English courts extend the "sufficient connection" test used to determine whether an overseas registered company can use a scheme of arrangement to cases where the original governing law of a loan agreement was not English law.
A number of companies registered in Austria, England, Germany, Belgium, Denmark and Norway sought sanction of an English scheme of arrangement under part 26 of the Companies Act 2006. The scheme simply put back the maturity date of the relevant loans to avoid putting the directors of the ultimate parent – a German company - into a position where they had to file for insolvency proceedings. The original facility documents were governed by German law and provided for the courts of Germany to have jurisdiction.
A change to the maturity date required unanimous consent of the lenders which was not obtained. A change to the law and jurisdiction clause required a two thirds majority which was obtained changing the governing law to English law and giving the English courts jurisdiction.
The Court decided it had jurisdiction and should sanction the scheme.
This is the first case in which parties have amended the original choice of law and jurisdiction clauses in finance documents to allow an English scheme of arrangement to be implemented to override a contractual requirement for unanimous consent. The court accepted expert evidence that both the change of law and jurisdiction and the scheme when sanctioned would be effective in all of the relevant jurisdictions.