Case Details
- Citation: [2023] SGHC 98
- Title: Re Babel Holding Ltd and other matters
- Court: High Court of the Republic of Singapore (General Division)
- Date of Decision: 17 April 2023
- Date Judgment Reserved: 31 March 2023
- Judge: Aedit Abdullah J
- Originating Applications: HC/OA 192/2023; HC/OA 193/2023; HC/OA 194/2023; HC/OA 195/2023; HC/OA 196/2023
- Summonses: For each OA, two summonses were taken out (681 & 899; 682 & 900; 684 & 902; 683 & 903; 685 & 904)
- Applicants (Scheme Companies / Applicants): Babel Holding Limited (BHL); Babel Asia Asset Management Private Limited (BAAMPL); Babel Block Limited (BBL); Moonalpha Financial Service Limited (Moonalpha); Shinar Trading Services Private Limited (Shinar)
- Non-Party Objector: DRB Panama Inc (Deribit)
- Legal Area: Insolvency Law — Schemes of arrangement; extension of moratoria
- Key Procedural Relief Sought: (i) Extension of moratoria under s 64 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA); (ii) Sealing orders in respect of documents containing unredacted creditor lists and letters of support
- Core Commercial Context: “Babel Finance” group cryptocurrency-related lending and asset management; proposed group scheme of arrangement with substantive consolidation and a deed poll structure
- Statutes Referenced: Insolvency, Restructuring and Dissolution Act 2018; Companies Act (1967) (including s 210); Companies Act 1967 (2020 Rev Ed); Restructuring and Dissolution Act 2018; Securities and Futures Act (SFA) (2001); Securities and Futures Act 2001 (2020 Rev Ed); Payment Services Act 2019 (PSA) (as alleged in submissions)
- Other Statutes Mentioned in Submissions: Payment Services Act 2019 (Act 2 of 2019)
- Cases Cited: [2018] SGHC 259; [2021] SGHC 209; [2022] SGHC 196; [2023] SGHC 98
- Judgment Length: 14 pages; 3,056 words
Summary
In Re Babel Holding Ltd and other matters ([2023] SGHC 98), the High Court granted applications by companies affiliated with the “Babel Finance” group for an extension of moratoria under s 64 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). The moratoria extension was sought to provide a period of respite for the applicants to formulate and implement a restructuring plan via a scheme of arrangement. The court also granted sealing orders covering documents containing unredacted lists of creditors and letters of support, finding that confidentiality concerns outweighed transparency interests at the moratoria stage.
The court addressed a structured set of questions: first, whether the sealing applications should be allowed; second, whether the statutory requirements for extending moratoria under ss 63(3) and 64 of the IRDA were satisfied; third, whether the “Skaugen” requirements were met; and fourth, whether the proposed mechanisms—substantive consolidation and a deed poll structure—were appropriate in principle. The court concluded that the requirements were met and that the moratoria should be extended, subject to the appropriate scope determined by the court.
What Were the Facts of This Case?
The applicants were companies affiliated with the “Babel Finance” brand, engaged in cryptocurrency-related business activities, including cryptocurrency lending and cryptocurrency asset management. The group comprised multiple entities across jurisdictions: Babel Holding Limited (BHL), a Cayman Islands holding company; Babel Asia Asset Management Private Limited (BAAMPL), a Singapore subsidiary; Babel Block Limited (BBL), a BVI subsidiary; Shinar Trading Services Private Limited (Shinar), a Singapore subsidiary; and Moonalpha Financial Service Limited (Moonalpha), a separate company incorporated in Hong Kong. Although Moonalpha preceded the Babel Finance brand and was not originally owned by BHL, it appeared to operate its business under the Babel Finance brand at the time of the application.
The applicants sought moratoria extension applications to secure a “respite” period to formulate a restructuring plan for the Babel Finance group. The restructuring plan was intended to be implemented through a scheme of arrangement (the “Scheme”). The Scheme was not limited to a single entity; rather, it contemplated a group-wide restructuring approach. A central feature of the proposed Scheme was substantive consolidation (pooling) of the assets and liabilities of the entire Babel Finance group.
To enable a single scheme of arrangement to be proposed for the group, the applicants also proposed a “deed poll structure” (the “Deed Poll Structure”). Under this structure, one of the Singapore subsidiaries would become a primary co-obligor in respect of the Scheme claims of the entire Babel Finance group, thereby allowing the Scheme to be framed as a single arrangement. The Scheme further contemplated converting customers’ deficits into “Babel Recovery Coins” (BRCs), being tokens issued by Babel Finance and pegged to certain cryptocurrencies, and contemplated new investments into the Babel Finance group.
