Rodenstock GmbH (The "Scheme Company"), Re

For a solvent foreign company, the expression liable to be wound up in Companies Act 2006 scheme legislation identifies a category of company capable of winding up. It does not require that an English winding-up order could presently be made. Neither the Judgments Regulation nor the Insolvency Regulation narrows that scheme jurisdiction.

A sufficient connection may arise from a single finance agreement governed by English law and containing an English jurisdiction clause for the lenders’ benefit. The court must also be satisfied that the scheme will be effective in practice and that an intelligent and honest creditor could reasonably approve it. Effectiveness may follow because the governing law recognises the contractual variation, even if the sanction order is not automatically recognised abroad.

A German company with its centre of main interests in Germany sought sanction of a solvent restructuring scheme under Part 26 of the Companies Act 2006. Its senior facilities agreement was governed by English law and gave the English courts exclusive jurisdiction for the lenders’ benefit. More than half of the scheme creditors by value were domiciled in England.

The scheme would vary the senior lenders’ rights to support a restructuring intended to avoid German insolvency proceedings. It received overwhelming approval, although a small group of creditors initially raised jurisdiction, effectiveness and merits objections. The central issues were whether the court had jurisdiction over the foreign company, whether its connection with England was sufficient, whether the scheme would be effective in Germany, and whether discretion should be exercised to sanction it.

1. The application was granted and the scheme was sanctioned. The statutory and meeting requirements had been met. The creditors approved the scheme by the requisite majorities.
2. The phrase liable to be wound up in section 895(2)(b) of the Companies Act 2006 identifies the kinds of companies to which the scheme jurisdiction extends. It does not require proof that the foreign company could presently be wound up in England. The court adopted the analysis in Re Drax Holdings Ltd that the traditional requirements for winding up a foreign company concern discretion, rather than the existence of scheme jurisdiction.
3. A solvent scheme falls within the Judgments Regulation as a civil and commercial matter, but proceedings for its sanction are not proceedings whose object is the dissolution of a company for Article 22.2. The Regulation and the Insolvency Regulation did not narrow the statutory scheme jurisdiction. In any event, jurisdiction was established on either possible analysis of the Regulation because more than half by value of the affected creditors were domiciled in England.
4. The English-law finance agreement, together with the English jurisdiction clause for the lenders’ benefit, supplied a sufficient connection. It was a single agreement governing both the lender-company relationships and the lenders’ inter se relationship. That differed materially from separate English-law contracts entered into independently by unrelated creditors.
5. The scheme would be effective in practice. Automatic recognition in Germany under the Judgments Regulation was uncertain. Nevertheless, German courts would apply English law under the Rome Convention to determine whether the lenders’ contractual rights had been varied, so the dissentients’ rights would be treated as varied after a merits determination.
6. The court exercised its discretion to sanction. The scheme followed extensive negotiations, had overwhelming independent creditor support, offered a better prospect than the insolvency alternatives, and was one which an intelligent and honest creditor acting in its own interests could reasonably approve.

not stated in the judgment.