newsletter Q1 2006.indd - BDO Raffles

BDO Raffles
Certified Public Accountants
BDO
CONNECT
MICA (P151/11/2004) Q1 2006
Contents
New Year, New Look,
New Website..................................1
BDO Raffles News & Events.....2
New Year, New Look, New Website!
With the beginning of the year 2006 comes a brand new look BDO
Raffles CONNECT in line with our BDO international corporate image
and brand.
Congratulations!...........................2
BDO International News &
Events..............................................6
Can the corporate
restructuring officer model
work in Asia?.................................7
Implications of the ruling in
Spectrum Plus that a charge
on book debts is a floating
charge...............................................8
We bring you all the news and goings-on throughout the first quarter of this
year in BDO both locally and internationally. Also, read commentaries
on issues relating to our service lines and relevant industry news written
by BDO professionals and our associates.
2006 Q1 also sees the launch of our new website. For information on
our services, the BDO international network and our recent bulletins
and publications log on to www.bdo.com.sg. You can also check the
latest BDO and industry news, upcoming event schedules and register
for our seminars.
www.bdo.com.sg
DISCLAIMER:
The information in this newsletter is for general
guidance only and is not a substitute for
professional advice. BDO Raffles and its staff
accept no responsibility for any actions taken or
not taken on the basis of the information in this
newsletter.
Copyright © March 2006 BDO Raffles.
All rights reserved.

BDO CONNECT
BDO Raffles’ NEWS & EVENTS
JAN 2006
Balanced Scorecard CEO Breakfast
Seminar
BDO Raffles’ Management Consulting Services Division
and Cedar Management Consulting International (CMC)
teamed up on the 24th January to offer CEOs and MDs
of local companies a complimentary breakfast roundtable
discussion on the challenges of implementing the
Balanced Scorecard (BSC).
The breakfast was held at the opulent Tower Club, Republic
Plaza from 8.30am.
The Balanced Scorecard is a hot topic nowadays, with
many keen to learn about and adopt the strategic tool.
However, it is also a fact that many of those who adopt the
tool encounter the same problems and challenges, which
are not as readily discussed.
Sanjiv Anand (pictured), the Managing Director of Cedar
Management Consulting International, flew in from India to
speak at the event. CMC is a leading global management
consulting firm with offices in 15 countries. CMC’s heritage
includes being part of the former Renaissance Worldwide
- whose senior management included the creators of the
Balanced Scorecard.
Sanjiv himself has over 20 years of
management consulting experience
across the globe, across industry
sectors and has conducted over 200
scorecard exercises across the US,
South Africa, Middle East, and Asia.
He has been a key note speaker
across the globe and is currently
writing a book on the challenges of
implementation to be published by Tata McGraw Hill.
Sanjiv outlined challenges relating to the ability
to implement the BSC, the design phase and the
implementation phase.
Following this successful event, BDO Raffles’ Management
Consulting Services Division is collaborating with CMC to
leverage on each others’ consulting strengths and offer
more value-adding services to our clients.
FEB 2006
Lo Hei
Dinner
BDO RAFFLES’
Partners and
Managers
invited their
most valued
clients to
celebrate
the Lunar New Year with a Lo hei Dinner at Pine Court
Restaurant, Meritus Mandarin Singapore on Friday, 3rd
February. Many thanks to the representatives who were
present at the celebrations.
Congratulations to...
.. Lim Ai Leen (right), who has been
promoted to Audit Partner.
As a CPA with over 10 years
experience in auditing and providing
business assurance services to
a diversified portfolio of clients
including listed companies and
MNCs, she has climbed up the ranks
to Partner in record time. She also oversees an audit
team of about 50 professionals and regularly conducts
training sessions for the firm.
Find out more about Ai Leen and what she has to
say in an in-depth interview in the next issue of BDO
Connect.
..the following BDO Raffles staff who passed their ACCA
examinations and attained ACCA Affiliate status.
