In The Matter Of Cimolai SPA

At a convening hearing for a restructuring plan, the court determines jurisdictional and class-composition issues, not the fairness or merits of the plan. A sufficient connection with England and Wales may exist where English-law liabilities require an English restructuring to make a parallel foreign restructuring effective, even though most compromised debt is governed by foreign law. Class composition depends on the similarity of creditors’ rights against the appropriate comparator. Differences in governing law, enforceability, litigation position, disputed claims and creditor-specific incentives may make consultation in a common class impossible. Financial difficulties may continue for the purposes of Part 26A while uncompromised English-law liabilities remain capable of enforcement. An assessment date may be selected to correlate the English plan with a foreign insolvency process where there is a good commercial reason.

Cimolai SpA and Luigi Cimolai Holdings SpA, Italian companies operating within the Cimolai Group, applied under Companies Act 2006 Part 26A for orders convening creditor meetings to consider restructuring plans. The plans were intended to implement in England the same restructuring proposed in Italian concordato preventivo proceedings.

The companies’ financial difficulties arose principally from disputed foreign-exchange derivative liabilities, including English-law claims. The court had previously recognised the Italian proceedings in England under the Cross-Border Insolvency Regulations. The principal issues were whether the statutory threshold and connection requirements were met, what comparator should be used, how creditors should be classified, whether the assessment date was appropriate, and whether the explanatory statement and meeting directions were sufficient.

1. Jurisdiction and threshold conditions. The court held that each Plan Company was a company within the meaning of section 901A(4), because it was of a type capable of being wound up under the Insolvency Act 1986. The court also found a sufficient connection with England and Wales. The English plans were intended to operate in parallel with, and improve the effectiveness of, the Italian restructuring, so the application was not illegitimate forum-shopping. Condition A was satisfied because the companies continued to face serious financial difficulties threatening their ability to continue as going concerns while English-law claims remained uncompromised. Condition B was satisfied because the plans constituted a compromise or arrangement and were intended at least to mitigate those difficulties.
2. Comparator and classes. The proper comparator was the more probable situation in which the Italian concordato proposals took effect but the English restructuring plans did not. Class composition focuses on creditors’ rights, tested against that comparator. English-law creditors differed materially from foreign-law creditors because their claims would not be compromised by the concordato and remained enforceable in England.
3. Disputed claims. In the unusual circumstances, creditors with disputed derivative claims could not consult with ordinary unsecured creditors. Their litigation tactics, counterclaims, dispute-resolution interests and exposure to the continuing management of the businesses created interests adverse to those of creditors focused principally on financial returns. Creditors offered a waiver of claims by the Plan Companies also had a material incentive not shared by creditors, including JB Drax, who received no such offer. Further adjustments to the proposed Cimolai classes were therefore required.
4. Other matters. The assessment date was permissible because it correlated the English plans with the Italian proposals and the relevant alternatives. The explanatory statement was adequate for the convening stage, although fairness, releases and any cramdown under section 901G were matters for sanction. The court ordered the meetings, subject to discussion of the precise class definitions and inclusion of a direction requiring the chairman to value claims under the stated process.