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2025 MarsdenLR 161
HIGH COURT MALAYA MALACCA
IMPONOTIVE AUTO SDN BHD & ORS – Appellant
Versus
OCBC BANK (MALAYSIA) BERHAD & ORS – Respondent
[Originating Summons No: MA-24NCC-4-07-2024]
A corporate scheme of arrangement must provide sufficient details for consideration, ensuring its viability and bona fides, with deficiencies leading to potential rejection by creditors.
Headnote:(A) Companies Act 2016 - Sections 366(1), 368(1) - Application for leave to convene a Creditors' Meeting and restraining order against creditors' proceedings - The Applicants are manufacturers significantly affected by financial issues due to the COVID-19 pandemic and sought approval for a Revised Scheme of arrangement with creditors - The court found the proposal lacking sufficient detail to demonstrate its viability and thus denied the application for leave, stating that 'there is no prospect that the Revised Scheme will be approved by the Interveners at the Creditors' Meeting.' (Paras 1, 27, 42, and 49)
(B) Legal Principle on Scheme Proposals - The court emphasized the necessity for sufficient particulars in the proposed scheme for it to be deemed bona fide and viable, reiterating that mere comparison of assets to liabilities is insufficient to justify approval of a scheme. (Paras 31, 36, and 45)
Facts of the case:
The Applicants applied for leave to convene a Creditors' Meeting while experiencing substantial financial difficulties aggravated by the pandemic, leading to multiple creditor oppositions against their proposed Revised Scheme of Arrangement.
Findings of Court:
The court concluded the Revised Scheme lacked necessary details such as financial forecasts and realistic timelines for repayment of debts, rendering it unworkable.
Issues: The main issues were whether the Revised Scheme contained sufficient particulars for consideration and if the Applicants could meet the statutory requirements for the creditors' approval at the meeting.
Ratio Decidendi: The court held that a scheme must include sufficient particulars and financial viability to avoid being rejected outright by creditors, emphasizing the importance of the creditors' sentiment in determining the application’s success.
Result: Application dismissed with costs awarded to the Interveners.
| Table of Content |
|---|
| 1. basis of application for leave and restraining order (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. applicants' justifications for revised scheme (Para 11 , 12 , 25) |
| 3. interveners' opposition to revised scheme (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 4. court's analysis of revised scheme viability (Para 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37) |
| 5. impact of interveners' opposition (Para 40 , 41 , 42 , 43 , 44) |
| 6. conclusion and orders issued by the court (Para 46 , 48 , 49) |
Introduction
[1] This is a decision on the Applicants' application via encl 1 for:
(i) an order pursuant to s 366(1) of the Companies Act 2016 granting leave to the Applicants to convene a Creditors' Meeting for the purpose of presenting for approval a scheme of arrangement between the Applicants and their respective Scheme Creditors; and
(ii) a restraining order pursuant to s 368(1) of the Companies Act 2016 to stay all proceedings initiated by the Applicants' creditors.
Background
[2] The Applicants are manufacturers of parts and components in the automotive industry, collectively known as the 'SPA Group'. They are interrelated via a common majority shareholder, Dato Sri Lim Teck Boon, who holds in excess of 95% shareholding in the Applicants. The Applicants have experienced serious financial issues, amongst others, poor cashflow and cost overruns as a result of the COVID-19 pandemic and that has impacted their financial well-being and commitments to a number of financial institutions.
[3] There was an earlier application for judicial management and a proposed scheme of arrangement ("Previous Scheme") via Originating Summons No. MA-28JM-1-11/2023 by the 1st, 3rd, 7th and 9th Applicants ("JM Application") filed on 20 November 2023. There was opposition to the scheme by their creditors, including secured creditors, and it led to the withdrawal of that scheme on 5 April 2024.
[4] Enclosure 1 is the application for leave to convene a meeting of creditors for the purposes of considering and approving a scheme of compromise and arrangement under s 366(1) of the Companies Act 2016 and for a restraining order under s 368(1) of the which was filed on 15 July 2024 ("Application").
[5] The current Application proposes a revised restructuring scheme of arrangement ("Revised Scheme") to repay the SPA Group liabilities to the Scheme Creditors. The Revised Scheme states that the Scheme Creditors are divided into 2 groups, first are the secured creditors which consist of AmBank (M) Berhad, Public Bank Berhad, RHB Bank Berhad, Malayan Banking Berhad ("Malayan Banking"), OCBC Al-Amin Bank Berhad ("OCBC AL-Amin"), OCBC Bank (Malaysia) Berhad ("OCBC"), Affin Bank Berhad ("Affin"), HSBC Amanah Malaysia Berhad ("HSBC"), CIMB Bank Berhad ("CIMB") and Standard Chartered Bank Malaysia ("Standard Chartered"). Secondly, the unsecured creditor, which consists of only Lembaga Hasil Dalam Negeri ("LHDN"). The detailed breakdown of each of the Applicants' liability to the secured creditors and the unsecured creditor appears in Exhibits A-15, A-16, A-17, A-18, A-19, A-20, A-21, A-22, A-23 in encl 5.
[6] The secured creditors OCBC Al-Amin, OCBC, Affin, HSBC, CIMB, Standard Chartered, Malayan Banking and the unsecured creditor LHDN had applied to intervene and oppose this Application, and that application was allowed by this Court on 6 November 2024 ("Interveners"). HSBC Amanah and Malayan Banking were not present at the hearing of this Application.
The Revised Proposed Scheme
[7] Briefly, the Revised Scheme, which appears in Exhibit A-14 of encl 5 proposed that:
(i) in respect of the secured creditors, each of the secured creditors will receive a 100% return on their respective outstanding principal sum and there will be waiver of late payment charges, penalties and interest accrued until the effective date of the proposes scheme; and
(ii) in respect of the unsecured creditor, the outstanding amount will be settled via an instalment as detail
