Singapore Court Issues Sudden Ruling Regarding Sritex: What is Happening?
The Singapore International Commercial Court has officially permitted the administrators of the bankrupt PT Sri Rejeki Isman (Sritex) to track and secure the company’s assets within the country. This decision potentially opens a new pathway for asset recovery for investors of other troubled Indonesian companies.
According to reports from The Edge Malaysia, the ruling issued last week details the court’s recognition of Sritex’s bankruptcy. Sritex was once one of Indonesia’s largest garment manufacturing giants. This decision provides a glimmer of hope for Sritex’s creditors, who have long questioned the whereabouts of funds from US$725 million (IDR 12.83 trillion) in bonds listed on the Singapore Exchange between 2016 and 2020.
Before the court, administrators admitted they do not know exactly how the funds were utilised, whether they were transferred to companies in Indonesia, or if any remain in Singapore. “To my knowledge, this is the first published recognition of an Indonesian company’s bankruptcy in Singapore. The most immediate practical impact may occur in the field of tracing offshore bond proceeds,” explained Smitha Menon, Lawyer and Partner at WongPartnership.
A New Chapter in Restructuring
Singapore has historically served as a hub for the restructuring of distressed Indonesian borrowers, including garment manufacturer PT Pan Brothers and the ongoing process for property developer PT Modernland Realty. The Sritex ruling grants stronger authority to administrators of bankrupt Indonesian companies to investigate and pursue assets for the benefit of creditors.
“Historically, it has been very difficult to pursue recovery against Indonesian borrowers outside of Indonesia, so the Singapore court’s recognition of Sritex’s bankruptcy in Indonesia is a significant practical development. It provides Indonesian insolvency practitioners with a clearer route to seek evidence and assistance regarding assets, recovery, and transactions in Singapore, where there is sufficient legal basis to do so,” said Julian Kwek, Co-Head of Corporate Restructuring and Workouts at Drew & Napier.
Sritex was officially declared bankrupt by Indonesian courts in 2024 after suffering severe losses during the pandemic due to a collapse in orders. The company has long produced clothing for global brands such as H&M, Uniqlo, and Zara.
“The curators will explore all possible avenues to recover Sritex’s assets,” asserted Remy Choo Zheng Xi, Founder and Director of RCLT Law Corporation, representing Sritex’s administrators in the Singapore court proceedings. He confirmed that the administrators have obtained approval from the Indonesian courts to investigate and hunt for Sritex’s assets abroad.
Allegations of Fraud and Embezzlement
While granting permission for asset tracing, the Singapore court strictly prohibited creditors from executing security over Sritex’s properties in Singapore without official permission from the court or the administrators. The judge stated that such restrictions were justified due to serious concerns that some security may have been granted unlawfully.
“Allegations of fraud, embezzlement, and corruption, including the disbursement of fraudulent loans, suggest there may be grounds to challenge previous transactions, security arrangements, or asset transfers,” concluded Smitha.