleared transactions). This letter also mentioned the MAS will

be introducing powers to prescribe safeguards from the exercise of resolution

powers which may affect the contractual rights of parties under set-off and

collateral arrangements in industry master agreements. The MAS issued a further

letter to ISDA on 26 August 2016 clarifying that for avoidance of doubt, it is not the

MAS' intent to defeat or otherwise affect the preservation of bilateral netting

arrangements, including any related security interests or collateral arrangements.

Copies of these letters have been attached in Appendix D; and

(b) in the April 2016 CP, the MAS stated that "set-off and netting arrangements are

widely used by commercial counterparties to offset liabilities to each other. It is not

MAS' intent, in exercising resolution powers over financial institutions, to interfere

with such contractual arrangements. An exercise of resolution powers should not

defeat or otherwise affect the preservation of set-off and netting arrangements,

which include transactions cleared on an approved clearing house". In its

response to feedback received in connection with the April 2016 CP, the MAS

stated that safeguards on protection of set-off and netting arrangements will be

respected when MAS exercises its resolution powers, and that it is not MAS' intent,

in the exercise of resolution powers over pertinent financial institutions, to defeat

or otherwise affect the preservation of set-off and netting arrangements.

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A]len~Gledhill

3.5.11 This is consistent with the views expressed in the parliamentary debates when

amendments were proposed to be made to the MAS Act in 2013 regarding the MAS'

resolution powers, where it is clear that Singapore regards itself as a good netting

jurisdiction, and that the policy intention is to preserve bilateral netting arrangements and

carve-outs for bilateral netting arrangements will apply across all financial institutions and

will not be defeated by resolution. In this regard, our view is that the MAS would take the

policy intent into account in exercising its powers under the MAS Act. We would note that

the MAS previously had equivalent powers in respect of licensed banks and insurance

companies to order moratoria, apply to the High Court for orders, and to order compulsory

transfers of business, but the MAS has not, to the best of our knowledge, exercised these

powers in such a way as to affect the validity of netting arrangements. We are also not

aware, to the best of our knowledge, of any exercise by the MAS of its powers under

Section 30AAS in such a way as to affect the validity of netting arrangements. Accordingly,

we are of the view that the abovementioned resolution powers would not affect our

conclusions above on the enforceability of the Close-out Provisions, save for an actual

sale of Designated Assets.

4. Assuming that the parties have entered into the TMA, one of the parties is insolvent

and the parties have selected a Termination Currency other than the currency of the

jurisdiction in which the insolvent party is organised, will the payment of any net

termination amount in the Termination Currency be enforceable under the laws of

Singapore?

4.1 Yes -- it is possible to file a proof of claim in liquidation proceedings in Singapore for adebt payable in a currency other than Singapore dollars. However, when payments to

creditors are made in the course of administering the insolvency, such payments will bemade in Singapore dollars, as per rule 181 of the Bankruptcy Rules, which provides that

the amount of the debt in foreign currency shall be converted to Singapore dollars at the

rate prevailing on the date of the bankruptcy or insolvency order, such rate being

determined as follows:

(a) the rate will be the rate of exchange made available by the MAS and prevailing on

the date of the bankruptcy order in question; and

(b) in the absence of any such rate, it shall be such rate as may be determined by the

administrator of the bankrupt's estate.

111. Close-Out Netting For Multibranch Parties

The discussions under this part III are based on the same facts and assumptions as set

forth in paragraphs (a) to (g) of part II above (as applicable) with the following

modifications:

(a) with respect to question 1 below, that a company incorporated in Singapore has

entered into a TMA on a multibranch basis. In the TMA, the corporate has

specified that Section 10(a) applies to it. The Singapore corporate then hasentered into Transactions and DFT Terms Agreements under the TMA through itshead office in Singapore and also through one or more branches located in other

countries that had been specified in the Schedule to the TMA. After entering into

these Transactions and DFT Terms Agreements and prior to the maturity thereof,(in the case of Transactions) or on the dates on which the relevant Designated

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Allen~Gledhill

Future transactions are scheduled to be entered into (in the case of DFT Terms

Agreements), the Singapore corporate becomes the subject of a voluntary or

involuntary proceeding under the insolvency laws of Singapore; and

(b) with respect to questions 2 and 3 below, that a corporate ("Corporate F")

organised and with its headquarters in a country ("Country H") other than

Singapore has entered into a TMA on a multibranch basis. In the TMA, Corporate

F has specified that Section 10(a) applies to it. Corporate F has entered into

Transactions and DFT Terms Agreements under the TMA through Corporate F

and also through one or more branches located in other countries that had been

specified in the Schedule to the TMA, including a branch of Corporate F located

and registered in and subject to the laws of Singapore (the "Local Branch"). After

entering into these Transactions and DFT Terms Agreements and prior to the

maturity thereof (in the case of Transactions) or the dates on which the relevant

Designated Future transactions are scheduled to be entered into (in the case of

DFT Terms Agreements), Corporate F becomes the subject of a voluntary or

involuntary proceeding under the insolvency laws of Country H.

In relation to a Mu/tibranch Party incorporated in Singapore:

1. Would there be any change in your conclusions concerning the enforceability of

close-out netting under the TMA based upon the fact that the Singapore corporate

has entered into a TMA on a mu/tibranch basis and Then conducted business in that

fashion prior to its insolvency?

Pursuant to Section 269(1) of the Companies Act, the liquidator of the Singapore

corporate (the principles should be similar for both voluntary and involuntary proceedings)

shall take into his custody or under his control all the property or choses in action to which

the Singapore corporate is or appears to be entitled. Accordingly, the liquidation

proceeding of the Singapore corporate will in principle extend to all domestic and foreign

assets of the Singapore corporate, including the assets of any non-Singapore branches of

the corporate. The Singapore courts will apply the laws of Singapore in such proceedings

and accordingly, our conclusions concerning the enforceability of close-out netting under

the TMA as set out under part II above will remain the same notwithstanding that the

Singapore corporate has entered into the TMA on a multibranch basis.

In relation to a Multibranch Party with a branch located in Singapore:

2. Would there be a separate proceeding in Singapore with respect to the assets and

liabilities of the Local Branch upon the start of the insolvency proceeding for

Corporate F in Country H? Or would the relevant authorities in Singapore defer to

the proceeding in Country H so that the assets and liabilities of the Local Branch

would be handled as part of the proceeding for Corporate F in Country H? Could

local creditors of the Local Branch initiate a separate proceeding in Singapore even

if the relevant authorities in Singapore did not do so?

2.1 Section 377(2) of the Companies Act provides that if a foreign company is liquidated or is

dissolved in its place of incorporation, the authorised representative of such foreign

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Allen~Gleclhill

company 2' shall, within 14 days after the commencement of the liquidation or the

dissolution or within such other time as the Registrar of Companies of Singapore (the

"Registrar") in special circumstances may allow, lodge, or cause to be lodged, with the

Registrar notice of that fact and when the liquidator is appointed, notice of such

appointment. Section 377(2)(b) of the Companies Act provides that the liquidator of such

foreign company shall, until a Singapore liquidator of such foreign company is duly

appointed by the Singapore courts, have the powers and functions of a liquidator for

Singapore. Case law in Singapore has, however, interpreted Section 377(2)(b) of the

Companies Act to mean that the powers and functions of the foreign liquidator

contemplated under Section 377(2)(b) are solely to enable the foreign liquidator to collect

and recover the assets of the foreign company in Singapore. Section 377(2)(b) of the

Companies Act does not confer on the foreign liquidator all the powers and the functions

of a liquidator appointed under the Companies Act (as discussed in paragraph 2.6 below).

In addition, where the Local Branch is a bank licensed in Singapore under the Banking Act,

the Banking Act provides that the foreign liquidator will not have the powers and functions

of a liquidator for Singapore unless the liquidator has been approved by the MAS and the

exercise of any power or function by the foreign liquidator in contravention of this

requirement will be invalid and of no effect.

2.2 In short, this means that the authority of the liquidator of Corporate F appointed under the

laws of Country H will be recognised in Singapore subject to the limitations stated in

paragraph 2.1 above. The question of whether there is any ring-fencing of assets would

depend on whether the Local Branch falls within certain categories of entities to which

ring-fencing applies. Pursuant to Section 377(3)(c)(ii) read with Section 377(14) of the

Companies Act, ring-fencing applies to foreign companies which are or were prior to

liquidation or dissolution carrying on business as "relevant companies" 24 . For such

"relevant companies" the liquidator of Corporate F appointed for Singapore by the

Singapore courts or a person exercising the powers and functions of such a liquidator shall

be concerned only with the recovery and the realisation of the assets of the foreign

company located or deemed to be located in Singapore and shall, subject to certain

conditions, pay the net amount so recovered to the liquidator of Corporate F after paying

any debts and satisfying any liabilities of the foreign company in Singapore, as well as any

preferential debts of the foreign company under Section 328 of the Companies Act. The

liquidator cannot pay out any creditor to the exclusion of any other creditor of the foreign

company, save in relation to preferential debts under Section 328 of the Companies Act or

where the liquidator has obtained a Singapore court order. In the case of a Local Branch

that is a Singapore licensed bank, the Banking Act further provides that where the Local

Branch becomes unable to meet its obligations or becomes insolvent or suspends

payment, the assets of the Local Branch shall be available to meet certain liabilities in

z3 A foreign company with a registered branch office in Singapore is required under the Companies Act to appoint one or

more natural persons resident in Singapore who are appointed as the company's authorised representatives.

24 "Relevant company" means a licensed bank, a merchant bank or other financial institution approved under section 28

of the MAS Act, a finance company, a person licensed to carry on remittance business, a licensed insurer, a

recognised market operator, a licensed foreign trade repository, a recognised clearing house, an approved holding

company, a holder of a capital markets services licence that does not carry on the business of providing credit rating

services, a Registered Fund Management Company as defined under the Securities and Futures (Licensing and

Conduct of Business) Regulations, a licensed financial adviser, a licensed trust company, an operator of a designated

payment system, and an approved holder of a widely accepted stored value facility.

