Purecircle Trading Sdn. Bhd. (WA-24NCC(SOA)-3-10/2024)

PURECIRCLE TRADING SDN. BHD. (Registration No. 201501014963 (1140295-D))

PURECIRCLE SDN. BHD. (Registration No. 200201011140 (578803-K)) … APPLICANTS GROUNDS OF JUDGMENT INTRODUCTION [1] These Grounds concern two (2) applications in Enclosures 1 and 3 (“Encl 1” and “Encl 3” respectively) made with respect to schemes of arrangement for the amalgamation of the Applicants (“the Schemes”) pursuant to sections 366 and 370 of Companies Act 2016 (“CA 2016”). All references to sections herein are with reference to sections in CA 2016. [2] The contents of this Judgment are set out below. Contents Page INTRODUCTION 2-3 The Schemes 3-4 Encl 1 4-5 Encl 14 5-7 The Overarching Issues 7-8 Sole Member Meeting 8 Dispensation with the Scheme Meeting 8-9 CA 2016 Provisions 9-11 Circular Members Resolution 11-15 Shortening of Notice Periods 15-16 Need for Creditor Meetings 16-20 Preconditions to the Section 370 Ancillary Orders 20-21 Approval of the Compromise or Arrangement 21-24 ‘Amalgamation’ 24-26 An Approved section 366 Scheme 26-28 An Artificial Scheme to invoke Section 470 28-32 ENCL 14 – THE CONVENING APPLICATION 33 The Court’s Role at the Convening Stage 33-35 The Scheme Meetings 35-36 ENCL 14 – THE SANCTION APPLICATION 36-38 ENCL 1 – ANCILLARY VESTING & TRANSFER ORDERS 38-39 CONCLUSION 39 [3] In essence, the Schemes are to implement an internal restructuring of the Applicants, which will have no impact on their creditors. These Grounds largely deal with the preconditions to and the procedural aspects of an internal restructuring, in particular, the important issue as to whether dispensation with Scheme Meetings may be ordered. The Schemes [4] The Applicants are part of a group of companies, which I will refer to as the “PureCircle Group”. They are both wholly owned subsidiaries of their common holding company, Pure Circle Limited, being the sole member of both Applicants (“the Sole Member”). [5] The Schemes are straightforward. The Applicants have proposed the Schemes to merge the assets and liabilities of the First Applicant (‘Transferor Company’) with those of the Second Applicant (‘Transferee Company’) (see Annexure A to Encl 3, as amended into Encl 14) both to the held by the Transferee Company. The transfer of the assets and liabilities of the First Applicant into the Second Applicant will be upon the terms of a Merger Agreement dated 20.9.2024 (“the Merger Agreement”). [6] The stated objective of the Schemes is to consolidate the Applicants’ businesses into a single legal entity, being the Transferee Company. The Applicants want to achieve greater overall business and operational efficiency and to streamline their processes. This is a common objective of an internal restructuring. [7] The following cause papers were also referred to:

Encl 1 filed pursuant to sections 366(4) and 370 to implement schemes of arrangement to be undertaken between the

Applicants’ affidavit in support of Encl 1, Encl 2;

Encl 3 (as amended into Encl 14);

Notice of Application dated 29.10.2024 in Encl 3 as amended on 25.11.2024 resulting in Encl 14;

Affidavit affirmed by Yeoh Keat Li on 29.10.2024 in Encl 4;

Applicants’ Outline Submissions dated 12.11.2024 in Encl 7;

Applicants’ Outline Submissions dated 12.11.2024 in Encl 10;

Sealed Order made under Encl 14 dated 28.11.2024 in Encl 17;

Two (2) affidavits affirmed by Yeoh Keat Li on 6.12.2024 in Encls 18 and 19 to report the outcome of the Scheme Meetings. Encl 1 [8] Encl 1 dated 16.10.2024 was filed under section 370 to vest the assets and liabilities of the First Applicant (as transferor) into the Second Applicant (as transferee). [9] The terms of the transfer are as set out in the Merger Agreement and reflected in paras 4 to 14 of Encl 1. Encl 14 [10] Encl 14 is an amended Notice of Application dated 25.11.2024 (originally Encl 3 dated 29.10.2024). [11] Para 1 prays for leave under section 366(1)(a) to convene meetings ("Scheme Meetings") of the Applicants’ common Sole Member. The Scheme Meetings were to approve the Schemes between each Applicant and the Sole Member of each Applicant. [12] However, by para 5b, the Applicants also pray that the Scheme Meetings be dispensed with. This must mean that the convening of the Scheme Meetings pursuant to para 1 is only required if I did not grant such dispensation. [13] Prayer 6 of Encl 14 prays for orders:

to sanction the Schemes of each Applicant pursuant to section 366(4); and

for ancillary relief under section 370(2) to facilitate the implementation of the Schemes (in addition to the ancillary relief also sought under para 6 of Encl 1). [14] It was urged upon me that Encls 1 and 14 should be granted as, inter alia, the test for sanction of the Schemes will inevitably be met, in that:

the relevant provisions of CA 2016 have or will be complied with;

