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Entrepreneur fails to stop bankruptcy action over $34m business debt

Entrepreneur fails to stop bankruptcy action over $34m business debt

Source: Straits Times
Article Date: 16 Sep 2024
Author: Toh Yong Chuan

Court rejects her plan to repay banks via sale of properties, revenue from leasing.

An entrepreneur who owns 18 residential, retail and commercial properties in Orchard Road has failed in a High Court appeal to stop two banks from taking bankruptcy action against her to recover more than $34 million in business debts.

Ms Yap Shiaw Wei, 50, volunteered to repay RHB Bank and CIMB by selling her properties and using revenue from her property leasing business, but the court rejected her plan on Sept 10, saying that her proposal “was neither serious nor viable and was merely seeking to delay the inevitable”.

In doing so, the court declined to allow Ms Yap to work out a voluntary repayment arrangement with the banks to avoid being declared bankrupt.

In its decision, the court set out how it assesses voluntary repayment proposals by debtors to fend off bankruptcy actions by creditors.

The decision comes at a time when bankruptcy-related actions are on the rise in Singapore: Latest official data shows that 2,334 bankruptcy applications were made in the first six months of 2024, up 25 per cent on the same period in 2023, while 594 were subsequently declared bankrupt, an increase of 11 per cent.

Ms Yap, described in court documents as a former finance professional, is the sole shareholder and director of various companies, including a property leasing business under the “Hovoh” brand. She owns 18 properties in Orchard Road: 13 at Centrepoint Orchard and five at Midpoint Orchard.

To operate and grow her business, she took both secured and unsecured loans from various banks and acted as a personal guarantor to the loans.

Among her debts are $25.9 million owed to RHB Bank and $8.4 million to CIMB.

In February 2024, CIMB applied to the High Court to have her declared bankrupt after she failed to pay debts that were due. RHB Bank followed suit in April.

Responding to the banks’ moves, Ms Yap in May made her own application to the court for more time to settle her debts. She wanted to take three steps to repay the banks.

First, she wanted to be given nine to 10 months to sell her 13 Centrepoint properties as part of a collective sale of all the units in Centrepoint.

Next, she asked for six to seven months to sell her five Midpoint properties.

Finally, she said that her Hovoh business is still running and able to generate revenue to repay her debts, adding that there is an interested buyer for her business.

Both banks disagreed with Ms Yap’s plan and a third bank – Maybank Singapore, to which Ms Yap owes $13 million – also joined in the objection. She also owes a fourth bank – Resona Merchant Bank Asia – an undisclosed sum, but the bank did not take a position on her bid to fend off bankruptcy.

After hearing Ms Yap’s request in June, a High Court Assistant Registrar in July rejected her three-part plan on the grounds that her proposal was neither serious nor viable.

Dissatisfied, Ms Yap filed an appeal and her case was heard by Judicial Commissioner Mohamed Faizal in August.

On Sept 10, the judge dismissed her appeal.

In a written judgment, the judge said that Ms Yap’s repayment proposal “is far too vague to be given any serious consideration” and it is “long on professions of optimism but exceedingly short on concrete specifics”.

For example, the judge said that Ms Yap, citing confidentiality, did not provide information on the identities of the major property developer purportedly interested in the collective sale of Centrepoint, the prospective buyers interested in her five Midpoint properties as well the buyer interested in taking a stake in her Hovoh business and the ballpark price.

Full transparency “is absolutely vital for the court to consider whether a proposal is in fact serious”, said the judge.

He added: “‘Trust me, I will share more when the time is right’ is simply not a legal argument that the court can or should give weight to in this context.”

The judge also noted that Ms Yap’s aim of completing the collective sale of the Centrepoint properties “appears especially fanciful”, given the complex moving parts of a broad redevelopment involving three plots of land in the Centrepoint vicinity put forth by her.

He said “the collective sale of the Centrepoint properties appears to be an abstract theoretical possibility that, even in a realistic best-case scenario, would only take place years later, if at all”.

The judge further questioned Ms Yap’s $42.5 million valuation of her five Midpoint properties. “This represents a shockingly high premium of over 50 per cent of the actual market value (of $28 million) of such properties as evidenced by valuation reports obtained by (Ms Yap) in 2023,” he said.

During the appeal, Ms Yap surprised the court with two new pieces of information.

She claimed that the three banks are not her biggest creditors and that her biggest creditor is Black Rock Collection, which is acting for creditors with debt of more than $40 million.

On this, the judge said Ms Yap has not provided evidence to support her claim and if the additional $40 million worth of debt were true, it raises the question of whether she has “been intentionally shielding material information from the outset about the number of creditors and the amount of debt she has”.

Ms Yap also claimed that a “white knight” investor has come to her rescue, but the judge noted that she “remains coy about the identity and motivations of the ‘white knight’”.

He added that “the newfound further debt of $40 million… and the emergence of a benevolent ‘white knight’, appear to be entirely unsupported by reality”.

On the voluntary repayment arrangements proposed by debtors to fend off bankruptcy, the judge said “just as a ‘good voluntary arrangement’ benefits everyone, a ‘bad voluntary arrangement’ benefits none”.

“Where bankruptcy is inevitable, it is crucial for creditors, and society as a whole, that the process of bankruptcy is handled promptly,” he added.

He said swift bankruptcy proceedings would mean a quicker recovery of some portion of the debt by the creditors, while debtors can receive a fresh start to rebuild their financial lives without prolonged distress.

Ms Yap’s appeal was argued by Whitefield Law Corp.

RHB Bank and CIMB were represented by law firm Shook Lin & Bok, Maybank Singapore by Allen & Gledhill and Resona Merchant Bank Asia by Selvam LLC.

Although Ms Yap’s appeal was unsuccessful, the judge had encouraging words for her.

“(Ms Yap) has, in the course of her professional life, built a successful career in finance with an impressive portfolio of prime properties in the heart of Singapore’s central shopping district,” he said.

“Given her background and ability, I am hopeful that she will, with the passage of time, bounce back.”

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

Re Yap Shiaw Wei (RHB Bank Bhd and others, non-parties) [2024] SGHC 232 

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Singapore Law Watch / 08 Oct 2024

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