Foreign bank mergers, universal succession and the Singapore Banking Act



Time to read

4 Minutes


On 18 May 2017, the Singapore Court of Appeal ('Court of Appeal') in Jacob Agam and another v BNP Paribas SA [2017] SGCA(I) 01 delivered its first judgment on an appeal from the Singapore International Commercial Court ('SICC').

Facts and decision

BNP Paribas Wealth Management (‘BNP WM’) was a bank incorporated in France and a wholly-owned subsidiary of BNP Paribas SA (‘BNPP’). In 2010, BNP WM, acting out of its Singapore branch, advanced loans to certain companies owned by Jacob and Ruth Agam (the ‘Appellants’) who also guaranteed the loans. The loans were not repaid in full at maturity and in November 2015, BNP WM commenced proceedings in the Singapore High Court for the recovery of approximately €30 million from the Appellants in their capacity as guarantors. In April 2016, the proceedings were transferred to the SICC.

In October 2016, BNP WM merged with BNPP pursuant to a merger agreement (the ‘Merger Agreement’) governed by French law which provided for a merger pursuant to the French Commercial Code. As a result, BNP WM was dissolved and its assets and liabilities were transferred to BNPP under the doctrine of universal succession under French law. Accordingly, BNPP filed an application to be substituted for BNP WM in the SICC proceedings. The SICC ordered the substitution and the Appellants appealed against the order.

The Court of Appeal considered the following.


First, the Appellants argued that the use of the French term ‘sera subrogée’ in the Merger Agreement suggested that BNPP was subrogated to the rights of BNP WM and could only sue in BNP WM's name. Since BNP WM no longer existed, there was no legal person with standing to sue the Appellants. The Court of Appeal disagreed. It held that, regardless of the meaning under French law, the meaning of ‘subrogation’ could not be given the common law meaning because that would contradict the entire substance of the Merger Agreement. The Merger Agreement provided for the dissolution of BNP WM and it could not have been the case that the parties contemplated that BNP WM would have to continue to exist for BNPP to enjoy the rights transferred to it.

Section 55B of the Banking Act

Second, there was a question as to whether Section 55B is mandatory in nature. Section 55B relates to voluntary transfers of the business of a bank in Singapore.

It was clear that Section 55B(1) applied to the merger between BNP WM and BNPP because BNP WM, being a foreign bank licensed in Singapore, was a ‘bank in Singapore’. Section 55B(1) requires, among other things, the approval of the Singapore High Court if a transfer is effected thereunder. However, Section 55B(2) goes on to state that:

‘Subsection (1) is without prejudice to the right of a bank to transfer the whole or any part of its business under any law.’

The Appellants argued that the words ‘without prejudice’ indicates that a bank is not free to disregard the requirements under Section 55B(1) and that ‘any law’ refers to Singapore law so the French law merger would not be covered by the saving provision in any event. The Appellants also advanced a number of policy reasons for a restrictive reading of the provision.

The Court of Appeal rejected the Appellant's arguments and held that Section 55B(2) is to be construed as being permissive. Section 55B(1) provides for a means of effecting a voluntary transfer of business but it is not intended to be the only means. Section 55B(2) makes that clear and there is a distinction between ‘any law’ and ‘any written law’. The latter refers to the Constitution and to Singapore legislation but the former is not so restricted and there is no reason to have to construe Section 55B(2) so restrictively.

Section 14A of the Banking Act

Finally, on the basis that ‘any law’ refers to Singapore law, the Appellants submitted that because BNP WM did not proceed under Section 55B, the only other method of merger open to them was Section 14A of the Banking Act.

The Court of Appeal's pithy response was ‘That submission is incorrect.’ Like Section 55B, the Court of Appeal held that Section 14A is permissive, not mandatory. Section 14A provides a mechanism for banks to merge with their wholly-owned bank subsidiaries but it does not compel a bank to choose this method.


This decision is to be welcomed for a number of reasons. It is a ‘double first’, being the first Court of Appeal decision on an appeal from the SICC and also the first decision providing guidance on Sections 14A and 55B of the Banking Act. It reflects a commercial and robust interpretation of Singapore legislation which will give market participants comfort that they have freedom to organise their commercial affairs and that their commercial arrangements will be recognised in Singapore.

Foreign banks operating in Singapore will also be relieved to know that corporate restructurings in their home jurisdiction, to the extent that it involves an entity with a Singapore branch that is licensed in Singapore, will be recognised by the local courts. Although it is customary to inform MAS of such business transfers, this does not imply that the approval of MAS or the Singapore courts will be required. In the present case, such notification was made and because BNP WM ceased to exist, the Singapore branch accordingly surrendered its banking licence in Singapore.

Second, the Court of Appeal’s decision is also consistent with the recent decision in JX Holdings Inc and another v Singapore Airlines Ltd [2016] 5 SLR 988, where the Singapore High Court recognised the doctrine of universal succession in the context of a corporate restructuring of a Japanese company. In that case, the Singapore High Court recognised for the first time that the doctrine of universal succession applies in Singapore. This was on the basis of international comity and that matters relating to the status of a company fall to be determined by the laws of the jurisdiction of incorporation of the company. Succession can be found even though the new entity inherits only a part of the patrimony of the predecessor, as long as this is the position under the laws of the jurisdiction of incorporation and the intent was nevertheless that the new entity would be the successor to that part of the assets and liabilities it received. This is a departure from the prevailing view under English law which requires a complete transfer of all assets and liabilities. Although it was strictly speaking obiter, the Singapore High Court also stated that even if the predecessor continues to exist, the doctrine of universal succession could still apply, depending on what is recognised under the laws of the jurisdiction of incorporation.

In short, Jacob Agam and another v BNP Paribas SA is a welcome decision which continues the trend of recognising the doctrine of universal succession and the emphasis placed by the Singapore courts on international comity and commercial pragmatism. 

Kai Loon Loh is a Counsel at Ashurst ADTLaw.


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