I have the power to and should dispense with the Scheme Meetings required under sections 366(4) and instead, to rely on the written resolutions of the Sole Member of both Applicants approving the Schemes;

there is no question as to whether the classes of members have been fairly represented at the Scheme Meetings as the Schemes are Members’ schemes between each Applicant and their common Sole Member. As each Applicant has only one (1) member, there are no class issues; and

the Schemes are fair which a member could reasonably approve. In fact, the Sole Member has indeed, approved both Schemes for the First Applicant and the Second Applicant. [15] However, Encls 1 and 14 were filed in an unusual order. The first application (Encl 1) is for the vesting orders which (as stated above) are consequential on sanction or approval, which is only prayed for in the second application, Encl 3 (now Encl 14). The order of the applications seem odd. [16] No matter. I dealt with Encl 14 first. This meant first dealing with convening and sanction issues. And, if sanction were thereafter allowed, I will then consider whether the ancillary orders under section 370(2) should be ordered under Encl 1. The Overarching Issues [17] There are four (4) overarching issues. These Grounds primarily deal with these issues, which can be summarised (in no particular order) as follows. [18] First, whether the dispensation of scheme meetings under section 366(1) (whether physical or virtual) may be granted, if the votes of the members for sanction have been secured and both Schemes will certainly be approved by the Sole Member. [19] Secondly, whether meetings of creditors need be called. [20] Thirdly, whether the preconditions to granting the ancillary transfer and vesting orders under section 370(2) have been or will be met. This includes whether a scheme of arrangement duly approved under section 366(4) is a precondition to the exercise of the Court’s powers to grant ancillary orders under section 370(2). [21] Lastly, and closely related to the third question is this. If the filing of a section 366 convening application was deliberately engineered for the purpose of taking advantage of the vesting provisions under section 370, would such filing constitute an abuse and invalid. [22] I will deal with these issues first before giving my ruling on Encl 14. Sole Member Meeting [23] At the outset, I must make it clear that the scheme meeting may be properly constituted by one (1) person, see Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, Chevron (TAPL) Pty Ltd [2022] FCA 220 (“Chevron (TAPL)”) at para 28. [24] In Re TSB Nuclear Energy Investment UK Ltd & Ors [2014] EWHC 1272, the meeting of a sole shareholder for the approval of the proposed Scheme was held and approved. The English Court was satisfied that the formal requirements were met and thus ordered the transfer and vesting orders. Dispensation with the Scheme Meeting [25] It was impressed on me that I should, under the inherent jurisdiction, order the dispensation of the requirement to hold Scheme Meetings under section 366(4). [26] The main reason is because the Applicants are within the same PureCircle Group of companies, which includes the Sole Member. And it would be a waste of time and costs to order Scheme Meetings of the one (1) Sole Member in each Scheme. And indeed, the Sole Member as the sole shareholder of each Applicant has already approved the Schemes, see the written resolutions signed by the corporate representative of the Sole Member at Exhibits "A- 3", "A-6" and "A-9" of Encl 2. [27] I do appreciate the force of Counsel’s submission that the ordering of actual Scheme Meetings would not serve any real practical purpose. And it does seem curious for the Sole Member of the Transferor and Transferee Companies to be compelled to attend actual meetings, when written resolutions signed by the Sole Member have already been passed. [28] Indeed, I can see the practical necessity for such dispensation. Had it been a matter of discretion, I probably would have granted such dispensation. [29] But in my judgment, it is not. CA 2016 Provisions [30] First, Counsel relies on various provision of CA 2016 which provide for the passage of written resolutions by members of companies. In particular, section 290(1) allows a resolution of members to be passed by a written resolution. And section 292 allows a special resolution to be passed in writing signed by a Corporate Representative authorised under section 333. Indeed, the decision of Buckley J (as he then was) in In re Duomatic Ltd. [1969] 2 Ch. 365, which allows the agreement of all members to take effect as a resolution of the company, comes to mind. [31] However, a Scheme Meeting is not a general meeting of the company. The Scheme Meetings are convened for a specific statutory purpose, which is not governed by the company’s constitutional documents. Scheme meetings are governed by the convening order of Court and specific scheme sections in applicable legislation. In Re Apcoa Parking Holdings GmbH [2014] EWHC 3849, Hildyard said at [120]: “[120] In the latter context, it may be worth noting that the summoning and conduct of a class meeting of creditors is in the discretion of the court under s 896 of Pt 26; and meetings thus convened and held are not meetings of the relevant scheme company but meetings of the classes of creditors [or members] selected. I mention that to emphasise the point, which may be obvious, that the convening and conduct of such meetings in the case of creditors is not a matter impinging on the constitution of the body corporate concerned and, in my judgment, does not involve any trespass on matters that should be the preserve of the law of incorporation.” [32] The constitutional source of the power of the meeting is the section activated by the order of Court. Such a meeting is not a general meeting of the company even if all the persons entitled to attend it are the members. It is a meeting convened for a specific statutory purpose and which is subject to provisions different from those pursuant to which a general meeting is convened and held; it follows that the Court may give separate directions which may differ from the company’s Constitution, see Re Australian Consolidated Press Ltd (1994) 14 ACSR 639 at 640. [33] In short, the provisions governing general meetings in CA 2016 have no direct application to scheme meetings. Accordingly, I do not accept that the sections cited by Counsel above are of any help. Circular Members Resolution [34] Secondly, a circular resolution signed by all the members is not enough. The statutory framework expressly or at least implicitly, provides that the scheme must be agreed by the members or creditors at a meeting convened by Court. And this would be so even if there was only a sole member of the class. Section 366(1) provides that: “366. (1) The Court may order a meeting in a summary way to be summoned in such manner as the Court directs on an application to the Court for the approval of a compromise or arrangement …

The compromise or arrangement shall be binding on—

(a)all the creditors or class of creditors;

(b)the members or class of members;