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Allen~Gled1-~ill

Singapore of the Local Branch (which generally relate to deposit liabilities and insured

deposits under the deposit insurance scheme). These liabilities have priority over all

unsecured liabilities of the Local Branch other than the preferential debts specified in the

Companies Act. Similar provisions apply under the Insurance Act25 and other licensed

financial institutions that fall within the definition of a "relevant company" may be subject to

similar considerations under their respective acts as well as under the mandatory

insolvency laws of Singapore. For foreign companies that are not "relevant companies",

the ring-fencing rule under Section 377(3)(c) does not apply, though the sequence of

priorities in respect of preferential debts under Section 328 of the Companies Act would

still apply to such foreign companies which are wound up or dissolved pursuant to Section

377. In addition, Section 377(4A) requires that the liquidator in Singapore must, before

paying any amount so recovered and realised in Singapore to the foreign liquidator, be

satisfied that the interests of creditors in Singapore are adequately protected.

2.3 In this respect, it is not entirely accurate to say that the relevant authorities in Singapore

would defer to the liquidation proceeding in Country H such that the assets and liabilities of

the Local Branch would be handled as part of the proceeding for Corporate F in Country H.

This is because even in the case of the liquidator appointed under the laws of Country H

(we shall describe the procedure whereby the liquidator for Singapore is appointed below),

the liquidator will be acting generally in accordance with the laws of Singapore (and the

mandatory provisions of the Banking Act and the MAS Act (if applicable) provide that

Singapore insolvency laws will prevail in the case of a Local Branch that is a Singapore

licensed bank) and moreover, the liquidator will pay the preferred and other approved

creditors of Corporate F in Singapore prior to remitting the surplus assets to himself as the

foreign liquidator, and the liquidator must still ensure that the interests of creditors in

Singapore are adequately protected.

2.4 As for the rights of the creditors of the Local Branch to initiate a separate winding-up

proceeding in Singapore, this is provided for in Section 351 of the Companies Act.

Section 351 basically provides that a foreign company may be wound-up:

(a) if the company is dissolved or has ceased to carry on business in Singapore or

has a place of business in Singapore only for the purpose of winding-up its affairs

or has ceased to carry on business in Singapore;

(b) if the company is unable to pay its debts; and/or

(c) if the Singapore court is of the opinion that it is just and equitable that the foreign

company should be wound-up.

2.5 The making of a winding-up order by the Singapore courts on any of the above three

grounds is a matter of discretion; however, Section 351(1)(d) provides that a foreign

company may be wound up only if it has a substantial connection with Singapore. For the

purposes of determining whether a foreign company has a substantial connection with

Singapore, the Singapore court may rely on the presence of one or more of the following:

(a) Singapore is the centre of main interests of the company;

25 Section 49FR of the Insurance Act provides that the assets of the licensed insurer (subject to certain provisions on

insurance funds) shall be available to meet specified liabilities in Singapore of the licensed insurer.

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Allen~Gleclhill

(b) the company is carrying on business in Singapore or has a place of business in

Singapore;

(c) the company is a foreign company that is registered under the Companies Act;

(d) the company has substantial assets in Singapore;

(e) the company has chosen Singapore law as the law governing a loan or other

transaction, or the law governing the resolution of one or more disputes arising out

of or in connection with a loan or other transaction; and

(f) the company has submitted to the jurisdiction of the Singapore court for the

resolution of one or more disputes relating to a loan or other transaction.

Section 351(3) of the Companies Act further provides that a foreign company may be

wound-up notwithstanding that it is simultaneously being wound-up under the laws of the

place under which it was incorporated.

2.6 The liquidator for the foreign company appointed under Section 351 of the Companies Act

will, upon his appointment, assume the authority of the liquidator of the foreign company

appointed under the laws of its place of incorporation and, in addition, will have all the

powers and functions of a liquidator appointed in respect of a Singapore company (cf. the

more limited powers of a foreign liquidator as described in paragraph 2.1 above).

Accordingly, the Local Branch may be wound-up notwithstanding that Corporate F is

already the subject of a liquidation proceeding, whether voluntary or involuntary, under the

insolvency laws of Country H. The winding-up proceeding in Singapore in respect of the

Local Branch is usually referred to as an ancillary proceeding and, as stated above, will

generally be limited in its scope or operation to assets located or deemed to be located in

Singapore.

2.7 We would also highlight that where the winding-up proceeding is initiated under Section

351 of the Companies Act, the Mandatory Insolvency Set-Off Provisions would be

triggered -this is in contrast to a situation where there is no Singapore court winding up, in

which case the Mandatory Insolvency Set-Off Provisions would not automatically be

i mported.

2.8 We would note that there is a possibility that foreign insolvency proceedings may have an

impact on the enforceability of the close-out netting provisions under Singapore law. Under

Singapore law, there is the possibility of recognition under common law in Singapore of

the appointment of the liquidator or other insolvency officer in the Counterparty's home

jurisdiction, and for the Singapore courts to assist, at common law, foreign insolvency

proceedings. Such possibility has been made clear in a recent Singapore Court of Appeal

decision of Beluga Chartering GmBH (in liquidation) & Ors v Beluga Projects (Singapore)

Pte Ltd (in liquidation) & Anor (deugro (Singapore) Pte Ltd, non party) [2014] SGCA 14.

However, the precise extent of recognition and assistance has yet to be worked out in

Singapore.

2.9 Nonetheless, it is our opinion that it seems unlikely that the Singapore courts will, in

recognising and assisting a foreign insolvency, go as far as to give assistance in such a

way that undermines the enforceability of valid close-out netting provisions. However, in

the absence of specific case law, it is not possible to state the position with absolute

certainty.

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Allen~'Gledhill

2.10 In addition to the possibility of assistance and recognition at common law, there is the

possibility of recognition and assistance being granted under statute. Singapore has

adopted the United Nations Commission on International Trade Law (UNCITRAL) Model

Law on Cross-Border Insolvency (the "Model Law"), which is given force of law in

Singapore under Section 3548 of the Companies Act read with the Tenth Schedule.

Situations in which the Model Law applies include (a) where assistance is sought in

Singapore by a foreign court or a foreign representative in connection with a foreign

proceeding, (b) where a foreign proceeding and a proceeding under Singapore insolvency

law in respect of the same debtor are taking place concurrently. The Model Law does not

apply to certain entities such as certain financial institutions.Zs

2.11 Where the Model Law does apply, we are of the view that the Model Law provisions

should not affect set-off and netting, for the reasons set out below.

2.12 Article 19 sets out the relief that may be granted by a Singapore court (at the request of a

foreign representative) from the time of filing an application for recognition until the

application is decided upon, while Article 20 sets out the effects of recognition of a foreign

main proceeding and Article 21 sets out the relief that may be granted upon the

recognition of a foreign proceeding (whether a foreign main proceeding or a foreign non-

main proceeding). These forms of relief include, for instance, the staying of the

commencement of actions or proceedings against a debtor, execution against the debtor's

property, suspension of the right to transfer, encumber or dispose of the debtor's property,

as well as any additional relief that may be available to a Singapore insolvency

officeholder.

2.13 The relief that may be granted under Article 20(1) is qualified by Article 20(2) which

provides that such relief is the same in scope and effect as if the debtor had been made

the subject of a winding-up order under the Companies Act and subject to the same

powers of the Singapore court and the same prohibitions, limitations, exceptions and

conditions as would apply under the law of Singapore. As described in paragraphs 1.8 to

1.13 of Part II above, there is no moratorium on termination, set-off or netting in

connection with winding-up proceedings. Furthermore, Article 20(3)(d) provides that the

stay and suspension under Article 20(1) do not affect any right of a creditor to set off its

claim against a claim of the debtor. The relief that may be granted is subject to the

following:

(a) a qualification under Article 22 which provides that in granting or denying relief

under Articles 19 or 21, or in modifying or terminating relief under paragraph 3 of

Article 22 or Article 20(6), the Singapore court must be satisfied that the interests

of the creditors and other interested persons, including if appropriate the debtor,

are adequately protected; and

Z6 The current list of exempted entities is set out under the Companies (Prescribed Companies and Entities) Order 2017.

These are licensed banks, merchant banks and other financial institutions approved under section 28 of the MAS Act,

finance companies, money changers, corporations carrying on remittance business, insurers, insurance brokers,

recognised market operators, licensed foreign trade repositories, recognised clearing houses, approved holding

companies, capital markets services licence holders, approved trustees, Registered Fund Management Companies,

financial advisers, licensed trust companies, designated payment system operators, approved holders of widely

accepted stored value facilities, designated payment system operators, and trustee managers of business trusts.

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Allen~Gledhill

(b) a qualification under Article 1(3), which provides that the Singapore court must not

grant any relief, or modify any relief already granted, or provide any cooperation or

coordination, if such relief or modified relief or cooperation or coordination would,

in the case of a proceeding under Singapore insolvency law, be prohibited by the

Companies Act or certain other written law. While it has not been established

whether "prohibited" includes situations where transactions or arrangements are

simply carved-out from the scope of a moratorium (as opposed to an express

prohibition against the imposition of a moratorium), we believe that the better view

is courts should not be able to grant relief under the Model Law that affects the

enforceability of set-off and netting arrangements. This is consistent with the view

taken by the Ministry of Law ("MinLaw"), which stated in its response to feedback

received from the consultation on the Draft Companies (Amendment) Bill 2017,

dated 27 February 2017, that "the exclusion of prescribed transactions from the

moratorium addresses a further concern that set-off and netting rights should be

preserved under the [Model Law]. Under the Model Law, a Singapore court may

not grant relief or co-operation that is contrary to the provisions of the Companies

Act. Since certain prescribed arrangements, including set-off and netting

arrangements, are excluded from the moratorium under the Companies Act, the

enforcement of these arrangements may not be restrained under the Model Law."

2.14 The comments by MinLaw make it clear that the policy intention is not to restrain the

enforcement of set-off and netting arrangements under the Model Law. This is consistent

with the policy intention articulated in Parliamentary debates (as described under

paragraph 3.5 of Part I above) and with the enactment of carve outs under the Companies

(Prescribed Arrangements) Regulations 2017 to safeguard surrounding collateral rights in

connection with derivatives transactions and master netting agreements Z'. Singapore

courts are required to adopt a purposive approach in statutory interpretation that promotes

the purpose of the 1aw28 and we believe the better view that is that Singapore courts should

not grant relief that interferes with the enforceability of the Close-out Provisions (save for

actual completion of the sale of Designated Assets, which we express no opinion on).

