Steinhoff International Holdings N.V., Re

The company applied for sanction of a creditors' scheme of arrangement under the Companies Act 2006 (sections 896 and 899) to enable amendments to English-law financing documents (notably amendments to the SEAG contingent payment undertaking and intercreditor agreement) as a stepping stone to a wider global settlement of Steinhoff Group disputes. The court found that statutory requirements for sanction were met: the convening order and meetings were properly conducted, the classes were appropriately constituted, and the requisite majorities acted bona fide. The court allowed a third party (Conservatorium) to be heard because the scheme is part of a broader restructuring affecting third-party interests, but concluded there was no "blot" on the scheme. The judge held that the scheme is a fair proposal that an intelligent and honest member of the class might reasonably approve, given (i) the scheme’s limited effect (authorising implementation steps), (ii) its role as a necessary gating item to the wider Steinhoff Group Settlement, and (iii) the availability of further processes in the Netherlands and South Africa where Conservatorium may present its substantive objections.

Background and parties:

• Steinhoff International Holdings N.V. (Steinhoff NV), a Netherlands-incorporated ultimate holding company with principal place of business in South Africa, sought sanction of a creditors' scheme under Companies Act 2006, section 896, affecting two classes of lenders (Facility A1 and Facility A2 lenders) to implement amendments to the SEAG CPU and SEAG intercreditor agreement.
• Conservatorium Holdings LLC was not a Scheme Creditor but claimed a sufficient interest because it asserted ownership of claims (the Thibault and Upington Claims) arising from share acquisitions and security arrangements and objected to aspects of the proposed global settlement (the Steinhoff Group Settlement).

Procedural posture:

• A convening order was made by Sir Alastair Norris and scheme meetings were held; the scheme was approved by the statutory majorities. The sanction hearing was before Mr Justice Adam Johnson on 26–27 January 2021.

Nature of the application:

• Sanction of a creditors’ scheme of arrangement to authorise agents to execute implementation documents amending English-law finance documents (notably extending maturity and reducing consent thresholds) to enable a global settlement of group claims. The application included releases for directors and advisers.

Issues framed:

• Whether statutory requirements and procedural protections for sanction were satisfied.
• Whether Conservatorium, a non-scheme creditor, had standing to object and whether its objection identified a "blot" making the scheme unfair.
• Whether the company’s conduct in proposing to pay Thibault/Titan notwithstanding an ownership dispute (rather than escrow) was unfair or amounted to an improper determination of rights.
• Whether the scheme would be effective internationally and whether subsequent processes in the Netherlands and South Africa provided adequate protection for third-party interests.

Court’s reasoning and conclusions:

• The court was satisfied the meetings and majorities complied with the Companies Act and that classes were properly constituted. The statutory majorities acted bona fide and in class interests.
• The court accepted Conservatorium should be heard because the scheme is a component of a wider restructuring and third-party interests may be affected; the court exercised its discretion to receive Conservatorium’s de bene esse submissions.
• On the merits, the court concluded the company was not purporting to adjudicate the ownership dispute: the company offered a compromise on assumptions about ownership and accepted that paying a claimant incorrectly would not bind a rival claimant. The company’s reformulation (from proposing escrow to proposing payment to Thibault/Titan) was a commercial judgement taken to maximise prospects of a global settlement, not an unlawful or unfair determination of proprietary rights.
• The court considered the scheme in its realistic commercial context: it is a "stepping stone" and further processes in South Africa and the Netherlands (including a section 155 proposal in South Africa and likely suspension of payments in the Netherlands) would allow Conservatorium to present its substantive objections. That mitigated the risk of unfairness from sanctioning the present scheme.
• Accordingly, although Conservatorium was afforded standing, the judge found no "blot" such as to justify refusing sanction and proposed to sanction the scheme, reserving form of order for further hearing.

Wider implications noted: the judgment emphasises the court’s commercial realism in sanction hearings where a scheme is a necessary gating step in a cross-border settlement, and confirms the court may take third-party consequences into account when the scheme is part of a larger process.

The court directed that the scheme be sanctioned (the application for sanction is granted). Rationale: statutory requirements were satisfied, the classes were properly constituted and acted bona fide, and although a non-scheme creditor (Conservatorium) was permitted to be heard, its objection did not disclose a "blot" rendering the scheme unfair. The scheme is a legitimate stepping stone to a wider cross-border settlement and further Dutch and South African processes will permit Conservatorium to present its substantive case.