Re Hong Kong Airlines: Restructuring Plan
A restructuring scheme was approved by the English courts in respect of a company incorporated in Hong Kong, but registered in England as an overseas company, with the court finding that it did have jurisdiction to approve the plan.
Hong Kong Airlines was incorporated in Hong Kong but was registered at Companies House in England as an overseas company. Following financial difficulties, the company sought to enter into a restructuring plan, the alternative to which would have been an imminent liquidation. The court's approval was sought in relation to an English law restructuring plan. A scheme of arrangement had also been approved in Hong Kong under the relevant local legislation.
The English restructuring plan sought to deal with some, but not all, of the company's assets. It was not capable of dealing with liabilities governed by Hong Kong law. The English restructuring plan was to work in conjunction with parallel scheme of arrangement in Hong Kong in an attempt to demonstrate the financial viability required in order to maintain a crucial air transport licence.
The court considered the following issues.
- Did the English court have jurisdiction to sanction a restructuring plan in respect of a company incorporated in Hong Kong?
- Were all of the other requirements needed to approve the plan met?
- Was the court able to rely on the outcomes of the various class meetings which had been held?
In order for the court to have jurisdiction, as it was a foreign company, a sufficient connection to the English jurisdiction was needed. The court found that there was a sufficient connection and cited the following factors as being relevant.
- The company was registered as an overseas entity at Companies House in England.
- The company had perpetual notes which were governed by English law.
- 42% of the company's debts were subject to agreements governed by English law.
- There had been significant involvement by non-English law creditors in the creditor approval of the plan.
- It would be beneficial to have one comprehensive plan supported by, and co-ordinated with, local plans in each of the relevant jurisdictions rather than a more piecemeal approach.
As the court had jurisdiction, it was then able to consider whether the other requirements were met and whether the outcomes of the class meetings could be relied upon. The court found that the other requirements had been met and that the meetings could be relied upon as (1) they could be regarded as fairly representative of the relevant class; and (2) those in attendance and those who chose not to attend had been properly informed.
This case shows the range of factors which the court will consider when considering issues of jurisdiction. The involvement of foreign creditors in the restructuring plan is also of interest as it helped the court to view the plan as part of a larger process involving all of the company's creditors.