3. If there would be a separate proceeding in Singapore with respect to the assets and

liabilities of the Local Branch, would the relevant insolvency official in Singapore

and the Singapore courts, on the facts above, include Corporate F's position under

a TMA, in whole or in part, among the assets of the Local Branch and, if so, would

the insolvency official and the Singapore courts recognise the close-out netting

provisions of the TMA in accordance with their terms? The most significant concern

would arise if the receiver, liquidator or court considering a single TMA would

require a counterparty of the Local Branch to pay the mark-to-market value of

Transactions and DFT Terms Agreements entered into with the Local Branch to the

liquidator or receiver of the Local Branch while at the same time forcing the

27 See paragraphs 1.8 to 1.10 of Part II, above.

28 Section 9A of the Interpretation Act requires that in the interpretation of a provision of written law, an interpretation that

would be promote the purpose or object underlying the written law (whether that purpose or object is expressly stated

in the written law or not) shall be preferred to an interpretation that would not promote that purpose or object. See e.g.

ABU v Comptroller of Income Tax [2015] 2 SLR 420, which upheld this approach. The case of Beluga Chartering

GmbH v Beluga Projects (Singapore) Pte Ltd [2014] 2 SLR 833 held that an absurd interpretation or one that leads to

unworkable consequences that are patently contrary to Parliaments intent should be avoided.

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Allen~Gledl-~ill

counterparty to claim in the proceedings in Country H for its net value from other

Transactions and DFT Terms Agreements with Corporate F under the same TMA. In

considering this issue, please assume that close-out netting under the TMA would

be enforced in accordance with its terms in the proceedings for Corporate F in

Country H.

3.1 In the event of a separate liquidation proceeding in Singapore with respect to the assets

and liabilities of the Local Branch, we would advise that the liquidator in Singapore and the

Singapore courts will include Corporate F's position under the TMA among the assets of

the Local Branch as the Transactions and DFT Terms Agreements documented by the

TMA constitute one agreement. In such a situation, the counterparty will make its claims

against the Local Branch in respect of debts arising under or in connection with all the

Transactions and DFT Terms Agreements documented under the TMA. There will not be

a net calculation based on only the Transactions and the DFT Terms Agreements booked

through the Local Branch.

3.2 The Singapore courts, in determining the amount which may be paid to the counterparty

against the assets of the Local Branch will have regard to the laws of Singapore (although

New York or English law will be relevant in determining whether the Transactions and the

DFT Terms Agreements are valid) with the result that the discussions relating to close-out

and close-out netting under part II above are equally applicable here. Accordingly, we

would repeat our earlier conclusion in Part II question 3 that the liquidator and the

Singapore courts would recognise the close-out netting provisions of the TMA in

accordance with their terms (subject to the possibility (albeit unlikely) that Singapore

courts may retain a discretion to grant relief in support of the recognition or assistance of

foreign proceedings (as described in paragraphs 2.8 to 2.14 of Part III above)).

3.3 It is therefore unlikely that the liquidator of Corporate F in Singapore considering a single

TMA would require the counterparty of the Local Branch to pay the mark-to-market value

of Transactions and DFT Terms Agreements entered into with the Local Branch to the

liquidator of the Local Branch and at the same time force the counterparty to claim in the

liquidation proceeding in Country H for the net termination value under other Transactions

and DFT Terms Agreements with Corporate F documented under the same TMA.

4. As indicated above thus far ISDA and IIFM have obtained legal opinions indicating

that bilateral and close-out netting would be enforceable in various jurisdictions.

However, ISDA and IIFM would like you to confirm that your answers to questions 1,

2 and 3 in part 111 remain the same, notwithstanding possible actions that could be

taken by an insolvency official or court in another jurisdiction where close-out

netting may be unenforceable (the "Non-Netting Jurisdiction"). Such actions taken

by an insolvency official of a Non-Netting Jurisdiction include the following

scenarios:

(1) In the case of an insolvency proceeding for a Local Branch, the Local

Branch, acting as multibranch party, has booked Transactions and DFT

Terms Agreements through its home office and one or more branches

located in Non-Netting Jurisdictions (the "Non-Netting Branches").

(2) In the case of an insolvency proceeding for a Local Branch of Corporate F,

Corporate F acting as a multibranch party, has booked Transactions and

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Allen~Gledlull

DFT Terms Agreements through (i) its home office, (ii) its Local Branch and

(iii) one or more Non-Netting Branches in other jurisdictions.

I n each situation, our responses in questions 1, 2 and 3 in part III would generally

remain the same in that:

(i) in respect of question 1, the Singapore courts will still apply the laws of

Singapore in the liquidation proceedings and our conclusions concerning

the enforceability of Close-out Provisions would remain the same;

(ii) in respect of question 2, there would be no change in the proceedings in

Singapore -there would be a separate proceeding in Singapore in respect

of the Singapore branch and creditors may still initiate a separate winding-

up proceeding in Singapore and a foreign liquidator would still be subject

to the limitations set out in paragraph 2.1 and certain creditors in

Singapore may be paid in priority; and

(iii) in respect of question 3, the insolvency official would still include

Corporate F's position under the TMA among the assets of the Local

Branch and there will not be a net calculation based on only the

Transactions and DFT Terms Agreements booked through the Local

Branch. The discussions relating to close-out and close-out netting under

part II would still be applicable.

However, we would highlight that where there are ongoing insolvency proceedings

in Non-Netting Jurisdictions, this may give rise to conflicts with the Singapore

insolvency proceedings, as the Non-Netting Jurisdictions may not recognise the

set-off effected by the Singapore courts.

5. Where courts in Singapore have jurisdiction over the assets of a bank organised in

Singapore or a Local Branch, would a mu/tibranch master agreement such as the

TMA be treated as a single, unified agreement by a receiver, liquidator or other

insolvency official under the laws of Singapore regardless of the treatment of the

TMA, the Transactions, the DFT Terms Agreements and the Designated Future

transactions thereunder by an insolvency official in a jurisdiction where close-out

netting maybe unenforceable.

We confirm that where courts in Singapore have jurisdiction over the assets of a corporate

organised in Singapore or a Local Branch, the TMA would be treated as a single, unified

agreement by an insolvency official under the laws of Singapore regardless of the

treatment of the TMA, the Transactions, the DFT Terms Agreements and the Designated

Future transactions thereunder by an insolvency official in a jurisdiction where close-out

netting may be unenforceable. As stated in paragraphs 2.8 to 2.14 of Part III above, it is

our opinion that it seems unlikely that the Singapore courts will, in recognising and

assisting a foreign insolvency under common law or the UNCITRAL Model Law, go as far

as to give assistance in such a way that undermines the enforceability of valid close-out

netting provisions (though it is not possible to state the position with absolute certainty in

the absence of specific case law).

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A11en~Gledhill

IV. Summary

We would summarise our conclusions as follows

(i) The netting provisions under Sections 6(d) and (e) (whether providing for

Automatic Eariy Termination or termination by notice) of the TMA are enforceable

under the laws of Singapore in the event of the insolvency of the Defaulting Party,

whether or not the parties have entered into the TMA on a multibranch basis.

(ii) With respect to the enforceability of Section 6(f), the sale of Designated Assets

pursuant to Section 6(f) of the TMA may, in certain circumstances, be void 29;

however, if the option to sell the Designated Assets is not exercised or the party to

which a notice has been given fails to comply with its undertaking to purchase,

and the Exercising Party is entitled to liquidated damages, then the Relevant

Index Amount or the liquidated damages are capable of being set-off under

Section 6(h) of the TMA (where such set-off is consistent with the Mandatory

Insolvency Set-Off Provisions).

(iii) The payment of the net termination amount in a currency other than Singapore

dollars will be enforceable under the laws of Singapore30

(iv) A separate liquidation proceeding may be commenced in Singapore in respect of

the Singapore branch of a Defaulting Party which is a corporate and in such

circumstances, Singapore insolvency laws would prevail and our analysis with

respect to the Close-out Provisions under Part II would apply.

V. Upcoming Developments

We would bring to your attention the following pending development or change in the laws

of Singapore. In October 2002, several proposals for changes to the laws of Singapore

were published by a committee known as the Company Legislation and Regulatory

Framework Committee (the "CLRFC") (which was followed by the ILRC). The

amendments to the Companies Act in 2017 (which are reflected in our responses to the

questions above) reflect some of these proposals, but there are other proposals that have

not been implemented. One change recommended by the CLRFC, and accepted by the

government, was the consolidation and refinement of Singapore's insolvency legislation,

which at present is set out in discrete portions of the Companies Act and in the Bankruptcy

Act. There is therefore a possibility that, when this consolidation and refinement takes

place, the insolvency laws could be amended in a way which affects the conclusions

reached in this memorandum (though we are of the view that this is unlikely to adversely

affect the conclusions herein). The ILRC's key recommendations and MinLaw's public

consultation, from 7 October 2013 to 2 December 2013, on the key recommendations

made in a final report by the ILRC in relation to Singapore's personal and corporate

insolvency regimes can be accessed at the following link:

http://www.mlaw.gov.sg/news/public-consultations/public-consultation-on-ILRC-report.html.

29 The risk may not be avoidable, but parties can rely instead on the liquidated damages provision of Section 6(~(v)(2).

3o Our opinion herein refers to the denomination of the net termination amount in a currency other than Singapore

dollars. We express no opinion on the actual act of payment of the net termination amount.

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Allen~Glecll-vll

I n respect of the proposals by the ILRC which have not been implemented, while much

would depend on the final product or legislation, we do not think that these proposals, if

implemented, should adversely affect the conclusions reached in this memorandum. The

Minister of Law has indicated that the omnibus Insolvency Bill will be introduced in the

second half of 2018.

This Memorandum is addressed to ISDA and IIFM solely for their benefit and the benefit of their

members. No other person may rely on this Memorandum for any purpose without our prior written

consent. However, this memorandum may be shown by ISDA, IIFM or their members to a

regulatory or supervisory authority or professional advisors for the purposes of information only, on

the basis that we assume no responsibility to such authority or any other person as a result.

ALLEN & GLEDHILL LLP

7 DECEMBER 2017

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Allen~Gleclhill

Appendix A

CERTAIN TRANSACTIONS UNDER THE TMA

Basis Swap. A transaction in which one party pays periodic amounts of a given currency based on

a floating rate and the other party pays periodic amounts of the same currency based on another

floating rate, with both rates reset periodically; all calculations are based on a notional amount of

the given currency.

Bond Forward. A transaction in which one party agrees to pay an agreed price for a specified

amount of a bond of an issuer or a basket of bonds of several issuers at a future date and the

other party agrees to pay a price for the same amount of the same bond to be set on a specified

date in the future. The payment calculation is based on the amount of the bond and can be

physically-settled (where delivery occurs in exchange for payment) or cash-settled (where

settlement occurs based on the difference between the agreed forward price and the prevailing

market price at the time of settlement).