1. Lai Aun Chie Amanda Audit A
2. Xie Hua Feng Essen Audit A
3. Neoh Su Mei Elsa Audit B
4. Teo Ee Boon Evelyn BTS
5. Hu Yan Judy Tax
6. Sng Eng Hui Anthony Tax
2

BDO Raffles’ NEWS & EVENTS cont’d.
BDO CONNECT
ASME 19th Executive Council
CONGRATULATIONS to our Audit Partner, Yeo Ek Khuan
who was appointed Honorary Treasurer of the 19th
Executive Council (EXCO) of the Association of Small &
Medium Enterprises (ASME).
The members who attended the ASME 18th Annual
General Meeting cast their votes showing a consensus
to retain most of the previous EXCO members as well as
appointing a few new ones.
“ ”
Tremendous energy
ASME is dedicated to providing support and development
services to SMEs in Singapore.
Having been part of the
EXCO for many terms,
Yeo Ek Khuan (right) told
Entrepreneurs’ Digest, “ I have
been involved with many
commercial and non-profit
organisations and I must
say that none can compare
to the speed and pace that
operates in ASME. The
tremendous energy and
enthusiasm of our EXCO is
simply contagious....one thing that has not changed is the
synergy present... [which] inspires me to continue to serve
my best with the EXCO.”
The official inauguration was held at the Blossoms of Spring
2006 on 24 February 2006. Over 350 guests attended the
event including ASME members, partners, sponsors and
friends, BDO Raffles’ being among them.
Minister of State for Trade & Industry and Education, Mr.
Chan Choo Sen was guest of honour.
BDO Sponsors DP SME Development
Survey
BDO RAFFLES is pleased to announce that it will be
sponsoring the SME Development Survey 2006.
This is the second year running that BDO has been
one of the main sponsors of the survey conducted by
DP Information Group, Singapore’s leading credit and
business information bureau.
The survey’s objective is to identify SMEs main issues and
diffculties relating to growth. It will be sent out to 10,000
companies selected from DP’s database of 100,000 SMEs.
To facilitate the improvement of assistance and services
available to SMEs, we sincerely encourage our clients
to respond. The usual response rate for such surveys is
between 5 per cent and 10 per cent, but in Singapore, the
rate has been more like 8 per cent to 9 per cent, according
to Ms Chen Yew Nah, Managing Director of DP Info.
BDO participates in IE Singapore’s
Trade Mission to New Zealand
FROM 27 February to 4 March 2006, Tah Wee Han,
Managing Consultant for BDO Raffles’ Management
Consulting Services Division (pictured right) accompanied
a business mission from Singapore to New Zealand
jointly organised by International Enterprise Singapore
(IE Singapore) and the New Zealand Trade & Enterprise
(NZTE).
International Enterprise Singapore, formerly the Singapore
Trade Development Board, is the lead government agency
spearheading Singapore’s efforts to develop its external
economic wing. Whilst providing market information and
assisting enterprises to develop their business capabilities
and find overseas partners, IE Singapore is also dedicated
to positioning Singapore as a base for foreign businesses
to expand into the region in partnership with Singaporebased
companies. Naturally, these two functions formed
the main purpose of this business mission.
3

BDO CONNECT
BDO Raffles’ NEWS & EVENTS cont’d.
New Zealand Trade & Enterprise (NZTE) is the New
Zealand government’s national economic development
agency.
The mission was led by the Deputy CEO of IE Singapore,
Mr. Ted Tan, with five participating companies from the
Information & Communications Technology Industry.
“
With both countries sharing
similar population sizes, there exist
numerous synergistic partnering
opportunities for their businesses
to enter in to new markets together
by tapping in to each others’
strengths.
” MAR
Tah Wee Han, Managing Consultant.
Wee Han commented, “I’m very pleased to have played
a role towards catalysing collaboration opportunities
between Singapore and New Zealand businesses. With
both countries sharing similar population sizes, there
exist numerous synergistic partnering opportunities for
their businesses to enter in to new markets together by
tapping in to each others’ strengths.”
