In September 2024, the Federal Reserve System (Fed) lowered its benchmark rates for the first time since 2020 by 50 basis points (bps) to a range of 4.75% to 5.00%. The rate cuts and anticipation of further cuts have caused the United States Treasuries (UST) to dip. Additionally, China announced a series of monetary and financial stimuli in September 2024, including a 50bps cut in outstanding mortgage rates and 50bps reduction in banks’ reverse requirement ratio. These signal that financing is becoming cheaper. The authors expect the loan market should remain robust as borrowers/issuers look to lock in attractive cost of funding for fresh financing, or re-financing of existing debt incurred during the height of the pandemic where interest rates where high.

In light of the ongoing Russia–Ukraine war and the Israel–Palestine conflict, the Monetary Authority of Singapore (MAS) has been maintaining its prevailing monetary policy, choosing to closely monitor global and domestic economic developments amid weaker than expected growth in the Eurozone and China. This has preserved the Singapore dollar on a broadly steeper path of appreciation against the nation’s key trading partners. Global economic uncertainties have increased expected inflation rates and prompted banks to reassess their lending strategies and tighten credit standards which likely leads to stricter standards for personal and corporate loans.

Separately, conflicting opinions on proposed economic policies between the republicans and democrats do have global impact. It appeared that some borrowers or issuers had been encouraged to front load funding plans in anticipation of further changes to interest rates and unpredictability of economic conditions to take advantage of the decline in UST. Following the outcome of the United States elections, it is expected that policies under the Trump administration such as aggressive tax cuts, corporate deregulation and tariffs’ imposition on trading partners will be introduced. Whilst such policies are intended to boost domestic economic growth in the United States, whether the administration will follow through with their economic pledges and the actual implications of these policies on the loan market in Singapore remain to be seen.

The high-yield market had encouraged more companies to explore issuance of bonds to secure funding resulting in an aggressive pace of debt refinancing ahead of an expected economic slowdown in late 2024. The high-yield market also boosted the private credit market. Private lending has led to more competitive financing terms, faster approval processes/creditworthiness tests and customised repayment structures tailored to borrowers’ needs. However, heightened activity in private lending draws scrutiny which may result in stricter covenants and reporting requirements on companies to maintain certain financial metrics, adding operational pressure.

The loan market generally witnessed a rapid expansion in alternative credit providers and a more diverse financing landscape. As traditional banks tighten lending criteria due to economic uncertainties, demand for flexible financing solutions has increased. It appears that alternative lenders such as peer-to-peer platforms, fintech lending solutions and private equity firms have stepped in to fill the gap. In Singapore, MAS announced in 2020 the award of digital banking licences to a number of entities. Following this, four digital banks, GXS Bank (backed by a consortium comprising Grab Holdings Inc. and Singapore Telecommunications Limited), MariBank (backed by South-east Asian e-commerce giant Sea Limited), Green Link Digital Bank (backed by Chinese developer Greenland Holdings and supply chain financing platform Linklogis Hong Kong), and Anext Bank (backed by Ant Group) launched their services in 2022 and 2023.

Influx of alternative credit providers has led to more competitive financing terms, faster approval processes and customised repayment structures. Additionally, alternative lenders often utilise technology to assess creditworthiness, allowing greater accessibility to funds for smaller borrower companies that may struggle with traditional bank requirements. This promotes innovation and inclusivity in the borrowing landscape.

Banking and finance techniques in Singapore are evolving to better align with the diverse needs of investors and borrowers. One notable trend is the increasing use of HoldCo structures, which allow businesses to raise more capital without increasing leverage at the operating company level. This optimises lending and enhances financial flexibility. The use of preferred equity is also becoming popular because it appeals to investors, giving them the opportunity to capture a fixed rate return with priority of payment. Fintech solutions have also enabled faster credit assessments and streamlined application processes, catering to the demands of smaller borrower companies and start-ups. These innovations reflect a broader shift towards more responsive and customised financial solutions to suit borrowers’ needs in Singapore.

The Singapore government is making progress on its objective to issue up to SGD35 billion of green bonds by 2030. As at 31 March 2024, the Singapore public sector has issued a total of SGD12.5 billion of green bonds across four green categories, namely clean transportation, waste management, green building and sustainable water, including the SGD2.8 billion Green Singapore Government Securities (Infrastructure) Bond, part of the proceeds of which will be allocated to finance Singapore’s expansion of its rail network.

The Green Finance Industry Taskforce (GFIT), convened by the MAS, has continued with its efforts to accelerate the development of green finance through the following key initiatives:

• developing a taxonomy;
• improving disclosures;
• fostering green finance solutions; and
• enhancing environmental risk management practices of financial institutions.

On 3 December 2023, the GFIT together with the MAS launched the Singapore-Asia Taxonomy for Sustainable Finance (Singapore-Asia Taxonomy) – the world’s first multi-sector transition taxonomy which sets out detailed thresholds and criteria for defining green and transition activities that contribute to climate change mitigation across eight focus sectors. The Singapore-Asia Taxonomy provides a credible framework to phase-out coal-fired power plants, a critical part of the energy transition in Asia-Pacific where coal accounts for almost 60% of power generation. To ensure credibility of the early coal phase-out process, the taxonomy sets out both entity and facility-level criteria that are aligned to a 1.5°C scenario.

