Legal Victory
34 Contractor Creditors Vote Unanimously for Infrastructure Developer's Scheme — RM 56.7 Million Debt Restructured
34 Contractor Creditors Vote Unanimously for Infrastructure Developer’s Scheme — RM 56.7 Million Debt Restructured NZSK Legal structured and executed a scheme of arrangement for a stalled toll road SPV involving 34 contractor creditors and complex CIPAA adjudication issues, achieving 100% approval across both creditor classes.
Summary
Industry
Infrastructure Development — Toll Road SPV, Peninsular Malaysia
Court
High Court (Commercial Division), Kuala Lumpur
Number of Creditors
34 Contractors
Debt Restructured
RM 56.7 Million
Class Voted
100% Approval
Project Status
Resumed
Maxine Khoo
Published: May 6, 2026
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Background
Our client was the special purpose vehicle (SPV) incorporated to develop and operate toll road support infrastructure under a government concession. A prolonged dispute with the concession authority caused a work stoppage, during which the SPV continued to accumulate payment obligations to its 34 appointed contractors and sub-contractors. By the time the dispute was partially resolved, total contractor claims stood at RM 56.7 million — significantly exceeding the SPV’s liquid assets.
Individual contractors had begun filing adjudication proceedings under the Construction Industry Payment and Adjudication Act 2012 (CIPAA). Several had obtained interim payment certificates they were threatening to enforce. As a law firm experienced in both construction law and corporate restructuring in Malaysia, NZSK Legal was instructed to assess whether a scheme of arrangement under the Companies Act 2016 could provide a comprehensive resolution — addressing all 34 creditors in a single court-supervised process rather than through piecemeal enforcement.
The Challenges
- The 34 contractor creditors were not a homogeneous group. Main contractors held larger claims and had direct contractual privity with the SPV. Sub-contractors and specialist suppliers had smaller claims and their legal relationship was primarily with the main contractors — not the SPV. Determining which sub-contractors had direct claims against the SPV, and how to classify them alongside main contractors, required detailed legal analysis.
- Several contractors had obtained or were pursuing CIPAA adjudication awards. The legal question of whether a CIPAA adjudication award creates a sufficiently different legal position to require a separate creditor class — and whether the Section 368 restraining order would extend to stay CIPAA enforcement proceedings — was not clearly settled in existing Malaysian case law at the time.
- The fragmented, largely unsophisticated creditor base created significant coordination complexity. Many smaller contractors did not understand the scheme of arrangement process, were instinctively suspicious that it was a device to reduce their entitlements, and were represented by different solicitors with different levels of familiarity with Malaysian restructuring law.
Our Approach
- NZSK Legal conducted a detailed legal analysis of CIPAA adjudication awards in the scheme context, concluding — supported by Singapore and Australian comparative jurisprudence — that CIPAA awards, while statutory, do not create materially different legal rights from ordinary unsecured contract claims for creditor classification purposes. This analysis was incorporated into the convening affidavit.
- NZSK Legal held individual briefing sessions with all 34 contractor creditors — in person and virtually — over a four-week period before any court application was filed. Each session presented an honest, evidence-based comparison between scheme recovery (full repayment over 48 months) and winding-up recovery (significantly lower, based on SPV asset realisation projections).
- The scheme proposed full repayment of all RM 56.7 million in contractor claims over 48 months, funded by resumed concession revenues following resolution of the concession authority dispute. No haircut was required — a feature that significantly eased creditor acceptance and reflected the SPV’s genuine long-term debt serviceability once the concession resumed.
- A Section 368 restraining order was obtained at the outset of the scheme process, staying all CIPAA enforcement proceedings and preventing a race among creditors during the scheme preparation period.
The Outcome
- Both creditor classes voted unanimously — 100% in value — in favour of the scheme at the court-convened creditors’ meeting. This is an exceptional outcome in Malaysian restructuring practice and reflected the thoroughness of the pre-vote creditor engagement.
- The High Court sanctioned the scheme without any creditor opposition. The court noted the thoroughness of the creditor engagement process and the clarity of the explanatory statement in its grounds.
- All 34 contractor creditors are receiving payments on the restructured schedule. The concession authority reinstated the works programme and the SPV commenced revenue-backed repayments on the contracted date. The toll road infrastructure project has been completed.
Key Legal Principle
In Malaysian schemes of arrangement involving large numbers of smaller, less sophisticated creditors, the outcome of the vote is almost always determined before the meeting is called. Proactive, individual creditor engagement — presenting clear, honest comparisons between scheme recovery and winding-up recovery — transforms suspicious creditors into informed supporters. The law enables the scheme; trust secures the vote.
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