Amongst others, the amendment includes matters pertaining to scheme of arrangements and reconstructions of companies. Schemes of arrangement are becoming increasingly more popular in recent years as the preferred way in which 'takeovers' of Australian listed companies are effected.A scheme of arrangement is Your email address will not be published. The only formal corporate rescue process currently available in Malaysia is the scheme of arrangement under section 176 of the Companies Act 1965. There is no irony here, given that companies do from time to time reconstruct themselves in line with changes of circumstances, therefore, tightening of provisions pertaining to scheme of arrangement and reconstruction are needed to enable such as reconstruction be carried out and to help companies to pick up again. Improvements to the scheme of arrangement procedure. The meeting(s) have been summoned and held in accordance with its previous Order; The proposals for the SOA have been approved by the requisite majority; and. If more than 75% of the total value of the creditors (or class of creditors) or members (or class of members) present and voting agrees to the proposed SOA, and the Court approves of the same, then such an SOA shall be deemed binding on the company’s creditors, members, liquidator and contributories (where applicable), and the company itself. KUALA LUMPUR (Dec 2): The proposed scheme of arrangement between Prestariang Bhd’s unit Prestariang Skin Sdn Bhd (PSkin) and its creditors has received the High Court’s approval.The sanction was granted by Judicial Commissioner Liza Chan Sow Keng during an e-review hearing today. The restraining order would restrain any further legal proceedings to be initiated against the applicant company applying for a scheme of arrangement. Once there is a proposed scheme which is viable, then an Originating Summons is filed to court detailing the status of the company and attaching the current proposed scheme. The SafeTravel Pass is a mandatory document for in-bound travellers for short-term essential business and official travel from Malaysia to Singapore via the Singapore-Malaysia RGL. Extension of period of a restraining order. A scheme of arrangement is a useful tool as it provides for a statutory form by which affected creditors and/or members may agree to a scheme which, if approved by the court, will bind dissenting creditors and/or members. In such a scenario, the control and management of the company’s affairs is maintained with the company’s Board of Directors. the proposed scheme. Scheme Of Arrangement in Malaysia. 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. It can be tailored to novel or complex corporate structures or be used for major group reconstructions. There is no irony here, given that companies do from time to time reconstruct … Request PDF | Scheme of Arrangement (SOA) In the Rehabilitation Of Abandoned Housing Projects: A Case Study of Malaysia | If a company is insolvent and is unable to … Firstly, a Court order on an application by either the company, any creditor or member of the company, liquidator or judicial manager (if the company is under judicial management), to summons for a meeting is to be obtained (Section 366, CA 2016). The additional hurdle of having to obtain a 50% majority in the total number of creditors or members has since been removed by the coming into force of the Companies Act 2016. echo __('Our newsletter containing perspectives and insights to legal and contemporary issues. Procedures after obtaining of the restraining order are laid down in Section 368(5) of the CA 2016, whereby the Company shall within 7 days from the order lodge an office copy with the Registrar and publish a notice of the order in 2 local newspapers, namely, one in national language and another in English language. Save my name, email, and website in this browser for the next time I comment. It may affect mergers and amalgamations and may alter shareholder or creditor rights. the company’s creditor, member, liquidator or judicial manager, where applicable) will have to file an application in Court pursuant to s.366 for leave to summon a meeting of the company between its creditors and/or members. KUALA LUMPUR (Dec 2): The proposed scheme of arrangement between Prestariang Bhd’s unit Prestariang Skin Sdn Bhd (PSkin) and its creditors has received the High Court’s approval. Thirdly, once the meeting(s) have approved the proposed SOA, the applicant then has to file a further application into Court for the Court to sanction the proposed SOA. One of the more overlooked distinctions between the three is that upon the Winding Up Order or the Notice of Appointment of Receiver or Receiver and Manager, control of the company’s affairs passes to either the liquidator or the receiver and manager, as applicable. Travellers must have remained in Singapore for 14 days prior to departure to Malaysia. The sanction was granted by Judicial Commissioner Liza Chan Sow Keng during an e-review hearing today. Scheme of Arrangement. Under Section 366 of the Companies Act 2016, the Court may order for a meeting of the company to be convened for the purposes of proposing a ‘scheme of arrangement’ (“SOA”), which is essentially a plan for how the company is going to pay off its outstanding debts. Upon obtaining the requisite approval, a further order by the Court