In the matter of Petroserv Marine

The court considered an application for a convening hearing for a scheme of arrangement under Part 26 of the Companies Act 2006. It held that the court had jurisdiction: the company fell within Part 26 because it was a company liable to be wound up under the Insolvency Act 1986, and the proposed transaction plainly amounted to a compromise or arrangement with the lenders. The judge accepted that 20 days' notice of the convening hearing was sufficient in the circumstances, noting the urgency of the restructuring. The court addressed class composition and approved, in broad terms, four classes corresponding to the existing lender tranches (A–D), rejecting a single class and fragmentation beyond the four tranches as inappropriate given differing recoveries in liquidation.

Background and parties: Petroserv Marine (the Company) applied for a convening hearing to promote a scheme of arrangement under Part 26 of the Companies Act 2006. Labrador Marine Corporation was identified as a non-participating creditor and counsel for Labrador attended the hearing.

Nature of the application: The application sought the court's directions and an order to convene creditor meetings for approval of a scheme which would insert a top-tier lending facility above existing tranches, in order to enable the Company and group companies to continue trading and complete an urgent restructuring.

Issues framed:

• Whether sufficient notice had been given of the convening hearing;
• whether the court had jurisdiction under Part 26 as to the Company and the nature of the arrangement;
• the appropriate composition of creditor classes for voting on the scheme; and
• the consequence and status of Labrador Marine Corporation's non-participation.

Court's reasoning and decision: The judge found 20 days' notice to be appropriate given the urgency and relative simplicity of the scheme. On jurisdiction the court was satisfied the Company was a company within Part 26 because it was liable to be wound up under the Insolvency Act 1986; any question of sufficient connection with the jurisdiction was a matter for judicial discretion rather than a jurisdictional bar. The proposed measures plainly amounted to a compromise or arrangement with the lenders, satisfying the statutory requirement. On class composition, the court concluded that classes should follow the existing seniority of the four tranches (A–D): a single class would be inappropriate because recoveries in liquidation would differ between tranches, and further fragmentation offered no proper justification. The judge noted that Labrador's position had been fully aired but that its non-participation was a matter for later stages, and indicated he was minded to make the convening order and would finalise the detailed terms with the Company's counsel.

The court granted the convening order for meetings under Part 26 of the Companies Act 2006. Rationale: the Company falls within Part 26 as liable to be wound up under the Insolvency Act 1986; the proposed arrangement is a compromise with the lenders; 20 days' notice was sufficient given the urgency; and creditor classes should be four, matching the existing lending tranches.