VTB Capital Plc (in administration), Re

At the convening stage of a scheme of arrangement, the court may approve a scheme which uses the insolvency rules as a modified base and adds contractual provisions. The court must be satisfied that the proposal is a plausible scheme worthy of consideration, rather than determine its ultimate merits.

Creditors should form a single class where their rights and interests are sufficiently aligned. Differences arising from sanctions, a creditor’s personal characteristics, or an ability to make an election will not necessarily fracture the class. Even where rights differ in effect, creditors may consult together if the practical difference is minimal.

The joint administrators of VTB Capital plc applied under Part 26 of the Companies Act 2006 for an order convening a meeting to consider a scheme of arrangement.

The company was subject to sanctions-related difficulties. The proposed scheme would preserve distributions due to disqualified creditors through trusts, facilitate dealings with blocked assets, address smaller claims, and include hotchpot and turnover provisions. The principal issues were jurisdiction, creditor classification, notice, explanatory material, meeting mechanics and possible sanctions-related roadblocks.

1. Jurisdiction. The company was within the jurisdiction of the English court and the proposal was an arrangement within Part 26 of the Companies Act 2006. There was no jurisdictional bar to a scheme which adopted the Insolvency Rules as a base, modified their operation and added further contractual provisions. That conclusion was supported by Kempe Ambassador Insurance Co [1998] 1 BCLC 234, Re Lehman Brothers International (Europe) (In Administration) [2019] Bus.L.R. 1012 and Re People's Energy (Supply) Limited in administration [2024] EWHC 1367 (Ch).
2. Classes. Applying the familiar authorities on class composition, one class of creditors was appropriate. Disqualified persons had the same interests as other creditors; their personal characteristics did not justify separate treatment. The parent company was not a separate class because it could make or reverse the relevant election and its rights could be aligned with those of other creditors.
3. The provision paying the first £50,000 of each claim in full could affect larger creditors differently. However, the practical difference was very small, if not minimal. The creditors could therefore consult together, and no class fracture was required.
4. The court was satisfied that the scheme was plausible and worthy of consideration because it might produce earlier and greater distributions. The merits were for creditors at the scheme meeting, not for determination at the convening hearing. Notice, the explanatory statement and the proposed meeting arrangements were adequate. The relevant licences and regulatory position did not prevent the meeting from being convened.
5. The order sought was made. A separate order under the Insolvency Act 1986 concerning distributions by administrators was left for the later sanctions hearing.