NN2 Newco Ltd, Re Politus BV

At the convening stage of a scheme of arrangement, the court considers jurisdiction, class composition and apparent roadblocks to sanction, but does not determine the scheme’s merits. A scheme company may be incorporated and assume liabilities to engage the English scheme jurisdiction where that structure seeks a better outcome for creditors and is not designed to evade debts.

An asymmetric jurisdiction clause is an agreement to English jurisdiction for Article 25 purposes, although it binds borrower and lender differently. A creditor class is fractured only where members’ rights are so dissimilar that consultation in their common interest is impossible. Differences in commercial interests, modest consent fees and independently justified work fees do not ordinarily meet that high threshold.

NN2 Newco Ltd sought directions to convene separate meetings of holders of notes and convertible bonds as part of a restructuring of a financially distressed international metals group. Politus BV, a Dutch financing vehicle, sought directions to convene a meeting of six lenders whose English-law facility was to be compromised.

The court considered whether each company fell within the scheme jurisdiction under the Companies Act 2006, whether European jurisdiction rules permitted the court to exercise jurisdiction over creditors, whether asymmetric English jurisdiction clauses engaged Article 25, and whether differences in creditors’ rights, fees or new-money opportunities required separate classes. It also considered the adequacy of notice and whether any apparent obstacle justified refusing or postponing the applications.

1. Applications granted. The court directed the convening of the proposed NN2 and Politus scheme meetings. A convening hearing is not the occasion to determine the merits of a scheme. It must nevertheless address jurisdiction and any apparent roadblock to sanction. The notice given was adequate in light of the extensive prior consultation, the sophistication of the creditors and the urgency created by impending insolvency.
2. NN2 was a company liable to be wound up and therefore a company within section 895 of the Companies Act 2006. Its incorporation to promote a scheme and its voluntary assumption of joint and several liability under the relevant instruments were not abusive. Those steps sought to obtain the best available outcome for creditors rather than evade debts. English governing law also supplied a sufficient connection. Politus, although Dutch, was an unregistered company liable to be wound up under Part V of the Insolvency Act 1986. The English governing law and jurisdiction clause in its facility established the necessary sufficient connection.
3. Assuming that the Recast Judgments Regulation applied, Article 8 jurisdiction existed for the NN2 scheme because English-domiciled creditors held sufficiently substantial proportions of the relevant debt. Article 8 could not assist Politus because none of its scheme creditors was domiciled in England.
4. An asymmetric jurisdiction clause is an agreement that the English courts are to have jurisdiction within Article 25. The borrower is confined to England, while the lender submits to English jurisdiction but retains liberty to commence proceedings elsewhere. Article 25 encompasses both exclusive and non-exclusive agreements. An application for approval of a scheme is a dispute for this purpose. The contrary obiter suggestion in Re Global Garden Products Italy SpA [2016] EWHC 1884 was not accepted.
5. The presumptive single class is fractured only where members’ rights are so dissimilar that consultation in their common interest is impossible. That is a high threshold. The proposed separate meetings of noteholders and bondholders were a permissible pragmatic solution. Fractional interests held through trusts did not require a separate class because their holders were placed as nearly as possible in the position of direct holders.
6. Work fees did not fracture the NN2 classes. They represented proportionate remuneration for work and trading restrictions, had an independent commercial justification, were fully disclosed and did not depend on voting. A modest consent fee offered to all creditors for early support likewise created no class issue.
7. The Politus lenders formed one class. All had the same rights in liquidation and under the scheme. The opportunity to provide new money was genuinely available to each lender. Different decisions about that investment reflected differences in interests, not rights, and did not fracture the class. Politus subsequently informed the court that it would not proceed with its scheme.

not stated in the judgment.