Pestech International Berhad (WA-24NCC(SOA)-1-01/2025)

These Grounds concern the application in Enclosure 1 [Encl 1]; an ex parte Originating Summons dated 23.1.2024 for sanction (“Sanction Application”) of a pre-packaged scheme of 2 arrangement (“the Pestech Pre-Pack”) between the Applicant and selected creditors (“the Scheme Creditors”).

Encl 1 is filed under section 369C of the Companies Act 2016 (“CA 2016”). It was introduced on 1.4.2024 as part of the new amendments to CA 2016, which provided for brave changes to the existing company law regime.

All references to sections are with reference to CA 2016, save where the context otherwise provides.

The cause papers filed herein comprise:

Encl 1;

affidavit of Datuk Mohamed Razeek Bin Md Hussain Maricar of 23.1.2025 [Encl. 2] in support of Encl 1;

supplementary affidavit of Ng Kar Man of 14.2.2025 [Encl. 9] in support of Encl

[5] The Contents of these submissions are as out below. Contents Para No. INTRODUCTION 3-5 Pre-packaged schemes 6-11 LEGISLATIVE HISTORY OF PRE-PACKS 12-14 Singapore: Section 71 of IRDA 15 US v UK Regimes 16-19 The Singapore Legislation 20 Malaysia: Section 369C 21-25 26 Introductory Facts 26-28 Financial Distress & the Pestech Pre-Pack 29-31 Advisors & The White Knight 32-33 The Scheme Debts 34-36 & THE CASH SETTLEMENT 37-43 The Vote Solicitation 44-49 The Initiation of the Pestech Pre-pack 50 Despatch of the ES & Ballot Forms 51-56 Voting Results as at 15.1.2025 57-60 The Filing of Encs 1 & 3 61-65 SANCTION 66-67 The Singapore Decisions 68-74 The Test for Section 369(C) Sanction 75-82 Disclosure to Scheme Creditors 83-92 Classification & the Statutory Majority 93-96 Classification 97-103 Calculation of the Statutory Majority 104-114 Section 369(C) Pre-Conditions 115-118 Bona Fide, Fair & Equitable 119-123 THE PROTECTION OF THE NON-SCHEME CREDITORS 124-125 The Rights of Excluded Non-Scheme Creditors 126-134 Initial Submissions 135 Comparison between the section 366 and section 369C Regimes 136-137 The IP’s 1st Report 138-140 Notice & Advertisement of the Pestech Pre-Pack 141-146 THE IP’S 2ND REPORT 147-151 CONCLUSION 152-154 POSTSCRIPT & POTENTIAL ABUSE 155-156

Pre-packaged schemes of arrangement (“pre-packs”) under the new section 369C are designed to expedite the conventional scheme process. The section now allows for pre-packs to be sanctioned and effective without applications for convening orders or the holding of scheme meetings.

I had occasion to consider whether meetings in conventional schemes under section 366 could be dispensed with, in Re Purecircle Trading Sdn Bhd & Anor [2025] MLJU 711; I held that they could not, see paras 40 to 43. Scheme meetings under section 366 are jurisdictional. So, failing to hold scheme meetings would 5 mean that the Court would have no jurisdiction to sanction the underlying scheme.

That must have been disappointing to the Applicant in Purecircle as the scheme only involved an internal intra-group restructuring which would be unanimously approved by the sole shareholder. Thus, the holding of meetings would, in practical terms, be an unnecessary expenditure of resources and time.

As a meeting in a conventional scheme is jurisdictional, it is no surprise that dispensation with meetings could only be permitted if new legislation were introduced allowing dispensation. Hence, I can only surmise that it was for this reason that section 369C and section 71 of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”) in Singapore, were enacted.

These pre-packs may compromise only selected or key creditors. Indeed, to ‘pre-pack’ all creditors may be impracticable. However, the legislation in Singapore and Malaysia makes no mention of the creditors that will be untouched by the pre-pack scheme and of protection afforded to them.

Accordingly, protection for such creditors must therefore be left to the Courts. This is one (1) of the reasons why Singapore preferred the US Chapter 11 regime over the UK pre-packaged administration. The US regime provides for Court supervision whereas the UK version generally does not, see paras 16 to 19 below. 6 LEGISLATIVE HISTORY OF PRE-PACKS

Malaysia’s pre-pack regime under section 369C was adopted from Singapore’s provisions introduced in 2017, and later re-introduced in 2018 through IRDA. Only Malaysia and Singapore have pre-pack scheme of arrangement regimes.

Singapore’s IRDA, was in turn, inspired by the US Chapter 11 regime under the United States Bankruptcy Code, Sub-Chapters II and III (“Chapter 11”).

The main purpose of the US Chapter 11 Regime was to expedite pre-packaged or pre-approved restructuring plans between a company and its creditors. As will be seen, this was also the reason to implement the pre-pack regimes in Malaysia and Singapore.

In 2015, the Singapore Ministry of Law established the ‘Committee to Strengthen Singapore as an International Centre for Debt Restructuring’ (“Committee”).

In its report dated 20.4.2016, at para 3.40, the Committee recommended that the US Chapter 11 regime be adopted in preference to the regime in England and Wales (“the UK pre-pack”). Apparently, the Committee also recommended adopting a pre-pack mechanism with safeguards including requirements to 7 give adequate disclosure to all creditors, see Re DSG Asia Holdings Pte Ltd [2021] SGHC 209 at para 22.

In essence, the Committee preference of the US pre-pack approach was that it offered greater flexibility in conceiving a restructuring plan. In contrast, the UK pre-pack involved the sale of the debtor’s business or assets by an administrator, which may not be practicable in all cases. And at para 3.40(b), the requirement for court approval allows a judicial body to act as a ‘gatekeeper’ to ensure that minority dissenting creditors are treated fairly and serves as a good safeguard against potential abuse.

Further, the UK pre-pack was not without controversy. The pre-arranged sale of the company’s business raised questions.

The appointment and sale by the administrator will result in a rapidly executed sale. Although structurally seen as a sale, economically, it achieves a debt restructuring, resulting in writing-off debt.

The sale is pushed through by the administrator while ostensibly shielding the directors and management from a challenge for a breach of duty, (see for example, the comments of the Mann J in Re Bluebrook Ltd [2009] EWHC 2114 (Ch) at para 7(v)). The purchaser could even be a director through a related company. And with management remaining in control. This ‘phoenixing’ of businesses is generally frowned upon.

Generally, and apart from the initial administration order, it is not subject to Court supervision. The potential for abuse is obvious. [19] What probably tipped the balance was the requirement of Court approval, see para 17 above. The Singapore Legislation [20] By section 22 of the Singapore Companies (Amendment) Act 2017, the pre-pack scheme mechanism was introduced as section 211I of the Singapore Companies Act (“CA section 211I”). In 2018, IRDA was enacted, which repealed CA section 211I and re-introduced pre-packs in section 71 of IRDA. Malaysia: Section 369C [21] The Malaysian section 369C was adapted from IRDA’s section 71. [22] Section 369C was introduced into CA 2016 by section 13 of the Companies (Amendment) Act 2024, which came into force on 1.4.2024. [23] In the prior Consultative Document on the Proposed Companies (Amendment) Bill 2020 (“Consultative Document”) at p. 262, it was stated (at para 60) that the policy objective of the pre-pack scheme regime was to allow the Court to approve a scheme without a meeting of creditors. [24] This led to section 369C (1), which provides: “369C. Power of Court to approve compromise or arrangement without meeting of creditors

Where a compromise or arrangement is proposed between a company and its creditors or any class of those creditors, the Court may, on an application made by the company, grant an order approving the compromise or arrangement without any meeting of the creditors or class of creditors.” [Emphasis mine] [25] Encl 1 was filed under section 369C. Introductory Facts [26] The Applicant is listed on the Main Market of Bursa Malaysia Securities Berhad (“Bursa”). [27] It is the ultimate parent company of the PESTECH Group of companies (“PESTECH Group”), which comprises more than thirty

companies operating in Malaysia and South-east Asia. [28] The PESTECH Group was in the business of engineering, manufacturing, installation, testing and commissioning electrical power infrastructures such as substations and transmission lines for power grid and rail networks. Financial Distress & the Pestech Pre-Pack [29] In 2023, the PESTECH Group faced financial difficulties. It generated a loss (before tax) of RM389.9 million. It attributed such difficulties to a range of factors, including:

the slowing progress of projects due to higher borrowing costs and restricted access to liquidity;

the termination of the ‘Aerotrain’ project on 16.8.2023 by Malaysia Airports Holdings Bhd (which has since been revived and where works are ongoing);

the termination of the Gemas-Johor Bahru Electrified Double Track project on 10.5.2023 by Syarikat Pembenaan Yeoh

the disposal to Cambodian Transmission II Co. Ltd on 22.3.2023, of a concession asset to develop a 230-kilovolt power transmission in Cambodia;

some of its international projects had “back-end” payment terms, where the PESTECH Group would need to finance the construction costs upfront through borrowings and thereafter, to be paid in stages by the project owners over four (4) to ten

years. This protracted collection period resulted in PESTECH Group having to wait extended periods before being paid;

there was a suspension of some of the PESTECH Group’s working capital facilities. [30] The PESTECH Group incurred debts of around RM267 million owed to working capital lenders, whereby the Applicant was either a principal borrower or a guarantor. [31] The Applicant sought to compromise this selected debt of RM267 million by implementing the Pestech Pre-Pack. Advisors & The White Knight [32] The Applicant appointed Thinkat Advisory Sdn Bhd (“Thinkat”) and Alvarez & Marsal (Malaysia) Sdn Bhd (“A&M”) to advise on the proposed restructuring (collectively “the Advisers”). [33] The Applicant, by the Advisers, also entered into negotiations with potential white knights.

