It is not an insolvency proceeding but can be implemented in ... debt-to-equity swap, moratorium or amendments to existing agreements).  The amendments set out provisions for the filing of the proof of debt, inspection of another creditor’s proof of debt, adjudication of the proof of debts by the Chairman of the meeting, and for how objections from creditors were to be made and resolved.. This is pending the issuance of the full grounds of judgment from the High Court. Moratorium on diligence; Diligence; Register of Insolvencies; Debt Arrangement Scheme (DAS) About DAS. Once sanctioned, a court order is sent to the Registrar of Companies, and the Scheme becomes effective. This section talks about – MAN Diesel & Turbo SE (“MAN”), a creditor of IMSPL, opposed IMSPL’s application. Further, proceedings can only be commenced/continued with leave of the court. The Court ultimately declined to exercise its discretion to grant super priority to the proposed financing from the investor, finding that the applicant had not taken reasonable efforts to obtain financing from alternative sources (that did not require super priority). 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. Briefly, a Scheme of Arrangement will become binding on a company’s creditors after the following three steps are completed: Prior to the IRDA, the legislative framework for Schemes of Arrangement was set out in Part VII of the Companies Act. I set out some thoughts on the arguments and the possible issues arising.  Section 211H(4) of the Companies Act. However, there are two sets of modifications in the IRDA that are worth highlighting. Then a moratorium might be the answer you need. Section 368 of the CA 2016 sets out the restraining order provisions. The applicant proposed a scheme of arrangement with the purchasers, and obtained a restraining order. The creditors would be alerted to the intended action and may accelerate their legal actions. 2 This moratorium was first provided for in s 210(10) of the Companies Act.1 However, as part of a … Phase 2 – 1st Meeting of Creditors The voluntary administration must co… The 2017 Amendments introduced a cross-class cram down mechanism for Schemes of Arrangement. After a scheme has been proposed, the Court may grant a moratorium (i.e. scheme of arrangement can in theory be used as a means of compromising the claims of all creditors of a trading company, it is rarely so used. Now section 68(8) to 68(10) of the IRDA. 5. 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. There have been conflicting High Court decisions on this issue when interpreting the predecessor section 176(10A) of the Companies Act 1965 (CA 1965). 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. Section 211A has been re-enacted as section 63 of the IRDA. The 2017 Amendments saw the introduction of sections 211A to 211J, which set out an enhanced framework for Schemes of Arrangement in Singapore. Moratorium in Schemes of Arrangement Section 64 of the IRDA re-enacted Section 211B of the Companies Act, with one crucial difference contained in sub-section 12(b), which provides that neither an order of Court to restrain proceedings against a company in a scheme of arrangement or the automatic moratorium will affect the commencement or continuation of any proceedings that may be … 5. The purpose of the moratorium was to allow IMSPL and SIMPL to propose a scheme to their respective creditors, and to allow the creditors of IM Skaugen time to consider the scheme which had already been proposed. moratorium in CVAs and Schemes of Arrangement. The company has filed an application for such a scheme with the National Company Law Tribunal, it said in a statement today. 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. 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. Schemes are fundamentally contractual in nature, being grounded in the Scheme document, which has the character of a contract between the company and its creditors. The Court ultimately decided to grant IMSPL’s moratorium application. loans) provided to troubled companies for the purpose of restructuring. (10A) The Court may grant a restraining order under subsection (10) to a company for a period of not more than ninety days or such longer period as the Court may for good reason allow if and only if–. However, this places a distressed company with a difficult hurdle in obtaining urgent moratorium protection. Therefore, to prevent abuse, there is also an element of Court supervision over the process. 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. Creditors would be stopped in their tracks in pursuing their legal remedies. 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. , Since its introduction in the 2017 Amendments, Section 211B proved to be a useful (and popular) tool for distressed companies.. 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. Are you thinking of applying for a debt solution such as a Trust Deed or Debt Arrangement Scheme (DAS), but need more time to mull it over and are worried about what your creditors are going to do? 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). A scheme of arrangement is a statutory procedure pursuant to Part 26 of the Companies Act 2006, whereby a company may make a compromise or arrangement with its members or creditors. The equivalent to a moratorium is a restraining order which must be applied to Court. The relatively recent (10-15 years) growth in the use of schemes of arrangement as a restructuring tool of choice is largely … Section 2 - Moratorium Where Directors Propose Voluntary Arrangement. However, such practical difficulties have to be weighed against the somewhat drastic effect of a restraining order. The international effectiveness of a ... procedure combines moratorium, debtor-in-possession management, reorganisation and restructuring of creditors’ rights. INTRODUCTION Singapore, 16 October 2020 – KrisEnergy Ltd. (“KEL” or the “Company”, together with its subsidiaries, the “KEL Group”), an independent upstream oil and gas company, refers to: (a) its announcement dated 14 August 2019 in respect of the application filed on 14 August Schemes of Arrangement is a practical examination of the legal and commercial aspects of schemes of arrangement, for corporate restructuring in mergers and acquisitions and insolvency scenarios. 