Consonant with forecasts that Southeast Asia’s energy needs will grow by 50% before 2050, demand for financing of conventional and renewable energy projects continues to increase. Introduced in October 2021 by Enterprise Singapore, Enterprise Financing Scheme-Green has been helping companies access green financing and many small and medium-sized enterprises developing and providing green solutions have received support, with up to SGD260 million of green loans being issued as of April 2023. As announced during the Singapore Budget 2024, from 1 April 2024, support will be expanded to include green solutions adopters and more sectors are eligible for the energy efficiency grant.

Under Singapore law, no person may carry on or hold him- or her-self out in any way as carrying on the business of a moneylender without holding the requisite moneylenders’ licence, unless he/she is an exempt or excluded moneylender. The relevant legislation, the Moneylenders Act 2008 (Moneylenders Act), provides that any person, other than an excluded moneylender, who lends a sum of money in consideration of a larger sum being repaid (ie, charges interest) shall be presumed, until the contrary is proved, to be a moneylender.

Under the Moneylenders Act, an excluded moneylender includes, amongst others, any person licensed, approved, registered or otherwise regulated by the MAS under any other written law. This would include banks or finance companies which are required to hold a valid licence to be granted by the MAS under the Banking Act 1970 and the Finance Companies Act 1967 respectively for the conduct of banking business and financing business in Singapore. Such excluded moneylender also includes any person who lends money solely to corporations or who lends money solely to accredited investors within the meaning of Section 4A of the Securities and Futures Act 2001. Hence, a non-bank lender would fall outside the licensing regime under the Moneylenders Act so long as it falls within the meaning of an “excluded moneylender” under the act.

Foreign lenders may provide loans in Singapore only if they are licensed under the Moneylenders Act, unless they are exempt or excluded moneylenders – see 2.1 Providing Financing to a Company.

There are generally no restrictions on foreign lenders receiving security or guarantees from a Singapore entity.

There are currently no exchange controls in Singapore.

In Singapore, borrowers are generally free to use proceeds from loans or debt securities if their use complies with the terms agreed with the lender under the lending documents and certain relevant regulatory requirements (depending on the type of loan, borrower and intended use of funds). A non-exhaustive list of such regulatory requirements is detailed below.

• Debt securities – the Securities and Futures Act (SFA) governs offers to the public, mandating a prospectus registered with the MAS unless exemptions apply, such as offerings to institutional investors or accredited investors, subject to certain conditions, under Sections 274 and/or 275 of the SFA. This framework allows issuers flexibility regarding the use of proceeds without direct restrictions, provided they adhere to disclosure requirements when marketing debt instruments to specified investors. Additionally, the Singapore Exchange (SGX) mandates disclosure of any material information impacting securities’ prices, protecting investors from adverse risk due to undisclosed uses of proceeds.
• Anti-money laundering (AML) and counter financing of terrorism (CFT) – borrowers must comply with Singapore’s AML and CFT regulations. Proceeds from loans or debt securities cannot be used for illicit activities and financial institutions are required to conduct thorough checks to ensure that the funds are not used for money laundering or terrorism financing purposes, by monitoring the use of proceeds and filing suspicious transaction reports if necessary.
• Property loans – there are regulatory limits on the use of proceeds from loans secured by property. For instance, the Total Debt Servicing Ratio (TDSR) framework limits the amount of credit an individual borrower can take against property, and proceeds cannot exceed the threshold set under the TDSR, which is 55%.

Both agent and trust concepts are recognised under Singapore law. Typically, lenders in a syndicated loan or a debt securities issuance appoint an agent to act on behalf of the lenders and a trustee to hold rights and other assets on trust for the lenders or secured parties.

In Singapore, loan transfers generally occur through assignments or novations, each with distinct implications for the transfer of benefits, rights and obligations.

Assignment

This is the most common method of transferring a loan. Under an assignment, a lender (the assignor) can transfer their rights to receive loan repayments to another party (the assignee) without the borrower’s consent, provided the loan agreement allows it. Assignments can be legal or equitable. A legal assignment must be in writing, signed by the assignor, and a notice of assignment must be issued to the borrower in order to allow the assignee to enforce the rights directly. However, obligations cannot be transferred by assignment and the original lender typically remains responsible for its obligations under the loan agreement.

When an assignment involves security interests, such as a mortgage or a charge, the assignment should expressly cover the transfer of such security interests as well. Additional agreements or steps may be required to effect or perfect the transfer of such security interests.

Novation

Novation fully transfers both rights and obligations under the loan to a new lender, effectively replacing the original lender with the new one. This requires consent from all parties, including the borrower. Fresh or supplemental security documentation may be required to transfer the associated security package to the new lender, unless the security package is held by an agent or trustee for the benefit of the lenders and their successors in the case of a syndicated loan.

Subject to the terms of the loan documentation, debt buyback by the borrower or sponsor may be permitted. The borrower may also prepay outstanding loans prior to the maturity of such loans – loan documentation typically includes right of voluntary prepayment by the borrower, with or without prepayment fee or penalty.

An issuer may redeem debt securities prior to their maturity in accordance with the terms and conditions relating to the securities.