(c)the company; or

(d)the liquidator and contributories, if the company is being wound up, if the compromise or arrangement is agreed by a majority of seventy-five per centum of the total value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy at the meeting or the adjourned meeting and has been approved by order of the Court.” [35] The scheme sections are littered with references to ‘a meeting’. However, section 366(1) specifically provides for a meeting to approve the compromise. And section 366(3) provides that the compromise will only be binding if approved by the meeting. In my judgment, the meeting is a statutory precondition to the compromise being binding. [36] In Re Montana Frocks Pty Ltd (1967) 87 WN (Pt 1) 271 at 273 all creditors agreed in writing to the scheme. Street J refused to approve the scheme holding that the Court had no power to dispense with the scheme meeting and therefore no jurisdiction to approve the scheme. [37] In AGL Energy Services (Qld) Pty Ltd v AGL Energy Services Pty Ltd (BC201002963), Emmet J held: “[7] The pivotal aspect of s 411 is contained within s 411(4), which provides that a compromise or arrangement is binding on the creditors or on the members if and only if at a meeting convened in accordance with an order under s 411(1) the compromise or arrangement is agreed to by the requisite majority or a resolution in favour of the compromise or arrangement is passed by the requisite majority and the compromise or arrangement is approved by an order of the court.” [Emphasis mine] [38] In Re Hastings Deering Pty Ltd. (1985) 9 ACLR 755 at 756 Kearney J held: “One starts with the well accepted principle, as exemplified in the decision of Street J in Re Montana Frocks Pty Ltd [1967] 2 NSWLR 584, that the legislation creates as a condition precedent to the court's jurisdiction to approve a scheme of arrangement, the holding of the requisite meetings. The meetings called for in the present instance are meetings respectively of the members of the company and of the various classes of members, existing either because of difference in the nature of shareholdings or by difference in interests which exist between various groups of shareholders: see Re Jax Marine Pty Ltd [1967] 1 NSWR 145; Re International Harvester Ltd (1983) 7 ACLR 796; 1 ACLC 889. The terms of s 315(4) emphasize the mandatory requirement for such meetings to be held as an essential foundation to the scheme of arrangement taking effect so as to bind the members, classes of members and the company respectively.” [Emphasis mine] [39] In Millennium CHPP Pty Ltd v Millennium Coal Pty Ltd [2009] FCA 1556, Stone J held: “[3] On 7 December 2009 I made orders for the calling of meetings under s 411(1) of the Corporations Act 2001 (Cth) (the Act). The meetings are a necessary precondition to evoking the jurisdiction of the court under s 413 of the Act.” [Emphasis mine] [40] As such, I am confident that the holding of a scheme meeting (whether physically or virtually: Re Castle Trust Direct plc [2020] EWHC 969) is mandatory and is an essential foundation of the Court’s jurisdiction to approve the scheme. I also agree that the Court will have no jurisdiction to approve or sanction the Scheme under section 366(4), without the requisite scheme meeting. [41] Indeed, Jacobson J in SGIC Insurance Ltd (supra) noted the possibility that the single shareholder could pass written resolutions but that may not be enough. He stated as follows: “[13] It may have been possible for the companies to follow the procedure laid down by s 249B of the Act. This is imported by reg 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth) which permits scheme meetings of members to be conducted in accordance with Pt 2G.2, s 249B of the Act, and enables the resolution to be passed by a written resolution. [14] Nevertheless, in the present case, the plaintiffs have decided that the appropriate course is to hold a meeting rather than to have written resolutions. The meeting was seen to be necessary to enliven the jurisdiction of the court: see s 411(1) and (4)(a) of the Act. It seems to me to follow from what I have said above, that it is plain that the meetings can be held notwithstanding that each company has only one member.” [Emphasis mine] [42] In Australia (the procedure laid down by section 249B of the Act as imported by reg 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth), may permit scheme meetings of members to be conducted in accordance with Pt 2G.2, s 249B of the Act, and enables a resolution of members to be passed by a written resolution. [43] Whatever the position is in Australia (for which I make no finding), Malaysia does not have any regulations allowing the dispensation of Scheme Meetings. Indeed, to grant dispensation with the Scheme Meeting would mean that the section 366 requirements would not be met thus preventing sanction of the Schemes. Such failure to call Scheme Meetings would be a jurisdictional ‘blot’ on the Schemes preventing sanction within Snowden J’s test in Re Noble Group (No. 2) [2019] 2 BCLC 548 at para 17 and at para 112 below. [44] I do accept that there may have been instances where the Courts have granted dispensation with holding Scheme Meetings. However, I have not been shown any written reasons for such decisions. As such and given the controversy on this issue, I cannot place any real weight on any such orders made. In Tetuan Wan Shahrizal, Hari & Co v Public Prosecutor [2023] 4 MLJ 1, at [11] to [23], Abdul Rahman Sebli CJ (Sabah and Sarawak) in delivering the majority judgment of the Federal Court held as follows: “[17] Obviously therefore, a decision that is delivered without the written grounds does not establish any principle or rule of law on which the decision is founded. The decision is therefore devoid of any ratio decidendi (rationale for the decision). It has no value as precedent.” [45] Accordingly, despite the able submissions of Counsel, I refused to grant dispensation prayed for in para 5b of Encl 14. Shortening of Notice Periods [46] In order to mitigate the lengthening of the timelines to call the Scheme Meetings, the Notice period to call the Scheme Meetings could be shortened as could the period between the Scheme Meetings and the sanction hearing. This would allow the internal restructuring to proceed without delay, given the speed with which such restructurings would ordinarily need be completed. [47] There would be no prejudice as the Sole Member would be required to vote at the Scheme Meetings, and it had already agreed to vote in favour. [48]

This poses no problems, see SGIC Insurance Ltd (supra) at para In Millennium CHPP Pty Ltd v Millennium Coal Pty Ltd [2009] FCA 1556, Stone J held: “[3] … Because most of the Scheme companies are single member intra-group entities the meetings are more of a formality than would otherwise be the case. For this reason, also, the interval between the first hearing on 7 December and this second hearing on 16 December in respect of approval under s 413 has been unusually short. This is not inappropriate where the meetings involve members of the same corporate group; SGIC Insurance Ltd v Insurance Australia Ltd [2004] FCA 1492; 51 ACSR 470.” [Emphasis mine] [49] In the circumstances, although I refused dispensation under para 5b of Encl 14, I was willing to shorten the time periods with respect to calling the Scheme Meetings and for the sanction hearing. Need for Creditor Meetings [50] When the Scheme is a members’ scheme, it is necessary to consider whether the interests of the creditors will be affected. If not, meetings of the creditors are unnecessary, see Re Clydesdale Bank [1950] SC 30. [51] In SGIC Insurance Ltd & Others v Insurance Australia Limited [2004] FCA 1492, it was held: "[7] An issue arises as to whether the schemes need to be creditors schemes. This is because the transfer of the assets and liabilities of the scheme companies to IAL may be thought, at least on one view, to affect creditors. [8] The same issue arose in the Re Clydesdale Bank Ltd [1950] SC 30 (Re Clydesdale). That was a Scottish decision in which the reporter appointed in accordance with Scottish practice took the view that the scheme of arrangement affected the creditors. [9] In Re Clydesdale at 38, Lord Keith said that the decision of the court was that an arrangement of the kind proposed in the application was not an arrangement between the company and its creditors. His Lordship said that it was unnecessary for there to be meetings of creditors. [10] Re Clydesdale was followed by Young J in Re AGL Sydney Ltd

