EFW 21 Renewable Energy Ltd v Companies Act 2014; EFW 21 Renewable Energy Ltd v Companies Act 2014

JurisdictionIreland
JudgeMr. Justice Michael Quinn
Judgment Date11 October 2023
Neutral Citation[2023] IEHC 548
CourtHigh Court
Docket Number[2023 No. 69 COS]
In the Matter of EFW21 Renewable Energy Limited

and

In the Matter of EFW21 Renewable Energy (Ireland) Limited

and

In the Matter of a Proposed Scheme of Arrangment Pursuant to Part 9, Chapter 1 of the Companies Act, 2014 As Amended.

[2023] IEHC 548

[2023 No. 69 COS]

[2023 No. 74 COS]

THE HIGH COURT

COMMERCIAL

Schemes of arrangement – Scheme circular – Companies Act 2014 s. 452 – Companies seeking to propose schemes of arrangement – Whether the scheme circular exhibited by the companies and intended to accompany the notification of meetings to consider and vote on the proposed scheme was manifestly deficient

Facts: EFW21 Renewable Energy Ltd (EFW21) and EFW21 Renewable Energy (Ireland) Ltd (EFW21 Ireland) (the Companies) intended to propose schemes of arrangement pursuant to the provisions of Part 9 of the Companies Act 2014. The first step in the procedure pursuant to Part 9 is the convening of meetings of the creditors or class of creditors intended to be bound by the scheme. The directors applied for an order pursuant to s. 450(3) for the convening of the meeting and for ancillary directions concerning the convening and conduct of the meetings. A number of creditors opposed the making of an order. The principal ground of opposition was that the scheme circular exhibited by the Companies and intended to accompany the notification of meetings to consider and vote on the proposed scheme was manifestly deficient and did not comply with the requirements of s. 452 concerning the information to be provided with a notice convening a meeting. On 20th July, 2023, the High Court was informed that the objectors were no longer maintaining their objection to the order convening the meetings. The objectors did not state that they were withdrawing all their objections and reservations. Therefore, the court considered the objections made about the circular. Quinn J decided that the proposed scheme circular, as revised in preparation for the final day of the hearing, and a final version of which was exhibited on 31 July 2023, was not manifestly deficient, such as to warrant refusal of an order convening statutory meetings to consider and vote on the proposed schemes of arrangement. He therefore made the order and directions applied for, and stated that he would give his reasons later.

Held by Quinn J that the most significant objections raised to the circular were that the “money trail” was not satisfactorily explained. He read the Alvares and Marsal report and concluded that it, coupled with later clarifications, provided in Appendix Eleven, contained a description of the sources and application of money into and from the Companies and other entities in the group and met the test for s. 452(1)(a), namely that it was not so manifestly deficient for its purpose, which was to enable creditors to make informed decisions as to voting on proposals for a scheme of arrangement, that the court should refuse to make the convening order. He therefore made the order pursuant to s. 450 convening the meetings proposed by the Companies.

Quinn J noted that certain of the investors were connected parties in that certain of the loan notes were beneficially owned by Solar 21 Renewable Energy Ltd of which Mr M Bradley was the sole director and shareholder, and in EFW21 certain other loan notes were owned by Mr A Bradley; similarly, in EFW21 Ireland, a number of the preference shares were held by MB Planning Limited, an entity of which Mr M Bradley was a director and the sole shareholder. It was submitted that the rights attaching to the interests of those connected parties were the same as those of other scheme investors and so, “are definitionally within the same class”. Quinn J held that this was correct, but in Re Millstream Recycling Ltd [2010] 4 IR 253 Laffoy J considered that such connected creditors should be classed differently. To remove any controversy on this subject, the connected parties had undertaken to be bound by the scheme and had undertaken not to vote or procure voting in respect of their relevant interests in the Companies. Quinn J held that this was a proper approach to adopt and, in reliance on that undertaking, he should not direct a separate class meeting for those parties. He was satisfied to direct a meeting of a single class of scheme investors in each case.

Application granted.

Judgment of Mr. Justice Michael Quinn delivered on the 11th day of October 2023

1

. EFW21 Renewable Energy Limited (“EFW21”) and EFW21 Renewable Energy (Ireland) Limited (“EFW21 Ireland”) intended to propose schemes of arrangement pursuant to the provisions of Part 9 of the Companies Act, 2014. I refer to these two companies as the “Scheme Companies” or the “Companies”.

2

. The first step in the procedure pursuant to Part 9 is the convening of meetings of the creditors or class of creditors intended to be bound by the scheme. The purpose of these meetings is to consider and vote on the proposals for a scheme of arrangement.

