Sino-Ocean Group Holding Limited, Re

The court conducted a convening hearing under Part 26A of the Companies Act 2006 and found that the statutory jurisdictional conditions in s.901A (Conditions A and B) were satisfied: the Plan Company is a "company" for the purposes of s.901(4) and has encountered financial difficulties affecting its ability to continue as a going concern, and a compromise or arrangement is proposed for the purpose of mitigating those difficulties. The court applied the established authorities on class composition (including the "rights in" and "rights out" analysis) and concluded the proposed four creditor classes (Classes A to D) were properly constituted: differences in the mix of Plan Consideration between Classes A–C were material enough to justify separate classes while Class D was appropriately separate because of subordination. The court rejected Long Corridor's application for an adjournment to permit further due diligence on class composition and said such fairness issues are principally for the sanction hearing. The court carried out a limited, high-level check for potential "roadblocks" connected to jurisdiction and concluded there was no reason at this stage to treat connection with England as a decisive obstacle. The Explanatory Statement was approved in form subject to an amendment to give greater prominence to the Plan's expected effect on shareholders, and directions were given including a modest slowing of the timetable to allow creditors time to advise following late receipt of key materials.

Background and parties. This was a convening hearing held 18 October 2024 concerning a proposed restructuring plan (the "Plan") for Sino-Ocean Group Holding Limited (the "Plan Company") under Part 26A CA 2006. The Plan Company is incorporated in Hong Kong and is the ultimate holding company of a large property development group with assets principally in the PeopleRs. China. The Plan seeks permission to convene four classes of creditor meetings (Classes A to D) to consider a cross-jurisdictional restructuring linked to a parallel Hong Kong scheme of arrangement.

Nature of the application. The application was for directions and for the courts permission to convene creditor meetings; the sanction hearing would follow if meetings approved the Plan. The Plan Company proposed to restructure unsecured financial indebtedness by issuing a package of new secured debt instruments and convertible securities (the "Plan Consideration"). The Plan interacts with a Hong Kong scheme dealing with the Class A (Hong Kong law) liabilities.

Issues framed by the court. The court identified and addressed: (i) jurisdiction under s.901A CA 2006 (whether the Plan Company qualifies as a company and whether Conditions A and B are met); (ii) the correct composition of creditor classes for the convening hearing in accordance with the Practice Statement and authorities (notably the tests in Re Virgin Atlantic, Re Virgin Active, Re AGPS Bondco and the "rights in/rights out" analysis from Re Hawk Insurance); (iii) whether any "roadblocks" existed that should prevent convening (sufficient connection with the jurisdiction); (iv) adequacy of the Explanatory Statement; and (v) whether an adjournment was required to permit further due diligence on class composition.

Courts reasoning and conclusions. On jurisdiction the court accepted the Plan Company is a "company" for s.901(4) purposes and that Conditions A and B were satisfied by the evidence (financial distress, winding-up petition, auditors' position and purpose of the compromise). On class composition the court applied the established test: a class must comprise creditors whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. The court emphasised analysing both the rights to be released or varied (rights in) and the new rights given under the Plan (rights out). The differences in the composition and options within the Plan Consideration between Classes A, B and C were held to be material; accordingly Classes A to C should be separate and Class D was separate by reason of subordination. Long Corridors request for an adjournment to permit further examination of the FTI materials and possible causes of action against shareholders was refused because the differences between the proposed classes were inherent in the rights out and would not be cured by further factual investigation; issues of fairness and valuation are principally for the sanction hearing. The court conducted a high-level review of potential "roadblocks" (connection with the jurisdiction) and concluded no reason at this stage to refuse to convene meetings; detailed determination of connection was to be left to the sanction hearing. The Explanatory Statement was acceptable in form but should be amended to give greater prominence to the Plans likely commercial effect on shareholders. Directions were given, including an extended timetable to reflect late dissemination of the FTI report and underlying papers so creditors could obtain advice.

Procedural posture: this was a first-instance convening hearing; the court made a convening order and practical directions but did not finally sanction the Plan.

At the convening hearing the court granted permission to convene creditor meetings and approved directions (including a revised timetable and an amendment to the Explanatory Statement to highlight effects on shareholders). The court held that the statutory conditions in s.901A CA 2006 were satisfied, and that the proposed creditor classes (A to D) were properly constituted because differences in the rights to be received under the Plan ("rights out") were material. An adjournment for further due diligence was refused and potential jurisdictional "roadblocks" were left for consideration at sanction, the court seeing no reason at this stage to refuse convening.