Case Commentary

Schemes of Arrangement: Threshold of Disclosure When Seeking Leave to Call a Scheme Meeting

The recent Singapore Court of Appeal judgment in Pathfinder Strategic Credit LP v Empire Capital Resources Pte Ltd [2019] SGCA 29 (the “Judgment“) – accessible here – is a timely reminder of a corporate debtor’s obligations when applying to restructure its debts under Singapore’s Companies Act (the “Act“).

Simply put, the main thrust of the Judgment considers the different duties on the debtor in providing to the Court and the creditors sufficient information when:-

(A) Seeking the leave of the Court to call a meeting of its creditors pursuant to Section 210(1) of the Act (the “Leave Stage“); and

(B) When applying to Court to sanction the proposed scheme of arrangement (assuming that the Court has jurisdiction to do so, which mainly revolves around the correct classification of creditors voting to approve the scheme and ensuring that the threshold is achieved) (the “Sanction Stage).

The Court held that although the pre-requisite for approval at the Sanction Stage are typically more onerous than those required at the Leave Stage, the corporate debtor :

(1) must “provide such financial disclosure by the leave stage in such manner and to such extent as is reasonably necessary for the court to be satisfied that fair conduct of the creditors’ meeting is possible“; and

(2) bears a duty of unreserved disclosure to assist the court in determining whether and how the creditors’ meeting is to be conducted.

See [50] and [51] of the Judgment.

As Singapore expands as a regional and global restructuring hub, such safeguards are critical to ensure that the corporate reorganisation / restructuring process under the Act is not taken advantage of to the detriment of creditors.

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*At the time of writing, the author is a non-practicing member of the Singapore Bar. The contents of this article represent the views and observations of the author alone from a Singapore law perspective and are subject to copyright protection under the laws of the Republic of Singapore (as may from time to time be amended). No part of this article may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed and/or broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of the author.

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