Indah Kiat International Finance Company B.V., Re The Companies Act 2006

At a scheme convening hearing, the court must be satisfied by sufficiently reliable evidence that the proposed process can properly proceed. Complex or novel schemes require adequate notice, particularly where creditors have not been consulted and cannot be directly identified. In the absence of real urgency, the Practice Statement should be followed.

The scheme company must make full and frank disclosure and provide creditors with sufficient information to form a reasonable judgment. The court may refuse to convene a meeting where evidence, class composition or the explanatory statement is materially deficient. For a foreign company, the statutory jurisdictional requirement is distinct from the additional question whether there is a sufficient connection with England and a realistic prospect of recognition abroad.

Indah Kiat International Finance Company B.V., a Netherlands-incorporated financing vehicle, applied under Part 26 of the Companies Act 2006 for an order convening a single meeting of creditors to consider a scheme compromising defaulted notes governed by New York law. The proposed scheme also sought releases of liabilities owed by its Indonesian parent and other group members.

APP Investment Opportunity LLC opposed the application. It sought an adjournment for inadequate notice and raised concerns about jurisdiction, the evidence supporting the proposed class, the independence of a substantial supporting creditor, the explanatory statement and the likely recognition of the scheme abroad.

1. Adjournment. The convening hearing was adjourned for at least six weeks. Fourteen days’ notice was inadequate for a complex and novel scheme distributed through multiple clearing-system intermediaries. No real urgency justified departing from the Practice Statement. The purpose of the convening hearing is to enable creditors to address class composition, jurisdictional issues and other fundamental obstacles before meetings are held.
2. Evidence and disclosure. The scheme company bears the burden of adducing evidence of sufficient quality and credibility. It also owes the court a duty of full and frank disclosure. The recent director’s vague evidence based on unidentified colleagues and relevant people did not comply with CPR 32PD 18.2. The court may refuse to convene a meeting where the draft explanatory statement contains manifest deficiencies, although adequacy may be challenged again at sanction.
3. Classes. Class composition ordinarily depends on comparison of creditors’ existing rights against the scheme company and the rights offered under the scheme. Creditors whose rights are sufficiently similar to consult together for their common interest should be placed in one class. However, if the alleged supporting creditor were in reality owned or controlled by the debtor, the rights proposed to be conferred might be commercially so dissimilar that separate treatment could be required.
4. Explanatory material. The documents needed fuller and more accurate information about the supporting creditor, the alternatives to the scheme, the parent’s solvency and the releases benefiting group companies and directors. A fairness opinion should also make clear whether its authors accept responsibility to creditors.
5. Foreign schemes. Section 895(2) supplied the pure jurisdictional requirement, which was satisfied. Separately, the court had to consider whether there was a sufficient connection with England and a realistic prospect of recognition and effect abroad. Those questions were generally better determined at sanction, after the meeting and on fuller evidence. The court therefore made no final ruling on them.

The convening hearing was relisted, with directions for further evidence and revised scheme documentation.