Re Smile Telecom Ltd

The Court sanctioned a restructuring plan promoted by Smile Telecoms Holdings Limited under Part 26A of the Companies Act 2006. The judgment addresses: the meaning of a "compromise or arrangement" under Part 26A; the scope and proper exercise of the court's power under section 901C(4) to refuse to summon classes that have no genuine economic interest; and the approach to sanctioning a plan for an overseas company which will alter members' rights. The judge held that (i) the Plan constituted a compromise or arrangement with sufficient "give and take" and that small payments described as "ex gratia" nonetheless constituted compensating advantage, (ii) Miles J was entitled to conclude at the convening stage that classes other than the super‑senior lender had no genuine economic interest so did not require meetings under section 901C(4), and (iii) the Court had sufficient jurisdiction and discretion to sanction a Plan that will be implemented, in part, in Mauritius provided CPR‑compliant foreign‑law opinions confirmed the mechanisms (including deposit and registration of a power of attorney) by which changes to the constitution and share capital could be given effect there.

The applicant company, Smile Telecoms Holdings Limited (a Mauritius company registered as an overseas company in England), applied for an order sanctioning a restructuring plan under Part 26A of the Companies Act 2006. The Company proposed a Plan which would (among other things) make 966 Co. S.à.r.l. the owner of the company by converting existing share classes into nominal deferred shares, compromise or release a range of creditor claims, provide limited cash consideration to many affected stakeholders, and implement a Disposal Proceeds Sharing Deed.

Parties and context: The Company is the holding company of an African telecoms group. The capital and debt structure included a super‑senior facility (966), senior facilities (including Afreximbank and IDC), preference shares, unsecured creditors and shareholder‑related subordinated loans. A prior restructuring plan (the First Plan) had been sanctioned in 2021. A sale process had failed to produce offers sufficient to repay all indebtedness and the company faced likely cashflow insolvency.

Nature of the application: sanction of a restructuring plan under Part 26A; consequential questions included whether the Plan is a "compromise or arrangement", whether the court could exclude classes from convening under section 901C(4), and whether the English court should sanction a Plan which will alter the constitution of a Mauritius company and rely on a power of attorney to effect changes in Mauritius.

Issues framed by the court:

• Whether the Plan qualifies as a "compromise or arrangement" for Part 26A purposes (including whether surrender of rights without adequate compensating advantage would bar jurisdiction).
• Whether Miles J was right to order, under section 901C(4), that only the super‑senior lender required to be summoned because other classes had no genuine economic interest.
• Whether it was appropriate to sanction a Plan which alters the capital and articles of a foreign company and whether those alterations could be given effect in Mauritius (including the validity and recognition of the power of attorney and the deposit/registration procedure in Mauritius).
• Whether the Plan would be capable of recognition and enforcement against dissenting creditors in jurisdictions where relevant assets and creditors are located (notably Nigeria and South Africa).

Reasoning: The judge applied the established "give and take" test for "compromise or arrangement" and accepted that modest payments labelled as ex gratia were properly regarded as consideration for modification or extinction of rights. The Court accepted Miles J's factual findings (on the balance of probabilities) that other creditor and member classes were out of the money in the relevant alternative (a formal insolvency), and therefore had no genuine economic interest such that section 901C(4) properly permitted excluding those classes from meetings; the Court emphasised the importance that any party opposing such an order should raise its case at the convening stage and adduce proper expert and valuation evidence rather than await the sanction hearing. On international elements, the Court treated the company's COMI being in England and the predominance of English‑law governed debt as a sufficient connection to entertain the Plan. The judge required CPR‑compliant foreign‑law opinions on Mauritius, Nigeria and South Africa issues; after receipt of confirmatory CPR‑compliant reports the Court was satisfied that (i) the power of attorney could be deposited and registered in Mauritius under local procedure so as to enable special resolutions to be passed there in the manner envisaged, (ii) recognition and effect against creditors in Nigeria and South Africa was reasonably likely, and (iii) therefore the Plan was not likely to be futile if sanctioned.

Outcome: The Court concluded it had jurisdiction and discretion and that it was appropriate to sanction the Plan (subject to receipt of confirmatory CPR‑compliant foreign law reports, which were thereafter provided and accepted).

The Court sanctioned the restructuring Plan. The judge held that (i) the Plan met the Part 26A requirement of a "compromise or arrangement" because affected rights were exchanged for compensating advantages, (ii) Miles J was justified in ordering under section 901C(4) that only the super‑senior lender required to be summoned because other classes had no genuine economic interest, and (iii) the Court had jurisdiction and should exercise its discretion to sanction a Plan affecting the constitution of a Mauritius company provided the proposed mechanism (including registration of a deposited power of attorney in Mauritius and available recognition remedies) and CPR‑compliant foreign‑law evidence showed the Plan could be given international effect. Confirmatory foreign law reports compliant with CPR were later provided and accepted.