In the matter of Syncreon Group B.V. (and ors) the English High Court on 31 July 2019 ([2019] EWHC 2068 (Ch)) presented its written reasons for granting an application by Syncreon Group to convene meetings of certain classes of creditors for the purpose of considering a scheme of arrangement. Syncreon Group is a private limited company incorporated under the laws of the Netherlands, and the other applicant, Syncreon UK, is a company incorporated in England and Wales.
Both are held directly or indirectly by Syncreon Group Holdings BV (Parent). The group headed by the Parent is the Group. It carries on the business of specialised contract logistics in the automotive and technology industry, having dealings etc in USA, Canada, the Netherlands, Ireland and Germany, and considers itself significantly over-leveraged and unlikely to be able to continue in business without restructuring its debt. The likely alternatives are enforcement action leading to an accelerated sale or piecemeal insolvency procedures. The Schemes form a key part of the proposed restructuring and the court solves several matters related to the classes of creditors.
Has the court jurisdiction? Syncreon UK is both incorporated and has its centre of main interests (COMI) in England and Wales. So here exercising jurisdiction is appropriate. Syncreon Group, however, is Dutch incorporated and does not have an English COMI. In such a case the English judicial approach is that the court has a “sufficient connection” with the jurisdiction (refering to Lehman Bros International (Europe) (in admin) [2019] BCC 115 at [62].
The steps to take in practice are now rather clear, being (i) that Syncreon Group relies on the documents now being governed by English law, and (ii) that the parties having contractually submitted to the jurisdiction of the English courts. As to (i) the fact that the Parent Credit Facility (PCF) and Note documentation is governed by English law, and that the parties have submitted to the jurisdiction of the English courts, does provide a sufficient connection with the English jurisdiction.
The courts is helpful by providing the basis for its argumentation: Re Vietnam Shipbuilding Industry Groups [2013] EWHC 2476 (Ch) at [8] and [9], whilst the change to the governing law is expressly contemplated by Article 3(2) of the Rome I Regulation (593/2008), and there being no objection in principle to such a change under English law: Mauritius Commercial Bank Ltd v Hestia Holdings Ltd [2013] EWHC 1328 (Comm) at [30]. As to (ii) the court explains that there have been a number of cases where governing law clauses have been changed with a view to creating a sufficient connection with the English jurisdiction for the purposes of a scheme of arrangement. Also here, the step taken is clear (and limited): ‘Whether that fact makes any difference to the court’s decision is a matter for the judge considering whether to sanction the Schemes, and not a matter for determination at this stage. For present purposes I will limit my comments to noting two points. First, the motivation behind the change to the governing law and jurisdiction clauses was explained to PCF lenders and Noteholders when the changes were sought. Secondly, the Group has received advice that the changes to the governing law and jurisdiction provisions will be respected …, and that the Schemes should be recognised in the US, Canada and the Netherlands.
Indeed, in the case of the US and Canada recognition is a condition of the restructuring. Although there are also significant operations in Ireland and Germany, it is anticipated that those jurisdictions will follow the EU principles referred to in the Dutch advice, and accordingly will be recognised there as well. In Re Magyar Telecom BV [2013] EWHC 3800 (Ch) David Richards J (as he then was) considered that the question of sufficient connection was closely related to the question of whether the scheme would have a substantial effect (paragraph 21). In these circumstances I am satisfied that there are no “roadblock” issues which make it obvious that the court has no jurisdiction or should otherwise refuse to exercise its discretion to sanction the Schemes, and accordingly that it is appropriate to permit the proposed Scheme meetings to be convened.’ To be continued.