On 24.7.2023, the Applicant entered into a share subscription agreement with IJM Corporation Berhad to fund PESTECH Group’s projects and repay borrowings. However, this agreement was terminated by mutual consent on 15.8.2024.

On 4.10.2024, the Applicant entered into a subscription agreement with Dhaya Maju Infrastructure (Asia) Sdn Bhd (“DMIA”) for the subscription of 1,333,333,500 shares in the Applicant for RM160 million (“DMIA Subscription”). The Scheme Debts [34] As stated above, the Pestech Pre-Pack sought to only resolve the RM267 million (“the Scheme Debts”) owed to the working capital Scheme Creditors. The compromise would be achieved by a cash payment of RM65 million to the Scheme Creditors, pari passu. [35] The Scheme Creditors comprised six (6) unsecured banks grouped within a single class of unsecured financial institutions, namely:

Alliance Bank Malaysia Berhad;

Bangkok Bank Berhad;

Bank Muamalat Malaysia Berhad;

CIMB Islamic Bank Berhad;

Maybank Islamic Berhad; and

OCBC Bank (Malaysia) Berhad. [36] Certain creditors were excluded from the Pestech Pre-Pack (“Excluded Creditors”) which form part of a wider group of Non-Scheme Creditors. The Excluded Creditors are set out in Appendix G of the Explanatory Statement (“ES”). They comprise:

Perpetual Sukuk Holders: holders of perpetual sukuk under the Applicant’s Perpetual Sukuk Musharakah Programme, these debts will be resolved separately through bilateral settlement.

Project Financing Creditors: syndicated financiers whose debts are secured against a project in Cambodia, and which will also be resolved separately through bilateral settlement.

Secured and Performing Creditors: banks whose debts are either secured by cash proceeds from projects or which arose from performing facilities. These will be settled in the ordinary course of business.

Preferential Creditors: employees and statutory bodies.

Professional Services: professional fees and expenses incurred in connection with the Pestech Pre-Pack payable to financial advisors, solicitors and the Court appointed Insolvency Practitioner. & THE CASH SETTLEMENT [37] The compromise of the Scheme Debts under the Pestech Pre-Pack was to be effected in two (2) phases, comprising fundraising and cash settlement. [38] The 1st Phase (fundraising) comprised the DMIA Subscription to raise RM160 million to fund the following:

RM60 million as cash settlement of the Scheme Creditors;

RM17 million for operational needs;

RM82 million as working capital; and

RM1 million to pay the estimated expenses of the DMIA Subscription. [39] A total of RM65 million would be used to pay the Scheme

RM60 million would be paid from sums allocated for the cash settlement; and

an additional sum of RM5 million would be paid from the RM82 million allocated for working capital. [40] The 2nd Phase (cash settlement) would be the cash payment of RM65 million to Scheme Creditors, pari passu. [41] As of 30.9.2024 (“Cut-Off Date”), the Cash Settlement represented about 24.35% of the Scheme Debts resulting in a ‘haircut’ to Scheme Creditors of about 76%. Details are set out in the table below. Scheme Creditors Scheme Creditors’ Debts as of Cut-Off Date Cash Settlement amount

Alliance Bank Malaysia Berhad (“Alliance Bank”) 42,957,028.33 10,457,913.28 2. Bangkok Bank Berhad (“Bangkok Bank”) 22,192,143.81 5,402,690.19 3. Bank Muamalat Malaysia Berhad (“Bank Muamalat”) 64,699,965.71 15,751,243.91 4. CIMB Islamic Bank Berhad (“CIMB”) 36,748,040.25 8,946,331.56 5. Maybank Islamic Berhad (“Maybank”) 45,714,462.20 11,129,212.14 6. OCBC Bank (Malaysia) Berhad (“OCBC”) 54,683,004.47 13,312,608.92 TOTAL 266,994,644.77 65,000,000.00 [42] The proceeds from the DMIA Subscription earmarked for the Cash Settlement were deposited into a designated escrow account maintained at Bank Islam Malaysia Berhad in the Applicant’s name (“Escrow Account”). Control over the Escrow Account and the Cash Settlement, would remain with the Applicant. [43] Upon disbursement of the Cash Settlement to the Scheme Creditors under the Pre-Pack:

the balance of the Scheme Debts would be deemed waived;

the guarantees and any other security executed for the facilities giving rise to the Scheme Debts (as set out in Appendix F of the ES at Exhibit “A-1” in Encl. 2) would be deemed discharged. The Vote Solicitation [44] As stated above, the Pestech Pre-Pack under section 369C does not involve obtaining a convening order nor holding Scheme Meetings. The Applicant would thus proceed directly to obtain Sanction from Court. Provided of course, the necessary statutory pre-conditions are met. [45] In particular, the Applicant would need to ensure that the necessary votes are secured. The threshold remains at 75% in value of the Scheme Creditors under section 367C(3)(d) when read together with section 366(3). [46] As such, a vote solicitation process is necessary to determine if sufficient votes have been secured to obtain sanction. To proceed without such support may result in a pointless and expensive failure. [47] On 15.11.2024, the Applicant wrote to the six (6) Scheme Creditors to obtain approvals-in-principle for the Pestech Pre Pack. [48] The Applicant secured approvals-in-principle with the Scheme Creditors which in turn, also satisfied the DMIA Subscription and formed the basis of the Pestech Pre-Pack. [49] By the closing date of 18.12.2024, four (4) Scheme Creditors with a total debt of approximately RM208 million (being 78% of the total Scheme Debts) responded favourably, see Appendix J of the ES at Exhibit “A-1” in Encl. 2, and as set out in Table 2 below.

Alliance 42,957,028.33 2. Bank Muamalat 64,699,965.71 3. Maybank 45,714,462.20 4. OCBC 54,683,004.47 TOTAL 208,054,460.71 The Initiation of the Pestech Pre-pack [50] With the statutory majority of 75% successfully secured through the aforesaid approvals-in-principle, the Applicant formally initiated the Pestech Pre-Pack. Despatch of the ES & Ballot Forms [51] On 18.12.2024, the Applicant issued the ES (see Exhibit “A-1” in Encl. 2) to the six (6) Scheme Creditors by hand and email, see Exhibit “A-2” in Encl.

[52] Counsel submitted that the ES set out all necessary information to enable the Scheme Creditors to make an informed decision on the Pestech Pre-Pack. This included, given the DMIA Subscription, the effect of the Pestech Pre-Pack on the Applicant’s shareholding structure. [53] As no physical Scheme Meetings under section 369C would be held, securing the necessary statutory majority would be held by Ballot through a notional voting process. Ballot Forms were sent to the Scheme Creditors with the ES, see Appendix I of the ES at Exhibit “A-1” in Encl. 2. [54] The ES required the Scheme Creditors to return their respective Ballots indicating whether they voted for or against the Pestech Pre-Pack, no later than 5.30pm on 15.1.2025 (“Voting Deadline”). [55] As at the Voting Deadline, the Applicant received a total of five (5) Ballots from the Scheme Creditors (see Exhibit “A-2” in Encl. 2). The total debt of these five (5) Scheme Creditors was RM202,294,679.06, comprising debts of:

four (4) banks (Alliance Bank, CIMB, Maybank and OCBC) being owed a total of RM180,102,535.25 (representing 89% of the total value of votes received). These banks voted in favour of the Pestech Pre-Pack; and

one (1) bank (Bangkok Bank) being owed RM22,192,143.81 (representing 11% of the total value of votes received). It voted against. [56] On 10.1.2025, the Applicant sent reminders of the Voting Deadline to the Scheme Creditors, see Exhibit “A-2” in Encl. 2. Voting Results as at 15.1.2025 [57] As at the Voting Deadline, the Applicant received a total of five (5) Ballots as aforesaid. [58] The voting results based on the Ballot Forms returned are set out in Table 3 below:

Against) Alliance Bank 42,957,028.33

For Bangkok Bank 22,192,143.81

CIMB 36,748,040.25

For Maybank 45,714,462.20

For OCBC 54,683,004.47 For 202,294,679.06 N/A [59] Bank Muamalat, which responded favourably by giving its approval-in-principle (see Exhibit “A-2” in Encl. 2) did not submit a Ballot by the Voting Deadline. [60] In summary, RM180,102,535.25, representing 89% in value of the votes received (comprising Alliance Bank, CIMB, Maybank and OCBC) voted in favour, while 11% (being Bangkok Bank) voted against, see Table 4 below. Table 4 Scheme Creditor Debt as of Cut-Off Date (RM) Value of debt

Against Alliance Bank 42,957,028.33 21% 21% -

Bangkok Bank 22,192,143.81 11% - 11%

CIMB 36,748,040.25 18% 18% -

Maybank 45,714,462.20 23% 23% -

OCBC 54,683,004.47 27% 27% - 202,294,679.06 100% 89% 11% The Filing of Encls 1 & 3 [61] Given the positive voting results, the Applicant filed Encl 1 for sanction. [62] The Applicant also filed the application to appoint an Insolvent Practitioner (“IP”) under section 367(3)(a) (“IP Appointment Application”) which is mandatory when a pre-pack scheme under section 369C is proposed. Section 367 provides: “367. (1) The Court may, on an application for the approval of a compromise or arrangement under section 366, appoint an insolvency practitioner to assess the viability of the proposed compromise or arrangement.

The insolvency practitioner appointed under subsection (1) shall prepare a report on the viability of the proposed compromise or arrangement and shall table the report at the meeting of creditors or members held under section 366.

Notwithstanding subsection (1), the Court shall appoint an insolvency practitioner for the company when—

the company makes an application under section 368B, 368D or 369C; or

a related company of the company makes an application under section 368A

The insolvency practitioner appointed under this section—

shall have the right of access to all the records of the company at all reasonable times; and

shall be entitled to require from any officer of the company any information and explanation as he may require for the purposes of his duty.

Where an insolvency practitioner is appointed under subsection (3), the insolvency practitioner shall prepare and submit a report on the progress of the proposed compromise or arrangement to the Court in the manner as the Court may determine before the compromise or arrangement is approved pursuant to subsection 366(4).” [Emphasis mine] [63] The stated duties of the IP under section 367 are basic. [64] Generally, the IP is to assess the viability of the scheme for the benefit of the creditors at the meeting under section 367(2). Certainly, the IP is to act for the benefit of the creditors. And he is to report the progress of the scheme to the Court under section 367(5). [65] On 3.3.2025, I made the appointment. SANCTION [66] I will now deal with application for Sanction in Encl 1. [67] There are no reported decisions or grounds of judgment dealing with section 369C in Malaysia. However, I did grant sanction for one (1) pre-pack scheme on 13.1.2025 in KL OS No. WA- 24NCC(SOA)-4-10/2024 involving Skyline Embassy Sdn Bhd. But with no written grounds. The Singapore Decisions [68] The Singapore cases dealing with sanction under section 71 of IRDA are important. They are:

Re DSG Asia Holdings Pte Ltd [2021] SGHC 209 (“DSG

Re Brightoil Petroleum (S’pore) Pte Ltd [2022] SGHC 35 (“Brightoil”); and

Re No Va Land Investment Group Corp [2024] SGHC(I) 17 (“No Va Land”). [69] In DSG Asia, the brief facts are as follows.

It concerned a sanction application under section 71 of IRDA for a pre-pack made by a group of nine (9) companies in Singapore and Malaysia. Sanction was contested.

Ultimately, the Court refused sanction and found that the applicant failed to make adequate disclosure to its scheme creditors before voting. And upon proper classification of its creditors, the statutory majority was not achieved. [70] In DSG Asia, Aedit Abdullah J confirmed that the objective of section 71 of IRDA is to provide an expedited scheme process. The considerations at sanction were held to be limited. His Lordship said: “[30] As the objective of the s 71 process is to provide an expedited process, the quid pro quo is satisfactory fulfilment of the requirements in s 71. Neither the IRDA nor the extrinsic materials indicate that a strict standard should be applied to determine whether the requirements are satisfied. [31] I am prepared in this case to interpret s 71 as requiring only that a clear case of agreement to the scheme be established. A stricter approach may be unduly narrow, as the statutory framework is intended to expedite matters rather than create a minefield for applicants. However, the threshold cannot be so low as to effectively allow applicants to circumvent the statutory requirements. A clear case standard strikes an appropriate balance: the applicant must show a clear case that there has been proper disclosure, as well as fulfilment of the voting requirements, which in turn entails proper classification of creditors.” [Emphasis mine] [71] DSG Asia at paras 65 and 66, also established that the bona fides of a scheme application is an implied requirement as a matter of general principle. DSG Asia was followed in Brightoil at para 19 and No Va Land at para 28. [72] Based on DSG Asia and section 369C, Counsel submitted that there are four (4) requirements to sanction a pre-pack scheme:

first, there was full disclosure of information to the scheme creditors to allow them to make an informed decision on how to vote on the pre-pack scheme. This is reflected in section 369C(3)(a) (“Disclosure”);

secondly, the statutory majority of scheme creditors was achieved on the notional counting of votes by Ballot under section 369C(3)(d) (“Voting”);

thirdly, the proposed scheme is bona fide (“Bona Fides”);

fourthly, the statutory pre-conditions have been satisfied (the “Statutory Pre-Conditions”), including: i. publishing a notice of the scheme application in accordance with section 369C(3)(b); ii. notifying the scheme creditors of the scheme application and sending them a copy of the same pursuant to section 369C(3)(c). And an Explanatory Statement under section 367C(3)(a); iii. appointing an IP under section 367(3)(a). [73] DSG Asia suggests that the Applicant only need show that there is a ‘clear case’ that these requirements have been met. [74] I believe that the ordinary test for sanction for a conventional scheme of arrangement, the Buckley test, is not wholly displaced. In my judgment, the Buckley test remains but is applied mutatis mutandis and subject to the statutory requirements in section 369(C). The Test for Section 369(C) Sanction [75] As stated in para 23 above, the objective of the section was to expedite the conventional scheme process by dispensing with the scheme meetings (and obviously, without convening applications). Section 369C (1), provides: “369C. Power of Court to approve compromise or arrangement without meeting of creditors

Where a compromise or arrangement is proposed between a company and its creditors or any class of those creditors, the Court may, on an application made by the company, grant an order approving the compromise or arrangement without any meeting of the creditors or class of creditors.” [Emphasis mine] [76] Indeed, the section itself suggests that the absence of a meeting is the only substantive difference and accordingly, section 369(C) is merely a modification of the section 366 process. In my mind, what was intended was that (subject to satisfying the statutory requirements in 369C) the standards under section 366 would continue to apply, with modifications. For example, section 369C(3)(d) applies the standards in section 366(3) in that the Court must be satisfied that had a meeting been summoned, the conditions in subsection 366(3) (such as the voting threshold) would have been satisfied. [77] It follows that the authorities applicable to section 366 will apply (see DSG Asia at para 21) and more importantly, the test for sanction should also apply mutatis mutandis. [78] In KNM Group Bhd & Anor v Hitachi Zosen Corporation & Ors [2025] MLJU 1234, I set out the traditional test for sanction, the Buckley test. “[137] … What is within the remit of the Sanction Court is generally outside the remit of the Convening Court. These are ‘the merits’, which comprise the four (4) stages of the Buckley test, as set out by Snowden J in Re Noble Group Ltd (No. 2) [2018] EWHC 3029 at para 17. “[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] [79] First, while I accept that the four (4) requirements propounded in DSG Asia (supra) apply, with the greatest of respect, I do not accept that they are exclusive. In my judgment, the Buckley test still applies mutatis mutandis. The sanction Court, in my view, will still need to assess whether the pre-pack scheme is fair, and that the majority creditors are not coercing the minority and that there is no ‘blot’ or defect that would make it unlawful or inoperable. [80] Secondly, what is glaring is that the statutory protection is primarily for the benefit of the Scheme Creditors. The ES, by section 369(C)(3)(a) is to be given to the Scheme Creditors only. No mention is made of nor consideration is given to the Excluded Non-Scheme Creditors. I accept that while their interests may not be affected by the pre-pack nor will they have any economic interest therein, these creditors are still allowed to complain if the pre-pack treats them unfairly. I have considered the rights of the Excluded Non-Scheme Creditors in paras 125 to 152 below. [81] Thirdly, I do not believe that tin considering the elements of the Buckley test over and above the four (4) prescribed in DSG Asia, will delay the pre-pack to an extent that would defeat the objective of expediting the scheme process. There is no basis to prevent the application of the Buckley test. The rights of all affected stakeholders warrant protection, particularly when the Court is expected to act as a ‘gatekeeper’ to prevent abuse, see para 17 above. In my judgment, the price for the expedited process has been paid by the express provisions in section 369C; there is no room for further intrusion into the protection of affected persons. [82] I hold accordingly. I would restate the modified Buckley test applicable to sanction under section 369(C)(1) as follows. The Court must be satisfied that:

there was sufficient disclosure in the ES in compliance with section 369C(3)(a) including, in particular, such information as is necessary to enable the creditors to make an informed decision whether to agree to the compromise or arrangement;

there has been proper classification and the proper calculation of votes on the notional voting by Ballot to ensure that had a meeting been summoned, the conditions in section 366(3) would have been satisfied;

that the statutory pre-conditions in section 369(C) have been satisfied;