Bond Option. A transaction in which one party grants to the other party (in consideration for a

premium payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the

case of a put) a specified amount of a bond of an issuer, such as Kingdom of Sweden or Unilever

N.V., at a specified strike price. The bond option can be settled by physical delivery of the bonds in

exchange for the strike price or may be cash settled based on the difference between the market

price of the bonds on the exercise date and the strike price.

Buy/Sell-Back Transaction. A transaction in which one party purchases a security (in

consideration for a cash payment) and agrees to sell back that security (or in some cases an

equivalent security) to the other party (in consideration for the original cash payment plus a

premium).

Cap Transaction. A transaction in which one party pays a single or periodic fixed amount and the

other party pays periodic amounts of the same currency based on the excess, if any, of a specified

floating rate (in the case of an interest rate cap), rate or index (in the case of an economic statistic

cap) or commodity price (in the case of a commodity cap) in each case that is reset periodically

over a specified per annum rate (in the case of an interest rate cap), rate or index (in the case of

an economic statistic cap) or commodity price (in the case of a commodity cap).

Collar Transaction. A collar is a combination of a cap and a floor where one party is the floating

rate, floating index or floating commodity price payer on the cap and the other party is the floating

rate, floating index or floating commodity price payer on the floor.

Commodity Forward. A transaction in which one party agrees to purchase a specified quantity of a

commodity at a future date at an agreed price and the other party agrees to pay a price for the

same quantity to be set on a specified date in the future. The payment calculation is based on the

quantity of the commodity and is settled based, among other things, on the difference between the

agreed forward price and the prevailing market price at the time of settlement.

Commodity Option. A transaction in which one party grants to the other party (in consideration for

a premium payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in

the case of a put) a specified quantity of a commodity at a specified strike price. The option can

be settled either by physically delivering the quantity of the commodity in exchange for the strike

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Allen~Gleclhill

price or by cash settling the option, in which case the seller of the option would pay to the buyer

the difference between the market price of that quantity of the commodity on the exercise date and

the strike price.

Commodity Swap. A transaction in which one party pays periodic amounts of a given currency

based on a fixed price and the other party pays periodic amounts of the same currency based on

the price of a commodity, such as natural gas, or a futures contract on a commodity (e.g., West

Texas Intermediate Light Sweet Crude Oil); all calculations are based on a notional quantity of the

commodity.

Credit Spread Transaction. A transaction involving either a forward or an option where the value

of the transaction is calculated based on the credit spread implicit in the price of the underlying

instrument.

Cross Currency Rate Swap. A transaction in which one party pays periodic amounts in one

currency based on a specified fixed rate (or a floating rate that is reset periodically) and the other

party pays periodic amounts in another currency based on a floating rate that is reset periodically.

All calculations are determined on predetermined notional amounts of the two currencies; often

such swaps will involve initial and or final exchanges of amounts corresponding to the notional

amounts.

Currency Option. A transaction in which one party grants to the other party (in consideration for a

premium payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the

case of a put) a specified amount of a given currency at a specified strike price.

Currency Swap. A transaction in which one party pays fixed periodic amounts of one currency and

the other party pays fixed periodic amounts of another currency. Payments are calculated on a

notional amount. Such swaps may involve initial and or final payments that correspond to the

notional amount.

Economic Statistic Transaction. A transaction in which one party pays an amount or periodic

amounts of a given currency by reference to interest rates or other factors and the other party pays

or may pay an amount or periodic amounts of a currency based on a specified rate or index

pertaining to statistical data on economic conditions, which may include economic growth, retail

sales, inflation, consumer prices, consumer sentiment, unemployment and housing.

Emissions Allowance Transaction. A transaction in which one party agrees to buy from or sell to

the other party a specified quantity of emissions allowances or reductions at a specified price for

settlement either on a "spot" basis or on a specified future date. An Emissions Allowance

Transaction may also constitute a swap of emissions allowances or reductions or an option

whereby one party grants to the other party (in consideration for a premium payment) the right, but

not the obligation, to receive a payment equal to the amount by which the specified quantity of

emissions allowances or reductions exceeds or is less than a specified strike. An Emissions

Allowance Transaction may be physically settled by delivery of emissions allowances or reductions

in exchange for a specified price, differing vintage years or differing emissions products or may be

cash settled based on the difference between the market price of emissions allowances or

reductions on the settlement date and the specified price.

Equity Forward. A transaction in which one party agrees to pay an agreed price for a specified

quantity of shares of an issuer, a basket of shares of several issuers or an equity index at a future

date and the other party agrees to pay a price for the same quantity and shares to be set on a

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Allen~Gledhill

specified date in the future. The payment calculation is based on the number of shares and can

be physically-settled (where delivery occurs in exchange for payment) or cash-settled (where

settlement occurs based on the difference between the agreed forward price and the prevailing

market price at the time of settlement).

Equity Index Option. A transaction in which one party grants to the other party (in consideration

for a premium payment) the right, but not the obligation, to receive a payment equal to the amount

by which an equity index either exceeds (in the case of a call) or is less than (in the case of a put)

a specified strike price.

Equity Option. A transaction in which one party grants to the other party (in consideration for a

premium payment) the right, but not the obligation, to purchase (in the case of a call) or sell (in the

case of a put) a specified number of shares of an issuer or a basket of shares of several issuers at

a specified strike price. The share option may be settled by physical delivery of the shares in

exchange for the strike price or may be cash settled based on the difference between the market

price of the shares on the exercise date and the strike price.

Equity Swab. A transaction in which one party pays periodic amounts of a given currency based

on a fixed price or a fixed or floating rate and the other party pays periodic amounts of the same

currency or a different currency based on the performance of a share of an issuer, a basket of

shares of several issuers or an equity index, such as the Standard and Poor's 500 Index.

Floor Transaction. A transaction in which one party pays a single or periodic amount and the other

party pays periodic amounts of the same currency based on the excess, if any, of a specified per

annum rate (in the case of an interest rate floor), rate or index level (in the case of an economic

statistic floor) or commodity price (in the case of a commodity floor) over a specified floating rate

(in the case of an interest rate floor), rate or index level (in the case of an economic statistic floor)

or commodity price (in the case of a commodity floor).

Foreign Exchange Transaction. A transaction providing for the purchase of one currency with

another currency providing for settlement either on a "spot' or two-day basis or a specified future

date.

Forward Rate Transaction. A transaction in which one party agrees to pay a fixed rate for a

defined period and the other party agrees to pay a rate to be set on a specified date in the future.

The payment calculation is based on a notional amount and is settled based, among other things,

on the difference between the agreed forward rate and the prevailing market rate at the time of

settlement.

Freight Transaction. A transaction in which one party pays an amount or periodic amounts of a

given currency based on a fixed price and the other party pays an amount or periodic amounts of

the same currency based on the price of chartering a ship to transport wet or dry freight from one

port to another; ail calculations are based either on a notional quantity of freight or, in the case

of time charter transactions, on a notional number of days.

Fund Option Transaction: A transaction in which one party grants to the other party (for an agreed

payment or other consideration) the right, but not the obligation, to receive a payment based on

the redemption value of a specified amount of an interest issued to or held by an investor in a fund,

pooled investment vehicle or any other interest identified as such in the relevant Confirmation (a

"Fund Interest"), whether i) a single class of Fund Interest of a Single Reference Fund or ii) a

basket of Fund Interests in relation to a specified strike price. The Fund Option Transactions will

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Allen~Gledhill

generally be cash settled (where settlement occurs based on the excess of such redemption value

over such specified strike price (in the case of a call) or the excess of such specified strike price

over such redemption value (in the case of a put) as measured on the valuation date or dates

relating to the exercise date).

Fund Forward Transaction: A transaction in which one party agrees to pay an agreed price for the

redemption value of a specified amount of i) a single class of Fund Interest of a Single Reference

Fund or ii) a basket of Fund Interests at a future date and the other party agrees to pay a price for

the redemption value of the same amount of the same Fund Interests to be set on a specified date

in the future. The payment calculation is based on the amount of the redemption value relating to

such Fund Interest and generally cash-settled (where settlement occurs based on the difference

between the agreed forward price and the redemption value measured as of the applicable

valuation date or dates).

Fund Swap Transaction: A transaction a transaction in which one party pays periodic amounts of

a given currency based on a fixed price or a fixed rate and the other party pays periodic amounts

of the same currency based on the redemption value of i) a single class of Fund Interest of a

Single Reference Fund or ii) a basket of Fund Interests.

Interest Rate Option. A transaction in which one party grants to the other party (in consideration

for a premium payment) the right, but not the obligation, to receive a payment equal to the amount

by which an interest rate either exceeds (in the case of a call option) or is less than (in the case of

a put option) a specified strike rate.

I nterest Rate Swap. A transaction in which one party pays periodic amounts of a given currency

based on a specified fixed rate and the other party pays periodic amounts of the same currency

based on a specified floating rate that is reset periodically, such as the London inter-bank offered

rate; all calculations are based on a notional amount of the given currency.

Longevity/Mortality Transaction. (a) A transaction employing a derivative instrument, such as a

forward, a swap or an option, that is valued according to expected variation in a reference index of

observed demographic trends, as exhibited by a specified population, relating to aging, morbidity,

and mortality/longevity, or (b) A transaction that references the payment profile underlying a

specific portfolio of longevity- or mortality- contingent obligations, e.g. a pool of pension liabilities or

life insurance policies (either the actual claims payments or a synthetic basket referencing the

profile of claims payments).

Physical Commodity Transaction. A transaction which provides for the purchase of an amount of a

commodity, such as oil including oil products, coal, electricity or gas, at a fixed or floating price for

actual delivery on one or more dates.

Property Index Derivative Transaction. A transaction, often structured in the form of a forward,

option or total return swap, between two parties in which the underlying value of the transaction is

based on a rate or index based on residential or commercial property prices for a specified local,

regional or national area.

Repurchase Transaction. A transaction in which one party agrees to sell securities to the other

party and such party has the right to repurchase those securities (or in some cases equivalent

securities) from such other party at a future date.

Allen~Gledhill

Securities Lendinq Transaction. A transaction in which one party transfers securities to a party

acting as the borrower in exchange for a payment or a series of payments from the borrower and

the borrower's obligation to replace the securities at a defined date with identical securities.

Swap Option. A transaction in which one party grants to the other party the right (in consideration

for a premium payment), but not the obligation, to enter into a swap with certain specified terms.

I n some cases the swap option may be settled with a cash payment equal to the market value of

the underlying swap at the time of the exercise.

