Empire Capital Resources: Scheme of Arrangement, Release of Claims Against Third Parties

In the High Court of Singapore, Empire Capital Resources Pte. Ltd. sought leave to convene a meeting of creditors to consider a proposed scheme of arrangement under Section 210 of the Companies Act. The Noteholders, Pathfinder Strategic Credit LP and BC Investment LLC, opposed the application. The court allowed the scheme meeting to be convened but ordered two classes of voters.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Scheme meeting may be convened, but with two classes of voters.

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

The High Court allowed Empire Capital Resources to convene a creditors' meeting for a scheme of arrangement, addressing objections regarding third-party releases and creditor classification.

1.7 Decision Date

18 February 2018

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Pathfinder Strategic Credit LP	Respondent	Limited Liability Partnership	Objections partially successful	Partial	Andrew Chan of Allen & Gledhill LLP Alexander Yeo of Allen & Gledhill LLP Philip Jeyaretnam of Dentons Rodyk & Davidson LLP Jo Tay of Allen & Gledhill LLP
BC Investment LLC	Respondent	Limited Liability Partnership	Objections partially successful	Partial	Andrew Chan of Allen & Gledhill LLP Alexander Yeo of Allen & Gledhill LLP Philip Jeyaretnam of Dentons Rodyk & Davidson LLP Jo Tay of Allen & Gledhill LLP
Empire Capital Resources Pte Ltd	Applicant	Corporation	Leave granted for scheme meeting to be called	Partial	Nair Suresh Sukumaran of Nair & Co LLC Tan Tse Hsien Bryan of Nair & Co LLC Foo Li-Jen Nicole of Nair & Co LLC

3. Judges

Judge Name	Title	Delivered Judgment
Aedit Abdullah	Judge	Yes

4. Counsels

Counsel Name	Organization
Andrew Chan	Allen & Gledhill LLP
Alexander Yeo	Allen & Gledhill LLP
Philip Jeyaretnam	Dentons Rodyk & Davidson LLP
Jo Tay	Allen & Gledhill LLP
Nair Suresh Sukumaran	Nair & Co LLC
Tan Tse Hsien Bryan	Nair & Co LLC
Foo Li-Jen Nicole	Nair & Co LLC

4. Facts

Empire Capital Resources Pte Ltd sought leave to convene a meeting of creditors to consider a proposed scheme of arrangement.
The proposed scheme involved the release of claims against various companies in the Berau Group.
The Applicant is a guarantor of the Existing Notes, rather than an issuer.
The Noteholders opposed the application, arguing that the proposed scheme was not properly structured.
The Noteholders argued that the 2015 and 2017 noteholders should be placed in different classes.
The Noteholders argued that insufficient financial disclosure had been given.
The Applicant argued that a single voting class was sufficient and that sufficient financial disclosure had been made.

5. Formal Citations

Re: Empire Capital Resources Pte Ltd, Originating Summons No 392 of 2017, [2018] SGHC 36

6. Timeline

Date	Event
2015-07-06	BCR commenced OS 630/2015 for a moratorium under s 210(10) of the Companies Act.
2016-03-03	Court dismissed BCR’s application in HC/SUM 84/2016 for an extension of the First Moratorium.
2016-06-01	OS 550/2016 and OS 551/2016 were filed by BCR and BCE respectively.
2016-11-02	OS 550/2016 and OS 551/2016 were withdrawn.
2016-11-11	BCR filed OS 1175/2016 and BCE filed OS 1180/2016 under s 210(1) of the Companies Act.
2017-04-09	BCR and BCE withdrew OS 1175/2016 and OS 1180/2016 respectively.
2017-06-06	Hearing date.
2017-09-22	Applicant’s skeletal submissions dated.
2017-11-02	Applicant’s reply submissions dated.
2017-11-08	Hearing date.
2017-12-22	Letter to court dated.
2018-01-18	Hearing date.
2018-02-19	Judgment reserved.

