Zlomrex International Finance S.A., Re

For a scheme under section 895 of the Companies Act 2006, jurisdiction depends on whether the company has a sufficiently close connection with England and Wales. The usual, but not exclusive, connection is the presence of assets within the jurisdiction. The test is distinct from the COMI test applicable to ordinary insolvency proceedings under the Insolvency Regulation. A company may establish the necessary connection through a genuine relocation of its principal place of business and management activities, even where the relocation was undertaken to obtain English scheme jurisdiction. The court may convene a meeting where the creditor class is properly constituted and the scheme is suitable to be put before creditors. At the convening stage, the court should identify scheme documents rather than express approval of documents it has not fully examined.

Zlomrex International Finance S.A., a French-registered finance company in a Polish scrap-metal group, applied under section 895 of the Companies Act 2006 for an order convening a meeting of beneficial owners of loan notes worth €118 million. The notes were governed by New York law and were repayable shortly after the application.

The company had recently moved its principal place of business, principal office, management arrangements, banking facilities, directors’ meetings and other activities to England. The relocation was intended to establish English jurisdiction for a restructuring scheme. The application raised questions concerning sufficient connection, COMI, recognition in New York and Poland, the proposed creditor class, and the form of the convening order.

1. Jurisdiction. The court held that the statutory scheme jurisdiction under section 895 of the Companies Act 2006 depends on the older English-law requirement of a sufficiently close connection with England and Wales. It is not governed by the COMI test applicable to winding-up or administration proceedings under article 3.1 of the Insolvency Regulation. The test approved in Re. Latreefers Inc. [2001] BCC, 174 was satisfied. The company’s recent relocation of its principal place of business and activities to England was sufficient, notwithstanding that it was undertaken to establish jurisdiction. The court also found, alternatively, that the company’s COMI had moved to England and Wales.
2. Convening the meeting. The beneficial owners of the notes could vote as contingent creditors, while the single technical note-holder and trustee would not vote. The creditor class was properly constituted, no further subdivision was required, and the scheme was suitable to be placed before creditors. The court therefore ordered the scheme proceedings to proceed.
3. International effectiveness. The court regarded recognition under Chapter 15 of the US Bankruptcy Code as a useful means of reconciling the English scheme with the New York-law notes. It was not satisfied that the proposed power to waive the recognition condition was necessarily appropriate, but left that issue for consideration at the sanction hearing.
4. Form of order. The court refused to order that the scheme documents be “approved” for the purpose of convening the meeting. It had not read the full explanatory statement and would not give the documents the court’s imprimatur. The order should identify the documents, or the provision should be removed.

not stated in the judgment.