In the Matter of Hong Kong Airlines Limited

Under Part 26A of the Companies Act 2006, a foreign company may seek an English restructuring plan where it has a sufficient connection with England and Wales. Sufficiency depends on an intense focus on the facts, not a fixed proportion of English-law debt. The court must scrutinise jurisdiction, class constitution, voting, information, creditor participation, fairness and likely international effectiveness. A plan is fair where it is a compromise that an intelligent and honest class member, considering ordinary class interests, might reasonably accept.

Hong Kong Airlines Ltd, a Hong Kong-incorporated airline registered in England as an overseas company, was insolvent and subject to a Hong Kong winding-up petition. It proposed a restructuring plan under Part 26A of the Companies Act 2006, involving new money, fleet reduction and compromises with unsecured creditors, critical lessors and perpetual noteholders. A parallel Hong Kong scheme addressed Hong Kong-law liabilities.

The court considered jurisdiction, compromise, the Cape Town Convention, statutory compliance, class composition, voting, fairness and international effectiveness. The central issue was whether the modified plan should be sanctioned.

1. Sanction granted. The modified restructuring plan was sanctioned under Part 26A of the Companies Act 2006.
2. The threshold conditions were satisfied. The company faced financial difficulties affecting its ability to carry on business as a going concern, and the plan proposed a compromise intended to reduce or mitigate their effect.
3. The company had a sufficient connection with England and Wales. Relevant factors included its English registration, English-law perpetual notes, creditor participation and coordination with the Hong Kong scheme. Sufficiency required an intense focus on the facts and did not depend on an overwhelming majority of English-law indebtedness.
4. The Cape Town Convention presented no obstacle. The critical lessors had voted unanimously for the plan and could choose an alternative under which they recovered their aircraft rather than accept modified rights. Modification therefore occurred with creditor consent.
5. The creditor classes were properly constituted. Secured and unsecured creditors could form one class because the plan compromised only deficiency claims and did not affect security rights. Different governing laws did not fracture the class where claims in the relevant liquidation were governed by common winding-up rules.
6. The statutory majorities were achieved, the meetings were fairly representative, creditors were sufficiently informed, participation was facilitated and the majority acted bona fide.
7. The fairness test was satisfied. The plan offered materially better projected recoveries than an immediate liquidation, and properly informed creditors were ordinarily the best judges of their commercial interests.
8. There was a reasonable prospect that the plan would achieve a substantial effect in Hong Kong, the British Virgin Islands, the Cayman Islands and China.