MLJU 293. APPLICANTS’ RESPONSE 25. In response to the issues raised, the Applicants contend as follows:- (i) | the Applicants have provided sufficient particulars of material facts necessary in the filing of the Application; 15 t S/N Q9MBg!2Ci80ynL30f8BUS0OQ ; (ii) | the Revised Scheme is meritorious and there are material changes in comparison to the Previous Scheme filed in the JM Application; (iii) the Applicants have taken steps to create a Special Purpose Vehicle known as Vanguard ASB Berhad pursuant to Section 15 of the Companies Act 2016 for the purposes of sale transactions involving assets of the Applicants in respect of the Asset Backed Securities Bond Programme; and (iv) ' the approval of the scheme is not dependent on the amount or percentage of debt to the Interveners but on 75% majority of creditors present and voting at the meeting and therefore the Interveners’ argument that the Application is futile is premature. 26. Reference was made to the decisions in AirAsia X Bhd v. BOC Aviation Ltd. & Ors [2021] CLJU 188 / [2021] 1 LNS 188 / [2021] 10 MLJ 942 and Capital City Property Sdn. Bhd. v. Achwell Property Sdn. Bhd. [2023] CLJU 22 / [2023] 1 LNS 22 / [2020] MLJU 2518. 16 DELIBERATIONS AND FINDINGS Revised Scheme 27. Now, the Revised Scheme highlights at Exhibit A-14 (page 102- 113), Enclosure 5 on the material changes between the current scheme and the Previous Scheme. This Court finds that the only material change highlighted by the Revised Scheme is the reduction on the timing of repayment of the principal amounts for the secured creditors from 7 years under the Previous Scheme to approximately 6 to 12 months after the Revised Scheme approval date. As for the unsecured creditor, repayment will take 147 months or 12.2 years to complete. Thus, apart from LHDN, according to the Revised Scheme, all other features of the Previous Scheme have not materially changed. 28. After reading the Revised Proposed Scheme, this Court finds that the proposal lacks the following: - (i) any preliminary financial model or forecasts; (ii) | any assessment or opinion on viability and financial models by an independent advisor; 17 (iii) no information on the prospects of who will subscribe the bonds to be issued and what will be the indicative general terms of the bonds; (iv) how the Applicants’ financials will perform under the Sale & Leaseback Transaction; (v) how the Applicants’ financials can execute a full settlement of all principal sums owing to the secured creditors within 12 months from the date of approval of the scheme; (vi) any explanation why the unsecured creditor has to wait 12 years for full settlement; and (vii) clarity on the proposed timelines for the execution of each component under the scheme including proposed time periods for securing all approvals from relevant authorities on the Sale and Lease back and Bonds issuance, scheme completion date, execution of the Sale and Lease back, negotiations with potential subscribers and subscription of bonds and commencement of payment obligations. ol 18 29. This Court further finds that the Revised Scheme now proposes a moratorium period of 6+6 months as opposed to just 6 months to provide, as the scheme says, breathing space to execute the proposed corporate exercise efficiently. 30. Counsel for the Applicants rely heavily on the decision of the High Court in AirAsia X Bhd v. BOC Aviation Ltd. & Ors. and Re Kuala Lumpur Industries Bhd. to argue that the Revised Scheme need not be too detailed and it would fulfil the requirement of the Application if the proposal contains sufficient materials to show the scheme features which will later be refined and made exact by the time the Creditors Meeting is convened. The Court should not consider the merits or fairness of the Revised Scheme as these issues are best left for the creditors to decide. 31. Now, those decisions do not rigidly dictate what information need or need not be included in the proposal. Although it may not be the practice in Malaysia as argued in AirAsia X Bhd v. BOC Aviation Ltd. & Ors that a full Explanatory Statement is normally included in the application for leave, the Court in that case nonetheless opined that the duty of disclosure are as follows:- a 19 “[66] In connection with the Court's role in determining the jurisdictional issues at the Convening Stage, it is incumbent upon the scheme company to adduce evidence of sufficient quality to persuade the Court to act on the scheme and it has a duty to make full and frank disclosure of all relevant facts and matters to the Court relevant to such jurisdictional issues including the classification of creditors.” 32. This Court finds agreement with the observations made in Indah Kiat International Finance Company BV [2016] BCC 418 and Pathfinder Strategic Credit LP and Another v. Empire Capital Resource Pte. Ltd. and Another Appeal [2019] 2 SLR 77, both referred in AirAsia X Bhd v. BOC Aviation Ltd & Ors, that the applicant bears the burden of providing such financial disclosure of sufficient quality and credibility to assist the Court in assessing and in determining that the proposal is bona fide, workable and deserves for consideration by the creditors. 33. In fact, in Re Kuala Lumpur Industries Bhd., the Court held that while the proposal need not be in its final form ready for a creditor 20 to vote, it must at least contain sufficient particulars to allow for proper consideration:- “... In my view, what must be available to the court when considering a s 176(10) application must be a proposal of a scheme of compromise or arrangement not necessarily ready for presenting to the creditors to be voted upon but with sufficient particulars to enable the court to assess that it is feasible and merits due consideration by the creditors when it is eventually placed before them in detailed form. Further, the court has to be satisfied that there is or that there would be a bona fide s 176(1) application.” 34. Coming back to the Revised Scheme, this Court finds that the scheme is not too dissimilar from the Previous Scheme. With exception of the reduced timeline for the payment of the principal sum for the secured creditors, the unsecured creditor has to wait 12 years until full settlement. Those points aside this Court does not find enough financial information that shows how the Applicants will execute the components of the Revised Scheme. 