Raiffeisen Zentralbank Osterreich AG v Continental Chemical Corp Pte Ltd

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 08 March 2010
• Neutral Citation: [2010] SGHC 71
• Plaintiff Counsel: Andrew Chan and Guo Zhuo Neng (Allen & Gledhill LLP)
• Docket Number: Originating Summons No 463 of 2009
• Date: 08 March 2010
• Hearing Date: 03 September 2009,14 January 2010,24 April 2009,07 September 2009,29 January 2010,23 April 2009
• Subject Matter: Insolvency Law
• Published date: 09 March 2010
• Citation: [2010] SGHC 71
• Defendant Counsel: Ashok Kumar, Mark Tan and Jason Yang (Stamford Law Corporation)
• Court: High Court (Singapore)
• Year: 2010

Choo Han Teck J:

An application was brought by Continental Chemical Corporation Pte Ltd (“the Company”) for the adjournment of winding up proceedings brought against it for six months. The winding up application was made by Raiffeisen Zentralbank Osterreich Aktiengesellschaft (“RZ Bank”), an unsecured creditor. I granted a five-month adjournment to the Company, and now give the grounds of my decision.

The Company was at all material times undisputedly insolvent. It had financial problems from the third quarter of financial year 2008 and as of 31 December 2008, its total liabilities amounted to US$356,853,982, comprising US$266,559,693 owed to secured creditors, US$87,630,290 owed to unsecured creditors, and US$2,664,000 worth of contingent liabilities. As a result of its financial problems, the Company was in default of a facility granted by RZ Bank. On 24 February 2009, RZ Bank served a statutory demand on the Company for the repayment of the sum of US$3,567,097.62. The Company did not repay RZ Bank. On 7 May 2009, based on the unsatisfied statutory demand, RZ Bank filed an application to compulsorily wind up the Company. On 12 July 2009, the Company filed an application for a stay of proceedings and for leave to convene creditors’ meetings to approve a scheme of arrangement. I granted this application and ordered a stay of all further proceedings until 7 January 2010.

By January 2010, the Company was still not ready to propose a scheme of arrangement to its creditors, despite having thought out a plan for the Company’s rescue. The Company was in negotiations with two interested potential investors to raise capital for a restructured entity created by merging the Company, its subsidiaries and another group of petrochemical companies, into a new holding company. It was envisaged that after the merger, this entity would be able to continue operating as a going concern. As consideration for the extinguishment of all the secured debt of the Company, the secured creditors would be allotted shares in the merged entity. It was envisaged that the Company’s unsecured creditors would enjoy a greater prospect of recovering their debts if the proposed merger was successful. The Company applied on 14 January 2010 for a further adjournment of six months for the completion of due diligence exercises and negotiations, so that the Company can propose a scheme of arrangement to its creditors. In support of the Company’s application, it urged the court to consider that the investors had entered into a non-binding Heads of Agreement with the Company and its secured creditors on 24 December 2009, which created an indicative timeline for the entry into agreements on the proposed merger in five months’ time.

The Company’s application for an adjournment was supported by the secured creditors, who, like the Company, urged the court to consider that a scheme of arrangement would result in the better realisation of the Company’s assets. In support of the Company’s position, they relied on a liquidation analysis on the likely consequence of winding up the Company. The report revealed that if the Company was put into liquidation, it would have insufficient assets to repay the secured creditors, and thus subjecting the unsecured creditors to face the...