Case Details
- Citation: [2016] SGHC 279
- Title: Re Conchubar Aromatics Ltd and another matter
- Court: High Court of the Republic of Singapore
- Date of Decision: 20 December 2016
- Case Number: Originating Summons Nos 153 and 154 of 2016
- Judge: Aedit Abdullah JC
- Decision Type: Application for leave to convene creditors’ meetings and subsequent approval/sanction of a scheme of arrangement under s 210 of the Companies Act
- Applicants: Conchubar Aromatics Ltd; UVM Investment Corporation
- Respondent/Opponent: SK Engineering and Construction Co Ltd (“SKEC”)
- Legal Area: Companies — Schemes of arrangement
- Statutes Referenced: Companies Act (Cap 50, 2006 Rev Ed); Evidence Act (Cap 97, 1997 Rev Ed); Supreme Court of Judicature Act
- Other Authorities Referenced in Metadata: Re R M Eastmond Pty Ltd and the Companies Act
- Key Procedural History Noted: Leave to convene meetings granted on 18 March 2016; meetings held on 19 May 2016; approval sought again on 29 August 2016; appeals allowed by the Court of Appeal on 30 August 2017 (see [2017] SGCA 51)
- Counsel (Applicants): Andy Lem, Chia Tze Yung Justin, Jaclyn Leong and Kok Yee Keong (Harry Elias Partnership LLP for the applicants)
- Counsel (Opponent): Debby Lim and Jamal Siddique (Shook Lin & Bok LLP) for SK Engineering & Construction Co Ltd
- Judgment Length: 15 pages, 8,875 words
- Companies/Entities Central to the Dispute: Conchubar Aromatics Ltd; UVM Investment Corporation; Jurong Aromatics Corporation Pte Ltd (“JAC”); SK Engineering & Construction Co Ltd (“SKEC”); SK E&C Jurong Investment Pte Ltd (“SKECJI”); SK International Investment Singapore Pte Ltd (“SKIIS”); JEI (Jurong Energy International Pte Ltd); Orient Time Capital Ltd (failsafe payment guarantor); Security Agent BNP Paribas (Singapore Branch)
Summary
This High Court decision concerns the statutory process for proposing and sanctioning a scheme of arrangement under s 210 of the Companies Act. Conchubar Aromatics Ltd and UVM Investment Corporation (together, “the Applicants”) sought leave to convene meetings of their respective creditors to consider a proposed scheme that was designed to facilitate a restructuring of their indirect and direct equity interests in Jurong Aromatics Corporation Pte Ltd (“JAC”). The scheme was contingent on the acceptance of a separate restructuring proposal by JAC’s receivers and managers (“R&M”), and it included a “failsafe” payment mechanism if a trigger event occurred.
At the sanction stage, the scheme was opposed by SK Engineering and Construction Co Ltd (“SKEC”), a creditor of both Applicants. SKEC argued, in substance, that the statutory majorities were artificially engineered by votes from related creditors and that the scheme was deficient in certainty and bona fides. The High Court held that the Applicants had proved the statutory majority requirement and that certain creditors were indeed related; however, the court was not persuaded that the scheme should be refused on the grounds advanced. The court granted sanction under s 210(3AB), subject to its assessment of how to treat related-party votes.
What Were the Facts of This Case?
Conchubar Aromatics Ltd was incorporated in the Cayman Islands on 20 August 2010 and had no underlying operating business. Its primary asset was a 6% shareholding in Jurong Aromatics Corporation Pte Ltd (“JAC”) which it held indirectly. Conchubar held 26.7% of the shareholding in SK E&C Jurong Investment Pte Ltd (“SKECJI”), which held 75% of the shareholding in SK International Investment Singapore Pte Ltd (“SKIIS”), which in turn held 30% of JAC. UVM Investment Corporation was incorporated in the British Virgin Islands on 30 September 2009 and, similarly, had no underlying business. Its primary asset was a 5.1% direct shareholding in JAC.
JAC was incorporated in Singapore on 30 May 2005 as a joint venture vehicle to own and operate a project on Jurong Island: the development, project financing, construction and operation of an integrated condensate splitter and aromatics complex. The project suffered delays in construction, and JAC was placed into receivership on 28 September 2015. By the time of the High Court hearing on 29 August 2016, construction had completed and the plant was operational.
