Court takes over THHE's winding-up, citing liquidator's bias

Free Malaysia Today

10 hours ago

The Kuala Lumpur High Court has ordered that THHE Engineering Berhad be wound up, with costs totalling RM150,000 to be paid out of its assets to the three petitioners led by Global Mariner Offshore Services Sdn Bhd.
PETALING JAYA : The Kuala Lumpur High Court has, in a landmark decision, converted TH Heavy Engineering Berhad's (THHE) voluntary winding-up into a court-supervised compulsory liquidation, citing serious concerns over how the process was conducted previously.
'This is probably the second time that such an application has been made,' Justice Atan Mustapha Yussof Ahmad said in a written judgment handed down recently.
'The earlier case was decided over a hundred years ago,' he added, citing the Seremban General Agency case from 1923.
The judge was setting out his grounds for allowing a petition by Global Mariner Offshore Services Sdn Bhd (GMOS) and two others under Sections 464(1) and (2) of the Companies Act 2016, and for the appointment of private liquidators.
GMOS became a creditor of THHE on July 21, 2023, after securing judgment for US$63.42 million in damages following a shareholders' dispute.
Together, GMOS and two other petitioners – Boomslang Technology Sdn Bhd and Dynac Sdn Bhd – hold 76.8% of THHE's total debt.
'The breaches of statutory provisions in the voluntary liquidation process, conflicts of interest of the interim liquidators, questionable circumstances surrounding the voluntary liquidation, and the compelling need for independent investigation all point inexorably to the conclusion that compulsory liquidation under court supervision is necessary.
'The evidence reveals concerning aspects of the voluntary liquidation process that call into question its bona fides,' Atan said in his 58-page judgment.
This includes conflicts of interest arising from the appointment of two individuals as interim liquidators when the creditors' voluntary liquidation process began on Sept 8, 2023.
FMT is withholding the names of the individuals concerned.
Atan said there were serious questions about the independence of the two appointees, given their 'long-standing relationship with the THHE Group'. The duo were previously appointed to advise on debt restructuring schemes drawn up in 2017 and 2023.
The judge said the interim liquidators had demonstrated a 'lack of objectivity and bias in favour of the directors who appointed them'.
He found that they failed to properly investigate a 'suspicious' declaration of solvency for THHE Fabricators Sdn Bhd – a subsidiary of the company – after it 'showed a dramatic change from a RM29.469 million deficit to RM10.525 million surplus within one month'.
He also said the interim liquidators had failed to adequately examine inter-company transactions, and had tended to defend actions taken by the company's directors instead of conducting impartial investigations.
'The interim liquidators' conduct throughout the voluntary liquidation process demonstrated a clear intention to maintain control rather than facilitate proper creditor governance,' the judgment read.
Atan also questioned their conduct of a meeting convened on Oct 4, 2023, alleging they had 'deprived creditors of their statutory rights to elect a chairman and nominate a liquidator of their choice'.
He criticised their subsequent attempt to initiate legal proceedings aimed at convening a fresh meeting 'under their control'.
'Their conduct throughout suggests a deliberate strategy to frustrate creditors' rights and maintain their position, rather than acting in the best interests of the creditor body as a whole,' he said.
He pointed to the timing and manner in which the voluntary liquidation had been commenced, saying it 'strongly (suggested) an ulterior purpose'.
He described the two scheme applications previously filed in court as 'tactical manoeuvres to delay creditors' enforcement actions', noting that they were submitted shortly after GMOS obtained its judgment.
The judge concluded that the voluntary liquidation had been initiated to preempt any attempt by creditors to compulsorily wind up the company.
'The timing and circumstances suggest the companies may have sought to maintain control over the liquidation process by placing it in the hands of their chosen liquidators, rather than risk court-appointed liquidators in compulsory proceedings,' he said.
Atan also found the creation of security interests immediately before liquidation to be 'particularly troubling'.
'The timing suggests an attempt to prefer certain creditors and ring-fence assets before liquidation commenced.
'The need for independent investigation is a recognised ground for conversion from voluntary to compulsory liquidation. A court appointed liquidator, as an officer of the court, may better serve the interests of the creditors,' he said.
The court ordered that THHE be wound-up, and appointed Lim Tian Huat and Chiang Teng Guan, nominated by the petitioners, as joint and several liquidators of the company.
It also ordered that costs totalling RM150,000 be paid to the petitioners out of THHE's assets.
THHE's largest shareholder is Urusharta Jamaah Sdn Bhd (UJSB), an asset management company established by the finance ministry in 2010 to manage underperforming Lembaga Tabung Haji investments.
Formerly known as Ramunia Holdings Berhad, the company was involved in the fabrication of oil and gas structures, and in construction and management services.
In 2017, it was classified as a PN17 company, and was delisted by Bursa Malaysia five years later.