In parallel with the moratoria extension applications, the applicants sought sealing orders in relation to documents containing unredacted versions of lists of the applicants’ creditors and letters of support for the moratoria extension applications (collectively, the “Documents”). The applicants’ position was that confidentiality was commercially necessary to prevent adverse market reactions and potential “contagion effects” on customers whose names appeared in the creditor lists. The objecting creditor, DRB Panama Inc (Deribit), opposed both the moratoria extension and the sealing applications, raising concerns about bona fides, jurisdictional connection to Singapore, the appropriateness of substantive consolidation, and the workability of the Scheme.
What Were the Key Legal Issues?
The court identified three main clusters of issues. First, it had to determine whether the sealing applications should be granted. This required the court to balance competing interests: the applicants’ interest in protecting commercially sensitive information (including creditor identities) against the objecting creditor’s interest in transparency and the ability of scheme creditors to consult one another about the moratoria extension applications.
Second, the court had to decide whether the requirements for extension of moratoria were fulfilled. This involved both statutory and case-law requirements. The statutory requirements included whether the applicants fell within the definition of “company” for scheme purposes under s 63(3) of the IRDA, and whether the requirements under s 64 of the IRDA for extending moratoria were satisfied. The court also had to consider whether the “Skaugen” requirements were met, referring to Re IM Skaugen SE and other matters [2018] SGHC 259 (“Skaugen”), which sets out criteria for granting moratoria extensions.
Third, the court had to consider whether the proposed restructuring mechanisms—substantive consolidation and the Deed Poll Structure—were appropriate in principle for use in a scheme of arrangement. This issue was relevant because the objecting creditor argued that substantive consolidation lacked commercial merit and was driven by poor corporate and financial management rather than legitimate restructuring objectives.
How Did the Court Analyse the Issues?
Sealing applications: balancing confidentiality against transparency
The court accepted the applicants’ arguments in favour of sealing the Documents at that stage. The governing approach was described as one of balancing competing interests. The applicants emphasised that the creditor lists and letters of support contained commercially sensitive information, particularly the identities of creditors. The court accepted that disclosure could lead to negative market reactions and potentially harm customers by associating them publicly with the Babel Finance group’s distress. The court therefore treated confidentiality as a legitimate and weighty consideration.
On the other hand, the objecting creditor argued that sealing should not be granted because scheme creditors needed access to information to consult with one another and protect their interests. The court responded by focusing on the procedural stage: the court was concerned only with extending moratoria, not with approving or sanctioning a scheme under s 210 of the Companies Act. At the moratoria stage, the need for full transparency and creditor consultation was “less pressing” than it would be at the later stage where the scheme itself would be considered. Accordingly, the court found that safeguarding commercially sensitive information outweighed the interests served by releasing the Documents publicly at that time.
Statutory requirements for moratoria extension: “company” and jurisdictional connection
The court then turned to whether the statutory requirements under ss 63(3) and 64 of the IRDA were met. Section 63(3) defines a “company” for the purposes of schemes of arrangement under Part 5 of the IRDA as any corporation “liable to be wound up under [the IRDA]”. For foreign companies, the IRDA imposes an additional jurisdictional requirement: under s 246(1)(d), a foreign company can be wound up only if it has a “substantial connection” with Singapore. Section 246(3) provides factors that may support a finding of substantial connection, including whether Singapore is the centre of main interests (COMI) of the company.
The applicants argued that the foreign applicants—BHL, BBL, and Moonalpha—had established a substantial connection to Singapore. The court accepted that the applicants had shown such a connection, relying on factors including the presence of substantial assets in Singapore and the existence of a Babel Finance team working out of BAAMPL’s registered office in Singapore. The court treated the Singapore-based team as conducting business for the whole Babel Finance group, including the foreign applicants, thereby supporting the conclusion that the foreign entities were sufficiently connected to Singapore for scheme purposes.
The Skaugen requirements: bona fides and reasonable prospect
Having addressed the statutory threshold, the court considered whether the “Skaugen” requirements were satisfied. In Skaugen, the High Court articulated criteria for granting moratoria extensions, including that the application should be made bona fide and that there is a reasonable prospect of the intended scheme working and being acceptable to the general run of creditors. The court found that these requirements were met on the evidence before it.
Although the objecting creditor raised multiple criticisms—such as alleged omissions in the creditor documents and alleged breaches of licensing requirements under the Payment Services Act 2019 and the Securities and Futures Act 2001—the court’s conclusion indicates that these objections did not undermine the overall bona fides of the applications or the reasonable prospect of the Scheme. Importantly, the court’s approach appears stage-sensitive: at the moratoria extension stage, the court is not conducting a full merits adjudication of the scheme’s ultimate acceptability, but rather assessing whether the statutory and case-law thresholds are met to justify granting a further period of protection.
