scheme of arrangement

English Law Schemes of Arrangement: Class Composition

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Focus on the AB InBev and SABMiller merger

Having received the sanction of antitrust regulators in Europe, the U.S., China and South Africa, the planned merger of brewing giants AB InBev and SABMiller was scrutinised this week by the High Court in London on a topic very familiar to those acquainted with English law restructurings: class composition. The outcome of the hearing, that not all members of SABMiller should be considered to be in the same class for scheme voting purposes, raises some interesting questions around class composition because of the unusual circumstances of the proposed merger. READ MORE →

Indah Kiat – A Scheme Pulped

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On 12 February 2016 Snowden J handed down his judgment in Indah Kiat International Finance Company B.V. [2016] EWHC 246 (Ch). Indah Kiat International Finance Company B.V. (“Indah Kiat”), part of the global Asia Pulp & Paper Group (one of the world’s largest pulp and paper manufacturers), applied for an order convening a meeting of scheme creditors to consider and, if thought fit, approve a proposed scheme of arrangement (the “Scheme”) under Part 26 of the Companies Act 2006. One creditor, APPIO, opposed the Scheme on various grounds and in this hearing sought an adjournment on the basis that insufficient notice was given to the creditors of the convening hearing.

The Indah Kiat judgment neatly follows a similar judgment of Snowden J in Van Gansewinkel Groep BV [2015] EWCG 2151 (Ch) only a few months earlier. In this case Snowden J took the opportunity to review the current law on jurisdiction relating to schemes of arrangement, and, arguably, to raise the jurisdictional hurdle. He noted that in recent years, schemes of arrangement have been increasingly used to restructure the financial obligations of overseas companies that do not have their centre of main interest or an establishment or any significant assets in England, and stated that companies seeking approval of a scheme would be well advised “to ensure that greater detail is provided, both in the explanatory statement and in the evidence before the court”. Additionally, and more importantly for Indah Kiat, he commented on the judgment in re Telewest Communications plc (No 2) [2005] 1 BCLC 772 that the court will not generally sanction a scheme if it finds a “blot” in the scheme such that the scheme will not have the effect that the company and creditors intend. This is key in the underlying message of Snowden J’s Indah Kiat judgment.

Whilst schemes of arrangement have become increasingly popular to compromise creditors’ claims in a pragmatic manner which may not be available in the jurisdiction of incorporation of the relevant debtor, the judgments in Van Gansewinkel and, more specifically, in Indah Kiat, make it clear that the English courts will not compromise the integrity of this highly effective restructuring tool where the parties invoking the court’s jurisdiction act other than with the “utmost candour”.

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