A recent decision of the Irish High Court puts the spotlight on Ireland as a key restructuring venue in the EU.

Mr Justice Barniville's thorough judgment is a clear endorsement of the use of Irish schemes of arrangement to implement complex cross border restructurings.

Part 9 Scheme of Arrangement

A scheme of arrangement under Part 9 of the Companies Act 2014 (the Act) is a court approved arrangement between a company, its shareholders and / or creditors that can be used to effect a solvent corporate reorganisation, a merger or de-merger and an insolvent restructuring.

Background

The case involved a scheme of arrangement between a company and its creditors pursuant to Part 9 of the Act. The company, Ballantyne Re plc (Ballantyne) is an Irish registered plc formed as a special purpose vehicle for the purpose of entering into a reinsurance agreement.

The scheme, which aimed to restructure Ballantyne's reinsurance obligations and its outstanding indebtedness, would enable the residual value in the company to be distributed to certain noteholders.

Objections

The sole objecting creditor was ESM Fund I LP, (ESM) a limited partnership formed in the United States opposed the Company's application. ESM contended that the scheme was deficient in terms of the information it provided. It also claimed that the Irish courts had no jurisdiction to sanction a scheme which provides for third party releases and that the sanctioning of the scheme would frustrate existing litigation that ESM had initiated in the United States.

The Judgment

Mr Justice Barniville cited the test outlined in The Matter of Colonia Re Insurance (Ireland) Limited [2005] IEHC 115 to the effect that the court must be satisfied that:

  1. sufficient steps have been taken to identify and notify all interested parties
  2. the statutory requirements and all directions of the court have been complied with
  3. the classes are properly constituted
  4. coercion is considered
  5. the scheme of arrangement is such that an intelligent and honest man, a member of the class concerned, acting in respect of his interest might reasonably approve

Mr Justice Barniville sanctioned the scheme finding that the above conditions had been met. The Court focussed on the last condition and Mr Justice Barniville considered and endorsed a Grand Court of Cayman decision (Re Ocean Rig UDW Inc. 18 September 2017) and found it to be a case of "considerable assistance".

It was held that the Irish court had jurisdiction as Ballantyne is registered in Ireland, its directors are Irish and all board meeting were held in Ireland.

Take Away

  • Irish courts will sanction schemes of arrangement which provide for third party releases
  • Irish courts will consider specific jurisprudence from other common law jurisdictions
  • The judgment also highlights the speed at which the Irish courts can operate. Mr Justice Barniville provided a thorough judgment the day after the contested hearing to sanction the scheme and within 6 weeks of Ballantyne's original application to the court

Re Ballantyne RE Plc & the Companies Act 2014 [2019] IEHC 407