Pursuant to rule 23.8 of the Singapore Code on Take-overs and Mergers (“Code”), “certain funds” provisions in public acquisition finance transactions are necessary to ensure that the acquirer/offeror has committed financing available to satisfy full acceptance of the offer of the acquisition. This financing commitment gives certainty to target shareholders and regulators like the SGX and the Singapore Securities Industry Council (SIC), which is the Singapore take-over regulator, by limiting the lenders’ ability to withdraw funding due to adverse events during the offer period. These provisions are less prevalent in private acquisition finance but may be negotiated in complex transactions to secure commitment certainty.

There is no prescribed form or length of such loan documentation to satisfy the regulatory requirement in the Code, but the practice is to use a full form document (such as a facility agreement). There is also no requirement for such loan documentation to be publicly filed in Singapore. However, the acquirer/offeror may be required to provide evidence to the SIC to demonstrate compliance with the Code.

Recent legal and commercial developments in Singapore have influenced legal documentation, especially in areas like ESG and sustainability-linked lending. Key developments include the introduction of new climate transition guidelines from the MAS and SGX (see 1. Loan Market Overview), with the intention of encouraging both listed and private companies to create credible climate action plans, impacting environmental representations and covenants in finance and corporate agreements. APLMA Asian facility documentation now includes specific sustainability-linked provisions that have a ratcheting effect on pivotal loan terms (eg, interest rate provisions).

Pursuant to Section 36(1) of the Moneylenders Act and rule 11(1) of the Moneylenders Rules 2009, the maximum rate of interest that may be charged on a loan granted to an individual is 4% per month.

There are no explicit usury laws that cap the amount of interest that can be charged to an entity. However, to protect entities from excessive or unconscionable interest rates, Section 23(2) of the Moneylenders Act requires licensing for businesses involved in lending and empowers courts to scrutinise loan agreements for high interest rates, which may be deemed “harsh and unconscionable or substantially unfair”. Here, the court has discretion to adjust terms or nullify the loan if necessary.

Financial contract disclosure requirements vary depending on the type of financial product, the intended audience and the legal structure governing the transaction.

The SFA sets the baseline for disclosures for financial products such as bonds, securities, and other investment instruments. Under the SFA, issuers offering securities to the public must provide a prospectus with detailed information about the securities, the issuer, and any associated risks. There are exemptions which apply to the requirement for such prospectus to be registered with the MAS.

Disclosure requirements also depend on whether the securities are publicly listed or privately offered. The SGX Listing Manual requires issuers to disclose material information affecting the price of listed debt securities and regularly update investors on redemptions or interest payments. Issuers must also provide immediate updates on events impacting security values or investor decisions, and non-compliance may lead to disciplinary actions by SGX.

Separately, financial institutions must adhere to MAS Notices, such as MAS Notice 628 on securitisation disclosures, which outline post-transaction reporting and investor transparency requirements. The Financial Reporting Standards (SB-FRS 107) also require disclosure of financial instruments’ risk exposure, such as credit/liquidity risks, ensuring entities disclose qualitative and quantitative risk information relevant to the provision of financial contracts.

Lastly, compliance with AML/CFT obligations adds further disclosure responsibilities, especially when dealing with higher-risk transactions.

No Tax on Principal

Singapore imposes tax only on income and not on capital. Accordingly, the receipt of repayment of principal on a loan is not taxed in Singapore.

Interest and Related Payments Subject to Withholding Tax

Generally, interest, commissions, fees or other payments in connection with any loan or indebtedness (“payments”) are (subject to exceptions) deemed to be sourced in Singapore if they are borne, directly or indirectly, by a tax resident* of Singapore or a permanent establishment in Singapore. Such payments are subject to withholding tax when made to non-Singapore tax residents.

The withholding tax rate for payments that are neither derived from any trade or business carried on in Singapore nor effectively connected with any permanent establishment in Singapore is 15% on the gross payment. Otherwise, such payments would be subject to a non-final tax at 17%, with deductions available. These rates may be reduced under applicable tax treaties.

Exemptions are available for payments such as:

• payments made to Singapore branches of non-resident companies;
• payments made between banks or their branches/head offices; and
• payments made by certain approved financial institutions for the purpose of their trade or business.

*An entity is a tax resident of Singapore if the “control and management” of its business is exercised in Singapore. This usually means that strategic decisions of the business are made through the meetings of the company’s board of directors in Singapore.

Income Tax

Lenders may derive income that is taxable in Singapore. Singapore’s Income Tax Act 1947 subjects income (including income of foreign entities operating in Singapore) to tax if it is either (i) sourced in Singapore or (ii) remitted into Singapore from outside Singapore.

Under (i), income would generally be sourced in Singapore if the income-producing activities took place in Singapore.

Under (ii), income may be deemed remitted into Singapore if it is used to satisfy any debt incurred in respect of a trade or business carried on in Singapore or used to purchase any movable property brought into Singapore.

Stamp Duties

Stamp duties are payable on dutiable documents relating to immovable properties in Singapore or stocks or shares of Singapore companies.

Generally, loan agreements or security documents that create security over immovable property in Singapore or stocks or shares of Singapore companies are dutiable documents, and would be subject to stamp duties (capped at SGD500) at the following rates on the loan amount.

• Mortgage other than an equitable mortgage: 0.4%.
• Equitable mortgage: 0.2%.

