Re Indah Kiat International Finance Co BV

This is an application under Part 26 of the Companies Act 2006 for an order convening a single meeting of scheme creditors to consider a proposed scheme of arrangement. The court held that the convening hearing must be adjourned because (i) notice to scheme creditors by dissemination through the clearing systems was inadequate given the complexity and novelty of the scheme, and (ii) the evidence and draft explanatory statement were materially deficient. The judge identified important failures of disclosure and evidential quality (notably reliance on the evidence of a recently appointed sole director who lacked personal knowledge and vague sourcing contrary to CPR 32PD 18.2), serious concerns about the true identity and role of a purported Supporting Creditor, and insufficient explanation of alternatives to the scheme and the likely effect of releases. The court refused to convene the meeting or approve circulation of the draft explanatory statement in its present form and adjourned the convening hearing with directions for further evidence and revised documentation.

This was a Part 8 application by Indah Kiat International Finance Company B.V. (the Scheme Company), a Dutch special purpose vehicle, seeking an order to convene a single meeting of its scheme creditors to consider a scheme of arrangement under Part 26 of the Companies Act 2006. The debts to be compromised arose under New York law governed notes issued in 1994 and related United States judgments; the parent company (the Parent) guaranteed the notes. The Scheme Company asserted that its COMI had been moved to England and gave notice by publications through DTC, Euroclear and Clearstream.

The application was opposed by a creditor, APP Investment Opportunity LLC (APPIO), which challenged the court's jurisdiction to entertain the scheme, contended that notice to creditors was inadequate, and criticised the adequacy and provenance of evidence and disclosure. The judge summarised the principal issues as: (i) adequacy of notice and urgency, (ii) evidential sufficiency and compliance with CPR 32PD 18.2, (iii) the identity, independence and role of a large Supporting Creditor relied upon in the documentation, (iv) the content and completeness of the draft Explanatory Statement and fairness materials (including the analysis of alternatives and disclosure of releases), and (v) wider questions about jurisdictional connection with England and the prospects of foreign recognition (notably in the United States).

The court reasoned that the convening hearing is primarily concerned with class composition and jurisdictional threshold points and is not the forum for deciding the merits of the scheme. Nonetheless, the applicant bears the burden of adducing credible evidence and must make full and frank disclosure. The evidence before the court was deficient: the Scheme Company relied on a sole director appointed only weeks earlier whose statements were largely sourced to unidentified "colleagues" and "relevant people"; the Practice Statement letter and the draft Explanatory Statement gave disproportionate prominence to a Supporting Creditor whose formation post‑dated the claimed negotiations and who appeared likely to be a nominee or connected party; and the documentation did not adequately explain the alternatives to the scheme or the financial position of the Parent. Given these defects, and the short notice actually given to creditors (14 days for a complex cross‑border scheme disseminated through clearing systems), the court was not satisfied that creditors had been given an effective opportunity to appear at the convening hearing or to consider the materials. The court therefore adjourned the convening hearing to a date not before 3 March 2016, refused to direct circulation of the draft Explanatory Statement in its present form, and ordered that any further evidence or revised documentation be filed and served on any creditor intending to appear at least 10 days before the relisted hearing. The judge indicated that more contentious jurisdictional and recognition questions would generally be addressed at the sanction stage unless they manifestly failed the initial threshold at convening.

The court adjourned the convening hearing and declined to authorise the circulation of the draft Explanatory Statement in its present form. The convening hearing was relisted to a date not before 3 March 2016. Rationale: inadequate notice to scheme creditors for a complex cross‑border scheme; inadequate and non‑compliant evidence (reliance on a recently appointed sole director with second‑hand information); material deficiencies and lack of candour about the identity and role of a large Supporting Creditor; and insufficient disclosure and analysis of alternatives, releases and the likely effect of the scheme abroad. Directions were given that any further evidence and revised explanatory/fairness materials must be filed and served at least 10 days before the relisted hearing, and permission was given to apply for further directions on two clear business days’ notice.