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;

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;

that the proposed scheme is bona fide. This would include ensuring that excluded creditors or stakeholders with no economic interest in the pre-pack are not treated unfairly;

whether there is any 'blot' or defect in the scheme that would, for example, make it unlawful or in any other way inoperable. Disclosure to Scheme Creditors [83] Disclosure, by section 369C(3)(a) requires the provision of the following information: “(i) information concerning the company’s property, assets, business activities, financial condition and prospects;

(ii) information on the manner in which the terms of the compromise or arrangement will, if it takes effect, affect the rights of the creditor; and

(iii) such other information as is necessary to enable the creditor to make an informed decision whether to agree to the compromise or arrangement.” [84] No Va Land at pp. 327-356, dealt with the disclosure obligations in pre-packs. James Michael Peck IJ held at paras 41 and 43 that the duty of disclosure does not come with a fixed checklist, but will depend on the facts of each case. He held: “[41] The Disclosure Requirement does not say how much information should be furnished. The list includes broad descriptions of what needs to be disclosed but leaves room for interpretation and does not offer specific guidelines for the Court or the parties regarding the nature and content of the required disclosure. The centering premise, however, is the necessity to furnish information that will enable an informed decision regarding a proposed compromise of a creditor’s rights with respect to outstanding obligations of a company… [43] Because each negotiation to restructure indebtedness necessarily involves its own distinct set of underlying facts, personalities, and business environments, as well as varying levels of complexity and commercial risk, it is impractical to treat the Disclosure Requirement as a fixed checklist. In effect, what should be included and what constitutes proper disclosure will depend on the particulars of each case.” [Emphasis mine] [85] I agree. Similarly, as I endeavoured to explain in KNM Group (supra) at paras 118 to 129, in a conventional scheme, what will amount to sufficient disclosure is fact sensitive and will vary from case to case. [86] In the present Pestech Pre-Pack, the Applicant and its Advisers engaged the Scheme Creditors in negotiations on how to resolve their Scheme Debts, which ultimately resulted in the proposed Cash Settlement. [87] I agree that the ES provides an overview of the events prior to the Pestech Pre-Pack, as well as the precise terms of settlement for each Scheme Creditor. [88] The Scheme Creditors were given one (1) month to review the ES (the ES was despatched on 18.12.2024) to submit their Ballots by the Voting Deadline of 15.1.2025. The Guidelines for the Chapter 11 Regime suggests a 21-day period for pre-packs; as such, a month appears reasonable. [89] Further, the Scheme Creditors here, are sophisticated and established financial institutions who would be perfectly able to assess the Pestech Pre-Pack within the time provided. [90] In No Va Land (supra) at para 51, Peck IJ held: “[51] Sophisticated parties, acting prudently, cannot be expected to compromise their claims without being given sufficiently detailed and reliable financial information on the company and its prospects. Thus, it seems that the commercial motivations and bargaining behavior naturally present in private negotiations can be expected to provide reasonable assurances that creditors will be given the materials that are needed to make well-informed business decisions.” [Emphasis mine] [91] As four (4) out of (5) Scheme Creditors, being established banks, had voted in favour implicitly shows that disclosure was sufficient. Otherwise, the Pestech Pre-Pack would have been rejected. [92] I therefore accept that the Applicant has made sufficient Disclosure to the Scheme Creditors. Indeed, the IP in his 1st Report also took the view that there was sufficient disclosure. Classification & the Statutory Majority [93] These two (2) requirements are critical: proper classification and the proper calculation of votes on the notional voting by Ballot. [94] Section 369C(3)(d) provides that the Court must be satisfied that: “had a meeting … been summoned, the conditions in subsection 366(3) would have been satisfied”. [95] Section 366(3) provides that a scheme is binding 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.” [96] These sections assume that the classification of creditors is correct. The calling of a physical meeting for voting is dispensed with, replaced by notional voting by Ballot. Both must be satisfied. Classification [97] First, in DSG Asia at para 47, the Court highlighted the need for the scheme creditors to be classified properly for the notional creditors’ voting. [98] The test for classification in a pre-pack scheme is no different than that in a conventional scheme as section 369C(3)(d) for pre-packs incorporates the class requirements for conventional schemes in section 366(3). [99] Essentially, the correct test as to classification is that in Sovereign Life Assurance v Dodd [1892] 2 QB 573 as approved by the Federal Court in relation to conventional schemes in Francis a/l Augustine Pereira v Dataran Mantin Sdn Bhd & Ors and other appeals [2014] 6 MLJ 56 at paras [44] and [65]. I reproduced and followed this test in KNM Group (supra) at para 59. [100] The Sovereign Life test for classification is this. “All creditors of a company whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.” [101] Here, the six (6) Scheme Creditors are Working Capital Lenders who provided unsecured working capital facilities to the PESTECH Group whereby the Applicant is either a borrower or a guarantor (see Encl 2, para 14(d)). [102] The Scheme Creditors are all unsecured creditors. They will all receive a similar Cash Settlement of 24.35% of their debts (see Table 1 above). They will all rank pari passu in the comparator scenario of a winding up. [103] As such, their rights against the Applicant are sufficiently similar so that they may consult together in voting on whether to accept the Prestech Pre-Pack. They were correctly placed in one (1) class. Calculation of the Statutory Majority [104] The calculation to determine whether the statutory majority has been achieved is governed by sections 369(3)(d) and 366(3). [105] Section 369(3)(d) provides: “the Court is satisfied that had a meeting of the creditors or class of creditors been summoned, the conditions in subsection 366(3) would have been satisfied.” [106] In turn, section 366(3) provides: “(3) The compromise or arrangement shall be binding on–

all the creditors or class of creditors …, if the compromise or arrangement is agreed by a majority of seventy-five percentum of the total value of the creditors or class of creditors… present and voting” [107] On the reading of section 369(3)(d), if a meeting were held, section 366(3) would be satisfied if 75% of creditors present and voting, voted in favour. In a physical meeting, creditors present but who did not vote are excluded from determining the total votes cast. [108] What is required under section 369(3)(d) is to apply the principles in section 366(3), mutatis mutandis, to a notional meeting under section 369(3)(d). [109] So, in a notional meeting, only creditors who have submitted their ballots and indicated their vote are treated as being present and voting within section 366(3). This would entitle them to have their votes counted towards the total votes cast. This was the approach taken in Brightoil, which concerned a pre-pack scheme with twelve

scheme creditors eligible to vote. Of the 12, only 11 voted by ballot: 10 voted in favour, while 1 voted against. The outcome of the notional vote was that the vote achieved the statutory majority and was accepted by the Court. [110] In Brightoil, out of the 12 scheme creditors, only the 11 scheme creditors who submitted their ballots were counted when calculating the total votes cast. The sole scheme creditor who did not submit its ballot was excluded from the total, being considered as a creditor present but not voting within section 366(3). I was informed that there were other instances in Singapore where a similar approach was taken. [111] I agree with this approach. [112] In the present Pestech Pre-Pack, the Applicant adopted the same mode of calculation, see Table 4: Table 4 Scheme Creditor Debt as of Cut-Off Date (RM) Value of debt Voted For Voted

