Re Petropavlovsk plc (in Administration) & Ors

At a scheme convening hearing, the court does not determine the merits of the scheme. It considers whether any jurisdictional or other roadblock makes sanction unlikely and whether creditors should meet in the proposed class or classes.

A compromise or arrangement is construed broadly and requires only an element of give-and-take. Creditors may constitute one class where their legal rights are not so dissimilar that they cannot consult together in a common interest. Differences in commercial interests, sanctions-related payment arrangements, or practical voting difficulties do not necessarily fracture a class.

For administration jurisdiction, a foreign company’s centre of main interests may be in England despite a foreign registered office where the relevant business is conducted there and that fact is ascertainable by third parties.

Applications were made for convening orders in relation to parallel schemes for three companies: Petropavlovsk plc, which was in administration, and two Jersey subsidiaries, Petropavlovsk 2010 Limited and Petropavlovsk 2016 Limited. The schemes concerned bondholders, noteholders and other creditors, and were intended to facilitate payment from sale proceeds following the group’s business sale.

The two Jersey companies also sought administration orders and approval for a letter of request to the Jersey court. The central issues were whether the schemes were compromises or arrangements, whether the proposed creditors could meet as single classes, whether adequate notice had been given, whether the Jersey companies had the necessary English connection and centre of main interests, and whether administration was reasonably likely to achieve its statutory purposes.

1. Convening orders. The applications were granted. At the convening stage, the court considers whether there is a jurisdictional roadblock which indicates that sanction will not be available; it does not decide the merits of the scheme.
2. Notice. Fourteen days is the usual period for notice of a convening hearing, but it is not prescribed. Shorter notice may be approved where urgency or other circumstances justify it. The notice given here was sufficient because the schemes had been publicised, creditors had been pre-warned, the purpose was payment in full, and banking facilities were shortly to close.
3. Compromise or arrangement. The expression is construed broadly and requires some element of give-and-take. Although creditors were intended to be paid in full, the schemes altered their rights, including enforcement rights, rights against guarantors, the timing and mechanics of payment, and potential currency outcomes. That was sufficient.
4. Class composition. The relevant test is whether creditors’ rights are not so dissimilar as to make it impossible for them to consult together in a common interest. The comparison concerns legal rights against the scheme company both without and with the scheme. Differences in put-option circumstances, intercompany claims, categories of general creditors, sanctions-related voting arrangements and a holding-period trust did not fracture the classes. The court applied the approach in Re Hawk Insurance Company Limited [2002] BCC 300, Re Telewest Communications plc [2004] BCC 342 and Re Nostrum Oil & Gas plc [2022] EWHC 1646.
5. Administration orders. The Jersey companies were unable to pay their debts. Their centre of main interests was in England, despite their Jersey registered offices, because their administration was conducted from England and this was ascertainable by third parties. Administration was reasonably likely to achieve a better result for creditors than winding up, principally because the parallel schemes could pay external creditors in full.
6. The court approved the draft scheme orders, made the administration orders, and approved the issue of a letter of request for recognition of the administrators in Jersey.