Agrokor D.D., Re

The court granted the applicant company permission to convene a creditors' meeting under Part 26 of the Companies Act 2006 to consider a scheme of arrangement affecting the super-priority facility agreement (SPFA) lenders. The judge concluded that the court has jurisdiction because the company is technically liable to be wound up under the Insolvency Act 1986 and some scheme creditors are domiciled in England and Wales, such that Article 8 of the recast Judgments Regulation 2012 could found jurisdiction if required. The court also found a sufficient connection with England because the rights of the company and the scheme creditors are governed by English law and there is a non-exclusive jurisdiction agreement in favour of English courts. Notice was held to be adequate, the creditors constituted a single class for voting, and the proposed lock-up fee (0.35 per cent) did not prevent a single meeting. The court made an order to convene the meeting on 28 February 2019 subject to a minor amendment requiring publication and emailing of scheme information by specified deadlines.

Background and parties:

• The applicant is Agrokor d.d., a Croatian-registered company within a large privately owned Croatian and Dutch group operating in agriculture, food production, wholesale and retail.
• The group entered an extraordinary administration under Croatian law after financial difficulties. An administrator was appointed in April 2017 and, in June 2017, the company obtained €1.06 billion of super-priority finance (the SPFA) which ranks as priority debt under the Croatian Extraordinary Administration Act.
• A Croatian court approved a settlement plan in July 2018 that became effective in principle on 18 October 2018 but is subject to conditions precedent, including restructuring/novation of the SPFA.

Nature of the application: The company applied under Part 26 Companies Act 2006 for an order to convene a creditors' meeting of the SPFA priority creditors to vote on a scheme of arrangement that would effect a novation and create new facilities binding all scheme creditors.

Issues framed by the court:

• Jurisdiction of the English court to convene the meeting and to determine the proposed scheme, including whether the recast Judgments Regulation 2012 applies and, if so, whether Article 8 confers jurisdiction in respect of creditors domiciled in other member states.
• Whether there is a sufficient connection with England to justify the court proceeding (governing law of rights, non-exclusive jurisdiction agreement, and likely recognition in Croatia).
• Whether the SPFA priority creditors form a single class for the purposes of convening a single meeting.
• Adequacy of notice and whether any practical impediment (such as the proposed lock-up fee) prevents a single meeting.

Reasoning and subsidiary findings:

• Jurisdiction: the company could, technically, be wound up under the Insolvency Act 1986; some creditors are domiciled in England and Wales, so even if the recast Judgments Regulation applies Article 8 could support jurisdiction; the court need not finally decide the Regulation point for the present application.
• Sufficient connection: the rights at issue are governed by English law, there is a non-exclusive jurisdiction agreement in favour of English courts, and evidence was adduced that a sanction order would likely be recognised and given effect in Croatia.
• Notice: notice to the scheme lenders on 1 and, for a small group, on 6 February was sufficient given the sophisticated international character of the lenders.
• Class composition: on the evidence there is no distinction in rights among the SPFA priority creditors under the existing SPFA or under the proposed replacement facilities, so a single class is appropriate.
• Lock-up fee and meeting practicality: a 0.35 per cent lock-up fee was offered, available to all lenders, and over 86 per cent by value had signed; this did not prevent convening a single meeting.

Disposition: The judge authorised convening a single scheme meeting to be held on 28 February 2019, subject to a minor amendment requiring scheme information to be posted to the specified website immediately and emailed to each scheme creditor by 4:00 pm on 15 February 2019. No scheme creditor appeared to oppose the application.

The application to convene a meeting of the scheme creditors was granted. Mr Justice Fancourt held that the English court had sufficient jurisdiction and that there was a sufficient connection with England (rights governed by English law and a non-exclusive jurisdiction agreement). The scheme creditors constituted a single class, notice had been adequate, and the proposed lock-up fee did not prevent a single meeting. An order was made to convene the meeting on 28 February 2019, subject to a small amendment requiring publication and emailing of scheme information by set deadlines.