Back
2021 MarsdenLR 1035
HIGH COURT MALAYA KUALA LUMPUR
SENTORIA BINA SDN BHD – Appellant
Versus
IMPAK KEJORA SDN BHD & ORS – Respondent
[Originating Summons No: WA-24NCC-519-11/2020]
The court sanctioned a proposed scheme of arrangement under the Companies Act, affirming the need for creditor majority support and compliance with statutory requirements, prioritizing creditor interests over individual claims.
Headnote:(A) Companies Act 2016 – Sections 366 and 368 – Application by a company for scheme of arrangement – The court allowed the scheme as it was found to be viable, with substantial support from creditors – Observations noted about the moratorium granted upon application, which extended to the company’s guarantor. (Paras 1-4, 9, 66-73, 100-102)
(B) Scheme of arrangement principles – The Court emphasized the necessity for creditor approval and compliance with statutory processes prior to sanctioning a scheme – This includes ensuring creditors are fairly represented and a majority decision is reached. (Paras 30-39)
(C) Court's role in sanctioning schemes – The court's duty is to ensure fairness and not to replace creditors' commercial judgment – The importance of majority creditor support was highlighted, along with reference to relevant precedents ensuring creditor protection during restructuring efforts. (Paras 60-67)
(D)
Findings of Court: The proposed scheme is fair and is approved, as it provides for full debt repayment in instalments while allowing the company to continue operating. (Paras 100-101) (E)
Result: Scheme of arrangement sanctioned and made binding upon the applicant and all scheme creditors. (Paras 101)
JUDGMENT
Introduction
[1] This judgment primarily revolves around an application by a company pursuant to s 366 of the Companies Act 2016 (" CA ") in relation to a proposed scheme of arrangement with its creditors.
[2] Of significance, this judgment will also be dealing with the principles governing the granting of an order restraining further proceedings under s 368(1) of the CA not only against the applicant but also additionally to the applicant's holding company ("SGB") who had provided some of the applicant's creditors with corporate guarantees.
[3] Briefly, the applicant is a wholly-owned subsidiary of Sentoria Group Berhad ("SGB"). SGB and its subsidiaries are referred to as the "Sentoria Group".
[4] The applicant is the construction arm of Sentoria Group and has been the main contractor for the Sentoria Group's resort development projects as well as the general civil and building work for most of the Sentoria Group's property development projects.
[5] The Sentoria Group has undertaken and invested in several significant projects of considerable value and also owns several pieces of land. However, due to mismatch in funding, there has been a resultant cash flow difficulty faced by the group whereby some of its development projects have yet to generate the expected returns. In this regard, the onset of the Covid 19 pandemic has also contributed to the financial challenge to the group's business.
[6] Consequently, due to the financial difficulties faced by the Sentoria Group, the applicant has received low or no repayment in regard to the amounts owing to it by the Sentoria Group which has resulted in the applicant experiencing financial difficulties and cash flow constraints to repay its creditors who are essentially its unsecured trade creditors. This predicament has led to the filing of this application by the applicant pursuant to s 366 of the CA .
Background Facts And Court Proceedings/Orders Made
[7] Pursuant to an ex parte application by the applicant, the Court had through an order dated 12 November 2020 (encl 10) granted the applicant several orders including leave to summon a creditors meeting pursuant to s 366 of the CA to consider a scheme of compromise.
[8] In its affidavit in support of such ex parte application, the same set out the proposed scheme which had identified the various scheme creditors, the amounts due to them whereby the applicant's proposal under such scheme was to pay all creditors the sums due as set out in the scheme in full over a six years period with identified percentages of payment each year. There was only one class of creditors ie, unsecured trade creditors.
[9] I had also on 12 November 2020 granted a restraining order ("RO") pursuant to s 368(1) of the CA for a period of three months as I was satisfied that the preconditions of s 368(2) of the had been complied with and met. In particular and in relation to the pre-condition contained in s 368(2)(d) of the , exh. A-8 evidenced that 71.86% of the value of the applicant's scheme creditors were agreeable to the nomination of one Dato' Jimmy Chan Kong San to act as a director under s 368(2)(d).
[10] Pursuant to the application in encl 1, I had also granted the RO on the following terms where it will be clear that the same extended to the guarantor of some of the applicant debts, namely SGB. I will later in this judgment explain the reasons for having made this order in respect of the guarantor SGB but for the moment, it will suffice for me to state that in so far as the scheme creditors were concerned, there was only one guarantor in relation to some of the debts and that was SGB which is the holding company of the applicant. I had amongst others made the following orders on 12 November 2020:
1. An Order be granted pursuant to s 366(1) of the Companies Act 2016 to summon meeting(s) ("Creditors' Meeting(s)") of the creditors of the Applicant or any class of them (including their successors) permitted assigns, heirs and/or estate)
