Enterprise Fund III Ltd v OUE Lippo Healthcare: Company Acquiring Own Shares & Estoppel
The Enterprise Fund III Ltd, VMF3 Ltd, and Value Monetization III Ltd (collectively, the "Crest Funds") appealed against the High Court's decision regarding a transaction involving OUE Lippo Healthcare Limited (formerly known as International Healthway Corporation Ltd, "IHC"). The case concerned whether IHC indirectly acquired its own shares in violation of Section 76(1A)(a)(i) of the Companies Act, and whether IHC was estopped from avoiding loan agreements related to the share acquisition. The Court of Appeal dismissed the appeal, holding that the entire transaction constituted a prohibited indirect acquisition, but the open market acquisitions were saved by Section 76A(1A).
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal Dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
The Court of Appeal addressed whether IHC indirectly acquired its own shares in breach of the Companies Act and whether IHC was estopped from avoiding loan agreements.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Value Monetization III Ltd | Appellant | Corporation | Appeal Dismissed | Lost | |
| The Enterprise Fund III Ltd | Appellant | Corporation | Appeal Dismissed | Lost | |
| VMF3 Ltd | Appellant | Corporation | Appeal Dismissed | Lost | |
| OUE Lippo Healthcare Limited (formerly known as International Healthway Corporation Ltd) | Respondent | Corporation | Appeal Dismissed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | Yes |
| Judith Prakash | Justice of the Court of Appeal | No |
| Steven Chong | Justice of the Court of Appeal | No |
4. Counsels
4. Facts
- The Crest Funds advanced $20m to IHC via a standby facility secured by security agreements.
- EFIII used funds from the standby facility to purchase IHC shares on the open market.
- EFIII held the purchased shares on trust for IHC.
- IHC underwent a management change and sought to avoid the transaction, claiming a breach of the Companies Act.
- IHC gave written notice to the Crest Funds to avoid the share acquisitions and the Standby Facility.
- The Standby Facility was to be used by IHC to purchase its own shares to combat short-selling.
5. Formal Citations
- The Enterprise Fund III Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd), Civil Appeal No 119 of 2018, [2019] SGCA 48
6. Timeline
| Date | Event |
|---|---|
| Mr. Tan and Mr. Aathar had a telephone conversation regarding IHC shares. | |
| Mr. Aathar emailed Mr. Tan about a potential short-selling attack on IHC shares. | |
| Crest Capital circulated a term sheet to IHC, Mr. Fan, and Mr. Aathar. | |
| IHC, Mr. Fan, and Mr. Aathar entered into a standby facility agreement with EFIII, Value Monetization III Ltd, and Enterprise Fund II Ltd. | |
| EFIII drew down on the Standby Facility to purchase IHC shares on the open market. | |
| Standby Fees were paid for the month of April. | |
| Standby Fees were paid for the month of May. | |
| Standby Fees were not paid from June onwards. | |
| A new standby facility agreement was signed. | |
| EFIII drew down on the Standby Facility to purchase IHC shares on the open market. | |
| SGX issued an announcement advising caution in dealing with IHC shares. | |
| EFIII issued a letter of demand to IHC for unpaid fees. | |
| The Crest Funds issued a notice of default under the Standby Facility Agreement. | |
| IHC's board of directors was removed by IHC's shareholders. | |
| IHC gave the Crest Funds written notice to avoid the share acquisitions and the Standby Facility. | |
| The Crest Funds responded, denying that the share acquisitions and the Standby Facility were void or voidable. | |
| IHC commenced Originating Summons No 380 of 2017. | |
| OS 380 was heard by the Judge between February and July 2018. | |
| OS 380 was heard by the Judge between February and July 2018. | |
| The Judge gave her decision in favor of IHC. | |
| Judgment reserved. | |
| Judgment reserved. |
7. Legal Issues
- Company Acquiring Its Own Shares
- Outcome: The Court held that the entire transaction constituted a prohibited indirect acquisition, but the open market acquisitions were saved by Section 76A(1A).
- Category: Substantive
- Sub-Issues:
- Indirect acquisition
- Saving provision for book-entry securities
- Estoppel
- Outcome: The Court held that IHC was not estopped from avoiding the loan agreements.
- Category: Substantive
- Sub-Issues:
- Estoppel in defiance of statute
- Promissory estoppel
8. Remedies Sought
- Declarations that the Standby Facility and related agreements were voidable
- Avoidance of EFIII’s acquisition of IHC shares
9. Cause of Actions
- Breach of Companies Act
10. Practice Areas
- Commercial Litigation
- Corporate Law
11. Industries
- Healthcare
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| International Healthway Corp Ltd v The Enterprise Fund III Ltd and others | High Court | Yes | [2018] SGHC 246 | Singapore | The current judgment is an appeal of this case. The Court of Appeal agreed with the outcome that the Judge reached in this case. |
| Aathar Ah Kong Andrew v CIMB Securities (Singapore) Pte Ltd and other appeals and another matter | Court of Appeal | Yes | [2019] 2 SLR 164 | Singapore | Cited to note that Mr. Aathar's application for a voluntary arrangement under the Bankruptcy Act was dismissed. |
| Swee Hong Investment Pte Ltd v Swee Hong Exim Pte Ltd and another (Kiaw Aik Hang Land Pte Ltd and another, third parties) and another appeal | Court of Appeal | Yes | [1994] 3 SLR(R) 259 | Singapore | Cited to show that the deeming provision in s 76A(14) was not exhaustive. |
| Public Prosecutor v Lew Syn Pau and another | High Court | Yes | [2006] 4 SLR(R) 210 | Singapore | Cited for the purpose of ensuring that the capital of the company is preserved intact. |
| Trevor and another v Whitworth and another | House of Lords | Yes | (1887) 12 App Cas 409 | United Kingdom | Cited for the reasons that explain the rationale underlying the prohibition of a company acquiring its own shares. |
| Chaston v SWP Group plc | English Court of Appeal | Yes | [2003] BCC 140 | United Kingdom | Cited to explain that the mischief targeted by the financial assistance prohibition was the resources of the company being used to assist the purchaser in making the acquisition. |
| Joshua Steven v Joshua Deborah Steven and others | High Court | Yes | [2004] 4 SLR(R) 403 | Singapore | Cited to determine whether the present facts and representations are more analogous to those in the former or those in the latter. |
| Cupid Jewels Pte Ltd v Orchard Central Pte Ltd and another appeal | Court of Appeal | Yes | [2014] 2 SLR 156 | Singapore | Cited to determine whether the present facts and representations are more analogous to those in the former or those in the latter. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) s 76(1A)(a)(i) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) s 76A(1) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) s 76A(1A) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) s 76A(2) | Singapore |
| Securities and Futures Act (Cap 289, 2006 Rev Ed) s 81SF | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Standby Facility
- Open Market Acquisitions
- Trust Arrangement
- Book-Entry Securities
- Indirect Acquisition
- Related Transactions
- Estoppel
- Whitewash
15.2 Keywords
- Companies Act
- Share Acquisition
- Estoppel
- Book-Entry Securities
- Financial Assistance
- Singapore
- Corporate Law
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Company Law | 90 |
| Share Capital | 70 |
| Estoppel | 60 |
| Contract Law | 50 |
16. Subjects
- Company Law
- Financial Law
- Contract Law