Total Return Swap. A transaction in which one party pays either a single amount or periodic

amounts based on the total return on one or more loans, debt securities or other financial

instruments (each a "Reference Obligation") issued, guaranteed or otherwise entered into by a

third party (the "Reference Entity"), calculated by reference to interest, dividend and fee payments

and any appreciation in the market value of each Reference Obligation, and the other party pays

either a single amount or periodic amounts determined by reference to a specified notional amount

and any depreciation in the market value of each Reference Obligation.

A total return swap may (but need not) provide for acceleration of its termination date upon the

occurrence of one or more specified events with respect to a Reference Entity or a Reference

Obligation with a termination payment made by one party to the other calculated by reference to

the value of the Reference Obligation.

Weather Index Transaction. A transaction, structured in the form of a swap, cap, collar, floor,

option or some combination thereof, between two parties in which the underlying value of the

transaction is based on a rate or index pertaining to weather conditions, which may include

measurements of heating, cooling, precipitation and wind.

Additional transactions

Profit Rate Swap. A Shari'ah-compliant transaction between two parties under which each of the

two parties enters into either:

(a) a wa'ad (or undertaking) in favour of the other party, under which the party providing the

wa'ad (a buyer) promises to purchase from the other party (a seller), on an agreed date or

agreed dates, (upon exercise by such other party of that wa'ad and pursuant to a Shari'ah-

compliant sale and purchase agreement); or

(b) a Shari'ah-compliant sale and purchase agreement, under which the relevant party (the

buyer) purchases from the other party (the seller), on an agreed date or agreed dates,

a specified quantity of specified assets at a purchase price (which may be either (i) a specified

agreed value, or (ii) the aggregate of the cost of assets to the seller plus a profit element, being the

agreed profit rate, as the case may be), such purchase price or such profit element of such

purchase price, if any, being based on a specified fixed rate or rates or a specified floating rate or

rates that may itself be calculated by reference to a benchmark rate, such as the London inter-

bankoffered rate, as agreed at the outset of the transaction.

All calculations in respect of the purchase price of the specified assets payable by the buyer to the

seller are referenced to a specified capital amount (or notional amount) in respect of the

transaction. Payment for assets may occur, pursuant to the relevant Shari'ah-compliant sale and

purchase agreement, as of the same day on which the seller delivers such assets to the buyer or

may occur on a deferred basis as of a later date, as agreed between the parties.

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Allen~'Gleclliill

Cross-currency swap or Islamic cross-currency swap. A Shari'ah-compliant transaction between

two parties under which each of the two parties enters into either:

(a) a wa'ad (or undertaking) in favour of the other party, under which the party providing the

wa'ad (a buyer) promises to purchase from the other party (a seller), on an agreed date or

agreed dates, (upon exercise by such other party of that wa'ad and pursuant to a Shari'ah-

compliant sale and purchase agreement); or

(b) a Shari'ah-compliant sale and purchase agreement, under which the relevant party (the

buyer) purchases from the other party (the seller), on an agreed date or agreed dates,

a specified quantity of specified assets at a purchase price (which may be either (i) a specified

agreed value, or (ii) the aggregate of the cost of assets to the seller plus a profit element, being the

agreed profit rate, as the case may be) denominated in a specified currency (the first currency)

(which will be a different currency from the currency in which the purchase price is payable by the

other party).

Typically, upon an initial sale of assets by each buyer to each seller, the purchase price or such

profit element of such purchase price, if any, payable by each buyer will be an amount in an

agreed currency equivalent to the specified capital amount (or notional amount) in respect of the

transaction (the currency for such payment by each such buyer being denominated in a different

currency). Typically, upon further periodic sales of assets by each buyer to each seller, the

purchase price or the profit element of such purchase price, if any, will be based on a specified

fixed rate or rates or a specified floating rate or rates calculated by reference to a benchmark rate,

such as the London inter-bank offered rate, and will be denominated in an agreed currency that is

different to the currency in respect of the initial asset sale (the second currency), as agreed at the

outset of the transaction. Typically, such swaps involve a final sale of assets by each buyer to

each seller, and the purchase price or such profit element of such purchase price, if any, payable

by each buyer will be an amount in the relevant second currency applicable to such buyer

equivalent to the specified capital amount (or notional amount) in respect of the transaction, plus

an amount calculated by reference to a specified fixed rate or rates or a specified floating rate or

rates calculated by reference to a benchmark rate, such as the London inter-bank offered rate, as

agreed at the outset of the transaction.

Ali calculations in respect of the purchase price of the specified assets payable by the buyer to the

seller are referenced to a specified capital amount (or notional amount) in respect of the

transaction or the equivalent of such specified capital amount (or notional amount) in respect of

the transaction in an agreed currency. Payment for assets may occur, pursuant to the relevant

Shari'ah-compliant sale and purchase agreement, as of the same day on which the seller delivers

such assets to the buyer or may occur on a deferred basis as of a later date, as agreed between

the parties.

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Allen~Gledhill

Appendix B

CERTAIN COUNTERPARTY TYPES

Description Covered byopinion

Legal forms)

Bank/Credit Institution. A legal entity, which may Yes, provided it A company

be organized as a corporation, partnership or in takes the form of a incorporated in

some other form, that conducts commercial Company or a Singapore under the

banking activities, that is, whose core business Branch. Companies Act,

typically involves (a) taking deposits from private Chapter 50 (a

individuals and/or corporate entities and (b) making "Company") or a

loans to private individual and/or corporate foreign corporation

borrowers. This type of entity is sometimes registered in

referred to as a "commercial bank" or, if its Singapore as a

business also includes investment banking and branch under the

trading activities, a "universal bank". (If the entity Companies Act,

~o conducts investment banking and trading Chapter 50 (a

activities, then it fails within the "Investment Branch").

Firm/Broker Dealer" category below.) This type of

entity is referred to as a "credit institution" inEuropean Community (EC) legislation. This

category may include specialised types of bank,

such as a mortgage savings bank (provided thatthe relevant entity accepts deposits and makes

loans), or such an entity may be considered in thelocal jurisdiction to constitute a separate categoryof legal entity (as in the case of a building society inthe United Kingdom (UK)).

Central Bank. A legal entity that performs the No Requires further legal

function of a central bank for a Sovereign or for an analysis and is

area of monetary union (as in the case of the outside the scope of

European Central Bank in respect of the euro this memorandum.

zone).

-41 -

Allen~'Gledhill

Description Covered by Legal forms)

opinion

Corporation. A separate legal entity that is Yes, provided it

organized as a corporation or company rather than takes the form of a

a partnership, is engaged in industrial and/or Company or a

commercial activities and does not fall within one of Branch.

the other categories in this Appendix B.

Hedge Fund/Proprietary Trader. A legal entity, Yes, provided it

which may be organized as a corporation, takes the form of a

partnership or in some other legal form, the Company or a

principal business of which is to deal in and/or Branch.

manage securities and/or other financial

instruments and/or otherwise to carry on an

investment business predominantly or exclusively

as principal for its own account.

Insurance Company. A legal entity, which may be Yes, provided it

organised as a corporation, partnership or in some takes the form of a

other legal form (for example, a friendly society or Company or a

industrial &provident society in the UK), that is Branch, and in the

licensed to carry on insurance business, and is case of a licensed

typically subject to a special regulatory regime and insurer under the

a special insolvency regime in order to protect the Insurance Act, all

interests of policyholders. Transactions andDFT TermsAgreementsentered into underthe TMA by theinsurer are

attributable to thesame insurancefund maintained by

the insurer underthe Insurance Act,Chapter 142 of

Singapore.

I nternational Organization. An organization of No Requires further legal

Sovereigns established by treaty entered into analysis and is

between the Sovereigns, including the International outside the scope of

Bank for Reconstruction and Development (the this memorandum.

World Bank), regional development banks and

similar organizations established by treaty.

- 42 -

Allen~Gledhill

Description Covered by

opinion

Legal forms)

Investment Firm/Broker Dealer. A legal entity, Yes, provided it

which may be organized as a corporation, takes the form of a

partnership or in some other form, that does not Company or a

conduct commercial banking activities but deals in Branch (in each

and/or manages securities and/or other financial case it is

instruments as an agent for third parties. It may transacting as

also conduct such activities as principal (but if it principal and not as

does so exclusively as principal, then it most likely trustee, agent or in

falls within the "Hedge Fund/Proprietary Trader" some other

category above.) Its business normally includes capacity).

holding securities and/or other financial instruments

for third parties and operating related cash

accounts. This type of entity is referred to as a

"broker-dealer" in US legislation and as an

"investment firm" in EC legislation.

Investment Fund. A legal entity or an arrangement Yes, provided it

without legal personality (for example, a common takes the form of a

law trust) established to provide investors with a Company or a

share in profits or income arising from property Branch (in each

acquired, held, managed or disposed of by the case it is

managers) of the legal entity or arrangement or a transacting as

right to payment determined by reference to such principal and not as

profits or income. This type of entity or trustee, agent or in

arrangement is referred to as a "collective some other

investment scheme" in EC legislation. It may be capacity).

regulated or unregulated. It is typically

administered by one or more persons (who may be

private individuals and/or corporate entities) who

have various rights and obligations governed by

general law and/or, typically in the case of

regulated Investment Funds, financial services

legislation. Where the arrangement does not have

separate legal personality, one or more

representatives of the Investment Fund (for

example, a trustee of a unit trust) contract on

behalf of the Investment Fund, are owed the rights

and owe the obligations provided for in the contract

and are entitled to be indemnified out of the assets

comprised in the arrangement.

- 43 -

Allen~Gledl~ill

Description Covered by Legal forms)opinion

Local Authority. A legal entity established to No Requires further legaladminister the functions of local government in a analysis and isparticular region within a Sovereign or State of a outside the scope ofFederal Sovereign, for example, a city, county, this memorandum.borough or similar area.

Partnership. A legal entity or form of arrangement No Requires further legalwithout legal personality that is (a) organised as a analysis and isgeneral, limited or some other form of partnership outside the scope ofand (b) does not fall within one of the other this memorandum.categories in this Appendix B. If it does not havelegal personality, it may nonetheless be treated asthough it were a legal person for certain purposes(for example, for insolvency purposes) and not forother purposes (for example, tax or personalliability).