is to be obtained to sanction the scheme of arrangement (Section 366(3), CA 2016). An approved liquidator may be appointed by the court to assess the viability of the proposed scheme or arrangement. However, the Court may further extend this period for not more than 9 months if the company succeeds in showing the Court that: Your email address will not be published. Rolling the Dice: Potential Consequences of not having a Shareholders’ Agreement, Differences between Criminal & Civil Breach of Trust, Personal Data Privacy in Malaysia: An Introduction, The Case of Barakah Offshore: Shooting Oneself in the Foot – Malaysian Litigator, Damage to Power Lines Causing Electricity Disruption – What Are Your Remedies? Provisions to scheme of arrangements and reconstructions can be found from Section 365 to Section 371 of the CA 2016. The Periodic Commuting Arrangement (PCA) is a scheme which will allow work and business-related travel between Singapore and Malaysia via the Johor-Singapore Causeway (Woodlands) and the Malaysia-Singapore Second Link (Tuas). The Periodic Commuting Arrangement (PCA) scheme is one of two travel schemes between Singapore and Malaysia now. The company must nominate, and the Court must approve, one person nominated by a majority of the creditors in the application for the restraining order to act as a director (or if that person is not already a director, to appoint that person to act as a director). Application Process for Residents in Malaysia Application 1. Who is eligible to apply to travel to Singapore under the RGL? At the same time, the applicant may also apply for a restraining order pursuant to s.368 of the Companies Act 2016 (discussed below). “A scheme of arrangement is a compromise or arrange-ment proposed between a company and its creditors, or any class of creditors, or between the company and its members, or any class of members. Under s.176 of the 1965 Act, a proposed SOA will have to be agreed upon by a 75% majority of the total value of the creditors (or class of creditors) or members (or class of members) and a 50% majority in the total number of them. Firstly, an applicant (i.e. Under Section 366 of the Companies Act 2016, the Court may order for a meeting of the company to be convened for the purposes of proposing a ‘scheme of arrangement’ (“SOA”), which is essentially a plan for how the company is going to pay off its outstanding debts.. With the new provision in Section 366 of the CA 2016, it outlines a clearer procedure on implementation of such scheme. limitation that Code Takeovers under scheme of arrangement can only be initiated by parties ... Bursa Malaysia Securities Berhador Bursa, a wholly owned subsidiary of Bursa Malaysia Berhad, is the main regulator with the primary responsibility to oversee compliance by listed It may be difficult for a company to meet the threshold of 75% under s.366, but if it can be met, this means that up to 25% of the company’s creditors involved in the SOA have no choice but to comply with the SOA, and they will not be able to get their money back (whether by legal proceedings or otherwise) unless the SOA falls through. [Part 2]. However, the company can still propose a scheme of arrangement if it is not wound up and/or have a receiver and manager appointed. The issue is how shareholders particularly minority in target company can be treated under a scheme. (1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them or between the company and its members or any class of them the Court may, on the application in a summary way of the company or of any creditor or member of the company, or in the case of a company being wound up of the liquidator, order a meeting of the creditors or class … The view and interest of those who have not approved the proposals at the meeting(s) received impartial consideration. Keyword for scheme of arrangement – viability. Failure to comply attracts an increased penalty of fine not exceeding RM1 million and in case of a continuing offence, to a further fine not exceeding RM1,000 for each day. Section 176(8) provides the duties of director to instruct the accountants or advocate or both to make a report and to be send to the director. This is a mechanism by the Court to ascertain the genuineness of such schemes and therefore not an abuse of the Court’s process, and to facilitate agreement by creditors and/or members to the scheme of arrangement. There are myriad differences between a company being wound up, a receiver & manager being appointed, and a scheme of arrangement. Companies with viable businesses may sometimes find themselves in financial trouble when they are burdened with large debts. Scheme of Arrangement. Schemes of arrangement can be used as an easier vehicle in a corporate acquisition. The company does not need to be insolvent in order to avail itself of a Part 9 Scheme. The voluntary arrangement may also end prematurely if it has not been or cannot be fully implemented. Takeovers (Scheme of Arrangement under S.366 of Companies Act 2016). The obtaining of a restraining order shall, however, not affect any further proceedings in an action or proceedings that should be taken by the Registrar or Securities Commission. Notes: This scheme is not applicable for tourists. Next is the putting forth of the scheme at the meeting to creditors and members of the company to be agreed upon by