PGS ASA, Re (Companies Act 2006)

When sanctioning a scheme of arrangement, the court must be satisfied that the statutory requirements have been met, the class was fairly represented, the voting majority acted bona fide and for proper purposes, the scheme is one which an intelligent and honest creditor might reasonably approve, and there is no legal or technical defect. For an international scheme, the court must also be satisfied that it will have substantial effect in the relevant jurisdictions. A substantial majority vote is strong evidence of fairness, and the court will generally give considerable weight to creditors’ commercial judgment where the meeting was properly conducted and adequately informed. Limited post-meeting modifications may be sanctioned where they do not materially and adversely affect creditors or impose additional material obligations, and would not have altered the voting outcome.

PGS ASA applied under section 899 of the Companies Act 2006 for sanction of a scheme restructuring and extending its group’s debt facilities. The court had previously ordered a single meeting of scheme creditors at a convening hearing reported at [2020] EWHC 3622 (Ch).

The adjourned virtual meeting was attended by almost all scheme creditors. The scheme received overwhelming support by value and number. Issues arose concerning mistaken interest overpayments, related amendments notified before the vote, and limited further modifications proposed after the meeting. The central questions were whether the statutory and procedural requirements were satisfied, whether the scheme was fair and effective internationally, and whether the further modifications could properly be sanctioned.

1. The scheme was sanctioned under section 899 of the Companies Act 2006. The statutory requirements were satisfied: the creditor class was properly constituted, the convening order was complied with, the explanatory statement was adequate, the meeting was properly conducted, and the statutory majorities were obtained.

2. Applying the approach summarised in Re KCA Deutag UK Finance plc [2020] EWHC 2977 (Ch), the court was satisfied that the class was fairly represented and that creditors acted bona fide and in the interests of the class. Cross-holdings did not make the meeting unfair, since the evidence showed that the scheme would still have been approved by the other creditors by substantial majorities.

3. The overwhelming vote in favour created strong evidence, and a rebuttable presumption, that the scheme was fair. The court was not required to decide whether the scheme was the fairest or best possible scheme. Where creditors have been properly informed and consulted, the court will generally regard them as better judges of their commercial interests and will be slow to differ from their decision. The lock-up fee, work fee, advisers’ fees, amendment fees, additional fees and backstop arrangements did not render the scheme unfair.

4. The scheme contained no technical or legal defect. It was also likely to have substantial effect internationally. The English governing law and jurisdiction clauses, the contractual support of virtually all scheme creditors, and expert evidence concerning relevant foreign jurisdictions provided sufficient grounds for concluding that the scheme was likely to be recognised and given effect abroad. The court applied the principle stated in Re Magyar Telecom B.V. [2014] BCC 448 that a scheme should achieve a substantial effect and need not be effective in every jurisdiction worldwide.

5. The further post-meeting modifications were limited waivers connected with recovery of mistaken interest payments. They did not materially and adversely affect any scheme creditor compared with another creditor and imposed no additional material obligations. Applying Re Aon plc [2020] EWHC 1003 (Ch), the court was satisfied that the modifications fell within the scheme’s modification provision and would not have affected the meeting’s outcome.

The judgment followed a convening order and earlier convening judgment in the same proceedings, reported at [2020] EWHC 3622 (Ch). No appeal was described.