In The Matter Of Cimolai SPA
[2023] EWHC 1819 (Ch)
Cimolai SpA & Anor, Re
25 August 2023
[2023] EWHC 2193 (Ch)
High Court
Two Italian companies were in financial trouble because of bad deals made by their employees. They proposed a plan to fix things, and a UK court approved it. Even though some creditors didn't agree, the court decided the plan was better than letting the companies go bankrupt.
Key Facts
- •Cimolai SpA and Luigi Cimolai Holdings Spa (Plan Companies) applied for sanctioning of a restructuring plan under Part 26A of the Companies Act 2006.
- •The Plan Companies are the principal operating and holding companies of the Cimolai Group, a global steel structures business.
- •The Group's financial difficulties stem from exposure to foreign exchange derivative contracts entered into without authority by former employees.
- •Concordato proceedings were commenced in Italy, and an interim order recognizing these proceedings was made in England.
- •The restructuring plans aim to implement the same arrangement under English law as the Italian Concordato proposals.
- •Many creditors with claims under English law derivative contracts declined to participate in the Italian proceedings.
- •The Concordato proposals were approved by 88.829% of creditors in Italy.
- •The restructuring plans provide for repayment of secured creditors, payments to unsecured creditors at varying rates, a shareholder capital increase, and equity instruments for creditors.
- •Creditors excluded from the Concordato proposals are also excluded from the English plans.
- •The restructuring plans will provide unsecured creditors with a better return than Italian liquidation.
Legal Principles
Approach to sanctioning a restructuring plan under Part 26A, incorporating principles from Part 26 schemes.
Re Noble Group Ltd [2018] EWHC 3092 (Ch), Re Houst Ltd [2022] BCC 1143, Re KCA Deutag UK Finance PLC [2020] EWHC 2977 (Ch)
Company must be liable to be wound up under the Insolvency Act 1986 and have a sufficient connection to England and Wales.
Re Drax Holdings Ltd [2004] 1 WLR 1049, Re Magyar Telecom BV [2015] 1 BCLC 418, Re Smile Telecoms [2022] BCC 808
Threshold conditions A and B of section 901A must be met (financial difficulties affecting ability to carry on business and the purpose of the plan mitigating these difficulties).
Companies Act 2006, section 901A
Cross-class cramdown principles under section 901G: 'no worse off' test, 75% approval in at least one class with economic interest, and overall discretionary considerations.
Re Virgin Active Holdings Limited [2021] EWHC 1246 (Ch), Re Listrac Midco [2023] EWHC 460 (Ch)
Jurisdiction to release claims against third parties if ancillary to the plan and necessary for its effectiveness.
Re Fitness First Clubs Ltd [2023] EWHC 1699 (Ch), Re Gategroup Guarantee Ltd (No. 1) [2022] 1 BCLC 98
Class composition at sanction hearing should generally follow the convening hearing unless challenged by a creditor.
Global Garden Products Italy SpA [2017] BCC 637 (Ch)
Outcomes
Restructuring plans sanctioned.
The court found that statutory requirements were met, including the 'no worse off' test under section 901G, and that the plans were fair and in the best interests of creditors.