Re Conchubar Aromatics Ltd and other matters

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 17 December 2015
• Neutral Citation: [2015] SGHC 322
• Court: High Court (Singapore)
• Docket Number: Originating Summons Nos 1064, 1065 and 1066 of 2015
• Year: 2015
• Published date: 05 March 2016
• Hearing Date: 10 December 2015
• Plaintiff Counsel: Vergis Abraham and Danny Quah (Providence Law Asia LLC)
• Subject Matter: Companies,Schemes of arrangement
• Citation: [2015] SGHC 322

Aedit Abdullah JC: Introduction

The three applicant companies applied for and were granted interim stay of proceedings under s 210(10) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) for 10 weeks or until earlier discharged, ahead of any application for the calling of a creditors’ meeting under s 210(1). A Malaysian decision, Re Kuala Lumpur Industries Bhd [1990] 2 MLJ 180 (“Re KL Industries”) is authority that this can be done. Apparently, although similar orders have been made in Singapore (see for instance the commentary in Woon’s Corporations Law (LexisNexis, Looseleaf Ed, 2005, July 2012 Release) (“Woon’s Corporations Law”) at para L [152]), the matter has not been addressed in written grounds. As the commercial discussions were still being pursued, the commercially sensitive details have been omitted.

Brief Background

The three applicant companies, Shefford Investments Holding Limited, UVM Investment Corporation, and Conchubar Aromatics Limited, were shareholders in Jurong Aromatics Corporation Pte Ltd (‘JAC”). These shareholdings, as well as shareholdings in SK E&C Jurong Investment Pte Ltd, were the primary assets of the applicants.

JAC ran into difficulties, eventually being put into receivership in September 2015. The Applicants themselves were similarly in some difficulty. While JAC and the Applicants faced difficulties, the Applicants hoped that a restructuring proposal would rehabilitate their position.

The Application

As matters were still being negotiated and discussed among various parties, a moratorium was necessary to protect the Applicants’ ability to continue their efforts at restructuring. The Applicants argued that a restraint order under s 210(10) of the Companies Act could be granted independent of the calling of a meeting under 210(1), citing Re KL Industries. It is authority for the proposition that a restraint order may be issued if there is a proposal which gives more than a general layout of the scheme and the applicant was acting bona fide. The fact that the applicants were foreign companies would not obstruct the granting of a moratorium, as there was sufficient nexus to Singapore such that these companies were liable to be wound up under the Act: Re TPC Korea Co Ltd [2010] 2 SLR 617 (“Re TPC”) at [12].

In the present case the restructuring proposal put forward to the Court was sufficiently particularised to merit due consideration by the creditors. The restructuring would confer some benefit to the Applicants' creditors, who would otherwise obtain nothing. Bona fides was shown by the fact that the restraint was to be operative for as short a period as possible to allow discussions to be finalised as to the proposal and the s 210(1) application to be filed and heard. No prejudice would occur to the Applicants' creditors if the order was granted.

A creditor, SK Engineering & Construction Co, Ltd appeared, but did not contest the application for the moratorium at this time.

The Decision

I granted a restraint order in respect of each of the three applications, operative for 10 weeks, unless discharged earlier, with a status conference fixed for an update on the situation. Further status conferences will be ordered as needed. I was satisfied that a restraint order could be granted under s 210(10) even if no application had yet been made under s 210(1), provided that there was a proposal sufficiently detailed as to indicate there was something definitive that could be put to the creditors shortly, and the application was made bona fides.

Analysis The ambit of s 210(10)

Section 210(10) of the Companies Act reads:

Power of Court to restrain proceedings

(10) Where no order has been made or resolution passed for the winding up of a company and any such compromise or arrangement has been proposed between the company and its creditors or any class of such creditors, the Court may, in addition to any of its powers, on the application in a summary way of the company or of any member or creditor of the company restrain further proceedings in any action or proceeding against the company except by leave of the Court and subject to such terms as the Court imposes.

The provision, in so far as the present circumstances apply thus...