a majority of 75% of total value of creditor present and voting, either in person or by proxy or at the adjourned meeting (Section 366(3), CA 2016). This entry was posted in . Disposal of property without leave of court after granting of the restraining order now attracts a higher penalty of fine not exceeding RM3 million or imprisonment for a term not less than 5 years, or both. If more than 75% of the total value of the creditors (or class of creditors) or … Power of the Court to appoint liquidator to assess viability of scheme of arrangement. The duty of the director of the company is essential in the making of this arrangement, even before the application i.e. Nevertheless, the scheme of arrangement process is commonly used by insolvent companies for purposes of restructuring, while receiving the benefit of court … lenders or debenture holders). In these challenging economic times, … The legal framework, transaction structure and process will depend on whether the entity being acquired is a public listed company or private limited company. A compromise or arrangement between a company and its members or creditors (or any class of them) under Part 26 of the Companies Act 2006.A scheme of arrangement can be used to effect a solvent reorganisation of a company or group structure, including by merger or demerger, as well as to effect insolvent restructurings such as by a debt for equity swap or by a wide variety of other … The RGL is only applicable for travel between (i) airports in Singapore and Malaysia which have available non-stop flight routes and (ii) land checkpoints. For clarification, the definition does not include companies undergoing reconstruction and/or amalgamation (Section 370, CA 2016). Companies have to play their part by ensuring the viability of their proposed scheme. Published: Mar 13, 2017 Updated: June 3, 2019 by Tan Poh Yee The amendments to the Companies Act 2016 exemplify the Government's efforts towards promotion of effective ways of doing business in Malaysia. Until very recently, schemes of arrangement were the most common type of scheme, used for corporate reconstructions, takeovers and amalgamations.”4 2. The current regime for an SOA is slightly more relaxed as compared to under the Companies Act 1965. A notice summoning such meeting is to be send to every creditor or member of the company, accompanied by (a) a explanatory statement of the effect of the arrangement and any material interests of the directors and the effect of the arrangement (if it has different effect on different class of creditors or members) and (b) advertisement of the notice (Section 369(1), CA 2016). Legislation has given the support to assist financially distressed companies by allowing a longer moratorium of restraining orders (provided fulfillment of the requirements) so that these companies can get back on their feet again. The extension of a further 9 months to the initial 3 months validity period of a restraining order, subject to compliance of requirements laid down under Section 368(2) of the CA 2016, underscores the legislative effort to enable financially distressed companies to see through their scheme of arrangements. Malaysia’s scheme of arrangement framework allows for a restraining order to be granted. Schemes of arrangement are not exclusively intended for insolvent companies and are widely utilised by solvent entities. The Periodic Commuting Arrangement (PCA) is a scheme agreed between Singapore and Malaysia to allow work and business-related travel between the two countries via the land border crossings at the Johor-Singapore Causeway and Malaysia-Singapore Second Link. Implemented by the Singapore and Malaysia Governments, it allows residents from both countries to enter the other country for long-term work. Secondly, once the Court has granted the Order for the summoning of the meetings, the meetings of different classes of creditors and/or members will be held. Amending Pleadings: When Leave of Court is Required & When it is Not, Summary of Industrial Court Hearing Process. This is in addition to the provision that such order shall not affect proceedings against directors being sued as guarantors. The first advantage is the Court’s power to order compromise or arrangement with creditors and members even though some creditors may not agree with the scheme of arrangement. So long as the said threshold over 75% is met, subject to the Court’s approval, the remaining creditors are forced to accept the compromise or arrangement. a scheme of arrangement.2The use of a scheme of arrangement to effect a takeover has gained popularity in Malaysia; it is also seen as an easier route to acquire control as compared to the traditional takeover bid which is A Scheme of Arrangement under Part 9 of the Companies Act 2014 ("Part 9 Scheme") is a flexible mechanism which allows for the restructuring of a company's debt and / or shareholding. The Court has the power to appoint an approved liquidator to assess the viability of the scheme proposed for the compromise or arrangement and the liquidator is to prepare a report, of which is to be tabled in the creditor’s  or member’s meeting (Section 367, CA 2016). Travel from Malaysia to Singapore. Amongst others, the amendment includes matters pertaining to scheme of arrangements and reconstructions of companies. The recent amendments to the Companies