Noble Group Ltd, Re

The court may sanction a scheme of arrangement where the statutory requirements are satisfied, the classes were properly constituted and represented, the majority acted bona fide, and the scheme is one an intelligent and honest creditor could reasonably approve. The scheme need not be the only or best fair scheme.

For a foreign company, there must also be a sufficient connection with England and credible evidence that the scheme will achieve substantial effect in relevant jurisdictions. A genuine, openly communicated transfer of central administration to England may establish that connection even where undertaken to obtain access to English restructuring procedures.

A Bermudian holding company applied under Part 26 of the Companies Act 2006 for sanction of a scheme compromising substantially all its creditors. The scheme formed part of a restructuring under which its assets would pass to a new group. Creditors would receive debt and equity interests, with enhanced consideration available to creditors providing new risk participation.

The court had previously directed separate meetings for Deutsche Bank and the remaining scheme creditors in [2018] EWHC 2911 (Ch). Both classes approved the scheme by overwhelming majorities.

The sanction hearing addressed statutory compliance, class representation, collateral fees, fairness, third-party releases, claims adjudication, the treatment of subordinated creditors, the company's connection with England, the scheme's likely international effectiveness, and the possible application of the Recast Judgments Regulation.

1. The scheme was sanctioned. The statutory requirements of Part 26 of the Companies Act 2006 had been satisfied. The classes were correctly constituted, notice and disclosure were sufficient, and the necessary majorities were obtained. Minor notification deficiencies were inadvertent, caused no prejudice and could be waived.

2. The sanction inquiry required consideration of statutory compliance, fair representation and proper voting, substantive fairness, and any legal or technical defect. Fairness meant that an intelligent and honest creditor acting in its own interest could reasonably approve the scheme. The court did not have to decide whether it was the only or best scheme and gave substantial weight to the informed commercial judgment demonstrated by the overwhelming vote.

3. The fees and other benefits available to some creditors did not make the majority unrepresentative. A special interest becomes objectionable where it is adverse to the class interest and has a sufficiently strong causal influence on the vote. Here, most fees had already been paid, the conditional backstop fees represented market-rate consideration for further accommodation, and large numbers of creditors receiving no such fees also supported the scheme.

4. Part 26 permitted third-party releases necessary to give effect to the compromise and releases protecting those involved in negotiating or implementing it. More tangential releases might create class issues where only some creditors possessed the released claims. No such claims were shown here, so the releases caused neither a class defect nor unfairness.

5. The independent adjudication procedure was fair. Although court access was restricted, the process was modelled on liquidation proofs, preserved mandatory appeal rights so far as the law required, used experienced and impartial adjudicators, and allowed flexible procedures, expert evidence and oral hearings.

6. The exclusion of subordinated perpetual securities created no defect. Their holders were substantially out of the money. The creditors owning the available economic value could, for credible commercial reasons, allocate some restructuring equity to shareholders and management.

7. The foreign company had a sufficient connection with England. Its openly communicated relocation of substantive head-office and administrative functions was neither illusory nor temporary. English-law debts, English creditors and overwhelming creditor support reinforced that connection. Parallel Bermudian proceedings, English governing-law clauses and persuasive evidence of likely United States recognition established a reasonable prospect that the scheme would have substantial international effect.

8. Assuming that the Recast Judgments Regulation applied, Article 8(1) was satisfied because English-domiciled noteholders held a significant proportion of the scheme claims. It was therefore unnecessary to decide whether the presence of any single English creditor would always suffice.

The application was at first instance. At an earlier convening hearing in the same proceedings, the court ordered separate class meetings and gave reasons in [2018] EWHC 2911 (Ch).