RE Antigen Holdings Ltd

CourtHigh Court
Judgment Date08 November 2001
Neutral Citation2001 WJSC-HC 111
Docket Number[2001 Nos. 183 and 182 Cos.]
Date08 November 2001
Proposals for a Scheme of Arrangement between Antigen Holdings Ltd. its members and creditors


Proposals for a Scheme of Arrangement between Castleholding Investment Co. Ltd. its members and creditors

2001 WJSC-HC 111

Record No: 183 COS/2001
Record No: 182 COS/2001





Liquidation - Credit and security - Banking law - Scheme of arrangement - Whether interests of banks impaired - Whether banks unfairly prejudiced by scheme - Whether court should approve scheme - Companies (Amendment) Act, 1990 section 18 (2001/182 & 183 COS - McCracken J - 8/11/01)

In re Antigen Holdings Ltd - [2001] 4 IR 600

Facts: The proceedings concerned the presentation to the High Court for approval of a scheme of arrangement in the examinership of a company. Meetings of members and creditors had been held with no one voting against the proposals, however in respect of certain matters banking creditors had abstained and sought to have the scheme modified. The proposed scheme provided for the payment of amounts due to creditors but at a deferred date or by instalments and without interest being paid. It was proposed to pay off the preferential creditors in 16 months, the ordinary unsecured creditors in 18 months and the Banks in over 30 months. In addition the investor who was prepared to fund the scheme was to purchase all the shares in the company and the shareholders were to give substantial warranties to the investor. The banks' complaints were that it was unjust that they should have to forgo interest as interest was a contractual right and secondly that shareholders should not benefit from a scheme like this unless and until all the creditors had been paid off.

Held by Mr. Justice McCracken in approving the scheme of arrangement. Under section 25 of the Companies (Amendment) Act, 1990 the banks could only object if their interests were being impaired. The banks had a right to raise their objections. However the purpose of the scheme was to ensure the viability of the company. This could only be done if there was a reasonable time to discharge the debt. The vast bulk of remaining creditors who presumably would continue to trade with the company. It was not unfair that these creditors would get some priority as they would keep the company going. If the banks were to be paid interest there would have to be new meetings of creditors to consider this proposal with the possibility that this new scheme would not be accepted. The court did not accept the contention that the payment to the shareholders would prejudice the banks. It appeared that the investor would not be prepared to invest without the normal commercial warranties from the shareholders and equally the shareholders would not give those warranties without receiving consideration for their shares. There was a serious danger that the scheme would collapse without the implementation of the agreement between the shareholders and the investor. The scheme had a high prospect of success, the company employed over 300 people and the creditors would eventually be paid. The banks would not be unfairly prejudiced by the scheme proceeding. The modifications to the scheme proposed by the banks were not accepted.








HOLIDAIR, RE 1994 1 ILRM 483






In this case the Examiner being satisfied as to matters set out in Section 18 of the Companies (Amendment) Act 1990has formulated proposals for a scheme of arrangement. He now brings these proposals before the Court pursuant to Section 24. Meetings of the various classes of members and creditors were duly held and nobody voted against the proposals at any of the meetings. However in respect of several classes some bank creditors abstained.


In argument before me they have not sought to have the scheme set aside but have sought modifications. A feature of this scheme is that all creditors are going to be paid the amounts due at the date of the petition in full but in most cases payment is being deferred or is to be by instalments without interest. The banks have been put in a separate category to the other creditors and it is anticipated the preferential creditors would be paid off in 16 months, the ordinary unsecured creditors in 18 months and the banks would be paid off over 30 months.


There is a further unusual feature. The investor who is going to fund this scheme is going to purchase all the ordinary shares in the company from the present shareholders for a substantial sum under an agreement negotiated between the investor and the shareholders outside the scheme altogether and the shareholders are giving substantial warranties to the investor.


The banks" complaints are twofold. Firstly, they say while they do not really complain they are to be repaid over a longer period than other creditors they do say it is unjust they should have to forgo interest because interest is a contractual right. Secondly they make the point shareholders should not benefit under a scheme like this unless and until all the creditors have been paid.


Now the first point to be considered that was raised is the locus standi of the banks. Under Section 25 the banks may only object if their interest is impaired. Under Section (22) sub-section (5) it reads:

"For the purpose of this section and sections (24) and (25) a creditor's claim against a company is impaired if he receives less in payment of his claim than the full amount due in respect of the claim at the date of presentation of the petition for the appointment of the examiner."


Now it is said the banks are receiving the full amount due in respect of their claim in the sense that the balance standing in the bank account at the date of the presentation of the petition will be paid over the 30 month period. This point was considered by Mr. Justice Costello in Jetmara Teoranta and the Companies Acts. In the course of his Judgment having quoted sub-section (5) section 22 he said:

"This is not the case in relation to the claim by the Bank, it is said. It is said that the Bank's claim against the company would not be impaired within this definition because it would be paid in full the amount due to it at the date of the petition. This is true, but the Bank was to be paid the sum due to it by instalments and it would be deprived of access to immediate repayment and would receive less in interest than the interest to which it is contractually entitled. It seems to me the bank has a contractual interest which is impaired."


That gives an understanding of how Section 22 is to be interpreted in this application. I must confess I had some doubts about whether I would agree with that but on consideration I think it certainly is arguable and it is probably the intention of the Act, that the amount due to the bank at the date of presentation of the petition was not just the capital sum due, but it was the capital sum due together with interest until such time as that was paid because that was a contractual right as Mr. Justice Costello said. So I think the banks do have the right to raise the objections they have raised.


I then have to consider whether the banks have been unfairly prejudiced. It is beyond doubt that if the company has to go into liquidation then the banks will receive considerably less than they would receive under the scheme and this is a consideration to be taken into account. But it is not the only one. It has to be said no creditors are getting paid interest. The banks" debt of course is by far the largest proportion of the creditors and they undoubtedly are not being treated in the same way as the ordinary creditors. They are being paid off over a longer period and there is some validity in their point that interest to a bank is the equivalent to the profit made by an ordinary trade creditor on selling his goods and the trade creditors are in fact getting paid that profit. However the question is; is this unfair.


The purpose of the scheme is to ensure the viability of the company. This can only be done if there is a reasonable time span in which to discharge the debt and that there is an amount being paid which is within the capacity of the company to pay. Now the vast bulk of remaining creditors are trade creditors who are presumably going to continue trading with the company. I don't think it is unfair they should get some priority because they are going to keep the company going.


I should also say while the Court has power to make modifications which is what is being sought by the Banks, the Court cannot re-write the scheme. In my view if the bank were to be paid interest, or the alternative they suggest, repaid all their capital immediately, I think there would clearly have to have been new meetings of the creditors to consider this and of course with the possibility that the creditors would not accept it and would not accept what would be effectively a new scheme and that would be most undesirable. It is also undesirable in the present case to postpone the final decision because this is a company which effectively has to some extent to keep trading.


Now with regard to the payment to the shareholders while this may be of benefit to them, I don't quite see how it can be a prejudice to the banks unless that money was going to be available to the creditors if it were not paid to the shareholders. I don't believe that would be so on the...

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