SUPREME COURT OF SINGAPORE
7 June 2024
Case summary
Re No Va Land Investment Group Corp [2024] SGHC(I) 17
Singapore International Commercial Court – Originating Application No 6 of 2024 and Summons No 19 of 2024
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Decision of the Singapore International Commercial Court (delivered by James Michael Peck IJ):
Outcome: The Singapore International Commercial Court (the “SICC”) allowed the application to sanction the first ever cross-border pre-pack scheme filed in the SICC pursuant to s 71 of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (the “IRDA”).
Pertinent and significant points of the decision
• One of the key requirements under s 71 of the IRDA is the requirement to disclose sufficient information to each creditor meant to be bound by the proposed pre-pack scheme (the “Disclosure Requirement”). The applicant must show that there was disclosure of all material information to enable a well-informed voting by the creditors. In determining whether there was adequate disclosure, the court will have regard to the relevant market practices for out-of-court restructuring and the level of creditor support for the pre-pack scheme: at [42], [46]–[49], [64].
Background
1 No Va Land Investment Group Corporation (the “Applicant”) is a Vietnamese real estate investment holding company incorporated in and doing business in Vietnam. In 2022, the Applicant’s business was adversely affected by the cycle of distress in Vietnam’s real estate sector. As conditions worsened, on 16 July 2023, the Applicant failed to meet its payment obligation under the New York-law governed US$300m convertible bonds (the “Bonds”). This gave rise to an event of default under the terms of the Bonds.
2 To facilitate a potential restructuring of the Bonds, the Applicant engaged in discussions with certain initial bondholder representatives (the “Initial Supporting Holders”). These negotiations led to a “transaction support letter” dated 14 December 2023, which includes many of the same restructuring terms now embodied in the pre-packaged scheme of arrangement (the “Scheme”) proposed by the Applicant and supported by all bondholders who voted on the Scheme (together with the Initial Supporting Holders, the “Supporting Holders”). Specifically, all 25 Supporting Holders constituting 95.11% of the outstanding Bonds voted in favour of the Scheme.
3 On 11 April 2024, the Applicant filed SIC/OA 6/2024 (the “Application”) to obtain the court’s sanction of the Scheme. The solicitor for the Initial Supporting Holders, registered under s 36E of the Legal Profession Act 1966 (2020 Rev Ed), also made an application under r 14(1A)(a) of the Legal Profession (Regulated Individuals) Rules 2015 (“LP(RI)R”) to seek the court’s permission to plead in this case.
Decision of the court
4 The Application was allowed: at [74].
5 The Applicant qualified for relief under Part 5 of the IRDA (which includes s 71). For a foreign unregistered company to prove that it has standing to seek relief under Part 5 of the IRDA, it had to show, pursuant to ss 63(3) and 246(1)(d) of the IRDA, that it is a company entitled to a winding up in Singapore due to its substantial connection with Singapore. On the facts, the Applicant had a substantial connection to Singapore based on the following factors: (a) the Bonds were listed on the main board of the Singapore Exchange Securities Trading Limited; (b) disputes arising out of the Bonds and the indenture governing the Bonds were to be resolved in a Singapore-seated arbitration; and (c) the Scheme unequivocally contemplated voluntary submission to the SICC’s jurisdiction by the Applicant and the Supporting Holders: at [16]–[24].
6 The Applicant fully satisfied the approval requirements of s 71 of the IRDA. There was a clear case of proper disclosure and fulfilment of the voting requirements (which in turn entailed proper classification of creditors): at [27]–[29].
7 All jurisdictional predicates for sanction of the Scheme were satisfied. To establish that the SICC had jurisdiction to sanction the Scheme, the Applicant had to show that there was a proceeding under the IRDA which was international and commercial in nature. This requirement was easily satisfied. The case was international in nature because, amongst other factors, the Applicant was a foreign company which had a substantial connection with Singapore. The case was also commercial in nature given that the subject matter was corporate bonds, a classic and archetypical commercial matter. The SICC had both subject matter jurisdiction by virtue of substantial connection, and personal jurisdiction due to the Applicant and the Supporting Holders’ submission to the SICC’s jurisdiction: at [30]–[36].
8 Specifically on the Disclosure Requirement, an applicant has to furnish all information necessary to enable the creditors to make an informed decision whether to agree to the proposed scheme. What constitutes proper disclosure is necessarily fact-sensitive. Current disclosure practices in the relevant restructuring market for consensual out-of-court restructurings, while not determinative, can function as a helpful benchmark for measuring the adequacy of disclosure. The level of creditor support for or opposition to the scheme will also be considered. In the present case, the Disclosure Requirement was unquestionably satisfied. The Applicant provided comprehensive, extensive and detailed disclosure to its creditors, and the overwhelming support from the creditors was a relevant factor in arriving at this conclusion: at [39]–[64].
9 The leave application by the solicitor for the Initial Supporting Holders under r 14(1A)(a) of the LP(RI)R was granted. The factors considered in allowing the application were the solicitor’s prominent role in representing a key constituency of Scheme stakeholders and the multiple international aspects of this cross-border case: at [65]–[73].
This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.