Representatives from IE Singapore also took the
opportunity to visit BDO’s Auckland office where a
presentation was made to various partners of the
office outlining the assistance that can be provided to
New Zealand companies seeking to set up business in
Singapore. As a follow-up, BDO Spicers will be publishing
a Business Brief in their Quarterly Publication for clients
on the various assistance schemes available as well as the
support that BDO Raffles can provide for their clients.
Group Photo of the Trade Mission led by Mr. Ted Tan, Deputy CEO of IE
Singapore (5th from Right)
Photo below left: Wee Han (far right) with Mr. Ted Tan, Deputy CEO, IE
Singapore (2nd from Left), Mr. Alex Matheson, New Zealand Trade Commissioner
to Singapore (far Left) and Mr. Aravind Vasu, Senior Vice President,
Matrixview Ltd
2006
BDO Annual Budget Seminar
BDO Raffles’ Tax Advisory Division held the Annual
Budget Seminar on 1 March 2006. This was organised, as
in other years, directly following the unveiling of the 2006
Budget by the Prime Minister, Lee Hsien Loong acting in
his position as Finance Minister, on 17th February.
The event, held in the afternoon at the Meritus Mandarin
Singapore, was open to the public as well as our clients.
It was a great pleasure for BDO Raffles to invite Dr Tan Kee
Wee for the second year running to share the benefit of his
extensive experience as an economist in his projections
for 2006. His talk was highly informative and entertaining
as Dr Tan presented in his unique style, using music,
pictures and movies to illustrate his
presentation.
Dr TAN Kee Wee (right) is an economist
at the Institute of Policy Studies.
For those who attended in 2005, the
return of Dr Tan was greatly welcomed
as in his outlook for 2005, he ‘got many things right’ even
though it was contrary to what others said.
Following Dr Tan, BDO’s own Tax team outlined and
4

BDO CONNECT
BDO Raffles’ NEWS & EVENTS cont’d.
reviewed this year’s changes. Tax Manager, Hu Fung Ling
(above right) spoke on the area of Corporate Tax followed
by Tax Manager, Nellie Koh on Personal Tax (GST) Changes
and Tax Director, Simon Poh (above left) shared his expert
opinion on the Recent Tax Changes.
For further information and comments on the Singapore
Budget 2006, please see our Commentary. Visit our
website at www.bdo.com.sg/budgetcommentary2006 or
for a hard copy email samanthajames@bdo.com.sg.
NUS/DP Biz Seminar Series
ALSO on 1 March, Lim Siew Ming, (below) Director of our
Accounting Management Division was invited to speak on
‘Managing Working Capital’ at the NUS/DP Biz Seminar
Series: Overseas Expansion as a Growth Strategy and its
Impact on Credit Risk Management.
The NUS/DP Biz Seminar Series is part of the Start-Up@
Singapore Enterprise Launcher Business Seminar and
Workshop Series jointly organised by NUS Entrepreneurship
Centre and DP Information Group.
The objective of the seminar was to share with participants
the various strategy choices for corporate growth, the
preferred growth strategy (with excerpts from SME
Development Survey Results 2005) and help Singapore
companies understand the important relationship between
achieving growth and improving credit risk management.
BDO Raffles participates in
7th Start-Up@Singapore 2005/2006
MANAGING Consultant of
our Management Consulting
Division, Tah Wee Han (right),
was pleased to be invited to
participate as a judge for this
year’s national business plan
competition jointly organised
by the National University of
Singapore (NUS) Entrepreneurship Centre (NEC) , NUS
Business School Alumni Association (NUSBSA) and NUS
Entrepreneurship Society (NES).
The Start-Up@Singapore competition was first launched
in 1999 and since then has attracted more than 845 teams
and 2800 participants including those outside Singapore
from countries such as Australia, Canada, China, France,
Germany, Greece, Hong Kong, Korea, India, Malaysia,
Norway, Philippines, Pakistan, Russia, Taiwan, UK and
US.
Judging of the competition is carried out online by more
than 100 judges from countries as far as US, UK, Israel,
Hong Kong, and Japan.
