Re Brightoil Petroleum: Scheme of Arrangement under IRDA s 71 & Classification of Scheme Creditors with Lock-Up Agreements
In Re Brightoil Petroleum (S’pore) Pte Ltd, the High Court of Singapore approved an uncontested scheme of arrangement under Section 71 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). The case concerned Brightoil Petroleum (S’pore) Pte Ltd (“BPS”), and its proposed scheme of arrangement to restructure debts to unsecured creditors. Aedit Abdullah J addressed the key issue of whether creditors with lock-up agreements, who received benefits for voting in favor of the scheme, should be classified separately from other creditors. The court found that the statutory majority requirements were met and the classification of creditors was appropriate, granting the application.
1. Case Overview
1.1 Court
General Division of the High Court of the Republic of Singapore1.2 Outcome
Application granted.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court approves Brightoil Petroleum's uncontested scheme of arrangement under IRDA s 71, addressing classification of creditors with lock-up agreements.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Brightoil Petroleum (S’pore) Pte Ltd | Applicant | Corporation | Application granted | Won | Hing Shan Shan Blossom, Chan Wei Meng, Foo Guo Zheng Benjamin, Clarie Ong Bee Sim |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Aedit Abdullah | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Hing Shan Shan Blossom | Drew & Napier LLC |
| Chan Wei Meng | Drew & Napier LLC |
| Foo Guo Zheng Benjamin | Drew & Napier LLC |
| Clarie Ong Bee Sim | Drew & Napier LLC |
4. Facts
- Brightoil Petroleum (S’pore) Pte Ltd (BPS) sought to restructure its debts via a scheme of arrangement.
- BPS is an indirect wholly-owned subsidiary of Brightoil Petroleum (Holdings) Limited (BOHL).
- BOHL encountered financial difficulties, leading to tightened credit terms for BPS.
- BPS proposed a scheme of arrangement to bind all creditors as of 31 July 2021.
- Scheme Creditors would receive payments fixed at US$6 million, distributed on a pari passu basis.
- Three Scheme Creditors (Locked-in Creditors) provided undertakings to vote in favor of the scheme in exchange for a consent fee.
- One Locked-in Creditor (TPCL) entered into a modified agreement where BOHL would make a separate payment of US$1.25 million.
- Six Scheme Creditors (Related Creditors) are indirect wholly-owned subsidiaries of BOHL and were in creditors’ voluntary liquidation.
5. Formal Citations
- Re Brightoil Petroleum (S’pore) Pte Ltd, Originating Summons No 1261 of 2021, [2022] SGHC 35
6. Timeline
| Date | Event |
|---|---|
| Brightoil Group embarked on a complex debt restructuring exercise. | |
| Brightoil Petroleum (S’pore) Pte Ltd unable to continue its operations. | |
| Cut-off date for creditors of BPS to be bound by the BPS Scheme. | |
| Related Creditors placed into creditors’ voluntary liquidation. | |
| Ng Chin Hock’s 1st Affidavit filed. | |
| Ng Chin Hock’s 2nd Affidavit filed. | |
| Applicant’s Skeletal Submissions dated. | |
| Court heard applications and granted further extension of moratoria for BPS and BOHL. | |
| Judgment Date | |
| Grounds of Decision issued. |
7. Legal Issues
- Classification of Scheme Creditors
- Outcome: The court determined that the Lock-in Creditors were properly part of the same class as the other creditors.
- Category: Substantive
- Sub-Issues:
- Dissimilarity of rights
- Impact of lock-up agreements
- Materiality of consent fees
- Related Cases:
- [2012] 2 SLR 213
- [2021] SGHC 209
- Approval of Scheme of Arrangement under s 71 of the IRDA
- Outcome: The court was satisfied that the statutory majority requirements were met and approved the scheme.