13 ACSR 597 (Re AGL Sydney). His Honour was of the view that a scheme such as the schemes proposed in the present application, which are schemes of reconstruction, should be dealt with as members schemes. His Honour pointed out that the appropriate protection for creditors is that they have the right to appear at the second court hearing in the event that they wish to express concerns as to the appropriate protection for creditors in the light of the transfer of obligations arising from the reconstruction." [Emphasis mine] [52] In All Star Funds Management Ltd v Ventura Investment Management Ltd [2012] FCA 527 at [10] to [11]: "10 In the present case, also in relation to the issue of creditors, paragraph 4.1 of the explanatory statement (which I note has been supported by a process of verification described in the affidavit material read into evidence) sets out that two of the scheme companies are dormant companies which have no balance sheet liabilities, and in relation to the other companies the directors of each scheme company believe that the creditors of each of those companies will not be adversely affected by the relevant scheme because, following the implementation of the scheme, each relevant transferee company will be solvent and have a superior net asset position to that of each scheme company. 11 … In terms of the position of creditors, Mr Oakes has pointed not only to the paragraphs of the explanatory statement to which I have referred but also to the evidence identifying the pro forma balance sheets for each of the plaintiffs and the defendants as at 31 March 2012, which supports the unaudited net position of each transferee company following implementation of the schemes…”. [Emphasis mine] [53] Counsel for the Applicants argues that the position of the Applicants is equally secure. He has taken great pains to adduce evidence that the Transferee Company which will receive the assets and undertaking of the First Applicant, has a net asset position that is clearly superior to the Transferor Company. [54] It was submitted that the Transferee Company will be fully solvent and no creditor would be prejudiced by the Schemes. This is because the combined assets of the Applicants after the implementation of the Scheme will be substantially larger than its combined liabilities. [55] Based on the latest management accounts of the Applicants as at 30.9.2024, the combined assets as against combined liabilities, are summarised below, see Exhibit "A-10" of Encl 2:

the management accounts of the Transferor Company as of 30.9.2024 show: Total assets RM 59,360,257 Total liabilities RM 11,593,166 Total net assets RM 47,767,091

the management accounts of the Transferee Company as of 30.9.2024 show: Total assets RM 915,670,404 Total liabilities RM 469,817,015 Total net assets RM 445,853,389

the combined assets against the combined liabilities of the Applicants are: Total assets RM 975,030,661 Total liabilities RM 481,410,181 Total net assets RM 493,620,480 [56] From the above analysis, I accept Counsel’s submission that the creditors will not be prejudiced by the Schemes. The Applicants are and will be fully solvent pre and post Schemes. [57] Meetings of the creditors are therefore unnecessary. The Schemes are truly Members’ Schemes which only require the consideration of the Sole Member. Preconditions to the Section 370 Ancillary Orders [58] It has been recognised that a scheme of arrangement is a legitimate method available under company law to effect a merger of two (2) or more companies in an expeditious and cost-effective manner. In Gower and Davies' Principles of Modern Company Law, 11th Edition at page 1796 to 1979, the learned authors opined: "Although it is perhaps not obvious that s. 895 contemplates the use of a scheme of arrangement to effect a merger, later sections make it clear that this is the case. Section 900 deals specifically with compromises or arrangements under s. 895 "proposed for the purpose of or in connection with a scheme for the amalgamation of two or more companies" and involving the transfer of the undertaking or property of one company involved in the scheme to another. Section 900 gives the court the power to make "ancillary orders" so as to transfer the undertaking from transferor to transferee company (without the parties having make arrangement to do this themselves by contract) and to dissolve the transferor company without winding it up.” [Emphasis mine] [59] These sections in the Companies Act (UK) are similar to the Malaysian legislation. It is therefore common for schemes of arrangement to include a mechanism for the transfer and vesting of assets and properties as part of the terms of the proposed scheme. [60] Indeed, section 370(2) is available to facilitate such vesting and transfers when a compromise or arrangement has been approved under section 366(4). Section 370(3) provides that an order made under section 370 for the transfer of property and liabilities will cause such property to be vested in, and liabilities to become the liabilities of, the transferee company. [61] However, there are preconditions before section 370 will apply. Approval of the Compromise or Arrangement [62] First, it will only apply if a compromise or arrangement is made and approved in connection with a scheme for the reconstruction or amalgamation of two (2) or more companies. [63] Section 370(1) provides: "370. Reconstruction and amalgamation of companies