Prizes include capital in the form of S$70,000 and
additional in-kind products and services divided among
winning teams. As an added advantage, many of these
teams will go on to receive funding by business angel
investors or venture capitalists.
Source: www.startup.org.sg
Meet our people.....
Hu Fung Ling, Tax Manager
Hu Fung Ling has extensive experience in both corporate and
personal taxation. An Accountancy graduate of the National
University of Singapore and a Member of the Institute of
Certifi ed Public Accountants of Singapore, Fung Ling started
her tax career with KPMG before moving on to Coopers &
Lybrand. Prior to joining BDO, Singapore in 1999, Fung
Ling was a Tax Manager with a medium size CPA fi rm for
more than four years.
5

BDO CONNECT
BDO International NEWS & EVENTS
UK: Partner scales new heights
BAKER Street audit partner Scott McNaughton, 31,
celebrated New Year’s eve with a nail-biting ascent of the
Southern hemisphere’s highest mountain.
The firm’s youngest
partner was the first in an
expedition of 11 people
to reach the summit of
Aconcagua, the highest
peak in the world outside
the Himalayas, 6,926
metres (23,000 feet) above
sea level.
Worsening weather
conditions forced the
climbers to attempt
reaching the summit without having had time to fully
acclimatise and on the last day of the ascent Scott soon
found himself leading the expedition as exhaustion and
altitude sickness claimed other members. After two
weeks on the mountain and following a 3am start, with
temperatures at minus 25 degrees centigrade, Scott finally
reached the summit at 2.30pm on December 31.
Further congraulations to
Sun Yong (right), ILP and
Senior Partner at BDO
Shanghai Zhonghua, who
has been selected as the
“Most Outstanding Certified Public Accountant (CPA)
of 2005 ” by the Shanghai Institute of Certified Public
Accountants” (SICPA).
Many Happy Returns!
Double birthday celebration:
BDO founder’s 80th and CEO’s 60th
HANS-HEINRICH OTTE,
Honorary Chairman and cofounder
of the BDO International
network, (the ‘O’ in BDO)
celebrated his 80th birthday on 23
January. Meanwhile, Frans Samyn,
CEO of BDO International, was 60
on 23 February.
Scott’s feat of endurance is all part of a massive fundraising
campaign that will culminate in an attempt to climb Everest,
8,848 metres above sea level, beginning in late March. All
costs for the expedition are being covered either by Scott
personally or by corporate sponsors, including BDO Stoy
Hayward. Who knows, we may soon see the BDO flag flying
at the top of the planet.
Scott was in Singapore the last week of February for an
Audit Meeting. Everyone at BDO Raffles wishes him all the
Hong Kong & China: CPA
appointments and awards
BDO RAFFLES congratulates Managing
Director Albert Au (right) of BDO McCabe
Lo Limited for his successful re-election
as a Council Member of the Hong Kong
Institute of Certified Public Accountants
(HKICPA) in the December 2005 Council
elections.
Source BDO Journal 3, February 2006
Mr Otte (above right) remains active within the German
Member Firm, BDO Deutsche Warentreuhand AG, as
Chairman of the Supervisory Board. He will resign from
that position at the Annual General Meeting of BDO
Deutschen Warentreuhand on 13 July 2006.
Frans Samyn (right) celebrated his
60th birthday on 23 February. His
colleagues welcomed him in the
Global Coordination Office with
banners, balloons and gifts, and
a celebratory lunch. Good wishes
and congratulations poured in
from throughout the network all
day.
Source BDO Journal 3, February 2006
6

Can the Corporate
Restructuring
Officer model
work in Asia?
BDO CONNECT
AS you may be aware, the turnaround,
restructuring and interim management of
companies are more acceptable with American
based firms as compared to the firms in
Europe.
However, a new trend, that of the Corporate Restructuring
Officer (“CRO”), has been transplanted from the US to
Europe recently, with impressive results that has been
very encouraging.
