Re Cimolai

The court granted the Plan Companies' application under section 901C of the Companies Act 2006 to convene meetings of creditors to consider restructuring plans that mirror the Italian concordato preventivo. The judge applied the Part 26A jurisdictional and threshold tests in sections 901A and 901C of the Companies Act 2006 (conditions A and B) and concluded both conditions were satisfied: the Plan Companies are companies capable of being wound up and are suffering financial difficulties affecting their ability to continue as going concerns, and the plans constitute a compromise or arrangement with Plan Creditors intended to mitigate those difficulties.

The court determined there was a sufficient connection with England and Wales to entertain the plans because they are intended to operate in parallel with and to give effect, so far as possible, to the concordato preventivo recognised under the Cross-Border Insolvency Regulations; the plans are conditional on the concordato and serve to address English-law creditors who have not submitted to the Italian process.

The court resolved complex class-composition issues. It held that classes should be formed by reference to the appropriate comparator (most probably the concordato being sanctioned in Italy without parallel English compromise) and that creditors with disputed derivative claims (particularly those governed by English law and litigating or with counterclaims) may appropriately be placed in separate classes from ordinary unsecured creditors. The court accepted the assessment date chosen (20 October 2022) and that the explanatory statement was in an appropriate form. Directions for convening meetings were ordered, subject to some refinements to the fourth and fifth Cimolai classes to be agreed with counsel.

Background and parties: Cimolai S.p.A. and Luigi Cimolai Holdings S.p.A. (the Plan Companies) are Italian companies in the Cimolai Group. Financial distress arose principally from claims under a number of foreign exchange derivative contracts (many governed by English law) and related margin calls and appropriated collateral.

Procedural posture and relief sought: The Plan Companies sought orders under section 901C Companies Act 2006 to convene meetings of creditors to consider restructuring plans which implement in English law terms the concordato preventivo proposals filed and accepted in Italy. The Italian court had commenced concordato proceedings and the English court had recognised those proceedings under the Cross-Border Insolvency Regulations; a moratorium had been imposed by this court with respect to certain claims but the stay in relation to JB Drax had expired.

Issues framed: (i) whether the Plan Companies fall within the Part 26A jurisdiction as companies capable of being wound up and with a sufficient connection to England and Wales; (ii) whether threshold conditions A and B in section 901A are satisfied; (iii) proper class composition for plan meetings, including whether disputed derivative creditors should be separated from other unsecured creditors and whether the arrangement constituted gerrymandering; (iv) adequacy of notice and explanatory statement; (v) choice of assessment date; and (vi) other directions for the conduct of meetings and inter-company releases.

Court's reasoning: The court accepted prior CBIR recognition of the concordato and found a rational basis for a parallel English restructuring plan because many creditors under English-law contracts had declined to participate in the Italian proceedings. Condition A was satisfied because the derivative exposure had produced cashflow difficulties threatening the companies' ability to continue as going concerns. Condition B was satisfied because the plans constituted a compromise or arrangement and were intended to mitigate those difficulties by binding English-law creditors to compromises governed by English law.

The court emphasised established class-composition principles (rights not interests; appropriate comparator). The most probable comparator was the concordato being sanctioned in Italy but not binding English-law creditors. On that basis the judge approved separate classes for secured, demoted unsecured and ordinary unsecured creditors and accepted the creation of separate classes for creditors with disputed derivative claims where rights, litigation posture, counterclaims and unequal incentives (for example, waivers offered to some disputed creditors but not JB Drax) made consultation with ordinary unsecured creditors impractical. The court ruled notice to creditors was sufficient; the assessment date (20 October 2022) was appropriate to align with the concordato; and the explanatory statement was in appropriate form. The court directed refinements to the formulation of certain classes and ordered meetings to be convened, leaving fairness (and any exercise of cramdown under section 901G) for the sanction hearing.

The judgment notes the court's vigilance against illegitimate forum-shopping and explains the English court's role in facilitating an effective cross-border restructuring rather than granting relief that may be in vain.

The application was granted and the court ordered that meetings of Plan Creditors be convened to consider the restructuring plans. The judge concluded that (i) the Plan Companies fall within the Part 26A Companies Act jurisdiction and have a sufficient connection to England and Wales, (ii) threshold conditions A and B in section 901A are satisfied, (iii) the proposed class structure was largely appropriate though some adjustments to the disputed-claims classes were required, (iv) notice and the explanatory statement were adequate, and (v) directions for the convening of meetings should be made, leaving fairness and any cramdown issues to the sanction hearing.