Pension Fund. A legal entity or an arrangement Yes, provided itwithout legal personality (for example, a common takes the form of alaw trust) established to provide pension benefits to Company or aa specific class of beneficiaries, normally Branch (in eachsponsored by an employer or group of employers. case it isIt is typically administered by one or more persons transacting as(who may be private individuals and/or corporate principal and not asentities) who have various rights and obligations trustee, agent or ingoverned by pensions legislation. Where the some otherarrangement does not have separate legal capacity).personality, one or more representatives of thePension Fund (for example, a trustee of a pensionscheme in the form of a common law trust) contracton behalf of the Pension Fund and are owed therights and owe the obligations provided for in thecontract and are entitled to be indemnified out ofthe assets comprised in the arrangement.

Sovereign. A sovereign nation state recognized No Requires further legalinternationally as such, typically acting through a analysis and isdirect agency or instrumentality of the central outside the scope ofgovernment without separate legal personality, for this memorandum.example, the ministry of finance, treasury ornational debt office. This category does not includea State of a Federal Sovereign or other politicalsub-division of a soverei n nation state if the

- 44 -

Allen~Gleclhill

Description Covered by Legal forms)opinion

sub-division has separate legal personality (for

example, a Local Authority) and it does not include

any legal entity owned by a sovereign nation state

(see "Sovereign-owned Entity").

Sovereign Wealth Fund. A legal entity, often Yes, provided it

created by a special statute and normally wholly takes the form of a

owned by a Sovereign, established to manage Company or a

assets of or on behalf of the Sovereign, which may Branch.

or may not hold those assets in its own name.

Such an entity is often referred to as an

"investment authority". For certain Sovereigns, this

function is performed by the Central Bank, however

for purposes of this Appendix B the term

"Sovereign Wealth Fund" excludes a Central Bank.

Sovereign-Owned Entitv. A legal entity wholly or Yes, provided it

majority-owned by a Sovereign, other than a takes the form of a

Central Bank, or by a State of a Federal Sovereign, Company or a

which may or may not benefit from any immunity Branch.

enjoyed by the Sovereign or State of a Federal

Sovereign from legal proceedings or execution

against its assets. This category may include

entities active entirely in the private sector without

any specific public duties or public sector mission

as well as statutory bodies with public duties (for

example, a statutory body charged with regulatory

responsibility over a sector of the domestic

economy). This category does not include local

governmental authorities (see "Local Authority").

State of a Federal Sovereign. The principal No Requires further legal

political sub-division of a federal Sovereign, such analysis and is

as Australia (for example, Queensland), Canada outside the scope of

(for example, Ontario), Germany (for example, this memorandum.

Nordrhein-Westfalen) or the United States of

America (for example, Pennsylvania). This

category does not include a Local Authority.

-45-

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~~i ,t~~i ENHANCING SINGAPORE AS AN~~"~`i;~~'~ ~"~ 4' INTERNATIONAL DEBT RESTRUCTURING'~~:~ ry ~~ ~ CENTRE FOR ASIA AND BEYOND

tf,~ , it

~. ~' ~ A note from Indranee Rajah S.C., Senior Minister of State for Law and Finance

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23 May 2017 is a date for Singapore insolvency practitioners to rennember.

That's when the Companies Act amendments for our enhanced debt restructuring regime cameinto effect - 24 months from the time the Comix~ittee to Strengthen Singapore as an InternationalDebt Restructuring Centre began its work, culminating in a Report' and 1Q weeles from the tinethe Bill was passed in F'arliament.z

This heralds an exciting new chapter for debt restructuring work in Asia.

It will cre~Ce opporCunities for all prafessiotZals in the debt restruct~.iring space - lawyers,accountants, valuers and financiers who specialise in distressed debt.

It also signals hope for Asian companies in financial distxess or on the brink of insolvency. The

enhanced regirz-~e offers greater flexibility and options for such companies to restructure andsurvive. Successful rescructurin~s riot only allow the company to carry on as a going concern butgenerally result in better outcomes for employees, creditors and investors as a whole.

The recomi7irndations in the CommiUee's report were summarised itt my Note of 26 July 201b which a~n be accessed ~i f•, r ; ~;, ~~ ~,4~>e =f=~, .~j

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From left, United States I~anhrup[cy Court Jor the Southern District of New Yorh, Supreme Court of Singapore, T7te Hish Court ofLngiand and Waies at the Rolis Buildtng,

In recent times we have seen many big names either go under oz- face financial dif~eulty — HanjinSl~~ippil-~g, China Fishery Group, Swiber I-Ioldings, Fzra Holdings and Swiss Co. Witl-~ a stilluncertain economic autloolz and unprecedented debt levels in flsia -- noix-bank borrowers will

have to 1-epay bonds of over U5$280 billion in Asia3 and US$27 billion i~~. Singapore over the ~xext

4 years -- there will undoubtedly be demand for restructuring ahead.

With the enhanced regime in force, we are well placed to meet this demand,

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Our new law incorporates the best features of the v,~orld's leading debt restructuring regimes.

Hitherto the debt restructuring regime in our Companies Act was modelled on tlae English

Companies .A.ct with some variations derzved from Australian legislation, and had two lzey features:

(i) Schemes of arrangement (where tl~e debtor remains in possession); and

(ii) ,J~aclicial managern~nt (akin to the English administration, where tl7e managelx~ent of the

debtor is displaced and a pro~essioxial or trustee takes possession),

The enhanced regirrze retains these two features but builds upon and strengthens them byadding key elements v£ Cha~ater 11 of the US Bankruptcy Code which have been instrumental inestablishing the US as apre-eminent debt restructuring centre.

Our scheme of arrangement ar Debto~~-in-Possession (DIP) regime is now enhanced by thefollowing Chapter 11 features.

(i) DTP financing (ar rescue financing)will now be available to companies indistress, for which the Court can grantstaper-p~or~ry over all other creditors.This encourages the injection offresh funds to rescue troubled debtorcompanies (section 211E);

(ii) Protection from ]aw suits and otherlegal action by virtue of:

a. are automatic 30 day inoratoriuxn "''' F t` ~~ ;r~ ~ 1against creditor aet~oz~ + ~ ~ ~~' ~r ~;-, ~ ~ ,'~~

, ,: ;.immediately upaxz the filing of -~-=- ~~~----an application by the debtor company. This applies even if the restructut-ing proposal~zas not been fully worked out and there is only an inte~~tion co present a restz~ucturingproposal as soon as practicable. The court can extend the moratorium if it is satisfiedthere are good reasons to do so (section 2118(8));

b, worldwide effect of such inazatoriwns, provided that the injuncted parties are subjectto in personum jurisdiction of the Singapore courts (section 21 li3(S); and

c. extension of i~aoratoriums to Che debtoz coln~az~y:s related e~~tities, which waspz-eviously unavailable (section 21.1 C);

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(iri) Cross-class cr~ttix~down of dissenting classes. This prevents a small mino~~ity class of creditors

from st}n~ieia~g reasonable px'oposals tivhich have majority stipp~rt (section 211H); and

(iv) Pre-~acicaged schemes of arrazxgement, which allows fot' fast-tracking of schemes that have

been pre-~Zegotiated (section 211I).

Likewise, our judicial maz~a~;ement (or professional-in-possession) regime has been enhanced by

the following:

(z) Super-priority for rescue financing (section 227HA);

(i) extension to foreign ca~np~nics. Previously, judicial management orders could not be

extended to foreign companies, malting it difficult to deal with a foreign debCor o~' its relatEd

entities (section 227A.A); ar~d

(i) Relaxation o~ the test for judicial znana~ement. Previously, one had to show that the

coanpany was actually insolvent before a judicial management order could lie made, However,

industry feeclbacic was teat this was often too late. Now on.e only needs to show that it is

likely that the company will beeorrae insolvent. The relaxation of the test allows a company

to be put into judicial managexnenk ea~~liex• in the day, which increases the prospects o(~ a

successful rehabilitatioi7 (section 2278).

Singapore is the first common law system in the warlcl to introduce this unique hybrid regime

which combines the flexibility of the English regime with the powexful arse7ial of US Chapter

11 provisions. Think of it as analogous to a merger of English rugby with American football

the rules and features are all familiar but there is i~ow a completely new game in town, open to

international stakeholders.

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Carve Outs

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1n the course of the public consultations, we received various rectuests foz• carve outs from the

enhanced z•egime. These have been addressed in our Government Responses

In summary, the Companies Act provides for two types of car~re outs — by illstiturion a7~d by

transaction,

' I~or rnr~re infarm~tior, p!ense see the ~Ainisiry5 Responsr io fceclbacl< (rorn Public C`or;sultaliui~ on the Ur,~ft ::.ornpa~iies iAmendment) hill 2017 io

St;enk;ihcn tiin};apure as an Inretr±atior~ul Centre !i~r L)elit Restruc~tu nt,.~i s~,, , c+:.'„~:~~llil ? :l; ~ ~ ~ ~~t:~.!?:~i..,ti.:~._,._:. r, d 1 i. ,+)r.i:it:~ s , ::;.

~ ' l 'r.~ ' t.. •.s ~ l. ~:i;~ i,!d,li d , ~~ _!;: 1 :~~~,~ 7..=~~+, one: Supple~nemory Itcsporse to I'ee~l'~ac!< Recr.ived on (':or~pu7ies (Amerdmen~': Au_ .?_' _~~:l7 IA- ~Iir..r>~;t ielf ~}n-~E;:~rr ~is.n} ti,;crnau„<ial i_ci~tr 1.';: t>~rb1 L•'~~•;U'~.~cuilntp, n .::it,- 3:., ' -~,i_ ~ :. ;, i (j~:. ;,!., ~..:J::_.- t ~..~-:~_.._ . " ....

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— Specif ed col7~panies a~~e carved out.' These include (1) b~lllltS ~11C~ F1I1at1C:l~ll ]l'1Sl.11ll[101"1S, whicl-~

fall 11I7C~~J' C11C Mone~a~y Au~hority of Singapore's resoll.icion fraar~ewoz•.le and have special

riles chit ~~rotect custome~~ deposits iii insolver~ey; ~it~d (ii) special purpose vehicles (SPVs)

for app~-ovec~ securitisatic~n. traz~sactior~s and coverecl bonds, While the e:nhnnced rt~~;irne is

unlikely to be used for these SPVs clue to t}~eir orpha~~ eomp~~~y st.ruGcure, these two types o~

SPVs hive nevertheless been carved out to dive financial maz-ke~s certainty.

There are also carve outs for certain an•angernents, such as cle.~~iva~ive ~:ra~~sactions ire relatioal

to closeout letting. While the exercise of netting and set-off rights under these coricracts

are not 4affect.ecl by the morat.oa'iw~~s, 0115 Cal'VC'. OUI: ~11SU1'e5 CI1~t. l"1~I1CS L111CIC1' 5UI'1'O1111C~]Tl~

security intexest arrai~~;en~~ents are nat affected by the morato~-iurns.'

