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Louise Jennings

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Louise Jennings

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2 March 2021

R&I update – March 2021 – 2 of 5 Insights

gategroup Guarantee Limited – UK restructuring plans are insolvency proceedings

  • Quick read

On 11 February 2021, the English High Court confirmed in gategroup Guarantee Limited that restructuring plans are insolvency proceedings so are not covered by the Lugano Convention.

One of the debt instruments subject to the gategroup restructuring plan contains an exclusive Swiss court jurisdiction clause. Under the Lugano Convention, proceedings relating to "civil and commercial matters" must generally be brought in the jurisdiction benefitting from the exclusive jurisdiction clause.

If, however, restructuring plans are insolvency proceedings and fall within the "bankruptcy exception" to the Lugano Convention, then the English High Court would have jurisdiction to sanction the plan.

The decision

In marked contrast to the generally held view that schemes of arrangement are civil and commercial matters, the court held that restructuring plans contain all the elements of insolvency proceedings and are outside the scope of the Lugano Convention. In particular, they are:

  • Collective proceedings the plan affected all the company's financial creditors.
  • Based on laws relating to insolvency unlike schemes, restructuring plans are available only to companies facing actual or anticipated financial difficulties, and their purpose must be to eliminate, reduce, prevent or mitigate, these difficulties.
  • Subject to the supervision of the court plan meetings are convened by court order; the composition of the classes approved by the court; and the plan is effective only upon sanction by the court.

Key takeaways

This judgment draws a clear line between restructuring plans and schemes of arrangement. Although the UK is no longer a party to the Lugano Convention post-Brexit, if it is permitted to accede, potentially different recognition rules apply to restructuring plans and schemes raising additional considerations in deciding which process to use.

Find out more

To discuss recognition issues or the practical steps to consider in the restructuring plan process, please reach out to a member of our Restructuring & Insolvency team.

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