Bankruptcy isn’t a moral failing. It’s a tourniquet for a bleeding firm.
In April 2021, Dennis Tay placed Naiise into liquidation and announced he would file for bankruptcy. The retailer, once one of Singapore’s best-known platforms for local designers, had reportedly struggled to pay vendors since at least 2016, first in instalments, then through deferred promises, and eventually not at all.
By then, Tay had exhausted his personal savings and borrowed heavily from banks against personal guarantees. He called the preceding weeks “the darkest of my life.”
Tay’s experience is growing more commonplace. Singapore’s bankruptcy figures have been climbing. In 2025, 1,623 people were declared bankrupt, about a third more than the year before and the highest since 2019. Business failure is one common driver, alongside personal debt, unemployment, and the trap of having guaranteed someone else’s obligations.
The problem with delay
Most people see a bankruptcy filing as a catastrophe. More often, it is merely the formal acknowledgement that the catastrophe has already occurred.
Why is that so? Every month a business that is no longer viable remains open, it consumes resources it cannot replenish and accumulates obligations it is increasingly unlikely to meet. Suppliers go unpaid and pass the loss down the chain. Workers who stayed on, believing the company would survive, end up owed wages that may never be paid in full. The assets – equipment, inventory and motor vehicles – that might have been sold earlier depreciate.
By the time the doors close, everything is worth less: less for the workers, less for the suppliers, less for the founder. Creditors, employees and suppliers are generally better served by an orderly closure than by a business that is allowed to run itself into the ground.
Sometimes, the delay does something crueller. A business closed early is, usually, just a business closed. A business dragged out until the founder has personally guaranteed its debts, drained the household savings, and borrowed against the home becomes something worse: two failures fused into one. The company dies and takes the person down with it. Holding on delivers preventable ruin.
Bankruptcy, understood correctly, is not the wound. It is the tourniquet. The moment a person is declared bankrupt, the bleeding stops. What is already lost stays lost; what stops is the loss still to come.
Creditors can no longer pursue them individually; the letters, the threats, the legal notices give way to a single orderly process. The debt freezes instead of compounding. A trustee steps in to manage what remains and distribute it more fairly than an exhausted founder could.
Economists call indebted and persistently unprofitable companies zombie firms: businesses kept alive past their economic usefulness by pride, fear, or creditor indulgence. They tie up capital, talent and premises that could otherwise be deployed more productively elsewhere.
Japan’s post-bubble decades show what this costs at the scale of an entire economy. After the crash of the early 1990s, near-zero interest rates and bank indulgence kept failing companies nominally alive, with families pouring their futures into servicing debts their parents took on during the boom.
In 1989, the Sato family borrowed 600 million yen to build a hotel beside the ski slopes in Yamagata, betting the boom would last. It did not. Tourism to the area fell by half; they cut room prices and scraped for guests. For more than 30 years, virtually every yen went towards interest. The principal did not move.
When her brother died of a stroke at 54, Chigusa Sato inherited the business and the debt. She believes the years of keeping it open killed him. She chose to close it rather than pass that weight to his son.
An economy full of such cases cannot reallocate, and an economy that cannot reallocate cannot grow. A dying business on life support is a slow tax on everyone else.
Not a moral failure
Mihir Desai, a finance professor at Harvard Business School, argues that bankruptcy is a technical failure rather than a moral one: a structured second chance, rather than a verdict on a person’s worth. No ledger supports that shame.
American bankruptcy law treats discharge the same way: as a fresh start, not a sentence. Henry Heinz went bankrupt in 1875, founded the firm that became Heinz within a year, and paid back the discharged debts anyway. He proved a fresh start and an honoured debt were not opposites. America tells these stories; we tend to keep ours quiet. The gap measures how far our culture trails our law.
Bankruptcy should come only after every honest attempt to restructure or recover has been exhausted. When a business is genuinely finished, the worst option is to pretend it isn’t.
Obviously, the hard part is knowing when a business is genuinely finished. No one inside a struggling company sees it with the clarity of hindsight; Tay kept going because he judged there was still a chance Naiise could repay its creditors. Yet from outside, with years of unpaid vendors on the record, this can look like the most expensive kind of hope.
Timing is a tricky thing. Acting too early costs a founder a company; acting too late, once the savings are gone and the house is pledged, costs the founder everything. One practical warning sign is when a founder is funding the company’s obligations out of personal savings, borrowed money, or the family home. At that point, the business isn’t sustaining itself any more. The founder is.
Even if one can discern the best timing to call it quits, acting on it is harder than it sounds. Unlike some jurisdictions, Singapore does not provide immediate relief from bankruptcy obligations. A bankrupt makes monthly contributions from income until a target is met, which for first-time cases generally takes three to seven years, and longer for repeat ones. Travel abroad requires the trustee’s permission. Directorships are off-limits, and one’s bankruptcy status must be declared when taking on new credit.
For a founder who has just watched years of work collapse, declaring bankruptcy can feel less like a fresh start and more of a different kind of sentence. Our system is designed to take debt seriously, and it works. But the same rigour that makes it credible makes it frightening, and fear keeps people clinging to companies that should have closed years ago.
That fear has a real cost. All the more reason the lawful path out of failure should feel less like a sentence and more like a beginning. Singapore reformed its insolvency law in 2016; the remaining work is cultural: whether we treat a discharged bankrupt as someone who failed and recovered, or as someone permanently diminished, which is a story we ourselves decide on.
Yet Singapore sadly treats financial failure as a moral failing and endurance as a virtue. We have built a folklore in which holding on is brave and letting go is shameful, and that folklore destroys more wealth and more futures than any single failed business ever could.
In a final Facebook post, Tay thanked those who had stayed with Naiise and wrote that he hoped he had played as big a part in building their businesses as they had in his. Grief runs through those words. So does finality: a door, irrevocably shut. The company had been dying for five years. The statement was the funeral it should have had years earlier.
Closing a business is painful. But sometimes it is also the most responsible decision a founder can make – for creditors, employees, family and themselves.
The article was first published in The Straits Times.