Against Alliance Bank 42,957,028.33 21% 21% -

Bangkok Bank 22,192,143.81 11% - 11%

CIMB 36,748,040.25 18% 18% -

Maybank 45,714,462.20 23% 23% -

OCBC 54,683,004.47 27% 27% - 202,294,679.06 100% 89% 11% [113] Bank Muamalat was excluded as it did not submit its Ballot. Out of the five (5) Scheme Creditors that submitted Ballots, 89% in value voted in favour. [114] Thus, in my judgment, the Applicant has achieved the statutory majority prescribed under sections 366(3) and 369(3)(d) on the notional voting for the Pestech Pre-Pack. Section 369(C) Pre-Conditions [115] Insofar as the Statutory Conditions are concerned, the Applicant has complied with section 369C(3)(b) and (c) in that:

as required under section 369C(3)(b), the Applicant published a notice of the Sanction Application via e-Advertisement on the CCM official website on 4.2.2024 (see Exhibit “NKM-1”in

on 18.12.2024, when the Pestech Pre-Pack was launched, the Applicant circulated the ES to the six (6) Scheme Creditors together with the ballot forms;

as required under section 369C(3)(c), the Applicant served a notice together with a copy of the Sanction Application to all the Scheme Creditors on 27.1.2025 (see Exhibit “NKM-1” in Encl. 9). [116] In relation to the appointment of an IP under section 367(3)(a):

the Applicant filed the Sanction Application together with the application for the appointment of the IP for the Pestech Pre-Pack. The Applicant nominated Mr. Alex Chiang of Messrs

the IP gave his Consent to Act with over 14 years of experience in corporate advisory, insolvency and restructuring in Malaysia;

the IP was prepared to submit a report to Court on the progress of the Pestech Pre-Pack under section 367(5);

I granted the IP Appointment Application on 3.3.2025. [117] As such, I believe that the Applicant has complied with all relevant statutory requirements before an order for sanction may be made. The Applicant has met all four (4) DSG Asia requirements - Disclosure, Voting, Bona Fides and the Statutory Conditions. [118] Over and above those, I believe that within the Buckley test, the Pestech Pre-Pack was fair and there is no evidence to suggest that any affected person was treated unfairly. Lastly, there was no apparent ‘blot’ on the Pestech Pre-Pack. Bona Fide, Fair & Equitable [119] It appears that over the course of several months, the Applicant and its Advisers engaged in negotiations with the Scheme Creditors to reach an acceptable settlement on the terms of the Pestech Pre-Pack. [120] Prior to the launch of the Pestech Pre-Pack, the Applicant first obtained approvals-in-principle from the Scheme Creditors. The Scheme Creditors’ formal approval was obtained on the Ballot voting. [121] As stated above, the Scheme Creditors are sophisticated and established banks. It is unlikely that the negotiated approval of the Pestech Pre-Pack by the majority of these banks would be anything less than bona fide. [122] The one (1) Scheme Creditor who voted against, Bangkok Bank, has not intervened in these proceedings nor has it formally objected to Encl 1 nor challenged the Pestech Pre-Pack in any way. Similarly, the one (1) Scheme Creditor who did not submit a Ballot, Bank Muamalat, did not intervene nor object to Encl 1. No other creditor or stakeholder has raised any objections. [123] There is therefore no evidence to suggest that the Pestech Pre-Pack was anything other than bona fide. THE PROTECTION OF THE NON-SCHEME CREDITORS [124] There was one (1) last issue that I required Counsel to deal with. What became apparent was that the statutory safeguards in section 369(c) were designed only for the protection of the Scheme Creditors. As stated above, it was glaringly obvious that there was little or no statutory protection for the Excluded Non-Scheme Creditors. Indeed, the Parliamentary reading in Singapore (see para 180 below) emphasised that certain groups of creditors may be excluded from pre-packs and were not affected. [125] And there were indeed, a number of Excluded and Non-Scheme Creditors excluded from the Pestech Pre-Pack. I was concerned to ensure that the rights of these creditors would not be harmed. The Rights of Excluded Non-Scheme Creditors [126] As a general principle, creditors who are excluded from a proposed scheme have no legal interest in the scheme, as they are neither affected nor bound by the scheme. The test is whether an excluded creditor has an economic interest in the scheme so as to be allowed a right to be heard. This test is derived from In re Tea Corporation Ltd [1904] 1 Ch 12. [127] Bluebrook (supra), a decision of Justice Mann, is a case on point. In that case, three (3) scheme companies applied for Court’s sanction of three (3) schemes of arrangement, each between a scheme company and its lenders, the ‘Senior Lenders’. At the Scheme Meetings, the schemes were approved by the requisite statutory majority. Only two (2) creditors voted against the schemes. [128] At sanction, a group of subordinated creditors (the ‘Mezzanine Lenders’ not affected by the schemes) objected, arguing that the schemes operated unfairly to them because they were deprived of valuable rights against the scheme companies. [129] The key principles applicable to the rights of an excluded creditor to object to a scheme are set out at paras 24 to 26 of the case: “[24] A company is free to select the creditors with whom it wishes to enter into an arrangement and need not include creditors whose rights are not altered by the scheme. This appears from Sea Assets Ltd v Pereroan etc Garuda Indonesia [2001] EWCA Civ 1869 and In re British & Commonwealth Holdings plc [1992] 1 WLR 672. Prima facie, therefore, the company is entitled to select the Senior Lenders as being those with whom it wishes to enter into a scheme and not enter into a scheme with the Mezzanine Lenders as well. Of course, whether that scheme can ultimately be effected, or will be sanctioned, is another matter. At this stage the question is one of choice of counterparty. [25] Next, in promoting and entering into a scheme, it is not necessary for the company to consult any class of creditors (or contributories) who are not affected, either because their rights are untouched or because they have no economic interest in the company. This is apparent from In re Tea Corporation Ltd [1904] 1 Ch 12, … [26] The schemes do not involve the Mezzanine Lenders in the sense of engaging them as parties. They will not bind them, and their legal rights are unaffected. The Mezzanine Lenders therefore cannot, and do not, complain as persons whose legal rights are being altered by the schemes in some unfair way. However, they are still entitled to object as creditors on grounds of unfairness if the schemes unfairly affect them in ways other than altering their strict rights. The court is exercising a discretion, and as a matter of principle can consider unfairness in that sense, if it is made out. That is the essence of the case of the Mezzanine Lenders.” [Emphasis mine] [130] In objecting to the scheme, the Mezzanine Lenders at para 30 argued, inter alia, that the directors of the scheme companies failed to negotiate a proper benefit for the creditors of the scheme companies (apart from the Senior Lenders), and that the schemes were part of a restructuring that was unfair to the non-participating creditors because of the alleged disproportionate benefits offered to the Senior Lenders. [131] Mann J dealt with the various objections raised by the Mezzanine Lenders, and ultimately concluded that: “[80] … it seems to me to be right to sanction the schemes, (or at least not to refuse to sanction them) and I so find. The Mezzanine Lenders are not bound by the schemes, and therefore their legal rights are unaffected. So far as it is said that in the circumstances the schemes are part of an overall arrangement which works unfairly to them, I find that they do not. I do not consider they have a relevant economic interest in the scheme companies.” [Emphasis mine] [132] Following Bluebrook, the legal interests of the Excluded Non-Scheme Creditors are unaffected by the Pestech Pre-Pack, as they are not bound by the same. However, it is clear that the Excluded Non-Scheme Creditors may still challenge the schemes for unfairness. [133] Indeed, this was confirmed by Leech J in Re Lamo Holding B.V. [2023] EWHC 1558 (Ch), who also recognised a challenge from non-parties to the Scheme. He held: “(2) The opposition of creditors and shareholders who are not parties

Section 899 of the Companies Act 2006 does not state in terms that a shareholder or creditor who is not a party to the proposed scheme and who has not voted at the scheme meetings has standing to oppose the scheme at the sanction hearing. Likewise, in formulating the general test which the Court should apply, David Richards J in Telewest (No 2) and Snowden J in KCA Deutag did not exclude the possibility that a creditor or shareholder, who is not a party and who is not entitled to vote, should be entitled to oppose the scheme on the basis that it is unfair or that there is some blot or defect in the scheme which should prevent the Court from exercising its discretion to sanction it. [Emphasis mine] [134] I asked Counsel to address me on how the rights and interests of the Excluded Non-Scheme Creditors are protected in the Pestech Pre-Pack. Initial Submissions [135] Counsel sought to persuade me that the Excluded Non-Scheme Creditors were not prejudiced for the following reasons.

Comparison between the scheme mechanisms in sections 366 and 369C shows increased safeguards.

Findings in the IP’s 1st Report submitted by the IP to the Court.

Notice to Scheme Creditors and advertisement of the Pestech Pre-Pack.

General position at law vis-à-vis Excluded Non-Scheme Creditors. Comparison between the section 366 and section 369C Regimes [136] Counsel set out the key differences between conventional section 366 schemes and pre-packs under section 369C. Section 369C scheme Section 366 scheme

The company must provide a copy of: (1) the details of the proposed scheme (typically by way of an ES), and

the sanction application to each creditor to be bound by the proposed scheme. (sections 369C(3)(a) and 369C(3)(c) At the first convening stage, the scheme company may apply ex parte for leave to convene Scheme Meetings. The scheme creditors may apply to intervene to challenge the proceedings. At the sanction stage, there is no express requirement to serve the sanction application on all the scheme creditors.

