Richards J said: ‘In considering the primary position of the Opposing Bondholders, it is important to keep in mind the function of the court at this stage. This is an application by the companies for leave to convene meetings to consider the schemes. It is emphatically not a hearing to consider the merits and fairness of the schemes. Those aspects are among the principal matters for decision at the later hearing to sanction the schemes, if they are approved by the statutory majorities of creditors. The matters for consideration at this stage concern the jurisdiction of the court to sanction the scheme if it proceeds. There is no point in the court convening meetings to consider the scheme if it can be seen now that it will lack the jurisdiction to sanction it later. This is principally a matter of the composition of classes. Under section 425, the court will have no jurisdiction to sanction the scheme if the classes have been incorrectly constituted. It is perhaps unfortunate that this is the case and there is much to commend an approach which enables the court to sanction a scheme in an appropriate case, where the classes have been incorrectly constituted in a way which would not have affected the outcome of the meetings. But that is not the position under section 425 and the practice now is to deal so far as possible with issues of class composition at the first stage of the application for leave to convene meetings. There might exceptionally be other issues which would go to jurisdiction and could properly raised at this stage: see re Savoy Hotel Ltd [1981] Ch. 351. What the court should not do is consider the fairness of the scheme with a view to deciding whether at the later hearing it will or will not sanction it.
If the Opposing Bondholders’ position is that the inclusion of the Average Exchange Rate produces so unfair a result that no court would sanction the scheme, that as it seems to me can and should be considered at the hearing to sanction the scheme . . .’
Judges:
Mr Justice Richards
Citations:
[2004] EWHC 1466 (Ch)
Links:
Statutes:
Cited by:
Cited – Mytravel Group Plc, Re Companies Act 1985 ChD 24-Nov-2004
The company sought approval of a proposed reconstruction under the section.
Held: Approval could not be given. To count as a reconstruction two principal qualities were required. The business carried on should be the same or similar, and those . .
Lists of cited by and citing cases may be incomplete.
Company, Insolvency
Updated: 11 June 2022; Ref: scu.198300