7. Legal Issues

Propriety of Scheme of Arrangement
- Outcome: The court found that the proposed scheme fell within the ambit of Section 210 and the permitted scope as recognized in Daewoo Singapore.
- Category: Substantive
- Sub-Issues:
  - Release of claims against third parties
  - Inclusion of guarantors in schemes of arrangement
  - Dilution of vote of opposing creditors
Classification of Creditors
- Outcome: The court ordered separate classes for the 2015 and 2017 noteholders.
- Category: Procedural
- Sub-Issues:
  - Dissimilarity of rights
  - Interdependence of arrangements
  - Circumvention of jurisdictional objections
Financial Disclosure
- Outcome: The court accepted that the information provided at this stage was sufficient.
- Category: Procedural
- Sub-Issues:
  - Sufficiency of information
  - Reliability of information
  - Assessment of returns
  - Commercial viability
Abuse of Process
- Outcome: The court did not find that there was anything that amounted to abuse of process by either side.
- Category: Procedural
- Sub-Issues:
  - Repeated applications
  - Tactical discontinuance
  - Multiple moratoria

8. Remedies Sought

Leave to convene a meeting of creditors
Moratorium

9. Cause of Actions

Scheme of Arrangement under Section 210 of the Companies Act

10. Practice Areas

Restructuring
Corporate Law
Commercial Litigation

11. Industries

Finance

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
The Royal Bank of Scotland NV v TT International Ltd	Court of Appeal	Yes	[2012] 2 SLR 213	Singapore	Cited for the principle that the court should not consider the merits and fairness of the scheme at the leave stage, as this stage concerns the court’s jurisdiction to sanction the scheme later if it proceeds.
Daewoo Singapore Pte Ltd v CEL Tractors	Court of Appeal	Yes	[2001] 2 SLR(R) 791	Singapore	Cited as an example of the inclusion of guarantors in schemes of arrangement.
Re Lehman Brothers International (Europe) (No 2)	English Court of Appeal	Yes	[2009] EWCA Civ 1161	England	Cited by the Noteholders regarding the release of third-party claims in schemes of arrangement.
Re Punj Lloyd Pte Ltd	High Court	Yes	[2015] SGHC 321	Singapore	Cited for the principle that abuse of process may be a reason for the court declining to approve the calling of the meeting.
Re Econ Corp Ltd	High Court	Yes	[2004] 1 SLR(R) 273	Singapore	Cited by the Noteholders regarding financial disclosure requirements.
Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd	High Court	Yes	[2003] 3 SLR(R) 629	Singapore	Cited by the Noteholders regarding the reliability of financial information disclosed.
Re Heron International NV	Unknown	Yes	[1994] 1 BCLC 667	Unknown	Cited for the principle that the information required to be disclosed even at the sanction stage is dependent on the specific facts, and inequality of information is not necessarily fatal.
Pacific Andes Resources Development Ltd	High Court	Yes	[2016] SGHC 210	Singapore	Cited for the principle that the court has an inherent jurisdiction to grant a moratorium that extends to proceedings outside Singapore.
In the matter of DTEK Finance Pls, In the Matter of the Companies Act 2006	High Court of Justice Chancery Division	Yes	[2016] EWHC 3562 (Ch)	England	Distinguished by the Noteholders as it involved a single issuer of multiple series of notes.
In the Matter of Metinvest BV	High Court of Justice Chancery Division	Yes	[2016] EWHC 79 (Ch)	England	Distinguished by the Noteholders as it involved a single issuer of multiple series of notes.
Re MIM Holdings Ltd	Unknown	Yes	[2003] 45 ACSR 554	Australia	Cited by the Noteholders for the principle that an unfair scheme will not be allowed to go forward.
Re Uniq plc	High Court of Justice Chancery Division	Yes	[2011] EWHC 749 (Ch)	England	Cited for the broad construction of the phrase 'compromise or arrangement'.