Dutiable documents must be stamped:

• if executed in Singapore, within 14 days after the date the document is executed; or
• if executed outside Singapore and subsequently brought into Singapore, within 30 days after it is received in Singapore.

As an international financial centre, Singapore is an attractive location to carry out cross-border financing transactions. Foreign lenders benefit from Singapore’s wide tax treaty network with over 90 countries which caps withholding tax at lower than statutory rates in many cases. The domestic tax system has well-developed rules and administrative guidance surrounding financing transactions and advance rulings are available to give taxpayers additional tax certainty.

All classes of collateral may potentially be available to secure lending obligations, provided the grant thereof is not against public policy. A non-exhaustive list of such common classes of collateral is set out below.

Real Property

A legal or equitable mortgage/charge or assignment of sale and purchase/lease/building agreement with mortgage-in-escrow is commonly granted over real property (land and to the extent immovable, plant and buildings thereon). The specific type of security will depend on, amongst other factors, whether title over the land has been issued, the land type and the type of holding.

There are two types of land in Singapore – common law titled land and land under the Land Titles Act (LTA). A legal mortgage over land under the LTA must be in a statutorily prescribed form and registered with the Singapore Land Authority (SLA). Where title to the land under the LTA has not been issued, a lender may take an equitable mortgage by way of an assignment of the sale and purchase/lease/building agreement, with an accompanying mortgage-in-escrow to be perfected upon the issuance of title.

Related security like assignments over insurances, rental and sale proceeds and agreements, and in respect of land under construction, assignments over construction contracts and performance bonds, are usually also taken.

Machinery and Equipment

Security over machinery and equipment is commonly taken by way of a fixed charge or debenture.

Receivables/Bank Accounts

Security over receivables and credit balances in bank accounts (being choices in action) are taken by way of an assignment or charge by a deed of assignment/charge or a debenture, depending on the security package to be taken. Lenders may also, for control purposes, obtain a charge (fixed or floating) over bank accounts into which the receivables are paid. To take a legal assignment over receivables/credit balances, it must be in writing with express written notice given to the debtor of the receivables. The giving of notice by the security provider to such counter parties/account banks also enables the lender to perfect the security and secure priority.

A charge over receivables can be fixed or floating. Where the lender is able to control the receivables and they are not subject to withdrawals without consent, a legal assignment or fixed charge may be created over the receivables. Often, however, the receivables are part of the ongoing business of the security provider and the lender does not seek to take control over the same. In such cases, only a floating charge may be created in substance, regardless of how the charge is termed in the documentation.

Inventory

Typically, a floating charge is created over inventory. The security provider will generally be permitted to deal with the inventory in the ordinary course of its business until the occurrence of a default event under the facility or notice from the lender, thereby crystalising the charge.

Shares

Shares in Singapore may be in certificated/scrip or scripless form.

Where shares are certificated, a legal or equitable mortgage may be taken over the shares. A legal mortgage may be granted by way of a share mortgage, accompanied by a transfer and registration of the shares and delivery of share certificates in the mortgagee’s name. An equitable mortgage/charge may be granted by way of a share mortgage/charge, accompanied by signed blank transfers and the delivery of the share certificates.

Where shares are in scripless form (ie, book-entry securities, being listed shares on the SGX), by statute, security may be taken over such shares by a statutory assignment or charge in prescribed form registered with the Central Depository (Pte) Limited, or by common law subject to certain prescribed requirements.

Perfection requirements in relation to the above securities would include stamping (within 14 days of execution of the securities in Singapore (or within 30 days of its receipt into Singapore if executed outside Singapore) for up to the maximum amount of SGD500), registration of the charges with the Accounting and Corporate Regulatory Authority of Singapore (ACRA) (within 30 days of execution of the securities in Singapore (or within 37 days if executed outside Singapore) and a filing fee of SGD60 per charge registration) and notices of assignment/charge to be served on the relevant parties. Failure to stamp security within the statutory deadline results in penalties, and failure to register a charge with ACRA within the statutory deadline renders the charge void against the chargor’s liquidator and other creditors.

Additionally, security interests over certain assets (eg, aircrafts, ships, intellectual property rights or land) will need to be registered at specialist registries and additional fees will apply.

Similarly, the timeframe for registration of security in respect of certain classes of assets at specialist registries may vary. For example, registration of a mortgage with the SLA may take several weeks/months if complex and involving multiple units. In the interim, a lender may protect its interest by the lodgment of a caveat with the SLA.

Security interests may be created over all present and future assets of a company by way of a floating charge in a debenture. Such debenture would typically provide for conversion or crystallisation of such floating charge into a fixed charge upon the occurrence of certain events including insolvency related events or other events of default, or upon the lender’s option.

There are generally no restrictions on Singapore entities providing downstream, upstream, and cross-stream guarantees, assuming the provision of such guarantee is supported by commercial benefit to the guaranteeing entity and the directors are not acting in breach of their fiduciary duty to the company in authorising the granting of such guarantee.

Section 76 of the Companies Act provides, inter alia, that a public company or a company whose holding company or ultimate holding company is a public company, shall not, whether directly or indirectly, give any financial assistance for the purpose of, or in connection with, the acquisition by any person (whether before or at the same time as the giving of financial assistance) or proposed acquisition by any person of shares in the company or in a holding company or ultimate holding company (as the case may be) of the company. The prohibition does not extend to sister subsidiary companies. The Companies Act further provides that financial assistance for the acquisition of the target’s shares may be provided by, among others, the giving of a guarantee or the provision of security.

