Vol 13 (2016) - Issue 3

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Re Van Gansewinkel Groep BV [2015] Bus LR 1046

Introduction
The scheme of arrangement has been a part of English company law since the nineteenth century. Since then it has been a powerful tool for restructuring the debts of both solvent and insolvent companies, and for a range of other purposes, such as effecting takeovers and mergers. The deceptively straightforward language of what is now Part 26 of the Companies Act 2006 provides a simple way to cram down dissenting creditors if a majority in number representing 75% in value vote in favour.
In recent years, the English scheme’s flexibility has made it increasingly common for the court to sanction schemes of arrangement in respect of foreign companies with no assets or establishment in the UK. In this latest decision of the English Companies Court, Snowden J recognised the extent to which the international role of English scheme of arrangement has changed over time, and laid down new guidance as to how issues of jurisdiction should be dealt with.

Background
Van Gansewinkel Groep ('VGG') provided waste management services across The Netherlands, Belgium and Luxembourg. The applications before the court concerned six separate but inter-conditional schemes in respect of the scheme companies, all of which were members of VGG. One of the companies was a management holding company, the contractual party to several key contracts and performed the head office function for the group. Another was the principal operating subsidiary of VGG and had approximately 1,500 employees and numerous operating contracts. A third operated as a real estate holding company. Three other companies were investment holding companies. All of the scheme companies had their centre of main interests (COMI) within the EU but outside the UK. None of them had an establishment, or any substantial assets, in England or Wales.
The scheme companies had, among them, drawn down in the region of EUR 800 million under various facilities agreements. In addition, one of the companies was party to four hedging agreements with an aggregate notional amount of EUR 600 million in order to hedge the floating interest rate liabilities under the existing facilities agreements. The obligations of the scheme companies under the existing senior facilities agreement and the hedging agreements were guaranteed by each of the other scheme companies (and one additional group company, Van Gansewinkel NV) and were secured by a comprehensive security package over the assets of the group.
In recent years, VGG’s revenue had fallen markedly due to a decline in waste volumes and severe price competition. The revenue for the group declined from EUR 1·034 billion in 2012 to EUR 962 million in 2014. Moreover, the group had negative net cash flow for 2014 of EUR 38 million. In spite of cutting costs, the group was unable to continue to meet its financial covenants and the scheme companies were unable to repay or refinance in full their obligations under the existing facilities agreements and hedging agreements. The group secured the forbearance of a significant majority of the scheme creditors pursuant to the terms of waiver requests so as to enable the formulation of the schemes. The scheme creditors also agreed to waive certain breaches, including breaches of financial covenants, under the existing senior facilities agreement. In the absence of the relevant waivers and forbearance, scheme creditors would have been entitled to accelerate the sums owing under the existing senior facilities agreement and enforce the security granted by the group.

Schemes of arrangement
Section 895 of the Companies Act 2006 provides that a scheme of arrangement may be entered into 'where a compromise or arrangement is proposed between a company and its creditors, or any class of them, or its members, or any class of them'. The application is often made by the company itself, but may be made by a creditor or a member (provided that the company itself consents) or by an insolvency officeholder (if the company is in liquidation or administration).