While the Europeans may be welcoming the idea of a
CRO to represent the creditors’ interest from inside a
consensual, out of court restructuring, will this model be
accepted in Asia?
..the answer is an absolute “no”
According to some critics, the answer is an absolute
“no”. Primarily, the role of a CRO is that he goes inside
the Company and helps to organise and drive forward
the restructuring. This requires a degree of openness
to outsiders from the stakeholders and the incumbent
management which may be common in the West, but is
less so amongst Asian businesses.
CROs seem to work best with public listed companies.
The reason being that most of the Asian companies are
owner-managed dominated by one strong personality
who is used to getting their own way. Traditionally, Asian
businesses are far more dominated by the family than
their Western counterparts. Historically, they are far less
used to letting outsiders help run the enterprise whether
as consultants or officers of the company.
..resistance to outside “interference”
is changing..
According to some consultants who handled turnarounds
with CRO concepts in Asia in the recent times, this
resistance to outside “interference” is changing, in
particular to Hong Kong and Singapore.
Certainly, whether this change takes place will be one of
the most exciting things to watch over the next few years.
We welcome your valuable views on the aforesaid subject
as part of our research work on restructuring of companies.
Please send in your comments (if any) to frankiechia @bdo.
com.sg or clarateu@bdo.com.sg
Article contributed by Clara Teu of our Business Recovery &
Restructuring Division.
Business Recovery & Restructuring Division
Services:
• Judicial Management
• Administration of Voluntary Arrangement
• Receivership
• Special Accountant for Debt Restructuring & Business
Turnaround
• Monitoring Accountant
• Liquidation
• Forensic Accounting, Investigation & Litigation Support
• Valuation of shares
• Strategic Exit Planning & Implementation
• Agent for Mortgagee-in-Possession / Receiver of Income
• Trustee / Nominee in Bankruptcy
7

Implications of
the Ruling in
Spectrum Plus
that a charge on
Book Debts is a
Floating Charge
- adapted from INSOL WORLD
(Journal of INSOL International)
IN a recent case law: Spectrum Plus Ltd Vs National
Westminster Bank - 2005, the House of Lords
ruled a general charge on book debts taken
by a clearing bank in a debenture is effective
as a fixed charge would only operate only as a
floating charge where the book debt proceeds
were paid into the company’s current account
with the bank.
The key questions for lenders are as follows:
(1) how this affects existing charges;
(2) how they should structure future charges; and
(3) what type of asset the ruling applies.
BDO CONNECT
In their view, payment of the proceeds into the Company’s
current account with the bank was not sufficient as the
company continued to be free to operate that account for
its business purposes within the agreed overdraft limit.
The House of Lords found it impossible to accept that this
was consistent with a fixed charge over the book debts.
Lord Hope said the ordinary relationship of banker and
customer does not permit the banker, without notice, to
refuse to allow his customer to operate a current account
as and whenever he wishes while it is credit or is within
the limits of any agreed overdraft. The debenture did not
restrict that relationship.
The Spectrum decision will swell the assets available to
administrators and creditors generally. This would be at
the expense of banks lending in reliance on those charges
over receivables which must now be treated as floating
charges. Preferential creditors are entitled to be paid out
of floating charge realizations in priority to the floating
charge holder
Other limitations of floating charge
A floating charge has other disadvantages compared with
a fixed charge. In particular, an administrator is free to
dispose of floating charge assets in his custody or control
without reference to the charge holder or the court and to
pay his remuneration and expenses out of the proceeds.
These expenses include liabilities under contracts entered
into by the administrator and tax on chargeable gains
accruing on disposals made during the administration.
Impact of the ruling
The House of Lords has overruled the decision in Siebe
Gorman Limited Vs Barclays Bank Limited that has been relied
upon for more than two decades that such a debenture
was effective to create a fixed charge. The outcome is
estimated to affect more than 550 UK insolvencies and
numerous insolvencies in other jurisdictions based
on English common law.
The House of Lords confirmed that it is conceptually
possible to create a fixed charge over book debts.