There are, however, whitewash procedures that would enable the target to effect a whitewash through, inter alia, board approval, if doing so does not materially prejudice the interests of the target or its shareholders or the target’s ability to pay its creditors, or the passing of shareholders’ and directors’ resolutions and lodgment of solvency statements and papers with ACRA without the need for public notification and objection period or court order. Where the target is unable to effect a short-form whitewash, parties must consider that the need for public notification and objection period for a long-form whitewash will mean that a timeframe of six to eight weeks (assuming no objections) may be required.

Entities in Singapore must be mindful of the prohibition under Section 163 of the Companies Act relating to the guarantee of loans, quasi-loans or credit transactions to companies related to their directors. Such prohibition does not apply to exempt private companies (ie, private companies owned wholly by individual shareholders not exceeding 20, or a government-owned private company gazetted as such).

Exceptions to this prohibition include where the companies involved are in a subsidiary/holding company relationship or are subsidiaries of the same holding company.

An exception was introduced with effect from 2016 to allow for prior approval by the company in a general meeting to permit such transactions. Securities which were previously prohibited under Section 163 of the Companies Act may now be granted subject to prior shareholder approval being obtained.

Securities are typically released in the form of a discharge deed, which would where applicable include reassignment of the security assets to the security provider. Additional steps may be required to remove security registration in a public registry.

Some types of security may necessitate additional procedures. For instance, discharging a mortgage over land under the LTA requires registration with SLA of a discharge instrument in the statutorily prescribed form.

Priority of competing common law security interests is governed by common law rules, which involves complex technical issues (a discussion of which would be outside the scope of this chapter) but generally, priority will be governed by the time of security creation, subject to compliance with other perfection requirements. For instance, failure to register a charge with ACRA within the statutory deadline would render the security void against the chargor’s liquidator and other creditors.

In Singapore, subordination is typically effected by way of a subordination agreement or contractual subordination clauses in other financing documents. Priority among different lenders can also be contractually varied by way of a priority deed or inter-creditor agreement, facilitating debt restructuring and prioritising claims based on contract terms. In Singapore, these contractual variations are legally recognised, allowing lenders to establish their desired priority framework within the lender group or between different lender groups, provided they are not in contravention of statutory provisions or public policy.

While subordination agreements generally are enforceable under Singapore law, the enforcement of such agreements in a Singapore court may be affected by bankruptcy, insolvency, liquidation, juridical management, reorganisation, reconstruction or similar laws affecting creditors’ rights.

Certain contractual provisions as to subordination might be ineffective in the event of the winding up of a subordinated creditor under Singapore law if they conflict with the statutory rule that the property of a company in winding up is to be applied in satisfaction of its liabilities pari passu.

Material security interests that can prime a lender’s interest by operation of law include liens granted for emergency financing and maritime liens. Under the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), companies undergoing restructuring can apply for court orders to obtain priority financing, often necessary to continue operations, with the financing secured through a “priming lien” on existing security.

To structure around these liens, lenders seek subordination agreements that set terms for priority financing under specific conditions. Where restructuring is anticipated, lenders may also engage in contractual arrangements with the borrower and emergency creditors to minimise exposure to priming liens.

Circumstances under which a secured lender may enforce its collateral will depend primarily on the terms of the security documents. The circumstances typically include events of default such as the non-payment of the loan.

Enforcement methods a secured lender may employ include seizing and/or selling the collateral (whether through private or court processes), and appointing a receiver over the collateral.

When seeking to enforce collateral, secured lenders will have to consider, among other things, whether the value of the collateral is sufficient to cover the loan provided; there are competing claims over the collateral; and there are any other prohibitions to enforcement, such as those which may arise when the debtor company is being wound up or placed in judicial management.

The choice of a foreign law as the governing law of the contract will typically be upheld under Singapore law, as long as the application of foreign law is not contrary to public policy and the choice is bona fide and legal.

Similarly, the Singapore courts will typically uphold a party’s submission to a foreign jurisdiction. Where a party has submitted exclusively to the jurisdiction of a state that is party to the Hague Convention, the Singapore Choice of Court Agreements Act 2016 (CCAA) will apply and the Singapore courts, will generally, subject to certain exceptions, stay or dismiss proceedings in the Singapore courts.

Even where the CCAA does not apply, the Singapore courts will generally stay local proceedings where there is a valid exclusive jurisdiction clause unless strong cause as to why such a stay should be refused is shown, such as a denial of justice.

Contractual waivers are also typically upheld under Singapore law. In particular, there may be waivers of sovereign immunity under the circumstances set out in the Singapore State Immunity Act 1979.

Judgments Given by a Foreign Court

Foreign judgments may be recognised and enforced in Singapore without a retrial of the merits of the case: (i) under the Reciprocal Enforcement of Foreign Judgments Act 1959 (REFJA); (ii) under the CCAA; or (iii) by way of the common law recognition and enforcement regime.

