Malaysia’s scheme of arrangement framework allows for a restraining order to be granted. However, there is a balancing of the rights of the applicant company and the creditors. Finally, the court can extend the moratorium under s.A15 IA 86 if the company is convening a meeting of creditors to consider a scheme of arrangement or the newly introduced restructuring plan under Companies Act 2006. The process is heavily court supervised, with court approval needed to convene meetings of creditors, for the scheme booklet and for the scheme itself (once it has been approved by creditors). These proposals are considered in detail in section 3 of this note. Section 211H also provided for additional safeguards against abuse in respect of cross-class cram downs, by expressly requiring that junior claims (i.e. ... Moratorium… This is a guide for companies and their advisers involved in, or affected by, schemes of arrangement between a company and its members under Pt 5.1 of the Corporations Act. In a decision on 22 April 2019, the High Court in Kuala Lumpur allowed the creditors’ applications to set aside the grant of the restraining order. The international effectiveness of a ... procedure combines moratorium, debtor-in-possession management, reorganisation and restructuring of creditors’ rights. Schemes of Arrangement A scheme of arrangement is a court supervised restructuring process which allows for the rights of creditors or shareholders to be varied, by cramming down on non-consenting parties in appropriate circumstances2. Offer can become unconditional with acceptances from 50.1 percent of ordinary shareholders. Pursuant to section 211B of the CA, where a … [16] Section 211F(2) of the Companies Act. periodic financial reports of the company and its subsidiaries. Significance: Indonesian company successfully applied for a moratorium under section 211B of the Companies Act, now section 65 of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA“) (which came into force on 31 July 2020). 2. [1] Section 211A(3) read with section 351 of the Companies Act. [3] Section 351(2A) of the Companies Act. Phase 2 – 1st Meeting of Creditors The voluntary administration must co… Significance: Indonesian company successfully applied for a moratorium under section 211B of the Companies Act, now section 65 of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA“) (which came into force on 31 July 2020). To my knowledge, this is also the first decision on this issue under the new section 368(2) of the Companies Act 2016 (CA 2016). The workings of Section 211B were considered in detail by the Singapore High Court in Re IM Skaugen SE and other matters [2019] 3 SLR 979 (“Re IM Skaugen”). Now section 68(7) of the IRDA. This decision is also important in emphasising the … A scheme can also be used to implement a pre-pack, where all the stakeholders are agreed on its terms. One argument is that if it were intended that section 368 allowed for the initial grant of a restraining order with no specific conditions, then section 368 of the CA 2016 would have simply adopted similar language as in section 398 and section 410 of the CA 2016. Do NOT follow this link or you will be banned from the site! A Scheme (unlike other forms of restructuring) is primarily a “debtor-in-possession” rehabilitation process, where the company’s existing management is not displaced in favour of a court-appointed officer. Updates on restructuring process – Scheme of Arrangement 1. The moratorium will be extended to the date specified in the order. A similar issue also arose under the predecessor provision of section 176(10A) of the CA 1965. The Applicant companies had not met with pre-conditions of (c) and (d) under section 368(2) of the CA 2016 at the time of obtaining the restraining order. A scheme of arrangement enables a company to agree with its creditors, or one or more classes of its creditors, a compromise in respect of its debts owed to those creditors. Once sanctioned, a court order is sent to the Registrar of Companies, and the Scheme becomes effective. IMSPL Pte Ltd (“IMSPL”), an entity in the Skaugen Group of companies, filed an application for a moratorium order pursuant to Section 211B of the Companies Act. 8 pages) A restraining order can be a crucial tool to allow the distressed applicant company to have a moratorium from creditors’ actions and to allow for a successful restructuring of the company’s debts through a scheme of arrangement. However, although Section 64(12)(b) makes it clear that the filing of an in rem writ is not prohibited, a person will still need to obtain leave of Court under Section 64(1)(c) or 64(8)(c) to be able to continue with such proceedings. Under both section 368(2) of the CA 2016 and section 176(10A) of the CA 1965, the most difficult pre-condition to meet was the requirement under (d). Scheme of arrangement. Now section 71(3) of the IRDA. Hence, a Scenario 1 would apply where the initial application for the restraining order would already require, at the very least, condition (d) to be met. © Clyde & Co LLP. The role of the monitor . A creditors scheme of arrangement is a binding court-approved compromise or arrangement between a company and its various creditors under Part 5.1 of the Corporations Act. provide for a moratorium going forwards,1 why we may wish to provide for cram down between classes of creditors within a scheme and how we should approach questions of fairness in allocating proceeds of the debt restructuring,2 and whether there should be a role for the insolvency practitioner in the scheme of arrangement The first example of this trend came with EMAS Offshore and its application dated 31 August 2017 for a worldwide moratorium under the enhanced Singapore scheme of arrangement. Such an application can be made at the same time as or prior to the making of the application to court to convene the relevant meetings of creditors. Now section 64(5) of the IRDA. Further even when a company uses the moratorium it is still required to meet its debts to financial creditors. One of the concerns with a