Tele Columbus AG, Re

At the convening stage of a scheme of arrangement, the court does not assess the scheme’s merits or fairness. It considers class composition and any issue that would deprive it of jurisdiction or make sanction unquestionably impossible. Creditors may vote in one class where their legal rights are sufficiently similar, even if their commercial interests differ. Lock-up arrangements and modest consent fees do not require separate classes where they do not materially affect consultation or voting. For an international scheme, the court need not be certain that foreign courts will recognise it, but must have a reasonable prospect that it will achieve a substantial purpose and must avoid acting in vain. A foreign company may have sufficient connection with England through English-law governed debt arrangements, although the limits of the jurisdiction may require fuller consideration at sanction.

Tele Columbus AG, a German company with its centre of main interests and operations in Germany and no business presence in England, applied for an order convening a single meeting of creditors to consider a scheme under Part 26 of the Companies Act 2006. The scheme proposed to extend and amend English-law governed senior facilities and notes, supported by a substantial equity contribution, to avoid an insolvency process.

The issues were whether notice was sufficient, whether lenders and noteholders could vote as one class, what directions should govern the meeting, whether the explanatory statement was adequate, and whether any jurisdictional or international-recognition roadblock was apparent.

1. Convening jurisdiction. The court made the convening order. At this stage it was not required to consider the merits or fairness of the scheme. It had to address class composition and any essential issue which would leave it without jurisdiction or make sanction unquestionably impossible.
2. Notice. Notice was sufficient. Relevant considerations included the scheme’s complexity, prior consultation with creditors and the company’s financial urgency. The scheme was relatively straightforward, creditors had been engaged through the lock-up process, more than 90% had acceded to it, and no creditor complained of inadequate notice.
3. Single class. Class composition depended on creditors’ legal rights against the company, not independent commercial interests. The notes and senior facilities ranked pari passu, shared security and guarantees, and would receive substantially aligned rights under the scheme. The lock-up agreement did not fracture the class because all creditors had an equal opportunity to accede and the scheme affected their rights alike. Early and late consent fees were de minimis and unlikely materially to influence voting, so they did not require separate classes.
4. Meeting and documents. A virtual meeting was permissible. The timetable gave creditors sufficient time. The court was not required to approve the explanatory statement, but could refuse to convene a meeting for manifest deficiencies; none was apparent.
5. Jurisdiction and recognition. Scheme jurisdiction may extend to an unregistered foreign company liable to be wound up under the Companies Act 2006 where sufficient connection exists. English-law governed debt arrangements could provide that connection, although the issue might require reconsideration at sanction. The court also had to avoid acting in vain. It required a reasonable prospect of recognition and substantial effect in relevant jurisdictions, not certainty. Expert evidence and prior decisions provided a realistic basis for concluding that the scheme was likely to be effective in Germany.