1. REFJA – the REFJA applies to judgments from the following countries:

a. Australia;

b. Brunei Darussalam;

c. Hong Kong Special Administrative Region of the People’s Republic of China;

d. India;

e. Malaysia;

f. New Zealand;

g. Pakistan;

h. Papua New Guinea;

i. Sri Lanka; and

j. United Kingdom of Great Britain and Northern Ireland.

The REFJA does not apply to any judgment which may be recognised or enforced in Singapore under the CCAA.

2. CCAA – foreign judgments may also be recognised under the CCAA, which applies in every international case where there is an exclusive choice of court agreement concluded in a civil or commercial matter.

Under the CCAA, foreign judgments from over 30 jurisdictions may be recognised and enforced by the Singapore courts without a review of the merits of the foreign judgment if the conditions set out in the CCAA are met.

3. Common law – in situations which fall outside the scope of the REFJA and the CCAA, a judgment creditor may also apply for the recognition and enforcement of the relevant foreign judgment under common law.

A foreign judgment may be enforced under the common law recognition and enforcement regime without a retrial of the merits of the case if:

• it was made by a court of competent jurisdiction;
• the foreign court had jurisdiction to give a judgment in personam capable of recognition or enforcement as against the person against whom it was given (eg, by submission to the jurisdiction of that court);
• it is final and conclusive on the merits;
• it is a final judgment for a fixed sum of money;
• does not involve the enforcement of foreign penal, revenue or other public laws; and
• there is no defence to its recognition.

Arbitral Awards

In general, foreign arbitral awards may be recognised and enforced in Singapore in accordance with the New York Convention read with the Singapore International Arbitration Act 1994 (pursuant to which the UNCITRAL Model Law on International Commercial Arbitration is put into force with modifications) without a retrial of the merits of the case.

Typically, the fact that a lender is foreign does not affect its ability to enforce its rights under a loan or security agreement. That said, if a foreign lender commences legal proceedings in Singapore to enforce its rights, the borrower (ie, defendant) may apply to court to ask that the lender provide security for its costs. In that case, the fact that the lender is ordinarily resident outside of Singapore is one factor which the Singapore courts will take into account in determining whether to grant the security for costs.

The commencement of insolvency and restructuring-related processes may impact the enforcement of a loan or security primarily through the imposition of statutory moratoria, in the following ways:

Winding Up

The IRDA provides for an automatic moratorium upon (i) the making of a winding up order, or (ii) the appointment of a provisional liquidator. During the automatic moratorium period, no action or proceeding may be proceeded with or commenced against the company except by permission of the court and in accordance with such terms as the court may impose. However, such a moratorium generally does not apply to the enforcement of security.

Where a company is wound up on an insolvent basis, a secured creditor cannot claim any interest on their debt after commencement of the winding up (Commencement Date), unless the secured creditor realises their security within 12 months after the Commencement Date, or such further period determined by the liquidator.

Judicial Management

The IRDA provides for an automatic moratorium when (i) an application for a judicial management order is made, or (ii) when a written notice of the appointment of an interim judicial manager is lodged (ie, where the judicial management process is commenced by way of a creditors’ resolution instead of by order of court).

During this automatic moratorium period, among other things, (i) no step may be taken to enforce any security over any property of the company, or to repossess any goods under any hire‑purchase agreement, chattels leasing agreement or retention of title agreement, except with the permission of the court and subject to such terms as the court may impose; and (ii) no enforcement order or other legal process may be issued, continued or executed, and no distress may be levied, against the company or its property, except with the permission of the court and subject to such terms as the court may impose.

Under the IRDA, an automatic moratorium also takes effect upon the court’s grant of a judicial management order, in such event, creditors are generally prohibited from enforcing any security over the company’s assets without the court or judicial manager’s permission. Similarly, a secured creditor cannot claim any interest on their debt from the date permission was granted unless the secured creditor realises their security within 12 months of receiving permission to do so, or such further period determined by the judicial manager.

Schemes of Arrangement

The Singapore courts may grant a moratorium which may cover the enforcement of security.

Under the IRDA, an automatic 30-day moratorium comes into effect on the filing of a moratorium application (subject to the relevant statutory requirements being satisfied). In addition, related companies of the subject company can apply to extend the moratorium to include them.

Creditors are broadly paid out in the following order on a debtor company’s insolvency:

• Secured creditors – secured creditors may enforce their rights in respect of the security taken over the debtor company’s assets ahead of preferential and unsecured creditors.
• Preferential creditors – under the IRDA, the following are some key preferential creditors who must be paid in priority to all other unsecured debts:
1. costs and expenses of the winding up incurred by the liquidator of the insolvency company;
2. costs of the applicant for the winding up order;
3. all wages and salary payable to any employee;
4. retrenchment benefit or ex gratia payment, subject to the prescribed limit.
• Unsecured creditors: Unsecured creditors, ie, creditors who do not hold security over the debtor company’s assets, are paid on a pari passu basis after the secured and preferential creditors are paid.

The time taken to complete a typical insolvency process depends on various factors, such as, the amount and location of assets available for distribution and the number of creditors involved. This may range from months to even years.

Similarly, creditors’ recoveries may also vary widely (see 7.2 Waterfall of Payments for the order in which payments are made on a company’s insolvency).

In Singapore, company rescue or reorganisation procedures outside of insolvency proceedings include judicial management and schemes of arrangement.

