Judicial management : an effective rescue measure

Judicial management was introduced in Singapore on 15 May 1987, and enacted as Part VIlA of the Companies Act. This new corporate rescue measure was introduced to mitigate the harshness of the existing insolvency procedures. Our research examines the effectiveness of judicial management in Singapore. The effectiveness of its operation is measured in terms of its ability to rehabilitate troubled companies facing temporary liquidity problems and giving them a new lease of life to continue their business as going concerns. Before the introduction of judicial management, other rescue procedures(winding up, receivership and Section 210 compromise and arrangement) were available for companies that were in red. However these procedures have their shortcomings, and they fail to provide a chance of survival for viable companies that are facing temporary cash flow problems. A review of judicial management procedures or its equivalent procedures adopted in other countries was done. This provides essential knowledge on the background of judicial management in Singapore and helps to trace the source of its adaptation in Singapore. In addition, the similarities and differences among the provisions of various countries were examined. In order to evaluate the effectiveness of judicial management in Singapore, two case studies were reviewed. Thereupon, key factors which attributed to the success of reviving the troubled companies placed under judicial management were drawn. The findings from the case studies indicate that the presence of the key success factors ensures an effective judicial management procedure, hence a greater likelihood of bringing the troubled companies back onto the road of recovery. Our research concludes that judicial management is an effective corporate rescue measure. This is mainly due to its ability to balance the interests of the shareholders and creditors of the insolvent company and at the same time, it allows the business of the company to continue as a going concern.ACCOUNTANC