Van Gansewinkel Groep BV & Ors, Re

The English court may sanction a scheme for a foreign company without an English centre of main interests, establishment or substantial assets. The company must be liable to be wound up under the Insolvency Act 1986, but the EC Insolvency Regulation does not restrict the scheme jurisdiction.

Assuming the recast Judgments Regulation applies, jurisdiction may arise under article 8(1) where at least one affected creditor is domiciled in England and the connected claims should expediently be determined together. An English governing law clause may also supply the sufficient connection required for the court to exercise its discretion.

The court must additionally be satisfied that the statutory procedure was observed, the classes were fairly represented, the majority acted bona fide, the scheme was one an intelligent and honest creditor could reasonably approve, and overseas recognition was realistically likely.

Six inter-conditional schemes under Part 26 of the Companies Act 2006 proposed a restructuring of the financial indebtedness of five Dutch companies and one Belgian company in a waste-management group. None had its centre of main interests, an establishment or substantial assets in England. The affected senior-facility, revolving-credit and hedging obligations were governed by English law.

The group could not comply with its financial covenants and depended upon creditor waivers and forbearance. The schemes reinstated sustainable operating debt, transferred other debt to a holding company and gave relevant creditors shares in the restructured group. Every creditor attending the meetings voted in favour.

The principal issues were whether the English court possessed and should exercise jurisdiction over the foreign companies and their creditors, whether the schemes satisfied the conventional sanction requirements, whether a non-scheme guarantor could properly be released, and whether the schemes had a sufficient prospect of recognition in the Netherlands and Belgium.

1. The schemes were sanctioned. Each foreign Scheme Company was a company liable to be wound up under the Insolvency Act 1986 for the purposes of section 895(2)(b) of the Companies Act 2006. That description identifies the types of company within the scheme jurisdiction. It does not depend upon transient circumstances governing whether a winding-up order would presently be made. The EC Insolvency Regulation did not limit the English scheme jurisdiction because schemes were not collective insolvency proceedings listed in Annex A and Parliament had not linked the statutory scheme jurisdiction to that Regulation: [2011] EWHC 1104 (Ch) followed.

2. The possible application of the recast Judgments Regulation was more difficult and did not require final resolution. The contractual jurisdiction clauses could not establish jurisdiction under article 25(1), because only the Scheme Companies had submitted to the English courts; the creditors had not done so. Assuming the Regulation applied, article 8(1) supplied jurisdiction. Fifteen of 106 creditors, holding claims of about €135 million and distributed across the classes, were domiciled in England. Their number and claim value were sufficiently substantial to make it expedient to determine the closely connected claims together.

3. Jurisdictional questions raised at the convening stage should be identified, with the supporting argument, in the Practice Statement notice. If proponents wish to rely later upon a convening-stage determination, they should ensure that the judge gives a reasoned ruling or that the essential reasoning is recorded in the order. No such ruling was available here, so the court considered the international jurisdictional questions afresh.

4. The statutory procedure and sanction requirements were satisfied. The meetings were properly convened, the statutory majorities were obtained by large margins, the classes were fairly represented and no coercion or adverse use of lock-up agreements appeared. Each scheme was one which an intelligent and honest creditor, acting in its own interest, could reasonably approve. The court ordinarily respects creditors’ assessment of their commercial interests, while retaining responsibility to examine jurisdiction, fairness and any defect in the scheme.

5. A scheme may require creditors to release rights against a third-party guarantor where that release is necessary to give legal or commercial effect to the compromise. The proposed release was integral to insulating the holding-company debt. Although the original documentation lacked a sufficiently clear mechanism, the schemes authorised the execution of other documents needed to implement the restructuring. A deed of release could therefore be executed, and the intended release had been adequately disclosed before voting.

6. English law had governed the relevant financing documents from the outset, and the jurisdiction provisions supplied a further connection with England. Expert evidence also demonstrated a good prospect of recognition in the Netherlands and Belgium, whether under the recast Judgments Regulation or domestic private international law. Certainty was unnecessary; credible evidence that the court would not act in vain was sufficient. The overwhelming creditor support further reduced the practical risk of action by dissentients.

• High Court (Chancery Division): Snowden J sanctioned all six schemes and subsequently gave the reasons reported at [2015] EWHC 2151 (Ch).
• Convening hearing: Henderson J ordered separate meetings for the relevant creditor classes. Because no reasoned jurisdictional ruling had been given or recorded, Snowden J determined the international jurisdictional issues afresh at the sanction hearing.