Show Me The Debts (If You Can)


The recent cases of Founder Group (Hong Kong) Ltd (in liquidation) v Singapore JHC Co Pte Ltd [2023] SGHC 159 (“Founder Group”) and Europ Assistance Holding SA v ONB Technologies Pte Ltd (ONB Holdings Pte Ltd, non-party) [2023] SGHC 226 (“Europ Assistance”) are a reminder to creditors that winding up orders are not given as a matter of course.


In both cases, the claimant applied to wind up the defendant company under section 125(1)(e) of the Insolvency, Restructuring and Dissolution Act 2018 (“the Act”) without relying on section 125(2)(a) of the Act i.e. no statutory demand was relied on. Thus, the claimants had to show that the defendants were unable to pay its debts. The debts in question arose out of contracts that contain arbitration clauses and involved disputes between shareholders.

In Founder Group, the claimant and the defendant company were once owned by the same ultimate holding company. Due to a reorganisation of the ultimate holding company, the claimant was put in liquidation and the defendant company had been sold off to a third-party consortium. The claimant alleges that the defendant owed USD 47.43 million based on an audit confirmation which the defendant issued to the claimant in 2019. The debt arose from three contracts for the sale of copper cathodes by the claimant to the defendant in December 2015 and January 2016. The claimant also relied on the defendant’s audited financial statements from 2016 to 2020 where it showed debts owing to related entities. The defendant company disputed delivery of the copper cathodes from the claimant, claimed that there was an agreement that parties would not enforce any payment obligations and the contracts are void under PRC law.

In Europ Assistance, the claimant extended a loan of $4,800,000 to the defendant (the “Loan Principal”) pursuant to the terms of an optionally convertible loan agreement dated 27 July 2021 (the “OCLA”). The OCLA provides that the Loan Principal plus interest (the “Debt”) shall be repaid in a single tranche on 30 January 2023. On 2 February 2023, the claimant gave formal notice to the defendant, requesting the immediate repayment of the Debt. The claimant argued that the defendant’s managing director has stated on numerous occasions that the defendant will be cash flow insolvent, the defendant has stated in a letter dated 11 January 2023 that the defendant and its subsidiaries’ cash position is only €98,053 and relied on cash flow documents of the defendant company which showed that the projected cash flow position of the defendant would be negative for the whole of 2023.


The High Court in Founder Group reminded litigants that only a civil court or an arbitral tribunal can determine that a claimant is a creditor of a defendant in a manner which binds both parties for all purposes whereas an insolvency court decides the specific question of whether a claimant is a creditor of a defendant within the meaning and for the purposes of the Act.

This is important as without a court judgment or arbitral award, it is open to defendants to challenge the alleged debt owed to a purported claimant and, consequently, the standing of the claimant as a creditor. After all, a defendant company only has to show that there is a triable issue on the debt in order for the insolvency court to ordinarily decline to determine the substantive legal question of whether the claimant is a creditor of the defendant.


The claimants in both cases sought to rely on different types of documents to prove the respective defendant’s insolvency. The High Court’s findings on the effect of those documents show that only detailed financial documents will be able to persuade the court on the defendant’s solvency status.

As mentioned, in Europ Assistance, the claimant sought to rely on statements made by the defendant’s director to establish insolvency. The High Court found that the director’s bare statements in the emails should not be taken as being conclusive in the context and manner in which they were made as the emails contain no financial documents to substantiate the director’s assertions.

In respect of the cash flow documents, the High Court in Europ Assistance found that even though it alluded to the defendant’s insolvency, they were not conclusive of the defendant’s insolvency. Firstly, the cash flow documents relied on by the claimant did not reflect the group’s actual performance because they were circulated some six months prior, and the group’s actual performance was much better. Secondly, although the group’s consolidated financials were at a net loss as of March 2023, the cash flow from financing (which was indicated in the cash flow documents as €0) may have improved given that the defendant was in talks with potential investors to provide financing. Thirdly, the cash flow documents related to the finances of the group as a whole and not the defendant company.

The strength of documents tendered in Founder Group did not fare much better. The High Court accepted that an audit confirmation is prima facie evidence of a debt but not conclusive evidence of a debt. In this case, the defendant company sought to withdraw its admission in the audit confirmation on the basis that it was the parties’ intention that the defendant’s payment obligation under the contracts should never be enforced. While the High Court did not take this change in position lightly, it accepted that an admission made without consideration can be withdrawn.

Even though, the High Court in Founder Group dismissed the winding up application on the basis of the arbitration clause (see below), it went on to consider whether the defendant was insolvent. It found that the defendant’s audited accounts from 2016 to 2020 show that its current liabilities far exceeded its current assets for all of those years and thus it failed the cash flow test. Further, the defendant’s auditors acknowledged every year from 2016 to 2020 that there was a material uncertainty casting significant doubt on the defendant’s ability to continue as a going concern.


The High Court, in both Europ Assistance and Founder Group, reiterated the Court of Appeal decision of AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 (“AnAn”) that in situations where there is a disputed debt or a cross-claim that is subject to an arbitration agreement, the prima facie standard should apply, such that the winding-up proceedings will be stayed or dismissed as long as:

  • there is prima facie a valid arbitration agreement between the parties;
  • the dispute or cross claim which the defendant raises in respect of the debt prima facie falls within the scope of the arbitration agreement; and
  • whether, upon a consideration of factors which do not relate to the merits of the dispute in respect of the debt or the merits of the cross claim, the defendant is abusing the court’s process by raising the dispute or cross claim.

The AnAn approach is favourable to a defendant company. In essence, once the court was satisfied that there was a prima facie dispute governed by an arbitration agreement and the dispute was not raised by the debtor in an abuse of the court’s process, the court will ordinarily dismiss the winding up application. Put another way, under the AnAn approach, the claimant will not be able to rely on the disputed debt to establish it is even a creditor of the defendant company.

As it was found that the arbitration clauses in both cases were prima facie valid and were wide enough to cover the present dispute, the winding up applications were dismissed on that basis.


Sometimes certain conduct has become such standard procedure that one forgets the rationale behind them. In the context of winding up applications, the use of statutory demands has become almost a given. Both Europ Assistance and Founder Group show the difficulty in proving a defendant company’s insolvency, as opposed to just refusal or inability to pay a specific debt. Although issuing a statutory demand delays an application by 3 weeks, this is balanced out by the presumption created by it which shifts the burden of proving solvency to the defendant. In Europ Assistance, the claimant explained that it did not issue a statutory demand due to the time it would take but any savings in time was effectively negated by the fact that the hearing occurred months after the filing of the winding up application.

Future claimants should also note that they ought to be armed with financial statements of the intended defendant. It would appear anything short of such a document would not be persuasive and/or can be easily explained away by the defendant.

Perhaps the most important reminder for creditors is the effect of an arbitration clause on disputed debts. An insolvency court ordinarily would not adjudicate on disputed debts and cannot do so, where an arbitration clause is present. Hence, relying on a court order or arbitral award as a basis for the debt is good practice.

For further information, please contact:

Hariz Lee


JTJB Singapore Office
E : harizlee@jtjb.com
T : 6220 9388