However, the true nature of a charge depends on whether
the account is one which allows the company to continue
to use the book debt proceeds as a source of its cash flow
or is effectively a blocked account.
8

BDO CONNECT
Implications of the Ruling in Spectrum Plus
that a charge on Book Debts is a Floating
Charge cont’d
Test of control
A key question concerns the level of control required to
sustain a fixed charge. The terms of the charge and the
intentions of the parties at the time of its creation, rather
than their subsequent conduct, are critical factors. Thus,
where a charge over debts
has taken effect as a floating charge because the charger
has been left to use the proceeds in the business, it is not
possible to classify it as a fixed charge by subsequently
requiring payment of the proceeds into a blocked
account.
Similarly, where the charging document includes an
express power of conversion, it is not possible to leapfrog
preferential creditors and others and gain priority over
them by converting an existing floating charge into a fixed
charge.
business, is changing from time to time; and
• it is contemplated by the charge that, until some
future step is taken by or on behalf of the charge
holder, the company may carry on its business in the
ordinary way as far as concerns the particular class
of assets.
the hallmark of a floating charge
It was noted that the first two characteristics are typical
but not distinctive of a floating charge. It is the third
characteristic, which is the hallmark of a floating charge.
In Spectrum, Lord Scott agreed and added that if a security
has the third characteristic, he was inclined to think that
it qualifies as a floating charge, and cannot be a fixed
charge. In any case, the charger remains free to remove
the charged assets from the security, he said, the charge
should, in principle be categorized as a floating charge.
A floating charge is defined as “a charge which, as created,
was a floating charge”. Instead, if the charge holder wants
a fixed charge, he should take a fresh charge and require
that the proceeds be paid from the outset into a separate
collection account controlled by the charge holder.
major practical problem
The House of Lords gave no clear guidance as to the
degree of control required. It appears that an effective
fixed charge can be created only if the book debt proceeds
are required to be paid into a blocked account controlled
by the charge holder and operated as such. This approach
overlooks a major practical problem as it implies that the
money would be released with the specific consent of the
charger on a case by case basis.
Recharacterisation risk
In view of the above, another issue arises on the extent to
which charges over assets other than book debts may be
recharacterised as floating charge.
The classic indicators of a floating charge are:
If the Company requires the right to deal, this normally
means that the relevant assets are of a type that changes
from time to time. However, in recent cases, charges over
non-circulating assets such as coal washing machines
and oil drilling licenses and company shares were held to
take effect as floating charges, because the charger had
express power to dispose of the charged assets in the
ordinary course of business.
These cases raised concerns if the courts have altered
the criteria for identifying a floating charge and whether
the right to deal is now the decisive, or even the only,
characteristic.
Need for further guidance
Charges over receivables are used in a wide range of
transactions. A commercially sensible control test is
required to enable fixed charges to be created with legal
certainty. Otherwise, Spectrum will lead to a further
increase in the use of less flexible finance methods such
as debt factoring and asset backed lending. It would be
good if the courts would provide a guide on this test as well
as to clarify that Spectrum should not be indiscriminately
applied to assets other than book debts.
• it is a charge on a class of assets of a company,
present and future;
• that class is one which, in the ordinary course of the
Article contributed by Clara Teu of our Business Recovery &
Restructuring Division.
9

For more information about our services, contact the following divisions:
Audit & Assurance Lim Ai Leen aileen@bdo.com.sg
Business Recovery & Restructuring Gary Loh garyloh@bdo.com.sg
Business Risk Management Koh Yee Luang yeeluang@bdo.com.sg
Business Transaction Services Ross Limjoco rosslimjoco@bdo.com.sg
Corporate Secretarial Lim Swe Jian swejian@bdo.com.sg
Management Consulting Tah Wee Han weehan@bdo.com.sg
Accounting Management Lim Siew Ming siewming@bdo.com.sg
Tax Advisory Simon Poh simonpoh@bdo.com.sg
What would you like to see in future editions of BDO CONNECT? Let us know by
email. Send your feedback to Samantha James at newsletter@bdo.com.sg.