(ii) The company must publish a notice of the proposed scheme in the manner required by the CCM. section 369C(3)(b) The scheme company would issue the notice of the scheme meeting, explanatory statement (under section 369) and with the proof of debt form (section 369B). The SSM Guidelines for the Adjudication of Proof of Debts would also apply. The theme across these sections are that the scheme company would only be issuing such documents and seeking the proof of debt from the creditors to be bound by the scheme (see section 369B

where a Court order extending the submission period for proof of debt must be served on each scheme Creditor).

(iii) The Court can direct the company to give further notice of the sanction application to the creditors. section 369C (4) There is no equivalent provision under the section 366 scheme.

(iv) It is mandatory for the Court to appoint an insolvency practitioner to submit a report on the proposed scheme. section 367(3)(a) It is not mandatory for the Court to appoint an insolvency practitioner. section 367(1) [137] It was submitted that from the table above:

the section 369C regime comes with additional procedural safeguards which are not present in a section 366 scheme;

although the section 369C pre-pack is a fast-tracked mechanism which dispenses with scheme meetings (although required in a section 366 scheme), there are more stringent procedural requirements in place to ensure that the Scheme Creditors in pre-packs are kept informed. The IP’s 1st Report [138] On 14.3.2025, the IP produced a report dated 12.3.2025 on the progress of the Pestech Pre-Pack submitted to Court under section 367(5) [Encl. 17] (“IP’s 1st Report”). [139] All Scheme Creditors were kept informed of Encl 1 at every stage of the proceedings, as confirmed by the IP. [140] The key findings in the IP’s 1st Report in Encl. 17 are:

in para 3.12 (at pp. 21), the IP noted that the Pestech Pre-Pack would yield an estimated return of 24.45% to the Scheme Creditors, which is higher than the returns in a liquidation (of about 1.4% to 7.3%);

in para 4 (at pp. 22-23), the IP reviewed the notional voting process by ballot and confirmed that it satisfied the requirements under section 369C (in para 4.9);

in para 5 (at pp. 23-24), the IP summarised his findings:

that the Applicant had provided the Scheme Creditors with sufficient information on the Pestech Pre-Pack in accordance with section 369C(3)(a), which would allow them to make an informed decision on the voting;

(ii) that the Scheme Creditors have been sufficiently informed of the Pestech Pre-Pack and the Sanction Application throughout the entirety of the restructuring exercise;

(iii) that had a meeting been convened pursuant to section 366(3), the Applicant satisfy the voting requirements. Notice & Advertisement of the Pestech Pre-Pack [141] In the IP’s 1st Report, the IP highlighted the following notices given by the Applicant to the Scheme Creditors.

On 15.11.2024, the Applicant wrote to the six (6) Scheme Creditors to secure approvals-in-principle for the Pestech Pre-Pack. By 18.12.2024, four (4) Scheme Creditors (Alliance, Bank Muamalat, Maybank and OCBC) representing 78% in value of the Scheme Creditors’ Debts responded favourably, see paras 2.15 and 2.16 (see Encl. 17 at pp. 18-19 and 1162- 1167).

On 18.12.2024, when the Pestech Pre-Pack was launched, the Applicant sent the ES to the six (6) Scheme Creditors together with the Ballot Forms, see para 4.2 and noted that all the Scheme Creditors acknowledged receipt of the ES on the same day (see Encl. 17 at pp. 22 and 1168-1190).

On 10.1.2025, the Applicant reminded Scheme Creditors who had not submitted their Ballot Forms that the Voting Deadline was 15.1.2025. The IP confirmed this at para 4.3 (see Encl. 17 at pp. 22 and 1191-1199).

As at the Voting Deadline of 15.1.2025, the Applicant received a total of five (5) Ballot Forms from the Scheme Creditors. The IP verified this as well as the weightage of each Scheme Creditor’s vote at paras 4.4 to 4.8 (see Encl. 17 at pp. 22-23 and 1200-1205): four (4) Scheme Creditors (Alliance Bank, CIMB, Maybank and OCBC) representing 89% of the total value of votes, voted in favour; and one (1) Scheme Creditor (Bangkok Bank) representing 11% of the total value of votes against the Pestech Pre-Pack.

On 27.1.2025, the Applicant informed the Scheme Creditors that Encl 1 was filed on 23.1.2025 and provided them with a copy of the Application. The IP confirmed this at para 4.10 (see Encl. 17 at pp. 23 and 1213-1219).

On 4.2.2025, the Applicant published a notice of the Sanction Application via e-Advertisement on the CCM official website. The IP confirmed that he sighted the publication of this notice at para 5.1 item 2(6) (see Encl. 17 at pp. 24 and 1206-1209).

On 7.3.2025, the Applicant informed the Scheme Creditors that the Court had appointed the IP on 3.3.2025 and that the Sanction Application is fixed for hearing on 25.3.2025. The IP confirmed this at (see para 5.1 item 2(7) Encl. 17 at pp. and 1220-1226). [142] However, the comparison of the differences between the section 366 and section 369(C) regimes did not help as the additional protection in section 369(C) was only for the benefit of the Scheme Creditors. Further, the findings in the IP’s 1st Report and Notices also predominantly benefit the Scheme Creditors only. [143] Such protection as outlined above is not afforded to the Excluded Non-Scheme Creditors, who were my main concern. I was not persuaded by this analysis that the Excluded Non-Scheme Creditors are protected. [144] The analysis changed with arrival of the IP’s 2nd Report (see para 147 below). [145] After the IP submitted his 1st Report to the Court, on 19.3.2025 the Applicant sent a copy of the IP’s 1st Report to the Scheme Creditors and reminded them that the Sanction Application is fixed for hearing on 25.3.2025 (see Encl. 18 at pp. 14-19). [146] The Sanction Application was called for hearing on 25.3.2025, where the matter was fixed for continued hearing on 16.4.2025. On 26.3.2025, the Applicant updated the Scheme Creditors of this continued hearing (see Encl. 20 at pp. 5-10). THE IP’S 2ND REPORT [147] On 8.4.2025, the IP submitted the IP’s Supplemental Report dated 7.4.2025 (“IP’s 2nd Report”) to address my query in relation to the protection of the Excluded Non-Scheme Creditors [Encl. 19]. [148] It changed everything.

in para 1.4 of the IP’s 2nd Report (see Encl. 19 at pp. 9-10), the IP confirmed that he had reviewed additional reference materials (comprising non-public information) to assess the financial position of the Applicant and in particular, whether the interests of the Excluded Creditors were addressed or affected under the terms of the Pestech Pre-Pack.

in paras 2.1 to 2.3 of the IP’s 2nd Report (see Encl. 19 at pp. 11-12), the IP noted that the Applicant and its Advisors had a meeting on 8.11.2024, which was attended by the six (6) Scheme Creditors and the six (6) financiers who were the Excluded Creditors, comprising:

Industrial and Commercial Bank of China (Malaysia) Berhad with an outstanding amount of RM173 million as at 30.9.2024 (see Table 2 item 8);

(ii) Bank of China (Malaysia) Berhad with an outstanding amount of RM226 million as at 30.9.2024 (see Table 2 item 4);

(iii) Bank Islam Malaysia Berhad with an outstanding amount of RM27 million as at 30.9.2024 (see Table 2 item 3);

(iv) Al-Rajhi Banking & Investment Corporation (Malaysia) Berhad with an outstanding amount of RM15 million as at 30.9.2024 (see Table 2 item 2);

HSBC Bank Malaysia Berhad with an outstanding amount of RM10 million as at 30.9.2024 (see Table 2 item 7); and

(vi) Hong Leong Islamic Bank Berhad with an outstanding amount of RM7 million as at 30.9.2024 (see Table 2 item 6).

All twelve (12) banks were briefed on the Pestech Pre-Pack (cf. Encl. 17 pp. 1149 at Table 2).

