Case Update: Federal Court Rules on Related Party Creditors in Scheme of Arrangement

The Federal Court in MDSA Resources Sdn Bhd v Adrian Sia Koon Leng has ruled on the issue of the votes of related-party creditors in a scheme of arrangement. This has an impact on the classification of related-party creditors for schemes of arrangement in Malaysia.

With the Federal Court’s 2-1 split decision, I share the majority judgment  and the dissenting minority judgment.

Summary of the Decision and Significance
Majority Grounds by: Nordin Hassan FCJ

The scheme company, MDSA Resources Sdn Bhd (MDSA), had undertaken a scheme of arrangement to restructure its debts of more than RM370 million.

Both the High Court and the Court of Appeal refused the sanction of MDSA’s scheme of arrangement.

The scheme of arrangement only had a single class of unsecured creditors. The High Court and Court of Appeal upheld the objection that related party creditors should not have been in the same class as the other unsecured creditors.

Leave to appeal to the Federal Court was allowed for 10 questions of law.

The Federal Court’s majority decision upheld the objection based on the related party creditors voting in the same class.

The Federal Court’s majority decision answered two questions of law as follows:

1. Whether the votes of related-party creditors are to be treated differently from the votes of other creditors in the same class in a scheme of arrangement.

[Answer: Yes]

 

2. If the answer to 1 is yes, whether the votes of related-party creditors in a scheme of arrangement should be discounted or not be counted altogether.

[Answer: Yes]

 

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6 Recent Developments in Restructuring and Insolvency: Malaysia Insolvency Conference 2023

 

The Malaysia Insolvency Conference 2023 was held on 21 June 2023 and it made a return to a physical setting after 3 years. We saw a record turnout of attendees from the restructuring and insolvency community. I spoke at a panel session titled ‘Landmark Cases: Sharing on Insolvency and Restructuring’ and spoke with fellow insolvency specialists.

I set out a selection of 6 key recent trends we discussed and prepared for the panel discussion. I have also supplemented some of the legal points with additional research I made.

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10 Laws for Malaysian Cyclists

I first started cycling on a road bike exactly a year ago. I am now an avid cyclist and I am out cycling every weekend and on some weeknights. I wanted to find out what are the applicable Malaysian road traffic laws to cyclists.

The main law is under the Road Transport Act 1987 (Road Transport Act) and the subsidiary laws in the Road Traffic Rules 1959 (Road Traffic Rules).

Out of interest, the Road Traffic Rules were enacted under the earlier Road Traffic Ordinance 1958. The Ordinance was repealed by the passing of the Road Transport Act but where the Rules continued to be maintained.

The Road Transport Act regulates vehicles on roads in general and has laws to protect third parties against the risks arising.

Bicycles do fall within the ambit of the Road Transport Act, and can fall within the definitions of:

“vehicle” means a structure capable of moving or being moved or used for the conveyance of any person or thing and which maintains contact with the ground when in motion

 

“micromobility vehicle” means any vehicle that is propelled by electrical means, an internal-combustion engine or human power or a combination of electrical means, an internal-combustion engine or human power, and having a maximum speed of 50 km/h

(Author’s note: I know of several Malaysian cyclists that would exceed this speed of 50 km/h!)

With that introduction, I set out the key 10 laws for Malaysian cyclists.

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Case Update: Court of Appeal Invalidates Meeting Due to Failure to Wait for 15 Minutes

The Court of Appeal in Abdul Malek Faisal bin Mohd Hyffny v Shaikh Marikhzan Jalani & 2 others (grounds of judgment dated 21 February 2023) invalidated an extraordinary general meeting (EGM) where the shareholders had passed a resolution to remove the director and chairperson of the company. The appeal turned on whether the shareholders should have waited for the full 15 minutes before electing one of their number to be chairperson of that meeting.
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Ng Jern-Fei KC’s Secret to Building a Successful Global Disputes Practice

On 2 March 2023, Ng Jern-Fei KC shared his tips and experience in the building of his successful global disputes practice. The session was organised by Lim Chee Wee Partnership and the Asian International Arbitration Centre.

This post distills the 5 lessons shared by Jern-Fei at this session.
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