In late 2015, Jurong Energy International Pte Ltd (“JEI”), a special purpose vehicle incorporated by the founding investors of JAC (including UVM and Conchubar), submitted a restructuring proposal to JAC’s receivers and managers (“R&M”). Under the JEI Proposal, JEI would inject approximately US$550 million into JAC in the form of equity, shareholder’s loan and feedstock, in exchange for a 60% shareholding in JAC. The stated objective was to enable JAC to repay debts owed to a syndicate of secured finance parties (“the Senior Lenders”). The Senior Lenders held share charges over approximately 95% of JAC’s shares.
The Applicants’ proposed scheme of arrangement was contingent on the R&M’s acceptance of the JEI Proposal. The scheme contemplated that, if accepted, JEI would purchase the Applicants’ shares in JAC. In return, the Applicants would receive JEI shares or JEI convertible bonds of equal or higher value, as determined by third-party valuation. Those instruments would then be distributed pari passu to the Applicants’ creditors. Conversely, if the R&M did not accept the JEI Proposal or if a “trigger event” occurred (one year from commencement of the scheme, whichever was earlier), a failsafe payment would be made: UVM would pay US$300,000 and Conchubar would pay US$650,000 to their respective creditors on a pari passu basis over 24 months in four instalments. The failsafe payments were guaranteed by Orient Time Capital Ltd.
What Were the Key Legal Issues?
The first legal issue was whether the statutory majority requirement under s 210(3AB) of the Companies Act was satisfied at the creditors’ meetings. The Applicants had to show that the requisite majority in number representing 75% in value of creditors voting in favour was achieved for each Applicant. Although the voting results appeared to meet the threshold on their face, SKEC challenged the validity or weight of votes cast by creditors it alleged were related to the Applicants.
The second issue concerned the treatment of related-party votes in the context of scheme sanction. SKEC’s position was that all creditors who voted in favour (other than SKEC itself) were related to Conchubar or UVM. SKEC urged the court to disregard those votes entirely, effectively applying a 100% discount to their votes. The Applicants disputed both the relatedness characterisation and the legal consequences of any relatedness.
A further issue, raised by SKEC, was whether the scheme was “bad” for lack of certainty and whether the Applicants acted in bad faith or dishonestly by allegedly orchestrating the voting outcome through assignments of debt claims to friendly entities. While these allegations were serious, the High Court’s reasoning focused heavily on evidence, burden of proof, and the appropriate discount methodology for related creditors.
How Did the Court Analyse the Issues?
At the outset, the High Court emphasised the statutory framework for schemes of arrangement under s 210. The court had previously granted leave to convene meetings, and the present stage required the court to decide whether to sanction the scheme. The burden of proving that the statutory majority requirement was met lay on the Applicants. This allocation of burden was consistent with general principles of evidence and the scheme-specific requirement that the court be satisfied the statutory conditions are fulfilled.
On the relatedness challenge, the court applied a basic evidential principle: he who asserts must prove. The High Court noted that SKEC argued that all creditors other than itself were related. However, it was for SKEC to prove that factual assertion. The court expressly linked this to s 105 of the Evidence Act, which codifies the principle that the burden of proof lies on the party who asserts a fact. In other words, the court did not treat the relatedness allegation as automatically displacing the statutory majority; rather, it required evidential support.
After considering the evidence, the court was persuaded that Chemicals was indeed related to Conchubar, and that MacNair and Emirates were related to UVM. The court’s reasoning reflected the factual matrix of corporate relationships: Chemicals’ claim against Conchubar arose from a corporate guarantee agreement under which Conchubar guaranteed a loan made by Chemicals to SKECJI, and the court accepted that shared ownership and common directorship links (including through a common sole shareholder and director) supported relatedness. Similarly, MacNair’s claim against UVM arose from a loan and convertible bond arrangement in which MacNair held a dominant economic position upon conversion, and Emirates’ claim was traced to an assignment from MacNair. The court thus accepted that relatedness existed, but it did not accept SKEC’s broader submission that all favourable votes should be disregarded.
The most legally nuanced part of the decision concerned the appropriate “discount” to apply to related-party votes. SKEC sought a 100% discount, effectively nullifying the votes of related creditors. The Applicants argued that even if relatedness existed, no discount should be applied, or at least that the court should not treat relatedness as automatically fatal. The High Court indicated that it faced difficulty in applying the guidance from the Court of Appeal in The Royal Bank of Scotland NV (formerly known as A …) (the extract is truncated in the provided text, but the High Court clearly treated that Court of Appeal decision as the relevant authority on discounting related votes). The court’s approach therefore required balancing two competing considerations: (i) the statutory purpose of ensuring that schemes are approved by a meaningful majority of creditors; and (ii) the need to guard against manipulation of voting outcomes through creditor relationships that may compromise independent creditor judgment.
