On 10 June 2021, the Singapore Court of Appeal published its decision in Sun Electric Power Pte Ltd v. RCMA Asia Pte Ltd.  SGCA 60, which provided important clarifications to the law in Singapore winding-up proceedings. In particular, the Court of Appeal held that in winding-up proceedings, the cash flow test, as opposed to the balance sheet test, should be the sole and determinative test to prove to the court that the company is unable to pay its debts under the erstwhile section 254(2)(c) of the Singapore Companies Act (CA) (now section 125(2)(c) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA)).
This decision will impact how winding-up proceedings are conducted in Singapore, and the nature of evidence to be adduced in support of the parties’ positions. For instance, heavier reliance on expert evidence may be necessary as the cash flow test frequently requires analysis of a series of projections of future financial performance.
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