Light SA, Re

When sanctioning an international scheme of arrangement, the court must examine statutory compliance, class representation and voting, whether an intelligent and honest creditor might reasonably approve the scheme, any blot, jurisdictional connection and likely international effectiveness.

Non-material defects in explanatory materials or compliance with a convening order may be waived where creditors received a sufficient explanation in time to make an informed decision. A scheme may release claims against third parties where the release is necessary to give effect to the compromise, including where a contribution arrangement creates consequential claims that would otherwise undermine it. English-law governing rights ordinarily provide a sufficient connection, even where the governing law was changed for the scheme, provided the change is effective and not abusive.

Light SA, a Brazilian company, applied under Part 26 of the Companies Act 2006 for sanction of a scheme with creditors holding notes issued by two subsidiaries and guaranteed by Light SA. The scheme implemented aspects of a Brazilian judicial restructuring and exchanged existing notes for new securities.

Richards J had previously made a convening order and directed a single class meeting: [2024] EWHC 2097 (Ch). The scheme was subsequently approved by 99.4% by value of creditors voting. The sanction issues included statutory and procedural compliance, class composition, creditor majorities, third-party releases, sufficient jurisdictional connection and recognition in relevant foreign jurisdictions.

1. Sanction framework. The court applied the established questions summarised in KCA Deutag UK Finance plc: statutory compliance; fair class representation and bona fide voting; whether an intelligent and honest creditor might reasonably approve the scheme; any blot; and, in an international case, whether sanction would be futile.
2. Compliance and class. Although final explanatory documents were supplied only nine days before the meeting, the changes were immaterial and later notifications sufficiently explained the scheme. The breaches of section 897 and the convening order were waived. There was no reason to revisit the single-class decision, and the changes did not create a new class issue.
3. Voting and commercial judgment. The statutory majorities under section 899(1) were plainly satisfied. The 94.38% turnout and 99.4% approval strongly supported fair representation and bona fide voting. The court gave substantial weight to the creditors’ commercial judgment, particularly because the scheme offered New York-law securities and reduced litigation risk.
4. Third-party releases. The release of claims against the non-scheme Note Issuers was not a blot. Although the court did not decide whether necessity always requires a conventional guarantor’s ricochet claim, the deed of contribution created consequential claims against Light SA. Releasing claims against the Note Issuers was therefore necessary to extinguish those claims and give effect to the restructuring. The mechanism served a proper commercial purpose and had overwhelming creditor support.
5. Connection and international effectiveness. English-law debt normally supplies a sufficient connection. That remained so where the governing law had been validly changed to English law for the scheme, provided the change was not abusive or contrary to international comity. The evidence established a real or reasonable prospect of recognition in Brazil, the key jurisdiction, and therefore the court would not be acting in vain.
6. The scheme was sanctioned.

This was a first-instance sanction application. The judgment records the earlier convening order made by Richards J in [2024] EWHC 2097 (Ch), followed by the scheme meeting and the present sanction hearing.