Zlomrex International Finance SA

For a scheme under Companies Act 2006, jurisdiction depends on a sufficiently close connection with England and Wales, usually but not invariably shown by assets within the jurisdiction. The court need not apply the COMI test applicable to insolvency proceedings, although COMI may provide an alternative basis where relevant. A cross-border scheme may properly proceed where foreign recognition is addressed by expert evidence and by conditions designed to prevent inconsistent enforcement. At the convening stage, the court should identify the scheme documents, but should not imply that it has reviewed or approved their substance where it has not done so.

Zlomrex International Finance SA, a French-registered finance company in a Polish group, sought an order convening a meeting of beneficial owners of loan notes worth €118 million. The proposed scheme would replace the existing debt with later-maturing notes issued by a new English debtor and would affect creditors connected with several jurisdictions. The company had recently moved its principal place of business and office to England and Wales to facilitate an English scheme. The application raised questions about jurisdiction, creditor class composition, the parallel conduct of contractual and statutory restructuring processes, and the treatment of potential recognition and enforcement issues in Poland and New York.

1. The application to convene a meeting of the beneficial owners of the loan notes was granted, subject to amendment of the proposed form of order concerning the scheme documents.
2. Under s 895 of the Companies Act 2006, the relevant jurisdictional test is the older English-law requirement of a sufficiently close connection with England and Wales, usually, but not invariably, in the form of assets within the jurisdiction. The COMI test under the Insolvency Regulation is not the applicable primary test for a scheme. The court nevertheless found, in the alternative, that the company’s COMI had moved to England and Wales.
3. The company’s recent relocation of its principal office and business, appointment of English directors, acquisition of English premises, transfer of funds and conduct of management activity in England established the required connection. The beneficial noteholders constituted an appropriate single class, and no further division was necessary.
4. The court accepted that statutory scheme proceedings could run in parallel with contractual restructuring proposals because the approaching maturity date left insufficient time to try the contractual route first. Foreign-law and recognition risks had to be addressed before sanction. The proposed mechanism making appropriate recognition in New York a condition of the scheme was a sound means of reconciling the jurisdictions. The court was not satisfied that the company should be compelled to remove a trustee-consented waiver at the convening stage, leaving the issue for the sanction hearing.
5. The court refused to order that the scheme documents be “approved” for convening purposes. That wording could suggest substantive judicial endorsement of documents, including an explanatory statement which the judge had not read in full. The order should instead identify the documents or omit the provision.

First-instance decision. No appellate history is stated in the judgment.