This section applies where an application is made to the Court under this Subdivision for the approval of a compromise or arrangement and it is proved to the Court that –

the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or the amalgamation of any two or more companies; and

under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme, "transferor company", is to be transferred to another company, "transferee company". [Emphasis mine] [64] Secondly, under section 370(2), the vesting or transfer of assets and other ancillary orders may only be made after sanction or approval of the compromise or arrangement under section 366(4). Section 370(2), provides: “(2) The Court may, either by the order approving the compromise or arrangement or by any subsequent order, make provision for all or any of the following matters:

the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of the transferor company;

the allotting or appropriation by the transferee company of any shares, debentures, policies or other similar interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;

the continuation by or against the transferee company of any legal proceedings pending by or against the transferor company;

the dissolution without winding up of the transferor company; …

such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out." [Emphasis mine] [65] Thus, an application for and approval of a scheme of arrangement under section 366(4) is a precondition to the Court’s jurisdiction to make transfer or vesting orders under section 370. It follows therefore, that to meet the precondition for making the orders under section 370, there must be a duly approved scheme of arrangement that fully complies with all elements of section 366, procedural and substantive. This certainly includes properly held Scheme Meetings. [66] As such, the preconditions that must be met before section 370 may be utilised are as follows. [67] First, there must be an amalgamation or reconstruction of two (2) or more companies. [68] Secondly, there must be an extant compromise or arrangement made for the purposes of a scheme under section 366 for an amalgamation of two (2) or more companies, and that such compromise or arrangement is duly sanctioned and approved by Court under section 366(4). [69] Specifically, section 370(1) provides that the section applies where an application is made to the Court for the approval of a compromise or arrangement for the purpose of the amalgamation. And section 370(2) further provides that the Court may either by the order approving the compromise or arrangement or by any subsequent order, make transfer or vesting orders to give effect to the amalgamation. ‘Amalgamation’ [70] First, “Amalgamation” refers to a merging of the undertakings of two (2) or more companies into one undertaking. It includes a transfer of the undertaking of one (1) company to an existing company. [71] In my judgment and for the reasons stated below, the Schemes (if approved) will constitute an ‘amalgamation’ of the First and Second Applicants. As such, I need not consider whether the Schemes will amount to a ‘reconstruction’, which they may very well be. [72] In Cold Storage (Malaysia) Bhd v Pemungut Duti Setem [1988] 2 MLJ 93, the Supreme Court noted at para 98 that: "The meaning of the words "scheme for the amalgamation of any companies" was considered in the leading case of Crane Fruehauf Ltd v IRC [1975] 1 All ER 429. Stamp L.J. said at p. 435 of his judgment that an amalgamation consisted for the purpose of section 55 of the combining of the businesses of more than one company in such a way that the businesses remained in substance owned by the same persons. This result may be achieved in two classes of case:

by a transaction whereunder the business of an existing company is acquired by another company (the transferee company) in return for an issue of shares in the transferee company to the transferor company or to its shareholders;

