The Companies (Amendment) Bill was introduced in Parliament yesterday (28 February 2017) to amend the Companies Act (the Act) on several significant matters.
The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal  2 SLR 213;  SGCA 9 – classification of creditors in scheme of arrangement and principles on implementation of Schemes of Arrangement
- The Court of Appeal in this case laid down several principles on how schemes of arrangement are to be implemented. Preliminarily, issues of creditors’ classification should be considered by a court when it first hears the application for creditors’ meetings.
- (a) A proposed scheme manager must act transparently and objectively and should not be in a position of conflict of interest (ie, if he aligns his interests without good reason with those of the company) (at -). In this case, the proposed scheme manager was conflicted because he was also the nominee for the individual voluntary arrangements filed by the chairman and an executive director (who was also the chairman’s wife) of the respondent (at -).
- (b) Scheme creditors are entitled to examine the proofs of debt submitted by other scheme creditors in respect of a proposed scheme (at -).
- (c) A scheme creditor should be notified of the proposed scheme manager’s decisions to admit or reject its own and other creditors’ proofs of debt before the votes are cast at the creditors’ meeting. In this case, the proposed scheme manager should have completed adjudicating all the proofs of debt submitted (and notified all scheme creditors of the admitted proofs) prior to the Scheme Meeting (at -).
- (d) A scheme creditor may appeal the proposed scheme manager’s decisions to admit or reject its own and other creditors’ proofs of debt for the purposes of voting. In this case, some of those decisions to admit or reject certain proofs of debt were held to be incorrect (at -).
- (e) Scheme creditors should be classified differently for voting purposes when their rights are so dissimilar to each other’s that they cannot sensibly consult together with a view to their common interest. In other words, if a creditor’s position will improve or decline to such a different extent vis-à-vis other creditors simply because of the terms of the scheme assessed against the most likely scenario in the absence of scheme approval, then it should be classified differently. In this case, while the contingent creditors’ claims need not have been classified separately, the claims of certain substantial shareholders should have been classified separately. This was because the substantial shareholders’ claims would have been subordinated in a liquidation pursuant to s 250(1)(g) of the Act, but they would not have been subordinated under the Scheme (at -).
- (f) Related party creditors and contingent creditors should generally have their votes discounted; while wholly owned subsidiaries should have their votes discounted to zero and should effectively be classified separately from the general class of unsecured creditors (at -).
 See Supreme Court Note: The Royal Bank of Scotland NV v TT International Ltd 2012] SGCA 9 (principles governing implementation of schemes of arrangement), Supreme Court Note, Supreme Court, Mar 2012 (1).
Long Say Ting Daniel v Merukh Nunik Elizabeth (personal representative of the estate of Merukh Jusuf, deceased) (Motor-Way Credit Pte Ltd, intervener)  1 SLR 1428;  SGHC 250. Section 391 of the Companies Act does not apply to proceedings commenced by persons other than the company.
- The High Court in this case interpreted section 391 of the Companies Act, which sets out the Court’s power to grant relief from liability where, among others, a director believes that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust.
- Section 391 applies to officers of a company, persons employed by a company as auditors, experts within the meaning of the Companies Act, and persons who are receivers, receivers and managers or liquidators (section 391(3) of the Companies Act)]
- The Court had to determine whether section 391 of the Act only applies to proceedings commenced by the company, and not by any other persons. The Court held in the affirmative, i.e. that section 391 of the Act does not apply to proceedings commenced by persons other than the company (at ).
- Background: the estate of the plaintiff’s deceased co-director threatened to take legal action against the plaintiff (either by the Company or qua the estate as a third party) for breach of director duties in selling several properties belonging to the company.
- The Court held (at , ) on the facts that the plaintiff was entitled to relief under section 391 against proceedings by the Company only as he had not been deceitful or unreasonable. However, this was not applicable to potential proceedings by third parties.
- Significance: this decision makes clear that relief under section 391 of the Companies Act is a narrow one and does not protect the applicant from proceedings by third parties. It is however unclear what effect a judgment granting relief under section 391 would have on proceedings commenced by third parties. It is likely that a favourable judgment would at the very least dissuade third parties from commencing proceedings since the court would already have deemed the applicant to have been acting honestly and reasonably.
Ang Thiam Swee v Low Hian Chor  SGCA 11 – commencement of statutory derivative action – good faith requirement.
The Court of Appeal clarified and articulated several principles on the good faith requirement (under section 216A(3)(b) of the Companies Act) in respect of commencing statutory derivative actions under section 216A of the Companies Act.
The Court of Appeal clarified that while the motivations of the applicant should be assessed, it is not the motivations per se that constitute bad faith; instead, bad faith will only be established where the applicant’s motivations amounted to a personal purpose (where the applicant’s judgment becomes “clouded by purely personal considerations”) which indicated that the company’s interest would not be served: at -.
There is no presumption that every party with a reasonable and legitimate claim was acting in good faith. Instead, the onus was upon the applicant to demonstrate that he was or may be genuinely aggrieved. (At -). (This overturned existing Singapore case law which stated that there was a presumption.)
Drawing from Canadian and Australian jurisprudence, the Court of Appeal applied a test for good faith which looked at (at -):
- whether the applicant had an honest belief in the merits of the proposed derivative action; and
- whether the applicant’s collateral purpose is sufficiently consistent with the purpose of doing justice to a company such that he is not abusing the statute, amounting to abuse of process, or abusing the company as a vehicle for his own personal interests.
Further, considerations of legal merit should not be factored into the assessment of good faith and may more appropriately be dealt with under s 216A(3)(c), which looked to the prima facie interests of the company (at ).
 See also Supreme Court Note- Ang Thiam Swee v Low Hian Chor  SGCA 11 (s 216A of the Companies Act) Supreme Court Note, Supreme Court, Mar 2013 (1).