Praesidiad Limited, Re

At a scheme convening hearing, the court considers whether notice, jurisdiction, class composition and meeting arrangements are adequate, and whether it is already obvious that sanction cannot be granted. A creditor class is generally defined by the rights to be released or varied and the rights conferred by the scheme, assessed in context and by reference to the likely alternative. Commercial interests and differences arising from a creditor’s personal characteristics do not ordinarily fracture a class where the scheme offers the same rights to all. A creditor subject to an asset freeze cannot vote where voting would deal with or use frozen economic resources by changing their amount or character.

Praesidiad Limited applied under Part 26 of the Companies Act 2006 for an order convening a single meeting of lenders under its senior facilities agreement and interim facilities agreement. The proposed restructuring involved a debt compromise, an equity transfer and new financing. Bank GPB International SA, a sanctioned creditor holding about 4.5% of the senior debt, opposed the proposed single class and contended that it was entitled to vote.

The court considered whether sufficient notice had been given, whether the statutory jurisdictional requirements were met, whether the proposed class was properly constituted, whether voting arrangements would ascertain creditor wishes, and whether the scheme was plainly incapable of taking effect or being sanctioned.

1. Order convening meeting. The application was granted, with minor amendments. Sufficient notice had been given, taking account of the scheme’s complexity, prior consultation, urgency and the sophistication of the creditors. The requirements of section 895 of the Companies Act 2006 were satisfied.
2. Class composition. The governing question was whether creditors’ rights were so dissimilar that consultation in a single class was impossible: Sovereign Life Assurance v Dodd [1892] 2 QB 573. Rights had to be analysed against the scheme company, including rights released or varied and rights conferred by the scheme, in context and by reference to the likely alternative if the scheme did not proceed: Re Hawk [2001] 2 BCLC 480 at [30]. Commercial interests were not the focus.
3. The differences relied upon by Bank GPB did not fracture the class. The same rights were offered to all lenders, although Bank GPB could not enjoy some of them because of its sanctioned status. That distinction did not create a separate class.
4. Voting by sanctioned creditor. Regulation 11 of the Russia (Sanctions) (EU Exit) Regulations 2019 prohibited dealing with frozen funds or economic resources. A scheme vote would affect the amount and character of Bank GPB’s loan participation as a tradable financial asset. It was therefore not merely a preparatory act. The court distinguished the reasoning in Re Palladyne International Asset Management BV and held that Bank GPB, and any other sanctioned lender, could not vote.
5. The explanatory statement and meeting arrangements were adequate. The conventional power-of-attorney mechanism was not a blot on the scheme, and the need for regulatory approvals and an OFSI licence did not create an impermissible conditionality. It was not obvious that the court lacked jurisdiction or would necessarily refuse sanction.