35. There should at least be an indicative financial and cashflow forecast or projections demonstrating how the components of the Revised Scheme will positively impact the Applicants’ ability to meet 21 its obligations under Revised Scheme. The Applicants’ claim their current assets are in excess of the debts are insufficient information on their own to push throughthe Revised Scheme without any explanation how the value of these assets will be monetized, in what value and apportioned towards settlement of each of the Applicants’ debts. 36. Such information would at least provide the creditors with better understanding and assessment of the viability of the Revised Scheme. Whilst this Cout agrees with the views of the authorities referred above by the Applicants that they are not expected to present a vote-ready proposal, it must at least serve as the curtain raiser, so to speak, of what the creditors can look forward to when the meeting is convened. The Revised Scheme in its current form is, to this Court, too general, broad and wanting better particulars. It does not sufficiently assist the Court in determining that the Revised Scheme is suitable to be presented at the Creditors Meeting. As expressed by the Court of Appeal of Singapore in Pathfinder Strategic Credit LP and Another v. Empire Capital Resource Pte Ltd and Another Appeal [2019] 2 SLR 77 the Court should not act merely as a rubber stamp:- wl 22 “52. We consider this formulation to be justified in principle. As an aspect of the company’s duty of disclosure at the leave stage, it should not be applied in a manner that is particularly onerous or exacting. The leave application is, after all, usually heard in an expedited basis... But this does not mean that the duty is a hollow one, and the court should not be taken as a rubber stamp just because the proposed scheme would likely return to the court at the sanction stage. By that stage, if an unsuitable creditors’ meeting had been convened in the interim, it is likely that valuable time and resources would have been spent, positions crystalised, the financial situation deteriorated and serious distrust engendered, all ' of which may be fatal to any prospective rehabilitation of the company while also being unfairly prejudicial to the creditors...” 37. For the above reasons, whilst this Court can agree with the views expressed by the Court in AirAsia X Bhd that the Court ought not to make any commercial judgment on the viability or otherwise of the company post the scheme at the convening stage without the benefits of any independent or expert report nor should the Court at that juncture speculate as to whether the proposer will or will not be able to raise the necessary funding and if successfully raised whether it is sufficient to implement the scheme, this Court declines however to take the same view as expressed by the Court in AirAsia X Bhd that the Court may exercise its judicial power to m1 23 grant the leave to convene a creditors’ meeting absent of any financial forecast or model and absent independent opinion from financial advisors to at least demonstrate the viability and workings of the proposed scheme. To grant leave merely on broad terms without enough specifics and information pointing towards a prima facie viability of the scheme would as state in Pathfinder Strategic Credit LP and Another v. Empire Capital Resource Pte. Ltd. and Another Appeal reduce the Court’s function to a rubber stamp. 38. Therefore, this Court does not find agreement with the Applicants’ Counsel's argument that this Court should see the Revised Scheme as work in progress and to allow the proposal to be improved and completed by the time the creditors meeting is convened. In this Cout’s view for such opportunity to be granted, the Revised Scheme must at the outset contain enough information to demonstrate its viability not merely by comparison of the value of assets and liabilities but more importantly by at least showing, inter-alia the following:- fl 24 (i) | how the Revised Scheme sets itself apart from the Previous Scheme other than the reduction of time for the payments to the secured creditors and the inclusion of LHDN; (ii) | how the components of the scheme will work with each other to produce the funds required to settle the secured creditors; (iii) providing some basic financial projections supported by an assessment by an independent financial advisor; and (iv) showing how the 3 and 8" Applicants businesses will be turned around and will generate the necessary cashflow to settle the outstanding amount to LHDN in the period of 12 years. 39. Thus, this Court finds difficulty in finding that that the Revised Scheme contains merits as claimed by the Applicants and that it is suitable to be referred and voted on by the creditors at the creditors’ meeting. 25 Opposition from the Interveners 40. It is clear that all the Interveners take the common stand that the Revised Scheme:- (i) is no better in terms of specifics and information than the Previous Scheme; (ii) lacks timeline on when the components are to executed and completed leaving them at the risk that the completion of the scheme will take an unreasonably long time; and (iii) it is not made bona fide in the interests of the creditors and is used merely for the purpose of frustrating claim and execution proceedings against the Applicants; 41. It is clear that the Interveners’ opposition to the scheme demonstrates the sentiment that will be carried to the meeting of creditors if leave is granted. 42. The success of the Revised Scheme is inter-dependent on the fate of each Applicant in the hands of their respective creditors. The wl 26 prospect of the Revised Scheme failing at a Creditors Meeting increases which each opposition the respective Applicant receives. With all the Interveners opposing the Revised Scheme not much can be said of the chances that the Revised Scheme will survive the required 75% of votes of the total value of creditors or class of creditors or the members or class of members present and voting at the Creditors Meeting. 43. Thus, this Court does not agree that the Interveners’ opposition at this stage is pre-mature on the basis that Section 366(3) of the Companies Act 2016 requires a majority of 75% votes at the Creditors’ Meeting. Since they have been given leave to intervene and state their objection, this Court cannot ignore their sentiment in assessing whether leave to convene a Creditors Meeting ought to be granted (see Globalcon Holding (M) Sdn. Bhd. v. Ambank Islamic Bank Bhd. & Anor [2022] CLJU 2446 / [2022] 1 LNS 2446 / [2022] MLJU 2546 and Lagenda Erajuta Sdn. Bhd. v. Acre Square Sdn. Bhd. & Ors [2020] CLJU 698 / [2020] MLJU 789 /