by the acquisition by the transferee company of shares of the existing company in exchange for shares in the transferee company issued to the shareholders of the existing company. As Scarman L.J. observed at p. 437 that "amalgamation" was frequently used to describe a merging of the undertakings of two or more companies into one undertaking.” [Emphasis mine] [73] In Australia, a similar meaning was ascribed to “amalgamation”, see Opes Prime Stockbroking Limited [2009] FCA 813 at para 74; Barrick (Australia Pacific Exploration) Pty Limited v Barrick (PD) Australia Pty Limited, in the matter of Barrick (Australia Pacific Exploration) Pty Limited (No. 2) [2017] FCA 1076 (“Barrick”) at para 65. And for “reconstructions”, see also Chevron (TAPL). [74] In my judgment, the transfer of the assets of a transferor company to the transferee company whereby the assets of both companies will thereafter be held by the transferee company, will amount to an “amalgamation”. In Chevron (TAPL) at para 23, a similar scheme was held to be an amalgamation: “[23] I am satisfied on the basis of the Implementation Agreement and the proposed scheme booklet that the Scheme is an arrangement between TAPL and its sole member, CAHPL. In substance the Scheme involves a transfer of the whole of the property and liabilities of one wholly owned subsidiary of CAHPL to another wholly owned subsidiary of CAHPL.” [75] I therefore accept that the Schemes in the present case fall squarely within the meaning of an “amalgamation” in section 370 and that ex facie, the vesting and transfer provisions thereunder, are available to the Applicants. An Approved section 366 Scheme [76] Secondly, in the context of an ‘amalgamation’, section 370 itself (supra) provides that the Court’s jurisdiction under section 370 is limited. As stated above, it only applies where a compromise or arrangement is proposed and approved for the purposes of a scheme for the amalgamation of two (2) or more companies. [77] In this sense, the Court does not have stand-alone jurisdiction or powers to give effect to an amalgamation without an approved scheme for an amalgamation. [78] There are analogous provisions in England, see sections 899 and 900 of the Companies Act 2006 (UK). In Australia, section 413 of the Corporation Act 2001 (Australia) provides for the transfer and vesting of property where a compromise or arrangement was proposed for the purposes of a reconstruction or amalgamation under a scheme of arrangement. [79] In SGIC Insurance Ltd v Insurance Australia Ltd [2004] FCA 1638 at para 1, Jacobson J regarded the application for approval of a scheme under section 411(4)(b) of the Corporations Act 2001 as a condition precedent to the court's jurisdiction to make orders giving effect to the amalgamation under section 413. For completeness, I also refer to Energy Services (Queensland) Pty Ltd v AGL Energy Services Pty Ltd (No 1) [2010] FCA 452 at paras 14 - 15 as followed in All Star Funds (supra) at paras 4 and 5; Barrick (supra) at para 81; and Chevron (TAPL) (supra) at [47]. [80] The above statutory provisions in Australia in relation to the Court's power to make ancillary orders are analogous to the Malaysian sections 366 and 370. [81] Whatever the position is in Australia, the terms of CA 2016 are clear. It is a condition precedent to the exercise of the power in section 370 that a scheme of arrangement for the purposes of an amalgamation must not just be made but it must also be approved. The ancillary orders under section 370(2) may be made either at the time the compromise or arrangement (i.e. the scheme) is approved, or by subsequent order. [82] In my judgment, a proposal for a compromise or arrangement for the purposes of an amalgamation has been made within section 370(1). And when the compromise or arrangement is approved, I would then have the power to make the ancillary orders under section 370(2) may be made. An Artificial Scheme to invoke Section 470 [83] The third issue is this. If the approval of a scheme of arrangement is a precondition to the making of a vesting or transfer order, will a scheme artificially and deliberately created merely to fulfil this statutory precondition, will be considered an abuse of process. [84] From a practical standpoint, all that would ordinarily be required to effect an amalgamation would be to complete the agreement between a Transferor and the Transferee, to transfer the assets and undertaking of the Transferor to the Transferee. Theoretically, the assets, liabilities and undertaking could be vested in the Transferee by contractual novations or assignments. [85] However, in a large and complex internal reconstruction or amalgamation, the mechanics and time needed to vest the legal title of such assets in the Transferee could be lengthy and bordering on the impracticable. I have in mind the “transfer” of employees and contracts which are non-assignable by reason of “no assignment” clauses or contracts for personal services. If to be implemented contractually, such transfers may involve lengthy negotiations and numerous legal and practical hurdles. [86] In Chevron (TAPL) (supra), it was held at para 61: "… s 413(1) enables the Court to make an order which has the effect of transferring a contract even if it contains a provision to the effect that it cannot be assigned without a party's consent: Stork at [96]-[99]; and J.P. Morgan Operations Australia Limited v J.P. Morgan Australia Group Pty Limited, in the matter of J.P. Morgan Operations Australia Limited [2018] FCA 1131 at [28] (Farrell J). The rationale, as explained in Stork, is that if the Court makes such orders, then any transfer that occurs, regardless of any contractual restrictions, occurs by operation of law under s 413(2)." [Emphasis mine] [87] So, the transfer of all obligations, and liabilities occurs by operation of law under section 370(2)(f), see also Stork ICM Australia Pty Ltd, Re; Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd (2007) 25 ACLC 208 at paras 98 and 99; Bombardier Transportation Australia Pty Ltd v Alstom Transport Australia Pty Limited (No 2) [2022] FCA 880 at para 59. [88] Such a consequence would cut through difficult practical problems, like the ones described above which would otherwise necessitate negotiated novations with third parties. In most cases, statutory vesting would therefore be necessary. [89] It is obvious that the preconditions of the statutory vesting sections should not be interpreted too stringently, which would otherwise unnecessarily stifle the reconstruction process. [90] It is inevitable that a scheme of arrangement would be artificially created to take advantage of the vesting provisions. For example, when consensual novations could be obtained to effect vesting and there was no real need for a scheme. [91] In Barrick (supra) Barker J at para 51, cited with approval, the dicta of Emmet J in AGL Energy Services (Qld) Pty Ltd (supra) at paras 14 and 15: “[14] A scheme for reconstruction or amalgamation within s 413 is not, of itself, a compromise or arrangement between a Part 5.1 body and its creditors within s 411. However, before the jurisdiction under s 413 can be exercised, there must be such a compromise or arrangement. As a practical matter, it may be that the compromise or arrangement is one that does not need to rely on s 411(4), because it is something that could be effected privately between a company and its members, as in this case, between the Company and the Company Member. However, there is nothing untoward, in invoking the powers conferred on the Court by s 411 as a prerequisite to enlivening the further provisions of s 413 (see, for example, Re Clydesdale Bank Ltd (1950) SC 30 at 36 ff, …. [15] The element of compromise or arrangement that is necessary to satisfy s 411 need not be of any great magnitude or significance, so long as what is proposed can fairly be characterised as a compromise or arrangement between a company, on the one hand, and its members, on the other. That will suffice to enliven the Court’s powers under s 413, so long as the compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction or amalgamation. Clearly enough, what is being proposed is for the purposes of, and in connection with, such a scheme.” [Emphasis mine] [92] So, artificially creating a scheme even if the transfers could be achieved privately, is permissible so long as the scheme involved a compromise, which must have an element of ‘give and take’ within the widely accepted broad definition of Brightman J in Re NFU Development Trust Ltd [1972] 1 WLR 1548. [93] Similarly, in JP Morgan Operations Australia Ltd v JP Morgan Australia Group Pty Ltd, Re JP Morgan Operations Australia Ltd [2018] FCA 1131, it was held: “[18] No narrow interpretation should be given to the expressions “compromise” or “arrangement”. A scheme of arrangement must involve some arrangement in a sense that is to be construed liberally. An arrangement within the meaning of s 411 connotes some element of give and take. An arrangement must involve some bargain giving benefit to both sides. However, there is no reason to construe the terms in s 411 as restricting in any way the nature of the bargain that might be made between a company and its members or creditors, subject only to the additional requirement that the arrangement must be within the power of the company and not in contravention of the Corporations Act: see Fowler v Lindholm (2009) 178 FCR 563; [2009] FCAFC 125 at [67] per Emmett, Gordon and Jagot JJ. The element of compromise or arrangement need not be of any great magnitude or significance, but it must be present. It can be satisfied by an agreement by members to the scheme despite diminution in their shareholding and the waiver of rights associated with that diminution in value: see All Star Funds Management Limited v Ventura Investment Management Ltd [2012] FCA 527 per Jagot J at [4]– [5]. [19] Transfers of liabilities and assets of the kind proposed have been held to be within the meaning of reconstruction and amalgamation in s 413: see All Star Funds Management Limited at [13] and the cases there cited.” [Emphasis mine] [94] In All Star Funds (supra), the Court held: “[13] In addition, and in accordance with the written submissions, the proposed orders under s 413 — namely, the transfer of the assets and liabilities of one company (and in this case, more than one company) in a corporate group to another company (and in this case, other companies) in a corporate group with the transferor company being deregistered — have been held to be within the meaning of a reconstruction and amalgamation as set out in s 413, having regard to the decisions in Stork and AGL. In other words, I am satisfied that what is ultimately proposed does involve an amalgamation or reconstruction within the meaning of that provision.” [Emphasis mine] [95] The scheme in All Star Funds (supra) was considered an ‘amalgamation’ within the analogous Australian sections. The Schemes in our case are similar. I am satisfied that they are sufficient for section 370 to be “enlivened”. It mattered not that the compromise could have been achieved privately and contractually. To hold otherwise would unjustifiably restrict the benefits of the vesting provisions and hinder the reconstruction or amalgamation process. [96] In my judgment, the transfer of the assets and liabilities of the Transferor to the Transferee with the implicit release of the Transferor from such liabilities will be sufficient ‘give and take’ within NFU Development (supra). There is no abuse. The jurisdiction to order the ancillary transfers and vesting has therefore been legitimately “enlivened”. And such orders may accordingly be made. ENCL 14 – THE CONVENING APPLICATION [97] The law on the three (3) stage Scheme process under section 366 is now clear, see the Federal Court in Mansion Properties Sdn Bhd v Sham Chin Yen & Ors [2021] 1 MLJ 527, at para 28. [98] We are at the first stage, the convening stage. Leave to convene Scheme Meetings of the Applicants to approve the Schemes is the subject of Encl 14 which I will now consider. The Court’s Role at the Convening Stage [99] In ASM Development Sdn Bhd v Badan Pengurusan Bersama Lingkaran Maju [2024] MLJ 3502, I considered the role of the Court at the convening stage. I said this: “[18] It is trite that the merits of the scheme (going to fairness and feasibility) will, generally, not be decided at the convening hearing. As explained by Ong J [in Air Asia X], this is a matter that goes to the exercise of discretion and should be left to the sanction stage. David Richards J (as he then was) set the standard in Re Telewest Communications plc (No 1); Re Telewest Finance (Jersey) Ltd (No 1) [2005] 1 BCLC 752 at para 14 … [19] Apart from jurisdictional issues, it is also open to the Court to consider factors which will prevent a Court from sanctioning the scheme, commonly termed ‘roadblocks’. In Re Noble Group Ltd (No 1) [2019] 2 BCLC 505, Snowden J (as he then was) said: “[76] What I do think that a scheme company can legitimately ask at the convening stage is for the Court to indicate whether it is obvious that it has no jurisdiction to sanction the scheme, or whether there are other factors which would unquestionably lead the Court to refuse to exercise its discretion to sanction the scheme. This is often described as the question of whether there is a 'roadblock' in the way of the Company. That was, I think, the real thrust of the points being made by David Richards J in T&N and by Hildyard J in Apcoa (No 1).” [Emphasis mine] [100] The above is the usual approach. [101] Classification, being a jurisdictional issue, will be considered at the convening stage. As would any issue that would be considered a ‘roadblock’ or lead to sanction being inevitably refused. [102] In as far classification is concerned, this being Members’ Schemes, only the Sole Member will attend the Scheme Meetings of both Applicants. Obviously, no other members will be prejudiced as there are none; issues as to unfairness between members do not therefore arise. Further, I have refused to dispense with the Scheme Meetings and I have found that meetings of creditors are unnecessary. As such, I am satisfied that there are no jurisdictional or fairness issues; nor are there any ‘blots’ on the Schemes. [103] In as far as commercial aspects of the Schemes are concerned, this is a matter for the persons commercially interested in the Schemes to consider. Generally, it is not for judicial minds to substitute our views for that of commercial men.

