The High Court considered whether it would be appropriate to approve a scheme of arrangement for a company incorporated in Luxembourg where the company's COMI had been moved to England and there had been a change in the governing law and jurisdiction clause in favour of the English courts.
Algeco Scotsman PIK SA ("Algeco") sought to restructure the group due to financial difficulties and to enable new investors into the group. The company had borrowed approximately USD$400 million, and as at April 2017 USD$699 million was outstanding. The monies had been borrowed pursuant to a loan facility agreement with a non-exclusive New York governing law and jurisdiction clause. The scheme of arrangement was proposed as the first stage of a wider reorganisation and restructuring of the business.
In order to be eligible to use the proposed scheme of arrangement, Algeco had to demonstrate there was a sufficient connection with the UK. The company undertook steps to shift its COMI to England prior to the presentation of the proposed scheme of arrangement. The creditors also voted to change the non-exclusive New York governing law and jurisdiction clause to English law to align more closely with the jurisdiction.
The main issues the High Court considered were:
- whether the statutory requirements for the scheme of arrangement had been met and if the creditors had been fairly represented;
- if there were any jurisdictional issues in such a cross border matter; and
- what was the effect of the change of governing law and jurisdiction.
The High Court had previously granted Algeco's application to convene a single scheme meeting in June 2017 to approve the proposed scheme of arrangement. A high majority (97.56%) of the requisite class of creditors eligible to vote, approved the proposed scheme. The High Court held that the meeting of creditors in June 2017 had been correctly convened and that the creditors had been properly informed. Mr Justice Hildyard also noted a clear majority had approved the scheme of arrangement.
On the issue of jurisdiction, it was held that Alegco was liable to be wound up under the Insolvency Act 1986. Mr Justice Hildyard also considered whether there would be any restrictions under European law, specifically Regulation (EU) No 1215/2012 (the "Recast Brussels Regulation"). He stated that the English courts have adopted the pragmatic practice of assuming the Recast Brussels Regulation applies when considering jurisdiction. He noted that the High Court would therefore have jurisdiction under Article 8 and/or Article 25. As such, the High Court would have jurisdiction to sanction a scheme of arrangement in relation to Alegco as per section 895 of the Companies Act 2006.
The issue of sufficient connection was fulfilled by the shift of the company's COMI to England, supported by the change in the governing law and jurisdiction clause from New York. Algeco had shifted its COMI to England a month before the presentation of the scheme of arrangement, for the purpose of facilitating the scheme. The High Court stated that the fact the company had shifted its COMI for the purpose of creating a sufficient connection was not a barrier, it in itself created a sufficient connection with England.
The High Court held that a further basis for establishing a sufficient connection was the change of governing law and jurisdiction to English law. Whilst this was a matter of US law the High Court relied on an opinion by a retired US Judge that the alterations were permissible and the scheme would be recognised in the US. Given the scheme would also be recognised in Luxembourg and it having satisfied the matter above, the scheme was approved.