Vol 18 (2021) - Issue 6

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Close to You: Revisiting Conchubar's Approach to Related Creditor Votes in Schemes of Arrangement

Synopsis
This short paper seeks to critically reexamine the 2017 Singapore Court of Appeal ('SCA') decision of SK Engineering & Construction Co Ltd v Conchubar Aromatics Ltd and another appeal [2017] SGCA 51 ('Conchubar'), particularly on the issue of the discounting of related creditors' votes. The case involved two schemes of arrangement relating to the debt restructuring of two stakeholders of Jurong Aromatics Corporation Pte Ltd which owned one of the world's largest petrochemical plants worth US$2.4 billion.
Since Conchubar, there have been a few recent decisions on related creditors in various other jurisdictions. It is noteworthy that none of these decisions have made reference to Conchubar. In the first place, it appears that the approach adopted by the Courts in England, Hong Kong and Australia differs from that adopted by the SCA in Conchubar. It is likely that Singapore's approach to the discounting of votes will be ripe for reconsideration in the future.
It will be argued here that the discounting of creditors' votes to take into account collateral interests is neither an exact science nor a mathematical exercise.
Indeed, the number of possible factual scenarios is vast and variegated in the scheme of arrangement context.
Any collateral interests that certain creditors may possess must be viewed by the Court through a commercial lens and measured by commercial common sense.