In paras 2.5 and 2.6 of the IP’s 2nd Report (see Encl. 19 at pp. 12-13), the IP estimated the Applicant’s cash flow forecast over seven (7) years. This showed that the Excluded Creditors’ debts will be accounted for through:

repayment out of secured contract assets,

(ii) settlement in the ordinary course of business,

(iii) payment via proceeds from the share subscription exercise and cash generated from the Applicant’s operations, or

(iv) pursuant to a separate restructuring.

provided details of the Pestech Pre-Pack and its effects on the Applicant’s shares and assets;

informed that the Sanction Application was fixed for hearing on 16.4.2025;

invited any creditor who had queries to contact the Applicant’s solicitors;

however, there were no queries from any creditor on the Pestech Pre-Pack or the Sanction Application. [151] The IP’s 2nd Report addressed my fears for the Excluded Non-Scheme Creditors. The invitation to creditors to forward queries and the advertisements of the notice of the Pestech Pre-Pack and the hearing date for Encl 1 showed that the Excluded Non-Scheme Creditors were not altogether ignored. CONCLUSION [152] I took the view that the Applicant had met all the necessary requirements for the Pestech Pre-Pack to be sanctioned. In particular, there is no evidence to show that the Excluded Non-Scheme Creditors were prejudiced in any way. The IP’s 2nd Report and the absence of complaints after the advertisements satisfied me that no creditor or stakeholder was treated unfairly in the Pestech Pre-Pack. [153] In the circumstances, I granted an order sanctioning the Pre-Pack Scheme under Encl 1. [154] I must thank Counsel for the Applicant for their hard work and enthusiastic submissions on this new area. POSTSCRIPT & POTENTIAL ABUSE [155] After my further research and analysis of pre-packs in Singapore, UK and to a superficial extent, the Chapter 11 regime in the US, I cannot help but think that pre-packs in general, do not adequately protect non-scheme creditors. [156] There is a common danger in pre-pack regimes, whether by way of pre-pack schemes or pre-pack administrations. It stems from the very objective of these regimes, speed and secrecy.

In para 3 of the IP’s 2nd Report (see Encl. 19 at pp. 13), the IP concluded that the Excluded Creditors’ interests were addressed in the PESTECH Group’s cash flow forecast. And that the Excluded Creditors’ interests are not affected nor prejudiced by the Pestech Pre-Pack. [149] Some of the Excluded Creditors were also privy to the proposed restructuring of the Scheme Creditors’ Debts in the negotiations prior to the launch of the Pestech Pre-Pack (see paras 2.1 to 2.3 of the IP’s 2nd Report at Encl. 19), and to date, none of these Excluded Creditors have objected to the Pestech Pre-Pack. [150] On 7.4.2025, the Applicant approached the Excluded Non-Scheme Creditors by advertising a notice of the Pestech Pre-Pack (see Encl. 20 at pp. 11-12) in two (2) local newspapers (New Straits

My limited research into the Chapter 11 pre-packs shows that there have been complaints. The most serious complaint is that non- 55 scheme creditors were not given sufficient information nor time to determine and negotiate the terms of the pre-pack scheme. And further, they may be prejudiced by schemes favouring certain creditors and internal major shareholders.

The suggested safeguards include first, judicial oversight to ensure fair and equitable treatment of all creditors. And that Judges may scrutinize plans for signs of insider favouritism or inequitable treatment of certain creditor groups.

And secondly, independent financial advisers are essential to properly analyse the effect of a pre-pack and to recommend improvements or alternatives to protect all stakeholder interests.

In short, the common thread is that disclosure, fairness, judicial supervision and independent financial experts are important safeguards.

A UK pre-pack administration was considered extensively by His Honour Judge Cooke sitting as a High Court Judge in Re Kayley Vending Ltd [2009] BCC 578. As with all pre-pack regimes, the accepted advantages are speed and secrecy, see para 6: “[6] The principal advantages of a pre-pack are well known. They are that the process enables a business to be sold quickly with the minimum possible adverse impact from either the public knowledge of its insolvency or the restrictions imposed by the insolvency process itself.”

But there is a price paid for speed and secrecy. His Honour, at paras 11 and 12, summarised a number of concerns which were raised by various bodies and the public, which resulted in the introduction of the Statement of Insolvency Practice 16 (“SIP-16”) as a safeguard. His Lordship said: “[11] A general summary of these concerns would be that the speed and secrecy which give rise to the advantages claim for pre-packs may too easily lead the directors and the insolvency practitioner to arrive at a solution which is convenient for both of them and their interests (perhaps also satisfying a secured creditor who might be in a position to appoint his own receiver or administrator), but which harms the interests of the general creditors because: (i) it may not achieve the best price for the assets; (ii) credit may be incurred inappropriately in the pre-appointment period; (iii) they are deprived of the opportunity to influence the transaction before it takes place; and (iv) having been presented with a fait accompli, they have insufficient information to make it worthwhile investigating and challenging the decisions taken. …

It was no doubt in response to these concerns that SIP 16 - Statement of Insolvency Practice 16 - was drafted and promulgated. It will act as a salutary reminder to insolvency practitioners of their responsibilities, which may influence the way in which they and the directors act, although it does not provide the creditors with any direct input into the decisions they take. It will, however, provide creditors with information on the basis of which they may ask questions and, possibly, seek redress after the fact. Any creditor who is dissatisfied with a pre-pack sale is of course still subject to the lack of economic incentive that Mr Moulton referred to: he may in practice have to fund the whole cost of investigating his concerns and any resulting litigation, at the end of which, even if successful, recoveries are uncertain and, in any event, go 57 in to the general pool of assets from which, at best, he is only likely to receive an enhanced dividend.” [Emphasis mine]

Judge Cooke explained pre-pack administrations thus. “[2] Pre-packs are increasingly common, and highly controversial. The term refers to a sale of all or part of the business and assets of a company negotiated 'in principle' while it is not subject to any form of insolvency procedure, but on the footing that the sale will be concluded immediately after the company has entered into such a procedure, and on the authority of the insolvency practitioner appointed. That procedure is now most commonly administration, but not necessarily so. …

It has been the deliberate policy of the legislature, embodied in the changes to the regimes of administration, receivership and voluntary arrangements made by the Insolvency Act 2000 and the 2002 Act, to reduce the involvement of the court in the initiation of insolvency processes, and, where an application to the court is still required, to simplify the requirements and particularly the information that has to be provided for the purpose. This raises the question whether, if pre-packs are thought to be potentially subject to abuse, the courts realistically can, or should seek to, do anything about the problem by the approach taken in the relatively small number of cases that do come before them before the sale is made, or whether this is a matter for the legislature. I am also conscious that it is not for me to purport to lay down anything that could be construed as being a practice direction, local or otherwise. [Emphasis mine]

After citing academic writings, Judge Cook explained the flaws in pre-pack administrations: 58 “[11] A general summary of these concerns would be that the speed and secrecy which give rise to the advantages claim for pre-packs may too easily lead the directors and the insolvency practitioner to arrive at a solution which is convenient for both of them and their interests (perhaps also satisfying a secured creditor who might be in a position to appoint his own receiver or administrator), but which harms the interests of the general creditors because: (i) it may not achieve the best price for the assets, (ii) credit may be incurred inappropriately in the pre-appointment period, (iii) they are deprived of the opportunity to influence the transaction before it takes place, and (iv) having been presented with a fait accompli, they have insufficient information to make it worthwhile investigating and challenging the decisions taken.

It was no doubt in response to these concerns that SIP 16 was drafted and promulgated. It will act as a salutary reminder to insolvency practitioners of their responsibilities, which may influence the way in which they and the directors act, although it does not provide the creditors with any direct input into the decisions they take. It will however provide creditors with information on the basis of which they may ask questions and, possibly, seek redress after the fact.” [Emphasis mine]

From the complaints highlighted by Judge Cooke above, the primary complaint is the lack of material information given to the creditors before the pre-pack is completed. The disclosure requirements were poor, with certain classes of creditors given insufficient disclosure. This is exacerbated by the speed at which the pre-arranged sale of assets is completed. Creditors are often faced with a fait accompli. The costs of investigating and of any litigation challenging the pre-pack administration after the event, may be too much for any one non-scheme creditor to bear. 59 [166] In Re Moss Groundworks Ltd [2019] EWHC 2825 (Ch), Snowden J endorsed the concerns that Judge Cooke had. As did the Court in Marko Ventures Ltd v London Antiaging Clinic Ltd [2025] EWHC 340 (Ch) at para 55.

Judge Cooke summarised the remedial measures introduced in SIP-16 at para [4]. This included a list of information in para 9 to be disclosed to the creditors and to call a meeting of creditors as soon as possible to allow them to discuss the sale. At para 8 of SIP-16, an important statement was made. “(iv) An important statement of principle appears at para 8: 'It is in the nature of a pre-packaged sale in an administration that unsecured creditors are not given the opportunity to consider the sale of the business or assets before it takes place. It is important, therefore, that they are provided with a detailed explanation and justification of why a pre-packaged sale was undertaken, so that they can be satisfied that the administrator has acted with due regard for their interests.' [Emphasis mine]

It is clear that the primary remedial measure in SIP-16 is to provide disclosure at an early stage of the proceedings to allow the creditors to challenge the pre-pack before completion rather than merely being faced with a fait accompli thereafter. SIP-16 was a major improvement.

In conclusion, at paras 24, 25 and 26 Judge Cooke said this: 60 “[24] … While it is primarily a matter for the applicant to identify what information is likely to assist the court, and that information may not be limited to the matters identified in SIP 16, it seems to me likely that in most cases the information required by SIP 16, insofar as known or ascertainable at the date of application, would fall within the requirement I have referred to and so ought to be included in the application. It should not normally be unduly burdensome or costly for it to be so included, and no doubt if there are special reasons why it cannot readily be provided in a particular case, this can be explained.

