IN THE MATTER OF SAFARI HOLDING VERWALTUNGS GMBH AND IN THE MATTER OF PART 26 OF THE COMPANIES ACT 2006

At the convening stage of a scheme of arrangement, the court must identify whether creditors’ rights are so dissimilar that they cannot consult together in their common interest.

Differences arising from backstop fees, consent fees, advisers’ fees or limited appointment rights will not fracture a class where the benefit is available on equal terms, represents payment for services, is immaterial compared with the scheme consideration, or is too intangible to influence voting.

A foreign company may use the scheme jurisdiction where it is liable to be wound up under the Insolvency Act 1986 and there is a sufficient connection with England and Wales. A present contractual choice of English law, reinforced by an English jurisdiction clause, may provide that connection.

Safari Holding Verwaltungs GmbH, a German company operating gaming arcades, applied under section 896 of the Companies Act 2006 for an order convening a meeting of holders of senior secured notes to consider a restructuring scheme.

The proposed restructuring would cancel existing notes and replace them with new notes and equity interests. It would also provide for new money and the repayment of revolving credit debt. The Company sought directions for a single class meeting.

The issues were whether notice was adequate; whether differences created by fees, adviser arrangements or director appointment rights fractured the creditor class; whether the court had jurisdiction over a foreign company; whether there was a sufficient connection with England and Wales; and whether the scheme had a real prospect of substantial international effect.

1. Order convening meeting. The court made the convening order and directed that the creditors’ meeting be held remotely on 28 April 2022.
2. Notice. Notice given approximately seven and a half weeks before the hearing, supplemented more than 21 days beforehand, was adequate. The customary period of 14–21 days was a useful reference point but depended on the circumstances: Re Swissport Fuelling Ltd [2020] EWHC 1499 (Ch).
3. Class composition. The governing question was whether creditors’ rights were so dissimilar as to make consultation together in their common interest impossible: Re Hawk Insurance [2001] 2 BCLC 480. The analysis required comparison of the rights released or varied and the new rights conferred.
4. The backstop fee did not fracture the class. It was properly characterised as payment for new commercial services and was only approximately 0.3% of the total scheme consideration. The consent fee did not fracture the class because every creditor had an identical right to accede to the lock-up agreement and the fee was immaterial compared with the difference between the proposed scheme recovery and the counterfactual recovery. Adviser fee arrangements conferred no material net benefit. A right to appoint one director to a board of up to 22 directors was too intangible and lacked control.
5. Jurisdiction and sufficient connection. The Company was a foreign company liable to be wound up as an unregistered company under Part V of the Insolvency Act 1986, and therefore fell within sections 895(1)(a) and 895(2)(b) of the Companies Act 2006. The scheme contained sufficient give and take to constitute a compromise.
6. The amended documents provided a present choice of English law, subject to a possible future change for specified provisions. Even if that construction were wrong, the remaining express choice of English law would strongly support an implied choice for those provisions. The choice of English law, reinforced by a non-exclusive English jurisdiction clause, established a sufficient connection: Re Drax Holdings Ltd [2005] 1 WLR 1049 (Ch); Re Vietnam Shipbuilding Industry Group [2014] BCC 433.
7. International effectiveness. At the convening stage, expert evidence need only provide sufficient support for a conclusion that the scheme was likely, or at least had a real prospect, of having substantial effect: Re Codere Finance 2 (UK) Ltd [2020] EWHC 2683 (Ch). The German law opinion supplied that support, and there was no reason at this stage to doubt that the scheme would be recognised in Germany.