Re Van Gansewinkel Groep

The court sanctioned six inter-conditional schemes of arrangement under Part 26 of the Companies Act 2006 in respect of six overseas group companies. The key legal principles were: (i) schemes of arrangement may be used to restructure the debt of companies whose centre of main interests (COMI) and assets lie outside England where there is a sufficient connection with England; (ii) the English court's scheme jurisdiction is not displaced by the EC Insolvency Regulation; (iii) if the recast Judgments Regulation applies to schemes, jurisdiction could be founded on Article 8(1) when at least one creditor is domiciled in England and it is expedient to determine closely connected claims together; (iv) the court must still consider whether the statutory requirements and the fairness test from Re National Bank (the "intelligent and honest man" test) are satisfied; and (v) the likely recognition of the sanction abroad is a material discretionary consideration. Applying those principles the judge was satisfied that (a) the statutory requirements and class composition had been correctly addressed, (b) there was a sufficient connection with England because the financing documents were governed by English law and some creditors were domiciled in England, (c) the schemes were of a kind that an intelligent and honest member of each class might reasonably approve, and (d) there was a realistic prospect of recognition in the Netherlands and Belgium. The court therefore sanctioned the Schemes and required certain supplementary steps (notably a deed of release in respect of a non-scheme guarantor) to be procured to give full commercial effect.

Background and parties. The applications concerned six companies in the Van Gansewinkel group (five Dutch companies and one Belgian company). None had their COMI, establishment or significant assets in England. The Schemes formed part of a cross-border restructuring of c. 800 million of indebtedness under an Existing Senior Facilities Agreement and certain Hedging Agreements, each governed by English law, and secured and guaranteed within the Group.

Relief sought and procedural posture. The Scheme Companies sought orders convening creditor meetings and thereafter sanctioning six inter-conditional schemes of arrangement under Part 26 of the Companies Act 2006. The convening hearing had been before Henderson J and scheme meetings were held; the sanction hearing was before Snowden J who delivered a written judgment after sanctioning the Schemes.

Issues framed by the court. The principal issues were: (i) jurisdiction under the Companies Act 2006 to sanction schemes for overseas companies, in particular whether the EC Insolvency Regulation or the recast Judgments Regulation limited that jurisdiction; (ii) whether a "sufficient connection" with England existed to justify exercise of the scheme jurisdiction; (iii) whether the statutory convening and voting requirements and the fairness test were satisfied; (iv) whether the Schemes would be effective in practice and recognised in the Netherlands and Belgium; and (v) ancillary issues such as the release of rights against a non-scheme guarantor and compliance with non-UK securities law considerations.

Court's reasoning. The judge accepted the prevailing line of authorities that the Insolvency Regulation does not restrict the English scheme jurisdiction. On the question whether the recast Judgments Regulation covered schemes, two views exist; the judge avoided deciding the broader question by assuming the Regulation could apply and then finding jurisdiction in any event under Article 8(1) because a not insignificant number of Scheme Creditors (15 of 106 with claims of around 135m) were domiciled in England and it was expedient to hear the claims together. The financing documents being governed by English law and containing jurisdiction clauses added to the connection with England. The convening and voting procedures had been followed, turnout was high and the necessary statutory majorities were achieved unanimously in favour. Applying the established fairness test (the "intelligent and honest man" test endorsed in Telewest (No.2)), the judge was satisfied that the Schemes were ones which an intelligent and honest member of the relevant classes might reasonably approve. Recognition in the Netherlands and Belgium was addressed by expert evidence; the judge concluded there was a good prospect that recognition would be given either under the Judgments Regulation if that applied or under domestic private international law if it did not. The judge required a deed of release to be procured in respect of a non-scheme guarantor to ensure the arrangements had the intended legal effect, but accepted that the Explanatory Statement had sufficiently disclosed the proposed release.

Practical observations. The judge criticised the procedure adopted in relation to jurisdictional issues at the convening stage and advised that proponents should make clear in the Practice Statement letter if jurisdictional points are to be determined at the convening hearing and ensure reasons are recorded.

The court sanctioned the six inter-conditional schemes of arrangement under Part 26 of the Companies Act 2006. Snowden J held that (i) the English scheme jurisdiction was not restricted by the Insolvency Regulation; (ii) jurisdiction could be assumed under the recast Judgments Regulation if necessary and in any event was available under Article 8(1) because a sufficient number and value of creditors were domiciled in England and the financing documents were governed by English law; (iii) the statutory convening and voting requirements and the fairness test were satisfied; and (iv) there was a realistic prospect of recognition in the Netherlands and Belgium, subject to the provision of a deed of release for a non-scheme guarantor to give full legal effect.