3

. Section 450 provides that directors of a company may convene the appropriate meetings, or the court, on application made by the company (or a creditor or its liquidator), may order the summoning of the meetings. In this case the directors have applied for an order pursuant to s.450(3) for the convening of the meeting and for ancillary directions concerning the convening and conduct of the meetings.

4

. At this first step in these proceedings, namely the “convening”, a substantial number of creditors opposed the making of an order. The principal ground of opposition was that the scheme circular exhibited by the Companies and intended to accompany the notification of meetings to consider and vote on the proposed scheme was manifestly deficient and did not comply with the requirements of s. 452 concerning the information to be provided with a notice convening a meeting. The objectors submitted that the proposed scheme circular was so deficient that the court should exercise its discretion to refuse the order convening meetings.

5

. Unusually therefore the convening hearing was a contested hearing.

6

. On the second day of the hearing the court was informed that the parties were engaging constructively in relation to further information to be provided by the Companies to the investors. On consent of the parties the court adjourned the application to enable this process continue.

7

. After two further adjournments the hearing of the application resumed on 20 th July, 2023. On that occasion the court was informed that the creditors who had originally objected to the convening order were no longer maintaining their objection to the order convening the meetings. This change of position arose from two developments.

8

. Firstly, during the period when the matter was adjourned further information had been exchanged, among the parties, with the assistance of restructuring professionals and other advisors. A new version of the proposed circular was exhibited by the Companies which it was said would contain the further information provided, thereby ensuring that all of such further information would be placed before all creditors in the circular accompanying the notice convening the meeting.

9

. Secondly, the court was informed that substantive changes were being made to the proposed scheme of arrangement. These were reflected in a revised draft of the proposed circular and appendices and of the intended scheme documents, all of which were exhibited.

10

. In light of these developments and new exhibits the hearing proceeded. However in circumstances where the position adopted by the original objecting creditors was not being maintained the contents of the original and revised circular were not subjected to the same degree of critical analysis or submissions by the parties at the resumed hearing as might have been the case had the objection been maintained. Nonetheless, the jurisdiction of the court conferred by s. 450 and by Part 9 is a supervisory one, and not a “rubber stamp” exercise. The court must have regard to the fact that the process affects not only those who have participated in these hearings but all investor creditors in the class intended to be bound by the scheme. Serious allegations and objections were made at the convening hearing regarding the contents of the proposed scheme circular. Although the objections to the making of the convening order were withdrawn, the objectors did not state that they were withdrawing all their objections and reservations. Therefore, the court in exercising this jurisdiction must consider the objections made about the circular.

11

. I had regard to all the evidence presented and submissions made over three days of hearing (18 May 2023, 20 July 2023 and 31 July 2023). I decided that the proposed scheme circular, as revised in preparation for the final day of the hearing, and a final version of which was exhibited on 31 July 2023, was not manifestly deficient, such as to warrant refusal of an order convening statutory meetings to consider and vote on the proposed schemes of arrangement. I therefore made the order and directions applied for, and stated that I would give my reasons later, which I do by this judgment.

12

. Those who were represented at the hearings before this court, and others who would be affected by the scheme, will have the forum to challenge the scheme of arrangement at a sanction hearing if it is approved by the required special majority and ultimately placed before this court for sanction pursuant to s. 453 of the Act. The adequacy or otherwise of information can still be a factor at such a hearing and can be relied on by any objectors, including those represented at these hearings, although arguably less weight would attach to objections on this (the “information”) ground by those who have now withdrawn their objection to the convening order. It is well established that defects in...

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2 cases
  • EFW 21 Renewable Energy Ltd v The Companies Act; EFW 21 Renewable Energy Ltd v The Companies Act
    • Ireland
    • High Court
    • December 7, 2023
    ...to the necessity for the schemes and to the convening application was described in detail in the court’s judgment of 11 October 2023: [2023 IEHC 548] (the convening judgment). Quinn J indicated when making the order sanctioning the schemes that he would state his reasons in a reserved judgm......
  • Re Zhongliang Holdings Group Company Ltd
    • Hong Kong
    • March 19, 2024
    ...[19]. [5] Supra, [20]. [6] Supra, [21]. [7] Re Praesidiad Ltd [2023] EWHC 2745 (Ch) at [14] (Sir Alastair Norris). [8] Supra, [22]. [9] [2023] IEHC 548 at [133] (Michael Quinn [10] Re Syncreon Group BV [2019] EWHC 2068 (Ch) at [18] (Falk J). [11] Supra, [23(3)]. [12] Supra, [23(5)]. [13] Su......

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