Vietnam Shipbuilding Industry Groups, Re

The court may convene a creditors’ scheme meeting where the company is liable to be wound up in England and there is a sufficient connection with the jurisdiction. An English-law governing clause may itself provide that connection, even where the company has no other English connection. A non-exclusive English jurisdiction clause can also engage Article 23 of Council Regulation (EC) No 44/2001. Creditors may form one class where their rights are sufficiently similar to consult together in a common interest. Irrevocable voting undertakings do not, without more, require a separate class. A scheme may be proposed for only one class of creditors.

Vietnam Shipbuilding Industry Group, a Vietnamese state-owned company in financial difficulty, applied under section 896 of the Companies Act 2006 for an order convening a meeting of lenders to consider a proposed scheme of arrangement. The scheme would replace existing loan and guarantee claims with notes issued by a state-owned entity and guaranteed by the Government of Vietnam.

The facility agreement was governed by English law and conferred non-exclusive jurisdiction on the English courts. The court considered jurisdiction under the Companies Act 2006 and Council Regulation (EC) No 44/2001, the composition of the creditor class, and whether a scheme could concern only the facility-agreement lenders.

1. Jurisdiction. The application under section 896 of the Companies Act 2006 was granted. The company was liable to be wound up by the English court, applying the wide meaning given to that expression in Re Drax Holdings Limited [2004] 1 WLR 1049.
2. The facility agreement’s English governing-law clause created a sufficient connection with England for the court to consider and, if appropriate, sanction the scheme. The non-exclusive jurisdiction clause provided an additional connection. The court adopted the reasoning in Re Drax Holdings Limited that international effectiveness may require a scheme altering contractual rights to be made by the court of the country whose law governs those rights. Re Primacom Holding GmbH was consistent with that conclusion.
3. The court assumed, without deciding, that Council Regulation (EC) No 44/2001 applied to schemes of arrangement. Article 23 applied to a non-exclusive jurisdiction agreement because the provision expressly contemplated that agreed jurisdiction might be non-exclusive. The English court therefore had jurisdiction under both the domestic statutory jurisdiction and the Regulation.
4. The proposed lenders constituted one class. The governing rights of all lenders were materially the same and the scheme treated them equally. Consistently with Re Telewest Communications plc No. 1 [2005] 1 BCLC 752, irrevocable undertakings to vote in favour did not require a separate class.
5. There was no inhibition on proposing a scheme with only one class of creditor, as established by Sea Assets Limited v. P T Garuda (Indonesia) [2001] EWCA Civ 1696. The procedural approach in Re Hawk Insurance Company Limited [2001] 2 BCLC 480 was followed, including giving creditors an opportunity at the convening stage to raise jurisdictional or class objections.
6. An order was made convening the meeting in Singapore, with the usual provision for notice, an explanatory statement and proxy forms.