In an insolvent scheme, these are the creditors, see Transmile Group Bhd & Anor v Malaysian Trustee Bhd & Ors [2012] 9 CLJ 1071, per Nallini Pathmanathan J (now FCJ) at para 103; Sentoria Bina Sdn Bhd v Impak Kejora Sdn Bhd [2021] 12 MLJ 690, Anand Ponnudurai JC (as he then was) at paras 59 to 60.

In Members’ schemes it is the Members. In our case, the Sole Member will make the decision as to whether the Schemes are commercially acceptable, see Bombardier (supra). [104] Hence, issues as to whether the commercial benefits of the internal restructuring under the Schemes are acceptable, must be left to the Sole Member as the only member of each Applicant. [105] In the circumstances, on 28.11.2024, I granted an order convening the Scheme Meetings of each Applicant on terms of the Amended Encl 3 (now Encl 14) (“Convening Order”). I dismissed the prayer in para 5b asking for dispensation of the Scheme Meetings. THE SCHEME MEETINGS [106] Pursuant to the Convening Order, the Sole Member was summoned by a Notices of the Scheme Meetings dated 3.12.2024 (“Scheme Notices”). On 4.12.2024, copies of the Scheme Notices, the Explanatory Statement to be served under section 369 enclosing the Schemes (“ES”), and the Form of Proxy for the Scheme Meetings (collectively, the “Scheme Documents”) were circulated to the Sole Member by e-mail. [107] On 5.12.2024, two (2) separate Scheme Meetings for each Applicant were held virtually on Microsoft Teams. The Scheme Meeting of the 1st Applicant was held on 5.12.2024 at 11.30am and that of the 2nd Applicant was held 5.12.2024 at 12.00 noon. [108] The Sole Member attended the Scheme Meetings by its corporate representative, Michael N. Levy. The resolutions were circulated at the Scheme Meetings and were approved by the Sole Member. The above, can be discerned from the two (2) affidavits filed by the Chairman on 6.12.2024 in Encls 18 and 19, to report on the outcome of the Scheme Meetings. [109] I am satisfied that the holding the Scheme Meetings complied with the Convening Order ENCL 14 – THE SANCTION APPLICATION [110] The application pursuant to prayer 6 of Encl 14 was for approval or sanction of the Schemes. The test for sanction is as set out by Snowden J in Re Noble Group Ltd and another (No 2) [2019] 2 BCLC 548. His Lordship adopted the test in Buckley on the Companies Acts (13th Edn, 1957) and held: “[17] There are, accordingly, four stages to be gone through under the Buckley test:

At the first stage, the Court must consider whether the provisions of the statute have been complied with. This will include questions of class composition, whether the statutory majorities were obtained, and whether an adequate explanatory statement was distributed to creditors.

(ii) At the second stage, the Court must consider whether the class was fairly represented by the meeting, and whether the majority were coercing the minority in order to promote interests adverse to the class whom they purported to represent.

(iii) At the third stage, the Court must consider whether the scheme is a fair scheme which a creditor could reasonably approve. Importantly it must be appreciated that the Court is not concerned to decide whether the scheme is the only fair scheme or even the 'best' scheme.