24NCC-126-04/2013, grounds of judgment dated 22 July 2013), Re PECD Bhd & Anor (No 2)  10 CLJ 486 and Re Sanda Industries Bhd & Ors  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. This was referred to as the “absolute priority rule”. Now section 68(7) of the IRDA. a temporary suspension of a certain activity) to restrain further legal action or proceedings against the company in question unless the Court has granted leave for these proceedings to go ahead.For example, the company may apply to the Court to restrain the commencement of certain legal actions stated under section 211B(1) of the Companies Act (CA). A moratorium is a period of time, usually six weeks, that offers those in financial distress a little breathing space.  Section 211E(9) of the Companies Act. There is authority for them This moratorium gives the debtor breathing space to work on its restructuring. Now section 64(5) of the IRDA. Post was not sent - check your email addresses! Ltd. (the “Company”) intends to propose a scheme of arrangement between the Company and its creditors. 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. Re PT MNC Investama TBK  SGHC 149 – Foreign company held to have standing to apply for moratorium for a scheme of arrangement. In particular, clause 14 of that Bill inserted the subsection (10A) to (10E) into section 176 of the CA 1965. The parties did not strongly argue whether condition (d) could then be read alone and whether conditions (a) to (c) should then be read separately. 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. 50). At the time, IMSPL had yet to propose a scheme to its creditors, but had stated its intention to do so. Authorised and regulated by the Solicitors Regulation Authority. The Court may have also taken into account the intent of the introduction of the conditions of (a) to (d). However, there are difficult pre-conditions to meet for securing a restraining order. Where a company was in financial distress and required urgent protection from creditor actions, it would be difficult for the company to meet this pre-condition. The restraining order in a scheme of arrangement requires a court order to give moratorium protection against legal proceedings. 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). Temporary provisions On the other hand, a restraining order could frustrate creditors’ actions over an extended duration but without a genuine scheme being proposed. Modification to the cross-class cram down. 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). 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.  Section 211A(3) read with section 351 of the Companies Act. Updates on restructuring process – Scheme of Arrangement 1.  Section 211B(8) read with section 211B(13) of the Companies Act.  Section 211F(2) of the Companies Act. However, the requirements to fulfil for a restraining order is burdensome and difficult to satisfy. Rescue financing generally refers to financing (for e.g. The plain reading of condition (d) would require that any application for a restraining order under section 368(1) must meet this condition. The Court recognised that there are practical difficulties in meeting these conditions.  Under Section 210(10) of the Companies Act. Now respectively section 64(8) and 64(14) of the IRDA. Necessary qualifying factors for moratorium protection under Section 211B. The Court is satisfied that the compromise or arrangement does not discriminate unfairly between 2 or more classes of creditors, and is fair and equitable to each dissenting class. Restructuring and Dissolution (Proofs of Debt in Schemes of Arrangement) Regulations 2020 (“PODSAR”) (the “Variation Application”); and (c) an extension of the moratorium order granted in HC/ORC 4997/2020 for a period of 2 months from the date the Extension Application is heard or until such further order by the This decision is also important in emphasising the … In practice however, the absolute priority rule created practical difficulties because Singapore lacked a statutory mechanism to compulsorily divest shareholders of their shares in the company. information relating to the acquisition or disposal of property or grant of security. The funds provided are necessary to achieve a more advantageous realisation of the company’s assets of a company than on a winding up of that company. 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. A moratorium is a period of debt relief during which creditors cannot take any action against you for debts you owe them. more than 50%) and this majority must represent 75% in value of the voting class. Simply put, a Scheme of Arrangement is an agreement between the company and its creditors, containing terms that allow the company to restructure and meet its debt obligations. Now section 71(3) of the IRDA. 2 Bill 1998. Lastly, the company will need to apply to obtain the Court’s sanction of the Scheme. As an example, Singapore introduced an option for an automatic moratorium under its scheme of arrangement provisions. The Scheme can then be used as an exit from administration. Dear Sirs, honestbee Pte. With the commencement of the IRDA, the sections in the Companies Act dealing with Schemes of Arrangement have been repealed and largely ported over into Part V of the IRDA. Phase 1 – Appointment of voluntary administrator A decision to appoint a voluntary administrator for a company is made by either: 1. The Court was further empowered to grant moratoriums on the application of a subject company’s holding company or subsidiary, which facilitated group-wide restructurings. Applicants must conscientiously prepare a restraining order application with care. There are key carve-outs to the moratorium, notably that the moratorium cannot be used if the company is party to a capital market arrangement of at least £10m. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Pending scheme of arrangement or restructuring plan. Scheme moratorium: court can order a stay on creditor proceedings pending a scheme of arrangement (High Court) Practical Law UK Legal Update 8-537-3769 (Approx.
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