In applying this framework, the High Court did not treat relatedness as a mechanical rule that always leads to full discount. Instead, it treated relatedness as a factor affecting the weight the court should give to the votes. The court’s reasoning suggests that the discount should be calibrated to the degree to which relatedness undermines the independence of the creditor’s vote, rather than applying an automatic binary outcome. While the court accepted relatedness for certain creditors, it ultimately concluded that the scheme should be sanctioned, implying that the statutory majority would still be satisfied (or would be satisfied in substance) even after applying an appropriate discount rather than a total disregard.
Finally, the court addressed SKEC’s additional criticisms: that the scheme lacked certainty and that the Applicants acted dishonestly or not bona fide. Although the extract does not include the full reasoning on these points, the court’s ultimate decision to sanction indicates that it was not persuaded that the scheme was so uncertain as to be unworkable, nor that the evidence supported a finding of dishonesty sufficient to refuse sanction. The court also considered the practical restructuring context: the scheme was structured around a contingent equity sale and a defined failsafe payment, with valuation to be determined by third parties and a guaranteed payment mechanism if the JEI Proposal failed to proceed.
What Was the Outcome?
The High Court granted sanction for the proposed scheme of arrangement under s 210(3AB) of the Companies Act. Although SKEC succeeded in persuading the court that some favourable votes came from related creditors, the court did not accept SKEC’s request to disregard those votes entirely. The practical effect was that the scheme proceeded, enabling the Applicants to implement the restructuring pathway contemplated by the JEI Proposal, while also providing creditors with the failsafe payment protection if the trigger event occurred.
Importantly, the LawNet editorial note in the metadata indicates that the appeals to this decision were allowed by the Court of Appeal on 30 August 2017 (see [2017] SGCA 51). Accordingly, while the High Court’s sanction was granted in December 2016, the appellate outcome altered the final legal position. For researchers, this means the High Court decision is best read as part of a developing appellate jurisprudence on schemes, related-party voting, and the court’s approach to discounting votes.
Why Does This Case Matter?
Re Conchubar Aromatics Ltd is significant for practitioners because it illustrates how the High Court approaches scheme sanction where creditor votes are challenged on the basis of relatedness. The decision reinforces that the statutory majority requirement is not automatically defeated by allegations of related-party voting; instead, the opponent must prove the relevant factual assertions. This is a direct application of the Evidence Act’s burden of proof principle, which can be decisive in scheme litigation where the record of corporate relationships and debt assignments is contested.
More broadly, the case highlights the court’s willingness to treat relatedness as a factor affecting the weight of votes rather than as an automatic ground to disregard votes entirely. This is crucial for deal planning: sponsors and insolvency practitioners must understand that creditor composition and the provenance of claims (including assignments) may be scrutinised, and that the court may apply a calibrated discount rather than a binary exclusion. The decision therefore informs how schemes should be structured and how evidence should be assembled at both the meeting and sanction stages.
Finally, the case matters because it sits within an appellate trajectory. The Court of Appeal’s subsequent decision in [2017] SGCA 51 (as noted in the metadata) indicates that the High Court’s approach to discounting and/or other aspects of sanction was not the last word. For legal researchers, this means the High Court judgment is a useful starting point for understanding the issues, but the authoritative position must be confirmed by the Court of Appeal’s reasoning.
Legislation Referenced
- Companies Act (Cap 50, 2006 Rev Ed), s 210 (including s 210(3AB) and s 210(3AB)(c))
- Evidence Act (Cap 97, 1997 Rev Ed), s 105
- Supreme Court of Judicature Act (referenced in the judgment metadata)
Cases Cited
- [2016] SGHC 279 (this decision)
- [2017] SGCA 51 (Court of Appeal decision allowing the appeals)
- The Royal Bank of Scotland NV (formerly known as A …) (Court of Appeal guidance on discounting related votes; full citation truncated in the provided extract)
- Re R M Eastmond Pty Ltd and the Companies Act (as referenced in the metadata)
Source Documents
This article analyses [2016] SGHC 279 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.