DTEK Finance Plc, Re Companies Act 2006

When deciding whether to convene a creditors’ meeting for a scheme of arrangement, creditors with different contractual terms may form one class where the differences would be immaterial in the likely insolvency alternative. Small voting-related fees will not require separate meetings where they are unlikely materially to influence voting decisions.

For the purposes of article 8(1) of the recast Judgments Regulation, the relevant inquiry focuses on the close connection between the claims and the expediency of determining them together. It is not necessarily determined by the number or value of creditors domiciled in the jurisdiction. Submission to the jurisdiction and the desirability of binding all creditors to one restructuring may also be relevant.

DTEK Finance plc applied under section 896 of the Companies Act 2006 for an order convening a meeting of creditors to consider a scheme of arrangement. The proposed scheme would replace two series of notes with a single note having an extended maturity.

The court considered whether the two groups of noteholders could constitute one class, whether three categories of fees affected the class analysis, and whether article 8(1) of the recast Judgments Regulation created a jurisdictional obstacle. The court also considered a minor drafting defect in the scheme documents.

1. Application granted. An order was made under section 896 of the Companies Act 2006 convening a meeting of scheme creditors.
2. The two series of noteholders could be treated as one class. Their maturity dates were only shortly different, and their differing interest rates would be immaterial in the likely insolvency alternative, where recoveries appeared unlikely to exceed 20 per cent.
3. The work fee and restructuring fee were of no material significance. The lock-up fee, although more open to argument, was approximately 0.76 per cent of principal and was substantially smaller than the 2.5 per cent consent fee considered in Re Avangardco Investments Public Limited. It was unlikely materially to influence voting decisions and did not require separate meetings.
4. The court did not decide finally whether the recast Judgments Regulation applied to schemes of arrangement. Provisionally, article 8(1) presented no obstacle. The language referring to “any one” defendant did not make jurisdiction depend on the number or value of other creditors domiciled in England.
5. In assessing expediency under article 8(1), the court considered that the close connection between the claims was important. For an English company with its centre of main interests in England, the existence of one creditor domiciled here might suffice, particularly given the legitimate expectation that restructuring would occur in England or under the governing law of the debts. The desirability of binding all creditors to one restructuring was also relevant.
6. The submission to the English jurisdiction by approximately 83 per cent of noteholders under a lock-up agreement further supported the provisional conclusion that it was expedient for the scheme to proceed in England.
7. A minor omission concerning the definition or cross-reference for the noteholder terms sheet was capable of being corrected. The court accepted the company’s assurance that the documentation would be tidied up.