- Category: Procedural
- Sub-Issues:
- Disclosure of information
- Satisfaction of statutory majority requirements
- Fair representation of creditors
- Related Cases:
- [2021] SGHC 209
8. Remedies Sought
- Sanction of a scheme of arrangement
9. Cause of Actions
- Restructuring of unsecured debts and liabilities
10. Practice Areas
- Commercial Litigation
- Insolvency
- Restructuring
11. Industries
- Petroleum
- Shipping
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re DSG Asia Holdings Pte Ltd | High Court | Yes | [2021] SGHC 209 | Singapore | Cited for the essential elements to obtaining court’s approval under s 71 of the IRDA: disclosure of information and satisfaction of the statutory majority requirements in the notional counting of votes. |
| The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal | Court of Appeal | Yes | [2012] 2 SLR 213 | Singapore | Cited for the dissimilarity principle in classifying creditors for schemes of arrangement. |
| United Securities Sdn Bhd (in receivership and liquidation) and another v United Overseas Bank Ltd | High Court | Yes | [2021] 2 SLR 950 | Singapore | Cited for the principle that unsecured creditors are entitled to a pari passu distribution of assets in liquidation. |
| Re ColourOz Investment 2 LLC and others | High Court | Yes | [2021] 1 BCLC 55 | England | Discusses the implications of paying consent fees in lock-up agreements and whether they fracture a class of creditors. |
| Re DX Holdings Ltd and other companies | High Court | Yes | [2010] EWHC 1513 (Ch) | England | Cited for factors considered when determining whether creditors who signed lock-up agreements should be classed separately. |
| Re Noble Group Ltd (No 1) | High Court | Yes | [2019] 2 BCLC 505 | England | Cited for elaborating on how the court should assess whether the consent fee payable to creditors under a lock-up agreement is so material that the rights of the creditors who will not be paid the fees are sufficiently dissimilar. |
| Re Codere Finance 2 (UK) Ltd (No 1) | High Court | Yes | [2021] 2 BCLC 396 | England | Cited for evaluating the materiality of the consent fee by comparing it to the likely forecasted returns under the scheme and a liquidation scenario. |
| Re Seat Pagine Gialle SPA | High Court | Yes | [2012] EWHC 3686 (Ch) | England | Cited to show that the mere fact that a benefit is conferred on some creditors who enter into lock-up agreements to vote in favour of a scheme is insufficient to require those creditors to be constituted as a separate class. |
| Re Sunbird Business Services Ltd | High Court | Yes | [2021] 2 All ER (Comm) 1019 | England | Cited for cautioning regarding the increasing prevalence of lock-up agreements. |
| Re Winsway Enterprises Holdings Ltd | Court of First Instance | Yes | [2017] 1 HKLRD 1 | Hong Kong | Cited for the Hong Kong Court of First Instance agreeing with the English position in Re DX Holdings regarding whether creditors who enter lock-up agreements should be classed separately when voting on a scheme. |
| Re Da Sen Holdings Group Ltd | Court of First Instance | Yes | [2022] HKCU 324 | Hong Kong | Cited for observing that a payment of a consent fee will not fracture a class of creditors if the lock-up agreement was made available to all creditors and the consent fee offered would not have distorted the outcome of the voting. |
| Goh Chan Peng and others v Beyonics Technology Ltd and another and another appeal | Court of Appeal | Yes | [2017] 2 SLR 592 | Singapore | Cited for the principle that each incorporated entity has a separate legal personality with distinct legal rights and liabilities. |
| SK Engineering & Construction Co Ltd v Conchubar Aromatics Ltd and another appeal | Court of Appeal | Yes | [2017] 2 SLR 898 | Singapore | Cited for obiter observations that disagreed with the partial discounting approach taken in TT International (No 1) as it is inevitably arbitrary. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Section 71 of the Insolvency, Restructuring and Dissolution Act 2018 | Singapore |
| Section 210 of the Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Scheme of arrangement
- Lock-up agreement
- Consent fee
- Scheme Creditors
- Locked-in Creditors
- Related Creditors
- Dissimilarity principle
- Statutory majority requirements
- Pari passu
- Liquidation
15.2 Keywords
- scheme of arrangement
- lock-up agreement
- creditors
- insolvency
- restructuring
- Brightoil
- IRDA
- Companies Act
16. Subjects
- Insolvency
- Schemes of Arrangement
- Corporate Restructuring
- Classification of Creditors
17. Areas of Law
- Insolvency Law
- Schemes of Arrangement
- Restructuring Law
- Company Law