Judicial Management

Judicial management is a process where a judicial manager is appointed to rehabilitate the distressed company, preserve all or part of the company’s business as a going concern, or achieve a more favourable outcome for the company’s creditors than if the company was wound up.

As part of the judicial management process, the judicial manager will take over the property, affairs and operations of the company.

Schemes of Arrangement

A scheme of arrangement is a court-sanctioned compromise or arrangement between a distressed company and its creditors or shareholders that enables the company to restructure its debts while still operating.

In a scheme of arrangement, the company retains control of its property, affairs and operations.

A key risk area for lenders is that certain transactions which they may enter into with the borrower prior to the commencement of judicial management or winding up proceedings, eg, for the repayment of the debt, are at risk of being set aside.

Where a company is in judicial management or is being wound up, the judicial manager or liquidator (as the case may be) may apply to court for an order to set aside certain transactions at an undervalue and/or transactions which constitute an unfair preference which occurred prior to the commencement of judicial management or winding up. This clawback period ranges from three years (transactions at an undervalue) to two years (unfair preferences, if given to a person connected with the company; if not, one year) before the commencement of liquidation or judicial management.

Furthermore, generally a floating charge on the debtor company’s property created within one year (two years if in favour of person connected with the company) prior to the commencement of the judicial management or winding up is invalid except to the extent of value of the consideration (to the extent that the consideration consists of money paid, goods or services supplied, or the discharge or reduction of debt) for the creation of the charge together with interest, unless the debtor company was solvent at the time the floating charge was created.

Project finance has been robust in the infrastructure, renewable energy and real estate sectors, with a focus on sustainable development particularly in green projects such as solar, waste-to-energy facilities and decarbonisation efforts.

The infrastructure sector remains one of the most active users of project finance, driven by investments in public transport, roads and utilities. Public–Private Partnerships (PPPs) have enabled the private sector to finance major projects while distributing risks and returns with the public sector. Recently, the Energy Market Authority of Singapore utilised project finance and collaborated with SP Group, a private company in Singapore to construct and upgrade the energy grid infrastructure in Singapore.

PPPs are governed primarily by the Public Sector (Governance) Act 2018 and the Public Private Partnership (PPP) Handbook issued by the Ministry of Finance. These frameworks facilitate collaboration between the government and private entities, particularly in infrastructure and service delivery projects.

Key sectors for PPPs include transport, healthcare, and urban development. The Building and Construction Authority and Land Transport Authority often oversee relevant projects, ensuring they align with national goals.

However, obstacles such as the complex procurement process may deter private investment. Additionally, regulatory compliance and risk allocation are critical considerations; potential investors must navigate legal frameworks to address liabilities and financing structures effectively. Lastly, the goals of the public sector and private sectors may diverge and PPPs may face agency problems which could result in opportunistic behaviours by the participants arising from conflicts of interests.

The Singapore government actively promotes PPPs, but challenges can arise due to differing interests between public and private sectors. Ongoing dialogue and adjustments to the regulatory landscape are essential to enhance the effectiveness of PPPs and attract investment, particularly as Singapore aims for sustainable development and infrastructure improvement.

In Singapore, project documents such as construction contracts, power purchase agreements, and offtake contracts are not strictly required to be governed by local law. Parties may choose the governing law of their contracts, including English or New York law. This choice is generally respected under Singapore law so long as the choice is bona fide and not contrary to public policy.

While there are generally no restrictions on the substantive choice of law, it is common for construction contracts for local projects with no international element to be governed by Singapore law. It is also not uncommon for construction contracts with international elements carried out in Singapore to be governed by Singapore law.

Regarding dispute resolution, international arbitration is widely accepted and promoted in Singapore, particularly due to its robust legal framework and arbitration-friendly environment. The Singapore International Arbitration Centre is a popular venue for arbitration.

The governing law and dispute resolution provisions should be clearly articulated in the contracts to avoid potential challenges. Parties may opt for international arbitration regardless of the governing law they choose.

In Singapore, there are certain restrictions regarding foreign ownership of real property, including surface and subsurface rights, as well as water rights.

Foreign Ownership of Real Property

Land Titles Act

Under the Land Titles Act 1993, foreign entities may require approval to acquire certain types of real estate. For instance, the Residential Property Act 1976 (Residential Property Act) generally restricts foreign ownership, allowing foreigners to buy private residential properties only with approval from the Minister for Law.

Commercial and industrial property

Foreign ownership of commercial and industrial property is less restricted, but still requires adherence to specific regulations. Foreign entities may acquire such properties, although there may be additional requirements under the Planning Act 1998 (Planning Act).

Water Rights

Water rights are primarily governed by the Public Utilities Act 2001, which does not explicitly limit foreign entities but requires compliance with local laws and regulations regarding the usage of water resources. One example would be the water agreements entered into by the state of Johore and the City Council of Singapore.

Lenders and Remedial Rights

Foreign lenders can hold security interests in real property and exercise remedial rights, such as enforcing liens on properties. However, any enforcement action must comply with Singapore law, including the Land Titles Act and the Conveyancing and Law of Property Act 1886.

Legal Form of the Project Company

Project companies in Singapore are typically structured as private limited companies (Pte. Ltd.) due to limited liability benefits and favourable tax treatment.