There is currently no carve out. for admiralty and maritii~~e claims. This is sirl~ilar to the position

in the US and the UK. in this rega~~d it should be noted that.:

-- Thez•e is no charge iz~ [he law with x•espect to the ~~ursuit of inari~ime claims in liquidation

and judicial rraanagemei~G situations.

— The only difference is ghat now, if az~ automatic or court-ordered xTiorzcorium in ~ schen~.e

situation is i~~ place, n~az~i~il~~e claimants will have to apply for leave to proceed with

their claims (in t11e same way that they have always hid to (~0 111 liquidation ~ncl judicial

mazzagement situations). There are well established principles on how the cou~~ts ti~ill deal

with applications for leave in ~•espect ot~ maritin7e claims in t.l~ese siturtions. These are noe

affected by the new legislacio~z.

— Tn urgent cases e.g. imminent expiz'y of limitation period, ehe writs and applications for Leave

should be filed simttlCaneously. Mii~Law understands tlxat. tl7e Sti~pz~e~ne Court Registry will

accept the filings and tl~ere~fter the Court will decide if the claim may proceEd,B

" See Companies (Prescribed Companies and Cntities) Urder 2017.

See Companies (Prescribed Fln~nngemcnl ,) Regulations 2017,

" For• discussion on (eedbacl< given by the shippfr~~; industry, please see Supplementary Response (link ~t foonoie 5 above)

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As these are early days yet, it will be necessary to see how the moratoriums a~~d carve outs workiz~ p~•accice, These may have to be augmented, refined or adjusCed over tizT~e.

Abolition of Ring-Fencitl~ Rule

Fre-.viously, lic{uidators of foreign companies ~vere rer~uired to ring fence Singapore assets to payoff debts incurred ~zl 5ingapore first before repatriating funds to Ghe foz'eig~ company's principalplace of lic~uidaCion. The ring fencan~ rule is now abolished, save in respect oI~ debts of specifiedfinazzcial e~itities, such as banks and insurance com~~anies (Section 3`l7).

The abolition of ring fezzcii~g levels the ~layin~ field for local and foreign crediCors, providing parity

of treatment in Singapore insolvency ~~roceeciings. "I~17xs x'e~noves a previous source of dissatisfactionamong f~oi~eagn creditors and aligns Sin~a~ore with established practice in,jurisdictions such as the

US, UK and Australia._ _ _ y

With rescue financing now in tl~e picture, ~.>we can expect two further developanents: ;,

— First funds and oCl~er investors '$~- .specialising in distressed debt will ~'` ^

now enter the Sii~gapare zestructuringspace; and

— Second, there will be increased demand for high ~~=~w -,~=~-~"quality business valuations, as this will be critical indetermining whether, and if so to what extent, rescue fina~.cin~ should be provided.

Funds lawyers should take note and reach out to clients vaitlx distressed debt portfolios.

The laCCer development pa~esents opportunities fox tl~e accounting firms and others in thevaluation. industry. It's also good news for graduates of the valuation course run by the SingaporeAccountancy Commission (SAC) in conjunction vaith the Nanyan~ Technological Uzliversity9

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A c{uestion often asked is the enforceability of 5iriga~~are z-estructuring orders. Creditors and

debtors urant to lrnow if they can be enforced overseas, par[icularly in jurisdictions where thedebtor comX~ai~y's ot~ its related entities' assets are located.

The short answer is that the enfo~•ceability of a Sin~apoz~e restr-uctw~ing orcle7• is xio di~ferer~t f~rotnthat. of~ tl~e US ar~d UK courts. Enfoxceability depends ozz a variety of things which include:

— Multilateral or bilateral arrangernc~nts;— Whetl-~er the foreign j~.u•isdictior~ has a framework for enforcement of orders made by other

courts;Reciprocity; and

— Practical ability to enforce even absent the above factors.

Singapore judgments and orders are enforceable in many jurisdictions under the fallowing:

For more infotrnaiion, please see lriit,_ ~"-ir ,,s:_..,: ~ ~!~~~~ ~..!:;= i.`.! ,.. ;,'i~ ~ zil .;,>~~~;.

-- UNCITRAI. Model Law oz~ Cross-Border Insolvel~cy (Ivlodel L.~ir~v)which provides e~~l~~ctin~ states with

a modern, h~rri~.onised and fair

procedural I~l'~lIllCW01'Iz ~o effectively

address cross-bonder insolvency cases.

Of~ the 42 s~at.es which leave enacted

the Model Law (wicll Singa~~ore Being

t}~~e latest ad~~_~tc~e), Clza~~ter 15 of the

US Iianlcruptcy Code and UK Cross-

Border Xnsolveiicy Rcgul~tions

~QO6 ha~~c been frec~izencly used for

recognition ol~ Singa}~ol~e orders —

allowin~; doxnest.ic US and UI< orders

[o he ~z•anted irl suppaz~t c~l~ Szngapore

p~~oceedings.

— Co~n~rion law, In addition to

t7ational legislation, the cona~~on

law provides a fureher avenue for

recognition of ia~solvency proceedings.

Courts reco~;nisE the desirability and

practzcali~y of a U111VE'TSr~I collection

and distribution of assets in a single

train proceeding, and offer assistance

to achieve this.

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— Tl~e ~7rinciple o~~~•eci~~rocity. Even where there are no multilatei-ai or bilateral arra~~gements,

many courts (including tl~.ose of civil law systems) will accord recognition to the judgments

of~ other cnua~t.r~ies on the principle of reciprocity i.e. they will enforce oul• jud~znents if we

v,~ill enforce eheirs (subject of~ course ~o certai~l rules and exceptions e.g. fz-aud or public

policy). Recently, v✓e have seen this pri.i-~ci~71e being applied. more generally in a civil andcommercial matter in China, where a Si~~gapore judgmEnt was accorded z~eco~nition by the

Nanji7~g Intermediate People's Court on this basis,'o

There ~~re also practical considerations which facilitate the enCo~~cei~ent of Singapore orders. In the

sat~~e way [liar New Yc~►~k's and London's status as financial hubs Enable tl~ie lJS and UK ~o enforcechair court c~rclers, liI<ewise: oui- status ~s a fin~a~lcial centre does the same..l' Many f~irzancial ir~stitu~ionsand corporate vehicles Trough w}rich funds for n~ulCinational con~loxr~erates are raised (and theirc>l~ficers) az~e ~resel~C in Siiz~;apc~re and he?z~ce subject ~o the jw-iscl~ctio~~ of the Singa~aore courts, eventhough t11e debi.oa~s' operac.ior~s may l~~e. overseas.

This is riot to say that there ~u~e nc~ challenges in eilforcirlg Singapore orders, partictalarly injt~risdic~.i~ns whose legal regimes .ire less develo~~ecl. However, these cl~iallenges are n.o cli(i~erentfrom those encountered b~~ orders c~rxl~~n.ating f~rotY~ other courts deaJir~~; with cross-border maters,including those n1 t1~e 1J5 and ~J1<.

" i„i~l:jf':;Uii(?i Y~Gli%` ~I 'I ii`i~l~~i:~(lii~t~.-i~ii;;l~r i~. ~' .i,;e(: }+9"9i):?.ii~ ~ .1ir; ~;ip~;rr a i~inkril .r, ~,~r ;~yi lin;inc.ril ~,riur ui ~Isia tGiul:~~l i iis:m~. i;d C.enucs Index 1J1

Rnundtuble orgu»ised by Milbank, Tweed, Hadley f~ McCloy LLA midGIC event on Sirtgupore's enhanced debt restructurinb regime.

.~ ~~ ~ ~;r

A lcey aspect of being; an international debt restrucCuring centre is to have judges who are wellversed i~~ both tl~e legal and coz~~mercial aspects of restructuring and insolvency,

The Committee's ~~ecornmendation for a dedicated bench of specialist judges to hear restnzcturingand insolvency cases has been accepted. Parties who bring their restz-ucturing cases before ourcouxts will Rave the assurance of lrnowin.g that the judges presiclizlg oven• their cases will lave the1-equisite experience and knowledge to deal with cross-border i°estructuring.

Fast experience iii complex cross-border insalvenciessucl~t as Lehman Brothe~~s az~d Nortel has high]ighted theimportance of effective communicatian and corporationbetween judiciaries.

Previously communication between counts in para~~e1insolvency proceedings was scarce oz' on an ad hoc basis.This created uncertainty, delays, and at tines conflictingcourt orders.

To address this, the Singapore Supreme Court hosted acan£erence in October 2016, which attracted insolvencyjudges from 10 jurisdictions,1z and x~sulted in theestablishment of the Judicial Insolvency Network (JIN),

J1N ~s a networiz for insolvency judges to share experiences,exchange ideas, identify areas for• judicial cooperatioziand develop best practices. JIN is a highly innovativeand useful channel for a coordinated approach to cross-border restructuring and insolvency and facilitation ofinternational enforcement.

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Presenting u wood carving of Singapore's oldSupreme Court to Chief Judge Morris of tl~e USI~an}:ruptcy Court for t?ie Southern District ofNew Yorh.

"Australia (i'e~leral Court of Ai~straliu and New South Wnics), bri~ish Virgin ]stands, Cansid~ (Qntario), Cayman Islands, EnglanJ 6Y Wales, l li~nP KongSAR (as observer), Unitcd Slates (Southern 1')isu-ict of New York and llelaware), and Singapore, Judges from 17errrn~da, Japan and South Korex were Jceptinto~med of the proce~ dings at the conference at their request.

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Nir~y 20] 7 study visit to the U.S 13ctn)trupt~y :our( (or the Snul.hr.rn Oisrricc of Ne,w Yor}r •~i~hir.'h includrr.! clisrussion.t with judnes andleciding ntembers of e~,~ rt~,~. York bankruptcy ~G1'.

At the inaugural ,JIN meeting in Singapore, the parCicipating j~~dges produced a best practices

wide (JIN Guidelines) to assist stalcelzolders in across-border insolvency develop protocols for

court-to-court carrimunicatioz2 and cooperation,

To date, t}1e ~J1N guidelines have been adopted by tl~e US Bankruptcy Courts for the District of

Delaware and the Southern District of New Yorlc, England and Wales, 13ermLYda, British Virgin

Islands and Singapore. More are expected in the coming montl~s.