Re: La Seda de Barcelona SA	High Court of Justice Chancery Division	Yes	[2010] EWHC 1364 (Ch)	England	Cited for the test for releases of claims against third parties.
Re T&N Ltd (No 3)	Unknown	Yes	[2007] 1 BCLC 563	United Kingdom	Cited in relation to third-party rights contingent on the existence of the creditors’ claims against the company.
Re Opes Prime Stockbroking Ltd	Federal Court of Australia	Yes	[2009] FCA 813	Australia	Cited for the Australian approach to third-party releases in schemes of arrangement, focusing on the existence of an adequate nexus.
Bacnet Pty Ltd v Lift Capital Partners Pty Ltd	Unknown	Yes	[2010] 183 FCR 384	Australia	Cited for taking a similar stance to Re Opes Prime Stockbroking Ltd regarding third party releases.
City of Swan v Lehman Brothers Australia Ltd	Federal Court of Australia	Yes	[2009] FCAFC 130	Australia	Cited for doubting the approach in Re Opes Prime Stockbroking Ltd.
SK Engineering & Construction Co Ltd v Conchubar Aromatics Ltd and another appeal	Court of Appeal	Yes	[2017] 2 SLR 898	Singapore	Cited for the principle that it is for the creditors to weigh what is in their interests, and conversely it is for the company to propose an attractive enough proposition.
Re UDL Holdings Limited & Ors	Unknown	Yes	[2002] 1 HKC 172	Hong Kong	Cited for the approach to classification of creditors, asking whether the creditors have rights that are so dissimilar that they cannot sensibly consult together with a view to their common interest and must be given separate meetings.
Re Hawk Insurance Co Ltd	Unknown	Yes	[2001] 2 BCLC 480	United Kingdom	Cited for the principle that whether a single meeting is enough depends on whether what is proposed is a single composite arrangement or in fact separate but interdependent arrangements with different classes.
Re Indah Kiat International Finance Company BV	High Court of Justice Chancery Division	Yes	[2016] EWHC 246 (Ch)	England	Cited by the Noteholders on the appropriate demonstration of evidence regarding differences in recovery.
The Royal Bank of Scotland NV v TT International (No 2)	Court of Appeal	Yes	[2012] 4 SLR 1182	Singapore	Cited by the Noteholders regarding the requirement in s 211(1) of the Companies Act that there be a statement explaining the effect of the compromise or arrangement.
Re Van Gansewinkel Groep BV and others	High Court of Justice Chancery Division	Yes	[2015] EWHC 2151 (Ch)	England	Cited by the Noteholders regarding the disclosure of possible alternatives and basis for the predicted outcomes.
In the matter of the Companies Act 1993 to 2009, and in the matter of Vantive Holdings and others	Supreme Court	Yes	[2009] IESC 69	Ireland	Cited by the Noteholders for the principle that repeated applications can amount to an abuse of process.
Re McInerney Homes Ltd and others	Supreme Court	Yes	[2011] IESC 31	Ireland	Cited by the Noteholders for the principle that repeated applications can amount to an abuse of process.
Re: Zetta Jet Pte Ltd and Others	High Court	Yes	[2018] SGHC 16	Singapore	Cited for the principle that once oral arguments have concluded, leave should be obtained from the court before further arguments are thrown in.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 210	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Scheme of arrangement
Creditors
Noteholders
Guarantor
Third-party releases
Voting classes
Financial disclosure
Moratorium
Existing Notes
New Notes

15.2 Keywords

Scheme of arrangement
Creditors
Companies Act
Singapore
Insolvency
Restructuring
Third-party release
Empire Capital Resources
Berau Group

17. Areas of Law

Area Name	Relevance Score
Schemes of Arrangement	80
Insolvency Law	70
Restructuring and Dissolution	70
Company Law	70
Arbitration	30
Contract Law	30

16. Subjects

Schemes of Arrangement
Corporate Insolvency
Restructuring