Joint ventures are also common for large projects in Singapore including government sector projects as some project tenders require a Singaporean joint venture partner to be involved for greater accountability to mitigate risks.

There are generally no restrictions to the legal form of the project company, as long as it is validly incorporated under the Companies Act and complies with the statutory registration requirements, filing and disclosure requirements. There could be ownership and control restrictions over certain companies if the entity conducts business in areas where it could affect the national security interests. The Ministry of Trade and Industry Singapore recently introduced the Significant Investments Review Act 2024 to delineate the entities that could potentially be affected.

Parties should also consider issues pertaining to goods and services tax as well as withholding tax issues when structuring a project company, particularly for projects with onshore/offshore construction elements.

Regulation and Compliance

There are specific regimes and requirements for various types of construction and related work in Singapore. For instance, the provision of architectural and professional engineering service is regulated by statute, primarily under the Architects Act 1991 and the Professional Engineers Act 1991. Builders who carry out building works for public or private sector construction projects are also required to hold a builder’s licence under the Builder Control Act 1989.

Restrictions on Foreign Investment

Residential Property Act – as noted above, foreign ownership of residential property is restricted.

The MAS may impose certain restrictions or requirements on foreign entities, especially in sectors deemed sensitive, such as telecommunications and media.

The MAS also oversees financial institutions and enforces regulations related to banking and financial services. Foreign investors must ensure compliance with MAS regulations, particularly if financing involves local banks or financial institutions.

Relevant Treaties

Bilateral Investment Treaties (BITs)

Singapore has entered into numerous BITs that provide protections for foreign investors, including provisions for fair and equitable treatment, protection against expropriation and access to international arbitration.

Double Tax Agreements (DTAs)

Singapore has signed DTAs with various countries to prevent double taxation on income, which can be beneficial for structuring project financing.

Project financing typically involves a mix of various financing sources and structures. Some options are listed below.

Bank Financing

Commercial banks

Bank loans are a primary source of financing for project finance in Singapore. Banks often provide term loans or revolving credit facilities, structured around the project’s cash flows.

Islamic financing

Given Singapore’s growing Islamic finance sector, Sharia-compliant financing options, such as Murabaha, Istina’a, Wakala or Ijara, may also be utilised in project finance.

Export Credit Agency (ECA) Financing

ECA financing

Singapore-based projects involving international suppliers may benefit from financing through ECAs. These agencies provide guarantees and loans to mitigate risks associated with exporting goods and services. For example, ECICS, the Singapore ECA can support projects that require export credit.

Project Bonds

Issuing project bonds is a viable financing option for large-scale infrastructure projects. These bonds are typically backed by the project’s cash flow and may be rated by credit rating agencies. For example, bond proceeds of the Singapore sovereign green bonds (known as Green Singapore Government Securities (Infrastructure)) are used to finance green infrastructure projects in Singapore.

Natural resources projects involve unique issues and considerations, particularly regarding resource management, export regulations, and local beneficiation.

Export Regulations

Restrictions on export

Singapore has few restrictions on the export of most natural resources. However, specific regulations may apply to controlled commodities, such as hazardous materials and certain minerals. The Ministry of Trade and Industry and other regulatory bodies oversee export controls to ensure compliance with international trade obligations.

Resource Management

Land use and resource management

The management of land and resources is governed by laws such as the Planning Act 1998 and the Land Acquisition Act 1966. These laws regulate land use and development, impacting the feasibility of natural resources projects.

Environmental considerations

Natural resources projects are subject to environmental regulations, primarily under the Environmental Protection and Management Act 1999. Environmental impact assessments are often required to evaluate potential impacts on the environment and ensure compliance with sustainability standards.

While there is no strict legal requirement mandating beneficiation, the government encourages value-added processing, manufacturing and provides for tax benefits and cash grants particularly in the realms of sustainability projects. This is aligned with the Singapore government’s efforts to be the leading centre for sustainable and green finance in Asia and globally with the implementation of GFIT as well as continual increased support from the Singapore Budget 2024 to provide greater aid to companies for its access to green financing and pursuit for sustainability and ESG-linked projects. Refer to 1.6 ESG/Sustainability-Linked Lending for further details.

In Singapore, several laws and regulatory frameworks govern environmental, health and safety aspects, including the following.

Environmental Laws

Environmental Protection and Management Act 1999

This covers pollution control, waste management, and environmental impact assessments for certain projects.

Environmental Public Health Act 1987

This relates to waste disposal and governs matter relating to environmental health services.

Land Planning and Conservation Laws

Various laws govern land use and conservation, including the Planning Act, which regulates development control and zoning.

Health and Safety Laws

Workplace Safety and Health Act 2006

This act establishes a framework for ensuring workplace safety and health across various industries. It mandates the responsibility of employers to ensure the safety of their workers and the public.

Fire Safety Act 1993

This provides for fire safety and matters connected therewith.

Regulatory Bodies

National Environment Agency

The Agency oversees environmental regulations, including pollution control, waste management, and environmental impact assessments processes.

Ministry of Manpower

The Ministry is responsible for enforcing workplace safety and health regulations, including the Workplace Safety and Health Act 2006.

Urban Redevelopment Authority

This Authority oversees land use planning and development, including community consultation for urban projects.

Building and Construction Authority

This Authority ensures safety standards in construction projects and promotes green building practices.