Icopal AS & Ors, Re

At the convening stage of a scheme of arrangement, the court determines jurisdiction and the proper constitution of creditor classes. It does not decide the scheme’s merits or fairness, which are ordinarily matters for the sanction hearing. It should nevertheless refuse to convene meetings if it is already apparent that the scheme cannot later be sanctioned for want of jurisdiction. Class composition depends on the similarity of creditors’ legal rights against the company, not differences in private interests or views. Creditors with sufficiently similar rights should meet together; separate meetings are required only where the rights are so dissimilar that the creditors cannot sensibly consult about their common interest. Where substantial evidence supports convening and objections require fuller evidence, the court may leave them for reconsideration at the sanction hearing.

Four companies applied for orders convening meetings of creditors to consider schemes of arrangement under section 899 of the Companies Act 2006. The schemes formed part of a restructuring intended to refinance the group by 2016. Most lenders supported them, but Svenska Handelsbanken AB and HSH Nordbanken AG opposed the applications.

The objections concerned recognition and enforceability in other jurisdictions and the proposed treatment of the lenders as a single creditor class. The court had to decide whether there was a sufficient jurisdictional connection and whether the proposed class was properly constituted at the convening stage.

1. Orders convening meetings. The court was satisfied for present purposes that the companies were liable to be wound up under section 895(2)(b) of the Companies Act 2006. An English-law jurisdiction clause provided a sufficient connection with England. Re Rodenstock GmbH and Re Primacom Holding GmbH, together with article 44 of the Council Regulation, supported that conclusion.

2. The convening hearing concerns jurisdiction and class composition, not the merits or fairness of the proposed schemes. The court should not convene meetings where it can already be seen that it will lack jurisdiction to sanction the scheme. The objections to recognition in Denmark, France and the United States were unsupported by properly adduced evidence. It could not presently be seen that there was no jurisdiction, and the issue could be reconsidered at the sanction hearing.

3. The applicable class test is whether creditors’ rights are so dissimilar that they cannot sensibly consult together with a view to their common interest. The relevant comparison is between legal rights against the company, including rights released, varied or created by the scheme. Differences in private interests, commercial preferences, facility tenors, maturity dates or margins do not themselves require separate meetings.

4. The evidence indicated a significant likelihood of insolvency if the schemes were not implemented. The court was therefore prepared to convene a single meeting for each company. It retained power to reconsider class composition at the sanction hearing, although that would ordinarily depend on the cogency of the dissenting creditors’ arguments.