Act exemplifies the Government’s efforts towards promotion of effective ways of doing business in Malaysia. A scheme of arrangement is an agreement entered between a company and its creditors/ shareholders/ members to implement various corporate exercises for the betterment of the company. In such situations, there are normally 3 ways it can play out: the company can be wound up, a receiver & manager can be appointed, or the company can go for a ‘scheme of arrangement’ for the restructuring of the companies. The Court can grant such restraining orders for a period of not more than 3 months at a time. LIQUIDATION, JUDICIAL MANAGEMENT & SCHEME OF ARRANGEMENT – PROCEDURE & PRACTICE CHANTAN LLC 2 • Section 210, Companies Act (Cap 50) provides for schemes of arrangement to be binding on creditors and members alike after the requisite approval by the specified majority and upon confirmation by the court. For example, SOA can be used to 1 : The challenge to implementation of scheme of arrangements is to obtain the 75% approval from creditors and/or members. There is no irony here, given that companies do … Post navigation An approved scheme is binding on all including shareholders. There is a SOA in place between the company and its creditors or any class of creditors representing at least half of the value of all creditors; The restraining order is necessary to enable the company and its creditors to formalise the SOA for the approval of the creditors or members of the company under s.366; The company must, at the same time it lodges an application for a restraining order, lodge a statement of particulars as to the affairs of the company, made up to a date not more than 3 days before the application is lodged; and. At this stage, the Court will need to ensure that: During the period that a company has already proposed an SOA, the company would be in a very tenuous position as it would be very difficult for a barely-solvent company to get the 75% it needs. During this stage, the Court will direct the manner in which the meeting or meetings are to be summoned. On the other … Therefore, to let the company have a fighting chance at rehabilitation, the Court has additional powers under s.368(1) of the Companies Act 2016, to stop all further proceedings in any action or proceeding against the company, unless the parties suing the company get leave specifically from the Court to proceed with their particular proceeding, subject to any terms as the Court may impose. Improvements to the scheme of arrangement procedure. It is not an insolvency process and is utilised under the Companies Act 2006 rather than insolvency legislation, but it must still be sanctioned by court process. Extension of the court-granted restraining order is … Posted on October 27, 2020 October 27, 2020 by shahirah. The previous provision in Section 176 of the CA 1965 did not shed much light on a scheme of arrangement is to be implemented. The benefits of a restructuring process via an SOA under s.366 lies in the details. At this stage, each meeting must approved the proposed SOA through a 75% majority of the total value of the creditors (or class of creditors) or members (or class of members) present and voting. Other than instructing its auditors or lawyers to report on the proposal, nothing is provided on the contents of such proposals. ', 'hhq') ?>. The only formal corporate rescue process currently available in Malaysia is the scheme of arrangement under section 176 of the Companies Act 1965. The 4 requirements for granting and/or extension of the restraining order are to be strictly fulfilled, namely, the proposal for scheme of arrangement must represent at least one half in value of all creditors; that the extension is necessary to enable the scheme of arrangement to be formalized for approval of creditors or members; that a statement of affairs of the company be prepared up to 3 days before lodging of such application in court and nomination of a person by creditors to be a director of the company. The Court has to ensure that those parties who would be affected by the proposed compromise or arrangement will be given a proper opportunity to be present and to vote. Therefore, companies are to ensure that its proposed scheme is viable. Required fields are marked *. echo __('Publish Date:', 'hhq') ?> 12 Mar 2017, By Tan Poh Yee. A scheme of arrangement (or a "scheme of reconstruction") is a court-approved agreement between a company and its shareholders or creditors (e.g. Bookmark the permalink. Amongst others, the amendment includes matters pertaining to scheme of arrangements and reconstructions of companies. If the Court can be satisfied with the schemes, this will surely facilitate approval by creditors to the scheme, thus, expediting reconstruction of a company. Lawyer Nathalie Ker of Lim Chee Wee Partnership appeared for PSkin.The decision comes after 100% of the scheme … Corporate Voluntary Arrangement (“CVA”) Judicial Management (“JM”) Purpose . SCHEME OF ARRANGEMENT A Scheme of Arrangement helps a company in the restructure of its debt, and aids recovery from financial distress. Persons of all nationalities who are legally resident in Malaysia, who need to make single-entry, short-term essential travel for business and official purposes, between Singapore and Malaysia. 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