_ ,~

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As an international financial centre from which mangy of the world's leading financial institutions

conduct cross-border lending, 5i17gapare has a st1•ong base of multinational talent involved in

regional debt restructuring wo~~k. These razage from legal pra~essionals to accounting and other

financial experts.

Nevertheless, it remains crucial forSingapore to continually produce, attract and retain professionals

of the highest quality to coi~zeribut.e to the debt restructuriaz~ ecosystem, An important aspect of

this inval~ves strengthening our existing professionals, while ensuz~ing a pipe-line of talent with

inter-disciplinary knowledge and skills,

To achieve this, we are loolzing into improving the tz•aining and education opportunities farinsolvency professionals Co upgrade their skills and non-insolvezlcy professionals to t~~ansit intothe sector.

An impartane feature will be to facilitate the acquisition of cz~oss-disciplinary skills, so that

professionals have greater breadth and depth of expertise. One option being exploxed is to allow

legal practiCioners who attend courses run by the accounting profession to count these courses

towards their continuing professional development (CPD) requirements and vice versa for

accountants attending legal courses.

We will v,~oriz with the Law Society, S.AC, Institute of Singapore Chartered Accountants and our

universities Co provide continu9ng education and training that is multi-disciplinary in nature toenable our professionals to acquire deep expertise and comprehensive sltillsets in restructuring

and insolvency.

~ ~f1~~3~~7\'~~1 1~.~~~.'~r1 ~h~pi ~~,. 7 I Q Y~H~ 7 ,:q.i.'1'1 ;~[~i'..~~y

~ -.. ..._ _ , .. ~... . _ _. .... _.. "___ ..J

We brought ouz~ enhanced regime into bung i7~ an expedited time frame of 24 months from staxt

to end. This was possible only due to the connbined anc~ concerCecZ efforts of many contributors,

both iii Singapore and internationally, including industzy, professionals, academics, judiciary andgovernment,

We thank al] involved far their sterling efforts, and loolz forward to continuing and extendi~~~

these strong pa~~tnerships and collalaorations as we eiTiUar•lt on this exciting phase of clevelopmer~tas an international debt restrucCuring hub for Asia.

— lndranee Rajah S.C., Senior Minister of State for 1_aw and Finance20 June 2017

MonF;ta.~yA:ixtla«rit.y of S:ia~gaporc

1 U Sl~entot~ ~/ay MSS f3uiltling Singapnre 07911 % Telephone 65 6225 5[i]1 I arsintil~ 65 6'1,29 J229

File Reference. MPI CMP 02/2014 Vol Ol

9 October 2014

Intez7l~tional Swaps and Derivatives flssociatioii, Ti1c,SO C,oJlyer Quay #~09-01 OUE Bayfi•antSin~a}~or~e 049321

Attention: Mr. D~~vid Geen, Ge~~eral Cour~se~Mr. Keit11 Noyes, Regio~~~l Dar•ector, E1sia Paczfic

Dear Sirs

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SAI+EGUARDS ON TH:E EXERCISE OF RESOLUTION 1'OWE~2S UND:CR 7'~'IEM~NETA~Y AUTX-~ORITY OF SINGAPORE A.C'T ("MAS ACT") ANDSECURITIES ANll FUTURES ACT ("SFA,")

~i1 ] 5 Ma1•cl~ 2013, the Monetary Authority of 5ia~~,~pore ("MAS") i»tz•oclucednew resolution powers unde~~ the MAS Act to adapt some of the r•ccommendatzorls i~~adeby the Financial Stability Board in it.s :Key Attributes of Effective Resolution Regimesfor Financial I~xsritutions ("FSB KA"}. Pant YVB of the MAS Act provides fai• variousremedies for a distressed approved clearing house ("ACH"), wl~icli include —

(a) ux~de~• section 30AA0 ~f~ the MAS Act, tl~e power of tl~e High Court, 01~the application of tl~e MAS to make or7c or zx~ore orders, including anorder tlYat iio steps be taken by az~y person, other than a spceif ed Jaersor~,to sell, transfer, assign or otherwise dispose of any property of theapX~roved clearing 1~ouse and airy suclx disposal in contravez~tioi~ of s~icho~-de~- shall be void; anti

(i~) tri~der section 30AAS of the MAS Act, tl~e power oCthe MAS to makedetermination that the whole or any p~irt cif the business of at~~ ACI-I shallbe trans~erz•ed.

2 As set nut in the IvTAS' response to public feedUack to tl~e Co~lsultation Paper oilPz~oposed Amendments to tl~e MAS Act of Decembe~~ 2012, it is not MAS' intent, in theexe;.rcise afiz~csolut.ion ~~owers over financial institutions, to c~efeaf or othet~wise affect thepreservatic7r~ ot~bilatera] z~etti»g az~ra~agemea~ts, W~11CI.1 II1C1L]C~eS CI'a1~51Ct10T1S C:IGill'GCI Ol] azlACl-1 ("centrally-cleal-ed transactions"),

ea

Monetary Authority af~Sr~l~apore

3 Uzider s~ctiozl 9(3) of tlYe Interpretation ,pct, matez'ia1 tJ1at i~aay be coi~sidercd ii1

the ialterpretatioi~ o~ a Wt'lt~(;1"] law shall include a sec;oltd readiYag s}~eech made in

Parliament. ley a Mi.niste~•. Du~•izl~ the Second Reading Spe~:ch of theMAS

(A1nei~dme~it) T3ila in 207 3, tl~e Miliister,ixi~cl~aY~ge of IVIAS fuz~tl~ex• explained that MAS

wi]1 be introducinb powez•s to prescz•ibe sat~e~;u~rds fi~oin the exercise of~ resol~.itiox~.

powers which may affect the contractual rights of paz-ties treader set-aft and collateral

ill'1"c'111~,8111~I]tS Xl1 117C~UStI'y ~711Ste1' abI'~~]Il~l1~S~ suc11 as t11e iSDA Master agreement. These

safe~;ua~'ds will provide additional transparency on MAS' adir~inistrative intent i~l flee

e~ercrse of ~~esolution powers, axed clarify tl~e scc7~~c of our inteiat to iiaclude centrally-

cleared t~•ansactians. MAS wilt be consultiz~~ publicly on file draft subsidiary legislG~tio1~

required to provide for such clazity.

4 Other than tl~e resolution ~oweY•s undez• the MAS Act, lllld~l' S~Ct10I7 $ I S q~ 5~1~

Secux•ities and Futures .pct ("SST"), where MAS has 1-eason to believe that a~~

ei~~e1-~;e.ncy exists or where necessary i~a the iz~tez~ests o~ floe public or for the pr-otectioli

~f il~vestors, IvTAS a~~ay direct ~n ACH to take actions as MAS cc~rlsrdcrs 7Xe;cessary to

maintain or z•cstore safe and efficient operatio~~s of tl~e clearing f~icilities operated by tl~e

ACH, including ox•derin~ the liquidation of all ~~asitions or any pant tl~ereaf, 01

rl~odifyirYg or suspe~xding any of the business rules o~the ACH. As with the exercise of

resolutio~~ powers, ixa exercising powers ui~.der i.he SFA t~aat relate to the lic~uiclat.ion of

positio~~s ot1 aye ACH, MAS does i~ot intend to exei'C1SE 51101 powers, iracludiilg its

powers u~~der section $1 S of the SSA , to de:Fc:at or otherwise effect Clue ~~7-eselvation of

bilatez~al netting; arrazageinents, ~iacludiylg ceX~.tra.11y-cleared trvssactioi~s. MAS will also

be co~lsiderin~ legislative cllaY~.~;es to the SFA to clarify this intent.

5 MAS is cur~~ently reviewing tl~e FSB KA to consider appropriate iznpleinentation

in ol7r domestic r~gizne. In this aspect, MAS will also be considering wlletl~ex~ to

include ac~diti~nal pawet's to irnpase tcinporary stays oi~ ea~~ly tcrtnination rights in

fizlancial contracts tl~zat xr~ay arise by Y•casox~ of entry into resoluti~a~ oa~ iz~ co.n.ixecCzor~ witka

the use of ~-est~lutian powers UI1dET t~'l~ MAS Act and the SFA. :(z~ relation to any

potential powe~~ to impose tem~oz-az•y stays on early terznix~atiozi rig}~ts, MAS is

CO~f175~I1t of (a) the 1Zeed fo1• t17e stay to be of a temporary z~atuY•e (:Eox• e;cazx~ple, for a

period not exceedi.n~ two business days), (b) in tl~e case of transfer of financial cor~t~•act,

the reed for the "no clleri~y ~icki~~~;" rule, and (c} the other safeguards provided in t~1e

FSB Imo. Tlxe administrative intent of tl~.e MAS is not to defeat or otherwise affect the

pceservatic~ra of bilateral nettir7~; arra~xgemex~ts (including cenirally~-cleared tr~iasactions).

Youz~s ~aitl~fully

~.i ~=LL;E I300N NG1APASSISTANT MANAGING :DIRECTOR

CAPITAL M/1RKETS

APPENDIX Q

MonetaryAtiGhority of Singapore1U Shenton Way MAS Building SinyaE~ore 079117 Telephone G5 G?.25 5577 Facsimile 65 G229 9229

26 August 2016

IiZter-~zltional Swaps and Derivatives A.ssociatiozz, Iz1c.50 Collyez• Quaff #09-0l OUE Bayfi~olltSingapore 049321

Attention: Ms. Kat~xeri~le Daz-ras, Gei~e~•al Cou~aselMr. Keit11 Noyes, Regional Darectoi•, Asia Pacific

D~ax• Sirs

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SAZ+'~GUARDS ON TI-~E ~X~RCZS~ QT' I~.ESOLUTION POWERS UNDERTHE 1Y10NETARX AUTHORITX Ol+ SrNGAPO~ .A,CT ("MAS AC'Z'")

Please refer to our letter to you dated 9 Octol~er 2014 (the "Letter").

2 MAS lzad set out in the Letter that it is not MAS' ilatez~t, iz~ the exez~cise ofresolution ~OW~1'S over financial institutions, to defeat o~• otlaex-wise affect thepreservation o£ bilateral netting a~'rai~gelnents.

3 For the avoidance of doubt, M.A.S' intent is aiot to defeat or otlaervvise affectthe preservation of bilateral zletting ar~•angerne~its, including any related secuz•~tyinterests ox collatez•a~ arz~a~~gements.

Yours :Faithfully

~ ~._~ !~

LEE BOON NGIAPASSISTANT M1INAGING DIRECTORCAPI`I'AI., MARKETS