(iv) At the fourth stage the Court must consider whether there is any 'blot' or defect in the scheme that would, for example, make it unlawful or in any other way inoperable. [Emphasis mine] [111] The application of the four (4) limbs of the Buckley test proved to be relatively straightforward.

First, the provisions of the statute have been complied with, including classification. This is a members’ scheme and the meetings of the members of the Applicants have been called. Meetings of the Sole Member of each Applicant were held and the resolutions passed.

Secondly, being Members’ Schemes, all members of each Applicant (being the Sole Member) attended and voted at the Scheme Meetings. Obviously, there was no question of coercing other members.

Thirdly, the Schemes are fair and are such that the Members could approve. Indeed, the Sole Member did approve each Scheme. The shareholders’ vote in favour of a scheme is evidence of its inherent fairness; if a majority of the shareholders have approved the scheme, it is unlikely that the scheme would be unreasonable, see Bombardier Transportation (supra) at para 8, where it was held: “[8] The shareholders ‘vote in favour of a scheme is evidence of its inherent fairness; if a majority of the shareholders have approved the scheme, it is unlikely that the scheme would be unreasonable: Amcor Ltd, in the matter of Amcor Ltd (No 2) [2019] FCA 842 at [11] (Beach J).”

Fourthly, there is no ‘blot’ or defect that would make the Scheme unlawful or inoperable, see para 102 above. [112] On 17.12.2024, I sanctioned the Schemes pursuant to section 366(4). ENCL 1 – THE ANCILLARY VESTING & TRANSFER ORDERS [113] I refer to paras 61 to 82 and para 114 above and state that I am satisfied that the preconditions to making the ancillary vesting and transfer orders under sections 370(1) and 370(2) have been met. [114] Further, I find that the ancillary orders sought are appropriate to implement the Schemes and the amalgamation of the Applicants, see generally the considerations in Stork (supra); Chevron (TAPL) (supra); Barrick (supra); Bombardier Transportation (supra). These orders will facilitate the vesting of the undertaking and liabilities of the Transferor Company into the Transferee Company, thus giving effect to the amalgamation under the Schemes. In particular, I refer to the prayer for dissolution without winding up. I also granted this as there will be nothing left in the Transferor Company and it will assist in the completion of the Schemes, as was the case in Bombardier Transportation (supra), see para 55. [115] I therefore also made the said ancillary orders as prayed for under paras 4 to 16 of Encl 1 on 17.12.2024,. CONCLUSION [116] In summary, I made the orders required to implement the Schemes. [117] I did not forget Counsel’s efforts in the research and preparation of the submissions, for which I am grateful. They were very helpful indeed. Dated 9th March 2025 ...................t.t........................... YA Tuan Saheran Suhendran Judicial Commissioner, High Court of Malaya, Kuala Lumpur. Eddie Chuah & Sofia Asyikin binti Mohd Kamil (Wong & Partners) for Applicant Cases Referred to: • Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, Chevron (TAPL) Pty Ltd [2022] FCA 220 (“Chevron (TAPL)”) • Re TSB Nuclear Energy Investment UK Ltd & Ors [2014] EWHC 1272 • Re Duomatic Ltd. [1969] 2 Ch. • Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 • Re Australian Consolidated Press Ltd (1994) 14 ACSR 639 • Re Montana Frocks Pty Ltd (1967) 87 WN (Pt 1) 271 • AGL Energy Services (Qld) Pty Ltd v AGL Energy Services Pty Ltd (BC201002963) • Re Hastings Deering Pty Ltd. (1985) 9 ACLR 755 • Millennium CHPP Pty Ltd v Millennium Coal Pty Ltd [2009] FCA 1556 • Re Castle Trust Direct plc [2020] EWHC 969 • Re Noble Group (No. 2) [2019] 2 BCLC 548 • Tetuan Wan Shahrizal, Hari & Co v Public Prosecutor [2023] 4 MLJ 1 • Re Clydesdale Bank [1950] SC 30 • SGIC Insurance Ltd & Others v Insurance Australia Limited [2004] FCA 1492 • All Star Funds Management Ltd v Ventura Investment Management Ltd [2012] FCA 527 • Gower and Davies' Principles of Modern Company Law • Cold Storage (Malaysia) Bhd v Pemungut Duti Setem [1988] 2 MLJ 93 • Opes Prime Stockbroking Limited [2009] FCA 813 • Barrick (Australia Pacific Exploration) Pty Limited v Barrick (PD) Australia Pty Limited, in the matter of Barrick (Australia Pacific Exploration) Pty Limited (No. 2) [2017] FCA 1076 • AGL Energy Services (Queensland) Pty Ltd v AGL Energy Services Pty Ltd (No 1) [2010] FCA 452 • Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd (2007) 25 ACLC 208 • Bombardier Transportation Australia Pty Ltd v Alstom Transport Australia Pty Limited (No 2) [2022] FCA 880 • Re NFU Development Trust Ltd [1972] 1 WLR 1548 • JP Morgan Operations Australia Ltd v JP Morgan Australia Group Pty Ltd, Re JP Morgan Operations Australia Ltd [2018] FCA 1131 • Mansion Properties Sdn Bhd v Sham Chin Yen & Ors [2021] 1 MLJ 527 • ASM Development Sdn Bhd v Badan Pengurusan Bersama Lingkaran Maju [2024] MLJ 3502 • Transmile Group Bhd & Anor v Malaysian Trustee Bhd & Ors [2012] 9 CLJ 1071 • Sentoria Bina Sdn Bhd v Impak Kejora Sdn Bhd [2021] 12 MLJ 690 • Re Noble Group Ltd and another (No 2) [2019] 2 BCLC 548 Legislation referred to: • Companies Act 2016 (“CA 2016”) • Federal Court (Corporations) Rules 2000 • Companies Act 2006 (UK) • Corporation Act 2001 (Australia) Decision date: 17th December 2024