It would not, in my view, be satisfactory to wait until an application is actually opposed and rely on the ability of the court to give directions for the filing of further evidence on the hearing of the opposed application. Information sufficient to evaluate the proposed pre-pack, it seems to me, is likely to assist the petitioning creditor in deciding whether or not to oppose the application and he should not be in the position of having to commit himself to opposition, with the cost implications that entails, in order to obtain such information.

Nor is it particularly satisfactory to say that, in so far as the information is not made available to the court on the hearing of the application, it will be provided to creditors in due course and they may exercise any remedy in respect of abuse afterwards. No doubt that is the primary mechanism by which any abuse which in fact occurs will be remedied, but it suffers from all the difficulties referred to above which may mean that it is far from effective.” [Emphasis mine]

The key take-aways from these concluding remarks are that:

The new provisions facilitate approval of these Pre-Packs as the Court may dispense with calling creditor meetings, if certain safeguards are met.” [181] With respect, I cannot accept that apart from scheme creditors, “other creditors” with no financial interest in the pre-pack, will not be affected. It is accepted that they may be harmed, see Bluebrook (supra) and paras 129 to 133 above. [182] As with the UK pre-packs (before SIP-16), the flaw in the Malaysian regime is that there is no disclosure of information to non-scheme creditors before the application for sanction or at all, but cf para 16 above for the statements of the ‘Committee’ in Singapore who intended that there should be disclosure to all creditors in pre- packs. Disclosure, may at best, only be obtained after the event and after sanction. And then only by individual creditors pursuant to a discovery application or an application to set aside the order for sanction. As observed by Judge Cooke in Re Kayley Vending (supra) it is unsatisfactory to place the burden to challenge a pre-pack for unfairness on one (1) sole creditor or a handful of creditors, after the event. The IP [183] As with other jurisdictions, pre-pack regimes commonly require the appointment of insolvency practitioners. In a Special Report entitled a “Comparative Look of Pre-Packs in Selected Jurisdictions” by INSOL International in June 2023 (“INSOL Report”), the utilisation of insolvency practitioners in pre-packs was examined. The INSOL Report suggests that IPs are required to be independent, free of conflicts and apparent bias, such as in Australia, Germany, Netherlands and Spain. I believe that this guideline is of universal application. In the UK, the duty is to act as officers of the Court ensuring fairness in providing creditors with disclosure vide the SIP-16 Statement. [184] As with Judge Cooke’s observation in Re Kayley Vending (at para 172 above), in my judgment, the Malaysian Court must be equally vigilant to ensure, as best it can, that the Court process is not abused in pre-packs. In this sense, the Court must be able to rely on the IP for advice on the commercial fairness of the pre-pack; the Court is wholly unsuited to police commercial abuses. The IP will therefore play a pivotal role in assuring the Court that the rights of both the scheme and non-scheme creditors, are not prejudiced. The IP must take on a more serious role as an officer of Court in examining the pre-pack in detail and advising all stakeholders. [185] In my judgment, the IP is obliged to act for the benefit of all stakeholders and certainly for all creditors and to advise the Court on whether the creditors, especially non-scheme creditors are prejudiced. This was the case here when the IP informed the Court that the projected cash flow of the Group would be enough to meet the debts of the Excluded Non-Scheme Creditors. The scope of the IP’s duty should not be unduly restricted. [186] However, the drafting of section 367 is problematic. Given that no meeting will be held in a pre-pack under section 369(C), then the obligation of the IP under section 367(2) to table a viability report at the creditors meeting under section 366 cannot arise. Similarly, the report to Court under section 367(5) is said to be before approval under section 366(4). This must be an error as approval of a pre-pack is not under section 366(4) but 369(C). [187] Although there are problems with the drafting, the Court has the power to order that the ES be sent to all creditors under section 369C(4) and similarly, any IP Report under section 369C(4), if necessary. I did not see the need to make any further orders given that the IP’s 2nd Report expressly stated that the Excluded Creditors were not prejudiced, see paras 147 to 151 above. Summary [188] I was careful not to re-write section 369(C). However, I would respectfully suggest that further safeguards be introduced, for example, disclosure of details of the pre-pack to all stakeholders promptly and before sanction. Perhaps the regulatory authorities would consider implementing directions similar to SIP-16 in the UK. [189] It seems to me that as things stand, the Malaysian pre-pack scheme regime is ripe for abuse. Dated 18th June 2025 ...................t.t........................... YA Tuan Saheran Suhendran Judicial Commissioner, High Court of Malaya, Kuala Lumpur. Lee Shih & Ng Kar Man (Lim Chee Wee Partnership) for the Applicant Cases Referred to: • Francis a/l Augustine Pereira v Dataran Mantin Sdn Bhd & Ors and other appeals [2014] 6 MLJ 56 • In re Tea Corporation Ltd [1904] 1 Ch 12 • KNM Group Bhd & Anor v Hitachi Zosen Corporation & Ors [2025] MLJU 1234 • Marko Ventures Ltd v London Antiaging Clinic Ltd [2025] EWHC 340 (Ch) • Re Bluebrook Ltd [2009] EWHC 2114 (Ch) • Re Brightoil Petroleum (S’pore) Pte Ltd [2022] SGHC 35 • Re DSG Asia Holdings Pte Ltd [2021] SGHC 209 • Re Kayley Vending Ltd [2009] BCC 578 • Re Lamo Holding B.V. [2023] EWHC 1558 (Ch) • Re Moss Groundworks Ltd [2019] EWHC 2825 (Ch) • Re No Va Land Investment Group Corp [2024] SGHC 17 • Re Purecircle Trading Sdn Bhd & Anor [2025] MLJU 711 Legislation Referred to: • Companies (Amendment) Act 2024 • Companies Act 2016 • Insolvency, Restructuring and Dissolution Act 2018 • Singapore Companies (Amendment) Act 2017 • Singapore Companies Act Decision Date: 28th April 2025

the additional information to be disclosed will not be unduly burdensome or expensive. I read this as meaning the additional effort will not defeat the objective of pre-packs of expediting the conventional scheme process; and

disclosure should not be delayed until a challenge is made or after the administration order is granted. [171] Clearly, prompt and not ‘after the event’ disclosure is considered necessary. In Court ordered administrations, the Courts have adapted, paying greater attention to the rights of the non-scheme creditors at the time the administration order is made. [172] His Honour held: “[24] It seems to me that in exercising its discretion in pre-pack cases, the court must be alert to see, so far as it can, that the procedure is at least not being obviously abused to the disadvantage of creditors in any of the ways outlined above.” [173] The role of the Court to be vigilant to prevent abuse of its process in pre-packs is established; if ever there was a need to establish such a role. Malaysian Pre-Packs - The Reality of Abuse [174] In Malaysia, similar problems may be inevitable. The speed at which a pre-pack may be completed will be the cause of abuse, ironically, when speed is the very objective of the new pre-pack regime in section 369(C). The process is as follows. [175] Negotiations with key creditors will take place months prior to initiation. It is only when the requisite approvals-in-principle from key scheme creditors are obtained, will the process be initiated by filing an application for sanction under section 369C (1). [176] With approvals-in-principle in hand, the notional voting of the Scheme Creditors by ballot could be rushed. Sanction could be heard urgently. In theory, the application for and obtaining sanction could be achieved in a matter of weeks of even days. In the US, a striking example is Re Belk, Inc (Case No 21-30630 (MI) (Bankr SD Tex 2021), where the debtors’ petitions for a Chapter 11 pre-pack plan, were confirmed by the bankruptcy court within twenty-four (24) hours. [177] Pre-packs in Malaysia may also be rushed, and non-scheme creditors may well be presented with a fait accompli without any real opportunity to contest sanction. Disclosure [178] Disclosure will also be a major problem. It will only be made to the Scheme Creditors vide the ES. Section 369(C) does not provide for any obligation to provide non-scheme creditors with any information nor a chance to contest sanction for unfairness. The process clearly favours the Scheme Creditors, with scant attention being paid to non-scheme creditors. [179] The objective of proponents would undoubtedly be to reach a compromise with key Scheme Creditors sufficient to financially rehabilitate the company; and thus, facilitating quick sanction without the need for the participation of non-scheme creditors. [180] This was made clear in Singapore in 2017, when Parliament Singapore passed the Companies (Amendment) Bill, which included a pre-packaged scheme regime. At the Second Reading of the Bill, the then Senior Minister of State said: “56. Fourth, Pre-Packs. The final feature adapted from Chapter 11 are provisions for pre-negotiated restructurings between the company and its key creditors or ‘Pre-Packs’. Other creditors will not be affected as the Pre-Pack is sufficient to save the company.