scheme of arrangement presently is that there is no automatic moratorium whilst the scheme goes through and excluding companies with capital markets arrangements will not address this concern. In 2017, the Companies Act was amended to significantly enhance the Scheme of Arrangement regime, introducing improved statutory moratoriums and pre-pack schemes, amongst other innovations. Informal. This moratorium gives the debtor breathing space to work on its restructuring. The issue is whether the pre-conditions under section 368(2) i.e. Now section 68(8) to 68(10) of the IRDA. For example, Singapore also had near-identical language in its original section 210(10) of the Singapore Companies Act for a restraining order in a scheme of arrangement. Then a moratorium might be the answer you need. After the expiry of this period, the debtor is deems not able to repay the debt and the creditor can file a winding up petition. The applicant proposed a scheme of arrangement with the purchasers, and obtained a restraining order. This guide explains: ASIC’s role under the scheme provisions in Pt 5.1; The IRDA is an omnibus legislation housing all of Singapore’s insolvency and restructuring laws in one single piece of legislation. SCHEME OF ARRANGEMENT An applicant must meet the statutory pre-conditions for the grant of a moratorium (otherwise known as a restraining order) under Malaysia’s scheme of arrangement even at the initial application stage. The Corporate Law Reform Committee process that led to the CA 2016 had recommended the imposition of a clear cut 3 and 9-month timeframe for the restraining order. The Company has accordingly filed an application in the Singapore High Court for a moratorium under section 211B of the Companies Act in HC/OS 981/2019 on 1 August 2019. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Moratorium on diligence; Diligence; Register of Insolvencies; Debt Arrangement Scheme (DAS) About DAS. Section 211E was considered by the High Court in Re Attilan [2018] 3 SLR 898, in which the applicant company sought leave to convene a creditors’ meeting to consider a Scheme and for super priority to be granted to proposed financing from a potential investor under section 211E of the Companies Act. Significantly, a scheme of arrangement can be used to implement a restructuring where not all creditors agree to the compromise proposed. Once the Court has sanctioned the Scheme, it will become binding on all creditors upon the lodgement of the Court order sanctioning the Scheme with the Registrar of Companies. CIGA is largely modeled on the English scheme of arrangement but with significant changes and enhancements. 2 This moratorium was first provided for in s 210(10) of the Companies Act.1 However, as part of a … The relatively recent (10-15 years) growth in the use of schemes of arrangement as a restructuring tool of choice is largely … Ltd. (the “Company”) intends to propose a scheme of arrangement between the Company and its creditors. This moratorium gives the debtor breathing space to work on its restructuring. CONSUMER electronics retailer TT International is seeking a fourth extension of a moratorium that restricts creditors from taking further action against it, as well as for the implementation of its scheme of arrangement, it announced on Friday evening. The Court held that upon its proper construction, the conditions of section 368(2) had to be complied with at the time the application was made for a restraining order under section 368(1) of the CA 2016. 24NCC-126-04/2013, grounds of judgment dated 22 July 2013), Re PECD Bhd & Anor (No 2) [2008] 10 CLJ 486 and Re Sanda Industries Bhd & Ors [1999] 1 CLJ 459, the Court essentially held that the pre-conditions in section 176(10A) of the CA 1965 had to be complied with at the very initial application for a restraining order. The applicant company must provide, among others, evidence of support from the company’s creditors for the intended or proposed compromise or arrangement, a brief description of the intended compromise or arrangement, a list of every secured creditor and a list of all unsecured creditors not related to the company. Rescue financing generally refers to financing (for e.g. As highlighted above, the 2017 Amendments introduced cross-class cram downs in Section 211H. [14] Section 211H(4) of the Companies Act. However, where a Scheme differs from a contract is that it can, in certain circumstances, bind even dissenting creditors. There is no moratorium period to protect the company unless it enters administration first; Even when sufficient creditors have agreed to the Scheme, it still requires court approval; Schemes of Arrangement are generally more expensive than insolvency procedures such as Company Voluntary Arrangements, due to their added complexity The restraining order in a scheme of arrangement requires a court order to give moratorium protection against legal proceedings. 2 Bill 1998. The decision in Jin Lin Wood had been appealed up to the Federal Court and with the leave question relating to section 176(10A) of the CA 1965. Stay under scheme? The following is issued on behalf of the Hong Kong Housing Authority: Under the current time-limited arrangement, banks and financial institutions participating in the provision of mortgage loans for the Subsidised Sale Flats Scheme (SSFS) (participating financial institutions) may offer a mortgage principal moratorium plan (moratorium plan) to SSFS flat mortgagors. Section 2 - Moratorium Where Directors Propose Voluntary Arrangement. The general framework of the IRDA has been discussed in the first article in our series of articles covering the various aspects of IRDA and can be found here. Features of a scheme of arrangement in Guernsey. Malaysia’s scheme of arrangement framework allows for a restraining order to be granted. In CVA, section 398 of the CA 2016 provides that a “moratorium in voluntary arrangement commences automatically from the time of filing of the following documents by the company to the Court”. 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