Re Hellas Telecommunications (Luxemburg) II SCA

This is an administration application in relation to a company called Hellas Telecommunications (Luxembourg) II SCA. The application is made by the company and by its directors on the ground that it is unable to pay its debts and that administration will produce a better result for creditors than a winding up. I must be satisfied that I have jurisdiction to make the order sought. That falls into two parts. The first is whether Hellas II (as I shall call it) is a company at all within the meaning of the Insolvency Act 1986. The second is whether it has its centre of main interests, or COMI, in England.

The evidence is that Hellas II is incorporated under the laws of Luxembourg. It is now a Société en Commandite par Actions which is, according to the evidence, a combination of a joint stock company and a limited partnership. It has a separate legal personality. It has a constitution and it has shareholders.

In those circumstances I consider that it does fall within the definition of company for the purposes of Schedule B1 of the Insolvency Act; and that therefore that jurisdictional hurdle is overcome. As mentioned, the company is incorporated under the laws of Luxembourg and consequently under the EC regulation there is a presumption that that is where its centre of main interests or COMI lies. That presumption can be rebutted; but in order to rebut the presumption there must be clear objective and ascertainable facts which rebut it. It is also the case as one might expect in a system of law which encourages a single market across the whole of the European Union that it is possible for an entity, whether a corporate entity or an individual, to change its COMI from its original or presumed location.

In the present case it is said that the company’s COMI was changed from Luxembourg to England in the middle of August this year. I have to consider the position as at today’s date. That is to say some three months on. The objective and ascertainable facts on which the company relies in support of its contention that it has shifted its COMI are that its head office and principal operating address is now in London, albeit that the premises it occupies are relatively modest since the company is no more than a financing and shareholding vehicle. The company’s creditors were notified of its change of address around that time and an announcement was made by way of a press release that its activities were shifting to England. It has opened a bank account in London and all payments are made into and from that bank account although there still remains a bank account in Luxembourg to deal with minor miscellaneous payments. It has registered under the Companies Act in this country, although its registered office remains in Luxembourg and it may remain liable to pay tax in Luxembourg too.

The purpose of the COMI is to enable creditors in particular to know where the company is and where it may deal with the company. Therefore, it seems to me that one of the most important features of the evidence, which is the feature I mention next, is that all negotiations between the company and its creditors have taken place in London.

On that evidence I am satisfied that the company has moved its COMI from Luxembourg to England with the consequence that I have jurisdiction to make the order sought. There is no doubt on the evidence that the company is insolvent; and the evidence is compelling that administration will produce a better result for creditors than would be produced on a winding up. The application is no longer opposed although concerns have been raised by some creditors of the company not to the effect that the outturn proposed would be no better than would be achieved in a winding-up, but that the outturn proposed could have been even better than the sale currently in prospect. The sale currently in prospect is a sale of the company’s asset, namely its shareholding in another company called WIND Hellas which is a telecoms company operating in Greece. The proposed buyer is a company called Weather which is part of the same group as the company. It is what is colloquially known as a pre-pack, in other words a prearranged sale which the administrators intend to effect as soon as or shortly after an administration order is made.

In the present case, unlike many, there has been a lengthy bid process and an attempt by the company to attract bidders for its assets. Complaints have been made about the method by which that process has taken place and in particular complaints have been made that the successful bidder, namely Weather, was given an advantage in terms of the information provided to it which was not, so it is said, provided to other bidders. Nevertheless, the fact remains that the Weather bid is now the only bid on the table. Perhaps more to the point any sale of the company’s assets which is effected otherwise than in the course of a a winding up requires the consent of senior creditors, who in accordance with an intercreditor deed have been allocated priority over different classes of creditor. Those senior creditors have made it clear that the only bid which they are prepared to sanction is the Weather bid. Therefore on the evidence before the court there is no real alternative for the administrators other than to proceed with the pre-pack sale to Weather. I am of course aware that pre-packs have caused concern and to that end Statement of Insolvency Practice 16 has been promulgated and encourages administrators to give as much information as possible to creditors. By analogy, Judge Cooke has decided in Re Kayley Vending Limited [2009] BCC 578 that it is good practice for the same information, or as much of it is possible, to be given to the court when it is considering the making of an administration order in the context of a pre-pack sale. That guidance has been fully complied with in the present case.

It is not entirely easy to see precisely where in the statutory structure the court is concerned with the merits of a pre-pack sale. It seems to me that in general the merits of a pre-pack sale are for the administrator to deal with; and the creditors, if sufficiently aggrieved, have a remedy in the course of the administration to challenge an administrator’s decision. It may on the evidence be obvious that a pre-pack sale is an abuse of the administrators powers, in which event the court could refuse to make the administration order or could direct the administrators not to complete a pre-pack sale. At the other end of the spectrum it may be that it is obvious that a particular pre-pack is on the evidence the only real way forward, in which case the court could give the administrators liberty to enter into the pre-pack, leaving open the possibility that a sufficiently aggrieved creditor could nevertheless challenge the administrator’s decision ex post facto. But in the majority of cases the position may not be clear; in which event the making of an administration order, even in the context of a pre-pack should not be taken as the court’s blessing on the pre-pack sale.

In the present case, as I have indicated, the evidence is that the Weather bid, that is to say the pre-pack, is the only bid that will command the consent of the creditors entitled to consent to a sale. I agree with both Mr. Trower QC and Mr. Sheldon QC that the evidence in this case is compelling and therefore I am prepared not only to make the administration order but also expressly to give the administrators liberty to enter into the pre-pack sale.