Standard Profil Automotive GmbH, Re

At a convening hearing under Companies Act 2006 Part 26, the court considers jurisdiction, class composition, procedural matters and any issue that would unquestionably prevent later sanction. It does not determine the merits or fairness of the scheme.

Class composition depends on creditors’ legal rights, including rights released or varied and any new rights conferred. Commercial interests and cross-holdings are generally irrelevant. Lock-up fees, backstop fees, work fees, advisers’ costs and ordinary governance rights do not fracture a class where they represent genuine commercial compensation, are modest, available on appropriate terms, or do not create materially different rights.

A foreign company may fall within Part 26 where it is liable to be wound up as an unregistered company under the Insolvency Act 1986.

Standard Profil Automotive GmbH, a German holding company, applied for an order convening one meeting of holders of its existing senior notes to consider a restructuring scheme under Part 26 of the Companies Act 2006.

The restructuring involved new super-senior funding, reinstated senior notes, amendments to security and priority arrangements, and the transfer of the existing shareholder loan. The company relied on the scheme as preferable to a likely German insolvency and accelerated sale.

The principal issues were whether the court had jurisdiction, whether the noteholders formed one class, whether fees and related arrangements fractured that class, and whether there were procedural or jurisdictional roadblocks to convening the meeting.

1. Convening order granted. The court ordered the convening of a single meeting of the existing senior noteholders, subject to agreement on the form of order and practical arrangements.
2. At the convening stage, the court considers jurisdiction, class composition, procedural requirements and any issue which would unquestionably cause sanction to be refused. The merits and fairness of the scheme are matters for a later sanction hearing if the statutory majority approves it: Re Telewest Communications Plc (No. 1) [2004] BCC 342.
3. The jurisdictional requirements were satisfied. The scheme involved a compromise or arrangement between the company and its creditors under section 895(1)(a). The German company qualified as a company for Part 26 purposes because it was liable to be wound up as an unregistered company under Part V of the Insolvency Act 1986: Re Drax Holdings Ltd [2004] 1 WLR 1049. The arrangement requirement was met because the restructuring involved a sequence of steps containing an element of give and take: Re Lehman Brothers International (Europe) [2019] BCC 115.
4. The noteholders formed a single class. The relevant comparison concerned their legal rights released or varied and the new rights conferred by the scheme. Their existing rights ranked pari passu and the scheme affected them on the same basis. Cross-holdings concerned commercial interests rather than legal rights and did not fracture the class: Re Hawk Insurance Company Limited [2001] 2 BCLC 480; Re Primacom Holdings GmbH [2013] BCC 201.
5. The lock-up agreement and early-bird fee did not fracture the class because the scheme affected creditors alike and the opportunity to participate had been extended to all creditors. The backstop shares represented compensation for underwriting services and were not a bounty. The work fee represented genuine compensation for negotiation work and trading restrictions. Payment of reasonable advisers’ costs merely defrayed expenses actually incurred. These arrangements therefore did not create materially different rights: Re Telewest Communications Plc (No. 1) [2005] 1 BCLC 752; Re Seat Pagine Gialli SpA [2012] EWHC 3686 (Ch); Re Pizza Express Financing 2 Ltd [2020] EWHC 2873 (Ch); Re Haya Holdco 2 Plc [2022] EWHC 1079 (Ch); Re Lecta Paper UK Ltd [2019] EWHC 3615 (Ch).
6. The notice, explanatory statement and proposed meeting arrangements disclosed no manifest deficiency. The amended governing law and jurisdiction clauses provided a sufficient connection with England. There was also a reasonable prospect of recognition of the scheme in Germany, so the court would not be acting in vain: Re Light SA [2024] EWHC 2733 (Ch); DTEK Energy BV [2022] 1 BCLC 260; Re Safari Holdings Verwaltungs GmbH [2022] EWHC 1156 (Ch).