Substantive consolidation and the Deed Poll Structure: not inappropriate in principle
The objecting creditor argued that substantive consolidation had no commercial merit and was necessitated solely by poor corporate and financial management. The court, however, held that the use of substantive consolidation and the Deed Poll Structure in the proposed Scheme was “not inappropriate in principle.” This language is significant: it suggests that the court was not definitively endorsing every aspect of the consolidation mechanics, but rather confirming that such tools could be considered legitimate restructuring mechanisms within the scheme framework.
In practical terms, the court accepted that substantive consolidation could be relevant where the group’s assets and liabilities are sufficiently intertwined and where a pooled approach can facilitate a coherent restructuring outcome. Similarly, the Deed Poll Structure was treated as a mechanism to enable a single scheme to be proposed for the group, by designating a Singapore subsidiary as a primary co-obligor for the scheme claims. The court’s reasoning indicates a pragmatic view of how group restructuring may be structured to achieve efficiency and coherence, subject to later scrutiny at the scheme sanction stage.
Scope of the moratoria extension
Finally, the court considered the scope of the moratoria extension. The applicants sought a six-month extension. While the truncated extract does not reproduce the court’s precise final wording on duration and scope, the court’s conclusion states that the moratoria extension applications should be granted and that the statutory and Skaugen requirements were satisfied. This implies that the court was satisfied that the requested protection was proportionate to the restructuring work needed to formulate and progress the Scheme.
What Was the Outcome?
The High Court granted the moratoria extension applications under s 64 of the IRDA. The court was satisfied that the statutory requirements under ss 63(3) and 64 were met, that the Skaugen requirements were satisfied, and that the proposed use of substantive consolidation and the Deed Poll Structure was not inappropriate in principle. The practical effect is that the applicants obtained additional protection from creditor enforcement actions for the period determined by the court, enabling them to continue restructuring planning and scheme preparation.
The court also granted the sealing orders. The sealing of the Documents was ordered because the court found that confidentiality interests—particularly the protection of commercially sensitive creditor identity information—outweighed transparency concerns at the moratoria stage. This means that, at least for the time being, the unredacted creditor lists and letters of support would not be made publicly available, reducing the risk of adverse market reaction and potential harm to creditors and customers.
Why Does This Case Matter?
This decision is important for practitioners because it clarifies how Singapore courts approach (i) moratoria extensions for group restructurings, (ii) the jurisdictional “substantial connection” requirement for foreign companies, and (iii) confidentiality and sealing at the pre-scheme stage. The court’s acceptance of a substantial connection analysis based on Singapore-based operational control and asset presence provides a useful template for future applications involving cross-border corporate groups.
From a restructuring strategy perspective, the case is also notable for its treatment of substantive consolidation and deed poll structures. While the court did not treat these mechanisms as automatically determinative, it confirmed that they are not inherently inappropriate in principle. This supports the view that group schemes may be structured flexibly to achieve coherent outcomes, especially where group entities are operationally integrated and where a single scheme is administratively efficient.
For insolvency practitioners, the decision also highlights the stage-sensitive nature of court scrutiny. The court explicitly distinguished between the moratoria stage and the later scheme approval/sanction stage under s 210 of the Companies Act. This distinction affects how transparency and creditor consultation interests are weighed. In practice, parties seeking moratoria extensions should expect that confidentiality arguments may carry greater weight before the scheme itself is considered, particularly where disclosure could trigger market harm.
Legislation Referenced
- Insolvency, Restructuring and Dissolution Act 2018 (IRDA) (2020 Rev Ed), in particular:
- Section 63(3)
- Section 64
- Section 246(1)(d)
- Section 246(3)
- Companies Act 1967 (2020 Rev Ed), in particular:
- Section 210 (scheme approval/sanction context)
- Restructuring and Dissolution Act 2018 (as part of the IRDA legislative framework)
- Securities and Futures Act 2001 (2020 Rev Ed)
- Securities and Futures Act 2001 (as referenced in submissions)
- Payment Services Act 2019 (Act 2 of 2019) (raised in submissions by the objecting creditor)
Cases Cited
- Re IM Skaugen SE and other matters [2018] SGHC 259
- Re Babel Holding Ltd and other matters [2023] SGHC 98 (this decision)
- [2021] SGHC 209
- [2022] SGHC 196
Source Documents
This article analyses [2023] SGHC 98 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.