Stripes Us Holdings Inc

On an application to sanction a scheme of arrangement, the court must consider:

1. whether the statutory requirements have been met;
2. whether the class was fairly represented and the statutory majority acted bona fide without oppression; and
3. whether the scheme is one which an intelligent and honest member of the class, acting in their own interests, might reasonably approve.

The court is not bound by the meeting’s decision, but should be slow to differ where the scheme has been properly considered and there is no articulated dissent. A foreign company may be subject to the court’s scheme jurisdiction where it is liable to be wound up under the Insolvency Act 1986. Jurisdiction over creditors may be founded under Article 8 of the Recast Judgment Regulation where the claims are closely connected and a sufficient number of creditors are domiciled in the jurisdiction.

Stripes UK Holdings Inc applied under section 896 of the Companies Act 2006 for sanction of a scheme relating to creditors under a US$200 million revolving credit facility. The Delaware-incorporated company formed part of the Steinhoff group and its principal asset was its interest in Mattress Firm, whose subsidiaries were in Chapter 11 proceedings in the United States.

The scheme would transfer creditors’ rights to SEAG in exchange for new debt instruments, followed by a contribution of the debt to the company’s capital. The creditors approved the scheme unanimously, representing 92.46% by value and 61.29% by number of all creditors entitled to vote. The issues were statutory compliance, class constitution, bona fides, commercial fairness, jurisdiction over the company and creditors, sufficient connection, and international efficacy.

The court sanctioned the scheme.

1. Statutory compliance. The statutory majorities required by section 899 of the Companies Act 2006 were obtained, and the convening order had been complied with. Although the court retained jurisdiction to reconsider the constitution of the class, it was slow to revisit the reasoned decision made at the convening stage, particularly where no creditor suggested that the single meeting had been wrongly constituted.
2. Bona fides and absence of oppression. The majority had acted bona fide. The participation of some creditors in the exit facility and the payment of consent fees did not establish coercion or oppression. Creditors outside those categories had also voted for the scheme, the fees were small compared with the value at risk, and there was no evidence that the majority had overridden the interests of the minority.
3. Commercial fairness. Applying the approach summarised in Re Telewest Communications (No. 2) Ltd [2005] 1 BCLC 722, the scheme was one which an intelligent and honest member of the class, acting in their own interests, might reasonably approve. The court was not bound by the meeting’s decision, but should be slow to differ where the scheme had been properly considered and there was no articulated dissent. The unanimous approval and the anticipated improvement in creditors’ recoveries supported sanction.
4. Jurisdiction. The court had jurisdiction over the foreign company because it was liable to be wound up under the Insolvency Act 1986. Assuming that the Recast Judgment Regulation applied, Article 8 provided a sufficient basis for jurisdiction over the creditors: their claims were inextricably connected, and six of the 31 creditors were domiciled in England and Wales.
5. Exercise of jurisdiction. The facility was governed by English law, which established a sufficient connection. Expert evidence indicated that the order would likely be recognised in the United States and would not improperly interfere with the US proceedings. The court therefore exercised its discretion to sanction the scheme.

This was a first-instance sanction application. The scheme had previously been convened by Zacaroli J under [2018] EWHC 2912 (Ch).