High Court Examines Class Composition and Jurisdiction in PlusHolding GmbH Scheme of Arrangement

Citation: [2023] EWHC 2915 (Ch)
Judgment on

Introduction

In the case of PlusHolding GmbH, the High Court of Justice examines the principles of a scheme of arrangement under Part 26 of the Companies Act 2006. The intricacies of class composition, jurisdictional issues, and creditor treatment have been scrutinized to make a determination on convening a single meeting of creditors for the purpose of restructuring.

Key Facts

PlusHolding GmbH, encountering financial difficulties, seeks to implement a comprehensive restructuring of its financial indebtedness via a scheme of arrangement. The group operates a data and IT infrastructure services business and has been affected by economic and operational challenges. The restructuring involves a transfer of ownership to the Scheme Creditors and a reinstatement of debt under existing Term Facilities. An Ad Hoc Committee has been established, and a lock-up agreement has been widely accepted by the Scheme Creditors. A single class of Scheme Creditors has been proposed due to the materially identical nature of their rights and obligations.

Jurisdiction and the Company as Foreign Entity

The ruling in Re Drax Holdings Ltd [2004] is invoked to affirm that the Court has jurisdiction over a foreign company like PlusHolding GmbH under section 895(2)(b) of the Companies Act 2006. The requirements for an ‘arrangement’ under the statute are met, given the presence of mutual consideration as outlined in Re Savoy Hotel Ltd [1981] and Re Lehman Brothers International (Europe) [2019].

Sufficient Connection with Jurisdiction

For international effectiveness, the English law obligations under the Term Facilities necessitate action by the English Court. Past cases tended to favor the jurisdiction of the English Court where contractual obligations under English law are subject to compromise, demonstrating a sufficient connection.

Class Composition Criteria

According to the principle from Sovereign Life Assurance v Dodd [1892], a class is appropriate where rights are not so dissimilar as to impede a common consultation. In this situation, all Scheme Creditors possess identical rights under the Senior Facilities Agreement. Potential contrary indicators such as a lock-up agreement, fees, backstop arrangements, and governance benefits are examined, but none fractures the single class as per precedent cases like Re Telewest Communications plc (No.1) [2004], Re Pizza Express Financing 2 Ltd [2020], and Re Codere Finance 2 (UK) Ltd [2021].

Outcomes

The Court has resolved that there is a single class of Scheme Creditors, deeming all identified contrary indicators insufficient to affect class composition. It establishes that the convening of a single meeting for the Scheme Creditors is appropriate, contributing to the narrative that English courts accommodate complex financial restructurings involving foreign entities with English law-governed debt obligations.

Conclusion

The High Court of Justice’s careful application of legal principles to the facts of PlusHolding GmbH’s proposed scheme of arrangement underscores a consistent approach favoring restructuring under English jurisdiction where there is a significant English law connection. Furthermore, it exemplifies the Court’s pragmatic approach to class composition, ensuring that rights and obligations remain practically analogous within a class despite the existence of varied benefits to subsets of creditors. This case reaffirms the English legal framework’s readiness to facilitate corporate debt restructurings in a manner that protects the unity and common interests of Scheme Creditors, while being anchored on established legal principles that ensure fairness and equity in corporate insolvency and restructuring procedures.