The court sanctioned a pre-pack scheme under Section 369C of the Companies Act 2016 to resolve creditors' debts, requiring proper disclosure and classification while ensuring the interests of excluded non-scheme creditors are protected.

[1] These Grounds concern the application in encl 1 [Encl 1]; an ex parte Originating Summons dated 23 January 2024 for sanction ("Sanction Application") of a pre-packaged scheme of arrangement ("the Pestech Pre-Pack") between the Applicant and selected creditors ("the Scheme Creditors").

[2] Encl 1 is filed under s 369C of the Companies Act 2016 (" CA 2016"). It was introduced on 1 April 2024 as part of the new amendments to 2016, which provided for brave changes to the existing company law regime.

Introduction

[3] All references to sections are with reference to CA 2016, save where the context otherwise provides.

[4] The cause papers filed herein comprise:

(a) Encl 1;

(b) affidavit of Datuk Mohamed Razeek Md Hussain Maricar of 23 January 2025 [Encl 2] in support of Encl 1;

(c) supplementary affidavit of Ng Kar Man of 14 February 2025 [Encl 9] in support of Encl 1.

[5] The Contents of these submissions are as out below.

Pre-Packaged Schemes

[6] Pre-packaged schemes of arrangement ("pre-packs") under the new s 369C are designed to expedite the conventional scheme process. The section now allows for pre-packs to be sanctioned and effective without applications for convening orders or the holding of scheme meetings.

[7] I had occasion to consider whether meetings in conventional schemes under s 366 could be dispensed with, in Re: Purecircle Trading Sdn Bhd & Anor 2025 MarsdenLR 3025 ; I held that they could not, see paras 40 to 43. Scheme meetings under s 366 are jurisdictional. So, failing to hold scheme meetings would mean that the Court would have no jurisdiction to sanction the underlying scheme.

[8] That must have been disappointing to the Applicant in Purecircle, as the scheme only involved an internal intra-group restructuring, which would be unanimously approved by the sole shareholder. Thus, the holding of meetings would, in practical terms, be an unnecessary expenditure of resources and time.

[9] As a meeting in a conventional scheme is jurisdictional, it is no surprise that dispensation with meetings could only be permitted if new legislation were introduced allowing dispensation. Hence, I can only surmise that it was for this reason that s 369C and s 71 of the Insolvency, Restructuring and Dissolution Act 2018 ("IRDA") in Singapore, were enacted.

[10] These pre-packs may compromise only selected or key creditors. Indeed, to 'pre-pack' all creditors may be impracticable. However, the legislation in Singapore and Malaysia makes no mention of the creditors that will be untouched by the pre-pack scheme and of the protection afforded to them.

[11] Accordingly, protection for such creditors must therefore be left to the Courts. This is one of the reasons why Singapore preferred the US Chapter 11 regime over the UK pre-packaged administration. The US regime provides for Court supervision, whereas the UK version generally does not, see paras 16 to 19 below.

Legislative History Of Pre-Packs

[12] Malaysia's pre-pack regime under s 369C was adopted from Singapore's provisions introduced in 2017, and later re-introduced in 2018 through IRDA. Only Malaysia and Singapore have pre-pack scheme of arrangement regimes.

[13] Singapore's IRDA was, in turn, inspired by the US Chapter 11 regime under the United States Bankruptcy Code, Sub-Chapters II and III ("Chapter 11").

[14] The main purpose of the US Chapter 11 Regime w