Sep 26, 2009 12:03 PM
4302 Views
I took this proposed scheme of arrangement to my lawyer and this is what he had to say: City Limouzines had collected money from people for 2 things : preference shares and unsecured debentures. I remember that they had a scheme of unsecured debentures with a maturiy period of 3 yrs.
It is mentioned in the scheme that "the amount received from creditors (dehors the preferential shares) is to be repaid under the scheme". (Dehors means "excluding" or "by not considering") .
It is also mentioned that this scheme does not affect the status and rights of "preferential share holders" in any manner whatsoever. Hence this scheme is only for the "unsecured debenture holers" and "other unsecured creditors" (if any).
City limouzines had a scheme in which the unsecured debenture holders were paid double their investment amount in a period of 3 years. It is these investors in debentures who will be affected, not the preferential share holders. These debenture holders have to be paid in equal 12 months installments at a rate of 7% Interest.
The scheme further classifies the debenture holders and unsecured creditors into class A and Class B. Class A are those whose principal is not yet repaid and class B are those whose principal has been repaid inclusive of a rate of interest of 7%. Class B unsecured creditors are not eligible for any amount while class A would be paid according to this proposed scheme.
*Hence I wish to repeat over here that this scheme again does not affect the preferrential share holders who are getting regular income by leasing out of the cars. It affects only the unsecured creditors i.e Debenture Holders.
The scheme again goes to mention in the last page that rights of preferential share holders will remain as before and hence will not be affected.
*One Cause of Concern:
It says that in the period during which this scheme is operational , the company shall continue with its business as usual, but all cases under any civil, criminal act not restricted to the "Negotiable Instruments Act" will lie in abensce.
The scheme is not clear as to when the preferential share holders (those who were getting income from leasing out cars) will start getting the income again.
There needs to be clarity on this aspect.
Hence, according to my lawyers legal advice, those who had leased out cars and were getting regular income in status as preferrential share holders will continue to get the income as before.
*Hence the preferential share holders can vote in favour of this scheme.
This scheme isagainst the interests of the unsecured debenture holders, hence they will choose to vote against this scheme.
*As per the companies Act, all interested parties (Preferential Share Holders, Unsecured Debenture Holders, Unsecured Creditors) will have to vote for this scheme (either for or against), for this scheme to reach a logical conclusion.
In the end the result of this vote will be conveved to the High court who is the final authority in authorising or rejecting this scheme of arrangement.
Please let me know if anyone has any questions, I will try to answer these to the best of my abilities.
Thanks and Regards
Rohit
