Convening judgment of Sir Anthony Mann (Re VTB Capital Plc)

The court granted an order under Part 26 of the Companies Act 2006 to convene a meeting of creditors to consider a proposed Scheme of Arrangement for VTB Capital plc (in administration). The judge held that the court has jurisdiction to sanction a scheme which applies the Insolvency Rules as a base but modifies or supplements them, citing Kempe Ambassador Insurance, Re Lehman Brothers International (Europe) and Re People's Energy. The Scheme's principal features include the use of trusts to preserve entitlements of "Disqualified Persons" affected by sanctions, a provision to pay the first £50,000 of each claim in full, hotchpot/turnover provisions to deter out-of-scheme enforcement, and mechanisms to deal with trapped assets and licences. The court found the Scheme to be a plausible proposal worthy of creditor consideration, that one class of creditors was appropriate, that notice to creditors was adequate, and that regulatory and sanctions authorities were content or not opposed. The meeting was ordered to be convened for 5 September 2024, subject to a separate insolvency order being obtained to permit administrators (rather than liquidators) to effect distributions.

This application sought a convening order under Part 26 of the Companies Act 2006 in respect of VTB Capital plc (in administration). The company, an English subsidiary of a Russian bank, was placed into administration following sanctions arising from the invasion of Ukraine. The administrators propose a Scheme of Arrangement intended to produce a quicker and better return to creditors than continuing the administration or moving to liquidation.

The Scheme addresses two main difficulties caused by the sanctions regime: (i) certain creditors are currently unable to receive distributions because they are sanctioned or disqualified, and (ii) certain assets are "trapped" in foreign jurisdictions or require licences to realise. Principal mechanisms in the Scheme include:

• a trust structure to receive distributions otherwise payable to Disqualified Persons and to hold blocked assets until licences are available or sanctions cease;
• a provision to pay in full the first £50,000 of any claim to reduce administrative costs and stop statutory interest accruing on small claims;
• hotchpot and turnover provisions treating out-of-scheme recoveries as proved and deemed distributed for distribution purposes;
• election mechanisms for certain creditors (notably the parent) in relation to distributions in specie.

The court was asked to consider jurisdiction to sanction a scheme that operates by applying and altering the Insolvency Rules, the proper composition of classes of creditors, adequacy of notice, and practical obstacles including sanctions and the need for licences. The judge concluded:

• there is no jurisdictional bar to a Part 26 scheme that applies the Insolvency Rules in amended form or with additions;
• one class of creditors was appropriate after considering whether Disqualified Persons, the parent company, or holders of small claims would require separate classes;
• notice to creditors was adequate (direct contact where possible, advertisements in the London Gazette, Financial Times and Kommersant) and the explanatory statement required minor amendment;
• the Office of Financial Sanctions Implementation indicated it was content and necessary licences or amendments were in place; the PRA had no objection and the FCA had not raised difficulties;
• the court found the Scheme to be a plausible proposal deserving creditor consideration and ordered that a meeting be convened for 2 p.m. on 5 September 2024; implementation remains subject to a further insolvency order permitting administrators to effect distributions.

The court made the order convening a meeting under Part 26 of the Companies Act 2006. The judge found that the court has jurisdiction to sanction a scheme which applies and modifies the Insolvency Rules, that the proposed Scheme was a plausible means to achieve earlier and greater distributions, that a single class of creditors was appropriate, that notice and consultation were adequate, and that sanctions/licence and regulatory issues did not preclude convening a meeting. The meeting was directed for 5 September 2024; implementation requires a further insolvency order to permit administrators to make distributions.